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Financial Skeptic Bulletin, 2016

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[Dec 02, 2019] The Myth of American Meritocracy by Ron Unz

Notable quotes:
"... Battle Hymn of the Tiger Mother ..."
"... Wall Street Journal ..."
"... The Price of Admission ..."
"... And while I am not as focused on the poverty ve wealth dynamic. this century has revealed something very disappointing that you address. That the elites have done a very poor job of leading the ship of state, while still remaining in leadership belies such a bold hypocrisy in accountability, it's jarring. The article could actually be titled: "The Myth of the Best and the Brightest." ..."
"... They are teaching the elite how to drain all value from American companies, as the rich plan their move to China, the new land of opportunity. When 1% of the population controls such a huge portion of the wealth, patriotism becomes a loadstone to them. The elite are global. Places like Harvard cater to them, help train them to rule the world .but first they must remake it. ..."
"... In my high school, there were roughly 15 of us who had been advanced two years ahead in math. Of those, 10 were Jewish; only two of them had a 'Jewish' last name. In my graduate school class, half (7) are Jewish. None has a 'Jewish' last name. So I'm pretty dubious of the counting method that you use. ..."
"... Regarding the declining Jewish achievement, it looks like it can be primarily explained through demographics: "Intermarriage rates have risen from roughly 6% in 1950 to approximately 40–50% in the year 2000.[56][57] This, in combination with the comparatively low birthrate in the Jewish community, has led to a 5% decline in the Jewish population of the United States in the 1990s." ..."
"... Jewish surnames don't mean what they used to. And intermarriage rates are lowest among the low-performing and highly prolific Orthodox. ..."
"... A potentially bigger issue completely ignored by your article is how do colleges differentiate between 'foreign' students (overwhelmingly Asian) and American students. Many students being counted as "Asian American" are in reality wealthy and elite foreign "parachute kids" (an Asian term), dropped onto the generous American education system or into boarding schools to study for US entrance exams, qualify for resident tuition rates and scholarships, and to compete for "American" admissions slots, not for the usually limited 'foreign' admission slots. ..."
"... As some who is Jewish from the former Soviet Union, and who was denied even to take an entrance exam to a Moscow college, I am saddened to see that American educational admission process looks more and more "Soviet" nowadays. Kids are denied opportunities because of their ethnic or social background, in a supposedly free and fair country! ..."
"... Actually, Richard Feynman famously rejected genetic explanations of Jewish achievement (whether he was right or wrong to do so is another story), and aggressively resisted any attempts to list him as a "Jewish scientist" or "Jewish Nobel Prize winner." I am sure he would not cared in the slightest bit how many Jews were participating in the Physics Olympiad, as long as the quality of the students' work continued to be excellent. Here is a letter he wrote to a woman seeking to include him in a book about Jewish achievement in the sciences. ..."
"... It would be interesting to know how well "true WASPS" do in admissions. This could perhaps be estimated by counting Slavic and Italian names, or Puritan New England last names. I would expect this group to do almost as well as Jews (not quite as well, because their ability would be in the lower end of the Legacy group). ..."
"... The missing variable in this analysis is income/class. While Unz states that many elite colleges have the resources to fund every student's education, and in fact practice need-blind admissions, the student bodies are skewed towards the very highest percentile of the income and wealth distribution. SAT scores may also scale with parents' income as well. ..."
"... Having worked with folks from all manner of "elite" and not so elite schools in a technical field, the main conclusion I was able to draw was folks who went to "elite" colleges had a greater degree of entitlement. And that's it. ..."
"... My own position has always been strongly in the former camp, supporting meritocracy over diversity in elite admissions. ..."
"... The Reality of American Mediocrity ..."
"... The central test of fairness in any admissions system is to ask this simple question. Was there anyone admitted under that system admitted over someone else who was denied admission and with better grades and SAT scores and poorer ? If the answer is in the affirmative, then that system is unfair , if it is in the negative then the system is fair. ..."
"... Harvard ranks only 8th after Penn State in the production of undergrads who eventually get Doctorates in Science and Engineering. Of course Berkeley has the bragging rights for that kind of attribute. ..."
"... There is an excellent analysis of this article at The Occidental Observer by Kevin MacDonald, "Ron Unz on the Illusory American Meritocracy". The MSM is ignoring Unz's article for obvious reasons. ..."
"... Could it be that the goal of financial, rather than academic, achievement, makes many young people uninterested in competing in the science and math competitions sought out by the Asian students? I ..."
"... America never promised success through merit or equality. That is the American "dream." ..."
"... Anyone famliar with sociology and the research on social stratification knows that meritocracy is a myth; for example, if one's parents are in the bottom decile of the the income scale, the child has only a 3% chance to reach the top decile in his or her lifetime. In fact, in contrast to the Horatio Alger ideology, the U.S. has lower rates of upward mobility than almost any other developed country. Social classses exist and they tend to reproduce themselves. ..."
"... The rigid class structure of the the U.S. is one of the reasons I support progressive taxation; wealth may not always be inherited, but life outcomes are largely determined by the class position of one's parents. In this manner, it is also a myth to believe that wealth is an individual creation;most financially successful individuals have enjoyed the benefits of class privilege: good and safe schools, two-parent families, tutors, and perhaps most important of all, high expecatations and positive peer socialization (Unz never mentions the importants of peeer groups, which data show exert a strong causal unfluence on academic performance). ..."
"... And I would challenge Unz's assertion that many high-performing Asians come from impovershed backgrounds: many of them may undereport their income as small business owners. I believe that Asian success derives not only from their class background but their culture in which the parents have authority and the success of the child is crucual to the honor of the family. As they assimilate to the more individualist American ethos, I predict that their academic success will level off just as it has with Jews. ..."
"... All I can say is see a book: "Ivy League Fools and Felons"' by Mack Roth. Lots of them are kids of corrupt people in all fields. ..."
Dec 28, 2016 | www.unz.com
November 28, 2012 | The American Conservative •
Just before the Labor Day weekend, a front page New York Times story broke the news of the largest cheating scandal in Harvard University history, in which nearly half the students taking a Government course on the role of Congress had plagiarized or otherwise illegally collaborated on their final exam. [1] Each year, Harvard admits just 1600 freshmen while almost 125 Harvard students now face possible suspension over this single incident. A Harvard dean described the situation as "unprecedented."

But should we really be so surprised at this behavior among the students at America's most prestigious academic institution? In the last generation or two, the funnel of opportunity in American society has drastically narrowed, with a greater and greater proportion of our financial, media, business, and political elites being drawn from a relatively small number of our leading universities, together with their professional schools. The rise of a Henry Ford, from farm boy mechanic to world business tycoon, seems virtually impossible today, as even America's most successful college dropouts such as Bill Gates and Mark Zuckerberg often turn out to be extremely well-connected former Harvard students. Indeed, the early success of Facebook was largely due to the powerful imprimatur it enjoyed from its exclusive availability first only at Harvard and later restricted to just the Ivy League.

NetWealth During this period, we have witnessed a huge national decline in well-paid middle class jobs in the manufacturing sector and other sources of employment for those lacking college degrees, with median American wages having been stagnant or declining for the last forty years. Meanwhile, there has been an astonishing concentration of wealth at the top, with America's richest 1 percent now possessing nearly as much net wealth as the bottom 95 percent. [2]

This situation, sometimes described as a "winner take all society," leaves families desperate to maximize the chances that their children will reach the winners' circle, rather than risk failure and poverty or even merely a spot in the rapidly deteriorating middle class. And the best single means of becoming such an economic winner is to gain admission to a top university, which provides an easy ticket to the wealth of Wall Street or similar venues, whose leading firms increasingly restrict their hiring to graduates of the Ivy League or a tiny handful of other top colleges. [3] On the other side, finance remains the favored employment choice for Harvard, Yale or Princeton students after the diplomas are handed out. [4]

The Battle for Elite College Admissions

As a direct consequence, the war over college admissions has become astonishingly fierce, with many middle- or upper-middle class families investing quantities of time and money that would have seemed unimaginable a generation or more ago, leading to an all-against-all arms race that immiserates the student and exhausts the parents. The absurd parental efforts of an Amy Chua, as recounted in her 2010 bestseller Battle Hymn of the Tiger Mother , were simply a much more extreme version of widespread behavior among her peer-group, which is why her story resonated so deeply among our educated elites. Over the last thirty years, America's test-prep companies have grown from almost nothing into a $5 billion annual industry, allowing the affluent to provide an admissions edge to their less able children. Similarly, the enormous annual tuition of $35,000 charged by elite private schools such as Dalton or Exeter is less for a superior high school education than for the hope of a greatly increased chance to enter the Ivy League. [5]

Many New York City parents even go to enormous efforts to enroll their children in the best possible pre-Kindergarten program, seeking early placement on the educational conveyer belt which eventually leads to Harvard. [6] Others cut corners in a more direct fashion, as revealed in the huge SAT cheating rings recently uncovered in affluent New York suburbs, in which students were paid thousands of dollars to take SAT exams for their wealthier but dimmer classmates. [7]

But given such massive social and economic value now concentrated in a Harvard or Yale degree, the tiny handful of elite admissions gatekeepers enjoy enormous, almost unprecedented power to shape the leadership of our society by allocating their supply of thick envelopes. Even billionaires, media barons, and U.S. Senators may weigh their words and actions more carefully as their children approach college age. And if such power is used to select our future elites in a corrupt manner, perhaps the inevitable result is the selection of corrupt elites, with terrible consequences for America. Thus, the huge Harvard cheating scandal, and perhaps also the endless series of financial, business, and political scandals which have rocked our country over the last decade or more, even while our national economy has stagnated.

Just a few years ago Pulitzer Prize-winning former Wall Street Journal reporter Daniel Golden published The Price of Admission , a devastating account of the corrupt admissions practices at so many of our leading universities, in which every sort of non-academic or financial factor plays a role in privileging the privileged and thereby squeezing out those high-ability, hard-working students who lack any special hook.

In one particularly egregious case, a wealthy New Jersey real estate developer, later sent to Federal prison on political corruption charges, paid Harvard $2.5 million to help ensure admission of his completely under-qualified son. [8] When we consider that Harvard's existing endowment was then at $15 billion and earning almost $7 million each day in investment earnings, we see that a culture of financial corruption has developed an absurd illogic of its own, in which senior Harvard administrators sell their university's honor for just a few hours worth of its regular annual income, the equivalent of a Harvard instructor raising a grade for a hundred dollars in cash.

An admissions system based on non-academic factors often amounting to institutionalized venality would seem strange or even unthinkable among the top universities of most other advanced nations in Europe or Asia, though such practices are widespread in much of the corrupt Third World. The notion of a wealthy family buying their son his entrance into the Grandes Ecoles of France or the top Japanese universities would be an absurdity, and the academic rectitude of Europe's Nordic or Germanic nations is even more severe, with those far more egalitarian societies anyway tending to deemphasize university rankings.

EliteCommInc., November 28, 2012 at 11:09 am GMT

Well, legacy programs are alive and well. According to the read, here's the problem:

"The research certainly supports the widespread perception that non-academic factors play a major role in the process, including athletic ability and "legacy" status. But as we saw earlier, even more significant are racial factors, with black ancestry being worth the equivalent of 310 points, Hispanics gaining 130 points, and Asian students being penalized by 140 points, all relative to white applicants on the 1600 point Math and Reading SAT scale."

These arbitrary point systems while well intended are not a reflection of AA design. School lawyers in a race not be penalized for past practices, implemented their own versions of AA programs. The numbers are easy to challenge because they aren't based on tangible or narrow principles. It's weakneses are almost laughable. Because there redal goal was to thwart any real challenge that institutions were idle in addressing past acts of discrimination. To boost their diversity issues, asians were heavily recruited. Since AA has been in place a lot of faulty measures were egaged in: Quotas for quotas sake. Good for PR, lousy for AA and issues it was designed to address.

I think the statistical data hides a very important factor and practice. Most jews in this country are white as such , and as such only needed to change their names and hide behaviors as a strategy of surviving the entrance gauntlet. That segregation created a black collegiate system with it's own set of elite qualifiers demonstrates that this model isn't limited to the Ivy league.

That an elite system is devised and practiced in members of a certain club networks so as to maintain their elite status, networks and control, this is a human practice. And it once served as something to achieve. It was thought that the avenues of becoming an elite were there if one wanted to strive for it. Hard work, honesty, persistence, results . . . should yield X.

And while I am not as focused on the poverty ve wealth dynamic. this century has revealed something very disappointing that you address. That the elites have done a very poor job of leading the ship of state, while still remaining in leadership belies such a bold hypocrisy in accountability, it's jarring. The article could actually be titled: "The Myth of the Best and the Brightest."

I don't think it's just some vindictive intent. and while Americans have always known and to an extent accepted that for upper income citizens, normal was not the same as normal on the street. Fairness, was not the same jn practice nor sentiment. What may becoming increasing intolerant has been the obvious lack of accountability among elites. TARP looked like the elites looking out for each other as opposed the ship of state. I have read three books on the financials and they do not paint a pretty portrait of Ivy League leadership as to ethics, cheating, lying, covering up, and shamelessly passing the buck. I will be reading this again I am sure.

It's sad to think that we may be seeing te passing of an era. in which one aspired to be an elite not soley for their wealth, but the model they provided od leadership real or imagined. Perhaps, it passed long ago, and we are all not just noticing.
I appreciated you conclusions, not sure that I am comfortable with some of the solutions.

EliteCommInc. November 28, 2012 at 11:21 am GMT

Since I still hanker to be an elite in some manner, It is interesting to note my rather subdued response to the cheating. Sadly, this too may be an open secret of standard fair - and that is very very sad. And disappointing. Angering even.

Russell Seitz November 28, 2012 at 1:51 pm GMT

The shifting social demography of deans, house masters and admissions committees may be a more important metric than the composition of the student body, as it determines the shape of the curriculum, and the underlying culture of the university as a legacy in itself.

If Ron harrows the literary journals of the Jackson era with equal diligence. he may well turn up an essay or two expressing deep shock at Unitarians admitting too many of the Lord's preterite sheep to Harvard, or lamenting the rise of Methodism at Yale and the College of New Jersey.

Sean Gillhoolley November 28, 2012 at 3:06 pm GMT

Harvard is a university, much like Princeton and Yale, that continues based on its reputation, something that was earned in the past. When the present catches up to them people will regard them as nepotistic cauldrons of corruption.

Look at the financial disaster that befell the USA and much of the globe back in 2008. Its genesis can be found in the clever minds of those coming out of their business schools (and, oddly enough, their Physics programs as well).

They are teaching the elite how to drain all value from American companies, as the rich plan their move to China, the new land of opportunity. When 1% of the population controls such a huge portion of the wealth, patriotism becomes a loadstone to them. The elite are global. Places like Harvard cater to them, help train them to rule the world .but first they must remake it.

• Replies: @Part White, Part Native I agree, common people would never think of derivatives , nor make loans based on speculation
Rob in CT November 28, 2012 at 4:05 pm GMT

First, I appreciated the length and depth of your article.

Having said that, to boil it down to its essence:

Subconcious bias/groupthink + affirmative action/diversity focus + corruption + innumeracy = student bodies at elite institutions that are wildly skewed vis-a-vis both: 1) the ethnic makeup of the general population; and 2) the makeup of our top-performing students.

Since these institutions are pipelines to power, this matters.

I rather doubt that wage stagnation (which appears to have begun in ~1970) can be pinned on this – that part stuck out, because there are far more plausible causes. To the extent you're merely arguing that our elite failed to counter the trend, ok, but I'm not sure a "better" elite would have either. The trend, after all, favored the elite.

Anyway, I find your case is plausible.

Your inner/outer circle hybrid option is interesting. One (perhaps minor) thing jumps out at me: kids talk. The innies are going to figure out who they are and who the outies are. The outies might have their arrogance tempered, but the innies? I suspect they'd be even *more* arrogant than such folks are now (all the more so because they'd have better justification for their arrogance), but I could be wrong.

Perhaps more significantly, this:

But if it were explicitly known that the vast majority of Harvard students had merely been winners in the application lottery, top businesses would begin to cast a much wider net in their employment outreach, and while the average Harvard student would probably be academically stronger than the average graduate of a state college, the gap would no longer be seen as so enormous, with individuals being judged more on their own merits and actual achievements

Is a very good reason for Harvard, et al. to resist the idea. I think you're right that this would be a good thing for the country, but it would be bad for Harvard. I think the odds of convincing Harvard to do it out of the goodness of their administrators hearts is unlikely. You are basically asking them to purposefully damage their brand.

All in all, I think you're on to something here. I have my quibbles (the wage stagnation thing, and the graph with Chinese vs USA per capita growth come on, apples and oranges there!), but overall I think I agree that your proposal is likely superior to the status quo.

Bryan November 28, 2012 at 5:12 pm GMT

Don't forget the mess one finds after they ARE admitted to these schools. I dropped out of Columbia University in 2010.

You can "make it" on an Ivy-league campus if you are a conservative-Republican-type with all the rich country-club connections that liberals use to stereotype.

Or you can succeed if you are a poor or working-class type who is willing to toe the Affirmative Action party line and be a good "progressive" Democrat (Obama stickers, "Gay Pride" celebrations, etc.)

If you come from a poor or working-class background and are religious, or culturally conservative or libertarian in any way, you might as well save your time and money. You're not welcome, period. And if you're a military veteran you WILL be actively persecuted, no matter what the news reports claim.

It sucks. Getting accepted to Columbia was a dream come true for me. The reality broke my heart.

Anonymous November 28, 2012 at 5:33 pm GMT

Regarding the overrepresentation of Jewish students compared to their actual academic merit, I think the author overstates the role bias (subjective, or otherwise) plays in this:

1) , a likely explanation is that Jewish applicants are a step ahead in knowing how to "play the admissions game." They therefore constitute a good percentage of applicants that admission committees view as "the total package." (at least a higher percentage than scores alone would yield). Obviously money and connections plays a role in them knowing to say precisely what adcoms want to hear, but in any case, at the end of the day, if adcoms are looking for applicants with >1400 SATs, "meaningful" life experiences/accomplishments, and a personal statement that can weave it all together into a compelling narrative, the middle-upper-class east coast Jewish applicant probably constitutes a good percentage of such "total package" applicants. I will concede however that this explanation only works in explaining the prevalence of jews vs. whites in general. With respect to Asians, however, since they are likely being actively and purposefully discriminated against by adcoms, having the "complete package" would be less helpful to them.

2) Another factor is that, regardless of ethnicity, alumni children get a boost and since in the previous generation Jewish applicants were the highest achieving academic group, many of these lesser qualified jews admitted are children of alumni.

3) That ivy colleges care more about strong verbal scores than mathematics (i.e., they prefer 800V 700M over 700V 800M), and Jewish applicants make up a higher proportion of the high verbal score breakdowns.

4) Last, and perhaps more importantly we do not really know the extent of Jewish representation compared to their academic merit. Unlike admitted Asian applicants, who we know, on average, score higher than white applicants, we have no similar numbers of Jewish applicants. The PSAT numbers are helpful, but hardly dispositive considering those aren't the scores colleges use in making their decision information.

Scott McConnell November 28, 2012 at 5:39 pm GMT

@Bryan– Getting accepted to Columbia was a dream come true for me. The reality broke my heart.

I'm touched by this. I've spent tons of time at Columbia, a generation ago -- and my background fit fine -- the kind of WASP background Jews found exotic and interesting. But I can see your point, sad to say. There are other great schools -- Fordham, where my wife went to law school at night, has incredible esprit de corps - and probably, person for person, has as many lawyers doing good and interesting work as Columbia.

HAR November 28, 2012 at 6:10 pm GMT

"There are other great schools–Fordham, where my wife went to law school at night, has incredible esprit de corps - and probably, person for person, has as many lawyers doing good and interesting work as Columbia."

Someone doesn't know much about the legal market.

KXB November 28, 2012 at 6:18 pm GMT

"Tiffany was also rejected by all her other prestigious college choices, including Yale, Penn, Duke, and Wellsley, an outcome which greatly surprised and disappointed her immigrant father.88″

In the fall of 1990, my parents had me apply to 10 colleges. I had the profile of many Indian kids at the time – ranked in the top 10 of the class, editor of school paper, Boy Scouts. SAT scores could have been better, but still strong. Over 700 in all achievement tests save Bio, which was 670.

Rejected by 5 schools, waitlisted by 3, accepted into 2 – one of them the state univ.

One of my classmates, whose family was from Thailand, wound up in the same predicament as me. His response, "Basketball was designed to keep the Asian man down."

The one black kid in our group – got into MIT, dropped out after one year because he could not hack it. The kid from our school who should have gone, from an Italian-American family, and among the few who did not embrace the guido culture, went to Rennsealer instead, and had professional success after.

Anonymous November 28, 2012 at 6:39 pm GMT

As a University of Chicago alum, I infer that by avoiding the label "elite" on such a nifty chart we can be accurately categorized as "meritocratic" by The American Conservative.

Then again, this article doesn't even purport to ask why elite universities might be in the business of EDUCATING a wider population of students, or how that education takes place.

Perhaps, by ensuring that "the best" students are not concentrated in only 8 universities is why the depth and quality of America's education system remains the envy of the world.

a November 28, 2012 at 6:43 pm GMT

Two comments:

In my high school, there were roughly 15 of us who had been advanced two years ahead in math. Of those, 10 were Jewish; only two of them had a 'Jewish' last name. In my graduate school class, half (7) are Jewish. None has a 'Jewish' last name. So I'm pretty dubious of the counting method that you use.

Also, it's clear that there are Asian quotas at these schools, but it's not clear that Intel Science Fairs, etc, are the best way to estimate what level of talent Asians have relative to other groups.

I was curious so I google High School Poetry Competition, High School Constitution Competition, High School Debating Competition. None of the winners here seem to have an especially high Asian quotient. So maybe a non-technical (liberal arts) university would settle on ~25-30% instead of ~40% asian? And perhaps a (small) part of the problem is a preponderance of Asian applicants excelling in technical fields, leading to competition against each other rather than the general population? Just wonderin'

Weighty Commentary November 28, 2012 at 6:43 pm GMT

Regarding the declining Jewish achievement, it looks like it can be primarily explained through demographics: "Intermarriage rates have risen from roughly 6% in 1950 to approximately 40–50% in the year 2000.[56][57] This, in combination with the comparatively low birthrate in the Jewish community, has led to a 5% decline in the Jewish population of the United States in the 1990s."

Jewish surnames don't mean what they used to. And intermarriage rates are lowest among the low-performing and highly prolific Orthodox.

http://en.wikipedia.org/wiki/American_Jews#Demographics

Jewish birth rates have been falling faster than the white population, especially for the non-Orthodox:

"In contrast to the ongoing trends of assimilation, some communities within American Jewry, such as Orthodox Jews, have significantly higher birth rates and lower intermarriage rates, and are growing rapidly. The proportion of Jewish synagogue members who were Orthodox rose from 11% in 1971 to 21% in 2000, while the overall Jewish community declined in number. [60] In 2000, there were 360,000 so-called "ultra-orthodox" (Haredi) Jews in USA (7.2%).[61] The figure for 2006 is estimated at 468,000 (9.4%).[61]"

http://www.jewishdatabank.org/Reports/RecentTrends_Sheskin_2011.pdf

"a very low fertility rate of 1.9, of which 1.4 will be raised as Jews (2.15 is replacement rate)"

http://www.aish.com/jw/s/48899452.html

"As against the overall average of 1.86 children per Jewish woman, an informed estimate gives figures ranging upward from 3.3 children in "modern Orthodox" families to 6.6 in Haredi or "ultra-Orthodox" families to a whopping 7.9 in families of Hasidim."

These statistics would suggest that half or more of Jewish children are being born into these lower-performing groups. Given their very low intermarriage rates, a huge portion of the secular, Reform, and Conservative Jews must be intermarrying (more than half if the aggregate 43% intermarriage figure is right). And the high-performing groups may now be around 1 child per woman or lower, and worse for the youngest generation.

So a collapse in Jewish representation in youth science prizes can be mostly explained by the collapse of the distinct non-Orthodox Jewish youth.

Incidentally, intermarriage also produces people with Jewish ancestry who get classified as gentiles using last names or self-identification, reducing Jewish-gentile gaps by bringing up nominal gentile scores at the same time as nominal-Jewish scores are lowered.

Adam November 28, 2012 at 6:49 pm GMT

The center of power in this country being located in the Northeast is nothing new. Whether it be in it's Ivy League schools or the ownership of natural resources located in other regions, particularly the South, the Northeast has always had a disproportionate share of influence in the power structures, particularly political and financial, of this nation. This is one of the reasons the definition of "white" when reviewing ethnicity is so laughably inaccurate. There is a huge difference in opportunity between WASP or Jewish in the Northeast, for instance, and those of Scots Irish ancestory in the mountain south. Hopefully statistical analysis such as this can break open that stranglehold, especially as it is directly impacting a minority group in a negative fashion. Doing this exercise using say, white Baptists compared to other white subgroups, while maybe equally valid in the results, would be seen as racist by the very Ivy League system that is essentially practicing a form of racism.

Bryan November 28, 2012 at 6:50 pm GMT

Scott, thanks for your words of commiseration.

Yeah, my ultimate goal was to attend law school, and a big part of the heartbreak for me–or heartburn, the more cynical would call it–was seeing how skewed and absurd the admissions process to law school is.

I have no doubt that I could have eventually entered into a "top tier" law school, and that was a dream of mine also. I met with admissions officers from Duke, Harvard, Stanford, Fordham, etc. I was encouraged. I had the grades and background for it.

But–and I'm really not trying to sound corny 0r self-important here–what does it profit a man to gain the world and lose his soul? I really don't feel that I'm exaggerating when I say that that's exactly how it felt to me.

The best experience I had while In New York was working as an after-school programs administrator for P.S. 136, but that was only because of the kids. They'll be old and bitter and cynical soon enough.

At one point it occurred to me that I should have just started claiming "Black" as my ethnicity when I first started attending college as an adult. I never attended high-school so it couldn't have been disproved. I'm part Sicilian so I could pass for 1/4 African-American. Then I would have received the preference toward admission that, say, Michael Jordan's kids or Barack Obama's kids will receive when they claim their Ivy-league diplomas. I should have hid the "white privilege" I've enjoyed as the son of a fisherman and a waitress from one of the most economically-depressed states in America.

The bottom line is that those colleges are political brainwashing centers for a country I no longer believe in. I arrived on campus in 2009 and I'm not joking at all when I say I was actively persecuted for being a veteran and a conservative who was not drinking the Obama Kool-aid. Some big fat African-American lady, a back-room "administrator" for Columbia, straight-up threw my VA benefits certification in the garbage, so my money got delayed by almost two months. I had no idea what was going on. I had a wife and children to support.

The fact that technology has enabled us to sit here in real-time and correspond back-and-forth about the state of things doesn't really change the state of things. They are irredeemable. This country is broke and broken.

If Abraham Lincoln were born today in America he would wind up like "Uncle Teardrop" from Winter's Bone. Back then, in order to be an attorney, you simply studied law and starting trying cases. If you were good at it then you were accepted and became a lawyer. Today, something has been lost. There is no fixing it. I don't want to waste my time trying to help by being "productive" to the new tower of Babel or pretending to contribute.

Anonymous November 28, 2012 at 8:44 pm GMT

Perhaps only one thing you left out, which is especially important with regard to Jewish enrollment and applications at Ivy leagues, and other schools as well.
Jewish high school graduates actively look out for campuses with large Jewish populations, where they feel more comfortable.
I don't know the figures, but I believe Dartmouth, for example, has a much smaller Jewish population than Columbia, and it will stay that way because of a positive feedback loop. (i.e. Jews would rather be at Columbia than Dartmouth, or sometimes even rather be at NYU than Dartmouth). This explains some of the difference among different schools (and not solely better admission standards).

This is also especially relevant to your random lottery idea, which will inevitably lead to certain schools being overwhelmingly Asian, others being overwhelmingly Jewish, etc., because the percentage of applicants from every ethnicity is different in every school. This will necessarily eliminate any diversity which may or may not have existed until now.

TM says: • Website November 28, 2012 at 9:51 pm GMT

I like the lottery admissions idea a lot but the real remedy for the US education system would be to abandon the absurd elite cult altogether. There is not a shred of evidence that graduates of so-called elite institutions make good leaders. Many of them are responsible for the economic crash and some of them have brought us the disaster of the Bush presidency.

Many better functioning countries – Germany, the Scandinavians – do not have elite higher education systems. When I enrolled to University in Germany, I showed up at the enrollment office the summer before the academic year started, filled out a form (1), and provided a certified copy of my Abitur certificate proving that I was academically competent to attend University. I never wasted a minute on any of the admissions games that American middle class teenagers and their parents are subjected to. It would surely have hurt my sense of dignity to be forced to jump through all these absurd and arbitrary hoops.

Americans, due to their ignorance of everything happening outside their borders, have no clue that a system in which a person is judged by what "school" they attended is everything but normal. It is part of the reason for American dysfunction.

Luke Lea November 28, 2012 at 10:04 pm GMT

Since they are the pool from which tomorrow's governing elites will be chosen, I'd much rather see Ivy League student bodies which reflected the full ethnic and geographic diversity of the US. Right now rural and small town Americans and those of Catholic and Protestant descent who live in the South and Mid-West - roughly half the population - are woefully under-represented, which explains why their economic interests have been neglected over the last forty years. We live in a multi-cultural, multi-ethnic representative democracy and our policy-making elites must reflect that diversity. Else the country will come apart.

Thus I recommend 'affirmative action for all' in our elite liberal arts colleges and universities (though not our technical schools). Student bodies should be represent 'the best and the brightest' of every ethnic group and geographical area of the country. Then the old school ties will truly knit our society together in a way that is simply not happening today.

A side benefit - and I mean this seriously - is that our second and third tier colleges and universities would be improved by an influx of Asian and Ashkenazi students (even though the very best would still go to Harvard).

Jack November 28, 2012 at 10:07 pm GMT

I believe that this article raises – and then inappropriately immediately dismisses – the simplest and most likely reason for the over-representation of Jewish students at Ivy League Schools in the face of their declining bulk academic performance:

They apply to those schools in vastly disproportionate numbers.

Without actual data on the ethnicity of the applicants to these and other schools, we simply cannot rule out this simple and likely explanation.

It is quite clear that a large current of Jewish American culture places a great emphasis on elite college attendance, and among elite colleges, specifically values the Ivy League and its particular cache as opposed to other elite institutions such as MIT. Also, elite Jewish American culture, moreso than elite Asian American culture, encourages children to go far away from home for college, considering such a thing almost a right of passage, while other ethnic groups tend to encourage children to remain closer. A high performing Asian student from, say, California, is much more likely to face familial pressure to stay close to home for undergrad (Berkeley, UCLA, etc) than a high performing Jewish student from the same high school, who will likely be encouraged by his or her family to apply to many universities "back east".

Without being able to systematically compare – with real data – the ethnicities of the applicants to those offered admission, these conclusions simply cannot be accepted.

Pat Boyle November 28, 2012 at 10:30 pm GMT

Different expectations for different races should worry traditional Americans.

If we become comfortable with different academic standards for Asians will we soon be expected to apply different laws to them also? Will we apply different laws or at least different interpretations of the same laws to blacks?

The association of East Asians with CalTech is now as strong as the association of blacks with violent crime. Can not race conscious jurisprudence be far behind?

Around a millenium ago in England it mattered to the court if you were a commoner or a noble. Nobles could exercise 'high justice' with impunity. They were held to different standards. Their testimony counted for more in court. The law was class concious.

Then we had centuries of reform. We had 'Common Law'. By the time of our revolution the idea that all were equal before the law was a very American kind of idea. We were proud that unlike England we did not have a class system.

Today we seem to be on the threshold of a similar sytem of privileges and rights based on race. Let me give an example. If there were a domestic riot of somekind and a breakdown of public order, the authorities might very well impose a cufew. That makes good sense for black male teens but makes little or no sense for elderly Chinese women. I can envision a time when we have race specific policies for curfews and similar measures.

It seems to be starting in schools. It could be that the idea of equality before the law was an idea that only flourished between the fifteenth century and the twenty first.

Anonymous November 28, 2012 at 11:06 pm GMT

"But filling out a few very simple forms and having their test scores and grades scores automatically forwarded to a list of possible universities would give them at least the same chance in the lottery as any other applicant whose academic skills were adequate."

They get a lot of applications. I am guessing they chuck about 1/2 or more due to the application being incomplete, the applicant did not follow instructions, the application was sloppy, or just obviously poor grades/test scores. The interview and perhaps the essay and recommendations are necessary to chuck weirdos and psychopaths you do not want sitting next to King Fahd Jr. So the "byzantine" application process is actually necessary to reduce the number of applicants to be evaluated.

Kelly November 28, 2012 at 11:15 pm GMT

I have a friend who went to Stanford with me in the early 80s. She has two sons who recently applied to Stanford. The older son had slightly better grades and test scores. The younger son is gay. Guess which one got in?

Anonymous November 28, 2012 at 11:31 pm GMT

Bryan,

If you were in Columbia's GS school, (or even if you were CC/SEAS/Barnard) you ought to reach out to some of on-campus and alumni veteran's groups. They can help you maneuver through the school. (I know there's one that meets at a cafe on 122 and Broadway) CU can be a lonely and forbidding place for anyone and that goes double for GSers and quadruple for veterans.

You ought to give it another go. Especially if you aren't going somewhere else that's better. Reach out to your deans and make a fuss. No one in the bureaucracy wants to help but you can force them to their job.

FN November 28, 2012 at 11:44 pm GMT

Mr. Unz, the issues of jewish/gentile intermarriage and the significance of jewish-looking names do indeed merit more consideration than they were given in this otherwise very enlightening article.

What would the percentage of jews in Ivy-League universities look like if the methodology used to determine the percentage of jewish NMS semifinalists were applied to the list of Ivy League students (or some available approximation of it)?

Ben K November 29, 2012 at 12:24 am GMT

For background: I'm an Asian-American who worked briefly in legacy admissions at an Ivy and another non-Ivy top-tier, both while in school (work-study) and as an alum on related committees.

Mendy Finkel's observations are spot on. Re: her 1st point, personal "presentation" or "branding" is often overlooked by Asian applicants. An admission officer at another Ivy joked they drew straws to assign "Night of a 1000 Lee's", so accomplished-but-indistinguishable was that group.

A few points on the Asian analysis:

1. I think this analysis would benefit from expanding beyond HYP/Ivies when considering the broader meritocracy issue. Many Asians esteem technical-leaning schools over academically-comparable liberal arts ones, even if the student isn't a science major. When I was in college in the 90′s, most Asian parents would favor a Carnegie Mellon or Hopkins over Brown, Columbia or Dartmouth (though HYP, of course, had its magnetic appeal). The enrollment percentages reflect this, and while some of this is changing, this is a fairly persistent pattern.

2. Fundraising is crucial. The Harvard Class of '77 example isn't the most telling kind of number. In my experience, Jewish alumni provide a critical mass in both the day-to-day fundraising and the resultant dollars. And they play a key role, both as givers and getters, in the signature capital campaign commitments (univ hospitals, research centers, etc.). This isn't unique to Jewish Ivy alumni; Catholic alumni of ND or Georgetown provide similar support. But it isn't clear what the future overall Asian commitment to the Ivy "culture of fundraising" will be, which will continue to be a net negative in admissions.

Sidenote: While Asians greatly value the particular civic good, they are uneasy with it being so hinged to an opaque private sector, in this case, philanthropy. That distinction, blown out a bit, speaks to some of the Republican "Asian gap".

3. I would not place too much weight on NMS comparisons between Asians and Jews. In my experience, most Asians treat the PSAT seriously, but many established Jews do not – the potential scholarship money isn't a factor, "NMS semifinalist" isn't an admissions distinction, and as Mendy highlighted, colleges don't see the scores.

On a different note, while the "weight" of an Ivy degree is significant, it's prestige is largely concentrated in the Northeast and among some overseas. In terms of facilitating access and mobility, a USC degree might serve you better in SoCal, as would an SMU one in TX.

And like J Harlan, I also hope the recent monopoly of Harvard and Yale grads in the presidency will end. No doubt, places like Whittier College, Southwest Texas State Teachers' College, and Eureka College gave earlier presidents valuable perspectives and experience that informed their governing.

But thank you, Ron, for a great provocative piece. Very well worth the read.

Anonymous November 29, 2012 at 12:28 am GMT

Hey Ron, your next article should be on the military academies, and all those legacies that go back to the Revolutionary War. How do you get into the French military academy, and do the cadets trace their family history back to the soldiers of Napoleon or Charles Martel or whatever?

M_Young November 29, 2012 at 1:46 am GMT

"Thus, there appears to be no evidence for racial bias against Asians, even excluding the race-neutral impact of athletic recruitment, legacy admissions, and geographical diversity."

Yes, at UCLA, at least up to 2004, Asian and white admits had nearly identical SATs and GPAs.

Further, it just isn't the case that Asians are so spectacular as people seem to think. Their average on the SAT Verbal is slightly less than whites, their average on SAT Writing is slightly more. Only in math do they have a significant advantage, 59 points or .59 standard deviation. Total advantage is about .2 over the three tests. Assuming that Harvard or Yale admit students at +3 standard deviations overall, and plugging the relative group quantiles +(3, 2.8) into a normal distribution, we get that .14% of white kids would get admitted, versus .26% of Asian kids. Or, 1.85 Asian kids for every one white kid.

But, last year 4.25 times as many whites as Asians took the SAT, so there still should be about 2.28 times as many white kids being admitted as Asians (4.25/1.85).

On GPA, whites and Asians are also pretty similar on average, 3.52 for Asians who took the SAT, 3.45 for whites who took the SAT. So that shouldn't be much of a factor.

Anonymous November 29, 2012 at 4:04 am GMT

I am a Cadet at the US Military Academy at West Point and generally pretty familiar with trans-national Academy admissions processes. There's an excellent comparative study of worldwide military academy admissions that was done in the late '90′s you might find interesting (IIRC it was done by a group in the NATO Defence College) and I think you will find that although soldiers are often proud of their family histories to a fault, it is not what controls entrance to the officer corps in most countries.

"Legacy" is definitely meaningless in US Military Academy admissions, although can be very helpful in the separate process of securing a political appointment to attend the Academy once accepted for admission and in an Army career. West Point is not comparable to the Ivy League schools in the country, because (ironically) the admissions department that makes those comparisons lets in an inordinate number of unqualified candidates and ensures our student body includes a wide range of candidates, from people who are unquestionably "Ivy League material" to those who don't have the intellect to hack it at any "elite" institution.

Prior the changes in admissions policies and JFK ordering an doubling of the size of the Corps of Cadets in the '60′s, we didn't have this problem. But, I digress. My point is, the Academy admissions system is very meritocratic.

Todd November 29, 2012 at 5:49 am GMT

Thank you for the great article.

I am a Jewish alum of UPenn, and graduated in the late 90s. That puts me almost a generation ago, which may be before the supposed Jewish decline you write about. I was in an 80%+ Jewish fraternity, and at least 2/3 of my overall network of friends at Penn was also Jewish. As was mentioned earlier, I have serious qualms with your methods for counting Jews based upon last name.

Based upon my admittedly non-scientific sample, the percentage of us who had traditionally Jewish last names was well under half and closer to 25%. My own last name is German, and you would never know I am Jewish based solely upon my name (nor would you based upon the surname of 3/4 of my grandparents, despite my family being 100% Jewish with no intermarriages until my sister).

By contrast, Asians are much easier to identify based upon name. You may overcount certain names like Lee that are also Caucasian, but it is highly unlikely that you will miss any Asian students when your criterion is last name.

Admittedly I skimmed parts of the article, but were other criterion used to more accurately identify the groups?

Interesting November 29, 2012 at 7:02 am GMT

Great article.

The Jewish presence is definitely understated by just looking at surnames. As is the American Indian.

My maternal grandfather was Ashkenazi and his wife was 1/2 Ashkenazi and 1/4 Apache. He changed his name to a Scots surname that matched his red hair so as to get ahead as a business man in 20s due to KKK and anti-German feelings at the time. Their kids had two PHDs and a Masters between them despite their parents running a very blue collar firm.

My surname comes from my dad and its a Scottish surname although he was 1/4 Cherokee. On that side we are members of the FF of Virignia. Altogether I am more Jewish and American Indian than anything else yet would be classified as white. I could easily claim to be
Jewish or Indian on admissions forms. I always selected white. I was NMSF.

Both my sister and I have kids. Her husband is a full blood Indian with a common English surname. One of my nieces made NMSF and another might. My sisters kids do not think of themselves as any race and check other.

My wife is 1/4 Indian and 3/4 English. My kids are young yet one has tested to an IQ in the 150s.

Once you get West of the Appalachians, there are a lot of mutts in the non-gentile whites. A lot of Jews and American Indians Anglicized themselves a generation or two ago and they are lumped into that group – as well as occupy the top percentile academically.

A Jew November 29, 2012 at 7:44 am GMT

Interesting article with parts I would agree with but also tinged with bias and conclusions that I would argue are not fully supported by the data.

I think more analysis is needed to confirm your conclusions. As others have mentioned there may be problems with your analysis of NMS scores. I think graduate admissions and achievements especially in the math and sciences would be a better measure of intellectual performance.

Now, I didn't attend an Ivy League school, instead a public university, mainly because I couldn't afford it or so I thought. I was also a NMS finalist.

But I always was of the opinion that except for the most exceptional students admission to the Ivies was based on the wealth of your family and as you mentioned there are quite a few affluent Jews so I imagine they do have a leg up. Harvard's endowment isn't as large as it is by accident.

It is interesting that you didn't discuss the stats for Stanford.

Lastly, I think your solution is wrong. The pure meritocracy is the only fair solution. Admissions should be based upon the entrance exams like in Asia and Europe.

There are plenty of options for those who don't want to compete and if the Asians dominate admissions at the top schools so be it.

Hopefully, all of this will be mute point n a few years as online education options become more popular with Universities specializing in graduate education and research.

Leon November 29, 2012 at 10:24 am GMT

Ron Unz on Asians (ie Asian Americans): "many of them impoverished immigrant families"

Why do you twice repeat this assertion. Asians are the wealthiest race and most of the wealthiest ethnic groups tracked by the Census Bureau, which includes immigrants.

A potentially bigger issue completely ignored by your article is how do colleges differentiate between 'foreign' students (overwhelmingly Asian) and American students. Many students being counted as "Asian American" are in reality wealthy and elite foreign "parachute kids" (an Asian term), dropped onto the generous American education system or into boarding schools to study for US entrance exams, qualify for resident tuition rates and scholarships, and to compete for "American" admissions slots, not for the usually limited 'foreign' admission slots.

Probably people from non-Asian countries are pulling the same stunt, but it seems likely dominated by Asians. And expect many more with the passage of the various "Dream Acts"

So American kids must compete with the offspring of all the worlds corrupt elite for what should be opportunities for US Americans.

Weighty Commentary November 29, 2012 at 12:03 pm GMT

New York PSAT data:

http://media.collegeboard.com/digitalServices/pdf/research/NY_12_05_02_01.pdf

In New York Asian-Americans make up 9.5%, whites 50.4%, Latinos 18.3% and African-Americans 15.7%.

California PSAT data:

http://media.collegeboard.com/digitalServices/pdf/research/CA_12_05_02_01.pdf

In California Asian-Americans make up 19.7% of PSAT takers, and whites make up 31.9%, with 37% Latino and 5.7% African-American.

Anonymous November 29, 2012 at 2:01 pm GMT

Am I the only one that finds the comparison of Asians (a race) to Jews (a religion) as basis for a case of discrimination completely flawed? I got in at Harvard and don't remember them even asking me what my religion was.

The value of diversity is absolutely key. I have a bunch of very good Asian friends and I love them dearly, but I don't believe a place like CalTech with its 40% demographics cannot truly claim to be a diverse place any more.

nooffensebut says: • Website Show Comment Next New Comment November 29, 2012 at 2:20 pm GMT

Regarding the SAT, we do know more than just differences of averages between whites and Asians. We have some years of score distributions . As recently as 1992, 1.2% of whites and 5.1% of Asians scored between 750 and 800 on the math subtest. As recently as 1985, 0.20% of whites and 0.26% of Asians scored in that range on the verbal/critical reading subtest.

On a different form of the writing subtest than is currently used, 5.0% of whites and 3.0% of Asians scored greater than 60 in 1985. We also know that, as the white-Asian average verbal/critical reading gap shrank to almost nothing and the average math gap grew in Asians' favor, the standard deviations on both for Asians have been much higher than every other group but have stayed relatively unchanged and have become, in fact, slightly lower than in 1985.

Therefore, Asians probably greatly increased their share of top performers.

Anonymous November 29, 2012 at 2:44 pm GMT

@Milton F.: "Perhaps, by ensuring that "the best" students are not concentrated in only 8 universities is why the depth and quality of America's education system remains the envy of the world."

Hardly. America's education system is "the envy" because of the ability for minorities to get placement into better schools, not solely for the education they receive. Only a very select few institutions are envied for their education primarily, 90% of the colleges and universities across the country are sub-standard education providers, same with high schools.

I would imagine you're an educator at some level, more than likely, at one of the sub-standard colleges or even perhaps a high school teacher. You're attempting to be defensive of the American education system, when in reality, you're looking at the world through rose colored glasses. Working from within the system, rather than from the private sector looking back, gives you extreme tunnel vision. That, coupled with the average "closed mindedness" of educators in America is a dangerous approach to advancing the structure of the American education system. You and those like you ARE the problem and should be taken out of the equation as quickly as possible. Please retire ASAP or find another career.

Rob Schacter November 29, 2012 at 3:37 pm GMT

Aside from the complete lack of actual ivy league admission data on jewish applicants, a big problem with unz's "jewish affirmative action" claim is how difficult such a policy would be to carry out in complete secrecy.

Now, it would be one thing if Unz was claiming that jews are being admitted with similar numbers to non-jewish whites, but in close cases, admissions staff tend to favor jewish applicants. But he goes much further than that. Unz is claiming that jews, as a group, are being admitted with lower SAT scores than non-jewish whites. Not only that, but this policy is being carried out by virtually every single ivy league college and it has been going on for years. Moreover, this preference is so pervasive, that it allows jews to gain admissions at many times the rate that merit alone would yield, ultimately resulting in entering classes that are over 20% Jewish.

If a preference this deep, consistent and widespread indeed exists, there is no way it could be the result of subjective bias or intentional tribal favoritism on the part of individual decision makers. It would have to be an official, yet unstated, admissions policy in every ivy league school. Over the years, dozens (if not hundreds) of admission staff across the various ivy league colleges would be engaging in this policy, without a single peep ever leaking through about Jewish applicants getting in with subpar SAT scores. We hear insider reports all the time about one group is favored or discriminated against (we even have such an insider account in this comment thread), but we hear nothing about the largest admission preference of them all.

Remember, admissions staffs usually include other ethnic minorities. I couldn't imagine them not wondering why jews need to be given such a big boost so that they make up almost a quarter of the entering class. Even if every member of every admissions committee were Jewish liberals, it would still be almost impossible to keep this under wraps.

Obviously, I have never seen actual admission numbers for Jewish applicants, so I could be wrong, and there could in fact be an unbreakable wall of secrecy regarding the largest and most pervasive affirmative action practice in the country. Or, perhaps, the ivy league application pool contains a disproportionate amount of high scoring jewish applicants.

Anonymous says: • Website Show Comment Next New Comment November 29, 2012 at 5:41 pm GMT

As some who is Jewish from the former Soviet Union, and who was denied even to take an entrance exam to a Moscow college, I am saddened to see that American educational admission process looks more and more "Soviet" nowadays. Kids are denied opportunities because of their ethnic or social background, in a supposedly free and fair country!

But this is just a tip of the iceberg. The American groupthink of political correctness, lowest common denominator, and political posturing toward various political/ethnic/religious/sexual orientation groups is rotting this country inside out.

Worse things are yet to come.

Julia November 29, 2012 at 6:13 pm GMT

"Similarly, Jews were over one-quarter of the top students in the Physics Olympiad from 1986 to 1997, but have fallen to just 5 percent over the last decade, a result which must surely send Richard Feynman spinning in his grave."

Actually, Richard Feynman famously rejected genetic explanations of Jewish achievement (whether he was right or wrong to do so is another story), and aggressively resisted any attempts to list him as a "Jewish scientist" or "Jewish Nobel Prize winner." I am sure he would not cared in the slightest bit how many Jews were participating in the Physics Olympiad, as long as the quality of the students' work continued to be excellent. Here is a letter he wrote to a woman seeking to include him in a book about Jewish achievement in the sciences.

Dear Miss Levitan:

In your letter you express the theory that people of Jewish origin have inherited their valuable hereditary elements from their people. It is quite certain that many things are inherited but it is evil and dangerous to maintain, in these days of little knowledge of these matters, that there is a true Jewish race or specific Jewish hereditary character. Many races as well as cultural influences of men of all kinds have mixed into any man. To select, for approbation the peculiar elements that come from some supposedly Jewish heredity is to open the door to all kinds of nonsense on racial theory.

Such theoretical views were used by Hitler. Surely you cannot maintain on the one hand that certain valuable elements can be inherited from the "Jewish people," and deny that other elements which other people may find annoying or worse are not inherited by these same "people." Nor could you then deny that elements that others would consider valuable could be the main virtue of an "Aryan" inheritance.

It is the lesson of the last war not to think of people as having special inherited attributes simply because they are born from particular parents, but to try to teach these "valuable" elements to all men because all men can learn, no matter what their race.

It is the combination of characteristics of the culture of any father and his father plus the learning and ideas and influences of people of all races and backgrounds which make me what I am, good or bad. I appreciate the valuable (and the negative) elements of my background but I feel it to be bad taste and an insult to other peoples to call attention in any direct way to that one element in my composition.

At almost thirteen I dropped out of Sunday school just before confirmation because of differences in religious views but mainly because I suddenly saw that the picture of Jewish history that we were learning, of a marvelous and talented people surrounded by dull and evil strangers was far from the truth. The error of anti-Semitism is not that the Jews are not really bad after all, but that evil, stupidity and grossness is not a monopoly of the Jewish people but a universal characteristic of mankind in general. Most non-Jewish people in America today have understood that. The error of pro-Semitism is not that the Jewish people or Jewish heritage is not really good, but rather the error is that intelligence, good will, and kindness is not, thank God, a monopoly of the Jewish people but a universal characteristic of mankind in general.

Therefore you see at thirteen I was not only converted to other religious views but I also stopped believing that the Jewish people are in any way "the chosen people." This is my other reason for requesting not to be included in your work.

I am expecting that you will respect my wishes.

Sincerely yours,

Richard Feynman

Ben K November 29, 2012 at 6:43 pm GMT

@Rob Schacter – your last point is basically spot-on. The Ivies are fairly unique in the high proportion of Jewish applicants. History, geographical bias, and self-selection all play a role. I think the overall preference distortion is probably not as wide as Unz claims, but you will see similar tilts at Stanford, Northwestern, etc. that reflect different preference distortions.

@Leon, two quick points.

1st – the census tracks by household, which generally overestimates Asian wealth. Many families have three generations and extended members living in one household (this reflects that many of them work together in a small family business).

2nd – most of the time, it's clear in the application (the HS, personal info, other residency info, etc.) which Asian applicants are Asian-American and which are "Parachute Kids". But the numbers are much smaller than one might think, and the implication depends on the school.

At Ivies, parachute kids (both Asian and not) tend to compete with each other in the application pool, and aren't substantially informing the broader admissions thesis in this article. I'm not saying that's right, just saying it's less material than we might think.

They more likely skew the admissions equation in great-but-not-rich liberal arts colleges (like Grinnell) and top public universities (like UCLA), which are both having budget crises and need full fare students, parachute or not. And for the publics, this includes adding more higher-tuition, out-of-state students, which further complicates assertions of just whose opportunities are being lost.

I will bring this back to fundraising and finances again, because the broader point is about who is stewarding and creating access: so long as top universities are essentially run as self-invested feedback loops, and position and resource themselves accordingly (and other universities have to compete with them), we will continue to see large, persistent discrepancies in who can participate.

Eric Rasmusen November 29, 2012 at 7:58 pm GMT

When I applied to Harvard College back in 1976, I was proud of my application essay. In it, I proposed that the US used the Israeli army as a proxy, just as the Russians were using the Cuban army at the time.
Alas, I wasn't admitted (I did get into Yale, which didn't require free-form essay like that).

This, of course, illustrates the point that coming from an Application Hell instead of from central Illinois helps a student know how to write applications. It also illustrates what might help explain the mystery of high Jewish admissions: political bias. Jews are savvier about knowing what admissions officers like to hear (including the black and Latino ones, who as a previous commentor said aren't likely to be pro-semite). They are also politically more liberal, and so don't have to fake it. And their families are more likely to read the New York Times and thus have the right "social graces" as we might call them, of this age.

It would be interesting to know how well "true WASPS" do in admissions. This could perhaps be estimated by counting Slavic and Italian names, or Puritan New England last names. I would expect this group to do almost as well as Jews (not quite as well, because their ability would be in the lower end of the Legacy group).


David in Cali November 29, 2012 at 8:16 pm GMT

The missing variable in this analysis is income/class. While Unz states that many elite colleges have the resources to fund every student's education, and in fact practice need-blind admissions, the student bodies are skewed towards the very highest percentile of the income and wealth distribution. SAT scores may also scale with parents' income as well.

Tuition and fees at these schools have nearly doubled relative to inflation in the last 25-30 years, and with home prices in desirable neighborhoods showing their own hyper-inflationary behavior over the past couple of decades (~15 yrs, especially), the income necessary to pay for these schools without burdening either the student or parents with a lot of debt has been pushed towards the top decile of earners. A big chunk of the upper middle class has been priced out. This could hit Asian professionals who may be self made harder than other groups like Jews who may be the second or third generation of relative affluence, and would thus have advantages in having less debt when starting their families and careers and be less burdened in financing their homes. Would be curious to see the same analysis if $$ could be controlled.


David in Cali November 29, 2012 at 8:19 pm GMT

I would also like to add that I am a late '80′s graduate of Wesleyan who ceased his modest but annual financial contribution to the school after reading The Gatekeepers.


Rebecca November 29, 2012 at 9:33 pm GMT

If I had a penny for every Jewish American I met (including myself) whose first and last name gave no indication of his religion or ethnicity, I'd be rich. Oh–and my brother and I have four Ivy League degrees between us.


Anonymous November 29, 2012 at 10:16 pm GMT

I almost clicked on a different link the instance I came across the word "elite" , but curiosity forced my hand.

Just yesterday my mom was remarking how my cousin had gotten into MIT with an SAT score far below what I scored, and she finished by adding that I should have applied to an ivy-league college after high school. I as always, reminded her, I'm too "black for ivy games".

I always worked hard in school, participated in olympiads and symposiums, and was a star athlete. When it came to applying for college I found myself startled when forced to "quantify" my achievements in an "application package". I did not do or engage in these activities solely to boost my chances of gaining admission into some elite college over similarly-hardworking Henry Wang or Jess Steinberg. I did these things because I loved doing them.

Sports after class was almost a relaxation activity for me. Participating in math olympiads was a way for me to get a scoop on advanced mathematics. Participating in science symposiums was a chance for me to start applying my theoretical education to solve practical problems.

The moment I realized I would have to kneel down before some admissions officer and "present my case", outlining my "blackness", athleticism, hard work, curiosity, and academic ability, in that specific order I should point, in order to have a fighting chance at getting admitted; is the moment all my "black rage" came out in an internal explosion of rebellion and disapproval of "elite colleges".

I instead applied to a college that was blind to all of the above factors. I am a firm believer that hard work and demonstrated ability always win out in the end. I've come across, come up against is a better way to put it, Ivy-league competition in college competitions and applications for co-ops and internships, and despite my lack of "eliteness" I am confident that my sheer ability and track record will put me in the "interview candidate" pool.

Finally, my opinion is: let elite schools keep doing what they are doing. It isn't a problem at all, the "elite" tag has long lost its meaning.


Anonymous November 29, 2012 at 10:52 pm GMT

The difficulty with using Jewish sounding last names to identify Jewish students works poorly in two ways today. Not only, as others have pointed out, do many Jews not have Jewish sounding last names, but there are those, my grandson for example, who have identifiably Jewish last names and not much in the way of Jewish background.


Anonymous November 29, 2012 at 11:34 pm GMT

Interesting reading. The article opens a deceptively simple statistical window into a poorly understood process - a window which I would guess even the key participants have never looked through. I especially appreciated the insights provided by the author's examination of Asian surname-frequencies and their over-representation in NMS databases.

Though this is a long and meticulously argued piece, it would have benefited from a more thorough discussion of the statistical share of legacies and athletic scholarships in elite admissions.

Perhaps, though, it would be better to focus on increasing meritocracy in the broader society, which would inevitably lead to some discounting of the value of educational credentials issued by these less than meritocratic private institutions.

It is precisely because the broader society is also in many key respects non-meritocratic that the non-meritocratic admissions practices of elite institutions are sustainable.


Anon November 29, 2012 at 11:50 pm GMT

Despite the very long and detailed argument, the writer's interpretation of a pro-Jewish admissions bias at Ivy-league schools is worryingly flawed.

First, he uses two very different methods of counting Jews: name recognition for counting various "objective" measures such as NMS semifinalists and Hillel stats for those admitted to Harvard. The first is most likely an underestimate while the latter very possibly inflated (in both cases especially due to the very large numbers of partially-Jewish students, in the many interpretations that has). I wonder how much of his argument would just go away if he simply counted the number of Jews in Harvard using the same method he used to count their numbers in the other cases. Would that really be hard to do?

Second, he overlooks the obvious two sources that can lead to such Asian/Jewish relative gaps in admissions. The first is the different groups' different focus on Science/Math vs. on Writing/Culture. It is very possible that in recent years most Asians emphasize the former while Jews the latter, which would be the natural explanation to the Caltech vs Harvard racial composition (as well as to the other stats). The second is related but different and it is the different group's bias in applications: the same cultural anecdotes would explain why Asians would favor applying to Caltech and Jews to Harvard. A natural interpretation of the data would be that Jews have learned to optimize for whatever criteria the Ivy leagues are using and the Asians are doing so for the Caltech criteria.

Most strange is the author's interpretation of how a pro-Jewish bias in admissions is actually put into effect: the application packets do not have the data of whether the applicant is Jewish or not, and I doubt that most admission officers figure it out in most cases. While it could be possible for admissions officers to have a bias for or against various types of characteristics that they see in the data in front of them (say Asian/Black/White or political activity), a systematic bias on unobserved data is a much more difficult proposition to make. Indeed the author becomes rather confused here combining the low education level of admissions officers, that they are "liberal arts or ethnic-studies majors" (really?), that they are "progressive", and that there sometimes is corruption, all together presumably leading to a bias in favor of Jews?

Finally, the author's suggestion for changing admittance criteria is down-right bizarre for a conservative: The proposal is a centralized solution that he aims to force upon the various private universities, each who can only loose from implementing it.

Despite the long detailed (but extremely flawed) article, I am afraid that it is more a reflection of the author's biases than of admissions biases.


Allan November 30, 2012 at 3:00 am GMT

Both the article and the comments are illuminating. My takeaways:

1) Affirmative action in favor of blacks and Hispanics is acknowledged.

2) Admissions officers in the Ivy League appear to limit Asian admissions somewhat relative to the numbers of qualified applicants.

3) They may also admit somewhat more Jewish applicants than would be warranted relative to their comparative academic qualifications. The degree to which this is true is muddled by the difficulty of identifying Jews by surnames, by extensive intermarriage, by changing demographics within the Jewish population, by geographic factors, and by the propensity to apply in the first place.

4) (My major takeaway.) White Protestants and Catholics are almost certainly the sole groups that are greatly under-represented relative to their qualifications as well as to raw population percentages.

5) This is due partly to subtle or open discrimination.

6) I would hypothesize that a great many of the white Protestants and Catholics who are admitted are legacies, star athletes, and the progeny of celebrities in entertainment, media, politics, and high finance. White Protestant or Catholic applicants, especially from the hinterlands, who don't fit one of these special categories–though they must be a very large component of Mr Unz's pool of top talent–are out of luck.

7) And everyone seems to think this is just fine.

The inner and outer ring idea seems to me an excellent one, though the likelihood of it happening is next to nil, both because some groups would lose disproportionate access and because the schools' imprimatur would be diminished in
value.

The larger point, made by several respondents, is that far too many institutions place far too much weight on the credentials conferred by a small group of screening institutions. The great advantage of the American system is not that it is meritocratic, either objectively or subjectively. It is that it is–or was–Protean in its flexibility. One could rise through luck or effort or brains, with credentials or without them, early in life or after false starts and setbacks. And there were regional elites or local elites rather than, as we increasingly see, a single, homogenized national elite. Success or its equivalent wasn't something institutionally conferred.

The result of the meritocratic process is that we are making a race of arrogant, entitled overlords, extremely skilled at the aggressive and assertive arts required to gain admission to, and to succeed in, a few similar and ideologically skewed universities and colleges; and who spend the remainder of their lives congratulating each other, bestowing themselves on the populace, and destroying the country.

No wonder we are where we are.


WG November 30, 2012 at 11:53 am GMT

This article is the product of careful and thoughtful research, and it identifies a problem hiding in plain sight. As a society, we have invested great trust in higher education as a transformative institution. It is clear that we have been too trusting.

That the admissions policies of elite universities are meritocratic is hardly the only wrong idea that Americans have about higher education. Blind faith in higher education has left too many people with largely worthless degrees and crushing student-loan debt.

Of course, the problems don't end with undergraduate education. The "100 reasons NOT to go to grad school" blog offers some depressing reading:

http://100rsns.blogspot.com/

The higher education establishment has failed to address so many longstanding internal structural problems that it's hard to imagine that much will change anytime soon.


candid_observer November 30, 2012 at 1:25 pm GMT

Jack above makes the following point:

"I believe that this article raises – and then inappropriately immediately dismisses – the simplest and most likely reason for the over-representation of Jewish students at Ivy League Schools in the face of their declining bulk academic performance:

They apply to those schools in vastly disproportionate numbers."

Here's the problem with that point. What Ron Unz demonstrates, quite effectively, is that today's Jews simply don't measure up to either their Asian or their White Gentile counterparts in terms of actual performance when they get into, say, Harvard. The quite massive difference in the proportions of those groups who get into Phi Beta Kappa renders this quite undeniable. What is almost certain is that policies that favored Asians and White Gentiles over the current crop of Jewish students would create a class of higher caliber in terms of academic performance.

If indeed it's true that Jews apply to Harvard in greater numbers, then, if the desire is to produce a class with the greatest academic potential, some appropriate way of correcting for the consequent distortion should be introduced. Certainly when it comes to Asians, college admissions committees have found their ways of reducing the numbers of Asians admitted, despite their intense interest in the Ivies.


candid_observer November 30, 2012 at 1:40 pm GMT

One way of understanding Unz's results here might be not so much that today's Jewish student is far less inclined to hard academic work than those of yesteryear, but rather that others - White Gentiles and Asians - have simply caught up in terms of motivation to get into elite schools and perform to the best of their abilities.

Certainly among members of the upper middle class, there has been great, and likely increasing, emphasis in recent years on the importance of an elite education and strong academic performance for ultimate success. This might well produce a much stronger class of students at the upper end applying to the Ivies.

It may be that not only the Asians, but upper middle class White Gentiles, are "The New Jews".


Howard November 30, 2012 at 5:11 pm GMT

I don't always agree with, Mr. Unz, but his expositions are always provocative and informative. As far as the criticisms of his data set go, he openly admits that they are less than ideal. However, the variances are so large that the margin of error can be excused. Jews are 40 TIMES more likely to be admitted to Harvard than Gentile whites. Asians are 10 times more likely. Of course, it could be possible that Jews, because of higher average IQs, actually produce 40 times as many members in the upper reaches of the cognitive elite.

Given Richard Lynn's various IQ studies of Jews and the relative preponderance of non-Jewish and Jewish whites in the population, however, whites ought to have a 7 to 1 representation vis-a-vis Jews in Ivy League institutions, assuming the IQ cutoff is 130. Their numbers are roughly equivalent instead.

Because Ivy League admissions have been a hotbed of ethnic nepotism in the past, it seems that special care should be taken to avoid these improprieties (or the appearance thereof) in the future. But no such safeguards have been put in place. David Brooks has also struck the alarm about the tendency of elites to shut down meritocratic institutions once they have gained a foothold: http://www.nytimes.com/2012/07/13/opinion/brooks-why-our-elites-stink.html?_r=1&ref=global-home

Clannish as the WASPs may have been, they were dedicated enough to ideals of fairness and equality that they opened the doors for their own dispossession. I predict that a new Asian elite will eventually eclipse our Jewish elite. Discrimination and repression can restrain a vigorously ascendant people but for so long. When they do, it will be interesting to see if this Asian cohort clings to its longstanding Confucian meritocratic traditions, embodied in the Chinese gaokao or if it too will succumb to the temptation, ever present in a multiethnic polity, of preferring ethnic kinsmen over others.

Does anyone know how a minority such as the Uighurs fares in terms of elite Chinese university admissions?


Daniel November 30, 2012 at 7:39 pm GMT

This may sound like special-pleading, but it's not clear that full-scale IQ measures are meaningful when assessing and predicting Jewish performance. Jewish deficits on g-loaded spatial reasoning task may reflect specific visuo-spatial deficits and not deficits in g. As far as I know, no one doubts that the average Jewish VIQ is at least 112 (and possibly over 120). This score may explain jewish representation which seems to exceed what would be projected by their full-scale iq scores. Despite PIQ's correllation to mathematical ability in most populations, we ought also remember that, at least on the WAIS, it is the VIQ scale that includes the only directly mathematical subtest. We should also note that Jewish mathematicians seem to use little visualization in their reasoning (cf. Seligman

That said, I basically agree that Jews are, by and large, coasting. American Jews want their children to play hockey and join 'greek life' and stuff, not sit in libraries . It's sad for those of us who value the ivory tower, but understandable given their stigmatiziation as a nerdish people.


Nick November 30, 2012 at 9:06 pm GMT

I wonder if it would be at all possible to assess the political biases of admissions counselors at these schools by assessing the rates at which applicants from red states are admitted to the elite universities. I suppose you would have to know how many applied, and those data aren't likely to exist in the public domain.


Alex November 30, 2012 at 9:47 pm GMT

One major flaw with this article's method of determining Jewish representation: distinctive Jewish surnames in no way make up all Jewish surnames. Distinctive Jewish surnames happen to be held by only 10-12% of all American Jews. In fact, the third most common American Jewish surname after Cohen and Levy is Miller. Mr. Unz' methodology does not speak well for itself, given that he's comparing a limited set of last names against a far more carefully scrutinized estimate.

I'm not suggesting his estimate of national merit scholars and the like is off by a full 90%, but he's still ending up with a significant undercount, possibly close to half. That would still mean Jews may be "wrongfully" over-represented are many top colleges and universities, but the disproportion is nowhere near as nefarious as he would suggest.


Ben K November 30, 2012 at 11:18 pm GMT

@Nick – the "red state" application and admission rates isn't useful data.

Short answer: There are many reasons for this, but basically, historical momentum and comfort play a much bigger role in where kids apply than we think. I assure you, far more top Nebraska HS seniors want to be a Cornhusker than a Crimson, even though many would find a very receptive consideration and financial aid package.

Long answer: 1st, although this article and discussion have been framed in broad racial/cultural terms, the mechanics of college admissions are mostly local and a bit like athletic recruiting – coverage (and cultivation) of specific regions and districts, "X" high school historically deliver "X" kinds of candidates, etc. So to the degree we may see broader trends noted in the article and discussion, some of that is rooted at the HS level and lower.

2nd, in "red states", most Ivy applicants come from the few blue or neutral districts. E.g.: the only 2 Utah HS's that consistently have applicants to my Ivy alma mater are in areas that largely mirror other high-income, Dem-leaning areas nationwide rather than the rest of Utah.

3rd, but, with some variation among the schools, the Ivy student body is more politically balanced than usually assumed. Remember, most students are upper-income, Northeastern suburban and those counties' Dem/Rep ratio is often closer to 55/45 than 80/20.

But to wrap up, ideology plays a negligible role in admissions generally (there's always an exception); they have other fish to fry (see below).

@soren in Goldman's post ( http://bit.ly/TrbJSB ) and other commenters here:

"Quota against Asians" is not entirely wrong, but it's too strong because it implies the forward intent is about limiting their numbers.

Put another way, Unz believes the Ivies are failing their meritocractic mission by over-admitting a group that is neither disadvantaged nor has highest technical credentials; and this comes at the expense of a group that is more often disadvantaged and with higher technical credentials. The Ivies would likely reply, "well, we define 'meritocractic mission' differently".

That may be a legitimate counter, but it's also what needs more expansion and sunlight.

But Unz' analysis has a broader causation vs correlation gap. Just because admissions is essentially zero-sum doesn't mean every large discrepancy in it is, even after allowing for soft biases. I've mentioned these earlier in passing, but here are just a couple other factors of note:

Admissions is accountable for selection AND marketing and matriculation – these are not always complementary forces. Essentially, you want to maximize both the number and distribution (racial, geographic, types of accomplishment, etc.) of qualified applicants, but also the number you can safely turn down but without discouraging future applications, upsetting certain stakeholders (specific schools, admissions counselors/consultants, etc.) or "harming" any data in the US News rankings. And you have a very finite time to do this, and – not just your competition, but the entire sector – is essentially doing this at the same time. You can see how an admissions process would develop certain biases over time to limit risks in an unpredictable, high volume market, even if rarely intended to target a specific group. Ivy fixation (but especially around HYP) is particularly concentrated in the Northeast – a sample from several top HS' across America (public and private) would show much larger application and matriculation variations among their top students than would be assumed from Unz's thesis. Different Ivies have different competitors/peers, which influences their diversity breakdowns – to some degree, they all co-compete, but just as often don't. E.g.: Princeton often overlaps with Georgetown and Duke, Columbia with NYU and Cooper Union, Cornell with SUNY honors programs because it has some "in state" public colleges, etc.

There's much more, of course, but returning to Unz's ethnographic thesis, I have this anecdote: we have two friends in finance, whose families think much of their success. The 1st is Asian, went to Carnegie Mellon, and is a big bank's trading CTO; the 2nd is Jewish, went to Wharton, and is in private equity.

Put another way, while both families shared a pretty specific vision of success, they differed a lot in the execution. The upper echelon of universities, and the kinds of elite-level mobility they offer, are much more varied than even 25 years ago. While the relative role of HYP in our country, and their soft biases in admission, are "true enough" to merit discussion, it's probably not the discussion that was in this article.


candid_observer November 30, 2012 at 11:23 pm GMT

Alex,

While you may have a point as to the difficulty in some cases of identifying a Jewish surname, the most important thing methodologically is that the criteria be performed uniformly if one is comparing Jewish representation today vs. that of other periods. I can't think, for example, of any reason that Cohens or Levys or Golds should be any less well represented today as opposed to many years ago if indeed there has not been an underlying shift in numbers of Jews in the relevant categories. (Nor, for that matter, should issues like intermarriage affect the numbers much here - for every mother whose maiden name is Cohen who marries a non-Jew with a non-Jewish surname, and whose half Jewish child will be counted as non-Jewish, there is, on average, going to be a man named Cohen who will marry a non-Jew, and whose half Jewish child will be counted as Jewish.)


Bud Wood November 30, 2012 at 11:43 pm GMT

One might suppose that all this "inequity" and "discrimination" matters if we're keeping score. However, seems to me that too much emphasis is typically placed on equality whereas real criteria in productive and satisfying lives are neglected. Kind'a like some people wanting bragging rights as much, if not more, than wanting positive reality.

I guess I just went about my way and lived a pretty god life (so far). Who knows?; maybe those "bragging rights" are meaningful.

Bud Wood
Grad – Stanford Elec Engrg.


Neil Schipper December 1, 2012 at 4:54 am GMT

Thought provoking article.

Ditto to many comments about the "last name problem", even if its correction weakens but doesn't invalidate the argument. (One imagines, chillingly, a new sub-field: "Jewish last name theory", seeking to determine proportionalities of classic names validated against member/donor lists of synagogues and other Jewish organizations.)

Regarding the 20% inner ring suggestion, it suffers from its harsh transition. Consider a randomized derating scheme: a random number between some lower bound (say 0.90) and 1.00 is applied to each score on the ranked applicant list.

The added noise provides warmth to a cold test scores list. Such an approach nicely captures the directive: "study hard, but it's not all about the grades".

By adjusting the lower bound, you can get whatever degree of representativeness relative to the application base you want.

That it's a "just a number" (rather than a complex subjectivity-laden labyrinth incessantly hacked at by consultants) could allow interesting conversations about how it could relate to the "top 1% / bottom 50%" wealth ratio. The feedback loop wants closure.


Alex December 1, 2012 at 6:12 am GMT

You missed my point, candid. A relatively small proportion of Jews, intermarried or otherwise, have distinctive Jewish names. I didn't make that 10-12% figure up. It's been cited in numerous local Jewish population studies and is used in part (but certainly far from whole) to help estimate those populations. It's also been significantly dragged down over the years as the Jewish population (and hence the surname pool) has diversified, not just from intermarriage, but in-migration from groups who often lack "distinctive Jewish surnames" such as Jews from the former Soviet Union. Consider also that for obvious reasons, Hillel, which maintains Jewish centers on most campus, has an incentive to over-report by a bit. Jewish populations on college campuses in the distant past were easier to gather, given that it was far less un-PC to simply point blank inquire what religious background applicants came from.

Again, I'm not saying there isn't a downward trend in Jewish representation among high achievers (which, even if one were to accept Unz's figures, Jews would still be triple relative to were they "should" be). But Unz has made a pretty significant oversight in doing his calculations. That may happen to further suit his personal agenda, but it's not reality.


Anonymous December 1, 2012 at 3:42 pm GMT

This is interesting, but I suspect mostly bogus, based on your not having a decent algorithm for discovering if someone's Jewish.

I'm not sure what exact mechanism you're using to decide if a name is Jewish, but I'm certain it wouldn't have caught anyone, including myself, in my father's side of the family (Sephardic Jews from Turkey with Turkish surnames), nor my wife's family, an Ellis Island Anglo name. Or probably most of the people in her family. And certainly watching for "Levi, Cohen and Gold*" isn't going to do anything.

And none of us have even intermarried!


conatus December 1, 2012 at 4:10 pm GMT

Isn't the point about Jewish over representation in the Ivy League about absolute numbers?

Yes the Jewish demographic has a higher IQ at 115 to the Goyishe Kop 100 but Jewish people are only 2% of the population so you have 6 million Jewish people vying with 200 million white Goys for admission to the Ivy League and future control of the levers of power. That is a 33 times larger Bell curve so the right tail of the Goys' Bell curve is still much larger than the Jewish Bell curve at IQ levels of 130 and 145, supposedly there are seven times more Goys with IQs of 130 and over 4 times more Goys with IQs of 145. So why the equality of representation, one to one, Jewish to white Goy in the Ivy Leagues?


Andrew says: • Website Show Comment Next New Comment December 1, 2012 at 6:29 pm GMT

http://www.huffingtonpost.com/andrew-phu-quoc-nguyen/asian-american-students_b_2173993.html I hope everyone can participate in gaining admittance and everyone can improve the system legally. Real repair is needed.


Amanda December 1, 2012 at 6:34 pm GMT

Russell K. Nieli on study by Thomas Espenshade and Alexandria Radford (mentioned by Unz):

"When lower-class whites are matched with lower-class blacks and other non-whites the degree of the non-white advantage becomes astronomical: lower-class Asian applicants are seven times as likely to be accepted to the competitive private institutions as similarly qualified whites, lower-class Hispanic applicants eight times as likely, and lower-class blacks ten times as likely. These are enormous differences and reflect the fact that lower-class whites were rarely accepted to the private institutions Espenshade and Radford surveyed. Their diversity-enhancement value was obviously rated very low."

..


Scott Locklin says: • Website Show Comment Next New Comment December 1, 2012 at 10:09 pm GMT

Having worked with folks from all manner of "elite" and not so elite schools in a technical field, the main conclusion I was able to draw was folks who went to "elite" colleges had a greater degree of entitlement. And that's it.


Shlomo December 2, 2012 at 4:27 am GMT

If all of the author's suspicions are correct, the most noteworthy takeaway would be that Jewish applicants have absolutely no idea that they are being given preferential treatment when applying to Ivys.

Not that they think they are being discriminated against or anything, but no Jewish high school student or their parents think they have any kind of advantage, let alone such a huge one. Someone should tell all these Jews that they don't need to be so anxious!

Also, I know this is purely anecdotal but having gone to an ivy and knowing the numbers of dozens of other Jews who have also gone, I don't think I have ever witnessed a "surprise" acceptance, where someone got in with a score under the median.


Anonymous December 2, 2012 at 5:22 am GMT

I don't doubt for a minute that it's increasingly difficult for Asian students to get into so-called "elite" universities. Having grown up in that community, I know a lot of people who were pressured into applying at Harvard and Yale but ended up *gasp* going to a very good local school. My sarcasm aside, we can't really deny that having Harvard on your CV can virtually guarantee a ticket to success, regardless of whether or not you were just a C student. It happens.

But what worries me about that is the fact that I know very well how hard Asian families tend to push their children. They do, after all, have one of the highest suicide rates and that's here in the US. If by some means the Asian population at elite universities is being controlled, as I suspect it is, that's only going to make tiger mothers push their children even harder. That's not necessarily a good thing for the child's psyche, so instead of writing a novel here, I'll simply give you this link. Since the author brought up the subject of Amy Chua and her book, I think it's a pretty fitting explanation of the fears I have for my friends and their children if this trend is allowed to continue.

http://www.asianmanwhitewoman.com/jocelyn/editorial/tiger-mother-rebuttal-why-east-west-mothers-are-superior/


Anonymous December 2, 2012 at 9:16 pm GMT

to respond to Alice Zindagi
Asian American does not have higher suicide rate.

http://www.apa.org/pi/oema/resources/ethnicity-health/asian-american/suicide.aspx


Anonymous says: • Website Show Comment Next New Comment December 2, 2012 at 9:30 pm GMT

As a former admissions staff person at Princeton, I always sigh when I read articles on elite college admissions processes which build cases on data analysis but which fail to consult with admissions experts on the interpretation of that data.

I am neither an expert in sociology, nor am I a statistician, but I have sat in that chair, reading thousands of essays, and I have a few observations:

The most selective part of any college's admissions process is the part where students themselves decides whether or not to apply. Without data on the actual applicant sets, it is, at the least, misleading to attribute incongruities between the overall population's racial/ethnic/income/what-have-you characteristics and the student bodies' make-ups entirely to the admission decisions. The reality is that there is always a struggle in the admission offices to compensate for the inequities that the applicant pool itself delivers to their doorsteps. An experienced admission officer can tell you that applicants from cultures where academics and education are highly valued, and where the emphasis on a single test is quite high, will generally present with very high SAT scores. Race does not seem to be correlated, but immigrant status from such a culture is highly correlated. (This may partially explain Unz's observation of a "decline" in Jewish scores, although I also do not believe that the surname tool for determining which scores are "Jewish" holds much water.) One of the reasons that such students often fare less well in holistic application processes is that the same culture that produces the work ethic and study skills which benefit SAT performance and GPA can also suppress activities and achievement outside of the academic arena. Therefore, to say that these students are being discriminated against because of race is a huge assumption. The true questions is whether the students with higher test scores are presenting activity, leadership and community contributions comparable to other parts of the applicant pool which are "overrepresented". All of these articles seem to miss the point that a freshman class is a fixed size pie chart. Any piece that shrinks or grows will impact the other slices. My first thought upon reading Unz' argument that the Asian slice shrank was, "What other pieces were forced to grow?" Forced growth in another slice of the class is the more likely culprit for this effect, much more likely than the idea that all of the Ivies are systematically discriminating against the latest victim. I could go on and on, but will spare you! My last note is to educate Mr. Unz on what an "Assistant Director" is in college admissions. Generally that position is equivalent to a Senior Admission Officer (one step up from entry level Admission Officer), while the head of the office might be the Dean and the next step down from that would be Associate Deans (not Assistant Directors). So while Michelle Hernandez was an Assistant Director, she was not the second in charge of Admissions, as your article implies. A minor distinction, but one which is important to point out so that her expertise and experience, as well as my own, as AN Assistant Director of Admission at Princeton, are not overstated.

A last personal note: During Princeton's four month reading season, I worked 7 days a week, usually for about 14 hours a day, in order to give the fullest, most human and considerate reading of each and every applicant that I could give. I am sure that the admission profession has its share of incompetents, corruptible people and just plain jerks, and apparently some of us are not intelligent enough to judge the superior applicants . . . . But most of us did it for love of the kids at that age (they are all superstars!), for love of our alma maters and what they did for us, and because we believed in the fairness of our process and the dignity with which we tried to do it.

The sheer numbers of applicants and the fatigue of the long winters lend themselves to making poor jokes such as the "Night of 1000 Lee's", but a good dean of admission will police such disrespect, and encourage the staff, as mine did, to read the last applicant of the day with the same effort, energy and attention paid to the first. We admission folk have our honor, despite being underpaid and playing in a no-win game with regard to media coverage of our activities. I am happy to be able to speak up for the integrity of my former colleagues and the rest of the profession.


Michael O'Hearn says: • Website Show Comment Next New Comment December 2, 2012 at 9:43 pm GMT

My own position has always been strongly in the former camp, supporting meritocracy over diversity in elite admissions.

When these Ivy League institutions were first begun in the colonial period, they were not strictly speaking meritocratic. The prevailing idea was that Christocentric education is the right way to go, both from an eschatological and a temporal perspective, and the central focus was on building and strengthening family ties. The Catholic institutions of higher learning took on the vital role of preserving Church tradition from apostolic times and were thus more egalitarian and universalist. The results went far beyond all expectations.

Nothing lasts forever. Your premise misses the essential point that the economy is for man and not vice-versa.


Michael O'Hearn says: • Website Show Comment Next New Comment December 3, 2012 at 3:09 am GMT

Perhaps this should have been titled The Reality of American Mediocrity ?


Janet Mertz December 4, 2012 at 12:56 am GMT

Many of the statements in this article relating to Jews are rather misleading: for while the Hillel data regarding percentage of students who self-identify as Jews may be fairly accurate, the numbers the author cites based upon "likely Jewish names" are a gross under-count of the real numbers, leading to the appearance of a large disparity between the two which, in reality, does not exist. The reason for the under-count is that a large percentage of American Jews have either Anglicized their family name or intermarried, resulting in their being mistaken for non-Hispanic whites. Thus, one ends up with incorrect statements such as "since 2000, the percentage (of Jewish Putnam Fellows) has dropped to under 10 percent, without a single likely Jewish name in the last seven years". The reality is that Jews, by Hillel's definition of self-identified students, have continued to be prominent among the Putnam Fellows, US IMO team members, and high scorers in the USA Mathematical Olympiad. I have published a careful analysis of the true ethnic/racial composition of the very top-performing students in these math competitions from recent years (see, Andreescu et al. Notices of the AMS 2008; http://www.ams.org/notices/200810/fea-gallian.pdf ). For example, Daniel Kane, a Putnam Fellow in 2002-2006, is 100% of Jewish ancestry; his family name had been Cohen before it was changed. Brian Lawrence was a Putnam Fellow in 2007, 2008, 2010, and 2011; his mother is Jewish. Furthermore, many of the non-Jewish Putnam Fellows in recent years are Eastern European or East-Asian foreigners who matriculated to college in the US; they were not US citizen non-Jewish whites or Asian-Americans, respectively. Rather, my data indicate that in recent years both Jews and Asians have been 10- to 20-over-represented in proportion to their percentage of the US population among the students who excel at the highest level in these math competitions. The authors conclusions based upon data from other types of competitions is likely similarly flawed.


mannning December 4, 2012 at 6:28 am GMT

The title of this piece captured me to read what it was all about. What was discussed was admissions into elite colleges as the only focus on "meritocracy" in America. That leaves the tail of the distribution of high IQ people in America, minus those that make it into elite colleges, to be ignored, especially those that managed to be admitted to Cal Tech, or MIT, or a number of other universities where significant intellectual power is admitted and fostered. this seems to further the meme that only the elite graduates run the nation. They may have an early advantage through connections, but I believe that the Fortune 400 CEO's are fairly evenly spread across the university world.


Eric Rasmusen December 4, 2012 at 4:45 pm GMT

A couple more thoughts:

(1) Jews are better at verbal IQ, Asians at math. Your measures are all math. That woudl be OK if all else were equal across time, but especially because Jews care a lot about admissions to Ivies, what we'd expect is that with growing Asian competition in math/science, Jews would give up and focus their energy on drama/writing/service. I wonder if Jewish kids are doing worse in music competitions too? Or rather- not even entering any more.

(2) For college numbers, adjustment for US/foreign is essential. How many Asians at Yale are foreign? It could well be that Asian-Americans are far more under-represented than it seems, because they face quota competition from a billion Chinese and a billion Indians. Cal Tech might show the same result as the Ivies.

(3) A separate but interesting study would be of humanities and science PhD programs. Different things are going on there, and the contrast with undergrads and with each other might be interseting.

MEH 0910 December 5, 2012 at 1:13 pm GMT

Half Sigma wrote about this Ron Unz article :

I also learned that Jews are no longer as prominent in math and science achievement, and that's not surprising to me at all, because everyone in the elite knows that STEM is for Asians and middle-class kids. Jewish parents have learned that colleges value sports and "leadership" activities more than raw academic achievement and nerdy activities like math olympiads, and that the most prestigious careers are value transference activities which don't require science or high-level math.

You should re-read my critique of Amy Chua's parenting advice . Jews have figured out that's crappy advice for 21st century America.

biaknabato December 6, 2012 at 12:59 am GMT

The higher representation of Jews in the Ivies compared to Asians who have better average academic records compared to Jews (applicants that is ) in the Ivies is due to the greater eligibility of Jews for preferences of every kind in the Ivies. In a typical Ivy school like Harvard, at least 60% of the freshman class will disappear because of the vast system of preferences that exists. There is no doubt that there is racial animus involved despite the denials of the Ivies and other private universities despite the constant denials involved like that of Rosovsky who happens to be a historian by training. Jews are classified as white in this country, hence there would presumably greater affinity for them among the white Board of Trustees and the adcom staff. This is in contrast to Asians who do not share the same culture or body physiogonomy as whites do.

I had read the Unz article and the Andrew Goldman response to it. I just do not agree with Unz with his solutions to this problem. First of all private schools are not going to give legacy preferences and other kinds of preferences for the simple reason that it provides a revenue stream. Harvard is nothing but a business just like your Starbucks or Mcdonald's on the corner.

Around the world private universities regarded as nothing but the dumping ground of the children of the wealthy, the famous and those with connections who cannot compete with others with regards to their talent and ability regardless of what anyone will say from abroad about the private universities in their own country. Bottomline is in other countries , the privates simply do not get the top students in the country, the top public school does. People in other countries will simply look askance at the nonsensical admissions process of the Ivies and other private schools, the system that the Ivies use for admission does not produce more creative people contrary to its claims.

The Goldman response has more to do with the humanities versus math . My simple response to Andrew Goldman would be this : a grade of A in Korean history is different from a grade of A in Jewish history, it is like comparing kiwis and bananas. The fast and decisive way of dealing with this problem is simply to deprive private schools of every single cent of tax money that practices legacy preferences and other kinds repugnant preferences be it for student aid or for research and I had been saying that for a long time. I would like to comment on the many points that had been raised here but I have no time.

Eric Rasmusen December 7, 2012 at 4:16 pm GMT

The solution to a lot of problems would be transparency. I'd love to see the admissions and grade data of even one major university. Public universities should be required to post publicly the names, SAT scores, and transcripts of every student. Allowing such posting should be a requirement for admission.

The public could then investigate further if, for example, it turned out that children of state senators had lower SAT scores. Scholars could then analyze the effect of diversity on student performance.

Of course, already many public universities (including my own, Indiana), post the salaries of their professors on the web, and I haven't seen much analysis or muckraking come out of that.

Anonymous December 8, 2012 at 12:29 am GMT

One factor hinted at in the article, but really needing to be addressed is the "school" that is being attended.

By this, I mean, you need philosophy students to keep the philosophy department going. When I was in college 20 years ago, I was a humanities major. I took 1 class in 4 years with an Asian American student. 1 class. When I walked through the business building, it was about 50% Asian.

Could Asian-American students only wanting to go to Harvard to go into business, science, or math be skewing those numbers? I don't know, but it's just a thought to put out there.

Anonymous says: • Website December 9, 2012 at 12:44 am GMT

You are preaching to the choir! I blog on this extensively on my Asian Blog: JadeLuckClub. This has been going on for the last 30 years or more! All my posts are here under Don't ID as Asian When Applying to College:

http://jadeluckclub.com/category/asian-in-america/dont-id-as-asian-when-applying-to-college/

biaknabato December 12, 2012 at 7:42 am GMT

All private schools basically practice legacy prefrences and other kinds of preferences and this practice has been going on in the Ivies since time immemorial. The income revenue from these gallery of preferences will certainly not encourage the Ivies to give them up.

In many countries around the world, private universiites are basically the dumping ground for the children of the wealthy , the famous and the well connected who could not get into the top public university of their choice in their own country. This no different from the Ivies in this country where these Ivies and other private universities are just a corral or holding pen for the children of the wealthy, the famous and the well connected and the famous who could not compete with others based on their won talent or ability.

Abroad you have basically 3 choices if you could not get into the top public university of that country , they are:

  1. Go to a less competetive public university
  2. Go to a private university
  3. or go abroad to schools like the Ivies or in other countries where the entrance requirements to a public or private university are less competetive compared to the top public universities in your own home country.

You can easily tell a top student from another country, he is the guy who is studying in this country under a government scholarship ( unless of course it was wrangled through corruption ). the one who is studying here through his own funds or through private means is likely to be the one who is a reject from the top public university in his own country. That is how life works.

I am generally satisfied with the data that Ron provided about Jews compared to Asians where Jews are lagging behind Asians at least in grades and SAT scores in the high school level, from the data I had seen posted by specialized schools in NY like Stuy , Bronx Sci, Brook Tech, Lowell (Frisco ) etc.

Ron is correct in asserting that the Ivies little represents the top students in this country. Compare UCLA and for example. For the fall 2011 entering freshman class at UCLA , there were 2391 domestic students at UCLA compared to 1148 at Harvard who scored above 700 in the Math portion of the SAT and there were 439 domestic students who scored a perfect 800 in the Math portion of the SAT at UCLA, more than Harvard or MIT certainly. For the fall 2012 freshman classs at UCLA the figure was 2409 and 447 respectively.

We can devise a freshman class that will use only income, SATS,grades as a basis of admissions that will have many top students like UCLA has using only algorithms.

The central test of fairness in any admissions system is to ask this simple question. Was there anyone admitted under that system admitted over someone else who was denied admission and with better grades and SAT scores and poorer ? If the answer is in the affirmative, then that system is unfair , if it is in the negative then the system is fair.

Anonymous December 12, 2012 at 7:20 pm GMT

I like the comments from Chales Hale. (Nov. 30, 2012) He says: "Welcome to China". It said all in three words. All of these have been experienced in China. They said there is no new things under the sun. History are nothing but repeated, China with its 5000 years experienced them all.

biaknabato December 12, 2012 at 11:01 pm GMT

I meant that there were 439 domestic students in the fall 2011 freshman class at UCLA and 447 domestic students in the fall 2012 freshman class at UCLA who scored a perfect score of 800 in the Math portion of the SAT. In either case it is bigger than what Harvard or MIT has got.

In fact for the fall 2011 of the entire UC system there were more students in the the freshman class of the entire UC system who scored above 700 in the Math portion of the SAT than the entire fall 2011 freshman of the Ivy League (Cornell not included since it is both a public and a private school )'

As I mentioned earlier there were 2409 domestic students in the fall 2012 UCLA freshman class who scored above 700 in the Math portion of the SAT. We know that Harvard had only 1148 domestic students in its fall 2011 freshman class who scored above 700 in the Math portion of the SAT, why would Harvard ever want to have that many top students like Berkeley or UCLA have ? The answer to that is simple , it has to do with money. For every additional student that Harvard will enroll it would mean money being taken out of the endowment .

Since the endowment needs constant replenishment. Where would these replenishment funds come from ? From legacies,from the children of the wealthy and the famous etc. of course . It would mean more legacy admits, more children of the wealthy admitted etc.
That would mean that the admission rate at Harvard will rise, the mean SAT score of the entering class will be no different from the mean SAT scores of the entering freshman classes of Boston University and Boston College
down the road. With rising admission rates and lower mean SAT scores for the entering freshman class that prospect will not prove appetizing or appealing to the applicant pool.

Harvard ranks only 8th after Penn State in the production of undergrads who eventually get Doctorates in Science and Engineering. Of course Berkeley has the bragging rights for that kind of attribute.

biaknabato December 12, 2012 at 11:32 pm GMT

In the scenario I had outlined above, it would mean that the mean SAT score of the Harvard freshman class will actually go down if it tried to increase the size of its freshman class and that kind of prospect ia unpalatable to Harvard and that is the reason as to why it wants to maintain its current " air of exclusivity ".

There is another way of looking at the quality of the Harvard student body. The ACM ICPC computer programming competition is regarded as the best known college competition among students around the world , it is a grueling programming marathon for 2 or 3 days presumably. Teams from universities around the world vie to win the contest that is dubbed the "Battle of the Brains " What is arguably sad is that Ivy schools, Stanford and other private schools teams fielded in the finals of the competition are basically composed of foreign students or foreign born students and foreign born coaches.

The University of Southern California team in this competition in its finals section was made up of nothing but foreign Chinese students and a Chinese coach. The USC team won the Southern California competition to win a slot in the finals. Apparently they could not find a domestic student who could fill the bill. However the USC team was roundly beaten by teams from China and Asia,Russia and Eastern Europe. The last time a US team won this competition was in 1999 by Harvey Mudd, ever since the US had gone downhill in the competition with the competition being dominated by China and Asia and by countries from Eastern Europe and Russia. Well I guess USC's strategy was trying to fight fire with fire (Chinese students studying in the US versus Chinese students from the Mainland ), and it failed.

Been there December 13, 2012 at 5:32 am GMT

Thank you Mr. Unz for scratching the surface of the various forms of corruption surrounding elite college admissions. I hope that your next article further discusses the Harvard Price (and Yale Price and Brown Price etc). The recent press surrounding the Hong Kong couple suing the person they had retained to pave their children's way into Harvard indicates the extent of the problem. This Hong Kong couple just were not savvy enough to lay their money down where it would produce results.
Additionally, a discussion of how at least some North Eastern private schools facilitate the corrupt process would be illuminating.
Finally, a more thorough discussion of whether the Asian students being admitted are US residents or nationals or whether they are foreign citizens would also be worth while and reveal. I suspect, an even lower admit percentage for US resident citizens of Asian ethnicity.
For these schools to state that their acceptances are need blind is patently untrue and further complicates the admissions process for students who are naive enough to believe that. These schools should come clean and just say that after the development admits and the wealthy legacy admits spots are purchased, the remaining few admits are handed out in a need blind fashion remembering that many of admit pools will already be filled by the development and wealthy legacy admits resulting in extraordinarily low rates for certain non-URM type candidates (I estimate in the 1% range).

Anonymous December 13, 2012 at 6:39 pm GMT

"By contrast, a similarly overwhelming domination by a tiny segment of America's current population, one which is completely misaligned in all these respects, seems far less inherently stable, especially when the institutional roots of such domination have continually increased despite the collapse of the supposedly meritocratic justification. This does not seem like a recipe for a healthy and successful society, nor one which will even long survive in anything like its current form."

I completely agree that it is not healthy for one tiny segment of our population to basically hold all the key positions in every major industry in this country. If Asians or Blacks (who look foreign) all of a sudden ran education, media, government, and finance in this country, there would be uproar and resistance. But because Jewish people look like the majority (whites), they've risen to the top without the masses noticing.

But Jewish people consider themselves a minority just like blacks and Asians. They have a tribal mentality that causes stronger ethnic nepotism than most other minority groups. And they can get away with it because no one can say anything to them lest they be branded "jew-hunters" or "anti-semists."

The question is, "where do we go from here?" True race-blind meritocracy will never be instituted on a grand scale in this country both in education and in the work force. One group currently controls most industries and the only way this country will see more balance is if other groups take more control. But if one group already controls them all and controls succession plans, how will there ever be more balance?

Larry Long says: • Website December 14, 2012 at 4:33 am GMT

If Jews become presidents or regents of universities, that's a credit to their ability. Nothing sinister there.

But when Jews (or anyone) buy into an institution to create the 'Goldman School of Business', or when they give large donations, that is not a credit to anyone's ability and there may well be something sinister there.

It is no secret that corporations and individuals look for influence, if not control, in return for cash. The same thinking can easily affect admissions policy.

It's always the same. In spite of all the jingoism about "democracy" and "freedoms" and the "free market capitalist system", the trail of money obfuscates and corrupts. It is still very true that whoever pays the piper, calls the tune. And naive to believe otherwise.

How recent was it that Princeton cancelled its anti-Semitism classes for lack of participation, and at least one Jewish organisation was screaming that Princeton would never get another penny from any Jew, ever.

That is close to absolute control of a curriculum. I give you money, and you teach what I want you to teach.

How far is that from I give you money and you admit whom I want you to admit? Or from I give you money and you hire whom I want?

A university that is properly funded by the government – "the people" – doesn't have these issues because there is nothing you can buy.

Operating educational institutions as a business, just like charities and health care, will always produce this kind of corruption.

Two other points:

1. It occurred to me that the lowly-paid underachiever admissions officers might well have been mostly Jewish, and hired for that reason, and that in itself could skew the results in a desired manner.

2. I think this is a serious criticism of the othewise excellent article:

At the end, Ron Unz wants us to believe that a $30-billion institution, the finest of its kind in the world, the envy of the known universe and beyond, the prime educator of the world's most prime elites, completely abandons its entire admissions procedures, without oversight or supervision, to a bunch of dim-witted losers of "poor human quality" who will now choose the entire next generation of the nation's elites. And may even take cash payments to do so.

Come on. Who are you kidding? Even McDonald's is smarter than this.

Anonymous December 14, 2012 at 3:00 pm GMT

Some of the comments suggest major problems with estimating who is Jewish. But the authors information is underpinned by data collected by Jewish pressure groups for the purpose of ensuring the gravy train keeps flowing. It's either their numbers, or the numbers are consistent with their numbers.

Anonymous December 14, 2012 at 7:54 pm GMT

This article, to me, is shocking and groundbreaking. I don't think anyone has gone this in-depth into this biased and un-meritocratic system. This is real analysis based on real numbers.

Why is this not getting more coverage in the media? Why are people so afraid to talk about this?

Achaean December 15, 2012 at 12:50 pm GMT

There is an excellent analysis of this article at The Occidental Observer by Kevin MacDonald, "Ron Unz on the Illusory American Meritocracy". The MSM is ignoring Unz's article for obvious reasons.

tomo December 15, 2012 at 10:46 pm GMT

I don't know if there's any truth behind the idea that Japanese Americans have become lazy relative to their Korean and Chinese counterparts. I've grew up in Southern California, a part of the country with a relatively high percentage of Japanese Americans, yet I've know very few other Japanese Americans in my life. I can recall one Japanese American classmate in jr. high, and one Japanese classmate in my high school (who returned to Japan upon graduating). Even at the UC school I attended for undergrad, I was always the only Japanese person in the every class, and the Japanese Student Association, already meager in numbers, was almost entirely made up of Japanese International students who were only here for school.

If, in fact, 1% of California is made up of Japanese Americans, I suspect they are an aging population. I also think many 2nd and 3rd generation Japanese Americans are only partially Japanese, since, out of necessity, Japanese Americans have a very high rate of out marriage.

Anonymous December 20, 2012 at 5:04 pm GMT

The carefully researched article makes a strong case that there is some discrimination against Asian-Americans at the Ivy League schools.

On the other hand, I don't see how a percentage of 40-60% Asian-Americans at the selective UC schools, even given the higher percentage of Asian-Americans in California, does not perhaps reflect reverse discrimation, or at least affirmative action on their behalf. To be sure one way or the other, we would have to see their test scores AND GPA, apparently the criteria that the UC schools use for admission, considered as well in the normalization of this statistical data.

Lynn December 20, 2012 at 6:37 pm GMT

The replies to date make some good points but also reflect precisely the biases pointed out in the article as likely causing the discussed distortions.

1) use of name data in achievement vs use of Hillel data for Ivy admits: definitely an issue but is this only one of the measures used in this study. Focusing only on this obscures the fact that Jewish enrollment as measured over time by Hillel numbers (apples to apples) increased significantly over the past decade while the percent of Jewish high school age students relative to other groups declined. One explanation for this surge could be that Jewish students became even more academically successful than they have been in the past. The achievement data using Jewish surnames is used to assess this thesis in the absence of other better data. Rejecting the surname achievement data still leaves a huge enrollment surge over time in Jewish attendance at the Ivies relative to their percentage of the population.

2) many comments accept that the numbers show disproportionate acceptance and enrollment growth but simply then go on to assert that Jewish students really are smarter (absolutely or in gaming the system) relying on anecdotal evidence that is not at all compelling. All definitions of "smarter" contain value judgments". Back in the '20s the argument was that the Ivies should rely more on objective testing to remove bias against the then high testing Jewish students; now the writers argue conveniently wthat the new subjective tests that are applied to disproportionately admit Jewish students over higher scoring Asians and non-Jewish Caucasians are better measures. In both cases, there is still an issue of using a set of factors that disproportionately favors one group. In all such cases of significant disproportionate admits, the choice of the factors used to definemmerit and their application should be carefully evaluated for bias. The burden of proof should shift to those defending the status quo in this situation. In any event, it is clear that given the large applicant pool, there is no shortage of non-Jewish caucasians and Asians who are fully qualified, so if the desire was there for a balanced entering class, the students are available to make it happen

3) the numbers don't break down admissions between men and women. When my child was an athletic recruit to Harvard, we received an ethnic breakdown of the prior year's entering class. I was surprised to discover that the Caucasian population skewed heavily male and the non-white/Asian population skewed heavily female. It seemed that Harvard achieved most of its ethnic diversity that year by admitting female URMs, which made being a Caucasian female the single most underrepresented group relative to its percentage in the school age population. I'm curious if this was an anomaly or another element of bias in the admissions process.

Titanium Dragon December 20, 2012 at 9:59 pm GMT

I will note that there is one flaw in this whole argument, and that flaw is thus:

Harvard and Yale aren't the best universities in the country. As someone who went to Vanderbilt, I knew people who had been to those universities, and their evaluation was that they were no better – and perhaps actually worse – than Vanderbilt, which is "merely" a top 25 university.

While there is a great deal of, shall we say, "insider trading" amongst graduates of those universities, in actuality they aren't actually the best universities in the country today. That honor probably goes to MIT and Caltech, which you note are far more meritocratic. But most of the other best universities are probably very close in overall level, and some of them might have a lot of advantages over those top flight universities.

Or to put it simply, the Ivy League ain't what it used to be. Yeah, it includes some of the best universities in the country, but there are numerous non-Ivy League universities that are probably on par with them. This may indeed be in part a consequence of some of what you have described in the article, as well as a sense of complacency.

I suspect that in twenty or thirty years a lot of Ivy League graduates are going to feel a lot less entitled simply because there has been an expansion of the top while they weren't paying attention.

Anonymous December 21, 2012 at 9:06 am GMT

I'm against the Ivies going up to 30-50% Asian but I'm also against the over-representation of a tiny minority group. This country is going to go downhill if we continue to let one group skirt a fair application process just because they possess money and influence. Who will stand up for fairness and equality?

McRoss December 22, 2012 at 12:49 am GMT

Many of those commenting above don't seem to be picking up on Unz's evidence of bias against white Gentiles, which by meritocratic measures is far worse than the bias against Asian Americans.

A drop of 70 PERCENT??? What's going on? Why is so much of the discussion that this article has spawned focused only on Asian Americans and (secondarily) Jews?

Anonymous December 22, 2012 at 4:11 am GMT

National Merit Scholarship semifinalists are chosen based on per-state percentiles.

What this means is that NMS semifinalist numbers would be skewed _against_ a high-performing demographic group to the extent that group's demographics concentrate geographically. Mr. Unz acknowledges that geographical skewing of Jewish populations is huge. However, he ignores its effect on the NMS semifinalist numbers he uses as a proxy for academic performance on a _national_ level to predict equitable distributions at _national_ universities.

Please somebody explain to me how this oversight isn't fatal to his arguments

Anonymous December 25, 2012 at 3:22 am GMT

Surely the author must be aware that approximately half the children with "Jewish" names are not fully Jewish. Over half of the marriages west of the Mississippi are reportedly mixed. Many non-Jews have last names that start with "Gold". Just these two facts make the entire analysis ridiculous. Hillel does not keep statistics on how Jewish a student is, while many of Levys and Cohens are not actually Jewish. What would we call Amy Chua's daughters? Jewish or Asian? It is therefore impossible to tease out in a multi-racial society who is who.

Anonymous December 25, 2012 at 9:12 am GMT

Mr. Unz,

I am an elementary school teacher at a Title One school in northern California. I supported your "English for the Children" initiative when it was introduced.
However, the law of unintended consequences has kicked in, and what exists now is not at all what you (or anyone else, for that matter) had intended.
The school day was not lengthened to create a time slot for English language instruction. Instead, history and science classes were elbowed aside to make way for mediocre English language instruction. These usually worthless classes have crowded out valuable core academic instruction for English language learners.

To make matters worse, while English language learners are in ESL classes, no academic instruction in science or history can be given to "regular" students because that would lead to issues of "academic inequity." In other words, if the Hispanic kids are missing out on history, the black kids have to miss out on it, too.

As a teacher, I hope you will once again consider bringing your considerable talents to focus on the education of low-income minority children in California.

Sincerely,
Shelly Moore

Anonymous December 25, 2012 at 4:50 pm GMT

Fascinating and disturbing article.

Could it be that the goal of financial, rather than academic, achievement, makes many young people uninterested in competing in the science and math competitions sought out by the Asian students? I wonder about the different percentages of applicants to medical school versus law or business.
I must also add that I am surprised that the author used the word "data" as singular, rather than plural. Shouldn't he be stating that the data ARE, not IS; or SHOW, not SHOWS.

Anonymous December 25, 2012 at 7:18 pm GMT

The author perhaps pays an incredible amount of attention to those with strengths in STEM fields (Science, technology, engineering, and math), even though the proportion of all native-born white students majoring in these fields has plummetted in recent decades. That means that he overlooks a shift in what kinds of training is considered "prestigious," and that this might be reflected in the pursuits of students in high school. Perhaps there is a movement away from Jewish students' focus on Math Olympiad because they are in no way interested in majoring in math or engineering fields, instead preferring economics or business. Is that the fault of the students, or of the rewards system that corporate America has set up?

Jobs in STEM fields pay considerably less than do jobs in numerous professions - investment banking and law. So that is why ~ 40% of the Harvard graduating class - including many of its Jewish students - pursue that route. But to rely on various assessments of math/science/computing as the measure of intelligence fails to incorporate how the rewards structure in our society has changed over time.

I teach at an Ivy League university, and believe that many of the authors' arguments have merit, but there are also many weaknesses in his argument. He sneers at Steinberg and the other sociologists he cites for not quite getting how society has changed - but he clearly doesn' tunderstand how other aspects of our society have changed. Many of our most talented undergrads have no desire to pursue careers in STEM fields. Entrance into STEM jobs even among those who majored in those fields is low, and there is very high attrition from those fields, among both men and women. Young adults and young professionals are voting with their feet. While our society might be better off with more Caltech grads and students interested in creating our way to a better future rather than pursuing riches on wall street, one cannot fault students for seeking to maximize their returns on their expensive education. That's the system we have presented them with, at considerable cost to the students and their families.

Personally, what I found profoundly disturbing is not the overrepresentation of Jewish students or the large presence of Asians who feel they are discriminated against, but the fact that Ivy League schools have not managed to increase their representation of Blacks for the last 3 decades. We all compete for the same talent pool. And until the K-12 system is improved, Black representation won't increase without others screaming favoritism. The other groups - high performing Asians, middle class Jews - will do fine, even if they don't get into Ivy League schools but have to "settle" for elite private schools. But if the Ivy Leagues are the pathway to prestige and power, than we're not broadening our power base enough to adequately reprewsent the demographic shifts reshaping our nation. more focus on that, please.

Anonymous says: • Website December 25, 2012 at 8:23 pm GMT

I've been an SAT tutor for a long time in West Los Angeles (a heavily Asian city), and I feel that at least some of Asians' over-representation in SAT scores and NMS finalists is due to Asian parents putting massive time and money into driving their children's success in those very statistics.

In my experience, Asian parents are more likely than other parents to attempt to ramrod their kids through test prep in order to increase their scores. For example, the few students I've ever had preparing for the PSAT - most students prepare only for the SAT - were all Asian.

Naturally, because it's so strange to be preparing for what is supposed to be a practice test, I asked these parents why their 9th or 10th grade child was in this class, and the answer was that they wanted to do well on the PSAT because of its use in the NMS! Similarly, many Asian immigrants send their children to "cram school" every day after regular school lets out (and I myself have taught SAT at one of these institutions), essentially having their students tutored in every academic subject year-round from early in elementary school.

Because whites are unlikely to do this, it would seem to me that the resulting Asian academic achievement is analogous to baseball players who use steroids having better stats than baseball players who do not.

It seems reasonable that the "merit" in "meritocracy" need not be based solely on test scores and grades, and that therefore a race-based quota system is not the only conclusion that one can draw from a decrease in the attendance rate of hard-driving test-preppers. Maybe the university didn't want to fill its dorms with grade-grubbers who are never seen because they're holed up in the library 20 hours a day, and grade-grubbers just happen to be over-represented in the Asian population?

Unz's piece analyzes only the data that lead up to college - when the Asian parents' academic influence over their children is absolute - whereas the Ivy League schools he criticizes are most concerned with what their students do during and after college. Is the kid who went to cram school his entire life as likely to join student organizations? To continue practicing his four instruments once his mom isn't forcing him to take lessons 4 days a week? To start companies and give money to his university? Or did he just peak early because his parents were working him so hard in order to get him into that college?

That's an article I'd like to read.

Dismalist December 25, 2012 at 10:49 pm GMT

The analysis is a tour de force!

However, the remedies considered are not. It is silly to believe that all abilities can be distilled into a small set of numbers, and anyway, no one knows what abilities will succeed in marketplaces. The source of the problem is the lack of competition in education, including higher education, a situation written in stone by current accreditation procedures. The solution to the problem is entry. Remember Brandeis U? With sufficient competition, colleges could take whomever they pleased, on whatever grounds, and everyone would get a chance.

Anonymous December 25, 2012 at 11:11 pm GMT

Concerning the drop in non-Jewish white enrollment:

I am a recent graduate of a top public high school, where I was a NMS, individual state champion in Academic Decathlon, perfect ACT score, National AP Scholar, etc. etc. Many of my friends – almost exclusively white and Asian – had similar backgrounds and were eminently qualified for Ivy. None of us even applied Ivy, let alone considered going there. Why? At $60,000/yr, the cost is simply not worth it, since none of us would have been offered anything close to substantial financial aid and our parents were unable/unwilling to fully fund our educations. Meanwhile, my Asian friends applied to as many Ivies as they could because it was understood that (a) their parents would foot the bill if they got in or (b) they would take on a large debt load in order to do it.

This article discounts financial self-selection, which (at least based on my own, anecdotal evidence) is more prevalent than we tend to think.

Anonymous December 26, 2012 at 12:18 am GMT

Three points:

  1. The author ignores the role that class plays in setting kids up for success. At one point he notes, "Given that Asians accounted for just 1.5 percent of the population in 1980 and often lived in relatively impoverished immigrant families. . ." When I was at Harvard in the mid-1980s, there were two distinct groups of Asian students: children of doctors, academics, scientists and businesspeople who came from educated families in China, Korea and Vietnam, and therefore grew up with both strong educational values and parental resources to push them; and a much smaller group of kids from Chinatown and Southeast Asian communities, whose parents were usually working class and uneducated. The second group were at a severe disadvantage to the first, who were able to claim "diversity" without really having to suffer for it.
  2. I would expect you'd see the same difference among higher-caste educated South Asian Brahmins and Indians from middle and lower castes or from places like Guyana. It is ridiculous to put South Asians and East Asians in the same category as "Asian." They have different cultural traditions and immigration histories. Ask any Indian parent what race they are and they'll answer "Caucasian." Grouping them without any kind of assessment of how they might be different undermines the credibility of the author.
  3. The takeaway is not that affirmative action is damaging opportunities for whites, but that whites are losing against Asians. The percentage of Hispanic and Black students at leading schools is still tiny. Hence, if invisible quotas for Asians are lifted, there will be far fewer white students at these schools. This isn't because of any conspiracy, but because white students are scoring lower than the competition on the relevant entry requirements. I would love to see an article in this publication titled, "Why White Students Are Deficient." How about some more writing about "The White Student Achievement Gap?"
Simon December 26, 2012 at 2:35 am GMT

As parents of 2 HYP grads, We can tell you from experience that Asian students are not under-represented in the Ivies today. (In fact, I think they are slightly over represented, for the same reasons and stats the author cited).

True, if one looks at stats, such as SAT, scientific competition awards etc, it seems to imply that a +35% enrollment of Asian students is warranted. However, these indicators are just a small part of a "holistc" approach in predicting the success of a candidate not only in the next 4 years, but the individual's success in life and be able to impact and contribute to society later.

I have seen candidates of Asian background, who score almost full mark in SAT but was less than satisfactory in all other aspects of being a potential achiever in life.

Granted, if one wants to be an achiever in science and technology, by all means go with Caltech and MIT. But if one wants an real "education" and be a leader later on in life, one has to have other qualities as well (skin color is NOT one of them). Of course, history, and current cultural and political climate may influence the assessment of such qualities because it is highly subjective. (Is is unfair to pick a pleasant looking candidate over a lesser one, if the rest are the same?)

That is why an interview with the candidates is a good way to assess a potential applicant. I always encourage my children to conduct interviews locally for their alma mater.

I just hope that the Ivies do not use this holistic approach to practice quota policies.

Oh btw I am Asian.

S

Anonymous December 26, 2012 at 2:42 am GMT

Here's a quote from a friend just today about this related topic: "Just like the Catholic church in the middle ages recruited the smartest peasants in order to forestall revolutionary potential, and to learn mind bending religious dogma to befuddle the remaining peasants, current practice is much the same. To twist Billy Clinton's mantra, "its the economy stupid", No ,"its the co opted brains"! "

We can substitute economics dogma to the befuddlement mix. The bottom line is every ruling elite has co-opted the top 1%-5% of high wage earners, to make the pyramid work. Sociology writing is all over this. Veblen, Weber, etc. We can see this little group created everywhere minerals or natural resources are coveted by private empires.

The universities are doing exactly what they are supposed to do to protect the interests of the Trustees and Donors who run them for a reason. They are a tool of, not a cause of, the inequality and over-concentration. It is interesting how the story goes into hairsplitting and comparing Asians to others, etc. But, the real story is a well understood sociology story. This article explains why Napoleon established free public education after the French Revolution.

Anonymous December 26, 2012 at 2:53 am GMT

This is a fascinating article. So much data. So many inferences. It's hardly surprising to any parent of high school students that college admissions are only marginally meritocratic. Whether that's a good a thing or a bad thing is an open question. I think meritocracy has a place in college admissions. But not the only place. Consider athletics, which are themselves almost exclusively meritocratic. Only the best among the best are offered Division I scholarships. The same, I think, applies to engineering schools, the physical sciences, and (to a lesser degree), elite law schools. It also applies to auto-mechanics, plumbers, and electricians. Regarding the humanities (a field in which I hold a PhD), not so much. I think Unz's beef is less with admissions policies per se (which I agree are mind-bogglingly opaque) than with the status of elite institutions. I also think, and I may be wrong, that Unz appears heading down the Bobby Fisher highway, intimating that those pesky Jews are

Anonymous December 26, 2012 at 4:19 am GMT

America never promised success through merit or equality. That is the American "dream." America promises freedom of religious belief and the right to carry a gun.

Anonymous says: • Website Show Comment Next New Comment December 26, 2012 at 4:16 pm GMT

This is a fascinating and extremely important article which I am very eager to discuss privately with the author, having spent my whole life in higher education, albeit with a unique perspective. I was flabbergasted the findings about Jewish and non-Jewish white representation, and intrigued, all the more so since my own ancestry is evenly divided between those two groups. I do want to make one criticism, however of something the author said about the 1950s which I do not think is correct.

At one point in the article the author makes the claim that the breakdown of Ivy League Jewish quotas in the 1950s reflected the power of Jews in the media and Hollywood. The statistics he gives about their representation there may be correct, but the inference, I believe, is unsustainable. The Proquest historical database includes the Washington Post, New York Times, and many other major newspapers. I did a search for "Harvard AND Jewish AND quota" for the whole period 1945-65 and it turned up only 20 articles, not one of which specifically addressed the issue of Jewish quotas at Harvard and other Ivy League schools. The powerful Jews of that era had reached their positions by downplaying their origins–often including changes in their last names–and they were not about to use their positions overtly on behalf of their ethnic group. (This could be, incidentally, another parallel with today's Asians.) Those quotas were broken down, in my opinion, because of a general emphasis on real equality among Americans in those decades, which also produced the civil rights movement. The Second World War had been fought on those principles.
I could not agree more that the admissions policies of the last 30 years have produced a pathetic and self-centered elite that has done little if any good for the country as a whole.

Anonymous says: • Website Show Comment Next New Comment December 27, 2012 at 4:48 am GMT

It is really refreshing to see in print what we all know by experience, but I have to wonder out loud, what is our higher purpose? Surely, you have a largely goal than merely exposing corruption in the academy. Lastly, I have to wonder out loud, how would the predicament of the working class fit into your analysis? I thank you for this scathing indictment of higher ed that has the potential to offer us a chillingly sobering assessment.

Jordan December 27, 2012 at 5:12 am GMT

This is why we need to reinstate a robust estate tax or "death tax" as conservatives derisively call it. To break the aristocracy described in this article. No less than Alexis de Tocqueville said that the estate tax is what made America great and created a meritocracy (which now is weaker and riddled with loopholes, thus the decline of America). Aristocracies dominated Europe for centuries because they did not tax the inheritance.

Anonymous December 27, 2012 at 9:09 pm GMT

The day when I learned so many Chinese ruling class' offspring are either alumni or current students of Harvard (the latest example being Bo GuaGua), it was clear to me Harvard's admission process is corrupt. How would any ivy college determine "leadership" quality? Does growing up in a leader's family give you more innate leadership skills? Harvard obviously thinks so.

Therefore, it's not surprising that Ron said the following on this subject. " so many sons and daughters of top Chinese leaders attend college in the West ..while our own corrupt admissions practices get them an easy spot at Harvard or Stanford, sitting side by side with the children of Bill Clinton, Al Gore, and George W. Bush." I hope world peace will be obtained within reach in this approach.

The chilling factor is a hardworking Chinese immigrant's child in the U.S. would have less chance of getting into ivies than these children of privileged.

It was also very disappointing to see another Asian parent whose children are HYP alumni saying too many Asians in ivies, despite the overwhelming evidence showing otherwise.

Peter December 28, 2012 at 3:37 am GMT

Perhaps it's to be expected given the length of the article (over 22,000 words), but so many of the objections and "oversights" raised in the comments are in fact dealt with – in detail and with a great deal of respect – by Unz in the article itself.

For example, this:

National Merit Scholarship semifinalists are chosen based on per-state percentiles.

What this means is that NMS semifinalist numbers would be skewed _against_ a high-performing demographic group to the extent that group's demographics concentrate geographically. Mr. Unz acknowledges that geographical skewing of Jewish populations is huge. However, he ignores its effect on the NMS semifinalist numbers he uses as a proxy for academic performance on a _national_ level to predict equitable distributions at _national_ universities.

Please somebody explain to me how this oversight isn't fatal to his argument

because geographical skewing of Asian populations is also huge, yet we don't witness the same patterning in admissions data pertaining to Asian students. As the article states: "Geographical diversity would certainly hurt Asian chances since nearly half their population lives in just the three states of California, New York, and Texas."

Unz goes on to note: "Both groups [Jews and Asians] are highly urbanized, generally affluent, and geographically concentrated within a few states, so the 'diversity' factors considered above would hardly seem to apply; yet Jews seem to fare much better at the admissions office."

So there's your answer.

And aside from the fact that your "basic question" has a very simple answer, it's just ludicrous in any case to suggest that the validity of the entire article rests on a single data point.

Anonymous December 28, 2012 at 5:30 pm GMT

There is no doubt this is more of a political issue than the academic one. If only merit is considered then asian american would constitute as much as 50% of the student population in elite universities. Politically and socially this is not a desired outcome. Rationale for affirmative action for the african americans and hispanics is same – leaving a large population is in elite institution is not desired, it smacks of segregation.

But the core issue remains unsolved. Affirmative action resulted in higher representation but not the competitiveness of the blacks. I am afraid whites are going the similar path.

Anonymous December 28, 2012 at 7:47 pm GMT

Anyone famliar with sociology and the research on social stratification knows that meritocracy is a myth; for example, if one's parents are in the bottom decile of the the income scale, the child has only a 3% chance to reach the top decile in his or her lifetime. In fact, in contrast to the Horatio Alger ideology, the U.S. has lower rates of upward mobility than almost any other developed country. Social classses exist and they tend to reproduce themselves.

The rigid class structure of the the U.S. is one of the reasons I support progressive taxation; wealth may not always be inherited, but life outcomes are largely determined by the class position of one's parents. In this manner, it is also a myth to believe that wealth is an individual creation;most financially successful individuals have enjoyed the benefits of class privilege: good and safe schools, two-parent families, tutors, and perhaps most important of all, high expecatations and positive peer socialization (Unz never mentions the importants of peeer groups, which data show exert a strong causal unfluence on academic performance).

And I would challenge Unz's assertion that many high-performing Asians come from impovershed backgrounds: many of them may undereport their income as small business owners. I believe that Asian success derives not only from their class background but their culture in which the parents have authority and the success of the child is crucual to the honor of the family. As they assimilate to the more individualist American ethos, I predict that their academic success will level off just as it has with Jews.

Anonymous December 29, 2012 at 2:31 am GMT

1. HYP are private universities: the success of their alumni verifies the astuteness of their admissions policies.
2. Mr. Unz equates "merit" with "academic". I wonder how many CalTech undergrads would be, or were, admitted, to HYP (and vice-versa).
3. I would like ethnic or racial stats on, for several examples, class officers, first chair musicians*, job holders, actors^, team captains, and other equally valuable (in the sense of contributing to an entering freshman class) high-school pursuits.*By 17, I had been a union trombonist for three years; at Princeton, I played in the concert band, the marching band, the concert orchestra, several jazz ensembles, and the Triangle Club orchestra.^A high school classmate was John Lithgow, the superb Hollywood character actor. Harvard gave him a full scholarship – and they should have.

Rosell December 29, 2012 at 8:00 am GMT

What if we were one homogeneous ethnic group? What dynamic would we set up then?

I suggest taking the top 20% on straight merit, based on SAT scores, whether they crammed for them or not, and take the next 50% from the economically poorest of the qualified applicants (1500 – 1600 on the SAT?) by straight ethnicity percentages to directly reflect population diversity, and 30% at random to promote some humility, and try that for 20 years and see what effects are produced in the quality of our economic and political leadership. And of course, keep them all in the dark as to how they actually got admitted.

Maybe one effect is that more non-ivy league schools will be tapped by the top recruiters.

Anonymous December 29, 2012 at 12:31 pm GMT

Jewish wrote:

"Surely the author must be aware that approximately half the children with "Jewish" names are not fully Jewish. Over half of the marriages west of the Mississippi are reportedly mixed. Many non-Jews have last names that start with "Gold". Just these two facts make the entire analysis ridiculous. Hillel does not keep statistics on how Jewish a student is, while many of Levys and Cohens are not actually Jewish. What would we call Amy Chua's daughters? Jewish or Asian? It is therefore impossible to tease out in a multi-racial society who is who."

Well, there are several arguments to be made. First, unless you are advocating that there has been a mass adoption of words like "Gold" in non-Jewish last names these past 10, 15 years, that argument sinks like a stone. Second, by selecting for specifically Jewish last names, intermarriage can be minimized but not eliminated. How many kids with the lastname "Goldstein" was a non-Jew in the last NMS? Not likely a lot of them.

Intermarriage can account for some fog, but not all, not by a longshot. Your entire argument reeks of bitter defensiveness. You have to come to grips that Jews have become like the old WASPs, rich, not too clever anymore, and blocking the path forward for brighter, underrepresented groups.

Sucks to be you.

Anonymous December 29, 2012 at 6:23 pm GMT

With all due respect, I was worried that I would get an answer that lazily points to the part of the essay that glosses over this point (which mind you I had combed through carefully before posting my question). However, I was hoping that in response someone might respond who had thought a little more carefully about the statistical fallacy in Unz's essay: that far-reaching statements about nation-wide academic performance can be drawn directly from per-state-percentiles.

Yes, Asian Americans, like Jews, have concentrations. But their geographical distributions differ. Yes, it might be possible that upon careful analysis of relative distributions of populations and NMS semifinalists in each state Unz might be able to draw a robust comparison: he might even come up with the same answer. The point that I made is that he doesn't even try.

Given the lengths Unz goes to calculate and re-calculate figures _based_on_ the assumption of _equal_ geographic distributions among Asians and Jews, it is - and I stand by this - a disservice to the reader that no effort (beyond hand-waving) is made to quantitatively show the assumption is at all justified.

Jewess December 30, 2012 at 2:02 am GMT

The statistical analysis used in this article is flawed. The author uses last names to identify the religion (or birth heritage) of NMS semifinalists? Are you serious? My son was a (recent) National Merit Finalist and graduated from an ivy league university. His mother is Jewish; his father is not, thus he has a decidedly WASP surname and according to the author's methods he would have been classified as WASP. With the growing numbers of interfaith and mixed-race children how can anyone draw conclusions about race and religion in the meritocracy or even "IQ" argument? Anecdotally, my son reported that nearly half his classmates at his ivy league were at least one-quarter Jewish (one or more parents or one grandparent). To use last names (in lieu of actual demographic data) to make the conclusion that Jews are being admitted to ivies at higher rates than similarly qualified Asians is irresponsible.

Anonymous January 2, 2013 at 2:49 am GMT

Essentially, the leftist forces in this country are trying to put the squeeze on white gentiles from both directions.

Affirmative action for underachieving minorities to take the place of white applicants.

Meritocracy for highly achieving Asians to push down white applicants, while never mentioning that full meritocracy would push out other minorities as well (that's not politically correct).

The whole thing has become more about political narrative than actual concern for justice. I want you to know that as an Asian man who graduated from Brown, I sympathize with you.

Anonymous January 11, 2013 at 4:40 pm GMT

Very interesting article. The case that East Asian students are significantly underrepresented and Jewish students overrepresented at Ivy League schools is persuasive, although not dispositive. The most glaring flaw in the analysis is the heavy reliance on performance on the PSAT (the discussion of the winners of the various Olympiad and Putnam contests has little informational value relevant to admissions, since those winners are the outliers on the tail of the distribution), which is a test that can be prepped for quite easily. Another flaw is the reliance on last names to determine ethnicity, which I doubt works well for Jews, although it probably works reasonably well for East Asians.

Unfortunately, the article is also peppered with (very) thinly supported (and implausible) claims like Asians are better at visuospatial skills, worse at verbal skills, and that the situation is reversed for Jews. This kind of claim strikes me as racial gobbledygook, and at least anecdotally belied if one considers the overrepresentation of Jews among elite chess players, both in the US and worldwide.

In any event, the fundamental point is that the PSAT (as is the case with all standardized tests) is a fixed target that can be studied for. Whether one chooses to put in 100s of hours studying for the PSAT is not, and should not be, the only criterion used for admissions.

I find the relative percentage of East Asians and Jews at schools like MIT (and also Caltech and Berkeley, although obviously those are in part distorted by the heavy concentration of East Asians in California) as compared to HYP as strong evidence that the admissions process at HYP advantages Jews and disadvantages East Asians.

I suspect, though, that the advantages Jews enjoy in the admissions process are unconscious and unintentional, whereas the disadvantages suffered by East Asians are quite conscious and intentional.

Anonymous January 14, 2013 at 3:30 pm GMT

The graph entitled "Asians Age 18-21 and Elite College Enrollment Trends, 1990-2011″ is misleading. It contrasts percentage of enrolled Asian students vs. the total number of the eligible Asian applicants. Therefore, it led to a flawed argument when comfusing number vs. percentage . For proof, if a similar graph of Hispanic student percentage vs. eligible applicants were drawn, it would appear that they were discriminated against as well. So would be the Black!

Anonymous says: • Website Show Comment Next New Comment January 21, 2013 at 5:03 am GMT

Hi

well, even a fair and objective admission criteria can have devastating consequences. here at IIT, we admit about 1 in 100. this has the same effect on student ethics, career options and so on. in fact, even worse, since IIT is an engineering college, the very definition of engineering in India has now distorted as serving international finance or distant masters in a globalized world. our own development problems remain unattended.

see http://www.cse.iitb.ac.in/~sohoni/RD.pdf

also, the above is a part of the current trend of knowledge concentration, i.e., a belief that only a few universities can impart us "true" knowledge or conduct "true" research.
see http://www.cse.iitb.ac.in/~sohoni/kpidc.pdf

regs, milind.

Anonymous January 24, 2013 at 1:21 am GMT

This is a very valuable article. It deals with a subject that has received too little attention. I believe that cultural bias in many cases outweighs the racial bias in the selection program. Time and again, I have seen young people with great potential being selected against because they are culturally different from what the selectors are looking for (often people who are like them culturally). The article's mentioning that students who participated in R.O.T.C., F.F.A. and/or 4H are often passed over is a good illustration.

It was interesting to note that the girl who wrote an essay on how she dealt with being caught in a drug violation found acceptance. I suspect that a student with similar academic qualifications who wrote an essay on the negative aspects of drug use would not be so lucky.

LMM

Thos. January 27, 2013 at 3:39 am GMT

comes news that Yale President Levin's successor will be Peter Salovey, tending to confirm Unz's observations regarding the grossly disproportionate number of Jewish presidents at Ivy League schools.

JF January 29, 2013 at 10:36 am GMT

All very interesting but I am among the National Merit Scholars from California who has a not obviously Jewish name despite having two Jewish parents. It was changed in the 1950s due to anti-Semitism and an urge to assimilate. A lot of other names can be German or Jewish for example. I suspect in light of that and intermarriage cases where the mom is Jewish and the dad is not, not to mention a lot of Russian names, you may be undercounting Jews among other things. Although to be fair, you are probably also undercounting some half-Asians given most of those marriages have a white husband and Asian wife.

Raymond February 4, 2013 at 4:43 pm GMT

I'm an Asian HYP grad. I applaud this article for being so extremely well researched and insightful. It's an excellent indictment of the arbitrariness and cultural favoritism concentrated in the hands of a very small group of unqualified and ideologically driven admissions officers. And I hasten to add that I am a liberal Democratic, an avid Obama supporter, and a strong proponent of correcting income inequality and combating discrimination in the workplace.

To me, the most compelling exhibit was the one towards the end which showed the % relative representation of enrolled students to highly-qualified students (I wish the article labeled the exhibits). This chart shows that in the Ivies, which administer highly subjective admission criteria, Jews are overrepresented by 3-4x, but in the California schools and MIT, which administer more objective criteria, Jews are overrepresented by only 0-50%, a range that can easily be explained by methodology or randomness.

This single exhibit is unequivocal evidence to me of systematic bias in the Ivy League selection process, with Jews as the primary beneficiary. I tend to agree with the author this this bias is unlikely to be explicit, but likely the result of cultural favoritism, with a decision-making body that is heavily Jewish tending to favor the activities, accomplishments, personalities, etc. of Jewish applicants.

The author has effectively endorsed one of the core tenets of modern liberalism – that human beings tend to favor people who look and act like themselves. It's why institutions dominated by white males tend to have pro-white male biases. The only twist here is that the decision-making body in this instance (Ivy League admissions committees) is white-Jewish, not white-Gentile.

So if you're a liberal like me, let's acknowledge that everyone is racist and sexist toward their own group, and what we have here is Jews favoring Jews. We can say that without being anti-semitic, just like we can say that men favor men without being anti-male, or whites favor whites without being anti-white.

Anonymous February 8, 2013 at 4:47 am GMT

Just some puzzling statistics: In p. 32, second paragraph, it is mentioned "The Asian ratio is 63% slightly above the white ratio of 61 percent", then in the third paragraph "However, if we separate out the Jewish students, their
ratio turns out to be 435 percent, while the residual ratio for non-Jewish whites drops to just 28 percent, less than half of even the Asian figure", leading to the conclusion that "As a consequence, Asians appear under-represented relative to Jews by a factor of seven, while non-Jewish whites are by far the most under-represented group of all". Not very clear on the analysis!

Let me try to make a guess on the calculation of this statistics ratio: Assume that all groups in NMS will apply, with mA=Asians, mJ=Jews, mW=Whites be the respective numbers in NMS. Suppose that nA, nJ, and nW are those Asians, Jews, and Whites finally admitted. Then if the statistics ratio for G means ((nG)/(mG))/(mG/mNMS), where mNMS is the total number in the NMS, then the ratio will amplify the admission rate (nG/mG) by (mNMS/mG) times and becomes very large or very small for small group size. For example, for a single person group, being admitted will give a ratio as large as mNMS, and a zero for not being admitted. Why can this ratio be used for comparing under-representation between different groups?

Anonymous February 14, 2013 at 12:29 am GMT

Very well. Loved the fact that the author put a lot into reseaching this piece. But i would like to know how many asians who manage to attend this ivy schools end up as nobel leaurets and professors?? This demonstrates the driving force behind the testscore prowess of the asians-financial motivation. The author talks about asians being under-represented in the ivies but even though they manage to attend then what?? do they eventually become eintiens and great nobel leurets or great cheese players. Also what is the stats like for asian poets, novelist, actors.etc Pls focus should be given on improving other non-ivy schools since we have a lots of high SAT test scores than high running universities.

Al February 23, 2013 at 3:13 pm GMT

Look at Nobel prizes, field medals and all kind of prizes and awards that recognize lifetime original academic contributions. Not many asians there yet. Perfect grades or SAT scores does not guarantee creativity, original thinking, intelectual curiosity or leadership. The problem is that those things are hard to measure and very easy to fake in an application.

Fred February 24, 2013 at 7:11 pm GMT

Loved all the research in the article and I am on board with the idea that moving in the tiger mother direction will kill creativity in young people. And I agree with the observation that our country's top leadership since 1970 or so has been underwhelming and dishonest especially in the financial services industry which draws almost entirely from the Ivies.

However, I am not so convinced that the over representation of Jewish students in the Ivy league is created by intentional bias on the part of Jewish professors or administrators at these institutions. Is it possible that admissions officers select Jewish applicants at such a high rate because they are more likely to actually attend? Once a family of four's income exceeds $160k the net price calculation for a year at Harvard jumps up pretty quickly. By the time you hit annual income of $200k you are looking at $43k/yr or $172k for 4 years. And at the lower income levels, even if a family has to pay just $15k a year, how will they do that if they are struggling to make it as it is? Do they want/does their student want to graduate with $60k worth of debt? Why not choose a great scholarship offer from a state university to pay nothing at all or go to community college for 2 years and then on to the state public institution?

There are many options for top students who can compete at the Ivy level. If I am an admissions officer looking to fill slots left over after minority admissions (ones poor enough to get the education for free and thus to say yes), legacies, athletic recruits, and the few super special candidates, wouldn't I choose those most likely to take me up on the admissions offer and protect my yield number? Might an easy way to get this done be to consult a demographic tool showing net worth by zip code? And to stack the yield odds a little more in my favor might I also choose families with Jewish appearing last names knowing they would be extremely likely to accept my offer since I obviously have recent history to show me that these families say yes to our prices? I think this is a much more plausible explanation then assuming some secret quota in force at these schools.

I am a conservative but I cannot believe Jewish liberals would go that far just to ensure more Jewish liberals attend their institutions or to keep conservative white non Jewish middle income students out. Dollars and cents and the perception a yield number conveys about the desirability of a school are what is at work here in my humble opinion.

Anonymous February 26, 2013 at 8:09 pm GMT

There is a very simple solution. There is no legal definition of race. Simply check the "Negro" (or "African-American" or whatever it is called today) box on the application form. You don't look it? Neither do many others, because your ancestry is really mixed. This may get you in. It won't hurt your chances, which are essentially zero before you check that box. At the very least, it will make it harder for the bigots in the admissions office to exercise their bigotry.

Anonymous March 1, 2013 at 7:13 pm GMT

"Look at Nobel prizes, field medals and all kind of prizes and awards that recognize lifetime original academic contributions. Not many asians there yet. Perfect grades or SAT scores does not guarantee creativity, original thinking, intelectual curiosity or leadership. The problem is that those things are hard to measure and very easy to fake in an application."

Last year, 75% of Ph.D candidates where foreign born, most of which were either Indian or Chinese. You should rely on statistics that are more current and relevant.

Doom March 12, 2013 at 8:45 pm GMT

Wow, another article on how corrupt higher eduation is.

Folks, open your eyes a bit. Online education is growing massively; sharing this growth are websites that write academic papers (even Ph.D. theses) on demands .these websites in toto have nearly as many customers as there are online students.

Harvard is unusual in that they actually banned students for cheating. Every investigation of cheating on campus shows it exists on a massive scale, and reports of half or more of a class cheating are quite common in the news.

The reason for this is simple: administrators care about retention, nothing else. Faculty have long since gotten the message. I've taught in higher education for nearly 25 years now, and I've seen many faculty punished for catching cheaters; not once has there been any reward.

Over 90% of remedial students fail to get a 2-year degree in three years, yet administration sees no issue with talking them into loans that will keep them in debt forever. Admin sees no issue with exploiting the vulnerable for personal gain, of course.

Here's what higher education is today: desperate people take out loans to go to college. They use the money to pay the tuition, and they use the money to buy academic papers because they really aren't there for college, they're there for the checks. Their courses are graded by poorly paid faculty (mostly adjuncts), again paid by those checks. The facutly are watched over by administrators to make sure there is no integrity to the system and again, admin is paid by those checks (in fact, most of the tuition money goes to administrators).

Hmm, what part of this could be changed that would put integrity back into the system?

Anonymous March 12, 2013 at 10:18 pm GMT

I think your sources who claim to be familiar with China are very wrong concerning entrance into Chinese universities, especially those so-called upper tier unis. It is well known amongst most Chinese students who take the gaokao, the all-or-nothing university entrance examination, bribes, guanxi (connections) and just being local, are often better indicators of who will be accepted.

• Replies: @KA Same and some more in India.
In India it is politics of the gutter. Someone can get to medical school and engineering school even if he or she did not qualify,if scored say 3 points out of 1000 points as long as he or she belonged to lower caste of Hindu. The minimum requirements they have to fulfill is to pass the school leaving examinations with science subjects .A passing level is all that matters . The process then continues (in further education -master , training, post doctoral, and in job and in promotion)
While upper caste Hindu or Christian or Muslim may not be allowed despite scoring 999 out of 1000. It is possible and has happened.
Unfortunately the lower caste has not progressed much. Upper caste Hindus have misused this on many occasions and continue to do do by selling themselves as lower caste with legal loopholes .Muslim or Christians can't do that for they can't claim to be Hindu
Bobby March 13, 2013 at 1:57 am GMT

Ron Unz is a brilliant man. He created software that made him rich, and has written articles on all kinds of subjects. But apparently, Ron shares a problem with a very tiny number of humanity. Ron is one of those oddball characters, that, no matter where the truth leads him, he simply has to express it, regardless of political correctness. He did this in California with the debate on English,etc.

Compared to the administrators of these Ivy League Institutions, Ron is a mental giant, not even near being in the same class as these supposedly important but in reality, worthless beurocrats.

Thom March 13, 2013 at 7:04 pm GMT

If ten million Gentile whites and Asians changed their surname to Kaplan, Levy, Golden, Goldstein, Goldman, it obviously would throw a monkey wrench into the process of ethnic favoritism.

To paraphrase Unz - the "shared group biases" of Ivy League college admission officers that have "extreme flexibility and subjectivity", does harm white Gentiles and Asians, but only because the process lacks objective, meritocratic decision making, and in its place is a vile form of corrupt cronyism and favoritism.

Anonymous March 21, 2013 at 4:39 pm GMT

An Asian speaking here, I agree that America isn't a meritocracy, but has it ever been? It seems like this article's falling for the oldest trick in the book - looking back at the "good old days". I'd argue that now more than ever, the barrier to entry is lower than ever, and that every individual can rise to the occasion and innovate for the better. Places like Exeter (my alma mater) aren't just playgrounds for the rich - I'm not extremely wealthy, and neither were my classmates. Most of us were even on financial aid. Don't just point fingers at institutions to account for shortcomings - if you had the stroke of fortune to be born in a nation with such opportunity, with hard work and CREATIVITY and INNOVATION, anything is possible.

Has anyone thought about why the test-prep business has expanded so much? It's to feed into the very same system that you're complaining about. Be the change you wish to see in the world, not a victim of it. To many of the Asians out there, I'd say get over your 4.0 GPA and 2400 SAT score and be unique for once.

Michael N Moore March 28, 2013 at 7:52 pm GMT

To put Unz's findings in social and historical perspective, it is important to understand where Jewish academics come from. The Eastern European Jews who immigrated to Northeast US in the Twentieth Century ran into an immigrant world dominated by Catholics and particularly Irish Catholics. The Irish, who were as "hungry" as the Jews got control over government and its ancillary economic benefits. I wasn't there at the time, but I imagine we Irish did not do much to help Jewish immigrants compared with Catholic immigrants.

One area abandoned by the Catholic Church was public and secular education. The Church formed its own educational Catholic ghetto. Jewish immigrants adopted the public-secular educational world as their own and became strong adherents of education as the key to Americanization. Education became their small piece of turf. The only memorable political conflict between Jews and AfricanAmericans in New York City was over control of the public schools.

Just as the Irish react against affirmative action for non-Irish in government jobs, the descendants of these Jewish immigrants react to the plagiarism of their assimilation plan by the Chinese/Koreans. When you have de facto Irish affirmative action you don't want de jure African American affirmative action. When you have Jewish "meritocracy" you don't want Asian meritocracy.

The result is what you see today. The Irish still have a stranglehold on government related jobs in the Northeast with a smattering of minorities ("New Irish") and the Jews try to protect their secular education turf from the "New Jews". It's just business. Don't take it personally.

marc April 7, 2013 at 4:12 pm GMT

All I can say is see a book: "Ivy League Fools and Felons"' by Mack Roth. Lots of them are kids of corrupt people in all fields.

But I disagree that opportunity is being closed off to most Americans. Here in North Dakota I work for a high school graduate, self made trucking millionaire. Five years ago she was a secretary in Iowa. But she got off her butt and went to where the money is circulating. Just my 2 cents

Anonymous April 7, 2013 at 8:18 pm GMT

Sorry, but quick correction regarding rankings (and I only have to say this because I go to MIT). Technically, MIT and Caltech are *both* ranked the same. The only reason why Caltech appears on the list before MIT is because it come before it alphabetically to suggest otherwise would be untrue. When you look at individual departments, you'll find that MIT consistently ranks higher than that of Caltech in all engineering disciplines and most scientific disciplines. Also, personally speaking, MIT has a far better humanities program that Caltech (especially in the fields of economics, political science, philosophy, and linguisitics). We do have a number of Pulitizer Prize winners who teach here.

Also generally, in academic circle, MIT is usually viewed with higher regard than Caltech, although that isn't to say Caltech isn't a fantastic school (it really and truly is–I loved it there and I wish more people knew more about it)

Rand April 7, 2013 at 10:27 pm GMT

One observation about methodology that struck me while reading this:

The Jewish population of universities is being evaluated based on Hillel statistics, with the "Non-Jewish white" population being based on the white population minus the Jewish population.

This can be problematic when you consider that these population are merging at a pretty high rate. (I don't have much information here, but this is from the header of the wikipedia article: "The 1990 National Jewish Population Survey reported an intermarriage rate of 52 percent among American Jews.")

What percentage of partially Jewish students identify as "Jewish" or does Hillel identify as Jewish? If you're taking a population that would have once identified as "white" and now identifying them as Jewish, obviously you'll see some Jewish inflation, and white deflation. And when a large percentage of this population bears the names "Smith", "Jones", "Roberts" etc., you're obviously not going to see a corresponding increase in NMS scores evaluated on the basis of last names.

Of course, I have no idea what methodology Hillel is using, but I wouldn't be surprised to learn that it's an inflated one.

NotAmerican April 15, 2013 at 4:56 pm GMT

Thank you Mr. Unz for this provocative article. It isn't the author's first one on Jewish & Asian enrollment at Ivy League colleges. I remember another one, in the 1990s I believe.

According to what I read, less and less American Jews apply for medical school nationwide, and Jewish women are very educated, but it comes also with a low birthrate and high median age. It makes the recent spike in Jewish admissions at Harvard College all the more curious, intriguing.

This month, the NY Times published a list of the highest earners in the hedge fund industry in 2012, and 8 out of 10 were Jewish. Are certain universities aggressively seeking donations from this super rich demographic since the 2000s?

History has a way of repeating itself.

NotAmerican April 15, 2013 at 5:01 pm GMT

I'm referring to HYP(Harvard-Yale-Princeton)'s history, during the Gilded Age for example.

Ira April 21, 2013 at 2:12 pm GMT

The young American Jew is not like his grandparents. They are just as fun loving and lazy as any other. This is the result of a lack of perceived persecution that use to keep the group together. In the major cities, half of the young people leave the tribe through intermarriage. This is human nature. The Rabbis changed the rules some time ago to define a Jew as coming from the mother, so the Jewish man would marry a Jewish woman, instead of a woman outside of the tribe. Read the Bible. In David's time, the men had an eye for good looking women outside of the tribe(like all men). Now days, the young people just laugh at the Rabbi's words.

Instead of the old folks liberal ideas of race and ethnic divisions, let us change it to go by economic class. According to liberal thought, intelligence is equally distributed throughout all economic classes, so higher education admissions should be by economic class, and not the old divisive ideas of race and ethnic background. After all, affirmative action programs are institutionalized racism and racial profiling.

• Replies: @KA Yes . You have points . This is one of the fears that drove the Zionist to plan of Israel in 1880 . It was the fear of secular life free from religious persecution and freedom to enjoy life to its fullest in the post industrial non religious Europe guided by enlightenment that drove them embrace the religious ethnic mix concept of statehood.
N. Joseph Potts April 29, 2013 at 7:43 pm GMT

These and many other ills would be alleviated if government would stop: (a) banning aptitude tests or even outright discrimination as determinants of employment; (b) subsidizing private institutions such as Harvard; and (c) close down all government schools, starting with state institutions of "higher learning."

I know, pie in the sky. But the author's suggestions by comparison are mere Band-Aids.

Clark Coleman May 14, 2013 at 4:13 am GMT

Great analysis, but pie-in-the-sky prescription, which was presumably just intended to be thought provoking. If you want to know why Harvard would never adopt the author's recommendation, just read what he wrote:

"But if it were explicitly known that the vast majority of Harvard students had merely been winners in the application lottery, top businesses would begin to cast a much wider net in their employment outreach, and while the average Harvard student would probably be academically stronger than the average graduate of a state college, the gap would no longer be seen as so enormous, with individuals being judged more on their own merits and actual achievements. A Harvard student who graduated magna cum laude would surely have many doors open before him, but not one who graduated in the bottom half of his class."

I wonder why Harvard officials would desire this outcome?

Anonymous May 23, 2013 at 4:00 am GMT

So a lot of ivy league presidents with Jewish-sounding names somehow influence admissions staff who may not have Jewish-sounding names to favor undeserving applicants because they also have Jewish-sounding names? And this is because of some secret ethnic pride thing going on? And nobody's leaked this conspiracy to the outside world until our whistle blowing author? The guy's a nut job.

foo May 31, 2013 at 5:31 am GMT

Benj Pollock says: [...stuf...]

What a weird ad-hominem attack! One of the weakest I have seen..you should really be calling the author an "anti-semite" shouldn't you ?

Anonymous July 27, 2013 at 5:04 pm GMT

All of your statistics are highly suspect due to the enormous, and rapid annual increase in Jewish intermarriage. I do not have the statistics, but over many years, it certainly appears that Jewish men are far more likely to intermarry than Jewish women (the lure of the antithesis to their Jewish mother??) and to complicate matters further, Jewish men seem to have a predilection for Asian women, at least in the greater NY Metro Area. But that still does not represent the majority of Jewish men marrying Christians. QED. More Jewish last names, for children who are DNA wise only half Jewish than non Jewish names for the intermarried. And if one wanted to get really specific, the rapidly rising intermarriage is diluting the "Jewish" genetic pool's previously demonstrable intelligence superiority., strengthened by the fact that most couples use the Jewish fathers last name.
These observations are in no way associated with how the various Jewish denominations define 'Jewish"

Methinks the statistics are highly flawed.

NB says: • Website Show Comment Next New Comment December 5, 2013 at 7:52 pm GMT

I have posted a critique of Unz's article here: http://alum.mit.edu/www/nurit

Columbia statistician Andrew Gelman discusses it here: http://andrewgelman.com/2013/10/22/ivy-jew-update/

In short: Unz substantially overestimated the percentage of Jews at Harvard while grossly underestimating the percentage of Jews among high academic achievers, when, in fact, there is no discrepancy.

In addition, Unz's arguments have proven to be untenable in light of a recent survey of incoming Harvard freshmen conducted by The Harvard Crimson, which found that students who identified as Jewish reported a mean SAT score of 2289, 56 points higher than the average SAT score of white respondents.

Walter Sobchak December 11, 2013 at 3:43 am GMT

I have a couple of thoughts about this article:

First. I was thrilled to see your advocacy of admissions by lottery. I have advocated such a plan on various websites that I participate in, but you have written the first major article advocating it that I have seen. Congratulations.

Just a small quibble with your plan, I would not allow the schools any running room for any alternatives to the lottery. They have not demonstrated any willingness to administer such a system fairly. After a few years of pure lottery it would be time to evaluate it and see if they should be allowed any leeway, but I wouldn't allow any variation before that.

I would hypothesize that one effect of a lottery admissions plan would be a return to more stringent grading in the class rooms. It would be useful to the faculty to weed out the poor performers more quickly, and the students might have less of an attitude of entitlement.

Second, I am glad that you raised the issue of corruption of the admissions staffs. It would be a new chapter in human history if there was no straight out bribe taking of by functionaries in their positions. My guess is that the bag men are the "high priced consultants". Pay them a years worth of tuition money and a sufficient amount will flow to the right places to get your kid in to wherever you want him to go.

Third, three observations about Jewish Students.

First, Jews are subject to mean reversion just like everybody else.

Second, the kids in the millennial generation were, for the most part, born into comfortable middle class and upper class homes. The simply do not have the drive that their immigrant grandparents and great-grandparents had. I see this in my own family. My wife and I had immigrant parents, and we were pretty driven academically (6 degrees between us). Our kids, who are just as bright as we were, did not show that same edge, and it was quite frustrating to us. None of them have gone to a graduate or professional school. They are all working and are happy, but driven they aren't.

Third, Hillel's numbers of Jewish students on their website should be taken cum grano salis. All three of our kids went to Northwestern U. (Evanston, IL) which Hillel claimed was 20% Jewish. Based on our personal observations of kids in their dorms and among their friends, I think the number is probably 10% or less.

Finally, the side bar on Paying Tuition to a Hedge Fund. I too am frustrated with the current situation among the wealthy institutions. I think that it deserves a lot more attention from policy makers than it has received. The Universities have received massive benefits from the government (Federal and state) - not just tax exemptions, but grants for research and to students, subsidized loans, tax deductions for contributions, and on, and on. They have responded to this largess by raising salaries, hiring more administrators, spending billions on construction, and continually raising tuitions far faster than the rate of inflation. I really do not think the tax payers should be carrying this much of a burden at a time when deficits are mounting without limit.

Henry VIII solved a similar problem by confiscating assets. We have constitutional limits on that sort of activity, but I think there a lot of constitutional steps that should be considered. Here a few:

1. There is ample reason to tax the the investment gains of the endowments as "unrelated business taxable income" (UBTI, see IRS Pub 598 and IRC §§ 511-515) defined as income from a business conducted by an exempt organization that is not substantially related to the performance of its exempt purpose. If they do not want to pay tax on their investments, they should purchase treasuries and municipals, and hold them to maturity.

2. The definition of an exempt organization could be narrowed to exclude schools that charge tuition. Charging $50,000/yr and sitting on 30G$ of assets looks a lot more like a business than a charity.

3. Donations to overly rich institutions should be non deductible to the donors. Overly rich should be defined in terms of working capital needs and reserves for depreciation of physical assets.

jholloway August 23, 2014 at 4:40 am GMT

Ron,

Is the proposed mechanism that Jewish university presidents create a bias in the admissions department?

That could be tested by comparing Jewish student percentages between schools with Christian and Jewish presidents. If Christian presidents produce student bodies with a high proportion of Jews, then Jewish ethnocentrism is not the cause. (We'd have to find a way to control for presidents' politics.)

If admissions departments are discriminating in favor of liberals, that will boost the proportion of all liberals, including many Jews, but it will be political discrimination, not ethnic discrimination. (Both are bad, but we should be accurate.)

Liberals see a discrepancy in ethnic outcomes and consider it proof of ethnic discrimination. Are we doing the same thing?

KA October 12, 2014 at 2:34 pm GMT

After Russian emancipation, the Jews from Pale settlement spread out and took up jobs in government services, secured admissions in technical and medical schools, and established positions in trade in just two decades. Then they started interconnecting and networking more aggressively to eliminate competition and deny the non-Jews the opportunities that the non Jews rightfully claimed. This pattern was also evident in Germany after 1880 and in Poland between interwars .

The anti-Jewish sentiment seen in pre revolutionary Russia was the product of this ethnic exclusivisity and of the tremendous in-group behaviors .

KA October 12, 2014 at 2:41 pm GMT
@Ira The young American Jew is not like his grandparents. They are just as fun loving and lazy as any other. This is the result of a lack of perceived persecution that use to keep the group together. In the major cities, half of the young people leave the tribe through intermarriage. This is human nature. The Rabbis changed the rules some time ago to define a Jew as coming from the mother, so the Jewish man would marry a Jewish woman, instead of a woman outside of the tribe. Read the Bible. In David's time, the men had an eye for good looking women outside of the tribe(like all men). Now days, the young people just laugh at the Rabbi's words.

Instead of the old folks liberal ideas of race and ethnic divisions, let us change it to go by economic class. According to liberal thought, intelligence is equally distributed throughout all economic classes, so higher education admissions should be by economic class, and not the old divisive ideas of race and ethnic background. After all, affirmative action programs are institutionalized racism and racial profiling.

Yes . You have points . This is one of the fears that drove the Zionist to plan of Israel in 1880 . It was the fear of secular life free from religious persecution and freedom to enjoy life to its fullest in the post industrial non religious Europe guided by enlightenment that drove them embrace the religious ethnic mix concept of statehood.

KA October 12, 2014 at 2:59 pm GMT
@Anonymous I think your sources who claim to be familiar with China are very wrong concerning entrance into Chinese universities, especially those so-called upper tier unis. It is well known amongst most Chinese students who take the gaokao, the all-or-nothing university entrance examination, bribes, guanxi (connections) and just being local, are often better indicators of who will be accepted.

Same and some more in India. In India it is politics of the gutter. Someone can get to medical school and engineering school even if he or she did not qualify, if scored say 3 points out of 1000 points as long as he or she belonged to lower caste of Hindu. The minimum requirements they have to fulfill is to pass the school leaving examinations with science subjects .A passing level is all that matters . The process then continues (in further education -master , training, post doctoral, and in job and in promotion)

While upper caste Hindu or Christian or Muslim may not be allowed despite scoring 999 out of 1000. It is possible and has happened. Unfortunately the lower caste has not progressed much. Upper caste Hindus have misused this on many occasions and continue to do do by selling themselves as lower caste with legal loopholes .Muslim or Christians can't do that for they can't claim to be Hindu

Ivy October 16, 2014 at 3:20 am GMT

Takeaways:
Jews are really good at networking and in-group activity. They have centuries of practice, and lived a meritocratic existence of self-sorting in the Pale and elsewhere.
That is evident to all who look.

Other groups have different approaches, and different organizational or affiliation bonds, based on their history, culture and other factors.

NE Asians share some traits, and both value education as a way to improve themselves and to some extent their groups.
S Asians will demonstrate their own approach, focusing heavily on STEM.

Expect demographics to win out, given 2.5B Asians versus a smaller NAM or NE European-base populace.

Anonymous November 26, 2014 at 5:06 pm GMT

Thanks for the informative article. Your proposal sounds reasonable. Another option would be to attempt to vastly decrease the significance of these elite private schools. Why should we allow undemocratic little fiefdoms to largely control entry into our country's ruling class? It would probably be considerably more fair, more transparent and more efficient to pour a lot of resources into our public universities. If Berkeley, Michigan, UVA, UMass, etc. were completely free, for instance–or if they provided students with living expenses as well as free tuition, the quality of their students would conceivably surpass that of the Ivy League's, and over time the importance and prestige of Harvard, Stanford, etc. would diminish. Instead, we are subsidizing students at elite private colleges more than those at public colleges–an absurd state of affairs (see this article, whose author is a bit of an ideologue but who is right on this issue: http://www.csmonitor.com/Business/Robert-Reich/2014/1014/How-the-government-spends-more-per-student-at-elite-private-universities-than-public ).

Truth December 25, 2014 at 4:04 pm GMT

Mr. Unz; thank you for the long, informational and scholarly article. I read the whole thing, and from Sailer I am familiar with your reputation as a certified genius. I must admit however, after the 5-10,000 words you had written, I was a bit shocked that your answer to how to improve elite University enrollment, was to FLIP A FIGURATIVE COIN.

I expected some chart with differential equations that I would have to consult my much more intelligent brother, the electrical engineer to explain to me. Not that it does not make a lot of sense.

The issue with your solution is that you go from a three class university:
1) Legacy Admits
2) Non athletic, black admits
3) everyone else

to a much-more rigid, two class university:

1) academic admits
2) coin-flip admits

One tier being one of the smartest 15-18 year olds in the world, the other being "somewhat better than good student at Kansas State."

Talk about a hierarchy!

Anonymous March 11, 2015 at 3:34 am GMT

My brother works at a little ivy league school. Well endowed because the parents Dun and Bradstreet reports are at the top of the selection sheets with parents jobs also. Extra points for finance and government jobs at executive levels.

This article was excellent and reinforced everything he has told me over the years. One thing he did mention i would like to add. Asians, which for years were their choice for filling minority quotas, are horrible when it comes to supporting the alma mater financially during the fund drives. This information was confirmed by several other schools in the area when they tried a multi-school drive in the far east and south east asia to canvas funds and returned with a pitiful sum.

Joe Franklin August 20, 2015 at 8:25 pm GMT

Diversity is a scheme that is the opposite of a meritocracy. Diversity is a national victim cult that generally demonizes gentiles, and more specifically demonizes people that conform to a jewish concocted profile of a nazi.

Why would anyone use the word diversity in the same sentence as the word meritocracy?

Joe Franklin August 29, 2015 at 4:42 pm GMT

"Are elite university admissions based on meritocracy and diversity as claimed?" Why would anybody claiming to be intelligent include meritocracy and diversity in the same sentence?

Part White, Part Native September 1, 2015 at 6:45 am GMT

@Sean Gillhoolley Harvard is a university, much like Princeton and Yale, that continues based on its reputation, something that was earned in the past. When the present catches up to them people will regard them as nepotistic cauldrons of corruption.

Look at the financial disaster that befell the USA and much of the globe back in 2008. Its genesis can be found in the clever minds of those coming out of their business schools (and, oddly enough, their Physics programs as well). They are teaching the elite how to drain all value from American companies, as the rich plan their move to China, the new land of opportunity. When 1% of the population controls such a huge portion of the wealth, patriotism becomes a loadstone to them. The elite are global. Places like Harvard cater to them, help train them to rule the world....but first they must remake it.

I agree, common people would never think of derivatives , nor make loans based on speculation .

Gandydancer December 26, 2015 at 1:43 am GMT

"Tiffany Wang['s] SAT scores were over 100 points above the Wesleyan average, and she ranked as a National Merit Scholarship semifinalist "

"Julianna Bentes her SAT scores were somewhat higher than Tiffany's "

Did Ms. Wang underperform on her SATs? NMS semifinalist status depends purely on the score on a very SAT-like test being at a 99.5 percentile level, as I understand it (and I was one, albeit a very long time ago) and I gather from the above that her SAT scores did not correspond to the PSAT one. That is, merely " 100 points above the Wesleyan average" doesn't seem all that exceptional. Or am I wrong?

Mr. Unz several times conflates NMS semifinalist status with being a top student. Which I most definitely was not. It's rather an IQ test. As was the SAT.

[Dec 01, 2017] Elite needs a kill switch for their front men and women

marknesop.wordpress.com
Patient Observer , July 23, 2016 at 7:07 pm
An interesting article on John McCain. I disagree with the contention that McCain hid knowledge that many American POWs were left behind (undoubtedly some voluntarily choose to remain behind but not hundreds ). However, the article touched on some ideas that rang true:

Today when we consider the major countries of the world we see that in many cases the official leaders are also the leaders in actuality: Vladimir Putin calls the shots in Russia, Xi Jinping and his top Politburo colleagues do the same in China, and so forth. However, in America and in some other Western countries, this seems to be less and less the case, with top national figures merely being attractive front-men selected for their popular appeal and their political malleability, a development that may eventually have dire consequences for the nations they lead. As an extreme example, a drunken Boris Yeltsin freely allowed the looting of Russia's entire national wealth by the handful of oligarchs who pulled his strings, and the result was the total impoverishment of the Russian people and a demographic collapse almost unprecedented in modern peacetime history.

An obvious problem with installing puppet rulers is the risk that they will attempt to cut their strings, much like Putin soon outmaneuvered and exiled his oligarch patron Boris Berezovsky.

One means of minimizing such risk is to select puppets who are so deeply compromised that they can never break free, knowing that the political self-destruct charges buried deep within their pasts could easily be triggered if they sought independence. I have sometimes joked with my friends that perhaps the best career move for an ambitious young politician would be to secretly commit some monstrous crime and then make sure that the hard evidence of his guilt ended up in the hands of certain powerful people, thereby assuring his rapid political rise.

The gist is that elite need a kill switch on their front men (and women).

http://www.unz.com/runz/american-pravda-when-tokyo-rose-ran-for-president/

Cortes , July 24, 2016 at 11:16 am

Seems to be a series of pieces dealing with Vietnam POWs: the following linked item was interesting and provided a plausible explanation: that the US failed to pay up agreed on reparations…

http://www.unz.com/runz/american-pravda-relying-upon-maoist-professors-of-cultural-studies/

marknesop , July 24, 2016 at 12:29 pm
Remarkable and shocking. Wheels within wheels – this is the first time I have ever seen McCain's father connected with the infamous Board of Inquiry which cleared Israel in that state's attack on USS LIBERTY during Israel's seizure of the Golan Heights.
Cortes , July 25, 2016 at 9:08 am
Another stunning article in which the author makes reference to his recent acquisition of what he considers to be a reliably authentic audio file of POW McCain's broadcasts from captivity. Dynamite stuff. The conclusion regarding aspiring untenured historians is quite downbeat:

http://www.unz.com/runz/american-pravda-will-there-be-a-spotlight-sequel-to-the-killing-fields/

marknesop , July 25, 2016 at 10:40 am
Also remarkable; fantastic. It's hard to believe, and a testament to the boldness of Washington dog-and-pony shows, because this must have been well-known in insider circles in Washington – anything so damning which was not ruthlessly and professionally suppressed and simply never allowed to become part of a national discussion would surely have been stumbled upon before now. Land of the Cover-Up.

yalensis , July 25, 2016 at 3:40 pm

So, McCain was Hanoi Jack broadcasting from the Hanoi Hilton?

[Dec 31, 2016] Milton Friedman was intellectual prostitute of financial oligarchy most of his long life, starting from his days in Mont Pelerin Society

Notable quotes:
"... So, if the period when he was a good econometrician exists it is limited to pre-war and war years. As he was born in 1912, he was just 33 in 1945. His "A Theory of the Consumption Function" was published in 1957. And "A Monetary History of the United States, 1867–1960" in 1963, when he was already completely crooked. ..."
"... Mont Pelerin Society was founded in 1947 with the explicit political goal of being hatching place for neoliberal ideology as alternative to communist ideology. He served as a President of this Society from 1970 to 1972. ..."
"... So what Krugnam is saying is a myth. And he is not an impartial observer. He is a neoliberal himself. I still remember Krugman despicable attacks on John Kenneth Galbraith and his unhealthy fascination with the usage of differential equations in economic modeling, the epitome of mathiness. ..."
Dec 31, 2016 | economistsview.typepad.com
JohnH : December 31, 2016 at 04:38 PM
Ironic isn't it? "Why didn't ... exhibit the same restraint in his role as a public intellectual?

The answer, I suspect, is that he got caught up in an essentially political role. Milton Friedman the great economist could and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm of his early career hardened into a rigid defense of what had become the new orthodoxy."

Krugman should have stuck to economics...

likbez -> JohnH...
Yes, this is pretty nasty verdict for Krugman too.

But, in reality, Milton Friedman was an intellectual prostitute of financial oligarchy most of his long life, starting from his days in Mont Pelerin Society ( https://en.wikipedia.org/wiki/Mont_Pelerin_Society) , where he was one of the founders.

So, if the period when he was a good econometrician exists it is limited to pre-war and war years. As he was born in 1912, he was just 33 in 1945. His "A Theory of the Consumption Function" was published in 1957. And "A Monetary History of the United States, 1867–1960" in 1963, when he was already completely crooked.

Mont Pelerin Society was founded in 1947 with the explicit political goal of being hatching place for neoliberal ideology as alternative to communist ideology. He served as a President of this Society from 1970 to 1972.

Capitalism and Freedom that many consider to be neoliberal manifesto similar to Marx and Engels "Manifesto of the Communist Party" was published in 1962.

So what Krugnam is saying is a myth. And he is not an impartial observer. He is a neoliberal himself. I still remember Krugman despicable attacks on John Kenneth Galbraith and his unhealthy fascination with the usage of differential equations in economic modeling, the epitome of mathiness.

[Dec 31, 2016] Milton Friedman was intellectual prostitute of financial oligarchy most of his long life, starting from his days in Mont Pelerin Society

Dec 31, 2016 | economistsview.typepad.com
JohnH : December 31, 2016 at 04:38 PM
Ironic isn't it? "Why didn't ... exhibit the same restraint in his role as a public intellectual?

The answer, I suspect, is that he got caught up in an essentially political role. Milton Friedman the great economist could and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm of his early career hardened into a rigid defense of what had become the new orthodoxy."

Krugman should have stuck to economics...

likbez -> JohnH...
Yes, this is pretty nasty verdict for Krugman too.

But, in reality, Milton Friedman was an intellectual prostitute of financial oligarchy most of his long life, starting from his days in Mont Pelerin Society ( https://en.wikipedia.org/wiki/Mont_Pelerin_Society) , where he was one of the founders.

So, if the period when he was a good econometrician exists it is limited to pre-war and war years. As he was born in 1912, he was just 33 in 1945. His "A Theory of the Consumption Function" was published in 1957. And "A Monetary History of the United States, 1867–1960" in 1963, when he was already completely crooked.

Mont Pelerin Society was founded in 1947 with the explicit political goal of being hatching place for neoliberal ideology as alternative to communist ideology. He served as a President of this Society from 1970 to 1972.

Capitalism and Freedom that many consider to be neoliberal manifesto similar to Marx and Engels "Manifesto of the Communist Party" was published in 1962.

So what Krugnam is saying is a myth. And he is not an impartial observer. He is a neoliberal himself. I still remember Krugman despicable attacks on John Kenneth Galbraith and his unhealthy fascination with the usage of differential equations in economic modeling, the epitome of mathiness.

[Dec 31, 2016] Problems with Krugman as an economist is that he, as a neoliberal, believes that profit motive is superior to the mutual benefit motive all the time.

Notable quotes:
"... My criticism of Krugman is far more fundamental. I do not believe the profit motive is superior to the mutual benefit motive when it comes to organizing economies. ..."
Dec 31, 2016 | economistsview.typepad.com
Paul Mathis -> anne... , December 31, 2016 at 06:48 PM
I have two problems with Prof. K:

1. His refusal to acknowledge the central role of consumption in our economy. As Keynes said, ""Consumption - to repeat the obvious - is the sole end and object of all economic activity." The General Theory, p. 104.

And Adam Smith agreed: "Consumption is the sole end and purpose of all production." The Wealth of Nations, Book IV Chapter VIII, v. ii, p. 660, para. 49.

2. Krugman's refusal to endorse fiscal stimulus unless the economy is at ZLB. That is not only anti-Keynesian, it plays directly into the hands of the debt fear mongers. (Krugman is also worried about the debt.)

yuan -> Paul Mathis... , December 31, 2016 at 06:56 PM
"Krugman's refusal to endorse fiscal stimulus unless the economy is at ZLB."

That is a strawman, and a bad one.

PS: My criticism of Krugman is far more fundamental. I do not believe the profit motive is superior to the mutual benefit motive when it comes to organizing economies.

anne -> Paul Mathis... , December 31, 2016 at 06:57 PM
Important criticisms.
anne -> Paul Mathis... , December 31, 2016 at 07:00 PM
https://www.marxists.org/reference/archive/smith-adam/works/wealth-of-nations/book04/ch08.htm

1776

An Inquiry into the Nature and Causes of The Wealth of Nations
By Adam Smith

On Systems of Political Economy

Conclusion of the Mercantile System

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self evident that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.

anne -> Paul Mathis... , December 31, 2016 at 07:07 PM
https://www.marxists.org/reference/subject/economics/keynes/general-theory/ch08.htm

1935

The General Theory of Employment, Interest and Money
By John Maynard Keynes

The Propensity to Consume: The Objective Factors

Consumption - to repeat the obvious - is the sole end and object of all economic activity. Opportunities for employment are necessarily limited by the extent of aggregate demand. Aggregate demand can be derived only from present consumption or from present provision for future consumption. The consumption for which we can profitably provide in advance cannot be pushed indefinitely into the future. We cannot, as a community, provide for future consumption by financial expedients but only by current physical output. In so far as our social and business organisation separates financial provision for the future from physical provision for the future so that efforts to secure the former do not necessarily carry the latter with them, financial prudence will be liable to diminish aggregate demand and thus impair well-being, as there are many examples to testify. The greater, moreover, the consumption for which we have provided in advance, the more difficult it is to find something further to provide for in advance, and the greater our dependence on present consumption as a source of demand. Yet the larger our incomes, the greater, unfortunately, is the margin between our incomes and our consumption. So, failing some novel expedient, there is, as we shall see, no answer to the riddle, except that there must be sufficient unemployment to keep us so poor that our consumption falls short of our income by no more than the equivalent of the physical provision for future consumption which it pays to produce to-day.

anne -> Paul Mathis... , -1
Krugman's refusal to endorse fiscal stimulus unless the economy is at zero lower bound. That is not only anti-Keynesian, it plays directly into the hands of the debt fear mongers. (Krugman is also worried about the debt.)

[ Only correct to a degree, economic weakness is recognized. ]

[Dec 31, 2016] Economists View 2007 Krugman on Milton Friedman

Dec 31, 2016 | economistsview.typepad.com
Mathew Kahn:
2007 Krugman on Milton Friedman : As you read this direct Paul Krugman quote, do y ou hear this song in the background.

"What's odd about Friedman's absolutism on the virtues of markets and the vices of government is that in his work as an economist's economist he was actually a model of restraint. As I pointed out earlier, he made great contributions to economic theory by emphasizing the role of individual rationality-but unlike some of his colleagues, he knew where to stop. Why didn't he exhibit the same restraint in his role as a public intellectual?

The answer, I suspect, is that he got caught up in an essentially political role. Milton Friedman the great economist could and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm of his early career hardened into a rigid defense of what had become the new orthodoxy.

In the long run, great men are remembered for their strengths, not their weaknesses, and Milton Friedman was a very great man indeed-a man of intellectual courage who was one of the most important economic thinkers of all time, and possibly the most brilliant communicator of economic ideas to the general public that ever lived. But there's a good case for arguing that Friedmanism, in the end, went too far, both as a doctrine and in its practical applications. When Friedman was beginning his career as a public intellectual, the times were ripe for a counterreformation against Keynesianism and all that went with it. But what the world needs now, I'd argue, is a counter-counterreformation."

Paul Mathis : , December 31, 2016 at 02:26 PM

Counter-reformation? Not exactly.

In an interview with Public Broadcasting System on Oct. 1, 2000, Dr. Milton Friedman said, "Let me emphasize [that] I think Keynes was a great economist. I think his particular theory in The General Theory of Employment, Interest, and Money is a fascinating theory. It's a right kind of a theory. It's one which says a lot by using only a little. So it's a theory that has great potentiality."

Brilliant economist? Not exactly. For monetarists who believe as Dr. Friedman did that "inflation is always and everywhere a monetary phenomenon," the nearly $4 trillion added to the money supply by the Fed since 2008 should have produced raging hyper-inflation. For Friedman, the answer was not debatable: "A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth." The Counter-Revolution in Monetary Theory (1970).

Dan Berg -> Paul Mathis... , December 31, 2016 at 02:38 PM
$4 T was not "added to the money supply"

https://fred.stlouisfed.org/graph/?g=2VX3

For Krugman, this is called being hoisted by one's own petard.

anne -> Dan Berg ... , December 31, 2016 at 03:35 PM
https://fred.stlouisfed.org/graph/?g=2VX3 :

this graph, which should have been labelled but was not, depicts the monetary base from October 2012 to December 2015 for reasons that are a mystery to me.

anne -> Paul Mathis... , December 31, 2016 at 02:44 PM
https://fred.stlouisfed.org/graph/?g=cfmn

January 15, 2016

Adjusted Monetary Base, 2000-2016


https://fred.stlouisfed.org/graph/?g=cfmq

January 15, 2016

Adjusted Monetary Base, 2008-2016

anne -> anne... , December 31, 2016 at 02:47 PM
About $3 trillion was added to the monetary base between 2008 and the beginning of 2015.
Dan Berg -> anne... , December 31, 2016 at 05:05 PM
so why are you depicting the monetary base if they are such a mystery; and without labels?
anne -> anne... , December 31, 2016 at 05:18 PM
Perfectly described and drawn graphs depicting more than a $3 trillion increase in the monetary base between 2008 and 2015. Nice and simple as that:

https://fred.stlouisfed.org/graph/?g=cfmn

January 15, 2016

Adjusted Monetary Base, 2000-2016

https://fred.stlouisfed.org/graph/?g=cfmq

January 15, 2016

Adjusted Monetary Base, 2008-2016

Tra la, tra la.

anne -> Paul Mathis... , December 31, 2016 at 03:44 PM
http://krugman.blogs.nytimes.com/2013/08/08/milton-friedman-unperson/

August 8, 2013

Milton Friedman, Unperson
By Paul Krugman

So Friedman has vanished from the policy scene - so much so that I suspect that a few decades from now, historians of economic thought will regard him as little more than an extended footnote.

anne -> Paul Mathis... , December 31, 2016 at 05:26 PM
Do write further on this matter when possible.
anne : , December 31, 2016 at 02:39 PM
http://www.nybooks.com/articles/19857

February 15, 2007

Who Was Milton Friedman?
By Paul Krugman - New York Review of Books

1.

The history of economic thought in the twentieth century is a bit like the history of Christianity in the sixteenth century. Until John Maynard Keynes published The General Theory of Employment, Interest, and Money in 1936, economics-at least in the English-speaking world-was completely dominated by free-market orthodoxy. Heresies would occasionally pop up, but they were always suppressed. Classical economics, wrote Keynes in 1936, "conquered England as completely as the Holy Inquisition conquered Spain." And classical economics said that the answer to almost all problems was to let the forces of supply and demand do their job.

But classical economics offered neither explanations nor solutions for the Great Depression. By the middle of the 1930s, the challenges to orthodoxy could no longer be contained. Keynes played the role of Martin Luther, providing the intellectual rigor needed to make heresy respectable. Although Keynes was by no means a leftist-he came to save capitalism, not to bury it-his theory said that free markets could not be counted on to provide full employment, creating a new rationale for large-scale government intervention in the economy.

Keynesianism was a great reformation of economic thought. It was followed, inevitably, by a counter-reformation. A number of economists played important roles in the great revival of classical economics between 1950 and 2000, but none was as influential as Milton Friedman. If Keynes was Luther, Friedman was Ignatius of Loyola, founder of the Jesuits. And like the Jesuits, Friedman's followers have acted as a sort of disciplined army of the faithful, spearheading a broad, but incomplete, rollback of Keynesian heresy. By the century's end, classical economics had regained much though by no means all of its former dominion, and Friedman deserves much of the credit.

I don't want to push the religious analogy too far. Economic theory at least aspires to be science, not theology; it is concerned with earth, not heaven. Keynesian theory initially prevailed because it did a far better job than classical orthodoxy of making sense of the world around us, and Friedman's critique of Keynes became so influential largely because he correctly identified Keynesianism's weak points. And just to be clear: although this essay argues that Friedman was wrong on some issues, and sometimes seemed less than honest with his readers, I regard him as a great economist and a great man....

anne -> anne... , December 31, 2016 at 03:00 PM
http://krugman.blogs.nytimes.com/2009/03/02/friedman-and-schwartz-were-wrong/

March 2, 2009

Friedman and Schwartz Were Wrong
By Paul Krugman

It's one of Ben Bernanke's most memorable quotes: at a conference honoring Milton Friedman on his 90th birthday, he said: *

"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."

He was referring to the Friedman-Schwartz argument that the Fed could have prevented the Great Depression if only it has been more aggressive in countering the fall in the money supply. This argument later mutated into the claim that the Fed caused the Depression, but its original version still packed a strong punch. Basically, it implied that no fundamental reforms of the economy were necessary; all it takes to avoid depressions is for central banks to do their job.

But can we say that recent events appear to disprove that claim? (So did Japan's experience in the 1990s, but that lesson failed to sink in.) What we have now is a Fed that is determined not to "do it again." It has been very aggressive about monetary expansion. Here's one measure of that aggressiveness, banks' excess reserves:

[Bank excess reserves, 1990-2009]

And yet the world economy is still falling off a cliff.

Preventing depressions, it turns out, is a lot harder than we were taught.

* http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm

anne -> anne... , December 31, 2016 at 03:17 PM
https://fred.stlouisfed.org/graph/?g=cfmx

January 30, 2016

Excess Reserves of Depository Institutions, 1990-2009

[Dec 31, 2016] Greed Springs Eternal

Notable quotes:
"... You can't go all Ayn Rand/Gordon Gekko on the importance of greed as a motivator while claiming that wealth insulates ... from temptation. ... ..."
"... And this is telling us something significant: namely, that supply-side economic theory is and always was a sham. It was never about the incentives; it was just another excuse to make the rich richer. ..."
"... "The modern conservative is engaged in one of man's oldest exercises in moral philosophy: that is, the search for a superior moral justification for selfishness." ..."
"... choosing a cabinet of billionaires, because rich men are incorruptible"...kind of like showering ZIRP on the Wall Street banking cartel and letting them how to ration credit to the rest of economy...mostly their wealthy clientele, who use it for stock buy-backs and asset speculation. ..."
"... Of course, 'liberal' economists see nothing wrong with trickle down, supply side economics, as long as it's the Wall Street banking cartel who's in charge of it... ..."
"... Stiglitz: "I've always said that current monetary policy is not going to work because quantitative easing is based on a variant of trickle-down economics. The lower interest rates have led to a stock-market bubble – to increases in stock-market prices and huge increases in wealth. But relatively little of that's been translated into increased and broad consumer spending." ..."
"... But pgl and many other '[neo[liberal' economists just can't get enough of the trickle down monetary policy...all the while they vehemently condemn trickle down tax policy. ..."
"... You all think Trump can do worse than the sitting cabal adding $660B from Sep 2015 to the federal debt quietly keeping the economy going for the incumbent party? ..."
"... The losers think the winners are as crooked as they! ..."
Dec 31, 2016 | economistsview.typepad.com

To belabor what should be obvious: either the wealthy care about having more money or they don't. If lower marginal tax rates are an incentive to produce more, the prospect of personal gain is an incentive to engage in corrupt practices. You can't go all Ayn Rand/Gordon Gekko on the importance of greed as a motivator while claiming that wealth insulates ... from temptation. ...

And this is telling us something significant: namely, that supply-side economic theory is and always was a sham. It was never about the incentives; it was just another excuse to make the rich richer.

Anomalous Cowherd : December 29, 2016 at 11:35 AM
In one sentence, you still can't beat John Kenneth Galbraith's assessment: "The modern conservative is engaged in one of man's oldest exercises in moral philosophy: that is, the search for a superior moral justification for selfishness."

Nothing is more admirable than the fortitude with which millionaires tolerate the disadvantages of their wealth. -- Nero Wolfe

DrDick -> Anomalous Cowherd... , December 29, 2016 at 12:31 PM
You need to know nothing else to understand the entirety of the conservative edifice.
JohnH :
"choosing a cabinet of billionaires, because rich men are incorruptible"...kind of like showering ZIRP on the Wall Street banking cartel and letting them how to ration credit to the rest of economy...mostly their wealthy clientele, who use it for stock buy-backs and asset speculation.

Of course, 'liberal' economists see nothing wrong with trickle down, supply side economics, as long as it's the Wall Street banking cartel who's in charge of it...

Gibbon1 : , December 29, 2016 at 12:29 PM
Why do we need Krugman to tell us this?
DrDick -> Gibbon1... , -1
*We* do not, but our pandering press does and I think that is Krugman's intended target.
JohnH -> pgl...
Stiglitz: "I've always said that current monetary policy is not going to work because quantitative easing is based on a variant of trickle-down economics. The lower interest rates have led to a stock-market bubble – to increases in stock-market prices and huge increases in wealth. But relatively little of that's been translated into increased and broad consumer spending."
http://www.theglobeandmail.com/opinion/munk-debates/joseph-stiglitz-current-monetary-policy-is-not-going-to-work/article24346548/

But pgl and many other '[neo[liberal' economists just can't get enough of the trickle down monetary policy...all the while they vehemently condemn trickle down tax policy.

yuan -> JohnH...
and few liberal economists have been more skeptical of QE's economic impact than Krugman.

http://www.marketwatch.com/story/krugman-meh-is-grade-fed-gets-on-qe-2015-11-09

PS: bernie, please save me from your bros.

ilsm :
You all think Trump can do worse than the sitting cabal adding $660B from Sep 2015 to the federal debt quietly keeping the economy going for the incumbent party?

The losers think the winners are as crooked as they!

yuan -> ilsm...
when we can borrow over the long-term at 3% and have truly massive infrastructure and clean energy needs we should be borrowing like military Keynesian republicans...

[Dec 31, 2016] Supply-side economic theory is and always was a sham

Notable quotes:
"... And this is telling us something significant: namely, that supply-side economic theory is and always was a sham. ..."
"... That it is and always a sham is irrelevant. It is THE NARRATIVE that matters! They had a compelling story and they stuck to it. That's how you sell politics in this country. ..."
Dec 31, 2016 | www.nytimes.com

Chris G said...

And this is telling us something significant: namely, that supply-side economic theory is and always was a sham.

Urgh. That it is and always a sham is irrelevant. It is THE NARRATIVE that matters! They had a compelling story and they stuck to it. That's how you sell politics in this country.

Trump told a significant fraction of the population that he understood their problems and that he would fix them. He told enough people what they wanted to hear - and did so with a convincing tone - that he got himself elected. That's how you win. You sell people on your vision. If you tell a good story most people aren't going to reality-check it. Sad but true.

On the importance of narrative: Drew Westen, "What Happened to Obama?" - http://www.nytimes.com/2011/08/07/opinion/sunday/what-happened-to-obamas-passion.html

[Dec 29, 2016] Krugman was clearly a neoliberal propagandist on payroll. His columns are clearly partisan.

Dec 29, 2016 | economistsview.typepad.com
Peter K. :

All of the Democratic primary voters somehow believed Hillary Clinton would make a better candidate against Trump than Sanders would.

And now we're stuck with Trump for at least 4 years.

Good job.

As Saul Bellow once said, "a great deal of intelligence can be invested in ignorance when the need for illusion is strong". Reply Wednesday, December 28, 2016 at 07:09 PM Peter K. -> Peter K.... , December 28, 2016 at 07:11 PM

Seriously why should we ever believe these neoliberal centrist Democrats again?

Why when they were so very, very wrong!

Krugman ASSURED us Clinton was a great candidate who would easily win.

likbez -> Peter K.... , December 28, 2016 at 10:09 PM
Krugman was clearly a neoliberal propagandist on payroll. He should not be even discussed in this context because his columns were so clearly partisan.

As for "Centrist Democrats" (aka Clinton wing of the party) their power is that you have nowhere to go: they rule the Democratic Party and the two party system guarantees that any third party will be either squashed or assimilated.

In no way they need that you believe them: being nowhere to go is enough.

Remember what happened with Sanders supporters during the convention? They were silenced. And then eliminated. That's how this system works.

Cal -> likbez... , -1
Krugman is a polarizing agent here in RiverCity...to our collective loss IMHO...as you know I don't have the Nobel.
But you might be giving him some hope with that "was"? Clearly he does not need $.

He is writing for our....yes, American, maybe even Global citizenship, which he thinks is in peril. It is. Otherwise I'd be out fishing.

And you? What's in it for you? Are you familiar with the history of political party systems that transition in and out of 2 parties? Is this little forum an example of the 2 party system: pro/con Krugman?

Egmont Kakarot-Handtke : , -1
Americans believe crazy things, yet they are outdone by economists
Comment on Catherine Rampell on 'Americans - especially but not exclusively Trump voters - believe crazy, wrong things'#1

Americans are NOT special. Since more than 5000 years people believe things JUST BECAUSE they are absurd - in accordance with Tertullian's famous dictum "credo quia absurdum".#2

As a matter of principle, almost everybody has the right to his own opinion no matter how stupid, crazy, wrong, or absurd; the only exception are scientists. The ancient Greeks started science with the distinction between doxa (= opinion) and episteme (= knowledge). Scientific knowledge is well-defined by material and formal consistency. Knowledge is established by proof, belief or opinion counts for nothing.

Opinion is the currency in the political sphere, knowledge is the currency is the scientific sphere. It is extremely important to keep both spheres separate. Since the founding fathers, though, economists have not emancipated themselves from politics. They claim to do science but they have never risen above the level of opinion, belief, wish-wash, storytelling, soap box propaganda, and sitcom gossip.

The orthodox majority still believes in these Walrasian hard core absurdities: "HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states." (Weintraub)

To be clear: HC2, HC4, HC5 are NONENTITIES like angels, Spiderman, or the Easter Bunny.

The heterodox minority still believes in these ill-defined Keynesian relationships: "Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment."

Until this day, Walrasians, Keynesians, Marxians, Austrians hold to their provable false beliefs and claim to do science. This is absurdity on stilts but it is swallowed hook, line and sinker by every new generation of economics students. Compared to the representative economist the average political sucker is a genius.

Egmont Kakarot-Handtke

#1 The Washington Post
https://www.washingtonpost.com/news/rampage/wp/2016/12/28/americans-especially-but-not-exclusively-trump-voters-believe-crazy-wrong-things/?utm_term=.3b8eabe9eb3d
#2 Wikipedia
https://en.wikipedia.org/wiki/Credo_quia_absurdum

[Dec 29, 2016] MSM has a nerve to critize ordinary American for believing in wrong things.

Did not William Casey (CIA Director) say, "We'll know our disinformation program is complete when everything the American public believes is false."?
Notable quotes:
"... The media should certainly shoulder some blame for parroting militarist propaganda but ordinary USAnians who continue to reward these scoundrels with their votes. And with Trump ordinary USAnians appear to have elected someone even more willing to shamelessly lie and loot than his predecessors. ..."
Dec 29, 2016 | economistsview.typepad.com

Catherine Rampell:

American Believe Crazy, Wrong Things : Many Americans believe a lot of dumb, crazy, destructive, provably wrong stuff.

JohnH, December 28, 2016 at 03:23 PM

Americans are also led to believe a lot of crazy, wrong things, such as Saddam had WMDs, or Iran had a nuclear weapons program, to cite only the most outrageous lies dutifully propagated by the mainstream media.

Before Catherine Rampell criticizes ordinary Americans, she should have the Washington Post engage in a little serious introspection and self-criticism...

yuan -> JohnH... , December 28, 2016 at 03:50 PM
The media should certainly shoulder some blame for parroting militarist propaganda but ordinary USAnians who continue to reward these scoundrels with their votes. And with Trump ordinary USAnians appear to have elected someone even more willing to shamelessly lie and loot than his predecessors.

It is time for ordinary USAnians to engage in a lot of serious introspection and self-criticism. I doubt this will happen until it's too late. (Very thankful that I am not tied to this nation!)

Chris G -> yuan... , -1
>It is time for ordinary USAnians to engage in a lot of serious introspection and self-criticism.

Don't hold your breath. Introspection and self-criticism aren't our strong suits. They run counter to that whole "American exceptionalism" thing.

> I doubt this will happen until it's too late.

I doubt that it will ever happen but, if it does, I have no doubt that it will happen until after its too late to salvage what currently passes for civilization in these parts.

"There's a big difference between the task of trying to sustain "civilisation" in its current form... and the task of holding open a space for the things which make life worth living. I'd suggest that it's this second task, in its many forms, which remains, after we've given up on false hopes." ( http://dark-mountain.net/blog/what-do-you-do-after-you-stop-pretending/)

Time to let go of false hopes.

[Dec 28, 2016] Neoliberalism consists of several eclectic parts such as neoclassic economics, mixture of Nietzscheanism (often in the form of Ann Rand philosophy; with the replacement of concept of Ubermench with creative class concept)) with corporatism.

Notable quotes:
"... But there are other flavors too. For example Trump introduced another flavor which I called "bastard neoliberalism". Which is the neoliberalism without neoliberal globalization and without "Permanent revolution" mantra -- efforts for enlargement of the US led global neoliberal empire. Somewhat similar to Eduard Bernstein "revisionism" in Marxism. Or Putinism - which is also a flavor of neoliberalism with added "strong state" part and "resource nationalism" bent, which upset so much the US neoliberal establishment, as it complicates looting of the country by transnational corporations. ..."
"... Neoliberalism also can be viewed as a modern mutation of corporatism, favoring multinationals (under disguise of "free trade"), privatization of state assets, minimal government intervention in business (with financial oligarchy being like Soviet nomenklatura above the law), reduced public expenditures on social services, and decimation of New Deal, strong anti trade unionism stance and attempt to atomize work force (perma temps as preferred mode of employment giving employers "maximum flexibility") , neocolonialism and militarism in foreign relations (might makes right). ..."
"... The word "elite" in the context of neoliberalism has the same meaning as the Russian word nomenklatura. https://en.wikipedia.org/wiki/Nomenklatura, -- the political establishment holding or controlling both public and private power centers such as media, finance, academia, culture, trade, industry, state and international institutions. ..."
Dec 28, 2016 | economistsview.typepad.com
sanjait -> Peter K.... December 28, 2016 at 05:02 PM , 2016 at 05:02 PM
At this point, when I hear people use the words "neoliberal," "elites" and "the media" in unspecified or highly generalized terms to make broad characterizations ... I know I'm dealing with an unserious person.

sanjait -> sanjait... , December 28, 2016 at 05:05 PM
It's a lot like when someone says "structural reform" without specification in an economic discussion: An almost perfect indicator of vacuity.
likbez -> sanjait... , -1
Let's define the terms.

Neoliberals are those who adhere to the doctrine of Neoliberalism (the "prohibited" word you should not ever see in the US MSM ;-)

In this sense the term is very similar to Marxists (with the replacement of the slogan of "proletarians of all nations unite" with the "financial oligarchy of all countries unite"). Or more correctly they are the "latter day Trotskyites".

Neoliberalism consists of several eclectic parts such as neoclassic economics, mixture of Nietzscheanism (often in the form of Ann Rand philosophy; with the replacement of concept of Ubermench with "creative class" concept)) with corporatism. Like with Marxism there are different flavors of neoliberalism and different factions like "soft neoliberalism" (Clinton third way) which is the modern Democratic Party doctrine, and hard neoliberalism (Republican party version), often hostile to each other.

But there are other flavors too. For example Trump introduced another flavor which I called "bastard neoliberalism". Which is the neoliberalism without neoliberal globalization and without "Permanent revolution" mantra -- efforts for enlargement of the US led global neoliberal empire. Somewhat similar to Eduard Bernstein "revisionism" in Marxism. Or Putinism - which is also a flavor of neoliberalism with added "strong state" part and "resource nationalism" bent, which upset so much the US neoliberal establishment, as it complicates looting of the country by transnational corporations.

Neoliberalism also can be viewed as a modern mutation of corporatism, favoring multinationals (under disguise of "free trade"), privatization of state assets, minimal government intervention in business (with financial oligarchy being like Soviet nomenklatura above the law), reduced public expenditures on social services, and decimation of New Deal, strong anti trade unionism stance and attempt to atomize work force (perma temps as preferred mode of employment giving employers "maximum flexibility") , neocolonialism and militarism in foreign relations (might makes right).

Like for any corporatist thinkers the real goals are often hidden under thick smoke screen of propaganda.

The word "elite" in the context of neoliberalism has the same meaning as the Russian word nomenklatura. https://en.wikipedia.org/wiki/Nomenklatura, -- the political establishment holding or controlling both public and private power centers such as media, finance, academia, culture, trade, industry, state and international institutions.

[Dec 28, 2016] Free trade is a delicate instrument, much like tennis racket.

Dec 28, 2016 | economistsview.typepad.com
Economists believe crazy things: December 28, 2016 at 06:05 PM

[As if] protectionist Japan is now backward and poverty stricken; free trade Africa is soaring on the wings of giant trade deficits :

Economists lead the way in silly beliefs that defy empirical reality and common sense. The most glaring example of this is the view that free trade is beneficial. All evidence points in the opposite direction, but no matter - our fake economists are happy to say/believe whatever so long as their foreign government paymasters and banks write the ten thousand dollar checks for "consulting" and "academic reports".

likbez -> Economists believe crazy things.. December 28, 2016 at 07:31 PM

You are probably wrong. Free trade is a delicate instrument, much like tennis racket. If you hold it too tightly you can't play well. If you hold it too loose you can't play well either.

Neoliberals promote "free trade" (note "free" not "fair") as the universal cure for all nations problems in all circumstances. This is a typical neoliberal Three-card Monte.

The real effect in many cases is opening market for transnationals who dictate nations the rules of the game and loot the country.

But isolationism has its own perils. So some middle ground should be fought against excessive demands of neoliberal institutions like IMF and World Bank. For example, any country that take loans from them (usually on pretty harsh conditions; with string attached), has a great danger that money will be looted via local fifth column. And will return in no time back into Western Banks leaving the country in the role of the debt slave.

The latter is the preferred role neoliberals want to see each and every third world country (and not only third world countries -- see Greece and Cyprus). Essentially in their "secret" book this is the role those counties should be driven into.

Recent looting of Ukraine is the textbook example of this process. The majority of population now will live on less then $2 a day for many, many years.

At the same time, balancing free trade and isolationism is tricky process also. Because at some point, the subversion starts and three letter agencies come into the play. You risk getting color revolution as a free present for your refusal to play the game.

Neoliberals usually do not take NO for the answer.

That's when the word "neoliberal" becomes yet another dirty word.

[Dec 28, 2016] MSm pressutute has a nerve to critize ordinary American for beleaving in wrong things.

Dec 28, 2016 | economistsview.typepad.com
Did William Casey (CIA Director) really say, "We'll know our disinformation program is complete when everything the American public believes is false."?

Catherine Rampell:

American Believe Crazy, Wrong Things : Many Americans believe a lot of dumb, crazy, destructive, provably wrong stuff.

JohnH : , December 28, 2016 at 03:23 PM

Americans are also led to believe a lot of crazy, wrong things, such as Saddam had WMDs, or Iran had a nuclear weapons program, to cite only the most outrageous lies dutifully propagated by the mainstream media.

Before Catherine Rampell criticizes ordinary Americans, she should have the Washington Post engage in a little serious introspection and self-criticism...

yuan -> JohnH... , December 28, 2016 at 03:50 PM
The media should certainly shoulder some blame for parroting militarist propaganda but ordinary USAnians who continue to reward these scoundrels with their votes. And with Trump ordinary USAnians appear to have elected someone even more willing to shamelessly lie and loot than his predecessors.

It is time for ordinary USAnians to engage in a lot of serious introspection and self-criticism. I doubt this will happen until it's too late. (Very thankful that I am not tied to this nation!)

yuan -> yuan... , December 28, 2016 at 03:50 PM
"but it is ordinary"

[Dec 27, 2016] The fake news is the everyday news in MSM. They just make it up.

Dec 27, 2016 | economistsview.typepad.com
Fred C. Dobbs : December 27, 2016 at 05:06 AM , 2016 at 05:06 AM
(Does this have something to do
with Jon Stewart's retirement &
Stephen Colbert 'going legit'?)

Wielding Claims of 'Fake News,' Conservatives

Take Aim at Mainstream Media http://nyti.ms/2iuFxRx
NYT - JEREMY W. PETERS - December 25, 2016

WASHINGTON - The CIA, the F.B.I. and the White House may all agree that Russia was behind the hacking that interfered with the election. But that was of no import to the website Breitbart News, which dismissed reports on the intelligence assessment as "left-wing fake news."

Rush Limbaugh has diagnosed a more fundamental problem. "The fake news is the everyday news" in the mainstream media, he said on his radio show recently. "They just make it up."

Some supporters of President-elect Donald J. Trump have also taken up the call. As reporters were walking out of a Trump rally this month in Orlando, Fla., a man heckled them with shouts of "Fake news!"

Until now, that term had been widely understood to refer to fabricated news accounts that are meant to spread virally online. But conservative cable and radio personalities, top Republicans and even Mr. Trump himself, incredulous about suggestions that fake stories may have helped swing the election, have appropriated the term and turned it against any news they see as hostile to their agenda.

In defining "fake news" so broadly and seeking to dilute its meaning, they are capitalizing on the declining credibility of all purveyors of information, one product of the country's increasing political polarization. And conservatives, seeing an opening to undermine the mainstream media, a longtime foe, are more than happy to dig the hole deeper.

"Over the years, we've effectively brainwashed the core of our audience to distrust anything that they disagree with. And now it's gone too far," said John Ziegler, a conservative radio host, who has been critical of what he sees as excessive partisanship by pundits. "Because the gatekeepers have lost all credibility in the minds of consumers, I don't see how you reverse it."

Journalists who work to separate fact from fiction see a dangerous conflation of stories that turn out to be wrong because of a legitimate misunderstanding with those whose clear intention is to deceive. A report, shared more than a million times on social media, that the pope had endorsed Mr. Trump was undeniably false. But was it "fake news" to report on data models that showed Hillary Clinton with overwhelming odds of winning the presidency? Are opinion articles fake if they cherry-pick facts to draw disputable conclusions?

"Fake news was a term specifically about people who purposely fabricated stories for clicks and revenue," said David Mikkelson, the founder of Snopes, the myth-busting website. "Now it includes bad reporting, slanted journalism and outright propaganda. And I think we're doing a disservice to lump all those things together."

The right's labeling of "fake news" evokes one of the most successful efforts by conservatives to reorient how Americans think about news media objectivity: the move by Fox News to brand its conservative-slanted coverage as "fair and balanced." Traditionally, mainstream media outlets had thought of their own approach in those terms, viewing their coverage as strictly down the middle. Republicans often found that laughable.

As with Fox's ubiquitous promotion of its slogan, conservatives' appropriation of the "fake news" label is an effort to further erode the mainstream media's claim to be a reliable and accurate source. ...

[Dec 27, 2016] Class Struggle In The USA

Notable quotes:
"... Rich individuals (who are willing to be interviewed) also express concern about inequality but generally oppose using higher taxes on the rich to fight it. Scheiber is very willing to bluntly state his guess (and everyone's) that candidates are eager to please the rich, because they spend much of their time begging the rich for contributions. ..."
"... Of course another way to reduce inequality is to raise wages. Buried way down around paragraph 9 I found this gem: "Forty percent of the wealthy, versus 78 percent of the public, said the government should make the minimum wage "high enough so that no family with a full-time worker falls below the official poverty line." ..."
"... The current foundational rules embedded in tax law, intellectual property law, corporate construction law, and other elements of our legal and regulatory system result in distributions that favor those with capital or in a position to seek rents. This isn't a situation that calls for a Robin Hood who takes from the rich and gives to the poor. It is more a question of how elites have rigged the system to work primarily for them. ..."
"... the problem is incomes and demand, and the first and best answer for creating demand for workers and higher wages to compete for those workers is full employment. ..."
"... if you are proposing raising taxes on the rich SO THAT you can cut taxes on the non rich you are simply proposing theft. ..."
"... what we are looking at here is simple old fashioned greed just as stupid and ugly among the "non rich" as it is among the rich. ..."
"... you play into the hands of the Petersons who want to "cut taxes" and leave the poor elderly to die on the streets, and the poor non-elderly to spend their lives in anxiety and fear-driven greed trying to provide against desperate poverty in old age absent any reliable security for their savings.) ..."
"... made by the ayn rand faithful. it is wearisome. ..."
"... The only cure for organized greed is organized labor. ..."
"... A typical voice of American politics is the avoidance of saying anything real on real issues" ..."
Mar 29, 2015 | Angry Bear

Noam Scheiber has a hard hitting article on the front page of www.nytimes.com "2016 Candidates and Wealthy Are Aligned on Inequality"

The content should be familiar to AngryBear readers. A majority of Americans are alarmed by high and increasing inequality and support government action to reduce inequality. However, none of the important 2016 candidates has expressed any willingness to raise taxes on the rich. The Republicans want to cut them and Clinton (and a spokesperson) dodge the question.

Rich individuals (who are willing to be interviewed) also express concern about inequality but generally oppose using higher taxes on the rich to fight it. Scheiber is very willing to bluntly state his guess (and everyone's) that candidates are eager to please the rich, because they spend much of their time begging the rich for contributions.

No suprise to anyone who has been paying attention except for the fact that it is on the front page of www.nytimes.com and the article is printed in the business section not the opinion section. Do click the link - it is brief, to the point, solid, alarming and a must read.

I clicked one of the links and found weaker evidence than I expected for Scheiber's view (which of course I share

"By contrast, more than half of Americans and three-quarters of Democrats believe the "government should redistribute wealth by heavy taxes on the rich," according to a Gallup poll of about 1,000 adults in April 2013."

It is a small majority 52% favor and 47% oppose. This 52 % is noticeably smaller than the solid majorities who have been telling Gallup that high income individuals pay less than their fair share of taxes (click and search for Gallup on the page).

I guess this isn't really surprising - the word "heavy" is heavy maaaan and "redistribute" evokes the dreaded welfare (and conservatives have devoted gigantic effort to giving it pejorative connotations). The 52% majority is remarkable given the phrasing of the question. But it isn't enough to win elections, since it is 52% of adults which corresponds to well under 52% of actual voters.

My reading is that it is important for egalitarians to stress the tax cuts for the non rich and that higher taxes on the rich are, unfortunately, necessary if we are to have lower taxes on the non rich without huge budget deficits. This is exactly Obama's approach.

Comments (87)

Jerry Critter

March 29, 2015 10:40 pm

Get rid of tax breaks that only the wealthy can take advantage of and perhaps everyone will pay their fair share. The same goes for corporations.

amateur socialist

March 30, 2015 11:42 am

Of course another way to reduce inequality is to raise wages. Buried way down around paragraph 9 I found this gem: "Forty percent of the wealthy, versus 78 percent of the public, said the government should make the minimum wage "high enough so that no family with a full-time worker falls below the official poverty line."

I'm fine with raising people's taxes by increasing their wages. A story I heard on NPR recently indicated that a single person needs to make about $17-19 an hour to cover most basic necessities nowadays (the story went on to say that most people in that situation are working 2 or more jobs to get enough income, a "solution" that creates more problems with health/stress etc.). A full time worker supporting kids needs more than $20.

You double the minimum wage and strengthen people's rights to organize union representation. Tax revenues go up (including SS contributions btw) and we add significant growth to the economy with the increased purchasing power of workers. People can go back to working 40-50 hours a week and cut back on moonlighting which creates new job opportunities for the younger folks decimated by this so called recovery.

Win Win Win Win. And the poor overburdened millionaires don't have to have their poor tax fee fees hurt.

Mark Jamison, March 30, 2015 8:09 pm

How about if we get rid of the "re" and call it what it is "distribution". The current foundational rules embedded in tax law, intellectual property law, corporate construction law, and other elements of our legal and regulatory system result in distributions that favor those with capital or in a position to seek rents.

This isn't a situation that calls for a Robin Hood who takes from the rich and gives to the poor. It is more a question of how elites have rigged the system to work primarily for them. Democrats cede the rhetoric to the Right when they allow the discussion to be about redistribution. Even talk of inequality without reference to the basic legal constructs that are rigged to create slanted outcomes tend to accepted premises that are in and of themselves false.

The issue shouldn't be rejiggering things after the the initial distribution but creating a system with basic rules that level the opportunity playing field.

coberly, March 30, 2015 11:03 pm

Thank You Mark Jamison!

An elegant, informed writer who says it better than I can.

But here is how I would say it:

Addressing "inequality" by "tax the rich" is the wrong answer and a political loser.

Address inequality by re-criminalizing the criminal practices of the criminal rich. Address inequality by creating well paying jobs with government jobs if necessary (and there is necessary work to be done by the government), with government protection for unions, with government policies that make it less profitable to off shore

etc. the direction to take is to make the economy more fair . actually more "free" though you'll never get the free enterprise fundamentalists to admit that's what it is. You WILL get the honest rich on your side. They don't like being robbed any more than you do.

But you will not, in America, get even poor people to vote to "take from the rich to give to the poor." It has something to do with the "story" Americans have been telling themselves since 1776. A story heard round the world.

That said, there is nothing wrong with raising taxes on the rich to pay for the government THEY need as well as you. But don't raise taxes to give the money to the poor. They won't do it, and even the poor don't want it except as a last resort, which we hope we are not at yet.

urban legend, March 31, 2015 2:07 am

Coberly, you are dead-on. Right now, taxation is the least issue. Listen to Jared Bernstein and Dean Baker: the problem is incomes and demand, and the first and best answer for creating demand for workers and higher wages to compete for those workers is full employment. Minimum wage will help at the margins to push incomes up, and it's the easiest initial legislative sell, but the public will support policies - mainly big-big infrastructure modernization in a country that has neglected its infrastructure for a generation - that signal a firm commitment to full employment.

It's laying right there for the Democrats to pick it up. Will they? Having policies that are traditional Democratic policies will not do the job. For believability - for convincing voters they actually have a handle on what has been wrong and how to fix it - they need to have a story for why we have seem unable to generate enough jobs for over a decade. The neglect of infrastructure - the unfilled millions of jobs that should have gone to keeping it up to date and up to major-country standards - should be a big part of that story. Trade and manufacturing, to be sure, is the other big element that will connect with voters. Many Democrats (including you know who) are severely compromised on trade, but they need to find a way to come own on the right side with the voters.

coberly, March 31, 2015 10:52 am

Robert

i wish you'd give some thought to the other comments on this post.

if you are proposing raising taxes on the rich SO THAT you can cut taxes on the non rich you are simply proposing theft. if you were proposing raising taxes on the rich to provide reasonable welfare to those who need it you would be asking the rich to contribute to the strength of their own country and ultimately their own wealth.

i hope you can see the difference.

it is especially irritating to me because many of the "non rich" who want their taxes cut make more than twice as much as i do. what we are looking at here is simple old fashioned greed just as stupid and ugly among the "non rich" as it is among the rich.

"the poor" in this country do not pay a significant amount of taxes (Social Security and Medicare are not "taxes," merely an efficient way for us to pay for our own direct needs . as long as you call them taxes you play into the hands of the Petersons who want to "cut taxes" and leave the poor elderly to die on the streets, and the poor non-elderly to spend their lives in anxiety and fear-driven greed trying to provide against desperate poverty in old age absent any reliable security for their savings.)

Kai-HK, April 4, 2015 12:23 am

coberly,

Thanks for your well-reasoned response.

You state, 'i personally am not much interested in the "poor capitalist will flee the country if you tax him too much." in fact i'd say good riddance, and by the way watch out for that tarriff when you try to sell your stuff here.'

(a) What happens after thy leave? Sure you can get one-time 'exit tax' but you lose all the intellectual capital (think of Bill Gates, Warren Buffet, or Steve Jobs leaving and taking their intellectual property and human capital with them). These guys are great jobs creators it will not only be the 'bad capitalists' that leave but also many of the 'job creating' good ones.

(b) I am less worried about existing job creating capitalists in America; what about the future ones? The ones that either flee overseas and make their wealth there or are already overseas and then have a plethora of places they can invest but why bother investing in the US if all they are going to do is call me a predator and then seize my assets and or penalise me for investing there? Right? It is the future investment that gets impacted not current wealth per se.

You also make a great point, 'the poor are in the worst position with respect to shifting their tax burden on to others. the rich do it as a matter of course. it would be simpler just to tax the rich there are fewer of them, and they know what is at stake, and they can afford accountants. the rest of us would pay our "taxes" in the form of higher prices for what we buy.'

Investment capital will go where it is best treated and to attract investment capital a market must provide a competitive return (profit margin or return on investment). Those companies and investment that stay will do so because they are able to maintain that margin .and they will do so by either reducing wages or increasing prices. Where they can do neither, their will exit the market.

That is why, according to research, a bulk of the corporate taxation falls on workers and consumers as a pass-on effect. The optimum corporate tax is 0. This will be the case as taxation increases on the owners of businesses and capital .workers, the middle class, and the poor pay it. The margins stay competitive for the owners of capital since capital is highly mobile and fungible.Workers and the poor less so.

But thanks again for the tone and content of your response. I often get attacked personally for my views instead of people focusing on the issue. I appreciate the respite.

K

coberly, April 4, 2015 12:34 pm

kai

yes, but you missed the point.

i am sick of the whining about taxes. it takes so much money to run the country (including the kind of pernicious poverty that will turn the US into sub-saharan africa. and then who will buy their products.

i can't do much about the poor whining about taxes. they are just people with limited understanding, except for their own pressing needs. the rich know what the taxes are needed for, they are just stupid about paying them. of course they would pass the taxes through to their customers. the customers would still buy what they need/want at the new price. leaving everyone pretty much where they are today financially. but the rich would be forced to be grownup about "paying" the taxes, and maybe the politics of "don't tax me tax the other guy" would go away.

as for the sainted bill gates. there are plenty of other people in this country as smart as he is and would be happy to sell us computer operating systems and pay the taxes on their billion dollars a year profits.

nothing breaks my heart more than a whining millionaire.

Kai-HK

April 4, 2015 11:32 pm

Sure I got YOUR point, it just didn't address MY points as put forth in MY original post. And it still doesn't.

More importantly, you have failed to defend YOUR point against even a rudimentary challenge.

K

coberly, April 5, 2015 12:45 pm

kai,

rudimentary is right.

i have read your "points" about sixteen hundred times in the last year alone. made by the ayn rand faithful. it is wearisome.

and i have learned there is no point in trying to talk to true believers.

William Ryan, May 13, 2015 4:43 pm

Thanks again Coberly for your and K's very thoughtful insight. You guys really made me think hard today and I do see your points about perverted capitalism being a big problem in US. I still do like the progressive tax structure and balanced trade agenda better.

I realize as you say that we cannot compare US to Hong Kong just on size and scale alone. Without all the obfuscation going Lean by building cultures that makes people want to take ownership and sharing learning and growing together is a big part of the solution Ford once said "you cannot learn in school what the world is going to do next".

Also never argue with an idiot. They will bring you down to their level then beat you with experience. The only cure for organized greed is organized labor. It's because no matter what they do nothing get done about it. With all this manure around there must be a pony somewhere! "

Last one.

coberly , May 16, 2015 9:57 pm

kai

as a matter of fact i disagree with the current "equality" fad at least insofar as it implies taking from the rich and giving to the poor directly.

i don't believe people are "equal" in terms of their economic potential. i do beleive they are equal in terms of being due the respect of human beings.

i also believe your simple view of "equality" is a closet way of guarantee that the rich can prey upon the poor without interruption.

humans made their first big step in evolution when they learned to cooperate with each other against the big predators.

Jerry Critter, May 17, 2015 12:10 am

it is mildly progressive up to about $75,000 per year where the rate hits 30%. But from there up to $1.542 million the rate only increases to 33.3%.

I call that very flat!

Jerry Critter, May 17, 2015 11:20 am

"i assume there are people in this country who are truly poor. as far as i know they don't pay taxes."

Read my reference and you will see that the "poor" indeed pay taxes, just not much income tax because they don't have much income. You are fixated on income when we should be considering all forms of taxation.

Jerry Critter, May 17, 2015 9:25 pm

Oh Kai, cut the crap. Paying taxes Is nothing like slavery. My oh my, how did we ever survive with a top tax rate of around 90%, nearly 3 times the current rate? Some people would even say that the economy then was pretty great and the middle class was doing terrific. So stop the deflection and redirection. I think you just like to see how many words you can write. Sorry, but history is not on your side.

[Dec 27, 2016] Trump's Economic Plan is a Betrayal of the People Who Voted for Him

Dec 27, 2016 | www.unz.com
Mike Whitney

... ... ..

Bottom line: Trump's Santa Rally could turn into a stock market bloodbath unless he's able to deliver on his promises, which doesn't look very likely. Check this out from Bloomberg:

"President-elect Donald Trump's race to enact the biggest tax cuts since the 1980s went under a caution flag Monday as Senate Majority Leader Mitch McConnell warned he considers current levels of U.S. debt "dangerous" and said he wants any tax overhaul to avoid adding to the deficit.

"I think this level of national debt is dangerous and unacceptable," McConnell said, adding he hopes Congress doesn't lose sight of that when it acts next year. "My preference on tax reform is that it be revenue neutral," he said

The Committee for a Responsible Federal Budget, a nonpartisan think tank, has projected that Trump's plans would increase the debt by $5.3 trillion over a decade, with deficits already over $600 billion a year and rising on autopilot

What I hope we will clearly avoid, and I'm confident we will, is a trillion-dollar stimulus," he said. "Take you back to 2009. We borrowed $1 trillion and nobody could find that it did much of anything. So we need to do this carefully and correctly and the issue of how to pay for it needs to be dealt with responsibly." ( McConnell, Warning of 'Dangerous' Debt, Wants Tax Cut Offsets , Bloomberg)

It doesn't sound like McConnell is a big fan of Trump's economic plan, does it? So why has the Dow risen to within 26 points of the 20,000-mark if that's the case?? Do investors think that Trump can simply issue an executive order and force Congress to do what he wants?

Good luck with that. The deficit-crazed Republicans are just as committed to austerity as ever, mainly because slashing government spending coupled with low interest rates is a tried-and-true method of transferring obscene amounts of money to the 1 percenters. Why would they tinker with a mechanism that works perfectly already?

They won't, at least not to the extent that it'll have any meaningful impact on the living standards of millions of working people across America. Congress is going to prevent that at all cost. And so will the Fed. Just listen to what Yellen had to say to a journalist from the Washington Post last week following the FOMC meeting. She was asked point-blank whether she thought the economy needed more fiscal stimulus or not. Her answer:

"Well I called for fiscal stimulus when the unemployment rate was substantially higher than it is now. So with a 4.6 percent unemployment, and a solid labor market, there may be some additional slack in labor markets, but I would judge that the degree of slack has diminished, So I would say at this point that fiscal policy is not obviously needed to help us get back to full employment But nevertheless, let me be careful that I am not trying to provide advice to the new administration or to Congress as to what is the appropriate stance of policy."

Nice, eh? Yellen threatens Trump with three more rate hikes in 2017, torpedoes his $1 trillion infrastructure plan with a wave of the hand, and then has the audacity to deny that she's dictating policy.

Of course she's dictating policy. What else would you call it?

Yellen is saying as clearly as possible, that if Trump launches his fiscal spending plan, the Fed's going to slap him down by raising rates. If that's not a threat, then what is??

[Dec 27, 2016] Income inequality has increased in many developed countries over the last several decades.

Dec 27, 2016 | economistsview.typepad.com
anne :

http://gabriel-zucman.eu/files/PSZ2016.pdf

December, 2016

Distributional National Accounts: Methods and Estimates for the United States
By Thomas Piketty, Emmanuel Saez, and Gabriel Zucman

Abstract

This paper combines tax, survey, and national accounts data to estimate the distribution of national income in the United States since 1913. Our distributional national accounts capture 100% of national income, allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth. We estimate the distribution of both pre-tax and post-tax income, making it possible to provide a comprehensive view of how government redistribution affects inequality.

The government has offset only a small fraction of the increase in inequality. The reduction of the gender gap in earnings has mitigated the increase in inequality among adults. The share of women, however, falls steeply as one moves up the labor income distribution, and is only 11% in the top 0.1% today.

Reply Tuesday, December 27, 2016 at 01:09 PM anne -> anne... , December 27, 2016 at 01:13 PM
http://gabriel-zucman.eu/files/PSZ2016.pdf

December, 2016

Distributional National Accounts: Methods and Estimates for the United States
By Thomas Piketty, Emmanuel Saez, and Gabriel Zucman

Introduction Income inequality has increased in many developed countries over the last several decades. This trend has attracted considerable interest among academics, policy-makers, and the general public. In recent years, following up on Kuznets' (1953) pioneering attempt, a number of authors have used administrative tax records to construct long-run series of top income shares (Alvaredo et al., 2011-2016). Yet despite this endeavor, we still face three important limitations when measuring income inequality. First and most important, there is a large gap between national accounts-which focus on macro totals and growth-and inequality studies-which focus on distributions using survey and tax data, usually without trying to be fully consistent with macro totals. This gap makes it hard to address questions such as: What fraction of economic growth accrues to the bottom 50%, the middle 40%, and the top 10% of the distribution? How much of the rise in income inequality owes to changes in the share of labor and capital in national income, and how much to changes in the dispersion of labor earnings, capital ownership, and returns to capital? Second, about a third of U.S. national income is redistributed through taxes, transfers, and public good spending. Yet we do not have a good measure of how the distribution of pre-tax income differs from the distribution of post-tax income, making it hard to assess how government redistribution affects inequality. Third, existing income inequality statistics use the tax unit or the household as unit of observation, adding up the income of men and women. As a result, we do not have a clear view of how long-run trends in income concentration are shaped by the major changes in women labor force participation-and gender inequality generally-that have occurred over the last century.

This paper attempts to compute inequality statistics for the United States that overcome the limits of existing series by creating distributional national accounts. We combine tax, survey, and national accounts data to build new series on the distribution of national income since 1913. In contrast to previous attempts that capture less than 60% of US national income- such as Census bureau estimates (US Census Bureau 2016) and top income shares (Piketty and Saez, 2003)-our estimates capture 100% of the national income recorded in the national accounts. This enables us to provide decompositions of growth by income groups consistent with macroeconomic growth. We compute the distribution of both pre-tax and post-tax income. Post-tax series deduct all taxes and add back all transfers and public spending, so that both pre-tax and post-tax incomes add up to national income. This allows us to provide the first comprehensive view of how government redistribution affects inequality. Our benchmark series uses the adult individual as the unit of observation and splits income equally among spouses. We also report series in which each spouse is assigned her or his own labor income, enabling us to study how long-run changes in gender inequality shape the distribution of income.

Distributional national accounts provide information on the dynamic of income across the entire spectrum-from the bottom decile to the top 0.001%-that, we believe, is more accurate than existing inequality data. Our estimates capture employee fringe benefits, a growing source of income for the middle-class that is overlooked by both Census bureau estimates and tax data. They capture all capital income, which is large-about 30% of total national income- and concentrated, yet is very imperfectly covered by surveys-due to small sample and top coding issues-and by tax data-as a large fraction of capital income goes to pension funds and is retained in corporations. They make it possible to produce long-run inequality statistics that control for socio-demographic changes-such as the rise in the fraction of retired individuals and the decline in household size-contrary to the currently available tax-based series.

Methodologically, our contribution is to construct micro-files of pre-tax and post-tax income consistent with macro aggregates. These micro-files contain all the variables of the national accounts and synthetic individual observations that we obtain by statistically matching tax and survey data and making explicit assumptions about the distribution of income categories for which there is no directly available source of information. By construction, the totals in these micro-files add up to the national accounts totals, while the distributions are consistent with those seen in tax and survey data. These files can be used to compute a wide array of distributional statistics-labor and capital income earned, taxes paid, transfers received, wealth owned, etc.-by age groups, gender, and marital status. Our objective, in the years ahead, is to construct similar micro-files in as many countries as possible in order to better compare inequality across countries. Just like we use GDP or national income to compare the macroeconomic performances of countries today, so could distributional national accounts be used to compare inequality across countries tomorrow.

We stress at the outset that there are numerous data issues involved in distributing national income, discussed in the text and the online appendix. First, we take the national accounts as a given starting point, although we are well aware that the national accounts themselves are imperfect (e.g., Zucman 2013). They are, however, the most reasonable starting point, because they aggregate all the available information from surveys, tax data, corporate income statements, and balance sheets, etc., in an standardized, internationally-agreed-upon and regularly improved upon accounting framework. Second, imputing all national income, taxes, transfers, and public goods spending requires making assumptions on a number of complex issues, such as the economic incidence of taxes and who benefits from government spending. Our goal is not to provide definitive answers to these questions, but rather to be comprehensive, consistent, and explicit about what assumptions we are making and why. We view our paper as attempting to construct prototype distributional national accounts, a prototype that could be improved upon as more data become available, new knowledge emerges on who pays taxes and benefits from government spending, and refined estimation techniques are developed-just as today's national accounts are regularly improved....

[Dec 27, 2016] Low oil prices and an increasingly costly war in Yemen have torn a yawning hole in the Saudi budget

Dec 27, 2016 | economistsview.typepad.com

December 27, 2016 at 04:40 AM

Low oil prices and an increasingly costly war in Yemen have torn a yawning hole in the Saudi budget and created a crisis that has led to cuts in public spending, reductions in take-home pay and benefits for government workers and a host of new fees and fines. Huge subsidies for fuel, water and electricity that encourage overconsumption are being curtailed. ...

[Dec 27, 2016] Is Trump just another globalists shill?

Dec 27, 2016 | economistsview.typepad.com
John San Vant... Tuesday, December 27, 2016 at 08:07 AM , December 27, 2016 at 08:07 AM
John,

I wonder what facts you have to label Trump's team "globalist shills".

Robert W. Merry in his National Interest article disagrees with you
http://nationalinterest.org/feature/trump-vs-hillary-nationalism-vs-globalism-2016-16041
=== start of the quote ===
Globalists captured much of American society long ago by capturing the bulk of the nation's elite institutions -- the media, academia, big corporations, big finance, Hollywood, think tanks, NGOs, charitable foundations. So powerful are these institutions -- in themselves and, even more so, collectively -- that the elites running them thought that their political victories were complete and final. That's why we have witnessed in recent years a quantum expansion of social and political arrogance on the part of these high-flyers.

Then along comes Donald Trump and upends the whole thing. Just about every major issue that this super-rich political neophyte has thrown at the elites turns out to be anti-globalist and pro-nationalist. And that is the single most significant factor in his unprecedented and totally unanticipated rise. Consider some examples:

Immigration: Nationalists believe that any true nation must have clearly delineated and protected borders, otherwise it isn't really a nation. They also believe that their nation's cultural heritage is sacred and needs to be protected, whereas mass immigration from far-flung lands could undermine the national commitment to that heritage.

Globalists don't care about borders. They believe the nation-state is obsolete, a relic of the 1648 Peace of Westphalia, which codified the recognition of co-existing nation states.

Globalists reject Westphalia in favor of an integrated world with information, money, goods and people traversing the globe at accelerating speeds without much regard to traditional concepts of nationhood or borders.
=== end of the quote ===

I wonder how "globalist shills" mantra correlates with the following Trump's statements:

http://www.usatoday.com/story/news/politics/elections/2016/06/28/donald-trump-globalization-trade-pennsylvania-ohio/86431376/

=== start of quote ===
"Globalization has made the financial elite who donate to politicians very, very wealthy ... but it has left millions of our workers with nothing but poverty and heartache," Trump told supporters during a prepared speech targeting free trade in a nearly-shuttered former steel town in Pennsylvania.

In a speech devoted to what he called "How To Make America Wealthy Again," Trump offered a series of familiar plans designed to deal with what he called [Obama] "failed trade policies" - including rejection of the proposed Trans-Pacific Partnership (TPP) with Pacific Rim nations and re-negotiation of the North American Free Trade Agreement (NAFTA) with Canada and Mexico, withdrawing from it if necessary.

The presumptive Republican presidential nominee also said he would pursue bilateral trade agreements rather than multi-national deals like TPP and NAFTA.

In addition to appointing better trade negotiators and stepping up punishment of countries that violate trade rules, Trump's plans would also target one specific economic competitor: China. He vowed to label China a currency manipulator, bring it before the World Trade Organization and consider slapping tariffs on Chinese imports coming into the U.S.

[Dec 27, 2016] Suicide rates rise after jobs move overseas, study finds

Notable quotes:
"... In Bristol County, which includes Fall River, New Bedford, and Taunton, manufacturing employed nearly a quarter of the workforce in 2000; now it provides jobs for only one in 10 workers. ..."
"... Most of the manufacturing jobs lost since 2000 are unlikely to return, economists said. Automation has made manufacturing much more specialized, requiring more education and fewer workers, leaving parts of the country struggling to figure out how to reinvent their economies. ..."
"... "We will probably never have as many manufacturing jobs as we had in 1960," Dunn said. "The question is how do we train workers and provide them opportunities to feel productive. What's clear from the election is an increasing number of people don't have those opportunities or don't feel that those opportunities will be available." ..."
"... Characteristics of people dying by suicide after job loss, financial difficulties and other economic stressors during a period of recession (2010–2011): A review of coroners׳ records ..."
Dec 27, 2016 | economistsview.typepad.com
Fred C. Dobbs : December 27, 2016 at 03:37 AM

Suicide rates rise after jobs move overseas, study finds
http://www.bostonglobe.com/business/2016/12/26/suicide-rates-rise-after-jobs-move-overseas-new-study-funds/yVhFkZOslgnODKEjTfcDTK/story.html?event=event25
via @BostonGlobe - Deirdre Fernandes - December 27, 2016

FALL RIVER - In this struggling industrial city, changes in trade policy are being measured not only in jobs lost, but also in lives lost - to suicide.

The jobs went first, the result of trade deals that sent them overseas. Once-humming factories that dressed office workers and soldiers, and made goods to furnish their homes, stand abandoned, overtaken by weeds and graffiti.

And now there is research on how the US job exodus parallels an increase in suicides. A one percentage point increase in unemployment correlated with an 11 percent increase in suicides, according to Peter Schott, a Yale University economist who coauthored the report with Justin Pierce, a researcher at the Federal Reserve Board.

The research doesn't prove a definitive link between lost jobs and suicide; it simply notes that as jobs left, suicides rose. Workers who lost their jobs may have been pushed over the edge and turned to suicide or drug addiction, lacking financial resources or community connections to get help, the authors suggest.

The research contributes to a growing body of work that shows the dark side of global trade: the dislocation, anger, and despair in some parts of the country that came with the United States' easing of trade with China in 2000. The impact of job losses was greatest in places such as Fall River and other cities in Bristol County, along with rural manufacturing counties in New Hampshire and Maine, vast stretches of the South, and portions of the Rust Belt.

"There are winners and losers in trade," Schott said. "If you go to these communities, you can see the disruptions."

The unemployment rate in Fall River remains persistently high and at 5.5 percent in September was a good two points above the Massachusetts average. Nearly one in three households gets some sort of public assistance.

Opposition to global trade policies became a rallying cry in Donald Trump's campaign, propelling him into the White House with strategic wins in the industrial Midwest and the South. Trump has threatened to impose tariffs on Chinese goods and has bashed recent US trade pacts. ...

Fred C. Dobbs -> Fred C. Dobbs... , December 27, 2016 at 03:41 AM

... Previous trade deals, including the 1994 North American Free Trade Agreement with Canada and Mexico, chipped away at US manufacturing towns. But economists say the decision to normalize relations with China was far more disruptive. Some economists have estimated the United States may have lost at least 1 million manufacturing jobs from 2000 to 2007 due to freer trade with China.

In Bristol County, which includes Fall River, New Bedford, and Taunton, manufacturing employed nearly a quarter of the workforce in 2000; now it provides jobs for only one in 10 workers.

Most of the manufacturing jobs lost since 2000 are unlikely to return, economists said. Automation has made manufacturing much more specialized, requiring more education and fewer workers, leaving parts of the country struggling to figure out how to reinvent their economies.

"We will probably never have as many manufacturing jobs as we had in 1960," Dunn said. "The question is how do we train workers and provide them opportunities to feel productive. What's clear from the election is an increasing number of people don't have those opportunities or don't feel that those opportunities will be available."

Officials in Fall River and Bristol County said they are trying to provide appropriate training, including computer programming, a prerequisite for many manufacturing jobs.

They also point out there have been recent victories.

Mayor Tom Hoye said Taunton has also been more active in recent years, holding community meetings and expanding social services for residents facing distress and drug addiction.

Despite the hits the city and its residents have taken, there is reason to be optimistic about the future, he said.

Jobs are returning, and the county's suicide rate dropped from 13 per 100,000 people in 2014 to 12 per 100,000 in 2015.

"We're reinventing ourselves," Hoye said on a recent morning as he sat in an old elementary school classroom that has served as the temporary mayor's office for several years.

"It's tough to lift yourself out of the hole sometimes. But we're much better off than we were 10 years ago."

Fred C. Dobbs -> Fred C. Dobbs... , December 27, 2016 at 03:55 AM
'The research doesn't prove a definitive
link between lost jobs and suicide; it
simply notes that as jobs left,
suicides rose.'

Pierce, Justin R., and Peter K. Schott (2016). "Trade Liberalization and Mortality:
Evidence from U.S. Counties," Finance and Economics Discussion Series
2016-094. Washington: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/econresdata/feds/2016/files/2016094pap.pdf

http://faculty.som.yale.edu/peterschott/files/research/papers/pierce_schott_pntr_20150301.pdf

Fred C. Dobbs -> Fred C. Dobbs... , December 27, 2016 at 04:00 AM
(Note: The 2nd link is to a
different paper, same authors.)

'The Surprisingly Swift Decline
of US Manufacturing Employment'

Fred C. Dobbs -> Fred C. Dobbs... , December 27, 2016 at 04:27 AM
Understanding vulnerability to self-
harm in times of economic hardship
and austerity: a qualitative study
M C Barnes, et al.

'This is the first UK study of self-harm
among people experiencing economic or
austerity-related difficulties.'

December 2015

http://bmjopen.bmj.com/content/6/2/e010131.full.pdf

---

Characteristics of people dying by suicide after job loss, financial difficulties and other economic stressors during a period of recession (2010–2011): A review of coroners׳ records
Caroline Coope, et al

Journal of Affective Disorders
Volume 183, 1 - September 2015

http://www.sciencedirect.com/science/article/pii/S0165032715002694/pdfft?md5=bebc4ce035acbeeee6cb0b9bd586a5e3&pid=1-s2.0-S0165032715002694-main.pdf

Chris G -> Fred C. Dobbs... , -1
Suicide rates rise after jobs move overseas, study finds

That's consistent with the GOP's notion of how to most effectively cover health problems: shoveled dirt.

[Dec 27, 2016] Trump should say, Thanks, Obama!

Notable quotes:
"... I would say both parties are for the rich and both do their best to distract their respective base with talk of abortion or race, while neither would like these red meat distractions disappear by being in any solved. ..."
"... Why do they like these particular distractions? Because the rich don't care about either. ..."
"... Trump broke the mold by talking about jobs in a meaningful way immigration and exporting factories both boost unemployment, suppressing wages while boosting profits; these topics have been forbidden since Ross Perot spoke of millions of jobs going south on account of Nafta, exactly what happened. ..."
"... 8mm official unemployment. 16mm reduced participation since 2005 in 25-54 age group. ..."
"... 24mm total, not counting part timers that want full time and 10mm fewer voted for dems in 2016 than 2008. ..."
"... Exactly the same number that voted for Romney voted for trump, so Hillary lost obamas third term not because of a wave of trump racists but because there was somehow dissatisfaction among former dem voters regarding the great jobs program, low cost healthcare, and prosecution of bankers and other elites that drove the economy off the cliff. Granted, nominating the second most unpopular person in America might not guarantee success ..."
Dec 27, 2016 | www.nakedcapitalism.com
John k, December 26, 2016 at 2:33 pm

Dems are the party of the rich and poor.

Really? When did they do something that benefitted the poor?

I would say both parties are for the rich and both do their best to distract their respective base with talk of abortion or race, while neither would like these red meat distractions disappear by being in any solved.

Why do they like these particular distractions? Because the rich don't care about either.

Trump broke the mold by talking about jobs in a meaningful way immigration and exporting factories both boost unemployment, suppressing wages while boosting profits; these topics have been forbidden since Ross Perot spoke of millions of jobs going south on account of Nafta, exactly what happened.

8mm official unemployment. 16mm reduced participation since 2005 in 25-54 age group.

24mm total, not counting part timers that want full time and 10mm fewer voted for dems in 2016 than 2008.

Exactly the same number that voted for Romney voted for trump, so Hillary lost obamas third term not because of a wave of trump racists but because there was somehow dissatisfaction among former dem voters regarding the great jobs program, low cost healthcare, and prosecution of bankers and other elites that drove the economy off the cliff. Granted, nominating the second most unpopular person in America might not guarantee success

Anyway, Trump should say, Thanks, Obama!

Synoia , December 26, 2016 at 2:40 pm

8mm official unemployment. 16mm reduced participation since 2005 in 25-54 age group.
24mm total, not counting part timers that want full time

Obama's legacy. Read it and weep.

John k , December 26, 2016 at 3:23 pm

I mis spoke.
Nominating her had risks, but it assured Bernie would not be president, and Bernie was a far greater risk to bankers and the other dem paymasters than trump. Remember, for them it was existential, bernie would have jailed bankers. Trump is one of the oligarchs.
With her nom bankers let out a sigh of relief and could thankfully murmur, 'mission accomplished!'

WheresOurTeddy , December 26, 2016 at 3:29 pm

Bernie would not be president only if they Bobby Kennedy'd him.

It didn't come to that. They just fixed the primary.

Vatch , December 26, 2016 at 7:12 pm

If Sanders had won the Democratic nomination, and he had been "Bobby Kennedy'd", people besides the conspiracy enthusiasts would have started to notice a pattern. Instead, there are millions of people who actually believe that Sanders lost the primaries to Clinton fair and square. Some of us know better. . . .

As for patterns, Trump's nominations for cabinet level offices are showing a pattern: billionaires, hecto-millionaires, overt vassals of the ultra-rich, and at least one (alleged) criminal: Ryan Zinke.

Yves Smith , December 26, 2016 at 10:22 pm

The one unambiguously positive feature of Obamacare was Medicaid expansion, which does help the poor.

marym , December 26, 2016 at 10:47 pm

It does help people, but increased privatization and estate recovery make it not unambiguous.

ambrit , December 27, 2016 at 4:42 am

True. Because of estate recovery, I am doing without medical "insurance" of any kind. As I tell Phyllis, if I get anything serious, just put me in my ragged old canvas chair in the back yard and keep the beer coming until I stop complaining.

This entire Medicade story is curious. I had thought that any self respecting oligarchy would want reasonably powerful clients to buttress the oligarch's power and influence. Instead, the Medicade Oligarchy buys into a "power base" of the poor and disenfranchised. The funds for this complex relationship are supplied, as best as I can discern, by the central government. What will the Medicade Oligarchs do when the "X" Oligarchs cut off or even just restrict the flow of funds from the central government?

Cry Shop , December 27, 2016 at 5:36 am

Not just estate recovery. Loading Medicaid with more claimants, particularly poor, ethnic minority claimants, was a great way to stress it's gonig to need a neo-liberal cure, if the neo-cons don't use the opportunity Obama gave them to out right kill it. Medicaid isn't Medicare, and the retired folks know it. They, the retires, would kill it in a second if they could get an extra $100 per annum in free drugs.

ambrit , December 27, 2016 at 5:46 am

I'm not too sure about the "Retired" "Poor" divide anymore. The two groups are converging and merging. Any animus experienced here would be the result of restriction of total benefits available. In other words, an artificially engineered conflict.
Once the "old folks" realize that they, as a class, are the poor, all bets will be off.

marym , December 27, 2016 at 8:44 am

Once the "old folks" actually are poor enough to qualify for Medicaid (dual eligible) they are at risk for being tossed off Medicare into Medicaid managed care .

marym , December 27, 2016 at 8:50 am

Nor is Medicare Medicare, in the sense of being a fully public program. Medicare Advantage, Medicare supplemental insurance, and prescription drug insurance are all privatized.

Tully , December 27, 2016 at 11:41 am

the funds supplied by the central government. No.
they are supplied by the taxpayers.
That is the system – taxpayers subsidize private sector profits.

steelhead , December 26, 2016 at 2:59 pm

43 years. The decline started in 1973, the year I graduated from high school.

Nittacci , December 26, 2016 at 3:00 pm

"I'm guessing that upwards of 90% of United States voters work for wages"

How is that possible with a 62% labor participation rate? Do you believe unemployed, retired, students and stay-at-home parents don't vote?

grayslady , December 26, 2016 at 5:48 pm

Yes, I had a problem with that phrase, as well; especially as older people (read "retired") are known to have the highest percentage of actual voters. Assuming that the 90% is an overstatement, I don't believe it negates the point that all ages and all races can find common ground on certain issues–Medicare for All being one of those issues. Seniors would definitely get behind an improved Medicare, just as students, unemployed, working poor, and others would support such a sensible universal health care program.

ambrit , December 27, 2016 at 4:46 am

" sensible universal health care program."
Sensible for whom? For the presently entrenched oligarchs, the system in use now is perfectly sensible.

Baldacci , December 26, 2016 at 9:31 pm

Only 30-35% of the total US population votes in any one election. 90% would be possible.

funemployed , December 27, 2016 at 9:34 am

They old though – retired folks love them some voting. Work or have worked for wages, or had vital domestic labor supported by a wage earning family member would surely get us over 90 IMO. (sorry for quibbling Lambert. I think we all get the point. Thanks for the lovely essay)

[Dec 27, 2016] The government's 20th century growth as a factory underestimates service sector growth and our continued share shrink in 20th century

Dec 27, 2016 | economistsview.typepad.com
AngloSaxon : December 26, 2016 at 10:24 PM , 2016 at 10:24 PM
In my opinion, probably not. The government's 20th century "growth as a factory" underestimates service sector growth and our continued share shrink in 20th century industrial production means our "potential" growth is by this factory methiod, in decline. If we grow 3% it is a gaudy number by the government's own statistical backwardness.

To regenerate American factory growth is not possible right now under a market system. I mean, it simply isn't. If we tried, we would crater industrial growth as well with consumption cuts.

likbez -> AngloSaxon... , -1
Growth of the service sector is also under attack due to increasing "robotization", replacing salaried workers with "perma-temps" and underpaid contractors (Uber) as well as offshoring of help desk and such.

What's left? Military Keynesianism ?

[Dec 27, 2016] Guriev mising on the Russian economy and President Putin

Economist was always adamantly anti-Russian and, especially, anti-Putin. The use of people like Sergey Guriev (recent emigrant to Paris, who excape to avoid the danger of criminal procecution for skolkovao machinations) is just an icing on the cake.
Notable quotes:
"... During the 2015-16 recession, GDP. fell by more than 4 percent and real incomes declined by 10 percent. That is significant, but much less serious than, say, the 40 percent drop in GDP that Russia experienced during the first half of the 1990s. Despite a dramatic decline in oil prices and the burden of sanctions imposed by Western governments after the Crimea crisis, the Putin administration has managed to avert economic disaster by pursuing competent macroeconomic policies. ..."
"... As the sanctions cut off Russia's access to global financial markets, the government set out to cover the budget deficit by undertaking major austerity measures and tapping its substantial sovereign funds. In early 2014, the Reserve Fund (created to mitigate fiscal shocks caused by drops in oil prices) and the National Welfare Fund (set up to address shortfalls in the pension system) together held the equivalent of 8 percent of GDP. ..."
Dec 27, 2016 | economistsview.typepad.com
Fred C. Dobbs :

In Russia, It's Not the Economy,
Stupid http://nyti.ms/2hlLRNx
NYT - SERGEI GURIEV - Dec 25

LONDON - The Russian economy is in trouble - "in tatters," President Obama has said - so why aren't Russians more upset with their leaders? The country underwent a major recession recently. The ruble lost half of its value. And yet, according to a leading independent pollster in Russia, President Vladimir V. Putin's approval ratings have consistently exceeded 80 percent during the past couple of years.

One reason is that while the Russian economy is struggling, it is not falling apart, and many Russians remember times when it was in a much worse state. Another, perhaps more important, explanation is that Mr. Putin has convinced them that it's not the economy, stupid, anymore.

Thanks largely to the government's extensive control over information, Mr. Putin has rewritten the social contract in Russia. Long based on economic performance, it is now about geopolitical status. If economic pain is the price Russians have to pay so that Russia can stand up to the West, so be it.

It wasn't like this in the 1990s and 2000s. Back then the approval ratings of Russian leaders were closely correlated with economic performance, as the political scientist Daniel Treisman has demonstrated. When the economy began to recover from the 1998 financial crisis, Mr. Putin's popularity increased. It dipped when growth stalled. It climbed again in 2005, after the global price of oil - Russia' main export commodity - rose, foreign investment flowed in and domestic consumption boomed. And it fell substantially after growth rates slowed in 2012-13.

Russia's intervention in Crimea in early 2014 changed everything. Within two months, Mr. Putin's popularity jumped back to more than 80 percent, where it has stayed until now, despite the recession.

One might argue that these figures are misleading: Given the pressures faced by the Kremlin's political opponents, aren't respondents in polls too afraid to answer questions honestly? Hardly, according to a recent study co-written by the political scientist Tim Frye, based on an innovative method known as "list experiments." It found that, even after adjusting for respondents' reluctance to openly acknowledge any misgivings about specific leaders, Mr. Putin's popularity really is very high: around 70 percent.

During the 2015-16 recession, GDP. fell by more than 4 percent and real incomes declined by 10 percent. That is significant, but much less serious than, say, the 40 percent drop in GDP that Russia experienced during the first half of the 1990s. Despite a dramatic decline in oil prices and the burden of sanctions imposed by Western governments after the Crimea crisis, the Putin administration has managed to avert economic disaster by pursuing competent macroeconomic policies.

As the sanctions cut off Russia's access to global financial markets, the government set out to cover the budget deficit by undertaking major austerity measures and tapping its substantial sovereign funds. In early 2014, the Reserve Fund (created to mitigate fiscal shocks caused by drops in oil prices) and the National Welfare Fund (set up to address shortfalls in the pension system) together held the equivalent of 8 percent of GDP.

The government also adopted sound monetary policy, including the decision to fully float the ruble in 2014. Because of the decline in oil prices and large net capital outflows - caused by the need to repay external corporate debt and limited foreign investment in Russia - the currency depreciated by 50 percent within a year. Although a weaker ruble hurt the living standards of ordinary Russians, it boosted the competitiveness of Russia's companies. The Russian economy is now beginning to grow again, if very modestly - at a projected 1 to 1.5 percent per year over the next few years.

This performance comes nowhere near meeting Mr. Putin's election-campaign promises of 2012, when he projected GDP. growth at 6 percent per year for 2011-18. But it isn't catastrophic either, and the government has managed to explain it away.

Thanks partly to its near-complete control of the press, television and the internet, the government has developed a grand narrative about Russia's role in the world - essentially promoting the view that Russians may need to tighten their belts for the good of the nation. The story has several subplots. Russian speakers in Ukraine need to be defended against neo-Nazis. Russia supports President Bashar al-Assad of Syria because he is a rampart against the Islamic State, and it has helped liberate Aleppo from terrorists. Why would the Kremlin hack the Democratic Party in the United States? And who believes what the CIA says anyway?

The Russian people seem to accept much of this or not to care one way or the other. This should come as no surprise. In a recent paper based on data for 128 countries over 10 years, Professor Treisman and I developed an econometric model to assess which factors affect a government's approval ratings and by how much. We concluded that fully removing internet controls in a country like Russia today would cause the government's popularity ratings to drop by about 35 percentage points. ...

What Makes Governments Popular
Sergei M. Guriev (CEPR), Daniel Treisman (UCLA)
November 11, 2016
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2882915

[Dec 27, 2016] The technocrats lied about how globalization would be great for everyone. Peoples actual experience in their lives has been different.

Notable quotes:
"... We have a dollar democracy that protects the economic interest of the elite class while more than willing to let working class families lose their homes and jobs on the back end of wide scale mortgage fraud. Then the fraud was perpetuated in the mortgage default process just to add insult to injury. ..."
"... One thing that Trump certainly got wrong that no one ever points out is that there is a lot more murder than rape crossing the Mexican-American border in the drug cartel operations ..."
"... The technocrats lied about how globalization would be great for everyone. People's actual experience in their lives has been different. ..."
"... Centrist Democrat partisans with their increasinly ineffectual defenses of the establishment say it's only about racism and xenophobia, but it's more than that. ..."
Dec 27, 2016 | economistsview.typepad.com
RC AKA Darryl, Ron
RE: Democracy Is Dying as Technocrats Watch - William Easterly

Assaults on democracy are working because our current political elites have no idea how to defend it.

[There are certainly good points to this article, but the basic assumption that our electorally representative form of republican government is the ideal incarnation of the democratic value set is obviously incorrect. We have a dollar democracy that protects the economic interest of the elite class while more than willing to let working class families lose their homes and jobs on the back end of wide scale mortgage fraud. Then the fraud was perpetuated in the mortgage default process just to add insult to injury.

One thing that Trump certainly got wrong that no one ever points out is that there is a lot more murder than rape crossing the Mexican-American border in the drug cartel operations:<) ]

Peter K. -> RC AKA Darryl, Ron... December 27, 2016 at 06:39 AM

The author fails to mention the Sanders campaign. An elderly socialist Jew from Brooklyn was able to win 23 primaries and caucuses and approximately 43% of pledged delegates to Clinton's 55%.

This despite a nasty, hostile campaign against him and his supporters by the Clinton campaign and corporate media.

There's also Jeremy Corbyn in the UK. Podemos, Syriza, etc.

Italy's 5 Star movement demonstrates a hostility to technocrats as well.

The author doesn't really focus on how the technocrats have failed.

The technocrats lied about how globalization would be great for everyone. People's actual experience in their lives has been different.

Trump scapegoated immigrants and trade, as did Brexit, but what he really did was channel hostility and hatred at the elites and technocrats running the country.

Centrist Democrat partisans with their increasinly ineffectual defenses of the establishment say it's only about racism and xenophobia, but it's more than that.

RC AKA Darryl, Ron said in reply to Peter K.... , -1
Yes sir.

[Dec 27, 2016] Donald Trump targets globalization and free trade as job-killers

Dec 27, 2016 | www.usatoday.com

"Globalization has made the financial elite who donate to politicians very, very wealthy ... but it has left millions of our workers with nothing but poverty and heartache," Trump told supporters during a prepared speech targeting free trade in a nearly-shuttered former steel town in Pennsylvania.

In a speech devoted to what he called "How To Make America Wealthy Again," Trump offered a series of familiar plans designed to deal with what he called "failed trade policies" - including rejection of the proposed Trans-Pacific Partnership (TPP) with Pacific Rim nations and re-negotiation of the North American Free Trade Agreement (NAFTA) with Canada and Mexico, withdrawing from it if necessary.

The presumptive Republican presidential nominee also said he would pursue bilateral trade agreements rather than multi-national deals like TPP and NAFTA.

In addition to appointing better trade negotiators and stepping up punishment of countries that violate trade rules, Trump's plans would also target one specific economic competitor: China. He vowed to label China a currency manipulator, bring it before the World Trade Organization and consider slapping tariffs on Chinese imports coming into the U.S.

[Dec 27, 2016] On Krugman And The Working Class - Tim Duys Fed Watch

Notable quotes:
"... Excellent critique. Establishment Democrats are tone-deaf right now; the state of denial they live in is stunning. I'd like to think they can learn after the shock of defeat is over, but identity politics for non-white, non-male, non-heterosexual is what the Democratic party is about today and has been the last decade or so. ..."
"... That's the effect of incessant Dem propaganda pitting races and sexes against each other. ..."
"... And Democrats' labeling of every Republican president/candidate as a Nazi - including Trump - is desensitizing the public to the real danger created by discriminatory policies that punish [white] children and young adults, particularly boys. ..."
"... So, to make up for the alleged screw job that women and minorities have supposedly received, the plan will be screwing white/hetro/males for the forseeable future. My former employer is doing this very plan, as we speak. Passed over 100 plus males, who have been turning wrenches on airplanes for years, and installed a female shop manager who doesn't know jack-$##t about fixing airplanes. No experience, no certificate......but she has a management degree. But I guess you don't know how to do the job to manage it. ..."
"... Bernie Sanders was that standard bearer, but Krugman and the Neoliberal establishment Democrats (ie. Super Delegates) decided that they wanted to coronate Clinton. ..."
"... Evolution of political parties happens organically, through evolution (punctuated equilibrium - like species and technology - parties have periods of stability with some sudden jumps in differentiation). ..."
"... If Nancy Pelosi is re-elected (highly likely), it will be the best thing to happen to Republicans since Lincoln. They will lose even more seats. ..."
"... The Coastal Pelosi/Schumer wing is still in power, and it will take decimation at the ballot box to change the party. The same way the "Tea Party" revolution decimated the Republicans and led to Trump. Natural selection at work. ..."
"... The central fact of the election is that Hillary has always been extraordinarily unlikable, and it turned out that she was Nixonianly corrupt ..."
"... I'm from Dallas. Three of my closest friends growing up (and to this day), as well as my brother in law, are hispanic. They, and their families, all vote Republican, even for Trump. Generally speaking, the longer hispanics are in the US, the more likely they tend to vote Republican. ..."
"... The Democratic Establishment and their acolytes are caught in a credibility trap. ..."
"... I also think many Trump voters know they are voting against their own economic interest. The New York Times interviewed a number who acknowledge that they rely on insurance subsidies from Obamacare and that Trump has vowed to repeal it. I know one such person myself. She doesn't know what she will do if Obamacare is repealed but is quite happy with her vote. ..."
"... Krugman won his Nobel for arcane economic theory. So it isn't terribly surprising that he spectacularly fails whenever he applies his brain to anything remotely dealing with mainstream thought. He is the poster boy for condescending, smarter by half, elite liberals. In other words, he is an over educated, political hack who has yet to learn to keep his overtly bias opinions to himself. ..."
"... Funny how there's all this concern for the people whose jobs and security and money have vanished, leaving them at the mercy of faceless banks and turning to drugs and crime. Sad. Well, let's bash some more on those lazy, shiftless urban poors who lack moral strength and good, Protestant work ethic, shall we? ..."
"... Clinton slammed half the Trump supporters as deplorables, not half the public. She was correct; about half of them are various sorts of supremacists. The other half (she said this, too) made common cause with the deplorables for economic reasons even though it was a devil's bargain. ..."
"... I have never commented here but I will now because of the number of absurd statements. I happen to work with black and Hispanic youth and have also worked with undocumented immigrants. To pretend that trump and the Republican Party has their interest in mind is completely absurd. As for the white working class, please tell me what programs either trump or the republican have put forward to benefit them? I have lost a lot of respect for Duy ..."
"... The keys of the election were race, immigration and trade. Trump won on these points. What dems can do is to de-emphasize multiculturalism, racial equality, political correctness etc. Instead, emphasize economic equality and security, for all working class. ..."
"... Krugman more or less blames media, FBI, Russia entirely for Hillary's loss, which I think is wrong. As Tim said, Dems have long ceased to be the party of the working class, at least in public opinion, for legitimate reasons. ..."
"... All Mr. Krugman and the Democratic establishment need to do is to listen, with open ears and mind, to what Thomas Frank has been saying, and they will know where they went wrong and most likely what to do about it, if they can release themselves from their fatal embrace with Big Money covered up by identity politics. ..."
"... Pretty sad commentary by neoliberal left screaming at neoliberal right and vice versa. ..."
"... The neoliberals with their multi-culti/love them all front men have had it good for a while, now there's a reaction. Deal with it. ..."
Dec 27, 2016 | economistsview.typepad.com
Jason Nordsell : , November 27, 2016 at 08:02 AM
Excellent critique. Establishment Democrats are tone-deaf right now; the state of denial they live in is stunning. I'd like to think they can learn after the shock of defeat is over, but identity politics for non-white, non-male, non-heterosexual is what the Democratic party is about today and has been the last decade or so.

The only way Dems can make any headway by the midterms is if Trump really screws up, which is a tall order even for him. He will pick the low-hanging fruit (e.g., tax reform, Obamacare reform, etc), the economy will continue to recover (which will be attributed to Trump), and Dems will lose even more seats in Congress. And why? Because they refuse to recognize that whites from the middle-class and below are just as disadvantaged as minorities from the same social class.

If white privilege exists at all (its about as silly as the "Jews control the banks and media" conspiracy theories), it exists for the upper classes. Poor whites need help too. And young men in/out of college today are being displaced by women - not because the women have superior academic qualification, but because they are women. I've seen it multiple times firsthand in some of the country's largest companies and universities (as a lawyer, when an investigation or litigation takes place, I get to see everyone's emails, all the way to CEO/board). There is a concerted effort to hire only women and minorities, especially for executive/managerial positions. That's not equality.

That's the effect of incessant Dem propaganda pitting races and sexes against each other. This election exposed the media's role, but its not over. Fortunately, Krugman et al. are showing the Dems are too dumb to figure out why they lost. Hopefully they keep up their stupidity so identity politics can fade into history and we can get back to pursuing equality.

bob -> Jason Nordsell... , November 28, 2016 at 03:02 PM
"There is a concerted effort to hire only women and minorities, especially for executive/managerial positions."

Goooooolllllllllllllly, gee. Now why would that be? I hope you're not saying there shouldn't be such an effort. This is a good thing. It exactly and precisely IS equality. It may be a bit harsh, but if certain folks continually find ways to crap of women and minorities, then public policies would seem warranted.

Are you seriously telling us that pursuing public policies to curb racial and sexual discrimination are a waste of time?

How, exactly, does your vision of "pursuit of equality" ameliorate the historical fact of discrimination?

Jason Nordsell -> bob... , November 29, 2016 at 10:17 AM
You don't make up for past discrimination with discrimination. You make up for it by equal application of the law. Today's young white men are not the cause of discrimination of the 20th century, or of slavery. If you discriminate against them because of the harm caused by other people, you're sowing the seeds of a REAL white nationalist movement. And Democrats' labeling of every Republican president/candidate as a Nazi - including Trump - is desensitizing the public to the real danger created by discriminatory policies that punish [white] children and young adults, particularly boys.

Displacement of white men by lesser-qualified women and minorities is NOT equality.

Paid Minion -> bob... , December 26, 2016 at 01:29 PM
So, to make up for the alleged screw job that women and minorities have supposedly received, the plan will be screwing white/hetro/males for the forseeable future. My former employer is doing this very plan, as we speak. Passed over 100 plus males, who have been turning wrenches on airplanes for years, and installed a female shop manager who doesn't know jack-$##t about fixing airplanes. No experience, no certificate......but she has a management degree. But I guess you don't know how to do the job to manage it.

God forbid somebody have to "pay some dues" before setting them loose as suit trash.

This will not end well.

Richard -> Jason Nordsell... , November 30, 2016 at 03:45 PM
You had me nodding until the last part.

Back when cultural conservatives ruled the roost (not that long ago), they didn't pursue equality either. Rather, they favored (hetero Christian) white men. So hoping for Dem stupidity isn't going to lead to equality. Most likely it would go back to favoring hetero Christian white men.

Todd : , November 27, 2016 at 08:46 AM
"...should they find a new standard bearer that can win the Sunbelt states and bridge the divide with the white working class? I tend to think the latter strategy has the higher likelihood of success."

Easy to say. What would that standard bearer or that strategy look like?

Bill -> Todd... , November 27, 2016 at 08:59 AM
Bernie Sanders was that standard bearer, but Krugman and the Neoliberal establishment Democrats (ie. Super Delegates) decided that they wanted to coronate Clinton. Big mistake that we are now paying for...
Bob Salsa -> Bill... , November 28, 2016 at 12:56 PM
Basic political math - Sanders would have been eaten alive with his tax proposals by the GOP anti-tax propaganda machine on Trump steroids.

His call to raise the payroll tax to send more White working class hard-earn money to Washington would have made election night completely different - Trump would have still won, it just wouldn't have been a surprise but rather a known certainty weeks ahead.

dwb : , November 27, 2016 at 10:47 AM
Evolution of political parties happens organically, through evolution (punctuated equilibrium - like species and technology - parties have periods of stability with some sudden jumps in differentiation).

Old politicians are defeated, new ones take over. The old guard, having been successful in the past in their own niche rarely change.

If Nancy Pelosi is re-elected (highly likely), it will be the best thing to happen to Republicans since Lincoln. They will lose even more seats.

The Coastal Pelosi/Schumer wing is still in power, and it will take decimation at the ballot box to change the party. The same way the "Tea Party" revolution decimated the Republicans and led to Trump. Natural selection at work.

In 1991, Republicans thought they would always win, Democrats thought the country was relegated to Republican Presidents forever. Then along came a new genotype- Clinton. In 2012, Democrats thought that they would always win, and Republicans were thought to be locked out of the electoral college. Then along came a new genotype, Trump.

A new genotype of Democrat will have to emerge, but it will start with someone who can win in flyover country and Texas. Hint: They will have to drop their hubris, disdain and lecturing, some of their anti-growth energy policies, hate for the 2nd amendment, and become more fiscally conservative. They have to realize that *no one* will vote for an increase in the labor supply (aka immigration) when wages are stagnant and growth is anemic. And they also have to appreciate people would rather be free to choose than have decisions made for them. Freedom means nothing unless you are free to make mistakes.

But it won't happen until coastal elites like Krugman and Pelosi have retired.


swampwiz -> dwb... , November 28, 2016 at 12:59 AM
My vote for the Democratic Tiktaalik is the extraordinarily Honorable John Bel Edwards, governor of Louisiana. The central fact of the election is that Hillary has always been extraordinarily unlikable, and it turned out that she was Nixonianly corrupt (i.e., deleted E-mails on her illegal private server) as well - and she still only lost by 1% in the tipping point state (i.e., according to the current count, which could very well change).
bob -> dwb... , November 28, 2016 at 03:09 PM
You know what will win Texas? Demographic change. Economic growth. And it is looking pretty inevitable on both counts.

I'm also pretty damned tired of being dismissed as "elitist", "smug" and condescending. I grew up in a red state. I know their hate. I know their condescension (they're going to heaven, libruls are not).

It cuts both ways. The Dems are going into a fetal crouch about this defeat. Did the GOP do that after 2008? Nope. They dug in deeper.

Could be a lesson there for us.

Smugly your,

dwb -> bob... , November 28, 2016 at 06:27 PM
Ahh yes, all Texas needs is demographic change, because all [Hispanics, Blacks, insert minority here] will always and forever vote Democrat. Even though the Democrats take their votes for granted and Chicago/Baltimore etc. are crappy places to live with no school choice, high taxes, fleeing jobs, and crime. Even though Trump outperformed Romney among minorities.

Clinton was supposed to be swept up in the winds of demographics and the Democrats were supposed to win the White House until 2083.

Funny things happen when you take votes for granted. Many urban areas are being crushed by structural deficits and need some Detroit type relief. I predict that some time in the next 30 years, poles reverse, and urban areas are run by Republicans.

If you are tired of being dismissed as "elitist", "smug" and condescending, don't be those things. Don't assume people will vote for your party because they have always voted that way, or they are a certain color. Respect the voters and work to earn it.

Jason Nordsell -> bob... , November 29, 2016 at 10:27 AM
The notion that hispanic=democrat that liberals like bob have is hopelessly ignorrant.

I'm from Dallas. Three of my closest friends growing up (and to this day), as well as my brother in law, are hispanic. They, and their families, all vote Republican, even for Trump. Generally speaking, the longer hispanics are in the US, the more likely they tend to vote Republican.

The Democratic Party's plan to wait out the Republicans and let demographics take over is ignorant, racist and shortsighted, cooked up by coastal liberals that haven't got a clue, and will ultimately fail.

In addition to losing hispanics, Democrats will also start losing the African American vote they've been taking for granted the last several decades. Good riddance to the Democratic party, they are simply unwilling to listen to what the people want.

RJ -> bob... , December 06, 2016 at 11:20 PM
You might be tired of it, but clearly you are elitist, smug, and condescending.

Own it. Fly your freak flag proudly,

Tom : , November 27, 2016 at 11:42 AM
This is a really shoddy piece that repeats the medias pulling of Clintons quote out of context. She also said "that other basket of people are people who feel that the government has let them down, the economy has let them down, nobody cares about them, nobody worries about what happens to their lives and their futures, and they're just desperate for change. It doesn't really even matter where it comes from. They don't buy everything he says, but he seems to hold out some hope that their lives will be different. They won't wake up and see their jobs disappear, lose a kid to heroin, feel like they're in a dead-end. Those are people we have to understand and empathize with as well."

Now maybe it is okay to make gnore this part of the quote because you think calling racism "deplorable" is patently offensive. But when the ignored context makes the same points that Duy says she should have been making, that is shoddy.

dwb -> Tom... , November 27, 2016 at 12:07 PM
There are zero electoral college votes in the State of Denial. Hopefully you understand a)the difference between calling people deplorable and calling *behavior* deplorable; b) Godwin's Law: when you resort to comparing people to Hitler you've lost the argument. Trump supporters were not racist, homophobic, xenophobic, or any other phobic. As a moderate, educated, female Trump supporter counseled: He was an a-hole, but I liked his policies.

Even my uber liberal friends cannot tell me what Clinton's economic plan was. Only that they are anti-Trump.

Trump flanked Clinton on the most popular policies (the left used to be the anti-trade party of union Democrats): Lower regulation, lower taxes, pro-2nd amendment, trade deals more weighted in favor of US workers, and lower foreign labor supply. Turn's out, those policies are sufficiently popular that people will vote for them, even when packaged into an a-hole. Trump's anti-trade platform was preached for decades by rust belt unions.

The coastal Democrats have become hostages to pro-big-government municipal unions crushing cities under structural deficits, high taxes, poorly run schools, and overbearing regulations. The best thing that can happen for the Democrats is for the Republicans to push for reforms of public pensions, school choice, and break municipal unions. Many areas see the disaster in Chicago and Baltimore, run by Democrats for decades, and say no thank you. Freed of the need to cater to urban municipal unions, Democrats may be able to appeal to people elsewhere.

Nick : , November 27, 2016 at 01:16 PM
Where can you move to for a job when wages are so low compared to rents?
The young generations are not happy with house prices or rents as well.
Giant_galveston -> Tim C.... , December 05, 2016 at 08:43 PM
Tim, I believe you've missed the point: by straightforward measures, Democratic voters in USA are substantially under-represented. The problem is likely to get much worse, as the party whose policies abet minority rule now controls all three branches of the federal government and a substantial majority of state governments.
Tim C. : , November 27, 2016 at 02:50 PM
This is an outstanding takedown on what has been a never-ending series of garbage from Krugman.

I used to hang on every post he'd made for years after the 2008 crisis hit. But once the Clinton coronation arose this year, the arrogant, condescending screed hit 11 - and has not slowed down since. Threads of circular and illogical arguments have woven together pathetic - and often non-liberal - editorials that have driven me away permanently.

Since he's chosen to ride it all on political commentary, Krugman's credibility is right there with luminaries such as Nial Ferguson and Greg Mankiw.

Seems that everyone who chooses to hitch their wagon to the Clintons ends up covered in bilge..... funny thing about that persistent coincidence...

dazed and confused : , November 27, 2016 at 02:58 PM
"And it is an especially difficult pill given that the decline was forced upon the white working class.... The tsunami of globalization washed over them....in many ways it was inevitable, just as was the march of technology that had been eating away at manufacturing jobs for decades. But the damage was intensified by trade deals.... Then came the housing crash and the ensuing humiliation of the foreclosure crisis."

All the more amazing then that Trump pulled out such a squeaker of an election beating Clinton by less than 2% in swing states and losing the popular vote overall. In the shine of Duy's lights above, I would have imagined a true landslide for Trump... Just amazing.

Jesse : , November 27, 2016 at 04:29 PM

The Democratic Establishment and their acolytes are caught in a credibility trap.

dimknight : , November 27, 2016 at 11:48 PM
"I don't know that the white working class voted against their economic interest".

I think you're pushing too hard here. Democrats have been for, and Republicans against many policies that benefit the white working class: expansionary monetary policy, Obamacare, housing refinance, higher minimum wage, tighter worker safety regulation, stricter tax collection, and a host of others.

I also think many Trump voters know they are voting against their own economic interest. The New York Times interviewed a number who acknowledge that they rely on insurance subsidies from Obamacare and that Trump has vowed to repeal it. I know one such person myself. She doesn't know what she will do if Obamacare is repealed but is quite happy with her vote.

Doug Rife : , November 28, 2016 at 07:17 AM
There is zero evidence for this theory. It ignores the fact that Trump lied his way to the White House with the help of a media unwilling to confront and expose his mendacity. And there was the media's obsession with Clinton's Emails and the WikiLeaks daily release of stolen DNC documents. And finally the Comey letter which came in the middle of early voting keeping the nation in suspense for 11 days and which was probably a violation of the hatch act. Comey was advised against his unjustified action by higher up DOJ officials but did it anyway. All of these factors loomed much larger than the deplorables comment. Besides, the strong dollar fostered by the FOMC's obsession with "normalization" helped Trump win because the strong dollar hurts exporters like farmers who make up much of the rural vote as well as hurting US manufacturing located in the midwest states. The FOMC was objectively pro Trump.
Nate F : , November 28, 2016 at 07:57 AM
I was surrounded by Trump voters this past election. Trust me, an awful lot of them are deplorable. My father is extremely anti semetic and once warned me not to go to Minneapolis because of there being "too many Muslims." One of our neighbors thinks all Muslims are terrorists and want to do horrible things to all Christians.

I know, its not a scientific study. But I've had enough one on one conversations with Trump supporters (not just GOP voters, Trump supporters) to say that yes, as a group they have some pretty horrible views.

Giant_galveston -> Nate F... , December 05, 2016 at 08:38 PM
Yep. I've got plenty of stories myself. From the fact that there are snooty liberals it does NOT follow that the resentment fueling Trump's support is justified.
Denis Drew : , November 28, 2016 at 08:41 AM
One should note that the "The racist, sexist, homophobic, xenophobic, Islamaphobic - you name it ... " voted for Obama last time around.

When the blue collar voter (for lack of a better class) figures out that the Republicans (Trump) are not going to help them anymore than the Dems did -- it will be time for them to understand they can only rely on themselves, namely: through rebuilding labor union density, which can be done AT THE STATE BY PROGRESSIVE STATE LEVEL.

To keep it simple states may add to federal protections like the minimum wage or safety regs -- just not subtract. At present the NLRB has zero (no) enforcement power to prevent union busting (see Trump in Vegas) -- so illegal labor market muscling, firing of organizers and union joiners go completely undeterred and unrecoursed.

Recourse, once we get Congress back might include mandating certification elections on finding of union busting. Nothing too alien: Wisconsin, for instance, mandates RE-certification of all public employee unions annually.

Progressive states first step should be making union busting a felony -- taking the power playing in our most important and politically impacting market as seriously as taking a movie in the movies (get you a couple of winters). For a more expansive look (including a look at the First Amendment and the fed cannot preempt something with nothing, click here):
http://ontodayspage.blogspot.com/2016/11/first-100-days-progressive-states-agenda.html

Labor unions -- returned to high density -- can act as the economic cop on every corner -- our everywhere advocates squelching such a variety of unhealthy practices as financialization, big pharam gouging, for profit college fraud (Trump U. -- that's where we came into this movie). 6% private union density is like 20/10 bp; it starves every other healthy process (listening blue collar?).

Don't panic if today's Repub Congress passes national right-to-work legislation. Germany, which has the platinum standard labor institutions, does not have one majority union (mostly freeloaders!), but is almost universally union or covered by union contracts (centralized bargaining -- look it up) and that's what counts.

Gary Anderson : , November 28, 2016 at 09:47 AM
Trump took both sides of every issue. He wants high and low interest rates. He wants a depression first, (Bannonomics) and inflation first, (Trumponomics), he wants people to make more and make less. He is nasty and so he projected that his opponent was nasty.

Now he has to act instead of just talk out of both sides of his mouth. That should not be as easy to do.

C Jones : , November 28, 2016 at 10:31 AM
Hi Tim, nice post, and I particularly liked your last paragraph. The relevant question today if you have accepted where we are is effectively: 'What would you prefer - a Trump victory now? Or a Trump type election victory in a decade or so? (with todays corresponding social/economic/political trends continuing).
I'm a Brit so I was just an observer to the US election but the same point is relevant here in the UK - Would I rather leave the EU now with a (half sensible) Tory government? Or would I rather leave later on with many more years of upheaval and a (probably by then quite nutty) UKIP government?
I know which one I prefer - recognise the protest vote sooner, rather than later.
Bob Salsa : , November 28, 2016 at 12:48 PM
Sure they're angry, and their plight makes that anger valid.

However, not so much their belief as to who and what caused their plight, and more importantly, who can and how their plight would be successfully reversed.

Most people have had enough personal experiences to know that it is when we are most angry that we do the stupidest of things.

Lars : , November 28, 2016 at 05:58 PM
Krugman won his Nobel for arcane economic theory. So it isn't terribly surprising that he spectacularly fails whenever he applies his brain to anything remotely dealing with mainstream thought. He is the poster boy for condescending, smarter by half, elite liberals. In other words, he is an over educated, political hack who has yet to learn to keep his overtly bias opinions to himself.
Douglas P Anthony : , November 29, 2016 at 08:16 AM
Tim's narrative felt like a cold shower. I was apprehensive that I found it too agreeable on one level but were the building blocks stable and accurate?

Somewhat like finding a meal that is satisfying, but wondering later about the ingredients.

But, like Tim's posts on the Fed, they prompt that I move forward to ponder the presentation and offer it to others for their comment. At this time, five-stars on a 1-5 system for bringing a fresh approach to the discussion. Thanks, Professor Duy. This to me is Piketty-level pushing us onto new ground.

JohnR : , November 29, 2016 at 12:07 PM
Funny how there's all this concern for the people whose jobs and security and money have vanished, leaving them at the mercy of faceless banks and turning to drugs and crime. Sad. Well, let's bash some more on those lazy, shiftless urban poors who lack moral strength and good, Protestant work ethic, shall we?
Raven Onthill : , November 29, 2016 at 04:12 PM
Clinton slammed half the Trump supporters as deplorables, not half the public. She was correct; about half of them are various sorts of supremacists. The other half (she said this, too) made common cause with the deplorables for economic reasons even though it was a devil's bargain.

Now, there's a problem with maternalism here; it's embarrassing to find out that the leader of your political opponents knows you better than you know yourself, like your mother catching you out in a lie. It was impolitic for Clinton to have said this But above all remember that when push came to shove, the other basket made common cause with the Nazis, the Klan, and so on and voted for a rapey fascist.

Rick McGahey : , November 30, 2016 at 02:44 PM
"Economic development" isn't (and can't) be the same thing as bringing back lost manufacturing (or mining) jobs. We have had 30 years of shifting power between labor and capital. Restoring labor market institutions (both unions and government regulation) and raising the floor through higher minimum wages, single payer health care, fair wages for women and more support for child and elder care, trade policies that care about working families, better safe retirement plans and strengthened Social Security, etc. is key here, along with running a real full employment economy, with a significant green component. See Bob Polllin's excellent program in https://mitpress.mit.edu/books/back-full-employment

That program runs up against racism, sexism, division, and fear of government and taxation, and those are powerful forces. But we don't need all Trump supporters. We do need a real, positive economic program that can attract those who care about the economics more than the cultural stuff.

Sandra Williams : , December 01, 2016 at 12:20 AM
How about people of color drop the democrats and their hand wringing about white people when they do nothing about voter suppression!! White fragility is nauseating and I'm planning to arm myself and tell all the people of color I know to do the same. I expect nothing from the democrats going forward.
Robert Hurley : , December 01, 2016 at 11:04 AM
I have never commented here but I will now because of the number of absurd statements. I happen to work with black and Hispanic youth and have also worked with undocumented immigrants. To pretend that trump and the Republican Party has their interest in mind is completely absurd. As for the white working class, please tell me what programs either trump or the republican have put forward to benefit them? I have lost a lot of respect for Duy
Giant_galveston -> Robert Hurley... , December 05, 2016 at 08:32 PM
Couldn't agree more.
RJ -> Robert Hurley... , December 06, 2016 at 11:26 PM
No one should advocate illegal immigration. If you care about being a nation of laws.
[email protected] : , December 01, 2016 at 06:13 PM
I think much of appeal of DJT was in his political incorrectness. PC marginalises. Very. Of white working class specifically. it tells one, one cannot rely on one's ideas any more. In no uncertain terms. My brother, who voted for Trump, lost his job to PC without offending on purpose, but the woman in question felt free to accuse him of violating her, with no regard to his fate. He was never close enough to do that. Is that not some kind of McCarthyism?
Eclectic Observer : , December 05, 2016 at 10:55 AM
Just to be correct. Clinton was saying that half (and that was a terrible error-should have said "some") were people that were unreachable, but that they had to communicate effectively with the other part of his support. People who echo the media dumb-ing down of complex statements are part of the problem.

Still, I believe that if enough younger people and african-americans had come out in the numbers they did for Obama in some of those states, Clinton would have won. Certainly, the media managed to paint her in more negative light than she objectively deserved-- even if she deserved some negatives.

I am in no way a fan of HRC. Still, the nature of the choice was blurred to an egregious degree.

Procopius : , December 05, 2016 at 08:40 PM
"The tough reality of economic development is that it will always be easier to move people to jobs than the jobs to people."

This is indisputable, but I have never seen any discussion of the point that moving is not cost-free. Back in the '90s I had a discussion with a very smart person, a systems analyst, who insisted that poor people moved to wherever the welfare benefits were highest.

I tried to point out that moving from one town to another costs more than a bus ticket. You have to pay to have your possessions transported. You have to have enough cash to pay at least two months' rent and maybe an additional security deposit.

You have to have enough cash to pay for food for at least one month or however long it takes for your first paycheck or welfare check to come in. There may be other costs like relocating your kids to a new school system and maybe changing your health insurance provider.

There probably are other costs I'm not aware of, and the emotional cost of leaving your family and your roots. The fact that some people succeed in moving is a great achievement. I'm amazed it works at all in Europe where you also have the different languages to cope with.

Kim Kaufman : , December 07, 2016 at 10:03 PM
I'm not sure the Hillary non-voters - which also include poor black neighborhoods - were voting against their economic interests. Under Obama, they didn't do well. Many of them were foreclosed on while Obama was giving the money to the banks. Jobs haven't improved, unless you want to work at an Amazon warehouse or for Uber and still be broke. Obama tried to cut social security. He made permanent Bush's tax cuts for the rich. Wars and more wars. Health premiums went up - right before the election. The most Obama could say in campaigning for Hillary was "if you care about my legacy, vote for Hillary." He's the only one that cares about his legacy. I don't know that it's about resentment but about just having some hope for economic improvement - which Trump offered (no matter how shallow and deceptive) and Hillary offered nothing but "Trump's an idiot and I'm not."

I believe Bernie would have beat Trump's ass if 1) the DNC hadn't put their fingers on the scale for Hillary and 2) same with the media for Hillary and Trump. The Dems need more than some better campaign slogans. They really need a plan for serious economic equality. And the unions need to get their shit together and stop thinking that supporting corrupt corporate Dems is working. Or perhaps the rank and file need to get their shit together and get rid of union bosses.

IHiddenDragon : , December 10, 2016 at 09:01 AM
The keys of the election were race, immigration and trade. Trump won on these points. What dems can do is to de-emphasize multiculturalism, racial equality, political correctness etc. Instead, emphasize economic equality and security, for all working class.

Lincoln billed the civil war as a war to preserve the union, to gain wide support, instead of war to free slaves. Of course, the slaves were freed when the union won the war. Dems can benefit from a similar strategy

IHiddenDragon : , December 10, 2016 at 09:05 AM
Krugman more or less blames media, FBI, Russia entirely for Hillary's loss, which I think is wrong. As Tim said, Dems have long ceased to be the party of the working class, at least in public opinion, for legitimate reasons.

Besides, a lot voters are tired of stale faces and stale ideas. They yearn something new, especially the voters in deep economic trouble.

Maybe it's time to try some old fashioned mercantilism, protectionism? America first is an appealing idea, in this age of mindless globalization.

Jesse : , December 26, 2016 at 11:08 AM
All Mr. Krugman and the Democratic establishment need to do is to listen, with open ears and mind, to what Thomas Frank has been saying, and they will know where they went wrong and most likely what to do about it, if they can release themselves from their fatal embrace with Big Money covered up by identity politics.

But they cannot bring themselves to admit their error, and to give up their very personally profitable current arrangement. And so they are caught up in a credibility trap which is painfully obvious to the objective observer.

c1ue : , December 26, 2016 at 12:11 PM
Pretty sad commentary by neoliberal left screaming at neoliberal right and vice versa.

It seems quite clear that the vast majority of commenters live as much in the ivory tower/bubble as is claimed for their ideological opponent.

It is also quite interesting that most of these same commenters don't seem to get that the voting public gets what the majority of it wants - not what every single group within the overall population wants.

The neoliberals with their multi-culti/love them all front men have had it good for a while, now there's a reaction. Deal with it.

[Dec 27, 2016] This Russian hacking thing is being discussed entirely out of realistic context.

Notable quotes:
"... This Russian hacking thing is being discussed entirely out of realistic context. ..."
"... Voting machines are public and for Federal elections then tampering with them is elevated to a Federal crime. ..."
economistsview.typepad.com

RC AKA Darryl, Ron : , December 18, 2016 at 07:18 AM

This Russian hacking thing is being discussed entirely out of realistic context.

Cyber security is a serious risk management operation that firms and governments spend outrageous sums of money on because hacking attempts, especially from sources in China and Russia, occur in vast numbers against every remotely desirable target corporate or government each and every day. At my former employer, the State of Virginia, the data center repelled over two million hacking attempts from sources in China each day. Northrop Grumman, the infrastructure management outsourcer for the State of Virginia's IT infrastructure, has had no known intrusions into any Commonwealth of Virginia servers that had been migrated to their standard security infrastructure thus far since the inception of their contract in July 2006. That is almost the one good thing that I have to say about NG. Some state servers, notably the Virginia Department of Health Professions, not under protection of the NG standard network security were hacked and had private information such as client SSNs stolen. Retail store servers are hacked almost routinely, but large banks and similarly well protected corporations are not. Security costs and it costs a lot.

Even working in a data center with an excellent intrusion protection program as part of that program I had to take an annual "securing the human" computer based training class. Despite all of the technical precautions we were retrained each year to among other things NEVER put anything in an E-Mail that we did not want to be available for everyone to read; i.e., to never assume privacy is protected in an E-Mail. Embarrassing E-Mails need a source. We should assume that there will always be a hacker to take advantage of our mistakes.

RGC -> RC AKA Darryl, Ron... , December 18, 2016 at 07:57 AM
Can you spell "diversion"?

Sanders: "Break up the banks!"

Trump: "The elites are screwing you over!"

Supporters of the status quo:

"It's racism"

"It's Russian hackers"

Whatever it takes to change the subject.

RC AKA Darryl, Ron -> RGC... , December 18, 2016 at 08:09 AM
Maybe it is diversion, but it is definitely uninformed if not just plain stupid.
sglover -> RC AKA Darryl, Ron... , December 18, 2016 at 06:11 PM
Absolutely. What does that suggest about Team Dem?
DrDick -> EMichael... , December 18, 2016 at 08:34 AM
The reality is that all the major world powers (and some minor ones), including us, do this routinely and always have. While it is entirely appropriate to be outraged that it may have materially determined the election (which I think is impossible to know, though it did have some impact), we should not be shocked or surprised by this.
RC AKA Darryl, Ron -> EMichael... , December 18, 2016 at 09:55 AM
"...I would suggest attacks on Putin's personal business holdings all over the world..."

[My guess is that has been being done a long time ago considering the direction of US/Russian foreign relations over NATO expansion, the Ukraine, and Syria.

Long before TCP/IP the best way to prevent dirty secrets from getting out was not to have dirty secrets. It still works.

The jabbering heads will not have much effect on the political opinions of ordinary citizens because 40 million or more US adults had their credit information compromised by the Target hackers three years ago. Target had been saving credit card numbers instead of deleting them as soon as they obtained authorizations for transfers, so that the 40 million were certainly exposed while more than twice that were probably exposed. Establishment politicians having their embarrassing E-mails hacked is more like good fun family entertainment than something to get all riled up about.]

http://money.cnn.com/2014/01/10/news/companies/target-hacking/

Target: Hacking hit up to 110 million customers

RC AKA Darryl, Ron -> EMichael... , December 18, 2016 at 10:22 AM
Voting machines are public and for Federal elections then tampering with them is elevated to a Federal crime. Political parties are private. The Federal government did not protect Target or Northrop Grumman's managed infrastructure for the Commonwealth of Virginia although either one can take forensic information to the FBI that will obtain warrants for prosecution. Foreign criminal operations go beyond the immediate domestic reach of the FBI. Not even Interpol interdicts foreign leaders unless they are guilty of genocide, crimes against humanity or war crimes.

The Federal government can do what it will as there are not hard guidelines for such clandestine operations and responses. Moreover, there are none to realistically enforce against them, which inevitably leads to war given sufficient cycles of escalation. Certainly our own government has done worse (political assassinations and supporting coups with money and guns) with impunity merely because of its size, reach, and power.

RC AKA Darryl, Ron -> EMichael... , December 18, 2016 at 10:43 AM
BTW, "the burglar that just ransacked your house" can be arrested and prosecuted by a established regulated legal system with absolutely zero concerns of escalating into a nuclear war, trade war, or any other global hostility. So, not the same thing at all. Odds are good though that the burglar will get away without any of that because when he does finally get caught it will be an accident and probably only after dozen if not hundreds of B&E's.

There is a line. The US has crossed that line, but always in less developed countries that had no recourse against us. Putin knows where the line is with the US. He will dance around it and lean over it, but not cross it. We have him outgunned and he knows it. Putin did not tamper with an election, a government function. Putin tampered with private data exposing incriminating information against a political party, which is a private entity rather than government entity. Whatever we do should probably stay within the rule of law as it gets messy fast once outside those boundaries.

RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , December 18, 2016 at 11:01 AM
As far as burglars go I live in a particular working class zip code that has very few burglaries. It is a bad risk/reward deal unless you are just out to steal guns and then you better make sure that no one is home. Most people with children still living at home also have a gun safe. Most people have dogs.

There are plenty burglaries in a lower income zip code nearby and lots more in higher income zip codes further away, the former being targets of opportunity with less security and possible drug stashes, which has a faster turnover than fencing big screen TV's. High income neighborhoods are natural targets with jewelry, cash, credit cards, and high end electronics, but far better security systems. I don't know much about their actual crime stats because they are on the opposite side of the City of Richmond VA from me, but I used to know a couple of burglars when I lived in the inner city. They liked the upscale homes near the University of Richmond on River Road.

Peter K. -> DrDick... , December 18, 2016 at 09:21 AM
Putin was mad b/c Clinton interfered in Russia's election using the bully-pulpit.

She may have been complete correct in what she was saying, but it's not surprising she pissed Putin off.

The Democratic establishment would rather discuss this than do a post-mortem on Hillary's campaign.

They kept telling us the e-mail didn't reveal anything and now they say the e-mail determined the election.

DeDude -> Peter K.... , December 18, 2016 at 09:43 AM
"They kept telling us the e-mail didn't reveal anything and now they say the e-mail determined the election"

And those two statement are not in conflict unless you are a brain dead Fox bot. Big nothing-burgers like Bhengazi or trivial emails can easily be blown up and affect a few hundred thousand voters. When the heck are you going to grow up and get past your 5 stages of Sanders grief?

Peter K. -> DeDude... , December 18, 2016 at 09:54 AM
"Big nothing-burgers like Bhengazi or trivial emails can easily be blown up and affect a few hundred thousand voters. "

There is already an audience for those faux scandals, the Fox viewers.

They don't create new Voters.

You're nothing but a brainwashed partisan Democrat, a mirror-image of these brainwashed Fox viewers.

You're told what you're supposed to think by the Party leadership and you eat it up.

No critical thinking skills.

EMichael -> DeDude... , December 18, 2016 at 09:55 AM
He's barely over Nader.
DeDude -> EMichael... , December 18, 2016 at 10:07 AM
I know - and there used to be some signs of a functional brain. Now it is all "they are all the same" ism and Hillary derangement syndrome on steroids. Someone who cares need to do an intervention before it becomes he get gobbled up by "ilsm" ism.
Peter K. -> EMichael... , December 18, 2016 at 01:08 PM
Nader's critique was correct.

The Democrats moved to the right and created more Trump voters.

im1dc -> RC AKA Darryl, Ron... , December 18, 2016 at 08:56 AM
ABC video interview by Martha Raddatz of Donna Brazile 2:43

Adding the following FACTS, not opinion, to the Russian Hacking debate at the DNC

Russian hacks of the DNC began at least as early as April, the FBI informed the DNC in May of the hacks, NO ONE in the FedGovt offered to HELP the DNC at anytime (allowed it to continue), and Russia's Putin DID NOT stop after President Obama told Putin in September to "Cut it Out", despite Obama's belief otherwise

http://www.huffingtonpost.com/entry/dnc-chair-says-committee-was-attacked-by-russian-hackers-through-election-day_us_5856acb6e4b08debb78992e4

"DNC Chair Says Russian Hackers Attacked The Committee Through Election Day"

'That goes against Obama's statement that the attacks ended after he spoke to Putin in September'

by Dave Jamieson Labor Reporter...The Huffington Post...12/18/2016...10:59 am ET

"The chair of the Democratic National Committee said Sunday that the DNC was under constant cyber attack by Russian hackers right through the election in November. Her claim contradicts President Barack Obama's statement Friday that the attacks ended in September after he issued a personal warning to Russian President Vladimir Putin.

"No, they did not stop," Donna Brazile told Martha Raddatz on ABC's "This Week." "They came after us absolutely every day until the end of the election. They tried to hack into our system repeatedly. We put up the very best cyber security but they constantly [attacked]."

Brazile said the DNC was outgunned in its efforts to fend off the hacks, and suggested the committee received insufficient protection from U.S. intelligence agencies. The CIA and FBI have reportedly concluded that Russians carried out the attacks in an effort to help Donald Trump defeat Hillary Clinton.

"I think the Obama administration ― the FBI, the various other federal agencies ― they informed us, they told us what was happening. We knew as of May," Brazile said. "But in terms of helping us to fight, we were fighting a foreign adversary in the cyberspace. The Democratic National Committee, we were not a match. And yet we fought constantly."

In a surprising analogy, Brazile compared the FBI's help to the DNC to that of the Geek Squad, the tech service provided at retailer Best Buy ― which is to say well-meaning, but limited.

"They reached out ― it's like going to Best Buy," Brazile said. "You get the Geek Squad, and they're great people, by the way. They reached out to our IT vendors. But they reached us, meaning senior Democratic officials, by then it was, you know, the Russians had been involved for a long time."..."

im1dc -> im1dc... , December 18, 2016 at 08:59 AM
This new perspective and set of facts is more than distressing it details a clear pattern of Executive Branch incompetence, malfeasance, and ineptitude (perhaps worse if you are conspiratorially inclined)
im1dc -> im1dc... , -1
The information above puts in bold relief President Obama's denial of an Electoral College briefing on the Russian Hacks

There is now no reason not to brief the Electors to the extent and degree of Putin's help for demagogue Donald

[Dec 27, 2016] Neopopulism

Dec 27, 2016 | economistsview.typepad.com

Fred C. Dobbs -> Peter K.... December 26, 2016 at 07:15 AM neopopulism: A cultural and political movement, mainly in Latin American countries, distinct from twentieth-century populism in radically combining classically opposed left-wing and right-wing attitudes and using electronic media as a means of dissemination. (Wiktionary)

[Dec 26, 2016] Neoliberalims led to impoverishment of lower 80 pecent of the USA population with a large part of the US population living in a third world country

Notable quotes:
"... Efforts which led to impoverishment of lower 80% the USA population with a large part of the US population living in a third world country. This "third world country" includes Wal-Mart and other retail employees, those who have McJobs in food sector, contractors, especially such as Uber "contractors", Amazon packers. This is a real third world country within the USA and probably 50% population living in it. ..."
"... While conversion of electricity supply from coal to wind and solar was more or less successful (much less then optimists claim, because it requires building of buffer gas powered plants and East-West high voltage transmission lines), the scarcity of oil is probably within the lifespan of boomers. Let's say within the next 20 years. That spells deep trouble to economic growth as we know it, even with all those machinations and number racket that now is called GDP (gambling now is a part of GDP). And in worst case might spell troubles to capitalism as social system, to say nothing about neoliberalism and neoliberal globalization. The latter (as well as dollar hegemony) is under considerable stress even now. But here "doomers" were wrong so often in the past, that there might be chance that this is not inevitable. ..."
"... Shale gas production in the USA is unsustainable even more then shale oil production. So the question is not if it declines, but when. The future decline (might be even Seneca Cliff decline) is beyond reasonable doubt. ..."
Dec 26, 2016 | economistsview.typepad.com

ilsm -> pgl... December 26, 2016 at 05:12 AM

"What is good for wall st. is good for America". The remains of the late 19th century anti trust/regulation momentum are democrat farmer labor wing in Minnesota, if it still exists. An example: how farmers organized to keep railroads in their place. Today populists are called deplorable, before they ever get going.

And US' "libruls" are corporatist war mongers.

Used to be the deplorable would be the libruls!

Division!

likbez -> pgl...

I browsed it and see more of less typical pro-neoliberal sentiments, despite some critique of neoliberalism at the end.

This guy does not understand history and does not want to understand. He propagates or invents historic myths. One thing that he really does not understand is how WWI and WWII propelled the USA at the expense of Europe. He also does not understand why New Deal was adopted and why the existence of the USSR was the key to "reasonable" (as in "not self-destructive" ) behaviour of the US elite till late 70th. And how promptly the US elite changed to self-destructive habits after 1991. In a way he is a preacher not a scientist. So is probably not second rate, but third rate thinker in this area.

While Trump_vs_deep_state (aka "bastard neoliberalism") might not be an answer to challenges the USA is facing, it is definitely a sign that "this time is different" and at least part of the US elite realized that it is too dangerous to kick the can down the road. That's why Bush and Clinton political clans were sidelined this time.

There are powerful factors that make the US economic position somewhat fragile and while Trump is a very questionable answer to the challenges the USA society faces, unlike Hillary he might be more reasonable in his foreign policy abandoning efforts to expand global neoliberal empire led by the USA.

Efforts which led to impoverishment of lower 80% the USA population with a large part of the US population living in a third world country. This "third world country" includes Wal-Mart and other retail employees, those who have McJobs in food sector, contractors, especially such as Uber "contractors", Amazon packers. This is a real third world country within the USA and probably 50% population living in it.

Add to this the decline of the US infrastructure due to overstretch of imperial building efforts (which reminds British empire troubles).

I see several factors that IMHO make the current situation dangerous and unsustainable, Trump or no Trump:

1. Rapid growth of population. The US population doubled in less them 70 years. Currently at 318 million, the USA is the third most populous country on earth. That spells troubles for democracy and ecology, to name just two. That might also catalyze separatists movements with two already present (Alaska and Texas).

2. Plato oil. While conversion of electricity supply from coal to wind and solar was more or less successful (much less then optimists claim, because it requires building of buffer gas powered plants and East-West high voltage transmission lines), the scarcity of oil is probably within the lifespan of boomers. Let's say within the next 20 years. That spells deep trouble to economic growth as we know it, even with all those machinations and number racket that now is called GDP (gambling now is a part of GDP). And in worst case might spell troubles to capitalism as social system, to say nothing about neoliberalism and neoliberal globalization. The latter (as well as dollar hegemony) is under considerable stress even now. But here "doomers" were wrong so often in the past, that there might be chance that this is not inevitable.

3. Shale gas production in the USA is unsustainable even more then shale oil production. So the question is not if it declines, but when. The future decline (might be even Seneca Cliff decline) is beyond reasonable doubt.

4. Growth of automation endangers the remaining jobs, even jobs in service sector . Cashiers and waiters are now on the firing line. Wall Mart, Shop Rite, etc, are already using automatic cashiers machines in some stores. Wall-Mart also uses automatic machines in back office eliminating staff in "cash office".

Waiters might be more difficult task but orders and checkouts are computerized in many restaurants. So the function is reduced to bringing food. So much for the last refuge of recent college graduates.

The successes in speech recognition are such that Microsoft now provides on the fly translation in Skype. There are also instances of successful use of computer in medical diagnostics. https://en.wikipedia.org/wiki/Computer-aided_diagnosis

IT will continue to be outsourced as profits are way too big for anything to stop this trend.

[Dec 26, 2016] Someone needs to buy Paul Krugman a one way ticket to Camden and have him hang around the devastated post-industrial hell scape his policies helped create.

Notable quotes:
"... Someone needs to buy Paul Krugman a one way ticket to Camden and have him hang around the devastated post-industrial hell scape his policies helped create. ..."
"... Krugman should be temporarily barred from public discourse until he apologizes for pushing NAFTA and all the rest. Hundreds of millions of people were thrust into dire poverty because of the horrible free trade policies he and 99.9% of US economists pushed. ..."
"... Extremes meet: extreme protectionism is close to extreme neoliberal globalization in the level of devastation, that can occur. ..."
"... But please do not forget that Krugman is a neoliberal stooge and this is much worse then being protectionist. This is close to betrayal of the nation you live it, people you live with, if you ask me. ..."
"... To me academic neoliberals after 2008 are real "deplorables". And should be treated as such, despite his intellect. There not much honor in being an intellectual prostitute of financial oligarchy that rules the country. ..."
Dec 26, 2016 | economistsview.typepad.com
Lincoln / McKinley tariffs...
Economists are still oblivious to the devastation created by 40 years of free trade.

Someone needs to buy Paul Krugman a one way ticket to Camden and have him hang around the devastated post-industrial hell scape his policies helped create.

Krugman should be temporarily barred from public discourse until he apologizes for pushing NAFTA and all the rest. Hundreds of millions of people were thrust into dire poverty because of the horrible free trade policies he and 99.9% of US economists pushed.

They have learned nothing and they have forgotten much.

pgl -> Lincoln / McKinley tariffs ... , December 26, 2016 at 11:25 AM
Oh yea - bring on the tariffs which will lead to a massive appreciation of the dollar. Which in turn will lead to massive reductions in US exports. I guess our new troll is short selling Boeing.
likbez -> pgl, -1
I tend to agree with you. Extremes meet: extreme protectionism is close to extreme neoliberal globalization in the level of devastation, that can occur.

But please do not forget that Krugman is a neoliberal stooge and this is much worse then being protectionist. This is close to betrayal of the nation you live it, people you live with, if you ask me.

To me academic neoliberals after 2008 are real "deplorables". And should be treated as such, despite his intellect. There not much honor in being an intellectual prostitute of financial oligarchy that rules the country.

[Dec 26, 2016] Neoliberals as closet Trotskyites are adamant neo-McCarthyists eager to supress any dissent, as soon as they feel it starts to influence public opinion

"You control the message, and the facts do not matter. "
Notable quotes:
"... That's funny. Neoliberals are closet Trotskyites and they will let you talk only is specially designated reservations, which are irrelevant (or, more correctly, as long as they are irrelevant) for swaying the public opinion. ..."
"... If you think they are for freedom of the press, you are simply delusional. They are for freedom of the press for those who own it. ..."
"... Try to get dissenting views to MSM or academic magazines. Yes, they will not send you to GULAG, but the problem is that ostracism works no less effectively. That the essence of "inverted totalitarism" (another nickname for neoliberalism). You can substitute physical repression used in classic totalitarism with indirect suppression of dissenting opinions with the same, or even better results. Note that even the term "neoliberalism" is effectively censored and not used by MSM. ..."
"... And the resulting level of suppressing of opposition (which is the essence of censorship) is on the level that would make the USSR censors blush. And if EconomistView gets too close to anti-neoliberal platform it will instantly find itself in the lists like PropOrNot ..."
Dec 26, 2016 | economistsview.typepad.com
likbez -> EMichael... December 26, 2016 at 04:20 PM
"Then of course, it is easy to attack the neoliberals, they'll actually let you talk."

That's funny. Neoliberals are closet Trotskyites and they will let you talk only is specially designated reservations, which are irrelevant (or, more correctly, as long as they are irrelevant) for swaying the public opinion.

They are all adamant neo-McCarthyists, if you wish and will label you Putin stooge in no time [, if you try to escape the reservation].

If you think they are for freedom of the press, you are simply delusional. They are for freedom of the press for those who own it.

Try to get dissenting views to MSM or academic magazines. Yes, they will not send you to GULAG, but the problem is that ostracism works no less effectively. That the essence of "inverted totalitarism" (another nickname for neoliberalism). You can substitute physical repression used in classic totalitarism with indirect suppression of dissenting opinions with the same, or even better results. Note that even the term "neoliberalism" is effectively censored and not used by MSM.

See Sheldon Wolin writings about this.

And the resulting level of suppressing of opposition (which is the essence of censorship) is on the level that would make the USSR censors blush. And if EconomistView gets too close to anti-neoliberal platform it will instantly find itself in the lists like PropOrNot

http://www.propornot.com/p/the-list.html

[Dec 26, 2016] The Democratic Party as a Party (Sanders was an outlier) has nothing to do with fair and equal play for all. This is a party of soft neoliberals and it adheres to Washington

Notable quotes:
"... The Democratic Party as a Party (Sanders was an outlier) has nothing to do with "fair and equal play for all". This is a party of soft neoliberals and it adheres to Washington consensus no less then Republicans. https://en.wikipedia.org/wiki/Washington_Consensus ..."
"... If you read the key postulates it is clear that that they essentially behaved like an occupier in this country. In this sense "Occupy Wall street" movement should actually be called "Liberation from Wall Street occupation" movement. ..."
"... Bill Clinton realized that he can betray working class with impunity as "they have nowhere to go" and will vote for Democrat anyway. In this sense Bill Clinton is a godfather of the right wing nationalism in the USA. He sowed the "Teeth's of Dragon" and now we have, what we have. ..."
Dec 26, 2016 | economistsview.typepad.com
EMichael : December 26, 2016 at 12:47 PM , 2016 at 12:47 PM
You guys should wake up and smell what country you live in. Here is a good place to start.

"Campaigning for president in 1980, Ronald Reagan told stories of Cadillac-driving "welfare queens" and "strapping young bucks" buying T-bone steaks with food stamps. In trumpeting these tales of welfare run amok, Reagan never needed to mention race, because he was blowing a dog whistle: sending a message about racial minorities inaudible on one level, but clearly heard on another. In doing so, he tapped into a long political tradition that started with George Wallace and Richard Nixon, and is more relevant than ever in the age of the Tea Party and the first black president.

In Dog Whistle Politics, Ian Haney L?pez offers a sweeping account of how politicians and plutocrats deploy veiled racial appeals to persuade white voters to support policies that favor the extremely rich yet threaten their own interests. Dog whistle appeals generate middle-class enthusiasm for political candidates who promise to crack down on crime, curb undocumented immigration, and protect the heartland against Islamic infiltration, but ultimately vote to slash taxes for the rich, give corporations regulatory control over industry and financial markets, and aggressively curtail social services. White voters, convinced by powerful interests that minorities are their true enemies, fail to see the connection between the political agendas they support and the surging wealth inequality that takes an increasing toll on their lives. The tactic continues at full force, with the Republican Party using racial provocations to drum up enthusiasm for weakening unions and public pensions, defunding public schools, and opposing health care reform.

Rejecting any simple story of malevolent and obvious racism, Haney L?pez links as never before the two central themes that dominate American politics today: the decline of the middle class and the Republican Party's increasing reliance on white voters. Dog Whistle Politics will generate a lively and much-needed debate about how racial politics has destabilized the American middle class -- white and nonwhite members alike."

https://www.amazon.com/Dog-Whistle-Politics-Appeals-Reinvented-ebook/dp/B00GHJNSMU

im1dc : , December 26, 2016 at 01:51 PM
Reading the above posts I am reminded that in November there was ONE Election with TWO Results:

Electoral Vote for Donald Trump by the margin of 3 formerly Democratic Voting states Michigan, Ohio, and Pennsylvania

Popular Vote for Hillary Clinton by over 2.8 Million

The Democratic Party and its Candidates OBVIOUSLY need to get more votes in the Electoral States that they lost in 2016, not change what they stand for, the principles of fair and equal play for all.

And, in the 3 States that turned the Electoral Vote in Trump's favor and against Hillary, all that is needed are 125,000 or more votes, probably fewer, and the DEMS win the Electoral vote big too.

It is not any more complex than that.

So how does the Democratic Party get more votes in those States?

PANDER to their voters by delivering on KISS, not talking about it.

That is create living wage jobs and not taking them away as the Republican Party of 'Free Trade' and the Clinton Democratic Party 'Free Trade' Elites did.

Understand this: It is not the responsibility of the USA, or in its best interests, to create jobs in other nations (Mexico, Japan, China, Canada, Israel, etc.) that do not create jobs in the USA equivalently, especially if the gain is offset by costly overseas confrontations and involvements that would not otherwise exist.

likbez : December 26, 2016 at 02:49 PM , 2016 at 02:49 PM
You are dreaming:

"The Democratic Party and its Candidates OBVIOUSLY need to get more votes in the Electoral States that they lost in 2016, not change what they stand for, the principles of fair and equal play for all. "

The Democratic Party as a Party (Sanders was an outlier) has nothing to do with "fair and equal play for all". This is a party of soft neoliberals and it adheres to Washington consensus no less then Republicans. https://en.wikipedia.org/wiki/Washington_Consensus

If you read the key postulates it is clear that that they essentially behaved like an occupier in this country. In this sense "Occupy Wall street" movement should actually be called "Liberation from Wall Street occupation" movement.

Bill Clinton realized that he can betray working class with impunity as "they have nowhere to go" and will vote for Democrat anyway. In this sense Bill Clinton is a godfather of the right wing nationalism in the USA. He sowed the "Teeth's of Dragon" and now we have, what we have.

[Dec 26, 2016] How could the US exist with no neoliberals and neocons pandering corporate war for Wall Street?

Notable quotes:
"... Do you think Trump will shutter those star wars bases in Poland and Rumania? ..."
Dec 26, 2016 | economistsview.typepad.com
ilsm -> A Boy Named Sue... , December 26, 2016 at 05:20 AM
Dreadful!

How could the US exist with no neoliberal, neocons pandering corporate war for wall st?

Do you think Trump will shutter those star wars bases in Poland and Rumania?

[Dec 26, 2016] The Quiet War on Medicaid - The New York Times

Dec 26, 2016 | www.nytimes.com
--> The Quiet War on Medicaid

By GENE B. SPERLING DEC. 25, 2016

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Progressives have already homed in on Republican efforts to privatize Medicare as one of the major domestic political battles of 2017. If Donald J. Trump decides to gut the basic guarantee of Medicare and revamp its structure so that it hurts older and sicker people, Democrats must and will push back hard . But if Democrats focus too much of their attention on Medicare, they may inadvertently assist the quieter war on Medicaid - one that could deny health benefits to millions of children, seniors, working families and people with disabilities.

Of the two battles, the Republican effort to dismantle Medicaid is more certain. Neither Mr. Trump nor Senate Republicans may have the stomach to fully own the political risks of Medicare privatization. But not only have Speaker Paul D. Ryan and Tom Price, Mr. Trump's choice for secretary of health and human services, made proposals to deeply cut Medicaid through arbitrary block grants or "per capita caps," during the campaign, Mr. Trump has also proposed block grants.

If Mr. Trump chooses to oppose his party's Medicare proposals while pushing unprecedented cuts to older people and working families in other vital safety-net programs, it would play into what seems to be an emerging strategy of his: to publicly fight a few select or symbolic populist battles in order to mask an overall economic and fiscal strategy that showers benefits on the most well-off at the expense of tens of millions of Americans.

Without an intense focus by progressives on the widespread benefits of Medicaid and its efficiency, it will be too easy for Mr. Trump to market the false notion that Medicaid is a bloated, wasteful program and that such financing caps are means simply to give states more flexibility while "slowing growth." Medicaid's actual spending per beneficiary has, on average, grown about 3 percentage points less each year than it has for those with private health insurance, according to the Center on Budget and Policy Priorities - a long-term trend that is projected to continue. The arbitrary spending caps proposed by Mr. Price and Mr. Ryan would cut Medicaid to the bone, leaving no alternative for states but to impose harsh cuts in benefits and coverage.

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Mr. Price's own proposal, which he presented as the chairman of the House budget committee, would cut Medicaid by about $1 trillion over the next decade. This is on top of the reduction that would result from the repeal of the Affordable Care Act, which both Mr. Trump and Republican leaders have championed. Together, full repeal and block granting would cut Medicaid and the Children's Health Insurance Program funding by about $2.1 trillion over the next 10 years - a 40 percent cut.

Photo
Tom Price, President-elect Trump's choice for secretary of health and human services, has made proposals to deeply cut Medicaid. Credit Joshua Roberts/Reuters

Even without counting the repeal of the A.C.A. coverage expansion, the Price plan would cut remaining federal Medicaid spending by $169 billion - or one-third - by the 10th year of his proposal, with the reductions growing more severe thereafter. The Henry J. Kaiser Family Foundation estimated that a similar Medicaid block grant proposed by Mr. Ryan in 2012 would lead to 14 million to 21 million Americans' losing their Medicaid coverage by the 10th year, and that is on top of the 13 million who would lose Medicaid or children's insurance program coverage under an A.C.A. repeal.

The emerging Republican plan to "repeal, delay and replace" the A.C.A. seeks to further camouflage these harmful cuts. Current Republican plans to eliminate the marketplace subsidies and A.C.A. Medicaid expansion in 2019 would create a health care cliff where all of the Medicaid funds and subsidies for the A.C.A. expansion would simply disappear and 30 million people would lose their health care.

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In the face of such a manufactured crisis, the Trump administration could cynically claim to be increasing Medicaid funding by offering governors a small fraction of the existing A.C.A. expansion back as part of a block grant. No one should be deceived. Maintaining a small fraction of the current Medicaid expansion within a tightly constrained block grant is not an increase.

Some might whisper that these cuts would be harder to beat back because their impact would fall on those with the least political power. Sweeping cuts to Medicaid would hurt tens of millions of low-income and middle-income families who had a family member with a disability or were in need of nursing home care. About 60 percent of the costs of traditional Medicaid come from providing nursing home care and other types of care for the elderly and those with disabilities.

While Republicans resist characterizations of their block grant or cap proposals as tearing away health benefits from children, older people in nursing homes or middle-class families heroically coping with children with serious disabilities, the tyranny of the math does not allow for any other conclusion. If one tried to cut off all 30 million poor kids now enrolled in Medicaid, it would save 19 percent of the program's spending. Among the Medicaid programs at greatest risk would be those optional state programs that seek to help middle-income families who become "medically needy" because of the costs of having a child with a serious disability like autism or Down syndrome.

Democrats at all levels of government must aggressively communicate the degree to which these anodyne-sounding proposals would lead to an assault on health care for those in nursing homes and for working families straining to deal with a serious disability, as well as for the poorest Americans. With many Republican governors and local hospitals also likely to be victimized by the proposals of Mr. Ryan and Mr. Price, this fight can be both morally right and politically powerful . Republicans hold only a slight majority in the Senate. It would take only three Republican senators thinking twice about the wisdom of block grants and per capita caps to put a halt to the coming war on Medicaid.

Gene B. Sperling was director of the National Economic Council from 1996 to 2001 and from 2011 until 2014.

[Dec 26, 2016] Wolf Richter: New Census Data Shows Why the Job Market is Still "Terrible" (as Trump said)

Notable quotes:
"... By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street ..."
"... should head down ..."
"... not ..."
"... A population of less than 100 million in 1945 became more than 200 million in 1976 and over 320 million in 2016! Tripling your population in 70 years is a really bad idea. At this rate over a billion US citizens will exist in 2086. ..."
"... 'Merika is the third most populous nation in the world followed by Indonesia, Brazil, Pakistan and Nigeria. ..."
Dec 26, 2016 | www.nakedcapitalism.com
Posted on December 26, 2016 by Lambert Strether Lambert here: I blame Putin.

By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street

Hardly any improvement for individuals since the Great Recession.

When Donald Trump campaigned on how "terrible" the jobs situation was, while the Obama Administration touted the jobs growth since the employment bottom of the Great Recession in 2010, it sounded like they were talking about two entirely different economies at different ends of the world. But they weren't. Statistically speaking, they were both right.

Since 2011, the US economy created 14.6 million "nonfarm payrolls" as defined by the Bureau of Labor Statistics – whether or not they're low-wage or less than full-time jobs. But for individuals, this job market, statistically speaking, looks almost as tough as it was during the Great Recession.

Obviously, a lot of people have found jobs, and some of them have found good jobs since then, and there are a ton of "job openings." But the Census Bureau just told us why the job market is still, to use Trump's term, "terrible" when it released its population estimates for 2016, just before clocking out for the holidays.

According to this report: From the beginning of 2010 – in terms of jobs, the darkest days of the Great Recession – through December 2016, the US "resident population" (not counting overseas-stationed military personnel) grew by 16 million people.

But since the beginning of 2010 through November 2016, nonfarm payrolls grew by only 13.8 million.

Note that in 2010, nonfarm payrolls declined by 900,000, after having plunged by over 5 million in 2009. The first year with growth in nonfarm payrolls was 2011.

The chart below shows this peculiar relationship between the "resident population" of the US (top green line) and nonfarm payrolls (bottom blue line). Both rose. But the bottom line (nonfarm payrolls) didn't rise nearly enough.

The difference between the two is the number of people that are not on nonfarm payrolls. They might be students, unemployed, retirees, or working in a job that the "nonfarm payrolls" do not capture (more on that in a moment). This is reflected by the red line, whose slope should head down in an economy where jobs grow faster than the population:

For the first five years of this seven-year period, the number of people not occupying a job as captured by nonfarm payroll data, kept growing (red numbers), even as the touted jobs growth was kicking in. Why? Because population growth outpaced jobs growth over the five years from 2010 through 2014.

Only in 2015 and 2016 has growth in "nonfarm payrolls" edged past population growth. Those were the only two years since the Great Recession when people on an individual basis actually had improving chances of getting a job.

The nonfarm payrolls data is not a complete measure of the US jobs situation. According to the Bureau of Labor Statistics , it excludes "proprietors, the unincorporated self-employed, unpaid volunteer or family employees, farm employees, and domestic employees. It also excludes military personnel, and employees of a big part of the intelligence community, including the CIA, the NSA, the National Imagery and Mapping Agency, and the Defense Intelligence Agency.

There are many folks who'd contend that this population growth is mostly young people who are not yet in the work force and old people who refuse to die, and that for working age people (say, 18 to 65), the jobs growth has been phenomenal.

But that's not the case. According to the Census report, in 2016, the percentage of people 18 and over grew to 249.5 million, making up 77.2% of the total US population, up from 76.8% in 2015 (247.3 million), and up from 76.2% in 2010! The millennials have moved into adulthood, elbowing each other while scrambling for jobs.

And boomers are not retiring from the working life. Why should they. Many of them are fit and don't want to sit around bored, and many of them have to work because they can't afford to quit working, even if they would like to. So the number of workers 65+ has soared 45% since the end of 2009, from 6.2 million to 9.0 million. So now there are nearly 3 million more of them on nonfarm payrolls than there had been in 2010:

The natural growth rate of the population (births minus deaths) has been declining for years. In 2016, it dropped to 0.38%, a new low. The growth rate from immigration, which fluctuates somewhat with the economy, edged down to 0.31%. So total population growth dropped to a new low of 0.69%. Of note: the natural growth rate via births won't impact the labor force until the babies are young adults. But the vast majority of new immigrants are of working age, and they add to the labor force immediately.

So the number of jobs since 2010 has risen by 13.8 million – which the economists are endlessly touting, along with the even better sounding 14.8 million since 2011. But the population has increased by 16 million since 2010. Most of them are people of working age, jostling for position to grab one of these jobs that would put them on the nonfarm payrolls. And this is why the job market for many individuals is "terrible," as Trump said.

But those might have been the good times. Read Red Flag on Recession Crops up in NY Fed's Coincident Economic Index, first time since November 2009

0 0 0 0 1 1 This entry was posted in Dubious statistics , Guest Post , Politics , The destruction of the middle class on December 26, 2016 by Lambert Strether . About Lambert Strether

Lambert Strether has been blogging, managing online communities, and doing system administration 24/7 since 2003, in Drupal and WordPress. Besides political economy and the political scene, he blogs about rhetoric, software engineering, permaculture, history, literature, local politics, international travel, food, and fixing stuff around the house. The nom de plume "Lambert Strether" comes from Henry James's The Ambassadors: "Live all you can. It's a mistake not to." You can follow him on Twitter at @lambertstrether. http://www.correntewire.com KK , December 26, 2016 at 5:55 am

A population of less than 100 million in 1945 became more than 200 million in 1976 and over 320 million in 2016! Tripling your population in 70 years is a really bad idea. At this rate over a billion US citizens will exist in 2086. There are resource limits to growth. And a car, house, vacation, pension, healthcare,and large family will cease to be possible for all or even the majority. Study how the average Indian or Chinese family live and that albeit with a few bits of technology is the future.

Arizona Slim , December 26, 2016 at 6:53 am

True.

But the pro-natalists don't want to hear any discussion of overpopulation. Because of all those inconvenient facts.

MtnLife , December 26, 2016 at 8:41 am

A lot of "pro-natalists" are religious fundamentalists who do actually see the population/resource crunch coming for which they are trying to stack the numbers on their team.

TG , December 26, 2016 at 9:54 am

Good points!

But I think most of the "pro-natalists" are rich people who, more than anything else, want cheap labor. And there is no better way to get cheap labor than to force population growth ever higher.

We are not importing foreign workers because the natives refuse to breed 'enough' children. The natives (of all races) are limiting their family sizes because they are worried about having more children than they can support, just like they did in the great depression. Left to themselves, that would start to tighten up the labor market and produce powerful forces raising wages. But not if we keep forcing ever more foreign workers into the labor pool. Which is of course the whole idea.

Cheap labor uber alles!

jefemt , December 26, 2016 at 10:26 am

'Merika is the third most populous nation in the world followed by Indonesia, Brazil, Pakistan and Nigeria. Seems to be a mind-jarring fat to most when I bring it up .

Ed , December 26, 2016 at 11:10 am

Alot of poorer countries in the "developing world" ensured they stayed poorer by letting their population growth get out of control. A big, if not the main, reason for China's economic success since 1975 was in getting its population growth under control, that is a big reason for the contrast between China and India.

Unlike, for example, Japan, the rulers of the United States decided to emulate the developing countries that let their populations expand too much, importing people from the developing world to get the job done.

sd , December 26, 2016 at 6:29 am

Interesting about excluding domestic employees when it would appear there's been a huge surge in nannies as well as home aides since the 1990s.

Larry , December 26, 2016 at 7:35 am

Very true, though most of these positions are by definition crappy jobs.

McWatt , December 26, 2016 at 8:44 am

The key to saving the planet is dealing with population growth.

diptherio , December 26, 2016 at 10:02 am

The planet can take care of itself. I think you mean "the key to saving ourselves." Also I think consumption patterns of the "global North" are more of a problem than simply population.

George Phillies , December 26, 2016 at 8:46 am

That resident population number appears to include under-16-year-olds who are in most cases not looking for employment. I have no idea how that number has changed. Ditto, it includes the voluntarily retired.

Jack , December 26, 2016 at 9:10 am

This article appears to be another argument for immigration. I am very much a progressive liberal, excepting the standard progressive immigration stance that more is better and that illegal immigration is o.k.

What would our job market look like without immigrants, even just legal immigrants?

Between 1970 and 2014, the percentage of foreign-born workers in the civilian labor force more than tripled, from 5 percent to 17 percent. In 2014 immigrants accounted for 17% of the work force; 27.6 million out of 159.5 million. What is that number was cut in half?

The number of US unemployed peaked in 2009 at 15,352,000. Today its 7,400,000 (if you believe the official numbers).

That means if we had cut immigration by just 30% there would be 0 unemployment. Of course this is a simplistic analysis but it is interesting to compare the two. And of course with near 0 unemployment wages would be pushed up.

No wonder the powers that be keep yammering about immigration but never do anything about it. More people in the country willing to work for less money means increased profits for the rich.

diptherio , December 26, 2016 at 10:13 am

Did you not read the article or simply fail to grasp it? Richter points out that the population has grown faster than the number of jobs and also that immigration is the largest part of that pop. growth (especially the adult population). He nowhere makes an argument for more illegal (or legal) immigration.

On immigration, how about we ask ourselves why it is that so many people are immigrating here and what we might do to discourage them? For instance, a kind of Marshall Plan for Central and South America would probably go a long way, as most people prefer to stay where they are from, if they can make a reasonable life there.

Pat , December 26, 2016 at 10:30 am

Call me crazy, but considering that the Clinton campaign had access to a certain portion of this information, their inability to understand the appeal of Sanders and Trump is clearly delusional.

Certainly the latest data just came out, but some of this about the period until 2014 and even a little after had to be out there. They had to know that until recently there really were not enough jobs to go around, and that there was a good chance that any gains in the last year or so were not enough to remotely cover the deficit up to that point. I get they might not have had the information that beyond not being enough most of the jobs created were part time and benefit free. That doesn't explain not seeing and getting that most Americans have seen little or no recovery.

It appears the DLC Democratic Party must be similar to that narrative driven NY Times environment, you only survive if you embrace the narrative even as the success of the enterprise you are apart loses more and more.

Art Eclectic , December 26, 2016 at 10:46 am

"It is difficult to get a man to understand something, when his salary depends on his not understanding it."

― Upton Sinclair

All career elected politicians on both sides of the aisle are paid to not understand the jobs problem by donors with very large wallets who do not want the jobs problem solved. Follow the money. Who wants cheap labor and what's the best way to get it if you can't offshore operations?

We cannot rebuild the DLC or any leftist party until we figure out how to fund campaigns without donor money that is interested in maintaining the status quo.

cocomaan , December 26, 2016 at 10:58 am

You can use data points ("14 million jobs created!!!!") to push whatever narrative you want.

Data driven decision making really is just excuse making by outsourcing your choices to endless computer-created pages of data.

Ed , December 26, 2016 at 11:16 am

I will comment elsewhere, but I keep on hearing arguments on the lines that if only Hillary Clinton had understood the problems of the white working class she would have won or something along these lines.

The Trump and Sanders campaigns were protest vehicles -- and there were precursors in previous elections -- over how the country has been run for the past several decades. Since 1981 either the Clintons or the Bushes have either lived in the White House or held really high ranking positions in the US government.

Members of neither family can credibly run against globalization (or "invade the world/ invite the world" as Steve Sailer puts it) or really other major policies pursued by the US government since the 1980s. They own it.

They have to run on a globalization platform. Hillary Clinton in fact did surprisingly well at the polls, considering this.

Enquiring Mind , December 26, 2016 at 11:13 am

There can be types of verbal Marshall Plans, too. Some percentage of the US transient population has self-deported already, although likely not enough to upset the temporary Obama Rush of 1,500+ per day streaming in to claim amnesty prior to January 20th. Announce that undocumented entrants will be turned back, instead of throwing benefits at them, and that will help stem the human tide.

Supplement that with specific policies to aid and abet Mexico and Central American governments in their internal and border control efforts to stop the human tide further south. Publicize those efforts and stick to them.

Both policies would change the dynamic and would allow some degree of US control over its own population growth. Then put in place specific, actionable steps to identify and facilitate thoughtful population growth to meet US needs and to allow for legitimate humanitarian relief instead of bleeding heart efforts that externalized ill-considered policies.

[Dec 26, 2016] IBM Promises To Hire 25,000 Americans As Tech Executives Set To Meet Trump

Dec 26, 2016 | politics.slashdot.org
(reuters.com) 241 Posted by BeauHD on Tuesday December 13, 2016 @10:30PM from the lick-and-a-promise dept. IBM Chief Executive Ginni Rometty has pledged to "hire about 25,000 professionals in the next four years in the United States " as she and other technology executives prepared to meet with President-elect Donald Trump on Wednesday. Reuters reports: IBM had nearly 378,000 employees at the end of 2015, according to the company's annual report. While the firm does not break out staff numbers by country, a review of government filings suggests IBM's U.S. workforce declined in each of the five years through 2015. When asked why IBM planned to increase its U.S. workforce after those job cuts, company spokesman Ian Colley said in an email that Rometty had laid out the reasons in her USA Today piece. Her article did not acknowledge that IBM had cut its U.S. workforce, although it called on Congress to quickly update the Perkins Career and Technical Education Act that governs federal support for vocational education. "We are hiring because the nature of work is evolving," she said. "As industries from manufacturing to agriculture are reshaped by data science and cloud computing, jobs are being created that demand new skills -- which in turn requires new approaches to education, training and recruiting." She said IBM intended to invest $1 billion in the training and development of U.S. employees over the next four years. Pratt declined to say if that represented an increase over spending in the prior four years.

[Dec 26, 2016] Economist's View Charles Dickens on Seeing the Poor

Dec 26, 2016 | economistsview.typepad.com

Economists might also wince just a bit... Dickens writes: "I know that the unreasonable disciples of a reasonable school, demented disciples who push arithmetic and political economy beyond all bounds of sense (not to speak of such a weakness as humanity), and hold them to be all-sufficient for every case, can easily prove that such things ought to be, and that no man has any business to mind them. Without disparaging those indispensable sciences in their sanity, I utterly renounce and abominate them in their insanity ..." Here's Dickens:

... ... ...

ilsm : , December 25, 2016 at 10:51 AM
Things ($) before people. Wrong!
likbez : , -1
Economists might also wince just a bit... Dickens writes: "I know that the unreasonable disciples of a reasonable school, demented disciples who push arithmetic and political economy beyond all bounds of sense (not to speak of such a weakness as humanity), and hold them to be all-sufficient for every case, can easily prove that such things ought to be, and that no man has any business to mind them. Without disparaging those indispensable sciences in their sanity, I utterly renounce and abominate them in their insanity ..."

This is not about insanity, this is about greed.

Reading this I am thinking that Hyman Minsky was a scientist, while Milton Friedman especially just before and after "Capitalism and Freedom" was a well-paid intellectual prostitute of financial oligarchy.

[Dec 25, 2016] Why Central Bank Models Failed and How to Repair Them

Notable quotes:
"... Popular pre-financial crisis versions of the model excluded banking and finance, taking as given that finance and asset prices were merely a by-product of the real economy. ..."
"... The centre-piece of Paul Romer's scathing attack on these models is on the 'pretence of knowledge' ..."
"... he is critical of the incredible identifying assumptions and 'pretence of knowledge' in both Bayesian estimation and the calibration of parameters in DSGE models. ..."
"... A further symptom of the 'pretence of knowledge' is the assumed 'knowledge' that these parameters are constant over time. A milder critique by Olivier Blanchard (2016) points to a number of failings of DSGE models and recommends greater openness to more eclectic approaches. ..."
"... The equation is based on the assumption of inter-temporal optimising by consumers and that every consumer faces the same linear period-to-period budget constraint, linking income, wealth, and consumption. ..."
"... In the basic form, consumption every period equals permanent non-property income plus permanent property income defined as the real interest rate times the stock of wealth held by consumers at the beginning of each period. Permanent non-property income converts the variable flow of labour and transfer incomes a consumer expects over a lifetime into an amount equally distributed over time. ..."
"... However, consumers actually face idiosyncratic (household-specific) and uninsurable income uncertainty, and uncertainty interacts with credit or liquidity constraints. ..."
"... The 2000 Commodity Futures Modernization Act (CFMA) made derivatives enforceable throughout the US with priority ahead of claims by others (e.g. workers) in bankruptcy. ..."
"... 2004 SEC decision to ease capital requirements on investment banks increased gearing to what turned out to be dangerous levels ..."
"... Similar measures to lower required capital on investment grade PMBS increased leverage at commercial banks. These changes occurred in the political context of pressure to extend credit to poor. ..."
"... The importance of debt was highlighted in the debt-deflation theory of the Great Depression of Fisher (1933). 5 Briefly summarised, his story is that when credit availability expands, it raises spending, debt, and asset prices; irrational exuberance raises prices to vulnerable levels, given leverage; negative shocks can then cause falls in asset prices, increased bad debt, a credit crunch, and a rise in unemployment. ..."
"... In the financial accelerator feedback loops that operated in the US sub-prime crisis, falls in house prices increased bad loans and impaired the ability of banks to extend credit. As a result, household spending and residential investment fell, increasing unemployment and reducing incomes, feeding back further into lower asset prices and credit supply. ..."
"... The transmission mechanism that operated via consumption was poorly represented by the Federal Reserve's FRB-US model and similar models elsewhere. ..."
"... Reminds me of a young poseur at engineering school, who exclaimed during a group study session, "I've got it all jocked out. Now I just need the equations!" ..."
"... I have been aware of that for a few years now, but I doubt that one person in a hundred (or a thousand) knows when they listen to some economist on a news program or a business channel that the person speaking thinks that how much debt people have does not substantively affect their spending. ..."
"... If I used or invented an econ model that left out the "consumer", and modeled it with a "consumption agent object" having a single independent input variable being the Fed zero term, zero risk interest rate, I'd be too embarrassed to admit it. I would probably just very quietly make a career change into one of the softer sciences. Maybe writing fictional romance novels, or some such thing. ..."
"... The worst thing about these types of mea culpas from the mainstream is the cited criticisms from other mainstream economists only. It can only be a valid criticism if it was published in a mainstream journal ..."
"... That 'political pressure' turned out to be the bait and switch for a system that shifted power via debt creation. ..."
"... What we have not yet come to terms with are the implications of David Graeber's anthropological insights: how does debt affect social relationships, alter social norms, and affect relationships among individuals? ..."
"... Debt is a form of power, but by failing to factor this into their equations, the Central Bankers are missing the social, political, and cultural consequences of the profound shifts in 'credit market architecture'. In many respects, this is not about 'money'; it's about power. ..."
"... The Central Bankers' models can include all the parameters they can dream up, but until someone starts thinking more clearly about the role and function of money, and the way that 'different kinds of money' create 'different kinds of social relationships', we are all in a world of hurt. ..."
"... Now, maybe it is just a coincidence, but it is hard for me not to notice that the explosion in consumer credit matches up nicely with the rise in inequality. ..."
"... " .. debt does not make society as a whole poorer: one person's debt is another person's asset. So total wealth is unaffected by the amount of debt out there. This is, strictly speaking true only for the world economy as a whole .. " Paul Krugman "End this Depression Now". ..."
Dec 25, 2016 | www.nakedcapitalism.com
By John Muellbauer, Professor of Economics, Oxford University. Originally published at VoxEU

The failure of the New Keynesian dynamic stochastic general equilibrium models to capture interactions of finance and the real economy has been widely recognised since the Global Crisis. This column argues that the flaws in these models stem from unrealistic micro-foundations for household behaviour and from wrongly assuming that aggregate behaviour mimics a fully informed 'representative agent'. Rather than 'one-size-fits-all' monetary and macroprudential policy, institutional differences between countries imply major differences for monetary policy transmission and policy.

The New Keynesian DSGE models that dominated the macroeconomic profession and central bank thinking for the last two decades were based on several principles.

  1. The first was formal derivation from micro-foundations, assuming optimising behaviour of consumers and firms with rational or 'model-consistent' expectations of future conditions. For such derivation to result in a tractable model, it was assumed that the behaviour of firms and of consumers corresponded to that of a 'representative' firm and a 'representative' consumer. In turn, this entailed the absence of necessarily heterogeneous credit or liquidity constraints. Another important assumption to obtain tractable solutions was that of a stable long-run equilibrium trend path for the economy. If the economy was never far from such a path, the role of uncertainty would necessarily be limited. Popular pre-financial crisis versions of the model excluded banking and finance, taking as given that finance and asset prices were merely a by-product of the real economy.
  2. Second, a competitive economy was assumed but with a number of distortions, including nominal rigidities – sluggish price adjustment – and monopolistic competition. This is what distinguished New Keynesian DSGE models from the general equilibrium real business cycle (RBC) models that preceded them. It extended the range of stochastic shocks that could disturb the economy from the productivity or taste shocks of the RBC model. Finally, while some models calibrated (assumed) values of the parameters, where the parameters were estimated, Bayesian system-wide estimation was used, imposing substantial amounts of prior constraints on parameter values deemed 'reasonable'.

The 'Pretence of Knowledge'

The centre-piece of Paul Romer's scathing attack on these models is on the 'pretence of knowledge' (Romer 2016); echoing Caballero (2010), he is critical of the incredible identifying assumptions and 'pretence of knowledge' in both Bayesian estimation and the calibration of parameters in DSGE models. 1

A further symptom of the 'pretence of knowledge' is the assumed 'knowledge' that these parameters are constant over time. A milder critique by Olivier Blanchard (2016) points to a number of failings of DSGE models and recommends greater openness to more eclectic approaches.

Unrealistic Micro-Foundations

As explained in Muellbauer (2016), an even deeper problem, not seriously addressed by Romer or Blanchard, lies in the unrealistic micro-foundations for the behaviour of households embodied in the 'rational expectations permanent income' model of consumption, an integral component of these DSGE models. Consumption is fundamental to macroeconomics both in DSGE models and in the consumption functions of general equilibrium macro-econometric models such as the Federal Reserve's FRB-US. At the core of representative agent DSGE models is the Euler equation for consumption, popularised in the highly influential paper by Hall (1978). It connects the present with the future, and is essential to the iterative forward solutions of these models. The equation is based on the assumption of inter-temporal optimising by consumers and that every consumer faces the same linear period-to-period budget constraint, linking income, wealth, and consumption. Maximising expected life-time utility subject to the constraint results in the optimality condition that links expected marginal utility in the different periods. Under approximate 'certainty equivalence', this translates into a simple relationship between consumption at time t and planned consumption at t +1 and in periods further into the future.

Under these simplifying assumptions, the rational expectations permanent income consumption function can be derived. In the basic form, consumption every period equals permanent non-property income plus permanent property income defined as the real interest rate times the stock of wealth held by consumers at the beginning of each period. Permanent non-property income converts the variable flow of labour and transfer incomes a consumer expects over a lifetime into an amount equally distributed over time.

However, consumers actually face idiosyncratic (household-specific) and uninsurable income uncertainty, and uncertainty interacts with credit or liquidity constraints. The asymmetric information revolution in economics in the 1970s for which Akerlof, Spence and Stiglitz shared the Nobel prize explains this economic environment. Research by Deaton (1991,1992), 2 several papers by Carroll (1992, 2000, 2001, 2014), Ayigari (1994), and a new generation of heterogeneous agent models (e.g. Kaplan et al. 2016) imply that household horizons then tend to be both heterogeneous and shorter – with 'hand-to-mouth' behaviour even by quite wealthy households, contradicting the textbook permanent income model, and hence DSGE models. A second reason for the failure of these DSGE models is that aggregate behaviour does not follow that of a 'representative agent'. Kaplan et al. (2016) show that, with these better micro-foundations, quite different implications follow for monetary policy than in the New Keynesian DSGE models. A third reason is that structural breaks, as shown by Hendry and Mizon (2014), and radical uncertainty further invalidate DSGE models, illustrated by the failure of the Bank of England's DSGE model both during and after the 2008-9 crisis (Fawcett et al. 2015). The failure of the representative agent Euler equation to fit aggregate data 3 is further empirical evidence against the assumptions underlying the DSGE models, while evidence on financial illiteracy (Lusardi 2016) is a problem for the assumption that all consumers optimise.

The Evolving Credit Market Architecture

Of the structural changes, the evolution and revolution of credit market architecture was the single most important. In the US, credit card ownership and instalment credit spread between the 1960s and the 2000s; the government-sponsored enterprises – Fannie Mae and Freddie Mac – were recast in the 1970s to underwrite mortgages; interest rate ceilings were lifted in the early 1980s; and falling IT costs transformed payment and credit screening systems in the 1980s and 1990s. More revolutionary was the expansion of sub-prime mortgages in the 2000s, driven by rise of private label securitisation backed by credit default obligations (CDOs) and swaps.

The 2000 Commodity Futures Modernization Act (CFMA) made derivatives enforceable throughout the US with priority ahead of claims by others (e.g. workers) in bankruptcy. This permitted derivative enhancements for private label mortgage-backed securities (PMBS) so that they could be sold on as highly rated investment grade securities. A second regulatory change was the deregulation of banks and investment banks. In particular, the 2004 SEC decision to ease capital requirements on investment banks increased gearing to what turned out to be dangerous levels and further boosted PMBS, Duca et al (2016). Similar measures to lower required capital on investment grade PMBS increased leverage at commercial banks. These changes occurred in the political context of pressure to extend credit to poor.

The Importance of Debt

A fourth reason for the failure of the New Keynesian DSGE models, linking closely with the previous, is the omission of debt and household balance sheets more generally, which are crucial for understanding consumption and macroeconomic fluctuations. Some central banks did not abandon their large non-DSGE econometric policy models, but these were also defective in that they too relied on the representative agent permanent income hypothesis which ignored shifts in credit constraints and mistakenly lumped all elements of household balance sheets, debt, liquid assets, illiquid financial assets (including pension assets) and housing wealth into a single net worth measure of wealth. 4 Because housing is a consumption good as well as an asset, consumption responds differently to a rise in housing wealth than to an increase in financial wealth (see Aron et al. 2012). Second, different assets have different degrees of 'spendability'. It is indisputable that cash is more spendable than pension or stock market wealth, the latter being subject to asset price uncertainty and access restrictions or trading costs. This suggests estimating separate marginal propensities to spend out of liquid and illiquid financial assets. Third, the marginal effect of debt on spending is unlikely just to be minus that of either illiquid financial or housing wealth. The reason is that debt is not subject to price uncertainty and it has long-term servicing and default risk implications, with typically highly adverse consequences.

The importance of debt was highlighted in the debt-deflation theory of the Great Depression of Fisher (1933). 5 Briefly summarised, his story is that when credit availability expands, it raises spending, debt, and asset prices; irrational exuberance raises prices to vulnerable levels, given leverage; negative shocks can then cause falls in asset prices, increased bad debt, a credit crunch, and a rise in unemployment.

In the 1980s and early 1990s, boom-busts in Norway, Finland, Sweden, and the UK followed this pattern. In the financial accelerator feedback loops that operated in the US sub-prime crisis, falls in house prices increased bad loans and impaired the ability of banks to extend credit. As a result, household spending and residential investment fell, increasing unemployment and reducing incomes, feeding back further into lower asset prices and credit supply.

The transmission mechanism that operated via consumption was poorly represented by the Federal Reserve's FRB-US model and similar models elsewhere. A more relevant consumption function for modelling the financial accelerator is needed, modifying the permanent income model with shorter time horizons, 6 incorporating important shifts in credit lending conditions, and disaggregating household balance sheets into liquid and illiquid elements, debt and housing wealth.

Implications for Macroeconomic Policy Models

To take into account all the feedbacks, a macroeconomic policy model needs to explain asset prices and the main components of household balance sheets, including debt and liquid assets. This is best done in a system of equations including consumption, in which shifts in credit conditions – which have system-wide consequences, sometimes interacting with other variables such as housing wealth – are extracted as a latent variable. 7 The availability of home equity loans, which varies over time and between countries – hardly available in the US of the 1970s or in contemporary Germany, France or Japan – and the also the variable size of down-payments needed to obtain a mortgage, determine whether increases in house prices increase (US and UK) or reduce (Germany and Japan) aggregate consumer spending. This is one of the findings of research I review in Muellbauer (2016). Another important finding is that a rise in interest rates has different effects on aggregate consumer spending depending on the nature of household balance sheets. Japan and Germany differ radically from the US and the UK, with far higher bank and saving deposits and lower household debt levels so that lower interest rates reduce consumer spending. A crucial implication of these two findings is that monetary policy transmission via the household sector differs radically between countries – it is far more effective in the US and UK, and even counterproductive in Japan (see Muellbauer and Murata 2011).

Such models, building in disaggregated balance sheets and the shifting, interactive role of credit conditions, have many benefits: better interpretations of data on credit growth and asset prices helpful for developing early warning indicators of financial crises; better understandings of long-run trends in saving rates and asset prices; and insights into transmission for monetary and macro-prudential policy. Approximate consistency with good theory following the information economics revolution of the 1970s is better than the exact consistency of the New Keynesian DSGE model with bad theory that makes incredible assumptions about agents' behaviour and the economy. Repairing central bank policy models to make them more relevant and more consistent with the qualitative conclusions of the better micro-foundations outlined above is now an urgent task.

Endnotes

[1] Part of the problem of identification is that the DSGE models throw away long-run information. They do this by removing long-run trends with the Hodrick-Prescott filter, or linear time trends specific to each variable. Identification, which rests on available information, then becomes more difficult, and necessitates 'incredible assumptions'. Often, impulse response functions tracing out the dynamic response of the modelled economy to shocks are highly sensitive to the way the data have been pre-filtered.

[2] This important research was highly praised in Angus Deaton's 2015 Nobel prize citation: http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2015/advanced.html

[3] See Campbell and Mankiw (1989, 1990) and for even more powerful evidence from the UK, US and Japan; Muellbauer (2010); and micro-evidence from Shea (1995).

[4] Net worth is defined as liquid assets minus mortgage and non-mortgage debt plus illiquid financial assets plus housing assets, and this assumes that the coefficients are all the same.

[5] In recent years, several empirical contributions have recognised the importance of the mechanisms described by Fisher (1933). Mian and Sufi (2014) have provided extensive micro-economic evidence for the role of credit shifts in the US sub-prime crisis and the constraining effect of high household debt levels. Focusing on macro-data, Turner (2015) has analysed the role of debt internationally with more general mechanisms, as well as in explaining the poor recovery from the global financial crisis. Jorda et al. (2016) have drawn attention to the increasing role of real estate collateral in bank lending in most advanced countries and in financial crises.

[6] The FRB-US model does build in shorter average horizons than text-book permanent income. It also has a commendable flexible treatment of expectations, Brayton et al (1997).

[7] The use of latent variables in macroeconomic modelling has a long vintage. Potential output, and the "natural rate" of unemployment or of interest are often treated as latent variables, for example in the FRB-US model and in Laubach and Williams (2003), and latent variables are often modelled using state space methods. Flexible spline functions can achieve similar estimates. Interaction effects of latent with other variables seem not to have been considered, however. We use the term 'latent interactive variable equation system' (LIVES) to describe the resulting format.

Jim Haygood , December 24, 2016 at 9:08 am

'the omission of debt and household balance sheets more generally'

putting these eclownometric [sic] models at about the same level of technical sophistication as the Newcomen steam engine of 1712, which achieved about one (1) percent thermodynamic efficiency.

'a macroeconomic policy model needs to explain asset prices and household balance sheets. This is best done in a system of equations.'

Yes indeedy. Reminds me of a young poseur at engineering school, who exclaimed during a group study session, "I've got it all jocked out. Now I just need the equations!"

fresno dan , December 24, 2016 at 12:37 pm

Jim Haygood
December 24, 2016 at 9:08 am

' the omission of debt and household balance sheets more generally '

You beat me to it. I have been aware of that for a few years now, but I doubt that one person in a hundred (or a thousand) knows when they listen to some economist on a news program or a business channel that the person speaking thinks that how much debt people have does not substantively affect their spending.

Really, 5 year olds describing how they get toys from Santa have a better grasp of economics than most "economists"

craazyboy , December 24, 2016 at 2:04 pm

If I used or invented an econ model that left out the "consumer", and modeled it with a "consumption agent object" having a single independent input variable being the Fed zero term, zero risk interest rate, I'd be too embarrassed to admit it. I would probably just very quietly make a career change into one of the softer sciences. Maybe writing fictional romance novels, or some such thing.

TiPs , December 24, 2016 at 9:41 am

The worst thing about these types of mea culpas from the mainstream is the cited criticisms from other mainstream economists only. It can only be a valid criticism if it was published in a mainstream journal

readerOfTeaLeaves , December 24, 2016 at 11:14 am

Of the structural changes, the evolution and revolution of credit market architecture was the single most important . In the US, credit card ownership and instalment credit spread between the 1960s and the 2000s; the government-sponsored enterprises – Fannie Mae and Freddie Mac – were recast in the 1970s to underwrite mortgages; interest rate ceilings were lifted in the early 1980s; and falling IT costs transformed payment and credit screening systems in the 1980s and 1990s. More revolutionary was the expansion of sub-prime mortgages in the 2000s, driven by rise of private label securitisation backed by credit default obligations (CDOs) and swaps. The 2000 Commodity Futures Modernization Act (CFMA) made derivatives enforceable throughout the US with priority ahead of claims by others (e.g. workers) in bankruptcy. This permitted derivative enhancements for private label mortgage-backed securities (PMBS) so that they could be sold on as highly rated investment grade securities. A second regulatory change was the deregulation of banks and investment banks . Similar measures to lower required capital on investment grade PMBS increased leverage at commercial banks. These changes occurred in the political context of pressure to extend credit to poor.

That 'political pressure' turned out to be the bait and switch for a system that shifted power via debt creation.

What we have not yet come to terms with are the implications of David Graeber's anthropological insights: how does debt affect social relationships, alter social norms, and affect relationships among individuals?

Debt is a form of power, but by failing to factor this into their equations, the Central Bankers are missing the social, political, and cultural consequences of the profound shifts in 'credit market architecture'. In many respects, this is not about 'money'; it's about power.

After Brexit, Trump, and the emerging upheaval in the EU, it's no longer enough to just 'build better economic models'.

The Central Bankers' models can include all the parameters they can dream up, but until someone starts thinking more clearly about the role and function of money, and the way that 'different kinds of money' create 'different kinds of social relationships', we are all in a world of hurt.

At this point, Central Bankers should also ask themselves what happens - socially, personally - when 'debt' (i.e., financialization) shifts from productivity to predation. That shift accelerated from the 1970s, through the 1990s, into the 2000s.

Allowing anyone to charge interest that is usurious is the modern equivalent of turning a blind eye to slavery.

By enabling outrageous interest, any government hands their hard working taxpayers over to what is essentially unending servitude.

This destroys the political power of any government that engages in such blind stupidity.

Frankly, I'm astonished that it has taken so long for taxpayers to show signs of outrage and revolt.

jsn , December 24, 2016 at 11:45 am

Voters in the U.S. react under radical new action retarding constraints:

  1. IT enhanced agnatology: kick ass propaganda
  2. Suburbanization: deportation of the working class from the collective action friendly urban geography
fresno dan , December 24, 2016 at 12:51 pm

readerOfTeaLeaves

December 24, 2016 at 11:14 am

I think you have come up with a good insight – I very much agree its about power and not money.

Now, maybe it is just a coincidence, but it is hard for me not to notice that the explosion in consumer credit matches up nicely with the rise in inequality.

And one other thing I would point out – it doesn't take usurious interest rates. If squillionaires have access to unlimited, essentially cost free money in which the distributors of money are guaranteed a profit, NO MATTER HOW MUCH THEY HAVE LOST, while the debts on non-squillionaires are collected with fees, penalties, and to the last dime, than it doesn't matter if interest rates are essentially zero.

Who gets bailed out is not due to logic or accounting that says that the banks' losses have to be made whole, but not home owners – that is an ideology called economics .

craazyboy , December 24, 2016 at 2:23 pm

I wouldn't downplay how cool the money part is, however. It's no fun making questionable, dodgy loans unless you can charge fees up front and then sell the risk off to a large crowd of suckers. Hence the importance of securitization and other "insurance" type derivatives. Then, if you run out of willing suckers, you need a place to stuff it all, say pension plans and maybe even privatized social security.

But if they allow this to happen in the real world, shouldn't the models have a piece reflecting this behavior as well? Full circle of course, where the "consumer balance sheet" contains his bad debt investment and savings assets* offsetting his liabilities. Then everyone would be more like a bank?

* we still need to model bubble assets – like real estate and stocks. This sounds like it's starting to get tricky!

José , December 24, 2016 at 12:19 pm

"Another important finding is that a rise in interest rates has different effects on aggregate consumer spending depending on the nature of household balance sheets".

This is a point that Warren Mosler and other MMTers have been making since the 1990s: depending on circumstances, lower interest rates may well have contractionary effects and higher interest rates may stimulate the economy.

The tool of choice to fight recessions and control inflation should thus be fiscal instead of monetary policy.

Again, MMT had the analysis right long before mainstream theory started to admit there might be serious problems with its favorite approaches (without ever giving appropriate credit to MMT, of course!).

Very sad!

craazyboy , December 24, 2016 at 2:50 pm

I think the Samarians knew that 5000 years ago. The Templars certainly knew it 1300 years ago. And most definitely, "modern" European banking knew it 300 years ago.

susan the other , December 24, 2016 at 12:25 pm

of note to me is just how simplistic Keynesian statistics were/are, based on almost fantasy-assumptions. And that was followed by Stiglitz et al's theory of asymmetric information models. And this above does give us a dose of all the different variables involved in accurately analyzing an economy – an economy that exploded with financialization, but nobody could keep up. As was proven in 2008. It shouldn't be this confusing. "Repairing CB policies to make them more relevant is now an urgent task." I think it is urgent enough to nationalize the banks and start over using a sovereign money model.

OpenThePodBayDoorsHAL , December 24, 2016 at 2:10 pm

Let's take an infinitely complex system (the economy) that is widely affected by human emotion, then we'll leave out the mechanism by which money itself is created and distributed and then let's "model" it.
We'll have two fans of Stalin's communist "command and control" economy (Keynes and Harry Dexter White) pretend they could create a stable system based on Ph.Ds divining future economic and trade flows and then "managing" them by price fixing the price of money. We'll set policy based on the national conditions of the country with the global reserve currency despite the fact that 2/3 of that currency is outside that country. And with a system where trade never settles so massive imbalances can persist indefinitely. Then let's put self-interested private institutions in charge of all money creation and distribution .and we'll be sure their system operates in secret and is never audited. When the system blows up we'll have these central overlords step in as uneconomic buyers of assets with no consideration for asset quality or price, with no economic need to ever sell, and with "unlimited" funds with which to buy more such assets. At the end we'll continue to call the system "capitalism" and we'll continue to call the scrip "money" and hope nobody notices.

End the Fed.

Plenue , December 24, 2016 at 5:32 pm

*sigh*

Congress creates the money when it passes budget legislation. The Fed merely enacts their decree.

Sound of the Suburbs , December 24, 2016 at 2:21 pm

Economics has long been known as the dismal science.

The IMF forecast Greek GDP would have recovered by 2015 with austerity.
By 2015 it was down 27% and still falling.

The IMF can attract some of the best economists in the world but a technocrat elite trained in a dismal science aren't up to much.

In 2008 the Queen visited the revered economists of the LSE and said "If these things were so large, how come everyone missed it?"

The FED is full of PhDs from America's finest universities but a technocrat elite trained in a dismal science aren't up to much.

The FED will have been looking at the US money supply, let me show you what they missed:

http://www.whichwayhome.com/skin/frontend/default/wwgcomcatalogarticles/images/articles/whichwayhomes/US-money-supply.jpg

Everything is reflected in the money supply.

The money supply is flat in the recession of the early 1990s.

Then it really starts to take off as the dot.com boom gets going which rapidly morphs into the US housing boom, courtesy of Alan Greenspan's loose monetary policy.

When M3 gets closer to the vertical, the black swan is coming and you have a credit bubble on your hands (money = debt).

The mainstream are all trained in neoclassical economics which is spectacularly dismal.

Steve Keen sits outside the mainstream and saw the credit bubble forming in 2005, you can see it in the
US money supply (money = debt).

In 2007, Ben Bernanke could see no problems ahead (dismal).

Irving Fisher looked at the debt inflated asset bubble after the 1929 crash when ideas that markets reached stable equilibriums were beyond a joke.

Fisher developed a theory of economic crises called debt-deflation, which attributed the crises to the bursting of a credit bubble.

Hyman Minsky came up with "financial instability hypothesis" in 1974 and Steve Keen carries on with this work today. The theory is there outside the mainstream.

To understand the theory you have to understand money:

" .. debt does not make society as a whole poorer: one person's debt is another person's asset. So total wealth is unaffected by the amount of debt out there. This is, strictly speaking true only for the world economy as a whole .. " Paul Krugman "End this Depression Now".

This is the neoclassical economic view of money and it's totally wrong and will always leave you blind to events like 2008, e.g.

1929 – US (margin lending into US stocks)
1989 – Japan (real estate)
2008 – US (real estate bubble leveraged up with derivatives for global contagion)
2010 – Ireland (real estate)
2012 – Spain (real estate)
2015 – China (margin lending into Chinese stocks)

Norway, Sweden, Canada and Australia have been letting their real estate bubbles inflate because their mainstream economists and Central Bankers don't know what's coming.

Money and debt are opposite sides of the same coin.
If there is no debt there is no money.
Money is created by loans and destroyed by repayments of those loans.

If you want to understand how money really works:

From the BoE:
http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

Advanced:
"Where does money come from" available from Amazon

You need to understand how money works to understand why austerity doesn't work in balance sheet recessions, the cause of the dire prediction from the IMF that I started with.

You can look at the money supply/debt levels (the same thing) to see how well the economy is doing.

The money supply is contracting – the economy will be doing badly and the risk of this turning into debt deflation is high, there is positive feedback tending to make the situation worse. Debt repayments are larger than the new debt being taken out, the overall level of debt is decreasing.

The money supply is stable – this is stagnation, in the ideal world the money supply should be growing at a steady pace.

The money supply is growing steadily – the ideal.

The money supply is growing very rapidly – you've got a credit bubble on your hands and the "black swan" is near. The FED didn't understand money and debt before 2008 so they missed it.

Richard Koo explains:
https://www.youtube.com/watch?v=8YTyJzmiHGk

Mario is still doing austerity now, no wonder those Italian banks are full of NPLs.

It's too late for Norway, Sweden, Canada and Australia's mainstream economists and Central Bankers, but we need to get this dismal neoclassical economics updated before the whole world descends into debt deflation.

It's almost here, there isn't much time.

Chuck another trillion in to keep this sinking ship afloat Central Bankers, we need to get our technocrat elite up to speed.

Sound of the Suburbs , December 24, 2016 at 2:23 pm

In brief:

Just look at the rate of change of the money supply/debt.

When it's rising rapidly you're in trouble as a credit bubble is forming.

A negative gradient is also a bad sign as it means your money supply is contracting, your economy is in trouble and debt deflation could be on its way.

Economists do waffle.

Sound of the Suburbs , December 24, 2016 at 2:50 pm

Now Mrs. Yellen, put that on a Post-It note on your desk and you won't make the same mistake as your predecessor.

Skip Intro , December 24, 2016 at 2:38 pm

I am shocked, shocked I tell you, that a model with 'Equilibrium' right in the name fails to predict crises. They could probably do better just aggregating results from a big multi-player version of The Sims.

Dick Burkhart , December 25, 2016 at 2:26 am

Better models should start from scratch, assuming non-linearity. They could take the Limits-to-Growth system of nonlinear pde's as a starting point, for example, to get a good handle on long range dynamics. Then add detailed submodels for money and debt, for different countries, for trade, for different economic sectors, etc. Use realistic agent based models where standard models are inadequate.

To do all, start by sending all those economics Ph.D.s back to school in other fields where they know how to do modern applied mathematics.

See original post for references

[Dec 24, 2016] If the 2018 elections will not be converted to verified paper ballots, accompanied by random auditing of all close elections, then it is clear that the accusations of Russian hacking were blatant lies

Notable quotes:
"... Another thing: it will be clear how serious they take the allegations of Russian hacking, by how they address the problem of auditing electronic voting machines. ..."
"... If the 2018 elections aren't all with voter verified paper ballots, accompanied by random auditing and auditing all close elections, we know the accusations of Russian hacking were blatant lies. ..."
Dec 24, 2016 | economistsview.typepad.com

John M -> John M ... December 23, 2016 at 07:17 PM

Another thing: it will be clear how serious they take the allegations of Russian hacking, by how they address the problem of auditing electronic voting machines.

If the 2018 elections aren't all with voter verified paper ballots, accompanied by random auditing and auditing all close elections, we know the accusations of Russian hacking were blatant lies.

[Dec 23, 2016] This is the time for stronger, more interventionist in internal policy state and the suppression of financial oligarchy

Notable quotes:
"... Democratic party under Bill Clinton became yet another neoliberal party (soft neoliberals) and betrayed both organized labour and middle class in favour of financial oligarchy. ..."
"... The cynical calculation was that "they have nowhere to go" and will vote for Democrats anyway. And that was true up to and including election of "change we can believe in" guy. After this attempt of yet another Clinton-style "bait and switch" trick failed. ..."
"... Now it is clear that far right picked up large part of those votes. So in a way Bill Clinton is the godfather of the US far right renaissances. The same is true for Hillary: her "kick the can down the road" stance made victory of Trump possible (although it surprised me; I expected that neoliberals were still strong enough to push their candidate down the US people throat) ..."
"... Under "democrat" Obama the USA pursued imperial policy of creating global neoliberal empire. The foreign policy remained essentially unchanged. Neocons were partially replaced with "liberal interventionists" which is the same staff in a different bottle. This policy costs the US tremendous amount of money and it is probable that the US is going the way British empire went -- overextending itself. ..."
"... Regional currency blocks are now a reality and arrangements bypass the usage of US dollar if international trade are common. They are now in place between several large countries such as Russia and China and absolutely nothing can reverse this trend. So dollar became virtualized -- a kind of "conversion gauge" but without profits for real conversion national currency to dollars for major TBTF banks. ..."
Dec 23, 2016 | economistsview.typepad.com
Fed C. Dobbs : , December 23, 2016 at 02:16 PM
(So, how long will the
post-inaugural honeymoon last?
I'd give it no more than a month.
Then what? I dunno, but nothing good.)

Reality TV Populism
http://nyti.ms/2i72Rol
NYT - Paul Krugman - Dec 23

This Washington Post article on Poland - where a right-wing, anti-intellectual, nativist party now rules, and has garnered a lot of public support - is chilling for those of us who worry that Trump_vs_deep_state may really be the end of the road for US democracy. The supporters of Law and Justice clearly looked a lot like Trump's white working class enthusiasts; so are we headed down the same path?

(In Poland, a window on what happens when
populists come to power http://wpo.st/aHJO2
Washington Post - Anthony Faiola - December 18)

Well, there's an important difference - a bit of American exceptionalism, if you like. Europe's populist parties are actually populist; they pursue policies that really do help workers, as long as those workers are the right color and ethnicity. As someone put it, they're selling a herrenvolk welfare state. Law and Justice has raised minimum wages and reduced the retirement age; France's National Front advocates the same things.

Trump, however, is different. He said lots of things on the campaign trail, but his personnel choices indicate that in practice he's going to be a standard hard-line economic-right Republican. His Congressional allies are revving up to dismantle Obamacare, privatize Medicare, and raise the retirement age. His pick for Labor Secretary is a fast-food tycoon who loathes minimum wage hikes. And his pick for top economic advisor is the king of trickle-down.

So in what sense is Trump a populist? Basically, he plays one on TV - he claims to stand for the common man, disparages elites, trashes political correctness; but it's all for show. When it comes to substance, he's pro-elite all the way.

It's infuriating and dismaying that he managed to get away with this in the election. But that was all big talk. What happens when reality begins to hit? Repealing Obamacare will inflict huge harm on precisely the people who were most enthusiastic Trump supporters - people who somehow believed that their benefits would be left intact. What happens when they realize their mistake?

I wish I were confident in a coming moment of truth. I'm not. Given history, what we can count on is a massive effort to spin the coming working-class devastation as somehow being the fault of liberals, and for all I know it might work. (Think of how Britain's Tories managed to shift blame for austerity onto Labour's mythical fiscal irresponsibility.) But there is certainly an opportunity for Democrats coming.

And the indicated political strategy is clear: make Trump and company own all the hardship they're about to inflict. No cooperation in devising an Obamacare replacement; no votes for Medicare privatization and increasing the retirement age. No bipartisan cover for the end of the TV illusion and the coming of plain old, ugly reality.

anne -> Fed C. Dobbs... , December 23, 2016 at 02:23 PM
Correcting the date:

http://krugman.blogs.nytimes.com/2016/12/19/reality-tv-populism/

December 19, 2016

Reality TV Populism
By Paul Krugman

likbez : , -1
Two points:

Point 1:

Democratic party under Bill Clinton became yet another neoliberal party (soft neoliberals) and betrayed both organized labour and middle class in favour of financial oligarchy.

The cynical calculation was that "they have nowhere to go" and will vote for Democrats anyway. And that was true up to and including election of "change we can believe in" guy. After this attempt of yet another Clinton-style "bait and switch" trick failed.

Now it is clear that far right picked up large part of those votes. So in a way Bill Clinton is the godfather of the US far right renaissances. The same is true for Hillary: her "kick the can down the road" stance made victory of Trump possible (although it surprised me; I expected that neoliberals were still strong enough to push their candidate down the US people throat)

Point 2:

Under "democrat" Obama the USA pursued imperial policy of creating global neoliberal empire. The foreign policy remained essentially unchanged. Neocons were partially replaced with "liberal interventionists" which is the same staff in a different bottle. This policy costs the US tremendous amount of money and it is probable that the US is going the way British empire went -- overextending itself.

Regional currency blocks are now a reality and arrangements bypass the usage of US dollar if international trade are common. They are now in place between several large countries such as Russia and China and absolutely nothing can reverse this trend. So dollar became virtualized -- a kind of "conversion gauge" but without profits for real conversion national currency to dollars for major TBTF banks.

So if we think about Iraq war as the way to prevent to use euro as alternative to dollar in oil sales that goal was not achieved and all blood and treasure were wasted.

In this sense it would be difficult to Trump to continue with "bastard neoliberalism" both in foreign policy and domestically and betray his election promises because they reflected real problems facing the USA and are the cornerstone of his political support.

Also in this case neocons establishment will simply get rid of him one way or the other. I hope that he understand this danger and will avoid trimming Social Security.

Returning to Democratic Party betrayal of interests of labour, Krugman hissy fit signifies that he does not understand the current political situation. Neoliberal wing of Democratic Party is now bankrupt both morally and politically. Trump election was the last nail into Bill Clinton political legacy coffin.

Now we returned to essentially the same political process that took place after the Great Depression, with much weaker political leaders, this time. So this is the time for stronger, more interventionist in internal policy state and the suppression of financial oligarchy. If Trump does not understand this he is probably doomed and will not last long.

That's why I think Trump inspired far right renaissance will continue and the political role of military might dramatically increase. And politically Trump is the hostage of this renaissance. Flint appointment in this sense is just the first swallow of increased role of military leaders in government.

[Dec 23, 2016] The Case for Protecting Infant Industries

Notable quotes:
"... The fact remains, however, that every single developed country got there by using protectionist policies to nurture the develop local industries. Protectionism in developed countries does have strongly negative consequences, but it is beneficial for developing economies. ..."
"... You are exactly right about Japan and I lived through that period. Please name one advanced economy which did not rely on protectionist laws to support domestic industries. All of the European industrial countries did it. The US did it. Japan and Korea did it. China is currently doing it and India has done it. ..."
"... Nobody cared about US labor or about hollowing out the US economy. Krugman frequently noted that the benefits to investors and 'strategic' considerations for free trade were more important that job losses. ..."
"... This extra demand for dollars as a commodity is what drives the price of the dollar higher, leading to the strategic benefits and economic hollowing out that I noted above. ..."
"... There really is no "post-industrialization era", no matter what fantasies the FIRE sector wants to sell. To the extent there is, the existing global trade agreements (including the WTO, World Bank, IMF, and related organization) accomplish that as well by privileging the position of first world capital. ..."
"... "Over the long haul, clearly automation's been much more important - it's not even close," said Lawrence Katz, an economics professor at Harvard who studies labor and technological change. No candidate talked much about automation on the campaign trail. Technology is not as convenient a villain as China or Mexico, there is no clear way to stop it, and many of the technology companies are in the United States and benefit the country in many ways. ..."
"... Globalization is clearly responsible for some of the job losses, particularly trade with China during the 2000s, which led to the rapid loss of 2 million to 2.4 million net jobs, according to research by economists including Daron Acemoglu and David Autor of M.I.T. ..."
"... People who work in parts of the country most affected by imports generally have greater unemployment and reduced income for the rest of their lives, Mr. Autor found in a paper published in January. Still, over time, automation has had a far bigger effect than globalization, and would have eventually eliminated those jobs anyway, he said in an interview. "Some of it is globalization, but a lot of it is we require many fewer workers to do the same amount of work," he said. "Workers are basically supervisors of machines." ..."
"... Clarification of 3: that is, infant industry protection as traditionally done, i.e. "picking winners", won't help. What would help is structural changes that make things relatively easier for small enterprises and relatively harder for large ones. ..."
"... Making direct lobbying of state and federal politicians by industry groups and companies a crime punishable by 110% taxation of net income on all the participants would be a start. ..."
"... "Over time, automation has generally had a happy ending: As it has displaced jobs, it has created new ones. But some experts are beginning to worry that this time could be different. Even as the economy has improved, jobs and wages for a large segment of workers - particularly men without college degrees doing manual labor - have not recovered." ..."
"... So why have manufacturing jobs plummeted since 2000? One answer is that the current account deficit is the wrong figure, since it also includes our surplus in trade in services. If you just look at goods, the deficit is closer to 4.2% of GDP. ..."
"... trade interacts with automation. Not only do we lose jobs in manufacturing to automation, but trade leads us to re-orient our production toward goods that use relatively less labor (tech, aircraft, chemicals, farm produces, etc.), while we import goods like clothing, furniture and autos. ..."
"... There are industries that are closely connected with the sovereignty of the country. That's what neoliberals tend to ignore as they, being closet Trotskyites ("Financial oligarchy of all countries unite!" instead of "Proletarian of all countries unite!" ;-) do not value sovereignty and are hell bent on the Permanent Neoliberal Revolution to bring other countries into neoliberal fold (in the form of color revolutions, or for smaller countries, direct invasions like in Iraq and Libya ). ..."
"... Neoliberal commenters here demonstrate complete detachment from the fact that like war is an extension of politics, while politics is an extension of economics. For example, denying imports can and is often used for political pressure. ..."
"... Now Trump want to play this game selectively designating China as "evil empire" and providing a carrot for Russia. Will it works, or Russia can be wiser then donkeys, I do not know. ..."
"... The US propagandists usually call counties on which they impose sanction authoritarian dictatorships to make such actions more politically correct, but the fact remains: The USA as a global hegemon enjoys using economic pressure to crush dissidents and put vassals in line. ..."
"... Neoliberalism as a social system is past it pinnacle and that creates some problems for the USA as the central player in the neoliberal world. The triumphal march of neoliberalism over the globe ended almost a decade ago. ..."
Dec 23, 2016 | economistsview.typepad.com
Noah Smith:
The Case for Protecting Infant Industries : I must say, it's been almost breathtaking to see how fast the acceptable terms of debate have shifted on the subject of trade. Thanks partly to President-elect Donald Trump's populism and partly to academic research showing that the costs of free trade could be higher than anyone predicted, economics commentators are now happy to lambast the entire idea of trade. I don't want to do that -- I think a nuanced middle ground is best. But I do think it's worth reevaluating one idea that the era of economic dogmatism had seemingly consigned to the junk pile -- the notion of infant-industry protectionism. ...
DrDick -> pgl...

The fact remains, however, that every single developed country got there by using protectionist policies to nurture the develop local industries. Protectionism in developed countries does have strongly negative consequences, but it is beneficial for developing economies.

DrDick -> sanjait... , December 22, 2016 at 04:52 PM
You are exactly right about Japan and I lived through that period. Please name one advanced economy which did not rely on protectionist laws to support domestic industries. All of the European industrial countries did it. The US did it. Japan and Korea did it. China is currently doing it and India has done it.
JohnH -> pgl... , -1
Japan and other developed countries took advantage of the strong dollar/reserve currency, which provided their industries de facto protection from US exports along with a price umbrella that allowed them export by undercutting prices on US domestic products. The strong dollar was viewed as a strategic benefit to the US, since it allowed former rivals to develop their economies while making them dependent on the US consumer market, the largest in the world. The strong dollar also allowed the US to establish bases and fight foreign wars on the cheap, while allowing Wall Street to buy foreign economies' crown jewels on the cheap.

Nobody cared about US labor or about hollowing out the US economy. Krugman frequently noted that the benefits to investors and 'strategic' considerations for free trade were more important that job losses.

JohnH -> anne... , December 22, 2016 at 05:06 PM
Even pgl's guy, Milton Friedman, recognized that "overseas demand for dollars allows the United States to maintain persistent trade deficits without causing the value of the currency to depreciate or the flow of trade to re-adjust."
https://en.wikipedia.org/wiki/International_use_of_the_U.S._dollar

This extra demand for dollars as a commodity is what drives the price of the dollar higher, leading to the strategic benefits and economic hollowing out that I noted above.

John San Vant -> JohnH... , -1
That is because you get a persistent trade surplus in services, which offsets the "Goods" trade deficit. The currency depreciated in the 2000's because said surplus in services began to decline creating a real trade deficit.
DrDick -> Mike Sparrow... , December 22, 2016 at 04:57 PM
"What about the post-industrialization era?"

There really is no "post-industrialization era", no matter what fantasies the FIRE sector wants to sell. To the extent there is, the existing global trade agreements (including the WTO, World Bank, IMF, and related organization) accomplish that as well by privileging the position of first world capital.

anne -> DrDick... , -1
There really is no "post-industrialization era", no matter what fantasies the Finance, Insurance, and Real Estate sectors want to sell....

[ Interesting assertion. Do develop this further. ]

Greg : , -1
The Long-Term Jobs Killer Is Not China. It's Automation.
( http://www.nytimes.com/2016/12/21/upshot/the-long-term-jobs-killer-is-not-china-its-automation.html?ref=economy&_r=0 )

1. I'm moderately surprised that this piece hasn't shown up in Links.

2. The Lump of Labor Fallacy is exposed as a fallacy - Sandwichman has been right all along.

3. Infant industry protection won't help in this environment

anne -> Greg... , December 22, 2016 at 01:08 PM
http://www.nytimes.com/2016/12/21/upshot/the-long-term-jobs-killer-is-not-china-its-automation.html

December 21, 2016

The Long-Term Jobs Killer Is Not China. It's Automation.

By Claire Cain Miller

The first job that Sherry Johnson, 56, lost to automation was at the local newspaper in Marietta, Ga., where she fed paper into the printing machines and laid out pages. Later, she watched machines learn to do her jobs on a factory floor making breathing machines, and in inventory and filing.

"It actually kind of ticked me off because it's like, How are we supposed to make a living?" she said. She took a computer class at Goodwill, but it was too little too late. "The 20- and 30-year-olds are more up to date on that stuff than we are because we didn't have that when we were growing up," said Ms. Johnson, who is now on disability and lives in a housing project in Jefferson City, Tenn.

Donald J. Trump told workers like Ms. Johnson that he would bring back their jobs by clamping down on trade, offshoring and immigration. But economists say the bigger threat to their jobs has been something else: automation.

"Over the long haul, clearly automation's been much more important - it's not even close," said Lawrence Katz, an economics professor at Harvard who studies labor and technological change. No candidate talked much about automation on the campaign trail. Technology is not as convenient a villain as China or Mexico, there is no clear way to stop it, and many of the technology companies are in the United States and benefit the country in many ways.

Mr. Trump told a group of tech company leaders last Wednesday: "We want you to keep going with the incredible innovation. Anything we can do to help this go along, we're going to be there for you."

Andrew F. Puzder, Mr. Trump's pick for labor secretary and chief executive of CKE Restaurants, extolled the virtues of robot employees over the human kind in an interview with Business Insider in March. "They're always polite, they always upsell, they never take a vacation, they never show up late, there's never a slip-and-fall, or an age, sex or race discrimination case," he said.

Globalization is clearly responsible for some of the job losses, particularly trade with China during the 2000s, which led to the rapid loss of 2 million to 2.4 million net jobs, according to research by economists including Daron Acemoglu and David Autor of M.I.T.

People who work in parts of the country most affected by imports generally have greater unemployment and reduced income for the rest of their lives, Mr. Autor found in a paper published in January. Still, over time, automation has had a far bigger effect than globalization, and would have eventually eliminated those jobs anyway, he said in an interview. "Some of it is globalization, but a lot of it is we require many fewer workers to do the same amount of work," he said. "Workers are basically supervisors of machines."

When Greg Hayes, the chief executive of United Technologies, agreed to invest $16 million in one of its Carrier factories as part of a Trump deal to keep some jobs in Indiana instead of moving them to Mexico, he said the money would go toward automation.

"What that ultimately means is there will be fewer jobs," he said on CNBC....

Greg -> Greg... , December 22, 2016 at 01:08 PM
Clarification of 3: that is, infant industry protection as traditionally done, i.e. "picking winners", won't help. What would help is structural changes that make things relatively easier for small enterprises and relatively harder for large ones.

Making direct lobbying of state and federal politicians by industry groups and companies a crime punishable by 110% taxation of net income on all the participants would be a start.

anne -> Greg... , December 22, 2016 at 01:09 PM
http://cepr.net/blogs/beat-the-press/what-s-different-about-stagnating-wages-for-workers-without-college-degrees

December 21, 2016

What's Different About Stagnating Wages for Workers Without College Degrees

There seems to be a great effort to convince people that the displacement due to the trade deficit over the last fifteen years didn't really happen. The New York Times contributed to this effort with a piece * telling readers that over the long-run job loss has been primarily due to automation not trade.

While the impact of automation over a long enough period of time certainly swamps the impact of trade, over the last 20 years there is little doubt that the impact of the exploding trade deficit has had more of an impact on employment. To make this one as simple as possible, we currently have a trade deficit of roughly $460 billion (@ 2.6 percent of GDP). Suppose we had balanced trade instead, making up this gap with increased manufacturing output.

Does the NYT want to tell us that we could increase our output of manufactured goods by $460 billion, or just under 30 percent, without employing more workers in manufacturing? That would be pretty impressive. We currently employ more than 12 million workers in manufacturing, if moving to balanced trade increase employment by just 15 percent we would be talking about 1.8 million jobs. That is not trivial.

But this is not the only part of the story that is strange. We are getting hyped up fears over automation even at a time when productivity growth (i.e. automation) has slowed to a crawl, averaging just 1.0 percent annually over the last decade. The NYT tells readers:

"Over time, automation has generally had a happy ending: As it has displaced jobs, it has created new ones. But some experts are beginning to worry that this time could be different. Even as the economy has improved, jobs and wages for a large segment of workers - particularly men without college degrees doing manual labor - have not recovered."

Hmmm, this time could be different? How so? The average hourly wage of men with just a high school degree was 13 percent less in 2000 than in 1973. ** For workers with some college it was down by more than 2.0 percent. In fact, stagnating wages for men without college degrees is not something new and different, it has been going on for more than forty years. Hasn't this news gotten to the NYT yet?

* http://www.nytimes.com/2016/12/21/upshot/the-long-term-jobs-killer-is-not-china-its-automation.html

** http://www.stateofworkingamerica.org/chart/swa-wages-table-4-15-hourly-wages-men-education/

-- Dean Baker

Peter K. : , -1
http://jaredbernsteinblog.com/inequality-technology-globalization-and-the-false-assumptions-that-sustain-current-inequities/

Inequality, technology, globalization, and the false assumptions that sustain current inequities

by Jared Bernstein

December 22nd, 2016 at 3:24 pm

Here's a great interview* with inequality scholar Branko Milanovic wherein he brings a much-needed historical and international perspective to the debate (h/t: C. Marr). Many of Branko's points are familiar to my readers: yes, increased trade has upsides, for both advanced and emerging economies. But it's not hard to find significant swaths hurt by globalization, particularly workers in rich economies who've been placed into competition with those in poorer countries. The fact that little has been done to help them is one reason for president-elect Trump.

As Milanovic puts it:

"The problems with globalization arise from the fact that gains from it are not (and can never be) evenly distributed. There would be always those who gain less than some others, or those who lose even in absolute terms. But to whom can they "appeal" for redress? Only to their national governments because this is how the world is politically organized. Thus national governments have to engage in "mop up" operations to fix the negative effects of globalization. And this they have not done well, led as they were by the belief that the trickle-down economics will take care of it. We know it did not."

But I'd like to focus on a related point from Branko's interview, one that gets less attention: the question of whether it was really exposure to global trade or to labor-saving technology that is most responsible for displacing workers. What's the real problem here: is it the trade deficit or the robots?

Branko cogently argues that "both technological change and economic polices responded to globalization. The nature of recent technological progress would have been different if you could not employ labor 10,000 miles away from your home base." Their interaction makes their relative contributions hard to pull apart.

I'd argue that the rise of trade with China, from the 1990s to the 2007 crash, played a significant role in moving US manufacturing employment from its steady average of around 17 million factory jobs from around 1970 to 2000, to an average today that's about 5 million less (see figure below; of course, manufacturing employment was falling as a share of total jobs over this entire period).

....

* https://newrepublic.com/article/139432/understand-2016s-politics-look-winners-losers-globalization

Peter K. : , -1
market monetarist Scott Sumner makes a good point about the post-war years.

http://www.themoneyillusion.com/?p=32214

Do current account deficits cost jobs

Over at Econlog I have a post that suggests the answer is no, CA deficits do not cost jobs.

But suppose I'm wrong, and suppose they do cost jobs. In that case, trade has been a major net contributor to American jobs during the 21st century, as our deficit was about 4% of GDP during the 2000 tech boom, and as large as 6% of GDP during the 2006 housing boom. Today it is only 2.6% of GDP. So if you really believe that rising trade deficits cost jobs, you'd be forced to believe that the shrinking deficits since 2000 have created jobs.

So why have manufacturing jobs plummeted since 2000? One answer is that the current account deficit is the wrong figure, since it also includes our surplus in trade in services. If you just look at goods, the deficit is closer to 4.2% of GDP.

But even that doesn't really explain very much, because it's slightly lower than the 4.35% of GDP trade deficit in goods back in 2000. So again, the big loss of manufacturing jobs is something of a mystery. Yes, we import more goods than we used to, but exports of goods have risen at about the same rate since 2000. So why does it seem like trade has devastated our manufacturing sector?

Perhaps because trade interacts with automation. Not only do we lose jobs in manufacturing to automation, but trade leads us to re-orient our production toward goods that use relatively less labor (tech, aircraft, chemicals, farm produces, etc.), while we import goods like clothing, furniture and autos.

So trade and automation are both parts of a bigger trend, Schumpeterian creative destruction, which is transforming big areas of our economy. It's especially painful as during the earlier period of automation (say 1950-2000) the physical output of goods was still rising fast. So the blow of automation was partly cushioned by a rise in output. (Although not in the coal and steel industries!) Since 2000, however, we've seen slower growth in physical output for a number of reasons, including slower workforce growth, a shift to a service economy, and a home building recession (which normally absorbs manufactured goods like home appliances, carpet, etc.) We are producing more goods than ever, but with dramatically fewer workers.

Update: Steve Cicala sent me a very interesting piece on coal that he had published in Forbes. Ironically, environmental regulations actually helped West Virginia miners, by forcing utilities to install scrubbers that cleaned up emissions from the dirtier West Virginia coal. (Wyoming coal has less sulfur.) He also discusses the issue of competition from natural gas.

If Economists hadn't ignored US and World Economic History they would have had a clue : , December 22, 2016 at 07:53 PM
The historical record is totally unambiguous. Protectionism always leads to wealth and industrial development. Free trade leads you to the third world. This was true four hundred years ago with mercantilist England and the navigation acts; it was true with Lincoln's tariffs in the 1860's, it was true of East Asia post 1945.

Economists better abandon silly free trade if they want to have any credibility and not be seen as quacks.

Peter K. : , -1
http://www.cnn.com/2016/12/21/politics/donald-trump-tariffs/

Trump team floats a 10% tariff on imports

By John King and Jeremy Diamond, CNN

Updated 3:57 PM ET, Thu December 22, 2016

Washington (CNN)President-elect Donald Trump's transition team is discussing a proposal to impose tariffs as high as 10% on imports, according to multiple sources.

A senior Trump transition official said Thursday the team is mulling up to a 10% tariff aimed at spurring US manufacturing, which could be implemented via executive action or as part of a sweeping tax reform package they would push through Congress.

Incoming White House Chief of Staff Reince Priebus floated a 5% tariff on imports in meetings with key Washington players last week, according to two sources who represent business interests in Washington. But the senior transition official who spoke to CNN Thursday on the condition of anonymity said the higher figure is now in play.

Such a move would deliver on Trump's "America First" campaign theme, but risks drawing the US into a trade war with other countries and driving up the cost of consumer goods in the US. And it's causing alarm among business interests and the pro-trade Republican establishment.

The senior transition official said the transition team is beginning to find "common ground" with House Speaker Paul Ryan and Ways and Means Committee Chairman Kevin Brady, pointing in particular to the border adjustment tax measure included in House Republicans' "Better Way" tax reform proposal, which would disincentivize imports through tax policy.

Aides to Ryan and Brady declined to say they had "common ground" with Trump, but acknowledged they are in deep discussions with transition staffers on the issue.

Curbing free trade was a central element of Trump's campaign. He promised to rip up the North American Free Trade Agreement with Mexico and Canada. He also vowed to take a tougher line against other international trading partners, almost always speaking harshly of China but often including traditional US allies such as Japan in his complaint that American workers get the short end of the stick under current trade practices.

Gulf with GOP establishment

It is an area where there is a huge gulf between Trump's stated positions and traditional GOP orthodoxy. Business groups and GOP establishment figures -- including Ryan and Senate Majority Leader Mitch McConnell -- have been hoping the transition from the campaign to governing would bring a different approach.

Ryan did signal in a CNBC interview earlier this month that Trump's goals of spurring US manufacturing could be accomplished through "comprehensive tax reform."

"I'll tell him what I've been saying all along, which is we can get at what he's trying to get at better through comprehensive tax reform," Ryan said.

The pro-business GOP establishment says the new Trump administration could make clear it would withdraw from NAFTA unless Canada and Mexico entered new talks to modernize the agreement to reflect today's economy. That would allow Trump to say he kept a promise to make the agreement fairer to American workers without starting a trade war and exacerbating tensions with America's neighbors and vital economic partners.

But there remain establishment jitters that Trump, who views his tough trade message as critical to his election victory, will look for ways to make an early statement that he is serious about reshaping the trade playing field.

And when Priebus told key Washington players that the transition is mulling a 5% tariff on imports, the reaction was one of fierce opposition, according to two sources who represent business interests in Washington and spoke on condition of anonymity because the conversations with the Trump team were confidential.

Priebus, the sources said, was warned such a move could start trade wars, anger allies, and also hurt the new administration's effort to boost the rate of economic growth right out of the gate.

Role of Wilbur Ross

One of the sources said he viewed the idea as a trial balloon when first raised, and considered it dead on arrival given the strong reaction in the business community -- and the known opposition to such protectionist ideas among the GOP congressional leadership.

But this source voiced new alarm Tuesday after being told by allies within the Trump transition that defending new tariffs was part of the confirmation "murder board" practice of Wilbur Ross, the President-elect's choice for commerce secretary.

At least one business community organization is worried enough about the prospect of the tariff it already has prepared talking points, obtained by CNN Wednesday night.

"This $100 billion tax on American consumers and industry would impose heavy costs on the US economy, particularly for the manufacturing sector and American workers, with highly negative political repercussions," according to the talking points. "Rather than using a trade policy sledgehammer that would inflict serious collateral damage, the Trump administration should use the scalpel of US trade remedy law to achieve its goals."

The talking points also claim the tariffs would lead to American job loss and result in a tax to consumers, both of which would harm the US economy.

Trump aides have signaled that Ross is likely to be a more influential player in trade negotiations than recent Commerce secretaries. Given that, the aides know his confirmation hearings are likely to include tough questioning -- from both Democrats and Republicans -- about Trump's trade-related campaign promises.

"The way it was cast to me was that (Trump) and Ross are all over it," said one source. "It is serious."

The second source was less certain about whether the tariff idea was serious or just part of a vigorous debate about policy options. But this source said the unpredictability of Trump and his team had the business interests nervous.

The business lobbying community is confident the GOP leadership would push back on any legislative effort to impose tariffs, which organizations like the Chamber of Commerce, the Business Roundtable, the National Association of Manufactures and others, including groups representing farmers, believe would lead to retaliation against US industries heavily dependent on exports.

But the sources aligned with those interests told CNN the conversation within the Trump transition includes using executive authority allowed under existing trade laws. Different trade laws enacted over the course of the past century allow the president to impose tariffs if he issues a determination the United States is being subjected to unfair trade practices or faces an economic or national security threat because of trade practices.

likbez : , December 23, 2016 at 08:25 AM
There are industries that are closely connected with the sovereignty of the country. That's what neoliberals tend to ignore as they, being closet Trotskyites ("Financial oligarchy of all countries unite!" instead of "Proletarian of all countries unite!" ;-) do not value sovereignty and are hell bent on the Permanent Neoliberal Revolution to bring other countries into neoliberal fold (in the form of color revolutions, or for smaller countries, direct invasions like in Iraq and Libya ).

For example, if you depends of chips produced outside the country for your military or space exploration, then sabotage is possible (or just pure fraud -- selling regular ships instead of special tolerant to cosmic radiation or harsh conditions variant; actually can be done with the support of internal neoliberal fifth column).

The same is probably true for cars and auto engines. If you do not produce domestically a variety at least some domestic brans of cars and trucks, your military trucks and engines will be foreign and that will cost you tremendous amount of money and you might depend for spare parts on you future adversary. Also such goods are overprices to the heaven. KAS is a clear example of this as they burn their money in the war with Yemen as there is no tomorrow making the US MIC really happy.

So large countries with say over 100 million people probably need to think twice before jumping into neoliberal globalization bandwagon and relying in imports for strategically important industries.

Neoliberal commenters here demonstrate complete detachment from the fact that like war is an extension of politics, while politics is an extension of economics. For example, denying imports can and is often used for political pressure.

That was one of factors that doomed the USSR. Not that the system has any chance -- it was doomed after 1945 as did not provide for higher productivity then advanced capitalist economies.

But this just demonstrates the power of the US sanctions mechanism. Economic sanctions works and works really well. The target country is essentially put against the ropes and if you unprepared you can be knocked down.

For example now there are sanctions against Russia that deny them advanced oil exploration equipment. And oil is an important source of Russia export revenue. So the effect of those narrow prohibitions multiples by factor of ten by denying Russia export revenue.

That's how an alliance between Russia and China was forged by Obama administration. because China does produce some of this equipment now. And Russia paid dearly for that signing huge multi-year deals with China on favorable for China terms.

Now Trump want to play this game selectively designating China as "evil empire" and providing a carrot for Russia. Will it works, or Russia can be wiser then donkeys, I do not know.

And look what countries are on the USA economic sanctions list: many entries are countries that are somewhat less excited about the creation of the global neoliberal empire led by the USA. KAS and Gulf monarchies are not on the list. So much about "spreading democracy".

The US propagandists usually call counties on which they impose sanction authoritarian dictatorships to make such actions more politically correct, but the fact remains: The USA as a global hegemon enjoys using economic pressure to crush dissidents and put vassals in line.

The problem with tariffs on China is an interesting reversion of the trend: manufacturing is already in China and to reverse this process now is an expensive proposition. So alienating Chinese theoretically means that some of USA imports might became endangered, despite huge geopolitical weight of the USA. They denied export of rare metals to Japan in the past. They can do this for Apple and without batteries Apple can just fold.

Also it is very easy to prohibit Apple sales in China of national security grounds (any US manufacturer by definition needs to cooperate with NSA and other agencies). I think some countries already prohibit the use of the USA companies produced cell phones for government officials.

So if Trump administration does something really damaging, for Chinese there are multiple ways to skin the cat. Neoliberalism as a social system is past it pinnacle and that creates some problems for the USA as the central player in the neoliberal world. The triumphal march of neoliberalism over the globe ended almost a decade ago.

[Dec 23, 2016] Republicans try link cutting Social Security with balancing budget but they face a fundamental problem with their math duto to need to granfather people older then 55

Just doubling the ceiling for SS contributions will sove the problem. $120K is too low.
Dec 23, 2016 | economistsview.typepad.com
likbez : December 23, 2016 at 04:07 PM

From
"One neat trick to stop Social Security 'Reform'"
http://angrybearblog.com/2016/12/one-neat-trick-to-stop-social-security-reform.html
=== quote ===
Republicans constantly try to bring Social Security into ongoing debates about 'Balanced Budgets'. But they face a fundamental problem with their math. For a variety of reasons, some quite reasonable and others nakedly political (seniors vote) nearly every 'Reform' proposal out there promises to hold 55 and older harmless. Meaning you can't have any more than miniscule effects on Cost projections until today's 54′s and younger start retiring. Except for a handful of early retirees that event happens 11+ years in the future, which is to say outside the 10 year Budget Scoring window.

You can't have a fix to a problem scored over 10 years with a solution starting Year 11. Sure the 'Reformers' will blather about "Infinite Future Horizons". But any proposal that spares current seniors from cuts will score close to zero by CBO and JCT. You just have to count years on your fingers.
... ... ...

GOP plans to "reform" Social Security often take this form

1. Américas $20 trillion public debt is unsustainable

2. Current Budget Deficits add to that debt

So far so good

3. Social Security must be part of that discussion

4. 55 and orders must be shielded from changes that allow them no time to adjust

5. (The Bush/Krasting argument) Payrolll tax increases across the board are neither politically possible nor econimically wise

All three of these are doubtful. This post points out that 2 and 3 +4 (2nd edit) are incompatible within a structure that assumes 10 year budget scoring. Argue or acknowledge that specific point and we can move on.
... ... ..
GOP point one is interesting on several fronts. One it is debatable on its own terms. It it is not clear that current Public Debt is unsustainable on a percentage of GDP basis, especially when you take that in the form of Debt Service at current and projected 10 year rates. A $10 trillion debt at 8% (roughly Bush era) is twice as expensive as a $20 trillion debt at 2% in debt service terms and assuming principal rollover. Simply put Obama years have seen a massive refi of Public Debt. Much credit for which belongs to the Feds QE1 and QE 2.

... ... ..

Jim A, December 15, 2016 11:31 am

Of course that 22% benefit cut is an illusion created by thinking that the SS trust fund is something more substantial than your left pocket borrowing from your right pocket and giving it IOUs.

Assuming that we were to simply run out the clock and make no changes to SS until the trust fund ran out. On the day before the trust fund ran out we would have combined general revenues and government borrowing sufficient to redeem the special, non-negotiable bonds held in the trust fund. On the day afterwards, the general revenue and the ability to the US treasury to borrow money wouldn't have changed. Under current law we would at that point be forced to cut benefits to all retirees by 22%.

Presumably that 22% of revenue that was NOT being spent to repay the trust fund would be applied as deficit reduction. Or used for tax cuts or new discretionary spending. Of course those are all political impossibilities, and would never happen.

It is important to the Republicans that want to reform SS that people never realize that we can afford to pay the shortfall in SS revenues from the treasury. Because once people realize that, they will be more comfortable with that than they will be with the alternatives.

[Dec 23, 2016] Top Ex-White House Economist Admits 94% Of All New Jobs Under Obama Were Part-Time

Growing inequality. We are already at Gini coefficients normally only found in banana republics.
Notable quotes:
"... from 2005 to 2015, the proportion of Americans workers engaged in what they refer to as "alternative work" soared during the Obama era, from 10.7% in 2005 to 15.8% in 2015. Alternative, or "gig" work is defined as "temporary help agency workers, on-call workers, contract company workers, independent contractors or freelancers", and is generally unsteady, without a fixed paycheck and with virtually no benefits. ..."
"... The two economists also found that each of the common types of alternative work increased from 2005 to 2015-with the largest changes in the number of independent contractors and workers provided by contract firms, such as janitors that work full-time at a particular office, but are paid by a janitorial services firm. ..."
Dec 23, 2016 | www.zerohedge.com
Just over six years ago, in December of 2010, we wrote " Charting America's Transformation To A Part-Time Worker Society ", in which we predicted - and showed - that in light of the underlying changes resulting from the second great depression, whose full impacts remain masked by trillions in monetary stimulus and soon, perhaps fiscal, America is shifting from a traditional work force, one where the majority of new employment is retained on a full-time basis, to a "gig" economy, where workers are severely disenfranchised, and enjoy far less employment leverage, job stability and perks than their pre-crash peers. It also explains why despite the 4.5% unemployment rate, which the Fed has erroneously assumed is indicative of job market at "capacity", wage growth not only refuses to materialize, but as we showed yesterday, the growth in real disposable personal income was the lowest since 2014 .

When we first penned our article, it was dubbed "fringe" tinfoil hattery, or in the latest vernacular, "fake news."

Fast forward 6 years, when a report by Harvard and Princeton economists Lawrence Katz and Alan Krueger , confirms exactly what we warned. In their study, the duo show that from 2005 to 2015, the proportion of Americans workers engaged in what they refer to as "alternative work" soared during the Obama era, from 10.7% in 2005 to 15.8% in 2015. Alternative, or "gig" work is defined as "temporary help agency workers, on-call workers, contract company workers, independent contractors or freelancers", and is generally unsteady, without a fixed paycheck and with virtually no benefits.

The two economists also found that each of the common types of alternative work increased from 2005 to 2015-with the largest changes in the number of independent contractors and workers provided by contract firms, such as janitors that work full-time at a particular office, but are paid by a janitorial services firm.

Krueger, who until 2013 was also the top White House economist serving as chairman of the Council of Economic Advisers under Obama, was "surprised" by the finding.

Quoted by quartz , he said " We find that 94% of net job growth in the past decade was in the alternative work category ," said Krueger. "And over 60% was due to the [the rise] of independent contractors, freelancers and contract company workers." In other words, nearly all of the 10 million jobs created between 2005 and 2015 were not traditional nine-to-five employment.

While the finding is good news for some, such as graphic designers and lawyers who hate going to an office, for whom new technology and Obamacare has made it more appealing to become an independent contractor. But for those seeking a steady administrative assistant office job, the market is grim. It also explains why despite an apparent recovery in the labor market, wage growth has been non-existant, due to the lack of career advancement and salary increase options for this vast cohort which was hired over the past decade.

The decline of conventional full-time work has impacted every demographic. Whether this change is good or bad depends on what kinds of jobs people want. " Workers seeking full-time, steady work have lost," said Krueger. He then added, perhaps sarcastically, that "while many of those who value flexibility and have a spouse with a steady job have probably gained."

Yes, well, spousal support aside, it also confirms another troubling finding this website reported first earlier this month, namely that the number of multiple jobholders has recently hit the highest number this century.

[Dec 22, 2016] Traders Place Massive Bets That 10Y Yields Tumble To 2% By February Zero Hedge

Dec 22, 2016 | www.zerohedge.com

It appears not everyone is convinced that "the 30 year bond bull is dead." A quick glance across US equity options today shows TLT (the long-end Treasury Bond ETF) is the most active with call volumes (bullish bonds, lower rates) more than double their average , with over $1.3 billion notional in February $126 Calls (which will payoff if rates drop to around 2.00% by then ).

[Dec 22, 2016] Wolf Richter What the Heck's Happening to Our Share Buyback Boom naked capitalism

Notable quotes:
"... [Afterall, I don't think she really believes that the national debt really matters; she knows better than that and if she doesn't she doesn't deserve to be in the Fed Reserve.] ..."
"... [The above said, I'm still not sure that the Fed Reserve controls the Fed Funds rate. For the last so many decades the Fed Funds rate has followed the 13 week treasury market. Even the rate hike this last week was consistent with this. Which begs the question. Is the 13 week treasury anticipating the Fed rate hike? If so, the 13 week treasury seems to know when the Fed will blink. The easier explanation is that the Fed Reserve is simply tacking on their profit margin on top of the 13 week treasury. In which case, Trump's enemy isn't the Fed Reserve. Rather it's bond vigilantes on the short-end of the curve. Still if bond vigilantes really are the controlling influence, they were certainly slow to respond during the last two bubbles.] ..."
Dec 22, 2016 | www.nakedcapitalism.com
Companies in the S&P 500 spent about $3 trillion since 2011 to buy back their own shares, often with borrowed money. It's part of a noble magic called financial engineering, the simplest way to goose the all-important metric of earnings per share (by lowering the number of shares outstanding). And it creates buying pressure in the stock market that drives up share prices.

With buybacks, you don't need to sell one extra iPhone to boost your earnings per share. So the amounts have grown and grown. With ultra-cheap money available to borrow endlessly, companies take on debt and hollow out shareholder equity. It has worked like a charm. Stock prices have soared. Declining revenues and earnings, no problem. But something is happening that hasn't happened since the Financial Crisis.

Share buybacks in the third quarter plunged 28% year-over-year, to $115.6 billion, the biggest year-over-year dive since Q3 2009, according to FactSet . It was the second quarter in a row of declines, from the glorious Q1 this year, when buybacks had reached $168 billion, behind only Q3 2007 before it all came apart.

From that great Q1 2016 to Q3, buybacks plunged 31%, or by $52 billion.

"Only" 362 of the S&P 500 companies bought back shares in Q3, the second lowest number in three years, with Q2 having been the lowest number (blue line in the chart below). Steve , December 21, 2016 at 8:05 am

Interesting post, no wonder Wall St is talking up the opposite? http://blogs.wsj.com/moneybeat/2016/11/21/goldman-sees-30-buyback-surge-in-2017/

DJG , December 21, 2016 at 9:27 am

One of the advantages of reading Naked Capitalism: I finally understood what stock buybacks are about. So when proxy seasons arrives, and I get to vote my 12.5 shares in the old SEP and IRA, I vote against the proposals. Not that I expect to have much influence.

Chauncey Gardiner , December 21, 2016 at 10:10 am

I suspect Q4 2016 will show a resurgence in corporate share buybacks. Having the corporations they control borrow money and expend the cash to buy their shares back at high prices maximizes personal financial gains for CEOs from their stock option grants, and many corporate board members who are in a position to approve these buybacks also benefit. Very few of these individuals founded the companies they lead or have significantly contributed to the organic growth of their organizations. In fact, in many cases the reverse is true.

This practice merely appears to be another form of control looting to me. I find it particularly troublesome when the corporations engaged in this practice enjoy large government contracts, large numbers of employees are subsequently laid off during economic downturns as an inevitable result of the decline in corporations' financial resilience, and corporations seek various forms of government assistance, including tax forbearances at the state and local level.

There are ways to address this damaging practice. One way is to aggressively raise taxes on executive stock option income. Another way is to simply outlaw the practice.

djrichard , December 21, 2016 at 10:38 am

If rates on long term bonds go up, then all this corporate debt will eventually have to be rolled into something that causes pain.

And that's what is beginning to happen. Presumably because of Trump being in office and the fiscal spigots being turned on.

I'm beginning to wonder if this is why Yellen is jawboning against fiscal stimulus by Trump. It's not that her target is fiscal spending per se. [Afterall, I don't think she really believes that the national debt really matters; she knows better than that and if she doesn't she doesn't deserve to be in the Fed Reserve.] Rather, I'm thinking her real target is long term bonds and trying to keep the rates down. To protect the debt load taken on by the corporations.

Which would make Yellen even more evil of course. Because when it comes down to cash flow to people vs asset inflation to corporations and the wealthy, it would mean she's landing squarely on the latter.

djrichard , December 21, 2016 at 11:29 am

More on Yellen vs Trump: http://www.businessinsider.com/fed-yellen-call-ruin-trump-fiscal-stimulus-2016-12 . Which is why I voted for Trump and not Yellen, lol.

Anyways, in theory the only weapon she's got really is the Fed Funds rate which drives the short end of the curve. However, she could invert the yield curve, which is the normal tell to market participants to get out of the market in anticipation of a significant down-turn. So her weapon vis-a-vis Trump is that she can tank the market. My advice to Trump would be to call her on this and to use his bully pulpit to let his constituency know the lengths that the Fed Reserve is willing to go to (tank the market) to fight him on infrastructure spending.

If Trump really wants to go Full Monty and amp it up a notch, declare that the Fed Reserve's primary interest is to protect the "wealth effect". Such that the common bloke must be thrown under the bus. "becuz inflation don't you know". Man how I would love to see Trump play this hand.

[The above said, I'm still not sure that the Fed Reserve controls the Fed Funds rate. For the last so many decades the Fed Funds rate has followed the 13 week treasury market. Even the rate hike this last week was consistent with this. Which begs the question. Is the 13 week treasury anticipating the Fed rate hike? If so, the 13 week treasury seems to know when the Fed will blink. The easier explanation is that the Fed Reserve is simply tacking on their profit margin on top of the 13 week treasury. In which case, Trump's enemy isn't the Fed Reserve. Rather it's bond vigilantes on the short-end of the curve. Still if bond vigilantes really are the controlling influence, they were certainly slow to respond during the last two bubbles.]

BenX , December 21, 2016 at 11:38 am

"And much of it is funded with debt" – and that has been getting more expensive. The Trump rally is likely due to an expectation of plus laissez faire, whether it be intent or negligence, it matters not.

Tim , December 21, 2016 at 2:37 pm

I'd like to see share buybacks on the same graph as relevant interest rates, to get an idea of you much potential causation is there between interest rates and share buybacks

RenoDino , December 21, 2016 at 10:53 pm

Trump is not a fan of the stock market and will to nothing to protect it. He has said repeatedly that the market is in a bubble. When it crashes, he'll say he was right. This Trump rally is not his idea and investors will be shocked when they finally realize stock prices mean absolutely nothing to him. This is not the metric he will use to measure his success, unlike every President before him for the last 20 years.

[Dec 22, 2016] Regulatory Capture 101

It's not regulation per se is deficient, it is regulation under neoliberal regime, were government is captured by financial oligarchy ;-). But that understanding is foreign to WSJ with its neoliberal agenda :-(.
Notable quotes:
"... Impressionable journalists finally meet George Stigler. ..."
"... The secret recordings were made by Carmen Segarra, who went to work as an examiner at the New York Fed in 2011 but was fired less than seven months later in 2012. She has filed a wrongful termination lawsuit against the regulator and says Fed officials sought to bury her claim that Goldman had no firm-wide policy on conflicts-of-interest. Goldman says it has had such policies for years, though on the same day Ms. Segarra's revelations were broadcast, the firm added new restrictions on employees trading for their own accounts. ..."
"... On the recordings, regulators can be heard doing what regulators do-revealing the limits of their knowledge and demonstrating their reluctance to challenge the firms they regulate. At one point Fed officials suspect a Goldman deal with Banco Santander may have been "legal but shady" in the words of one regulator, and should have required Fed approval. But the regulators basically accept Goldman's explanations without a fight. ..."
"... The journalists have also found evidence in Ms. Segarra's recordings that even after the financial crisis and the supposed reforms of the Dodd-Frank law, the New York Fed remained a bureaucratic agency resistant to new ideas and hostile to strong-willed, independent-minded employees. In government? ..."
"... "as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit." ..."
"... Once one understands the inevitability of regulatory capture, the logical policy response is to enact simple laws that can't be gamed by the biggest firms and their captive bureaucrats. ..."
"... And it means considering economist Charles Calomiris's plan to automatically convert a portion of a bank's debt into equity if the bank's market value falls below a healthy level. ..."
Oct 05, 2014 | Casino Capitalism and Crapshoot Politics
Regulatory Capture 101

Impressionable journalists finally meet George Stigler.

The financial scandal du jour involves leaked audio recordings that purport to show that regulators at the Federal Reserve Bank of New York were soft on Goldman Sachs . Say it ain't so.

... ... ...

The secret recordings were made by Carmen Segarra, who went to work as an examiner at the New York Fed in 2011 but was fired less than seven months later in 2012. She has filed a wrongful termination lawsuit against the regulator and says Fed officials sought to bury her claim that Goldman had no firm-wide policy on conflicts-of-interest. Goldman says it has had such policies for years, though on the same day Ms. Segarra's revelations were broadcast, the firm added new restrictions on employees trading for their own accounts.

The New York Fed won against Ms. Segarra in district court, though the case is on appeal. The regulator also notes that Ms. Segarra "demanded $7 million to settle her complaint." And last week New York Fed President William Dudley said, "We are going to keep striving to improve, but I don't think anyone should question our motives or what we are trying to accomplish."

On the recordings, regulators can be heard doing what regulators do-revealing the limits of their knowledge and demonstrating their reluctance to challenge the firms they regulate. At one point Fed officials suspect a Goldman deal with Banco Santander may have been "legal but shady" in the words of one regulator, and should have required Fed approval. But the regulators basically accept Goldman's explanations without a fight.

The sleuths at the ProPublica website, working with a crack team of investigators from public radio, also seem to think they have another smoking gun in one of Ms. Segarra's conversations that was not recorded but was confirmed by another regulator. Ms. Seest means. For example, a company offering securities is exempt from some registration requirements if it is only selling to accredited investors, such as people with more than $1 million in net worth, excluding the value of primary residences.

The journalists have also found evidence in Ms. Segarra's recordings that even after the financial crisis and the supposed reforms of the Dodd-Frank law, the New York Fed remained a bureaucratic agency resistant to new ideas and hostile to strong-willed, independent-minded employees. In government?

***

Enter George Stigler, who published his famous essay "The Theory of Economic Regulation" in the spring 1971 issue of the Bell Journal of Economics and Management Science. The University of Chicago economist reported empirical data from various markets and concluded that "as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit."

Stigler knew he was fighting an uphill battle trying to persuade his fellow academics. "The idealistic view of public regulation is deeply imbedded in professional economic thought," he wrote. But thanks to Stigler, who would go on to win a Nobel prize, many economists have studied the operation and effects of regulation and found similar results.

A classic example was the New York Fed's decision to let Citigroup stash $1.2 trillion of assets-including more than $600 billion of mortgage-related securities-in off-balance-sheet vehicles before the financial crisis. That's when Tim Geithner ran the New York Fed and Jack Lew was at Citigroup.

Once one understands the inevitability of regulatory capture, the logical policy response is to enact simple laws that can't be gamed by the biggest firms and their captive bureaucrats. This means repealing most of Dodd-Frank and the so-called Basel rules and replacing them with a simple requirement for more bank capital-an equity-to-asset ratio of perhaps 15%. It means bringing back bankruptcy for giant firms instead of resolution at the discretion of political appointees. And it means considering economist Charles Calomiris's plan to automatically convert a portion of a bank's debt into equity if the bank's market value falls below a healthy level.

GS4

[Dec 21, 2016] The widespread belief of neoliberals that they are entitled to a good hand in the market economy casino. This is reflected in the more or less universal belief of the affluent that

Krugman is a neoliberal stooge. Since when Social Security is an entitlement program. If you start contributing at 25 and retire at 67 (40 years of monthly contributions), you actually get less then you contribute, unless you live more then 80 years. It just protects you from "free market casino".
Notable quotes:
"... A "contribution" theory of what a proper distribution of income might be can only be made coherent if there are constant returns to scale in the scarce, priced, owned factors of production. Only then can you divide the pile of resources by giving to each the marginal societal product of their work and of the resources that they own. ..."
"... n a world--like the one we live in--of mammoth increasing returns to unowned knowledge and to networks, no individual and no community is especially valuable. Those who receive good livings are those who are lucky -- as Carrier's workers in Indiana have been lucky in living near Carrier's initial location. It's not that their contribution to society is large or that their luck is replicable: if it were, they would not care (much) about the departure of Carrier because there would be another productive network that they could fit into a slot in. ..."
"... If not about people, what is an economy about? ..."
"... I hadn't realized that Democrats now view Social Security and Medicare as "government handouts". ..."
"... Some Democrats like Krugman are Social Darwinists. ..."
"... PK is an ignorant vicious SOB. Many of those "dependent hillbillies" PK despises paid SS and Medicare taxes for many decades, most I know have never been on foos stamps, and if they are on disability it is because they did honest hard work, something PK knows nothing about. What an ignorant jerk. ..."
"... What is a very highly subsidized industry that benefits Delong and Krugman? Higher education. Damn welfare queens! :) ..."
"... No Krugman is echoing the tribalism of Johnny Bakho. These people won't move or educate themselves or "skill up" so they deserve what they get. Social darwinism. ..."
"... People like Bakho are probably anti-union as well. They're seen as relics of an earlier age and economically "uncompetitve." See Fred Dobbs below. That's the dog whistle about the "rust belt." ..."
"... Paul Krugman's reputation, formerly that of a a noted economic, succumbed after a brief struggle to Trump Derangement Syndrome. Friends said Mr Krugman's condition had been further aggravated by cognitive dissonance from a severely challenged worldview. ..."
"... He is survived by the New York Times, also said to be in failing health. ..."
"... For a long time DeLong was mocking the notion of "economic anxiety" amongst the voters. Does this blog post mean he's rethinking that idea? ..."
"... The GOP has a long history of benefitting from the disconnect where a lot of their voters are convinced that when government money goes to others (sometimes even within their own white congregations), then it is not deserved. ..."
Dec 21, 2016 | economistsview.typepad.com

anne : December 18, 2016 at 05:13 AM , 2016 at 05:13 AM

http://krugman.blogs.nytimes.com/2016/12/17/what-do-trump-voters-want/

December 17, 2016

What Do Trump Voters Want?
By Paul Krugman

Brad DeLong has an interesting meditation * on markets and political demands - inspired by a note from Noah Smith ** - that offers food for thought. I wonder, however, if Brad's discussion is too abstract; and I also wonder whether it fully recognizes the disconnect between what Trump voters think they want and reality. So, an entry of my own.

What Brad is getting at is the widespread belief by, well, almost everyone that they are entitled to - have earned - whatever good hand they have been dealt by the market economy. This is reflected in the more or less universal belief of the affluent that they deserve what they have; you could see this in the rage of rentiers at low interest rates, because it's the Federal Reserve's job to reward savers, right? In this terrible political year, the story was in part one of people in Appalachia angrily demanding a return of the good jobs they used to have mining coal - even though the world doesn't want more coal given fracking, and it can get the coal it still wants from strip mines and mountaintop removal, which don't employ many people.

And what Brad is saying, I think, is that what those longing for the return to coal want is those jobs they deserve, where they earn their money - not government handouts, no sir.

A fact-constrained candidate wouldn't have been able to promise such people what they want; Trump, of course, had no problem.

But is that really all there is? Working-class Trump voters do, in fact, receive a lot of government handouts - they're almost totally dependent on Social Security for retirement, Medicare for health care when old, are quite dependent on food stamps, and many have recently received coverage from Obamacare. Quite a few receive disability payments too. They don't want those benefits to go away. But they managed to convince themselves (with a lot of help from Fox News etc) that they aren't really beneficiaries of government programs, or that they're not getting the "good welfare", which only goes to Those People.

And you can really see this in the regional patterns. California is an affluent state, a heavy net contributor to the federal budget; it went 2-1 Clinton. West Virginia is poor and a huge net recipient of federal aid; it went 2 1/2-1 Trump.

I don't think any kind of economic analysis can explain this. It has to be about culture and, as always, race.

* http://www.bradford-delong.com/2016/12/is-the-problem-one-of-insufficient-market-wages-inadequate-social-insurance-polanyian-disruption-of-patterns-of-life-.html

** https://www.bloomberg.com/view/articles/2016-12-16/four-ways-to-help-the-midwest

anne -> anne... , December 18, 2016 at 05:18 AM
http://www.bradford-delong.com/2016/12/is-the-problem-one-of-insufficient-market-wages-inadequate-social-insurance-polanyian-disruption-of-patterns-of-life-.html

December 17, 2016

Regional Policy and Distributional Policy in a World Where People Want to Ignore the Value and Contribution of Knowledge- and Network-Based Increasing Returns

Pascal Lamy: "When the wise man points at the moon, the fool looks at the finger..."

Perhaps in the end the problem is that people want to pretend that they are filling a valuable role in the societal division of labor, and are receiving no more than they earn--than they contribute.

But that is not the case. The value--the societal dividend--is in the accumulated knowledge of humanity and in the painfully constructed networks that make up our value chains.

A "contribution" theory of what a proper distribution of income might be can only be made coherent if there are constant returns to scale in the scarce, priced, owned factors of production. Only then can you divide the pile of resources by giving to each the marginal societal product of their work and of the resources that they own.

That, however, is not the world we live in.

In a world--like the one we live in--of mammoth increasing returns to unowned knowledge and to networks, no individual and no community is especially valuable. Those who receive good livings are those who are lucky -- as Carrier's workers in Indiana have been lucky in living near Carrier's initial location. It's not that their contribution to society is large or that their luck is replicable: if it were, they would not care (much) about the departure of Carrier because there would be another productive network that they could fit into a slot in.

All of this "what you deserve" language is tied up with some vague idea that you deserve what you contribute--that what your work adds to the pool of society's resources is what you deserve.

This illusion is punctured by any recognition that there is a large societal dividend to be distributed, and that the government can distribute it by supplementing (inadequate) market wages determined by your (low) societal marginal product, or by explicitly providing income support or services unconnected with work via social insurance. Instead, the government is supposed to, somehow, via clever redistribution, rearrange the pattern of market power in the economy so that the increasing-returns knowledge- and network-based societal dividend is predistributed in a relatively egalitarian way so that everybody can pretend that their income is just "to each according to his work", and that they are not heirs and heiresses coupon clipping off of the societal capital of our predecessors' accumulated knowledge and networks.

On top of this we add: Polanyian disruption of patterns of life--local communities, income levels, industrial specialization--that you believed you had a right to obtain or maintain, and a right to believe that you deserve. But in a market capitalist society, nobody has a right to the preservation of their local communities, to their income levels, or to an occupation in their industrial specialization. In a market capitalist society, those survive only if they pass a market profitability test. And so the only rights that matter are those property rights that at the moment carry with them market power--the combination of the (almost inevitably low) marginal societal products of your skills and the resources you own, plus the (sometimes high) market power that those resources grant to you.

This wish to believe that you are not a moocher is what keeps people from seeing issues of distribution and allocation clearly--and generates hostility to social insurance and to wage supplement policies, for they rip the veil off of the idea that you deserve to be highly paid because you are worth it. You aren't.

And this ties itself up with regional issues: regional decline can come very quickly whenever a region finds that its key industries have, for whatever reason, lost the market power that diverted its previously substantial share of the knowledge- and network-based societal dividend into the coffers of its firms. The resources cannot be simply redeployed in other industries unless those two have market power to control the direction of a share of the knowledge- and network-based societal dividend. And so communities decline and die. And the social contract--which was supposed to have given you a right to a healthy community--is broken.

As I have said before, humans are, at a very deep and basic level, gift-exchange animals. We create and reinforce our social bonds by establishing patterns of "owing" other people and by "being owed". We want to enter into reciprocal gift-exchange relationships. We create and reinforce social bonds by giving each other presents. We like to give. We like to receive. We like neither to feel like cheaters nor to feel cheated. We like, instead, to feel embedded in networks of mutual reciprocal obligation. We don't like being too much on the downside of the gift exchange: to have received much more than we have given in return makes us feel very small. We don't like being too much on the upside of the gift exchange either: to give and give and give and never receive makes us feel like suckers.

We want to be neither cheaters nor saps....

ken melvin -> anne... , December 18, 2016 at 05:32 AM
If not about people, what is an economy about?
Observer -> anne... , December 18, 2016 at 05:59 AM
I hadn't realized that Democrats now view Social Security and Medicare as "government handouts".
Peter K. -> Observer... , December 18, 2016 at 09:25 AM
Some Democrats like Krugman are Social Darwinists. They're the "center-left" versus Bernie Sanders's leftwing supporters.
Tom aka Rusty -> anne... , December 18, 2016 at 06:06 AM
PK is an ignorant vicious SOB. Many of those "dependent hillbillies" PK despises paid SS and Medicare taxes for many decades, most I know have never been on foos stamps, and if they are on disability it is because they did honest hard work, something PK knows nothing about. What an ignorant jerk.
Tom aka Rusty -> Tom aka Rusty... , December 18, 2016 at 06:31 AM
What is a very highly subsidized industry that benefits Delong and Krugman? Higher education. Damn welfare queens! :)
RC AKA Darryl, Ron -> Tom aka Rusty... , December 18, 2016 at 06:37 AM
Not LOL worthy, but still a good solid :<)
anne -> Tom aka Rusty... , December 18, 2016 at 06:53 AM

Education from elementary through college and professional levels is of course publicly supported in every reasonably advanced country in the world.

EMichael -> Tom aka Rusty... , December 18, 2016 at 07:18 AM
What is a very highly subsidized industry that benefits Rusty?

Healthcare.

Damn welfare queen!

Peter K. -> EMichael... , December 18, 2016 at 09:33 AM
Or Krugman's textbook industry.
BenIsNotYoda -> Tom aka Rusty... , December 18, 2016 at 10:49 AM
PK's rhetoric, together with shills like pgl and emichael, has deteriorated quite a bit. Nicely done Rusty.
anne -> Tom aka Rusty... , December 18, 2016 at 06:34 AM
"dependent hillbillies"

[ This is a false quote. A writer should never be falsely quoted. There is no such expression used in this or any other essay by Paul Krugman. ]

pgl -> anne... , December 18, 2016 at 09:34 AM
It must be really cold where Rusty lives and he woke up in one foul mood.
DeDude -> Tom aka Rusty... , December 18, 2016 at 08:58 AM
Exactly the same could be said about many of those inner city minorities that the "dependent hillbillies" look down on as "welfare queens". That may be one of the reasons they take special issues with "food stamps", because in contrast to the hillbillies, inner city poor people cannot grow their own food. What Krugman is pointing out is the hypocrisy of their tribalism - and also the idiocy, because the dismantling of society would ultimately hurt the morons that voted GOP into power this round.
Peter K. -> DeDude... , December 18, 2016 at 09:31 AM
"What Krugman is pointing out is the hypocrisy of their tribalism "

No Krugman is echoing the tribalism of Johnny Bakho. These people won't move or educate themselves or "skill up" so they deserve what they get. Social darwinism.

Peter K. -> Peter K.... , December 18, 2016 at 09:58 AM
People like Bakho are probably anti-union as well. They're seen as relics of an earlier age and economically "uncompetitve." See Fred Dobbs below. That's the dog whistle about the "rust belt."
Julio -> Tom aka Rusty... , December 18, 2016 at 10:53 AM
His tone is supercilious and offensive. But your argument is that they are not "dependent" because they earned every benefit they get from the government. I think his point is that "dependent" is not offensive -- the term jus reflects how we all depend on government services. DeLong makes the point much better in the article quoted by anne above.
Observer -> anne... , December 18, 2016 at 06:07 AM
In Memorium

Paul Krugman's reputation, formerly that of a a noted economic, succumbed after a brief struggle to Trump Derangement Syndrome. Friends said Mr Krugman's condition had been further aggravated by cognitive dissonance from a severely challenged worldview.

He is survived by the New York Times, also said to be in failing health.

RC AKA Darryl, Ron -> Observer... , December 18, 2016 at 06:38 AM
:<)
kthomas -> anne... , December 18, 2016 at 06:52 AM
Judith Miller. Dowd. Doh!at. Broder. Brooks.

BS

anne -> anne... , December 18, 2016 at 06:55 AM
The New York Times is easily the finest newspaper in the world, is broadly recognized as such and is of course flourishing. Such an institution will always have sections or editors and writers of relative strength but these relative strengths change over time as the newspaper continually changes.
Observer -> anne... , December 18, 2016 at 07:36 AM
Flourishing?

NYT Co. to revamp HQ, vacate eight floors in consolidation

"In an SEC filing, New York Times Co. discloses a staff communication it provided today to employees about a revamp of its headquarters -- including consolidating floors.

The company will vacate at least eight floors, consolidating workspaces and allowing for "significant" rental income, the memo says."

http://seekingalpha.com/news/3231232-nyt-co-revamp-hq-vacate-eight-floors-consolidation

anne -> Dan Kervick... , December 18, 2016 at 07:17 AM
Brad DeLong's piece was thoughtful.

[ Importantly so, worth a couple of close readings. ]

Peter K. -> Dan Kervick... , December 18, 2016 at 09:30 AM
For a long time DeLong was mocking the notion of "economic anxiety" amongst the voters. Does this blog post mean he's rethinking that idea?
Peter K. -> Peter K.... , December 18, 2016 at 09:57 AM
Technocratic Democrats like DeLong and Krugman (or neoliberal centrists) are notoriously against economic democracy and unions and the like.

Maybe that's a factor here.

Dan Kervick -> Peter K.... , December 18, 2016 at 01:13 PM
I think he and others have finally reached a point where denial is not an option.
DeDude -> anne... , December 18, 2016 at 08:37 AM
The GOP has a long history of benefitting from the disconnect where a lot of their voters are convinced that when government money goes to others (sometimes even within their own white congregations), then it is not deserved. But if that same government money goes to themselves (or their real close relatives), then it is a hard earned and well-deserved payback for their sacrifices and tax payments. So the GOP leadership has always called it "saving social security" and "cracking down on fraud" rather than admitting to their attempts to dismantle those programs. The Dems better be on the ball and call it what it is. If you want to save those programs you just have to prevent rich people from wiggling out of paying for them (don't repeal the Obamacare medicare taxes on the rich).
rjs -> anne... , December 18, 2016 at 10:12 AM
What Do Trump Voters Want? for starters, they'd probably want people like Krugman to stop looking down their noses at them like they're lepers..
DeDude -> rjs ... , December 18, 2016 at 01:49 PM
Can we at least call those with the pointy white hats, despicable?
rjs -> DeDude... , December 18, 2016 at 02:29 PM

depends on how many of those people who voted for Obama in 2012 you figure to have joined the pointy white hat club since...


http://peakwatch.typepad.com/.a/6a00d83452403c69e201bb0960723f970d-pi

DeDude -> rjs ... , December 18, 2016 at 03:45 PM
Would they not be despicable regardless of what kind of wood they previously enjoyed burning?
RC AKA Darryl, Ron : , December 18, 2016 at 06:15 AM
Excellent post election commentary from Bloom County (comic).

http://www.gocomics.com/bloom-county/2016/11/27

David : , December 18, 2016 at 07:16 AM
On the Pk piece. I think it is really about human dignity, and the need for it. There were a lot of factors in this horrific election, but just as urban blacks need to be spared police brutality, rural whites need a dignified path in their lives. Everyone, united, deserves such a path.

This is a real challenge for economists; how do we rebuild the rust belt (which applies to areas beyond the literal rust belt).

If we do not, we risk Trump 2.0, which could be very scary indeed.

EMichael -> David... , December 18, 2016 at 07:36 AM
I agree to a point, but what the piece is about is that in search of a solution to the problems of the rustbelt (whatever the definition is),people voted for Trump who had absolutely no plan to solve such a problem, other than going back to the future and redoing Nafta and getting rid of regulations.

Meanwhile, that vote also meant that the safety net that helps all Americans in trouble was being placed in severe risk.

Those voters were fixed on his rhetoric and right arm extended while his left hand was grabbing them by the (in deference to Anne I will not say the words, but Trump himself has said one of them and the other is the male version).

Peter K. -> EMichael... , December 18, 2016 at 08:48 AM
"I agree to a point,"

Really? You didn't seem to before. You'd say what Duy or Noah Smith or DeLong were mulling about was off-limits. You'd ban them from the comment section if you could. "This is a real challenge for economists; how do we rebuild the rust belt (which applies to areas beyond the literal rust belt).

If we do not, we risk Trump 2.0, which could be very scary indeed." I don't see why this is such a controversial point for centrist like Krugman. How do we appeal to the white working class without contradicting our principles?

By promoting policies that raise living standards. By delivering, which mean left-wing policies not centrist tinkering. It's the Clinton vs. Sanders primary. Hillary could have nominated Elizabeth Warren as her VP candidate but her corporate masters wouldn't let her.

sglover -> EMichael... , December 18, 2016 at 06:08 PM
"Meanwhile, that vote also meant that the safety net that helps all Americans in trouble was being placed in severe risk."

That safety net is an improvement over 1930. But it's been fraying so badly over the last 20-30 years that it's almost lost all meaning. It's something people turn to before total destitution, but for rebuilding a life? A sick joke, filled with petty hassles and frustrations.

And the fraying has been a solidly bipartisan project. Who can forget welfare "reform"?

So maybe the yokels you're blaming for the 10,000-th time might not buy your logic or your intentions.

Fred C. Dobbs -> David... , December 18, 2016 at 08:07 AM
In the rustbelt, Dems are accustomed to
dealing with their supporters who are
union members. (Why the auto industry
was bailed out, dontchaknow.)

That obviously doesn't work so well
any more. In that region, recovery
was 'less than robust', no?

In New England, where unions are much
less of a factor, recovery has been
relatively successful. Dems remain
pretty strong here.

Why can't the rustbelt be more
like the northeast?

The ongoing new industrial revolution
would seem to have much to do
with such matters.

Peter K. -> Fred C. Dobbs... , December 18, 2016 at 08:49 AM
"In New England, where unions are much less of a factor, recovery has been relatively successful. Dems remain pretty strong here."

Is that accurate?

Fred C. Dobbs -> Peter K.... , December 18, 2016 at 09:30 AM
unions don't have much to celebrate (in MA) http://www.bostonglobe.com/metro/2014/08/29/labor-day-but-there-little-for-labor-celebrate/e4MOhMsc5lf6rJkZdCPbKM/story.html?event=event25
via @BostonGlobe - August 2014

... At the height of their influence in the 1950s, labor unions could claim to represent about 1 of every 3 American workers. Today, it's 1 in 9 - and falling.

Some have seen the shrinking size and waning influence of labor unions as a sign that the US economy is growing more flexible and dynamic, but there's mounting evidence that it is also contributing to slow wage growth and the rise in inequality. ...


(Union membership) NY 24.7%, MA 12.4%, SC 2.1%

... Are unions faring any better here in Massachusetts?

While Massachusetts's unions are stronger than average, it's not among the most heavily unionized states. That honor goes to New York, where 1 in every 4 workers belongs to a union. After New York, there are 11 other states with higher union membership rates then Massachusetts.

Here too, though, the decline in union membership over time has been steep.

(From 1983 to 2013) US -42%, MA -44%

Fred C. Dobbs -> Peter K.... , December 18, 2016 at 09:44 AM
Union Members Summary - BLS - Jan 2016 https://www.bls.gov/news.release/union2.nr0.htm

... In 2015, 30 states and the District of Columbia had union membership rates below
that of the U.S. average, 11.1 percent, and 20 states had rates above it. All states
in the East South Central and West South Central divisions had union membership rates
below the national average, and all states in the Middle Atlantic and Pacific divisions
had rates above it. Union membership rates increased over the year in 24 states and
the District of Columbia, declined in 23 states, and were unchanged in 3 states.
(See table 5.)

Five states had union membership rates below 5.0 percent in 2015: South Carolina
(2.1 percent), North Carolina (3.0 percent), Utah (3.9 percent), Georgia (4.0 percent),
and Texas (4.5 percent).

Two states had union membership rates over 20.0 percent in
2015: New York (24.7 percent) and Hawaii (20.4 percent).

State union membership levels depend on both the employment level and the union
membership rate. The largest numbers of union members lived in California (2.5 million)
and New York (2.0 million).

Roughly half of the 14.8 million union members in the
U.S. lived in just seven states (California, 2.5 million; New York, 2.0 million;
Illinois, 0.8 million; Pennsylvania, 0.7 million; and Michigan, Ohio, and New Jersey,
0.6 million each), though these states accounted for only about one-third of wage and
salary employment nationally.

(It appears that New England union participation
lags in the northeast, and also in the rest of
the US not in the Red Zone.)

Table 5. Union affiliation of employed wage and salary workers by state https://www.bls.gov/news.release/union2.t05.htm

Peter K. -> Fred C. Dobbs... , December 18, 2016 at 09:56 AM
"In New England, where unions are much
less of a factor, recovery has been
relatively successful. Dems remain
pretty strong here."

I'm questionning the causation. B/c New England has fewer unions, they're doing better?

My bet is that most of these centrists like Krugman don't like unions and think they're ancient relics which hurt the economies "competitiveness."

Fred C. Dobbs -> Peter K.... , December 18, 2016 at 10:12 AM
I have noted before that New England
is doing better 'than average' (IMO)
because of high-tech industry & education.

Not necessarily because of a lack of
unionization, which is prevalent here
in public education & among service
workers. Note that in higher ed,
much here is private.

Private industry here traditionally
is not heavily unionized, although
that is probably not the case
among defense corps.

Fred C. Dobbs -> Peter K.... , December 18, 2016 at 10:21 AM
As to causation, I think the
implication is that 'Dems dealing
with unions' has not been working
all that well, recovery-wise,
particularly in the rust belt.

That must have as much to do with
industrial management as it does
with labor, and the ubiquitous
on-going industrial revolution.

Fred C. Dobbs -> Fred C. Dobbs... , December 18, 2016 at 10:24 AM
It may well be that in the
rust belt, corps are doing
reasonably well, but not as
much with labor. That is an
industrial revolution problem.
sglover -> Fred C. Dobbs... , December 18, 2016 at 06:10 PM
"In the rustbelt, Dems are accustomed to dealing with their supporters who are union members. (Why the auto industry was bailed out, dontchaknow.)"

Uh huh. Sure.

Know how many times HRC visited UAW groups during her "campaign" in Michigan?

Zero.

Those autoworkers are real ingrates.

DeDude -> David... , December 18, 2016 at 09:35 AM
Everybody needs, and desperately crave, self-confidence and dignity. In white rural culture that has always been connected to the old settler mentality and values of personal "freedom" and "independence". It is unfortunate that this freedom/independence mythology has been what attracted all the immigrants from Europe over here. So it is as strongly engrained (both in culture and individual values) as it is outdated and counterproductive in the world of the future. I am not sure that society can help a community where people find themselves humiliated by being helped (especially by bad government). Maybe somehow try to get them to think of the government help as an earned benefit?
Fred C. Dobbs -> DeDude... , December 18, 2016 at 10:22 AM
Ok, that seems very quaint.

[Dec 21, 2016] The essence of voting the lesser of two evils: To comfortable centrists like pgl, the Democrats should be graded on a curve. As long as theyre better than the awful Republicans, then theyre good enough and beyond criticism.

Notable quotes:
"... The essence of voting the lesser of two evils: "To comfortable centrists like pgl, the Democrats should be graded on a curve. As long as they're better than the awful Republicans, then they're good enough and beyond criticism." ..."
"... These Wall Street Democrats can rest assured that Democrats will surely get their turn in power in 4-8 years...after Trump thoroughly screws things up. And then Democrats will proceed to screw things up themselves...as we learned from Obama and Hillary's love of austerity and total disinterest in the economic welfare of the vast majority. ..."
"... In case you didn't notice, Democrats did nothing about the minimum wage 2009-2010. ..."
"... Many Democratic candidates won't even endorse minimum wage increase in states where increases win via initiative. They preferred to lose elections to standing up for minimum wage increases. ..."
Dec 20, 2016 | economistsview.typepad.com
December 20, 2016 at 07:59 AM

Peter K.... The essence of voting the lesser of two evils: "To comfortable centrists like pgl, the Democrats should be graded on a curve. As long as they're better than the awful Republicans, then they're good enough and beyond criticism."

These Wall Street Democrats can rest assured that Democrats will surely get their turn in power in 4-8 years...after Trump thoroughly screws things up. And then Democrats will proceed to screw things up themselves...as we learned from Obama and Hillary's love of austerity and total disinterest in the economic welfare of the vast majority.

To pgl and his ilk, Obama was great as long as he said the right things...regardless of what he actually did. Hillary didn't even have to say the right things...she only had to be a Wall Street Democrat for pgl to be enthusiastic about her.

JohnH -> jonny bakho... , December 20, 2016 at 12:39 PM
In case you didn't notice, Democrats did nothing about the minimum wage 2009-2010. At a minimum, they could have taken their dominance then to enact increases for 2010-2016 or to index increases to inflation. Instead, Pelosi, Reid and Obama preferred to do nothing.

Many Democratic candidates won't even endorse minimum wage increase in states where increases win via initiative. They preferred to lose elections to standing up for minimum wage increases.

[Dec 21, 2016] The reason Trump won the GOP nomination was exactly because he claimed to reject traditional GOP policies and approaches

Notable quotes:
"... At some point the GOP has to decide how much of Trump's populist agenda they can stuff in the toilet without inducing an uncontrollable backlash. ..."
"... The reason Trump won the GOP nomination was exactly because he claimed to reject traditional GOP policies and approaches. ..."
"... If the GOP just go ahead with a traditional "rule for the rich" policy (because they won) there could be serious fireworks ahead - provided the Dems can pull out a populist alternative policy by the the next election. ..."
"... I have no idea what's going to happen, but my guess is that Trump and the Republicans are going to completely sell out the "Trump voters." ..."
"... But they still tried to push through Social Security privatization even though everyone is against it. ..."
"... If recent history is any guide, incumbents get a second term regardless of how bad the economy is. Clinton, Bush, and Obama were all reelected despite a lousy economy. The only exception in recent memory was Bush 41. ..."
"... Upper class tax cuts were central to his policies. Anybody who believed he was anything other than an standard issue Republican would buy shares in Arizona swampland. ..."
"... trump did indeed state that he would give bigger tax cuts to the rich, repeatedly. the genius of trump's performance is that by never having a clear position his gullible followers were able to fill in the gaps using their own hopes and desires. ..."
"... That is correct, but also the weakness in his support. They will almost certainly be disappointed as the exact interpretations and choices between incompatible promises turns out to be different from the individuals hopes and desires. ..."
"... And consider how dysfunction from laissez faire healthcare policy readoption leads to rising prices/costs above current trend to limit disposable income even more, it will be amazing if we do not have stagnation and worse for the bulk of society. ..."
"... Bush implemented and expanded a community health clinic system, that reallnwoukd be a nice infrastructure play for the US, but this Congress is more likely to disinvest here. They certainly don't want these do-gooder nonprofits competing against the doctor establishment. ..."
"... The question is first of all whether Trump can bully the Fed away from their current and traditional course (which would not allow much of a stimulus, before they cancelled it out with rate hikes). ..."
"... Second whether the Fed itself having been traditionally prone to support GOP presidents (see inconsistencies in Greenspan's policies during Clinton vs. Bush) will change its policies and allow higher inflation and wage growth than they have under any Dem president. ..."
"... The little people go to the credit channels to help finance the purchase of durables and higher education too. The Fed's actions themselves will see these credit prices ratchet, so nit good fir basic demand. Veblen goods will see more price rises as the buyers will have lots of rentier/lobbying gathered money to burn. ..."
Dec 21, 2016 | economistsview.typepad.com
DeDude -> jonny bakho... December 20, 2016 at 07:40 AM
At some point the GOP has to decide how much of Trump's populist agenda they can stuff in the toilet without inducing an uncontrollable backlash.

The reason Trump won the GOP nomination was exactly because he claimed to reject traditional GOP policies and approaches. It was the old tea-partiers insisting that their anti-rich/Anti-Wall street sentiments be inserted into the GOP.

If the GOP just go ahead with a traditional "rule for the rich" policy (because they won) there could be serious fireworks ahead - provided the Dems can pull out a populist alternative policy by the the next election.

Peter K. -> DeDude... , December 20, 2016 at 07:56 AM

hey, a good comment!

I have no idea what's going to happen, but my guess is that Trump and the Republicans are going to completely sell out the "Trump voters."

George W. Bush wasn't completely horrible (besides Iraq, John Roberts, tax cuts for the rich, the Patriot act and the surveillance state, Katrina, etc. etc. etc.). He was good on immigration, world AIDS prevention, expensive Medicare drug expansion, etc.

But they still tried to push through Social Security privatization even though everyone is against it.

To some extent Bush demoralized the Republican base and they didn't turn out in 2008.

JohnH -> DeDude... , December 20, 2016 at 08:04 AM
If recent history is any guide, incumbents get a second term regardless of how bad the economy is. Clinton, Bush, and Obama were all reelected despite a lousy economy. The only exception in recent memory was Bush 41.

About the only thing that can derail Trump is a big recession in 2019.

DrDick -> DeDude... , December 20, 2016 at 08:18 AM
"The reason Trump won the GOP nomination was exactly because he claimed to reject traditional GOP policies and approaches."

While generally enthusiastically embracing them. Upper class tax cuts were central to his policies. Anybody who believed he was anything other than an standard issue Republican would buy shares in Arizona swampland.

DeDude -> DrDick... , December 20, 2016 at 08:35 AM
He never came out directly saying or tweeting that he would give bigger tax cuts to the rich than anybody else - he said he would give bigger tax cuts. It is true that people with a college education had an easy time figuring him out even before the election. But the populist messages he campaigned on were anti-establishment including suggesting that the "hedge-fund guys" were making a killing by being taxed at a lower rate.
yuan -> DeDude... , December 20, 2016 at 10:00 AM
trump did indeed state that he would give bigger tax cuts to the rich, repeatedly. the genius of trump's performance is that by never having a clear position his gullible followers were able to fill in the gaps using their own hopes and desires.
DeDude -> yuan... , December 20, 2016 at 11:19 AM
"his gullible followers were able to fill in the gaps using their own hopes and desires"

That is correct, but also the weakness in his support. They will almost certainly be disappointed as the exact interpretations and choices between incompatible promises turns out to be different from the individuals hopes and desires. The reason Trump was able to beat even a Tea party darling, was the backlash against big money having taken over the Tea party. The backlash against Trump_vs_deep_state being "taken over by big money" interest will be interesting to observe, especially if the Dems find the right way to play it.

yuan -> DeDude... , December 20, 2016 at 11:36 AM
i hope you are right! however, history shows that a political movement can remain irrational longer than your government can remain democratic.
DrDick -> jonny bakho... , December 20, 2016 at 08:14 AM
And that is the least of the damage they will inflict.
New Deal democrat said in reply to pgl... , December 20, 2016 at 05:10 AM
Following up on Johnny Bakho's comment below, let's assume that average wage growth YoY for nonsupervisory workers never reaches 3% before the next recession hits. Wage growth rates always decline in recessions, usually by over 2%.

If in the next recession, we see actual slight nominal wage decreases, is a debt-deflationary wage-price spiral inevitable? Or could there be a small decline of less than -1% without triggering such a spiral.

Got any opinion? Is there any research on this?

pgl -> New Deal democrat... , December 20, 2016 at 06:04 AM
"is a debt-deflationary wage-price spiral inevitable?"

Good question. It all depends on the response of policy makers. If we continue with the stupid fiscal austerity that began in 2011, it may be inevitable. Which is why doing public infrastructure investment is a very good idea.

New Deal democrat said in reply to pgl... , December 20, 2016 at 06:28 AM
We're doomed.
DrDick -> New Deal democrat... , December 20, 2016 at 08:19 AM
I knew that immediately after the election.
JF -> DrDick... , December 20, 2016 at 01:07 PM
And consider how dysfunction from laissez faire healthcare policy readoption leads to rising prices/costs above current trend to limit disposable income even more, it will be amazing if we do not have stagnation and worse for the bulk of society.
Peter K. -> pgl... , December 20, 2016 at 07:08 AM
"Which is why doing public infrastructure investment is a very good idea."

If Hillary Clinton was so progressive according to people like you and Krugman, then why was her infrastructure plan so meager?

Alan Blinder said it would be small small that it wouldn't effect the Fed's thinking on its rate hike schedule.

JF -> Peter K.... , December 20, 2016 at 01:10 PM
Bush implemented and expanded a community health clinic system, that reallnwoukd be a nice infrastructure play for the US, but this Congress is more likely to disinvest here. They certainly don't want these do-gooder nonprofits competing against the doctor establishment.
ilsm -> Peter K.... , December 20, 2016 at 03:52 PM
EMike said it about Bernie..... no soup for you!

For Clinton dems, the ones the wiki revealed are con artists, doing for the peeps [like Bernie stood for] is too far ideologically for the faux centrists.

They are neoliberals market monetarists who keep the bankers green and everyone else takes the back seats.

DeDude -> pgl... , December 20, 2016 at 07:49 AM
At this point in time pretty much anything the policy makers do will be countered by the Fed. The question is first of all whether Trump can bully the Fed away from their current and traditional course (which would not allow much of a stimulus, before they cancelled it out with rate hikes).

Second whether the Fed itself having been traditionally prone to support GOP presidents (see inconsistencies in Greenspan's policies during Clinton vs. Bush) will change its policies and allow higher inflation and wage growth than they have under any Dem president.

pgl -> DeDude... , December 20, 2016 at 07:55 AM
As long as the FED thinks the natural rate of the employment to population ratio is only 60% - you'd be right. But then the FED is not thinking clearly.
yuan -> Peter K.... , December 20, 2016 at 10:59 AM
like many of my fellow socialists, i fulminated about bernanke's coddling of banks and asset holders. i was somewhat wrong. bernanke was a evidently a strong voice for banking regulation and an end to the moral hazard of TBTF. it is a pity that obama did not listen to him.

https://www.brookings.edu/blog/ben-bernanke/2016/05/13/ending-too-big-to-fail-whats-the-right-approach/

JF -> yuan... , -1
The little people go to the credit channels to help finance the purchase of durables and higher education too. The Fed's actions themselves will see these credit prices ratchet, so nit good fir basic demand. Veblen goods will see more price rises as the buyers will have lots of rentier/lobbying gathered money to burn.

Will the Fed use rulemaking to control bubbling in the financial asset marketplaces as they wont want to rause rates too much. I hope they are paying attention

[Dec 21, 2016] Jeb Hensarling and the Allure of Economism

Notable quotes:
"... I always laugh when Newt Gingrich says we need "rational regulation". His crew has as its prime agenda getting rid of any regulation that is actually rational. ..."
"... the greater the information asymmetry, the easier it is to loot. ..."
"... Gramm pushed the next round of stupid deregulation which led to the latest crisis. And it seems Team Trump is about to relive the same mistake. Studying overly simplified models that have historically failed us over and over is the height of stupidity. ..."
Dec 19, 2016 | economistsview.typepad.com
James Kwak:

Jeb Hensarling and the Allure of Economism : The Wall Street Journal has a profile up on Mike Crapo and Jeb Hensarling, the key committee chairs (likely in Crapo's case) who will repeal or rewrite the Dodd-Frank Wall Street Reform and Consumer Protection Act. It's clear that both are planning to roll back or dilute many of the provisions of Dodd-Frank, particularly those that protect consumers from toxic financial products and those that impose restrictions on banks (which, together, make up most of the act).

Hensarling is about as clear a proponent of economism -the belief that the world operates exactly as described in Economics 101 models-as you're likely to find. He majored in economics at Texas A&M, where one of his professors was none other than Phil Gramm. Hensarling described his college exposure to economics this way :

"Even though I had grown up as a Republican, I didn't know why I was a Republican until I studied economics. I suddenly saw how free-market economics provided the maximum good to the maximum number, and I became convinced that if I had an opportunity, I'd like to serve in public office and further the cause of the free market."

This is not a unique story...

Introductory economics, and particularly the competitive market model, can be seductive that way. The models are so simple, logical, and compelling that they seem to unlock a whole new way of seeing the world. And, arguably, they do: there are real insights you can gain from a working understanding of supply and demand curves.

The problem, however, is that the people ... forget that the power of a theory in the abstract bears no relationship to its accuracy in practice. ...

Hensarling, who likes to quote market principles in the abstract, doesn't appear to have moved on much from Economics 101. ... This ritual invocation of markets ignores the fact that there is no way to design a contemporary financial system that even remotely resembles the textbook competitive market: perfect information, no barriers to entry, a large number of suppliers such that no supplier can affect the market price, etc. ...

Regulatory policy that presumes well-functioning markets that don't exist is unlikely to work well in the real world. Actually, Bill Clinton and George W. Bush tried that already, and we got the financial crisis. But to people who believe in economism, theory can never be disproved by experience. Hensarling is "always willing to compromise policies to advance principles," he actually said to the Journal . That's a useful trait in an ideologue. It's frightening in the man who will write the rules for our financial system.

yuan : , December 20, 2016 at 11:17 AM

so...what kind of bubble will cutting onerous government regulations blow this time?
pgl -> yuan... , December 20, 2016 at 11:20 AM
I always laugh when Newt Gingrich says we need "rational regulation". His crew has as its prime agenda getting rid of any regulation that is actually rational.
yuan -> pgl... , December 20, 2016 at 11:24 AM
the greater the information asymmetry, the easier it is to loot.
pgl -> yuan... , December 20, 2016 at 01:25 PM
Exactly right and a key point.
Tom aka Rusty -> pgl... , December 21, 2016 at 08:18 AM
Like the 521 page explanation of the new overtime rules?
mulp -> Tom aka Rusty... , December 21, 2016 at 12:18 PM
That is required to cover all the common law complexities from civil suits on labor issues being legislated from the Federal bench.

Businesses have resorted to getting judges to legislate their way once their lobbying failed to get Congress to legalize slavery by other names.

Labor is a part of econ 101 that businesses do not understand.

Businesses see labor as black holes sucking all the money it can out of the economy. Consumers, on the other hand, are infinite sources of spending as long as government does not require consumers repay debts. But government does need to put more money in consumer pockets with more and bigger tax cuts.

When I learned econ 1 in secondary school social studies, the money spent at businesses came 100% from wages businesses paid.

A more advanced concept was economic profits were bad because that meant monopoly power restricting supply to consumers to take too much of their money and also pay them less than in an efficient economy.

pgl : , December 20, 2016 at 11:18 AM
"Hensarling is about as clear a proponent of economism -- the belief that the world operates exactly as described in Economics 101 models-as you're likely to find. He majored in economics at Texas A&M, where one of his professors was none other than Phil Gramm."

Gramm never really got the economics of financial institutions. Milton Friedman did as he studies their failures during the Great Depression. We sort of relived this during the 1980's S&L crisis but on a smaller scale. That crisis was driven by ill advised financial deregulation.

Gramm pushed the next round of stupid deregulation which led to the latest crisis. And it seems Team Trump is about to relive the same mistake. Studying overly simplified models that have historically failed us over and over is the height of stupidity.

yuan -> pgl... , December 20, 2016 at 11:23 AM
https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act


"The Gramm–Leach–Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999, (Pub.L. 106–102, 113 Stat. 1338, enacted November 12, 1999) is an act of the 106th United States Congress (1999–2001). It repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company. With the bipartisan passage of the Gramm–Leach–Bliley Act, commercial banks, investment banks, securities firms, and insurance companies were allowed to consolidate. Furthermore, it failed to give to the SEC or any other financial regulatory agency the authority to regulate large investment bank holding companies.[1] The legislation was signed into law by President Bill Clinton.[2]"

Peter K. -> yuan... , December 20, 2016 at 01:24 PM
" The legislation was signed into law by President Bill Clinton."

Who was his adviser? Larry Summers.

pgl calls them "progressive."

Daniel Brockman -> Peter K.... , December 21, 2016 at 11:38 AM
How is it relevant that pgl called (or may have called) Larry Summers and Bill Clinton "progressive"? It's not relevant. Peter K. argues ad hominem.
pgl -> yuan... , December 20, 2016 at 01:29 PM
Some pest who knows nothing decided to slam Lawrence Summers. Here is something he co-authored with Natasha Sarin which relates to this issue:

https://www.brookings.edu/bpea-articles/have-big-banks-gotten-safer/

It is an excellent discussion which you might enjoy. That know nothing will not read it as actual analysis only gets him angry.

yuan -> pgl... , December 20, 2016 at 02:03 PM
a good read but i disagree with their suggested approach:

"Consideration needs to be given to approaches such as those suggested by Bulow and Klemperer (2015) and
King (2016) that give more weight to market prices as indicators of asset values and that bring automaticity to the restoration of bank capital when it starts to decline."

imo, small enough to fail institutions pose less system risk and are less likely to speculate.

pgl -> yuan... , December 20, 2016 at 02:57 PM
I suspect over time we will disagree slightly here and there on specifics but it is a joy to have someone here that gets down to real analysis.

In my view Sarin-Summers took too tiny a step into something fundamental but often overlooked. The return to equity is a mix of the equity/asset ratio (which needs to go up) aka leverage risk and the issue of operational risk which you are hinting at.

I bet Anne will demand more on what I'm saying here. Tiem to think about how best to present this over at Econospeak as this is a really big deal. Even if it is something Trump's new CEA (Lawrence Kudlow) does not get. Neither does PeterK so maybe he can work for Kudlow - the stupidest man alive (almost).

anne -> pgl... , December 20, 2016 at 03:09 PM
The return to equity is a mix of the equity/asset ratio (which needs to go up) aka leverage risk and the issue of operational risk...

[ This is important and needs to be described further when time allows. ]

Sanjait -> yuan... , December 20, 2016 at 09:48 PM
Small enough to fail institutions like ... Bear and Lehman?

Theory aside, in the real life crisis we had risk built up across the entire system, not just big banks, and when a few midsized firms went under it broke the buck and everything went to hell.

Perhaps more importantly though, it was *consumers'* overleveraging that caused the prolonged depression. The big banks participated in that but didn't have central roles.

mulp -> pgl... , December 21, 2016 at 12:34 PM
"Milton Friedman did as he studies their failures during the Great Depression."

So, how is it that he promised money market funds would ever be at risk of insolvency and need Fed bailout of credit, and that money market funds would never face bank runs because no one would ever question their safety and solvency?

How is it that he failed to predict Primary Reserve breaking the buck and triggering bank runs on the shadow banks?

I remember the debate over Regulation Q and retail money market funds. I agreed with the big government liberals that it was going to end badly. That it took 37 years is not a surprise to me, but October 2008 was no surprise at all to me. It was forecast by my kind of economists in 1970 based on what happened multiple times before 1935 when sane bankers and economists developed the bank regulation that produced half a century of no bank crisis.

Friedman, on the other hand, argued for deregulation that delivered bank crisis in the late 80s, the 90s multiple times deftly handled by bailouts by both government and by forcing Wall Street banks to do Morgan bailouts, eg LTCM, and the IMF, and then yet again, the bank crisis of the 00s.

Three decades of bank crisis in four decades is hardly evidence Friedman understood banking.

Paul Mathis : , December 20, 2016 at 12:45 PM
For Free Market Ideologues the Great Depression Never Happened

Simple question for Jeb H: Why was there a Great Depression when we had budget surpluses every year during the 1920s?

How could the Free Market have failed so completely from 1929 to 1933? We had gold money and regulations were minimal. It was the ideal context for the Free Market and yet the Dow lost 90% of its value. Why has the Dow nearly tripled in value now with Dodd-Frank in force?

DeDude -> Paul Mathis... , December 20, 2016 at 02:13 PM
Those are the inconvenient facts and questions that are willfully ignored in order to avoid uncomfortable shaking of simple narratives.
yuan -> Paul Mathis... , December 20, 2016 at 02:14 PM
but banks have under-performed relative to the market as a whole. now that government sachs controls the executive branch this may very well change!
Paul Mathis -> yuan... , December 20, 2016 at 02:23 PM
Banks Underperformed Because Rates Were Low

Now that the Fed is raising rates, banks stocks are leading the stock market rally.

pgl -> Paul Mathis... , December 20, 2016 at 02:59 PM
I'm with yuan on this one. But this is a long story. For today - let me applaud you and yuan for bringing something new and needed here. Debates over actual economic analysis.
pgl -> Paul Mathis... , December 20, 2016 at 03:01 PM
I have particularly hard on pathetic BofA so I checked:

https://finance.yahoo.com/quote/BAC?ltr=1

You have a point on the stock prices as even this welfare queen is finally doing well in the market place.

yuan -> Paul Mathis... , December 20, 2016 at 03:02 PM
"Now that the Fed is raising rates, banks stocks are leading the stock market rally."


i expect profit-generating financial innovation.

pgl : , December 20, 2016 at 02:53 PM
Not financial regulation but a key issue - Paul Ryan's desire to lie to us on repealing Obamacare has taken a major hit from the CBO:

https://www.cbo.gov/publication/52351

Shorter CBO - we are onto your lies Mr. Speaker.

Chris G : , December 20, 2016 at 04:36 PM
Lord save from True Believers like Hensarling.
Larry : , December 20, 2016 at 06:12 PM
We got a lot more than the financial crisis from r lying on markets more than government. Yes, regs are necessary (externalities, monopolies, etc) but "the more the merrrier" is not the underlying principle. Read that D/F has > 20k "rules" with >300 "major" rules yet to be written after 6 years of work. The world changes way faster than government can. Regulators need to find much simpler, more general approaches ("less leverage") if they're going to continue to add value.
jcb : , December 20, 2016 at 08:12 PM
This is a problem of the teaching of contemporary economics, not of Jed Hensarling. Economists tout simplified classical models as fundamentally correct, teach them in freshman Economics 101, and only admit that they don't approximate reality in Econ 401, for seniors. But most students never take another econ course after 101. The damage is done. Not surprisingly, most young Republicans discover that economic reality is...Free Market and Republican!

Think maybe it's time to show them that the classical model doesn't really work when they are freshmen, and not complain after they're already in Congress.

100panthers : , December 20, 2016 at 09:01 PM
Agency's '04 Rule Let Banks Pile Up New Debt
It was unanimous. The decision, changing what was known as the net capital rule, was completed and published in The Federal Register a few months later.

With that, the five big independent investment firms were unleashed.

In loosening the capital rules, which are supposed to provide a buffer in turbulent times, the agency also decided to rely on the firms' own computer models for determining the riskiness of investments, essentially outsourcing the job of monitoring risk to the banks themselves.

At Bear Stearns, the leverage ratio - a measurement of how much the firm was borrowing compared to its total assets - rose sharply, to 33 to 1.

http://mobile.nytimes.com/2008/10/03/business/03sec.html

100panthers : , December 20, 2016 at 09:03 PM
Do some economists live in Post-truth (errr...Post-eco-history) and not read economic history?
reason : , December 21, 2016 at 12:10 AM
Ah, Texas the home of fundamentalism. Texas basically lives by sticking a big straw in the ground and selling what comes out. That is great until it (as it will) stops working. Texas is a caricature of all that is wrong with mankind.
reason -> reason ... , December 21, 2016 at 12:11 AM
(P.S. I'm not just talking about oil and gas, but also water.)
reason -> reason ... , -1
Another way to look at Texas is as the Saudi Arabia of North America. All that is missing is a King. The rest of the USA should get together and give it back to Mexico. Both countries would be better off.

[Dec 21, 2016] Globalization and Sovietization of America by Vladimir Brovkin

Notable quotes:
"... Democracy is inevitably going to clash with the demands of Globalization as they are opposite. Globalization requires entrepreneurs to search cheaper means of production worldwide. ..."
"... In practice, this means moving capital out of the USA. ..."
"... To put it in Marxist terms the interests of American society to survive and prosper came into contradiction with the interests of capitalism as a system of production and with the capitalists as a class who has no homeland, and for whom homeland is where it is easier to make money. ..."
"... American capitalism from its very beginning was based on the assumption that what was good for business was good for America. Until 1929 it more or less worked. The robber barons were robbing other entrepreneurs and workers but at least they reinvested their ill gained profits in America. The crash of 1929 showed that the interests of Big Banks clashed with the interest of American society with devastating results. ..."
"... The decades after WWII have seen a slow and steady erosion of American superiority in technology and productivity and slow and steady flight of capital from the USA. Globalization has been undermining America. From the point of view of Global prosperity if it is cheaper to produce in China, production should relocate to China. From the point of view of American worker, this is treason, a policy destroying the United States as an industrial power, as a nation, and as a community of citizens. Donald Trump is the first top ranking politician who has realized this simple fact. The vote for Donald Trump has been a protest against Globalization, immigration, open borders, capital flight, multiculturalism, liberalism and all the values American Liberal establishment has been preaching for 60 years that are killing the USA. ..."
"... Donald Trump wants to arrest the assault of Globalization on America. He promised to reduce taxes, and to attract business back to the USA. However, reduced taxes are only one ingredient in incentives. For businesses to stay or come back to the US, companies must have educated labor force, steady supply of talented, well-educated young people, excellent schools, and safe neighborhoods, among other things. As of now most of these preconditions are missing. ..."
"... Dr. Brovkin is a historian, formerly a Harvard Professor of History. He has published several books and numerous articles on Russian History and Politics. Currently, Dr. Brovkin works and lives in Marrakech, Morocco. ..."
"... This is an interesting question: is it possible to contain neoliberal globalization by building walls, rejecting 'trade' agreement, and so on. I get the feeling that a direct attack may not work. Water will find a way, as they say. With a direct attack against globalization, what you're likely to face is major capital flight. ..."
Dec 21, 2016 | www.unz.com
In his election campaign Donald Trump has identified several key themes that defined American malaise. He pointed to capital flight, bad trade deals, illegal immigration, and corruption of the government and of the press. What is missing in Trump's diagnosis though is an explanation of this crisis. What are the causes of American decline or as Ross Pero used to say: Let's look under the hood.

Most of the challenges America faces today have to do with two processes we call Globalization and Sovietization. By Globalization we mean a process of externalizing American business thanks to the doctrine of Free trade which has been up to now the Gospel of the establishment. By Sovietization we mean a process of slow expansion of the role of the government in economy, education, business, military, press, virtually any and every aspect of politics and society.

Let us start with Globalization.

Dani Rodrick ( The Globalization Paradox: Democracy and the Future of the World Economy) has argued that it is impossible to have democracy and globalization at the same time. Democracy is inevitably going to clash with the demands of Globalization as they are opposite. Globalization requires entrepreneurs to search cheaper means of production worldwide.

In practice, this means moving capital out of the USA. For fifty years economists have been preaching Free trade, meaning that free unimpeded, no tariffs trade is good for America. And it was in the 1950s, 60s and 1970s that American products were cheaper or better than those overseas. Beginning with the 1970s, the process reversed. Globalization enriched the capitalists and impoverished the rest of Americans. To put it in Marxist terms the interests of American society to survive and prosper came into contradiction with the interests of capitalism as a system of production and with the capitalists as a class who has no homeland, and for whom homeland is where it is easier to make money.

American capitalism from its very beginning was based on the assumption that what was good for business was good for America. Until 1929 it more or less worked. The robber barons were robbing other entrepreneurs and workers but at least they reinvested their ill gained profits in America. The crash of 1929 showed that the interests of Big Banks clashed with the interest of American society with devastating results.

The decades after WWII have seen a slow and steady erosion of American superiority in technology and productivity and slow and steady flight of capital from the USA. Globalization has been undermining America. From the point of view of Global prosperity if it is cheaper to produce in China, production should relocate to China. From the point of view of American worker, this is treason, a policy destroying the United States as an industrial power, as a nation, and as a community of citizens. Donald Trump is the first top ranking politician who has realized this simple fact. The vote for Donald Trump has been a protest against Globalization, immigration, open borders, capital flight, multiculturalism, liberalism and all the values American Liberal establishment has been preaching for 60 years that are killing the USA.

Donald Trump wants to arrest the assault of Globalization on America. He promised to reduce taxes, and to attract business back to the USA. However, reduced taxes are only one ingredient in incentives. For businesses to stay or come back to the US, companies must have educated labor force, steady supply of talented, well-educated young people, excellent schools, and safe neighborhoods, among other things. As of now most of these preconditions are missing.

To fight Globalization Donald Trump announced in his agenda to drop or renegotiate NAFTA and TPP. That is a step in the right direction. However, this will not be easy. There are powerful vested interests in making money overseas that will put up great resistance to America first policy. They have powerful lobbies and votes in the Congress and it is by far not certain if Trump will succeed in overcoming their opposition.

Another step along these lines of fighting Globalization is the proposed building of the Wall on Mexican border. That too may or may not work. Powerful agricultural interests in California have a vested interest in easy and cheap labor force made up of illegal migrants. If their supply is cut off they are going to hike up the prices on agricultural goods that may lead to inflation or higher consumer prices for the American workers.

... ... ...

The Military: Americans are told they have a best military in the world. In fact, it is not the best but the most expensive one in the world. According to the National priorities Project, in fiscal 2015 the military spending amounted to 54% of the discretionary spending in the amount of 598.5 billion dollars . Of those almost 200 billion dollars goes for operations and maintenance, 135 billion for military personnel and 90 billion for procurement (see Here is How the US Military Spends its Billions )

American military industrial complex spends more that the next seven runners up combined. It is a Sovietized, bureaucratic structure that exists and thrives on internal deals behind closed doors, procurement process closed to public scrutiny, wasted funds on consultants, kickbacks, and outrageous prices for military hardware. Specific investigations of fraud do not surface too often. Yet for example, DoD Inspector General reported:

material internal control weakness that affect the safeguarding of assets, proper use of funds, and impair the prevention of and identification of fraud, waste and abuse. Source: "FY 2010 DoD Agencywide Agency Financial Report (vid. p.32)" (PDF). US Department of Defense. Retrieved 7 January 2011, cited in: https://en.wikipedia.org/wiki/Military_budget_of_the_United_States#cite_note-20

Why is it that an F35 fighter jet should cost 135 million apiece and the Russian SU 35 that can do similar things is sold for 35 million dollars and produced for 15 million? The answer is that the Congress operates on a principle that any price the military asks is good enough. The entire system of military procurement has to be scrapped. It is a source of billions of stolen and wasted dollars. The Pentagon budget of half a trillion a year is a drain on the economy that is unsustainable, and what you get is not worth the money. The military industrial complex in America does not deliver the best equipment or security it is supposed to.(on this see: http://nationalinterest.org/blog/the-skeptics/cutting-waste-isnt-enough-curb-pentagon-spending-18640 )

Donald Trump was the first to his credit who raised the issue: Do we need all these bases overseas? Do they really enhance American security? Or are they a waste of money for the benefit of other countries who take America for a free ride. Why indeed should the US pay for the defense of Japan? Is Japan a poor country that cannot afford to defend itself? Defense commitments like those expose America to unnecessary confrontations and risk of war over issues that have nothing to do with America's interests. Is it worth it to fight China over some uninhabitable islands that Japan claims? (See discussion: http://nationalinterest.org/blog/the-skeptics/should-the-us-continue-guarantee-the-security-wealthy-states-17720 )

Similarly, Trump is the first one to raise the question: What is the purpose of NATO? ( see discussion of NATO utility: http://nationalinterest.org/blog/the-buzz/will-president-trump-renegotiate-the-nato-treaty-18647 ) Yes the Liberal pro-Clinton media answer is: to defend Europe from Russian aggression. But really what aggression? If the Russians wanted to they could have taken Kiev in a day two years ago. Instead, they put up with the most virulently hostile regime in Kiev. Let us ask ourselves would we have put up with a virulently anti-American regime in Mexico, a regime that would have announced its intention to conclude a military alliance with China or Russia? Were we not ready to go to nuclear war over Soviet missiles in Cuba? If we would not have accepted such a regime in Mexico, why do we complain that the Russians took action against the new regime in Ukraine. Oh yes, they took Crimea. But the population there is Russian, and until 1954 it was Russian territory and after Ukrainian independence the Russians did not raise the issue of Crimea as Ukrainian territory and paid rent for their naval base there The Russians took it over only when a hostile regime clamoring for NATO membership settled in Kiev. Does that constitute Russian aggression or actually Russian limited response to a hostile act? (see on this Steven Cohen: http://eastwestaccord.com/podcast-stephen-f-cohen-talks-russia-israel-middle-east-diplomacy-steele-unger/ ) As I have argued elsewhere Putin has been under tremendous pressure to act more decisively against the neo-Nazis in Kiev. (see Vlad Brovkin: On Russian Assertiveness in Foreign Policy. ( http://eastwestaccord.com/?s=brovkin&submit=Search )

With a little bit of patience and good will a compromise is possible on Ukraine through Minsk accords. Moreover, Ukraine is not in NATO and as long as it is not admitted to NATO, a deal with the Russians on Ukraine is feasible. Just like so many other pro-American governments, Ukraine wants to milk Uncle Sam for what it is worth. They expect to be paid for being anti/Russian. (See discussion on need of enemy: http://nationalinterest.org/feature/does-america-need-enemy-18106 ) Would it not be a better policy to let Ukraine know that they are on their own: no more subsidies, no more payments? Mend your relations with Russia yourselves. Then peace would immediately prevail.

If we admit that there is no Russian aggression and that this myth was propagated by the Neo/Cons with the specific purpose to return to the paradigm of the cold war, i.e. more money for the military industrial complex, if we start thinking boldly as Trump has begun, we should say to the Europeans: go ahead, build your own European army to allay your fears of the Russians. Europe is strong enough, rich enough and united enough to take care of its defense without American assistance. (See discussion of Trumps agenda: http://nationalinterest.org/feature/course-correction-18062 )

So, if Trump restructures procurement mess, reduces the number of military bases overseas, and invests in high tech research and development for the military on the basis of real competition, hundreds of billions of dollars could be saved and the defense capability of the country would increase.

... ... ...

Dr. Brovkin is a historian, formerly a Harvard Professor of History. He has published several books and numerous articles on Russian History and Politics. Currently, Dr. Brovkin works and lives in Marrakech, Morocco.

Mao Cheng Ji says: December 21, 2016 at 8:43 am GMT • 200 Words

This is a bit too much, Volodya. Maybe you should've taken one subject – globalization, for example – and stop there.

This is an interesting question: is it possible to contain neoliberal globalization by building walls, rejecting 'trade' agreement, and so on. I get the feeling that a direct attack may not work. Water will find a way, as they say. With a direct attack against globalization, what you're likely to face is major capital flight.

You might be able to make neoliberal globalization work for you (for your population, that is), like Germany and the Scandinavians do, but that's a struggle, constant struggle. And it's a competition; it will have to be done at the expense of other nations (see Greece, Portugal, Central (eastern) Europe). And having an anti-neoliberal president is not enough; this would require a major change, almost a U turn, in the whole governing philosophy. Forget the sanctity of 'free market', start worshiping the new god: national interest

animalogic says: December 21, 2016 at 10:14 am GMT • 400 Words

What an INTERESTING article -- So much that is right, so much that is wrong. An article you can get your teeth into.
On globalisation: pretty spot-on (although I believe he exaggerates the US weakness in what he calls "preconditions": there are still many well educated Americans, still good neighborhoods (yes, sure it could be a lot better). He's against NAFTA & other neoliberal Trade self indulgences.
But then we come to his concept of "Sovietization" of the US. Perhaps it's mere semantics, but I find the concept incoherent & suspiciously adapted to deliberately agitate US conservatives.

Example: "huge sectors of American economy are not private at all, that in fact they have been slowly taken over by an ever growing state ownership and control"

This is nonsense on its face: the government spews out trillions to private actors to provide goods & services. It does so, in part, because it has systematically privatized every government function capable of returning a profit. The author can't see the actor behind the mask: how much legislation is now written by & for the benefit of private interests ? (Obama care, Bush pharmaceutical laws ?)

Of course, the author is correct on the US military-industrial complex: it is a sump of crime & corruption. Yet he seems not to grasp that the problem is regulative capture. How is the Fiasco of the F35 & MacDonald Douglas merely an issue for the Legislature alone & how does this circus resemble the Soviet Union, beyond the fact that BOTH systems (like most systems) are capable of gross negligence & corruption ?

I like what the author says about NATO, Japan, bases etc. Although he's a little naive if he thinks NATO for instance is about "protecting" Europe. Yes, that's a part of it: but primarily NATO etc exist as a tool/mask behind which the US can exert it's imperial ambitions against friend & for alike.

The author does go off against welfare well that's to be expected: sadly I don't think he quite gets the connection between globalisation & welfare .He also legitimately goes after tertiary education, but seems to be (again) confused as to cause & effect.

The author is completely spot on with his sovietization analogy when he comes to the US security state. Only difference between the Soviets & the US on security totalitarianism ? The US is much better at it (of course the US has technological advantages unimaginable to the Soviets)

• Replies: @Randal I agree with you that it's a fascinating piece, and I also agree with many of the points you agree with.
But then we come to his concept of "Sovietization" of the US. Perhaps it's mere semantics, but I find the concept incoherent & suspiciously adapted to deliberately agitate US conservatives.

Example: "huge sectors of American economy are not private at all, that in fact they have been slowly taken over by an ever growing state ownership and control"

This is nonsense on its face: the government spews out trillions to private actors to provide goods & services. It does so, in part, because it has systematically privatized every government function capable of returning a profit. The author can't see the actor behind the mask: how much legislation is now written by & for the benefit of private interests ? (Obama care, Bush pharmaceutical laws ?)

I think part of the problem here might be a mistaken focus on "the government" as an independent actor, when in reality it is just a mechanism whereby the rulers (whether they are a dictator, a political party or an oligarchy or whatever), and those with sufficient clout to influence them, get things done the way they want to see them done.

As such there is really not much difference between the government directly employing the people who do things (state socialism), and the government paying money to companies to get the same things done. Either way, those who use the government to get things done, get to say what gets done and how. There are differences of nuance, in terms of organizational strengths and weaknesses, degrees of corruption and of efficiency, but fundamentally it's all big government.

A more interesting question might be - how really different are these big government variants from the small government systems, in which the rulers pay people directly to get things done the way they want them to be done?

Miro23 says: December 21, 2016 at 11:06 am GMT • 300 Words

An excellent article. The points that resonated the most were:

For businesses to stay or come back to the US, companies must have educated labor force, steady supply of talented, well-educated young people, excellent schools, and safe neighborhoods, among other things. As of now most of these preconditions are missing.

This is an enormously difficult problem that will take years to resolve, and it will need a rethink of education from the ground up + the political will to fight the heart of Cultural Bolshevism and the inevitable 24/7 Media assault.

Drain the swamp in Washington: ban the lobbyists, make it a crime to lobby for private interest in a public place, restructure procurement, introduce real competition, restore capitalism, phase out any government subsidies to Universities, force them to compete for students, force hospitals to compete for patients. Cut cut cut expenditure everywhere possible, including welfare.

Banning lobbyists should be possible but draining the rest of the swamp looks really complicated. Each area would need to be examined from the ground up from a value for money – efficiency viewpoint. It doesn't matter which philosophy each one is run on – good value healthcare is desirable whichever system produces it.

Could we have ever imagined in our worst dreams that a system of mass surveillance would be created and perfected in the USA. (see discussion on this in: Surveillance State, in http://www.americamagazine.org/issue/surveillance-state

This one should be easy. The Constitution guarantees a right to privacy so just shut down the NSA. Also shut down the vast CIA mafia (it didn't exist prior to 1947) and the expensive and useless FED (controlling the money supply isn't the business of a group of private banks – an office in the Treasury could easily match the money supply to economic activity).

• Replies: @Daniel Chieh
This one should be easy. The Constitution guarantees a right to privacy so just shut down the NSA. Also shut down the vast CIA mafia (it didn't exist prior to 1947) and the expensive and useless FED (controlling the money supply isn't the business of a group of private banks – an office in the Treasury could easily match the money supply to economic activity).

From Unz, I have learned that the US actually has a four-part government: the "Deep State" part which has no clear oversight from any of the other three branches.

anonymous says: December 21, 2016 at 5:22 pm GMT • 300 Words

To put it in Marxist terms the interests of American society to survive and prosper came into contradiction with the interests of capitalism as a system of production and with the capitalists as a class who has no homeland, and for whom homeland is where it is easier to make money.

Another add-on contradiction, comrade, is that the selfsame capitalist class expect their host nation to defend their interests whenever threatened abroad. This entails using the resources derived from the masses to enforce this protection including using the little people as cannon fodder when deemed useful.

Donald Trump is the first top ranking politician who has realized this simple fact.

Come now, do you really believe that all these politicians who have gone to these world-class schools don't know this? They simply don't care. They're working on behalf of the .1% who are their benefactors and who will make them rich. They did not go into politics to take vows of poverty. They just realize the need to placate the masses with speeches written by professional speechwriters, that's all.

Insofar as Social Security/Medicare/Medicaid goes, those are the most democratic institutions of all. It's money spent on ourselves, internally, with money being cycled in and out at the grassroots level. Doctors, nurses, home-care providers, etc etc, all local people get a piece of the action unlike military spending which siphons money upwards to the upper classes.

I'd rather be employed in a government job than unemployed in the private sector. That's not the kind of "freedom" I'm searching for comrade.

Randal says: December 21, 2016 at 6:29 pm GMT • 300 Words

@animalogic What an INTERESTING article -- So much that is right, so much that is wrong. An article you can get your teeth into.

On globalisation: pretty spot-on (although I believe he exaggerates the US weakness in what he calls "preconditions": there are still many well educated Americans, still good neighborhoods (yes, sure it could be a lot better). He's against NAFTA & other neoliberal Trade self indulgences.
But then we come to his concept of "Sovietization" of the US. Perhaps it's mere semantics, but I find the concept... incoherent...& suspiciously adapted to deliberately agitate US conservatives.

Example: "huge sectors of American economy are not private at all, that in fact they have been slowly taken over by an ever growing state ownership and control"

This is nonsense on its face: the government spews out trillions to private actors to provide goods & services. It does so, in part, because it has systematically privatized every government function capable of returning a profit. The author can't see the actor behind the mask: how much legislation is now written by & for the benefit of private interests ? (Obama care, Bush pharmaceutical laws ?)

Of course, the author is correct on the US military-industrial complex: it is a sump of crime & corruption. Yet he seems not to grasp that the problem is regulative capture. How is the Fiasco of the F35 & MacDonald Douglas merely an issue for the Legislature alone...& how does this circus resemble the Soviet Union, beyond the fact that BOTH systems (like most systems) are capable of gross negligence & corruption ?

I like what the author says about NATO, Japan, bases etc. Although he's a little naive if he thinks NATO for instance is about "protecting" Europe. Yes, that's a part of it: but primarily NATO etc exist as a tool/mask behind which the US can exert it's imperial ambitions ...against friend & for alike.
The author does go off against welfare...well that's to be expected: sadly I don't think he quite gets the connection between globalisation & welfare....He also legitimately goes after tertiary education, but seems to be (again) confused as to cause & effect.

The author is completely spot on with his sovietization analogy when he comes to the US security state. Only difference between the Soviets & the US on security totalitarianism ? The US is much better at it (of course the US has technological advantages unimaginable to the Soviets)

I agree with you that it's a fascinating piece, and I also agree with many of the points you agree with.

But then we come to his concept of "Sovietization" of the US. Perhaps it's mere semantics, but I find the concept incoherent & suspiciously adapted to deliberately agitate US conservatives.
Example: "huge sectors of American economy are not private at all, that in fact they have been slowly taken over by an ever growing state ownership and control"
This is nonsense on its face: the government spews out trillions to private actors to provide goods & services. It does so, in part, because it has systematically privatized every government function capable of returning a profit. The author can't see the actor behind the mask: how much legislation is now written by & for the benefit of private interests ? (Obama care, Bush pharmaceutical laws ?)

I think part of the problem here might be a mistaken focus on "the government" as an independent actor, when in reality it is just a mechanism whereby the rulers (whether they are a dictator, a political party or an oligarchy or whatever), and those with sufficient clout to influence them, get things done the way they want to see them done.

As such there is really not much difference between the government directly employing the people who do things (state socialism), and the government paying money to companies to get the same things done. Either way, those who use the government to get things done, get to say what gets done and how. There are differences of nuance, in terms of organisational strengths and weaknesses, degrees of corruption and of efficiency, but fundamentally it's all big government.

A more interesting question might be – how really different are these big government variants from the small government systems, in which the rulers pay people directly to get things done the way they want them to be done?

[Dec 21, 2016] Current Shiller Ration and S P500 stock price

Dec 21, 2016 | economistsview.typepad.com
anne :

December 20, 2016

Valuation

The Shiller 10-year price-earnings ratio is currently 28.08, so the inverse or the earnings rate is 3.56%. The dividend yield is 1.98%. So an expected yearly return over the coming 10 years would be 3.56 + 1.98 or 5.54% provided the price-earnings ratio stays the same and before investment costs.

Against the 5.54% yearly expected return on stock over the coming 10 years, the current 10-year Treasury bond yield is 2.56%.

The risk premium for stocks is 5.54 - 2.56 = 2.98

Reply Tuesday, December 20, 2016 at 01:56 PM anne : , December 20, 2016 at 01:56 PM
http://www.multpl.com/shiller-pe/

Ten Year Cyclically Adjusted Price Earnings Ratio, 1881-2016

(Standard and Poors Composite Stock Index)

December 20, 2016 PE Ratio ( 28.08)

Annual Mean ( 16.71)
Annual Median ( 16.05)

-- Robert Shiller

anne -> anne... , December 20, 2016 at 01:57 PM
http://www.multpl.com/s-p-500-dividend-yield/

Dividend Yield, 1881-2016

(Standard and Poors Composite Stock Index)

December 20, 2016 Div Yield ( 1.98)

Annual Mean ( 4.38)
Annual Median ( 4.33)

-- Robert Shiller

i
anne : , December 20, 2016 at 01:56 PM
http://www.multpl.com/s-p-500-dividend-yield/

Dividend Yield, 1881-2016

(Standard and Poors Composite Stock Index)

December 20, 2016 Div Yield ( 1.98)

Annual Mean ( 4.38)
Annual Median ( 4.33)

-- Robert Shiller

anne -> anne... , December 20, 2016 at 02:08 PM
Accidentally posted here, should have been and was subsequently posted above.
im1dc : , -1
Bogle on factoring in Total Return on stocks vs Speculative Return

http://www.marketwatch.com/story/jack-bogles-secrets-to-becoming-a-winning-investor-2016-12-20

"Jack Bogle tells you the secret to becoming a winning investor"

By Chuck Jaffe, Columnist...Dec 20, 2016...11:40 a.m. ET

..."On smart beta investing in general:

Bogle: Smart beta is stupid.

So not one of these new index products is intriguing?

Bogle: No, no, no, no, no. Academics can find anything with these masses of data they have on their computers. They can find something that works in the past, it's as easy as rolling off a log. But it almost never works in the future – and not for very long - because they all forget the most important single thing that happens in our markets reversion to the mean. As the Good Book says, 'And the first shall be last and the last shall be first.'...

On what to expect from the market:

Bogle: The key to stock market investment returns is today's dividend yield [around 2%] plus future earnings growth. Nobody knows what that earnings growth will be, but I am guessing it will be maybe in the range of 4% to 5%. That seems like an informed reasonable expectation.

You compare that with history and we are looking at something very different. An average dividend yield not of 2% but of maybe 4.5%, and earnings growth has averaged over 6% over the last 50 years.

So we have lower earnings forecast and a much lower dividend yield built in. No one is going to change that. It's like buying a bond, what is the interest rate when you buy in. So we're talking about lower returns from investment side, from what corporations do.

The other side of total return on stocks is what we call speculative return, and that's how bullish or bearish investors are, which is measured by the price/earnings multiple -- how many times earnings your companies sell at or the total stock market sells at. Over the long-term past, that number has been about 15 times earnings. Today, depending on who you are listening to, it could be as high as 25 times earnings. ...I look backward at reported earnings after all the bad stuff and I'm looking at a p/e of 25. So the market is at least fully valued and I think it is reasonable to expect possibly negative returns but certainly no positive speculative return.

So we're looking at future market returns, if we are lucky, of 4-5% before the costs of investing are deducted."

[Dec 21, 2016] Bad News for America's Workers

Dec 21, 2016 | economistsview.typepad.com
anne : , December 20, 2016 at 05:34 AM
https://www.project-syndicate.org/commentary/trump-economy-hurts-workers-by-joseph-e--stiglitz-2016-12

December 19, 2016

Bad News for America's Workers
By JOSEPH E. STIGLITZ

NEW YORK – As US President-elect Donald Trump fills his cabinet, what have we learned about the likely direction and impact of his administration's economic policy?

To be sure, enormous uncertainties remain. As in many other areas, Trump's promises and statements on economic policy have been inconsistent. While he routinely accuses others of lying, many of his economic assertions and promises – indeed, his entire view of governance – seem worthy of Nazi Germany's "big lie" propagandists.

Trump will take charge of an economy on a strongly upward trend, with third-quarter GDP growing at an impressive annual rate of 3.2% and unemployment at 4.6% in November. By contrast, when President Barack Obama took over in 2009, he inherited from George W. Bush an economy sinking into a deep recession. And, like Bush, Trump is yet another Republican president who will assume office despite losing the popular vote, only to pretend that he has a mandate to undertake extremist policies.

The only way Trump will square his promises of higher infrastructure and defense spending with large tax cuts and deficit reduction is a heavy dose of what used to be called voodoo economics. Decades of "cutting the fat" in government has left little to cut: federal government employment as a percentage of the population is lower today than it was in the era of small government under President Ronald Reagan some 30 years ago.

With so many former military officers serving in Trump's cabinet or as advisers, even as Trump cozies up to Russian President Vladimir Putin and anchors an informal alliance of dictators and authoritarians around the world, it is likely that the US will spend more money on weapons that don't work to use against enemies that don't exist. If Trump's health secretary succeeds in undoing the careful balancing act that underlies Obamacare, either costs will rise or services will deteriorate – most likely both.

During the campaign, Trump promised to get tough on executives who outsource American jobs. He is now holding up the news that the home heating and air conditioning manufacturer Carrier will keep some 800 jobs in my home state of Indiana as proof that his approach works. Yet the deal will cost taxpayers $7 million, and still allow Carrier to outsource 1,300 jobs to Mexico. This is not a sound industrial or economic policy, and it will do nothing to help raise wages or create good jobs across the country. It is an open invitation for a shakedown of the government by corporate executives seeking handouts.

Similarly, the increase in infrastructure spending is likely to be accomplished through tax credits, which will help hedge funds, but not America's balance sheet: such programs' long track record shows that they deliver little value for money. The cost to the public will be especially high in an era when the government can borrow at near-zero interest rates. If these private-public partnerships are like those elsewhere, the government will assume the risks, and the hedge funds will assume the profits.

The debate just eight years ago about "shovel-ready" infrastructure seems to be a distant memory. If Trump chooses shovel-ready projects, the long-term impact on productivity will be minimal; if he chooses real infrastructure, the short-term impact on economic growth will be minimal. And back-loaded stimulus has its own problems, unless it is managed extremely carefully.

If Trump's pick for US Treasury Secretary, the Goldman Sachs and hedge-fund veteran Steven Mnuchin, is like others from his industry, the expertise he will bring to the job will be in tax avoidance, not constructing a well-designed tax system. The "good" news is that tax reform was inevitable, and was likely to be undertaken by Speaker of the House Paul Ryan and his staff – giving the rich the less progressive, more capital-friendly tax system that Republicans have long sought. With the abolition of the estate tax, the Republicans would finally realize their long-held ambition of creating a dynastic plutocracy – a far cry from the "equality of opportunity" maxim the party once trumpeted....

anne -> anne... , December 20, 2016 at 05:36 AM
https://www.theguardian.com/business/2016/dec/19/what-the-us-economy-doesnt-need-from-donald-trump

December 19, 2016

What the US economy doesn't need from Donald Trump
The only way he can square higher infrastructure and defence spending with tax cuts is voodoo economics
By Joseph Stiglitz - Guardian

As Donald Trump fills his cabinet, what have we learned about the likely direction and impact of his administration's economic policy?

To be sure, enormous uncertainties remain. As in many other areas, Trump's promises and statements on economic policy have been inconsistent. While he routinely accuses others of lying, many of his economic assertions and promises – indeed, his entire view of governance – seem worthy of Nazi Germany's "big lie" propagandists.

Trump will take charge of an economy on a strongly upward trend, with third-quarter GDP growing at an impressive annual rate of 3.2% and unemployment at 4.6% in November. By contrast, when Barack Obama took over in 2009, he inherited from George W Bush an economy sinking into a deep recession. And, like Bush, Trump is yet another Republican president who will assume office despite losing the popular vote, only to pretend that he has a mandate to undertake extremist policies.

The only way Trump will square his promises of higher infrastructure and defence spending with large tax cuts and deficit reduction is a heavy dose of what used to be called voodoo economics. Decades of "cutting the fat" in government has left little to cut: federal government employment as a percentage of the population is lower today than it was in the era of small government under Ronald Reagan about 30 years ago.

With so many former military officers serving in Trump's cabinet or as advisers, even as Trump cozies up to the Russian president, Vladimir Putin, and anchors an informal alliance of dictators and authoritarians around the world, it is likely that the US will spend more money on weapons that don't work to use against enemies that don't exist. If Trump's health secretary succeeds in undoing the careful balancing act that underlies Obamacare, either costs will rise or services will deteriorate – most likely both.

During the campaign, Trump promised to get tough on executives who outsource American jobs. He is now holding up the news that the home heating and air-conditioning manufacturer Carrier will keep around 800 jobs in my home state of Indiana as proof that his approach works. Yet the deal will cost taxpayers $7m, and still allow Carrier to outsource 1,300 jobs to Mexico. This is not a sound industrial or economic policy, and it will do nothing to help raise wages or create good jobs across the country. It is an open invitation for a shakedown of the government by corporate executives seeking handouts.

Similarly, the increase in infrastructure spending is likely to be accomplished through tax credits, which will help hedge funds, but not America's balance sheet: such programmes' long track record shows that they deliver little value for money. The cost to the public will be especially high in an era when the government can borrow at near-zero interest rates. If these private-public partnerships are like those elsewhere, the government will assume the risks, and the hedge funds will assume the profits....

Fred C. Dobbs : , December 20, 2016 at 05:37 AM
Millennials aren't lazy, they're workaholics
http://www.bostonglobe.com/business/2016/12/19/millennials-aren-lazy-they-workaholics/3ZD86pLBYg954qUEYa3SUJ/story.html?event=event25
via @BostonGlobe - Katie Johnston - December 20, 2016

As soon as he awakes, Brian Porrell checks his e-mail, sometimes firing off a message before he gets out of bed. He makes calls during his commute to the Waltham staffing firm WinterWyman, spends 10 to 12 hours at the office and out visiting clients, and keeps his phone by his side at night, checking work e-mails while he watches sports on TV.

Like many workers today, Porrell, 30, is on the job wherever he is - and he doesn't count out-of-office exchanges in his 50-plus hour week.

The millennial generation, the first to grow up with smartphones in their hands, is often stereotyped as lazy and entitled. But workplace experts say workaholics are common among 19-to-35-year-olds, perhaps more so than among older members of Generation X and baby boomers.

In one online study, more than 4 in 10 millennials consider themselves "work martyrs" - dedicated, indispensable, and racked with guilt if they take time off.


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What's more, nearly half of millennials want to be seen that way, according to the survey of 5,600 workers by Project: Time Off, a Washington, D.C., coalition that promotes vacation time.

So why are millennials bent on being workaholics? Even though the economy has improved markedly in recent years, young people in the workforce today have record levels of student loan debt. They are also less likely than previous generations to earn more than their parents, according to a Stanford University report. The percentage of children who are better off than their parents has dropped dramatically - 50 percent of those born in the 1980s have a higher standard of living than their parents, compared with 90 percent of those born in the 1940s.

(December 8, 2016 - Today's children face tough
prospects of being better off than their parents,
Stanford researchers find http://stanford.io/2ghwtmj
via @Stanford)

The way millennials were raised may play into their always-on mindset, too, said Bob Kelleher, a Boston-based employee engagement consultant and author. Many of them were highly scheduled, he said, going to soccer camps, enrolling in SAT prep courses, and competing on the debate team in order to get into a good college.

And some have delayed several of the responsibilities of adulthood, he noted, living with their parents and putting off marriage and kids. That frees them up to work even more.

"This is a driven generation," he said.

Jane Alexander, 26, a staffing manager at WinterWyman, said she is often one of the first to arrive and the last to leave the office but acknowledged she will probably work less when she has kids. "That is part of why I want to crank it now while I do have time," she said.

The concept of 24/7 work has become so prevalent that workplace analysts are starting to talk about "work-life blending" instead of "work-life balance."

The ability to work anytime, anywhere, helps propel this blending of work and life, in part because answering a work text at a coffee shop doesn't feel as much like work as sitting in a cubicle. Indeed, nearly one in five people said they don't consider after-hours texts from clients or customers to be work, according to Workforce Institute at Kronos Inc., a think tank set up by the Chelmsford human resources software provider.

"If a friend texted me at the gym I would answer their text. Answering a work e-mail is just a natural extension of that," said Jessica Molson, a 24-year-old integration manager at Beacon Communities, the Boston real estate developer and property management firm. "I don't think of it as working; it's just communicating."

Molson finds herself answering e-mails and jumping on conference calls even when she's on vacation, once distracting other participants with the sound of seagulls in the background while she was in Florida with her family. But going on a real vacation is a rarity for Molson, who tends to take long weekends because she's afraid of missing something at work - and also because she loves what she does.

Like many millennials, Molson came of age when the economy was reeling, and the uncertain job market had a profound effect on her.

"I'm very anxious to rack up as much experience as possible," she said.

Millennials are also more likely to forfeit paid days off than older generations of workers, with a quarter of 18-to-25-year-olds reporting they weren't using any of their paid vacation days this year, according to the personal finance website Bankrate.com. The rise of companies offering unlimited vacation time may contribute to that, workplace consultants say, noting that when there is no set bank of "use it or lose it" vacation time, people are less likely to take days off than they otherwise would be.

But not being able to truly get away from work can have serious downsides. Employees who don't disconnect experience more stress and anxiety, which leads to reduced productivity and a higher rate of burnout, said Dan Schawbel, research director at Future Workplace, an executive development firm in New York.

"If all you're doing is trying to be the perfect employee, it's actually not going to work out in your favor because it's going to make you less happy," said Schawbel, who describes working too much as "a weakness disguised as a strength."

Seeing co-workers hunched over their desks late at night can cause others to feel they should be doing the same and increase guilt, or resentment, among employees who strive to keep their work and home lives separate.

It can also lead people working around the clock to hold it against their employer - "even if it's your own fault," Schawbel noted. Indeed, people who see being a "work martyr" as a good thing are more likely to be unhappy with their jobs, and less likely to receive bonuses, according to the Project: Time Off study.

That can lead to retention problems, particularly among millennials, who aren't afraid to quit. Two out of three young workers expect to leave their current job by 2020, according to a recent study by Deloitte.

Still, workaholics aren't necessarily unhappy - many are ambitious or simply enjoy their work. At Beacon Communities, several employees work 60 to 70 hours a week no matter what adjustments supervisors make. Adding more people to an overachiever's team doesn't help, said chief administrative officer Darlene Perrone: "They just find another project." ...

reason -> Fred C. Dobbs ... , December 20, 2016 at 05:44 AM
I have enormous problems with generationism. Anything that starts with {generation} is/are(n't) I know what is coming is mostly nonsense. It is exactly the same as if you replaced {generation} with {race} {gender} {nationality} it is sure to be wrong for a significant (perhaps even a majority) of the addressed category.
Fred C. Dobbs -> reason ... , December 20, 2016 at 06:06 AM
It never concerned me (much) whether I
was 'doing better' than my parents, but
as a parent, my children's success does
concern me. Go figure.
point -> reason ... , December 20, 2016 at 06:17 AM
There does seem to be a fruitful direction to take in "generational" analysis, though.

It may be that the mechanism by which increasing inequality works is by reducing the prospects of new young workers while generally maintaining the income of older ones. Thus by age cohort, lifetime incomes follow a lower and lower track as the young age compared to older workers.

If that is what is happening, and someone with sufficiently fine data may be able to show it, then it would be trivial to forecast future inequality by re-composing forecasts of lifetime income profiles for the various cohorts and the inflow of new young cohorts.

The possibility is that there is a much more severe inequality on the way that is embedded in the current age cohorts, if we could display them.

Pinkybum -> reason ... , December 20, 2016 at 09:59 AM
I agree with this. I don't believe all the bullshit categories come up with like Generation X, Millenials etc. However, the ruling classes like to use age divisions to divide and conquer so we will keep on hearing about how unengaged, bored, lazy, vapid, greedy and irresponsible young people are. And we have heard it going back at least to Plato and Socrates!
Peter K. -> Pinkybum... , December 20, 2016 at 01:36 PM
Or Clinton supporters like pgl Krugman talking about Bernie Bros.
Pinkybum -> Peter K.... , December 20, 2016 at 06:39 PM
I know you love Krugman really.
Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 06:03 AM
Today's children face tough prospects
of being better off than their parents
http://stanford.io/2ghwtmj
via @Stanford - Dec 8

Parents often expect that their kids will have a good shot at making more money than they ever did.

But young people entering the workforce today are far less likely to earn more than their parents when compared to children born two generations before them, according to a new study by Stanford researchers.

In a new study, Stanford economist Raj Chetty found that the link between income and life expectancy varies from one area to another within the United States.

The findings show that the fraction of kids earning more than their parents has fallen dramatically – from 90 percent for kids born in the 1940s to 50 percent for kids born in the 1980s.

"It's basically a coin flip as to whether you'll do better than your parents," said economics Professor Raj Chetty, a senior fellow at the Stanford Institute for Economic Policy Research and one of the study's authors.

One of the most comprehensive studies of intergenerational income mobility to date, the study used a combination of Census data and anonymized Internal Revenue Service records to measure the rate of "absolute income mobility" – or the percentage of children who earned more than their parents – for people born between 1940 and 1984.

What emerged from the empirical analysis was an economic portrait of the fading American Dream, and growing inequality appeared to be the main cause for the steady decline.

"One of the defining features of the American Dream is the ideal that children have a higher standard of living than their parents," Chetty said. "We assessed whether the U.S. is living up to this ideal, and found a steep decline in absolute mobility that likely has a lot to do with the anxiety and frustration many people are feeling, as reflected in the election." ...

The paper was co-authored by David Grusky, a SIEPR senior fellow, sociology professor and director of the Stanford Center on Poverty and Inequality; Maximilian Hell, a sociology doctoral student at Stanford; Professor Nathaniel Hendren and doctoral student Robert Manduca, both of Harvard; and Jimmy Narang, a former SIEPR predoctoral fellow who is currently a doctoral student at the University of California, Berkeley.

The study – and more information about the team's research – can be found on The Equality of Opportunity Project website run by Chetty and Hendren.

http://www.equality-of-opportunity.org/

Fred C. Dobbs : , December 20, 2016 at 06:20 AM
Which Trump Will the World See?
http://nyti.ms/2i4v5UT
NYT - DESMOND LACHMAN - Dec 20

One of the basic themes of Donald J. Trump's election campaign was that the United States was being ripped off by foreign countries and that his administration would reduce our trade deficit.

Yet the budget policies he is now proposing would be sharply at odds with that goal. By advocating an expansive budget through tax cuts and infrastructure spending, Mr. Trump's plan would most likely lower national savings and propel the United States dollar ever higher, creating the very conditions to widen rather than to narrow the trade deficit.

Mr. Trump seems to be overlooking a matter of basic arithmetic. While a country's trade balance is the difference between a country's exports and imports, it is also the difference between the amount it saves and invests, as can be derived from rearranging the components of a country's aggregate demand equation. If a country saves more than it invests, it will run a trade surplus. Conversely, a country that saves less than it invests will run a trade deficit.

Seemingly oblivious to this basic math, Mr. Trump is proposing far-reaching and seemingly unfunded cuts in both corporate and household tax rates. Worse yet, he is simultaneously proposing large increases in both public infrastructure and military spending.

He is doing so in the unrealistic hope that these policies will cause the economy to accelerate from its present 2 percent growth rate to between 3 and 4 percent. And he is counting on such faster economic growth to generate additional tax revenue.

Should a significant pickup in economic growth not materialize, the net effect of these tax cuts and public spending policies will almost certainly lead to a significant widening of the budget deficit and to a corresponding decline in public savings. That, in turn, would in all probability lead to a significant widening of the trade deficit as the country's overall savings rate would decline.

A further basic weakness of Mr. Trump's budget proposal is that it would add stimulus to the economy at the very time that the economy is at or very close to full employment. That policy is bound to raise concerns about inflation and to push the Federal Reserve to raise interest rates more than it is currently contemplating in order to meet its inflation target.

One of the distinguishing characteristics of the global economy right now is the divergence of monetary policy stances among the world's major central banks. The United States Federal Reserve is now embarked on a path of raising interest rates at a time when the European Central Bank and the Bank of Japan are still engaged in aggressive rounds of quantitative easing in an effort to kick-start their moribund economies.

Forcing the Federal Reserve to raise interest rates at a faster pace than it is presently contemplating will only serve to widen the difference between it and the other major central banks. This would more than likely put further upward pressure on the dollar.

Since the November election, the United States dollar has already appreciated significantly, to its strongest level in the past 14 years. The last thing that the country needs if it is to reduce its trade deficit is a further dollar appreciation. Such an appreciation would make our exports across the board more expensive in foreign markets and make our imports cheaper in United States dollar terms. That would hardly seem to be the way to reduce the country's trade deficit. ...

Related:

Room for Debate: Can Trump's Infrastructure
Plan Work? http://nyti.ms/2i4tuye

Much of President-elect Donald J. Trump's pledge to
be a job creator rests on his call for a $1 trillion in
infrastructure spending over 10 years. While few question
the need for such investment, many have questioned how he
would finance it and what it would fund. Can Trump's plan
effectively repair the nation's infrastructure?

(Five pundits discuss.)

Peter K. -> Fred C. Dobbs ... , December 20, 2016 at 08:05 AM
"A further basic weakness of Mr. Trump's budget proposal is that it would add stimulus to the economy at the very time that the economy is at or very close to full employment. That policy is bound to raise concerns about inflation and to push the Federal Reserve to raise interest rates more than it is currently contemplating in order to meet its inflation target."

Centrist fail.

Krugman might be right that Trump's policies don't add much actual stimulus.

(He's better on economics than on politics.)

And so Obama's Fed might actually raise rates too quickly.

Combined with a strong dollar and weakening exports this could bring on a recession.

(EMichael is horrified at the fact that Obama's Fed might be considered anti-worker.)

Mohammed El-Erian talks about the international aspect in today's links.

He says the same thing as Krugman and pgl (except adds the Republican BS about tax cuts and deregulation being pro-growth.)

https://www.project-syndicate.org/commentary/international-cooperation-for-trumps-economic-plan-by-mohamed-a--el-erian-2016-12

DeDude -> Fred C. Dobbs ... , December 20, 2016 at 08:21 AM
"Mr. Trump seems to be overlooking a matter of basic arithmetic. While a country's trade balance is the difference between a country's exports and imports, it is also the difference between the amount it saves and invests,"

Exactly, his understanding of economics is at the 5'th grade level. Furthermore, just as he thinks he known "more than the generals", he also thinks he knows more than the economists. We have elected a narcissistic moron like Turkey's Ergodan and the Philippine's Duterte. We will se the same erratic and destructive policies they have seen, because he is equally incapable of leading a nation. The hope is that our institutions checks and balances will prevent us from slipping into the same type of semi-democracy.

RGC -> Fred C. Dobbs ... , December 20, 2016 at 10:02 AM
This is a very misleading presentation.

"If a country saves more than it invests, it will run a trade surplus. Conversely, a country that saves less than it invests will run a trade deficit."

But:

GDP (Gross Domestic Product) is the value of all goods and services sold within a country during one year. GDP measures flows rather than stocks (example: the public deficit is a flow, the government debt is a stock). Flows are derived from the National Accounting relationship between aggregate spending and income. Ergo:

(1) Y = C + I + G + (X – M)
where Y is GDP (expenditure), C is consumption spending, I is private investment spending, G is government spending, X is exports and M is imports (so X – M = net exports).

Another perspective on the national income accounting is to note that households can use total income (Y) for the following uses:
(2) Y = C + S + T
where S is total saving and T is total taxation (the other variables are as previously defined).

You can then bring the two perspectives together (because they are both just "views" of Y) to write:
(3) C + S + T = Y = C + I + G + (X – M)
You can then drop the C (common on both sides) and you get:

(4) S + T = I + G + (X – M)

Then you can convert this into the following sectoral balances accounting relations, which allow us to understand the influence of fiscal policy over private sector indebtedness. Hence, equation (4) can be rearranged to get the accounting identity for the three sectoral balances – private domestic, government budget and external:

(S – I) = (G – T) + (X – M)

The sectoral balances equation says that total private savings (S) minus private investment (I) has to equal the public deficit (spending, G minus taxes, T) plus net exports (exports (X) minus imports (M)), where net exports represent the net savings of non-residents.

Thus, (S-I) can be positive if (G-T) ( the federal deficit) is greater than (X-M) ( an assumed trade deficit).

Also:

"Should a significant pickup in economic growth not materialize, the net effect of these tax cuts and public spending policies will almost certainly lead to a significant widening of the budget deficit and to a corresponding decline in public savings."

But (S – I) = (G – T) + (X – M), i.e., a federal deficit increase that exceeds a trade deficit increase means greater public savings.

https://en.wikipedia.org/wiki/Sectoral_balances

DeDude -> RGC... , December 20, 2016 at 11:34 AM
"a federal deficit increase that exceeds a trade deficit increase means greater public savings."

Or "export" of treasuries, dollars and other pieces of paper that allow the private sector and government to run deficits at the same time. Nobody in the US need to save as long as we either print more money or sell more paper assets to savers in the non-US part of the world.

RGC -> DeDude... , December 20, 2016 at 11:42 AM
The equation includes all exchanges.
anne : , December 20, 2016 at 06:36 AM
http://cepr.net/blogs/beat-the-press/how-to-get-new-drugs-at-generic-prices

December 20, 2016

How to Get New Drugs at Generic Prices

The New York Times had an interesting piece * discussing the National Institutes of Health collaboration with private companies in the development of new cancer drugs. As the piece points out, this collaboration has proven very profitable for the drug companies, but leads to drugs that are very expensive because the drug companies are allowed to have patent monopolies, with no restriction on the price they charge.

It also suggests an alternative path. It shows, contrary to conventional wisdom in right-wing circles, everything the government funds is not worthless garbage. If the tables were turned, and all the funding came from the government (rather than relying on government imposed patent monopolies), then the new drugs could be sold at generic prices since everyone already would have been paid for their research.

In many cases, the generic price would be less than one percent of the patent protected price. New cancer drugs that might sell for $100,000 for a year's treatment, might sell for hundreds of dollars. ** Policy types who don't work for the pharmaceutical industry should be looking into more efficient alternatives for financing drug research.

* http://www.nytimes.com/2016/12/19/health/harnessing-the-us-taxpayer-to-fight-cancer-and-make-profits.html

** http://www.thebodypro.com/content/78658/1000-fold-mark-up-for-drug-prices-in-high-income-c.html

-- Dean Baker

anne -> anne... , December 20, 2016 at 06:43 AM
http://www.nytimes.com/2016/12/19/health/harnessing-the-us-taxpayer-to-fight-cancer-and-make-profits.html

December 18, 2016

Harnessing the U.S. Taxpayer to Fight Cancer and Make Profits
By MATT RICHTEL and ANDREW POLLACK

Enthusiasm for cancer immunotherapy is soaring, and so is Arie Belldegrun's fortune.

Dr. Belldegrun, a physician, co-founded Kite Pharma, a company that could be the first to market next year with a highly anticipated new immunotherapy treatment. But even without a product, Dr. Belldegrun has struck gold.

His stock in Kite is worth about $170 million. Investors have profited along with him, as the company's share price has soared to about $50 from an initial price of $17 in 2014.

The results reflect widespread excitement over immunotherapy, which harnesses the body's immune system to attack cancer and has rescued some patients from near-certain death. But they also speak volumes about the value of Kite's main scientific partner: the United States government.

Kite's treatment, a form of immunotherapy called CAR-T, was initially developed by a team of researchers at the National Cancer Institute, led by a longtime friend and mentor of Dr. Belldegrun. Now Kite pays several million a year to the government to support continuing research dedicated to the company's efforts.

The relationship puts American taxpayers squarely in the middle of one of the hottest new drug markets. It also raises a question: Are taxpayers getting a good deal?

Defenders say that the partnership will likely bring a lifesaving treatment to patients, something the government cannot really do by itself, and that that is what matters most.

Critics say that taxpayers will end up paying twice for the same drug - once to support its development and a second time to buy it - while the company reaps the financial benefit.

"If this was not a government-funded cancer treatment - if it was for a new solar technology, for example - it would be scandalous to think that some private investors are reaping massive profits off a taxpayer-funded invention," said James Love, director of Knowledge Ecology International, an advocacy group concerned with access to medicines.

The debate goes squarely to one of the nation's most vexing challenges: rising health care and drug prices. Kite is one of a growing number of drug and biotech companies relying on federal laboratories. Analysts expect the company to charge at least $200,000 for the new treatment, which is intended as a one-time therapy for patients.

While the law allows the government to demand drug-price concessions from its private-sector partners, the government has declined to do so with Kite and generally disdains the practice.

Insisting on lower prices, federal researchers say, would drive away innovative partners that speed the drug-development process and benefit patients. But with the government doing so much pivotal research, others say that the private sector cannot afford to walk away.

"The market is so reliant on the knowledge and know-how that comes out of the government and academic labs," said Dr. Aaron Kesselheim, director of the Program on Regulation, Therapeutics and Law at Brigham & Women's Hospital in Boston....

Fred C. Dobbs : , December 20, 2016 at 06:46 AM
Paul Krugman ‏✔ @paulkrugman · 8 minutes ago

Are people noticing that the Trump economic team is shaping up as a gathering of gold bugs? 1/

Treasury goes to a guy with little public profile, but hangs out with John Paulson (who is also close to Trump) 2/

(Trump's Treasury Pick Moves in Secretive Hedge
Fund Circles http://nyti.ms/2i3aZu6
NYT - MATTHEW GOLDSTEIN and ALEXANDRA STEVENSON - Dec 19)

And Paulson has been predicting inflation -- sometimes double-digit -- from Fed policy for years 3/

(John Paulson: Gold Will Rise In
Proportion To Bernanke's Dollar Printing http://www.forbes.com/sites/afontevecchia/2011/04/14/john-paulson-gold-will-rise-in-proportion-to-bernankes-dollar-printing/ Forbes - April 14, 2011)

Budget director appears to be John Bircher and conspiracy theorist (but aren't they all? But note economic views 4/

(Trump's Budget Director Pick Rick
Mulvaney Spoke at a John Birch Society Event
http://www.motherjones.com/politics/2016/12/trump-mulvaney-john-birch-society via @motherjones)

Birchers want return to gold and silver, Mulvaney seems to agree 5/

https://twitter.com/paulkrugman/status/811217899528429569

In this crew, Kudlow -- who thinks it's always the 1970s, but doesn't seem to see hyperinflation under his bed -- is the most reasonable 6/

Whoops -- forgot Mulvaney's Bitcoin derp: "He praised bitcoin as a currency that is "not manipulatable by any government."" 7/

Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 06:47 AM
https://twitter.com/paulkrugman/status/811219022695890948
Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 07:15 AM
(Is there also a place for Jim Cramer?)

Kudlow Close to Being Named
Trump Chief Economist, Paper Says http://www.bloombergquint.com/global-economics/2016/12/15/kudlow-close-to-being-named-trump-chief-economist-adviser-says
via @Bloomberg - Dec 18

President-elect Donald Trump's transition team is close to picking economic commentator Larry Kudlow to be chairman of the White House Council of Economic Advisers, according to a report in the Detroit News.

Kudlow, 69, has served as an informal adviser to the Trump campaign, primarily focused on tax policy and teaming primarily with Stephen Moore, a visiting fellow at the Heritage Foundation and fellow alumnus of President Ronald Reagan's economic team. Moore was cited by the newspaper as saying Thursday the selection of Kudlow would be announced in the next 48 hours.

Kudlow's appointment, which would require Senate confirmation, marks another non-traditional pick by the incoming administration. Kudlow doesn't hold a Ph.D. in economics, unlike former heads of the CEA. For five years, he hosted a show on CNBC on business and politics, and he's worked at the Federal Reserve Bank of New York. During Reagan's first term, Kudlow was associate director for economics and planning in the White House's Office of Management and Budget. ...

Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 04:05 PM
Kudlow & Cramer (was) a CNBC American business
and politics television program hosted by
conservatives Lawrence Kudlow and Jim Cramer, which aired weekdays from 2002 to 2005. (Wikipedia)
Peter K. -> Fred C. Dobbs ... , December 20, 2016 at 07:32 AM
"In this crew, Kudlow -- who thinks it's always the 1970s, but doesn't seem to see hyperinflation under his bed -- is the most reasonable 6/"

Maybe pgl will insult Krugman like he insulted Bernstein who pgl said was soft on Kudlow.

pgl -> Peter K.... , December 20, 2016 at 07:58 AM
Misrepresenting 24/7 we see. No - Krugman got this right. And yes Jared was nicer to Kudlow than I could ever be. But soft? A day without a PeterK lie is like a day without sunshine.
Peter K. -> pgl... , December 20, 2016 at 08:16 AM
It's funny how you refuse to stand up for your own arguments.

Your inconsistency reminds me of Kudlow in a way.

DeDude : , December 20, 2016 at 07:16 AM
What is the appropriate response when an adversary throws the election to ensure their favorite candidate becomes our president?

http://www.vox.com/world/2016/12/20/14001118/putin-russia-hack-dnc-clinton-trump-election-podesta-emails

Peter K. -> DeDude... , December 20, 2016 at 07:34 AM
Whip up some xenophobic, anti-Russia hysteria to distract people from the fact that your lame centrist candidate lost to a laughable reality TV star?
DeDude -> Peter K.... , December 20, 2016 at 09:09 AM
Oh buh-hu-hu. Get over it and stop the whining.

You candidate was to weak to win the semifinals, and he would have been crushed in the finals. He didn't have what it takes to win in little league, and he wouldn't have had what it takes to win in the big league either. Maybe the democrats could have found someone who would have won against Trump; but it sure as hell wasn't any of the losers of their primary contest.

anne : , December 20, 2016 at 07:32 AM
http://cepr.net/blogs/beat-the-press/someone-has-to-tell-john-williams-inflation-is-not-accelerating

December 20, 2016

Someone Has to Tell John Williams Inflation Is Not Accelerating

The Federal Reserve Board raising interest rates last and seem poised to do so again in the not distant future. The rationale is that the economy is now near or at full employment and that if job growth continues at its recent pace it will lead to a harmful acceleration in the inflation rate.

We have numerous pieces raising serious questions about whether the labor market is really at full employment, noting for example the sharp drop * in employment rates (for all groups) from pre-recession levels and the high rate of involuntary part-time ** employment. But the story of accelerating inflation is also not right.

This is particularly important, since John Williams, the president of the San Francisco Federal Reserve Bank, cited accelerating inflation as a reason to support last week's rate hike, and possibly future rate hikes, in an interview in the New York Times this morning. Williams has been a moderate on inflation, so there are many members of the Fed's Open Market Committee who are more anxious to raise rates than him.

A close look at the data does not provide much evidence of accelerating inflation. The core personal consumption expenditure deflator, the Fed's main measure of inflation, has risen 1.7 percent over the last year, which is still under the 2.0 percent target. This target is an average, which means that the Fed should be prepared to allow the inflation rate to rise somewhat above 2.0 percent, with the idea that inflation will drop in the next recession.

Anyhow, the 1.7 percent rate is slightly higher than a low of 1.3 percent reached in the third quarter of 2015, but it is exactly the same as the rate we saw in the third quarter of 2014. In other words, there has been zero acceleration in the rate of inflation over the last two years.

Furthermore, even this modest acceleration has been entirely due to the more rapid increase in rent over the last two years. The inflation rate in the core consumer price index, stripped of its shelter component, actually has been falling slightly over the last year. It now stands at 1.1 percent over the last year.

[Consumer Price Index Minus Food, Energy and Shelter, 2006-2016]

It is reasonable to pull shelter out of the CPI because rents do not follow the same dynamic as most goods and services. In fact, higher interest rates, by reducing construction, are likely to increase the pace of increase in rents rather than reduce them.

This issue is hugely important, since if the Fed prevents the labor market from tightening further it will be preventing millions of people from getting jobs. These people are disproportionately African American and Hispanic and also less-educated workers. The decision to tighten will also lessen the bargaining power of a much larger group of workers, making it more difficult for them to get pay increases.

The weak labor market of the Great Recession resulted in a large redistribution from wages to profits. The tightening of the labor market in the last two years has reversed part of this shift. If the Fed raises interest rates enough to prevent further tightening, then it will be locking in place this redistribution to profits. That would be bad news for tens of millions of workers, especially if the decision was based on a misreading of inflation data.

* http://cepr.net/blogs/beat-the-press/men-who-don-t-work-when-did-economists-stop-being-wrong-about-the-economy

** http://cepr.net/blogs/cepr-blog/the-rise-of-involuntary-part-time-employment-by-race-gender-age-industry-and-occupation

*** http://www.nytimes.com/2016/12/20/upshot/feds-john-williams-feels-uncertainty-among-business-leaders.html

-- Dean Baker

anne -> anne... , December 20, 2016 at 07:34 AM
https://fred.stlouisfed.org/graph/?g=cbCB

January 15, 2016

Consumer Price Index Less Food and Energy & Consumer Price Rent Index, 2000-2016

(Percent change)


https://fred.stlouisfed.org/graph/?g=cbCD

January 15, 2016

Consumer Price Index Less Food and Energy & Consumer Price Rent Index, 2000-2016

(Indexed to 2000)

Fred C. Dobbs : , December 20, 2016 at 07:36 AM
(Only 4 billionaires though,
counting Trump, totaling $12.65B.)

Trump's Cabinet picks so far worth a combined $13b
http://www.bostonglobe.com/metro/2016/12/20/trump-cabinet-picks-far-are-worth-combined/XvAJmHCgkHhO3lSxgIKvRM/story.html?event=event25
via @BostonGlobe - Matt Rocheleau - December 20, 2016

President-elect Donald Trump boasted about his wealth during his campaign. Now he's surrounding himself with people who have similarly unimaginable riches.

Collectively, the wealth of his Cabinet choices so far is about five times greater than President Obama's Cabinet and about 34 times greater than the one George W. Bush led at the end of his presidency.

And Trump still has four more key advisory spots left to fill.

The net worth of the Cabinet Trump had selected as of Monday was at least $13.1 billion, based on available estimates, or more than the annual gross domestic product of about 70 small countries.

That included the $3.7 billion Trump is estimated to be worth, according to Forbes. (Trump has claimed to be worth much more - around $10 billion.)

It also included the $5.1 billion in net worth that Forbes estimated belongs to the family of Betsy DeVos, the former Michigan Republican Party chair and education activist selected to be education secretary.

Investor Wilbur Ross, picked to become commerce secretary, is estimated to be worth $2.5 billion, according to Forbes.

Linda McMahon, a former WWE executive and U.S. Senate candidate, has been picked to serve as small business administrator. She and her husband Vincent McMahon are worth at least an estimated $1.35 billion, according to Bloomberg.

Exxon Mobile CEO Rex Tillerson, nominated to become secretary of state, is estimated to be worth $365 million, according to Bloomberg.

Steven Mnuchin, the former Goldman Sachs executive in line to become Treasury secretary, is worth at least $46 million, according to Politico.

Retired neurosurgeon and former presidential candidate Ben Carson, who is in line to become the housing and urban development secretary, was worth $26 million, according to a Forbes estimate from 2015.

The pick for transportation secretary, Elaine Chao, the former labor secretary, was worth an estimated $16.9 million as of 2008, when she last held public office, according to the Center for Responsive Politics, a Washington-based nonprofit that tracks campaign finance data.

Two other Cabinet picks - Alabama Senator Jeff Sessions for attorney general and Georgia Representative Tom Price for health and human services secretary - were estimated to be worth about $7.5 million and $13.6 million, respectively, as of 2014, according to the center.

Former Texas governor and presidential candidate Rick Perry, selected to be energy secretary, is estimated to be worth about $3 million, according to the Associated Press.

U.S. Representative from South Carolina Mick Mulvaney, picked to become director of the Office of Management and Budget, was worth an estimated $2.6 million as of 2014, according to the center.

Fast-food executive Andrew Puzder, picked to fill the role of labor secretary, is also a multi-millionaire, according to Politico.

U.S. Representative from Montana Ryan Zinke, picked to become interior secretary, was worth an estimated $675,000 as of 2014, according to the center. ...

Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 08:31 AM
The 5 richest Cabinet members of all time http://on.mktw.net/2h8iBvr

(Andrew Mellon tops the list. Treasury
secretary under Harding, Coolidge and
Hoover, worth $50 billion in current
dollars. No one else is even close.)

Mellon was the third-richest American of his time - behind only John D. Rockefeller and Henry Ford - and has been ranked the 14th richest American of all time, in inflation-adjusted dollars.

Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 09:34 AM
'Collectively, the wealth of his Cabinet choices so far is about five times greater than President Obama's Cabinet and about 34 times greater than the one George W. Bush led at the end of his presidency.'

So, the Obama cabinet is worth $2.6B apparently.

That would largely be due to Penny Pritzker,
#3 on the MarketWatch list above,
who is said to be worth $1.85B.

And, believe it or not, the Bush Jr
cabinet was apparently only worth
$382M, a pittance.

Peter K. : , December 20, 2016 at 08:08 AM
Mohamed A. El-Erian on Trump's macro and international economics.

https://www.project-syndicate.org/commentary/international-cooperation-for-trumps-economic-plan-by-mohamed-a--el-erian-2016-12

This sounds a lot like what pgl and Krugman are saying about a strong dollar providing headwinds to the economy.

My question though is consider a thought experiment where Comey didn't throw the election to Trump.

Hillary's fiscal policies were supposedly budget neutral and wouldn't really effect the rate of Fed hikes.

Would the strong dollar effect have been applicable to a strengthening Clinton economy as well to a Trump economy?

Much depends on the rate of Fed hikes?

Peter K. -> Peter K.... , December 20, 2016 at 08:11 AM
Obviously without the tax cuts for the rich, Hillary's budget would have allowed more fiscal room for stimulus in the event of a downturn.

Her infrastructure spending, such as it was, would have provided more automatic stabilizers and helped give the Fed room to lower rates later on.

Peter K. -> Peter K.... , December 20, 2016 at 08:14 AM
When Yellen says there's no need for fiscal stimulus - which should be blasphemous to all "real" progressives* - what she's saying is that the Fed can just use uncoventional monetary policy again the next time there is a downturn.

They gave us the recovery they wanted this past time after all.

* of course pgl refuses to discuss this episode. His lies of omission are the biggest of all. Krugman too refuses to address Yellen's blasphemy. Only DeLong was brave enough and honest enough to disagree.

im1dc : , December 20, 2016 at 08:21 AM
Good News For Guys and the Gals that love them and outstandingly clever science

"Surgeons have described a new treatment for early stage prostate cancer as "truly transformative"

http://www.bbc.com/news/health-38304076

"Prostate cancer laser treatment 'truly transformative'"

By James Gallagher, HEalth and science reporter...BBC News...12-20-2016...7 hours ago

"The approach, tested across Europe, uses lasers and a drug made from deep sea bacteria to eliminate tumours, but without causing severe side effects.

Trials on 413 men - published in The Lancet Oncology - showed nearly half of them had no remaining trace of cancer.

Lifelong impotence and incontinence are often the price of treating prostate cancer with surgery or radiotherapy.

Up to nine-in-10 patients develop erectile problems and up to a fifth struggle to control their bladders.

That is why many men with an early stage tumour choose to "wait and see" and have treatment only when it starts growing aggressively.

"This changes everything," said Prof Mark Emberton, who tested the technique at University College London.

Triggered to kill

The new treatment uses a drug, made from bacteria that live in the almost total darkness of the seafloor and which become toxic only when exposed to light.

Ten fibre optic lasers are inserted through the perineum - the gap between the anus and the testes - and into the cancerous prostate gland.

When the red laser is switched on, it activates the drug to kill the cancer and leaves the healthy prostate behind..."

Fred C. Dobbs -> im1dc... , December 20, 2016 at 01:40 PM
Light therapy effectively treats early prostate
cancer: New non-surgical treatment for low-risk
prostate cancer can effectively kill cancer cells
while preserving healthy tissue
https://www.sciencedaily.com/releases/2016/12/161219202008.htm

Padeliporfin vascular-targeted photodynamic
therapy versus active surveillance in men with low-
risk prostate cancer (CLIN1001 PCM301): an open-
label, phase 3, randomised controlled trial
http://www.thelancet.com/journals/lanonc/article/PIIS1470-2045%2816%2930661-1/abstract

Peter K. : , December 20, 2016 at 08:22 AM
Krugman:

http://krugman.blogs.nytimes.com/2016/05/09/the-facts-have-a-well-known-center-left-bias/

The Facts Have A Well-Known Center-Left Bias

MAY 9, 2016 8:01 AM

"But I'm also hearing from Berniebros, insisting that anything I say must be wrong, because I criticized their hero. And this suggests to me that we may need a clarification of the doctrine that facts have a well-known liberal bias. More specifically, they seem to have a center-left bias: conservatives are big on empirical denial, but so is some of the U.S. left."

I'd say the center-left is big on empirical denial, especially when it comes to the rise of populism and globalization.

They'd rather focus on Putin's hackers.

But some are coming around or at least asking questions. See Tim Duy, DeLong, and Noah Smith.

http://economistsview.typepad.com/timduy/2016/12/responsibility.html

https://www.bloomberg.com/view/articles/2016-12-16/four-ways-to-help-the-midwest

http://www.bradford-delong.com/2016/12/is-the-problem-one-of-insufficient-market-wages-inadequate-social-insurance-polanyian-disruption-of-patterns-of-life-.html

Peter K. -> Peter K.... , December 20, 2016 at 08:24 AM
From a New York Times article on the growing popularity of the universal basic income idea.

http://www.nytimes.com/2016/12/17/business/economy/universal-basic-income-finland.html

"he search has gained an extraordinary sense of urgency as a wave of reactionary populism sweeps the globe, casting the elite establishment as the main beneficiary of economic forces that have hurt the working masses. Americans' election of Donald J. Trump, who has vowed to radically constrain trade, and the stunning vote in Britain to abandon the European Union, have resounded as emergency sirens for global leaders. They must either update capitalism to share the spoils more equitably, or risk watching angry mobs dismantle the institutions that have underpinned economic policy since the end of World War II."

The center-left, like Krugman, EMichael, pgl, Bakho, etc. argue that's just racism. That's it.

There's been an upsurge in racism and tribalism worldwide for some inexplicable reason. Fox News.
Or Obama.

Peter K. -> Peter K.... , December 20, 2016 at 08:27 AM
Krugman discusses the 1930s but fails to recall how the Great Depression helped lead to the rise of National Socialism and Hitler.

He forgets Keynes's The Economic Consequences of The Peace.

https://en.wikipedia.org/wiki/The_Economic_Consequences_of_the_Peace

Peter K. -> Peter K.... , December 20, 2016 at 08:32 AM
Even the U.S you had Father Coughlin, the populist Huey Long, and Charles Lindbergh's America First movement which was isolationist just like Trump.

"Europe as a whole was badly hit, in both rural and industrial areas. Democracy was discredited and the left often tried a coalition arrangement between Communists and Socialists, who previously had been harsh enemies. Right wing movements sprang up, often following Italy's fascist mode."

Like Greece's fascist Golden Dawn.

im1dc : , December 20, 2016 at 08:29 AM
Not expecting this, but here it is anyway

The shocking election of demagogic hate monger Trump has let Genie out of the Bottle, the Liberal Genie

"Why US liberals are now buying guns too"

http://www.bbc.com/news/magazine-38297345

"Why US liberals are now buying guns too"

By Brian Wheeler...BBC News, Washington DC...12-20-2016...6 hours ago

"Gun ownership has traditionally been associated with the right wing in America but the election of Donald Trump has prompted some left-wingers to join gun clubs - and even start preparing for the collapse of society.

"I really didn't expect to be thinking about purchasing a gun. It was something that my father did and I rolled my eyes at him."

Clara, a 28-year-old nursing student, grew up in the Mid-West, where "the folks that had guns were seen as hicks" or were just "culturally different", she says.

But since the election of Donald Trump in November she has started going to a gun range for the first time and is shopping around for a semi-automatic pistol.

"It's been seeing the way that Trump's election has mobilised a lot of the far right and given them hope," she says, citing a rise in reports of hate crimes and neo-Nazi activity.

As a transgender woman, she does not fear for her personal safety in the Californian city where she now lives but she says she knows people in rural areas "who woke up and found a bunch of swastikas and words like 'faggot' and 'trannie' scrawled all over their building".

She foresees a wide-ranging struggle between the Trump administration and the left over issues such as immigration and racial politics.

But won't buying a gun just increase tensions?

"Things are already escalating and they will continue to do so and me not engaging or being prepared to defend my friends by force... isn't going to stop people from being attacked or harassed," Clara says.

Gun sales in America hit record levels in October amid fears a Hillary Clinton election victory would lead to increased controls.

Many expected the election of Donald Trump, whose candidacy was backed by the National Rifle Association, to bring an end to the panic buying. Shares in gun manufacturers dropped by as much as 18% following his victory.

But instead FBI background checks for gun transactions soared to a new record for a single day - 185,713 - during the Black Friday sales on 25 November, according to gun control news site The Trace.

Some of this has been put down to gun retailers selling off stock at reduced prices, but there have also been reports of more "non-traditional" buyers, such as African Americans and other minorities, turning up at gun shops and shooting ranges..."

im1dc : , December 20, 2016 at 08:59 AM
Item #1 of 3 in your Briefing that explains THE WAY BACK

http://www.nbcnews.com/politics/first-read/single-greatest-force-american-politics-partisanship-n698186

"The Single Greatest Force in American Politics? Partisanship"

by Chuck Todd, Mark Murray and Carrie Dann...Dec 20 2016...8:56 am ET

"Why partisanship is the single greatest force in American politics"

Want to know why partisanship -- or party identification -- is the single greatest force in American politics today? Just check out these shifting attitudes about the economy and nation's direction in the latest NBC/WSJ poll:

... 68% of Republicans believe the economy will get better in the next 12 months (versus just 14% of GOPers who said this a year ago in the Dec. 2015 NBC/WSJ poll).

... By contrast, only 19% of Democrats said the economy will improve next year (compared with 37% of them who said this last December).

... Right now, 52% of Republicans say the country is headed in the right direction (versus just 5% who said this in December 2015).

... Conversely, only 18% of Democrats say the country is headed in the right direction (compared with 37% of them who said this a year ago).

Folks, the underlying dynamics of the U.S. economy have remained pretty much the same over the past year. The only thing that has changed is the party that will be in the White House next year. It's all confirmation that so much public opinion is shaped through Americans' partisan lenses, and little else. Want another example of this from our NBC/WSJ poll? A combined 86% of Democrats say they are bothered a great deal/quite a bit by Russia's interference in the 2016 presidential election, versus just 29% of Republican respondents who say this..."

im1dc -> im1dc... , December 20, 2016 at 09:01 AM
Item #2 of 3 of THE WAY BACK briefing

same NBC source

"Asymmetrical warfare: Democrats have knives, Republicans have guns"

"But if partisanship is the greatest force in American politics, there's maybe a more important dynamic at play -- the asymmetrical warfare between the two parties. As the New York Times' David Leonhardt writes in comparing how Barack Obama is leaving the White House versus how Republican Pat McCory is leaving power in North Carolina, Democrats are wielding knives while Republicans have guns. Think of the 2011 debt-ceiling standoff. Mitch McConnell denying Obama's Supreme Court pick to even get a hearing. And now what's playing out in North Carolina. Republicans are playing a different game than Democrats are playing."

im1dc -> im1dc... , December 20, 2016 at 09:02 AM
Item #3 of 3 of THE WAY BACK briefing

same NBC source

"Trump's popularity improves -- but he's still the most unpopular president-elect in the history of our poll"

"Also from our NBC/WSJ poll: 40% of Americans now have a positive view of Donald Trump, versus 46% who have a negative view. That's up considerably from his 29%-62% rating in the October NBC/WSJ poll. Still, Trump's 40%-46% fav/unfav score is the WORST in the history of our poll for a president-elect and the first time it's a net-negative. Bill Clinton's was 60%-19% in Dec. 1992, George W. Bush's was 48%-35% in Dec. 2000, and Barack Obama's was 67%-16% in Dec. 2008.

For the rest on our poll, click here. http://www.nbcnews.com/politics/first-read/poll-majority-americans-pessimistic-or-uncertain-about-trump-presidency-n697971

im1dc : , December 20, 2016 at 09:12 AM
My prescription and takeaway is for the next four years for the Democratic Party especially those in D.C. is for Hyper Partisanship, no holds barred bare knuckle deliberate faithless drug out deliberations and negotiations with the GOP, and the ceaseless cacaphonic BLAME, BLAME, BLAME media game of imagined, fake, and real failures of every Republican especially Donald Trump and his family.

There you have it, your assignment for the next next Presidential Election.

im1dc -> im1dc... , December 20, 2016 at 09:23 AM
This is, of course, the opposite of the Democratic Party Obama-way and the Clinton-way that reasonably expected the American Electorate to see through and reject those same tactics used on President Obama and Hillary Clinton when they relied upon logic not lies, facts not falsehoods, and intellectual and scientific critical thinking instead of rants, ravings, and unhinged screeds to win the argument and sway the Electorate.

IOW, time to stick it to Middle America Fly Over country and make them see how wrong they were to vote for Trump while aiding the BiCoastal States, and the majority of voters in the last Election, survive the next 4 years.

First and foremost start by insisting on cutting off or at least severely reducing any and all AG support welfare and corporate welfare for noncompetitive manufacturers before any support for cutting Obamacare, SS, and Medicare, which are the highest items on Ryan's and the GOP's agenda.

im1dc : , December 20, 2016 at 09:40 AM
Trump and his assembled Cabinet picks and Team are a full month away from taking the Oath of Office and have loaded the DEMS up with issues at the heart of every American Worker, Blue and Middle Class: Class Warfare and Pay Inequality

http://www.nbcnews.com/business/business-news/why-donald-trump-could-spell-doom-ceo-pay-transparency-n698156

"Why Donald Trump Could Spell Doom for CEO Pay Transparency"

by Martha C. White...Dec 20 2016...7:49 am ET

"Outsized CEO pay is an issue coming under increasing scrutiny, and Donald Trump has already promised to do away with legislation that would require companies to be more transparent.

However, compensation experts say an executive branch filled with corporate titans could benefit the relative few atop the corporate ladder at the expense of everyone else.

The implicit assumption is that these CEOs will look out for their own.

Furthermore, because Trump is one of those CEOs himself, it might very well "put a halo effect around the whole issue [of executive pay] for a while," said John Challenger, CEO of executive outplacement firm Challenger, Gray & Christmas.

Repeal of Dodd-Frank?

"I think the first year will be a true measure of who he is as a policy person," said Lawrence Mishel, president of the Economic Policy Institute, a left-leaning think tank...

...Starting next year, the Securities and Exchange Commission planned to require companies to disclose how much their CEO makes as a ratio of median employee pay, giving shareholders - and ordinary Americans - a window into how companies treat their CEO compared to the rank-and-file workers, but the future of that rule is in limbo.

Donald Trump, although he railed against fat CEO pay packages during his campaign, calling them "disgraceful," also vowed to "dismantle" the Dodd-Frank Act, which provided the mandate for the new SEC rule...

...For the future, many expect the SEC's push for increased transparency to be scuttled, in keeping with Donald Trump's promise to roll back regulations of all types...

..."they believe now that it's likely to be pulled out is when you look at the cabinet Trump is putting together, there are a lot of billionaires, a lot of CEOs," Kropp said.

"It seems to me that the pressure is going to abate. There's going to be less scrutiny," Challenger predicted..."

Observer : , December 20, 2016 at 09:48 AM
This doubling of the sub fleet was outlined in a defense White Paper earlier this year. Basically, its due to concerns about China. The article doesn't say, but I assume these are AIP powered.


Australia, France sign submarine deal

"Australia and France on Tuesday signed the final agreement for French naval contractor DCNS to build 12 submarines in what Prime Minister Malcolm Turnbull called a "critically important step in the development of our security."

The 34.9 billion euro ($36.3 billion) deal, including separate agreements with US and Australian contractors, is one of the world's largest defense contracts.

Turnbull described the deal as the "last foundation stone needed to ensure Australia is able to develop a cutting-edge sovereign submarine capability."

The submarines will be a conventionally-powered version of France's 4,700-tonne nuclear-fuelled Barracuda complete with stealth technology. France and Australia agreed in April to the deal, for which Germany and Japan were also contending.

Most of the submarine production will be in the southern city of Adelaide and create 2,800 high-skilled jobs, Turnbull said.

US defense giant Lockheed Martin will produce the combat systems for the Barracudas."

http://www.dw.com/en/australia-france-sign-submarine-deal/a-36839878

Fred C. Dobbs -> Observer... , December 20, 2016 at 11:56 AM
Submarines deal: Why is
Australia paying for old technology?

Dick Smith (#) furious at $50 billion submarines 'fiasco' - September 14, 2016
http://www.news.com.au/finance/business/dick-smith-furious-at-50-billion-subs-fiasco/news-story/6f85752a58e5a7afa5472c0ac5453065

A war of words has erupted between a group of prominent Australian businessmen and seemingly the entire southern state over the Federal Government's controversial French submarines deal.

(Adelaide, South Australia, is to be
a recipient of much employment related
to this deal.)

The group, which includes entrepreneur Dick Smith, Gary Johnston of Jaycar Electronics and adman John Singleton, took out a full-page advertisement in
The Australian on Tuesday slamming the move to go with French producer DCNS, suggesting buying off-the-shelf nuclear subs would be a better option.

They warned the current deal, announced on April 28 this year, will "condemn our sailors to their graves". The group says it can't understand the Federal Government's decision to award a multi-billion deal to French supplier DCNS, which will be required to deliver 12 diesel-powered submarines for which there are no drawings and no plans.

They said under the deal, the navy's next fleet of conventionally-powered subs would come into service at a time when the rest of the world would be operating nuclear fleets, which would be "like putting a propeller plane up against a modern jet".

"We will be condemning our sailors to their graves," the advertisement said. It also questioned the economics of the decision, saying it would be cheaper to subsidise car industry jobs, if creating jobs was the desired outcome. Mr Johnston said DCNS was being asked to build a diesel-powered version of what is essentially a nuclear-powered sub.

"It's a bit like trying to turn a cat into a dog. It's crazy. Why would you do it?" he told Sky News. "They haven't got a drawing, they haven't got a plan. Their current nuclear submarine, the Barracuda, is sitting on a slipway. It won't even be tested until next year."

DCNS declined to comment on the row, but the Federal Government said the decision to award the contract to the company came after a competitive evaluation process, which involved the best experts available. It said the new subs would be regionally superior and would allow Australia to pursue its national and international interests. ...

The government estimates building the submarines in Adelaide will create 2800 jobs.

That would be the equivalent of giving every single one of those 2800 workers a cheque for $5.4 million - or handing every single man, woman and child in South Australia a cheque for nearly $9000.

Speaking on 2GB, Mr Johnston said "if we were smart" we would simply buy the French or British nuclear sub, or even the "ultimate" US Virginia class nuclear submarine, which has 33 years of fuel.

"You don't have to have a nuclear industry in Australia - you just simply buy the thing and 33 years later you trade it in on a new one," he said.

"It's unbelievable how these things are just such an order of magnitude better than a diesel sub. Every one of the enemy we would hopefully not ever encounter, but if we do, would have nuclear submarines which will blow diesel submarines out of the water."

But the group was dismissed as "sad old men" by South Australian Premier Jay Weatherill, who rubbished their proposal to go nuclear. "[It] looked like it was scribbled on the back of a serviette after a long lunch," Mr Weatherill tweeted on Tuesday.

Defence Industry Minister Christopher Pyne, who holds the South Australian seat of Sturt, described the criticism as "misinformed, misguided" and "entirely wrong". "We don't have nuclear energy in Australia and therefore we can't have nuclear submarines," Mr Pyne told ABC radio on Wednesday.

"The advice from defence was entirely clear and that was that the French DCNS design was the best for what we needed.

"Quite clearly we are not getting a Short Fin Barracuda submarine, we are getting a unique design for Australian conditions. We've chosen DCNS because we believe that they have the best record and the best designs in terms of large submarines both nuclear and non nuclear." ...

#- Richard Harold "Dick" Smith, AC (*) is an Australian entrepreneur, businessman, aviator, philanthropist, and political activist. He is the founder of Dick Smith Electronics, Dick Smith Foods and Australian Geographic, and was selected as the 1986 Australian of the Year. In 2010 he founded the media production company Smith&Nasht with the intention of producing films about global issues. In 2015 he was awarded the Companion of the Order of Australia (*), and is a fellow of the Committee for Skeptical Inquiry. (Wikipedia)

Fred C. Dobbs -> Fred C. Dobbs ... , December 20, 2016 at 12:30 PM
Fun facts: (Wikipedia)

Shortfin barracuda may refer to:
Australian barracuda, a fish found
mainly outside Australia & New Zealand

(Australian barracuda, arrow barracuda,
Australian sea pike, sea pike, snook, or
shortfin barracuda, Sphyraena novaehollandiae)

Shortfin Barracuda-class submarine, a submarine class proposed for Australia's Collins-class replacement

ilsm -> Fred C. Dobbs ... , December 20, 2016 at 04:12 PM
Super batteries, high efficiency motor generators, materials......

going diesel is not old tech!

In fact there are cost suggestions that CVN's are too expensive to have to find oilers all the time for gas guzzling jets.

Where all that waste goes for two full reactors 'sets'............

im1dc : , December 20, 2016 at 10:05 AM
From the GOPsters Playbook 'First move on the poor to deny necessities of life'

Wisconsin, US - 6m ago

"Wisconsin Gov. Scott Walker asks President-elect Trump for flexibility to implement drug screening, testing of some adults on SNAP - statement"

Read more on walker.wi.gov

im1dc : , December 20, 2016 at 10:10 AM
Gee, what a surprise...more lying disingenuousness from Republicans in D.C.

2016 US elections - 1h ago

"Senate Majority Leader Mitch McConnell says no select committee needed to investigate Russian meddling; says 'no question' on election interference - The Hill"

Read more on thehill.com

im1dc -> im1dc... , December 20, 2016 at 10:13 AM
This should serve as a warning to those here that put their faith in some Republican senators such as S. Lindsey Graham and S. John McCain, they can not trusted, they are straw men, sent out to make their Party look less extreme than it is in fact.
im1dc -> im1dc... , December 20, 2016 at 10:22 AM
Embracing xenophobia is not the way for Americans

US immigration reform debate - 2h ago

"Wisconsin Gov. Scott Walker asks Donald Trump for more control over refugees - AP"

Read more on madison.com

ilsm -> im1dc... , December 20, 2016 at 04:16 PM
let's have the committees read the wikileaks' stuff into the congressional record!
anne : , December 20, 2016 at 10:30 AM
http://www.nytimes.com/2016/12/19/opinion/how-republics-end.html

December 18, 2016

How Republics End
By Paul Krugman

Roman politics involved fierce competition among ambitious men. But for centuries that competition was constrained by some seemingly unbreakable rules. Here's what Adrian Goldsworthy's "In the Name of Rome" says: *

"However important it was for an individual to win fame and add to his own and his family's reputation, this should always be subordinated to the good of the Republic. The same belief in the superiority of Rome that made senators by the second century BC hold themselves the equals of any king ensured that no disappointed Roman politician sought the aid of a foreign power."

* http://erenow.com/ancient/in-the-name-of-rome-the-men-who-won-the-roman-empire/7.html

anne -> anne... , December 20, 2016 at 10:31 AM
http://erenow.com/ancient/in-the-name-of-rome-the-men-who-won-the-roman-empire/7.html

2003

In the Name of Rome: The Men Who Won the Roman Empire
By Adrian Goldsworthy

General in exile: Sertorius and the Civil War

Quintus Sertorius (c. 125–72 BC)

The Roman political élite was not unique in its competitiveness and desire to excel. The aristocracies of most Greek cities – and indeed of the overwhelming majority of other communities in the Mediterranean world – were just as eager to win personal dominance and often unscrupulous in their methods of achieving this. Roman senators were highly unusual in channelling their ambitions within fairly narrow, and universally recognized, boundaries. The internal disorder and revolution which plagued the public lives of most city states were absent from Rome until the last century of the Republic. Even then, during civil wars of extreme savagery when the severed heads of fellow citizens were displayed in the Forum, the Roman aristocracy continued to place some limits on what means were acceptable to overcome their rivals. A common figure in the history of the ancient world is the aristocratic exile – the deposed king or tyrant, or the general forced out when he was perceived to be becoming too powerful – at the court of a foreign power, usually a king. Such men readily accepted foreign troops to go back and seize power by force in their homeland – as the tyrant Pisistratus had done at Athens – or actively fought against their own city on their new protector's behalf, like Alcibiades.

Rome's entire history contains only a tiny handful of individuals whose careers in any way followed this pattern. The fifth-century BC, and semi-mythical, Caius Marcius Coriolanus probably comes closest, for when banished from Rome he took service with the hostile Volscians and led their army with great success. In the story he came close to capturing Rome itself, and was only stopped from completing his victory by the intervention of his mother. The moral of the tale was quintessentially Roman. However important it was for an individual to win fame and add to his own and his family's reputation, this should always be subordinated to the good of the Republic. The same belief in the superiority of Rome that made senators by the second century BC hold themselves the equals of any king ensured that no disappointed Roman politician sought the aid of a foreign power. Senators wanted success, but that success only counted if it was achieved at Rome. No senator defected to Pyrrhus or Hannibal even when their final victory seemed imminent, nor did Scipio Africanus' bitterness at the ingratitude of the State cause him to take service with a foreign king.

The outbreak of civil war did not significantly change this attitude, since both sides invariably claimed that they were fighting to restore the true Republic. Use was often made of non-Roman troops, but these were always presented as auxiliaries or allies serving from their obligations to Rome and never as independent powers intervening for their own benefit. Yet the circumstances of Roman fighting Roman did create many highly unorthodox careers, none more so than that of Quintus Sertorius, who demonstrated a talent for leading irregular forces and waging a type of guerrilla warfare against conventional Roman armies. Exiled from Sulla's Rome, he won his most famous victories and lived out the last years of his life in Spain, but never deviated from the attitudes of his class or thought of himself as anything other than a Roman senator and general....

ilsm -> anne... , December 20, 2016 at 04:18 PM
Anne, the analogy to the Roman republic is so far fetched.

I am deeply dismayed with pk.

anne -> anne... , December 20, 2016 at 10:36 AM
Paul Krugman has drawn on the writing of Adrian Goldsworthy to make sense of and point out what he obviously considers to be a possible undermining of the American republic. The complete Goldsworthy passage strikes me as critical in understanding Krugman.

Though Krugman has mentioned Goldsworthy before, I only began to read "In the Name of Rome" yesterday.

im1dc : , December 20, 2016 at 10:43 AM
Update re F-35

The Pentagon's fight for the F-35 with Trump has broken into the open

http://www.upi.com/Business_News/Security-Industry/2016/12/20/F-35-program-is-not-out-of-control-JSF-chief-fires-back-at-Trump/9951482251830/

"F-35 program is not 'out of control', JSF chief fires back at Trump"

By Ryan Maass ... Dec. 20, 2016 ... 1:01 PM

"WASHINGTON, Dec. 20 (UPI) -- The F-35 program is not "out of control" as President-elect Donald Trump suggests, the head of the F-35 program office asserted.

F-35 executive director Lt. Gen. Christopher Bogdan maintained the program was going as planned in response to the incoming president's controversial tweet, which appeared to threaten the plane's funding.

"The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th," Trump tweeted on Dec. 12.

The Lockheed Martin-led effort has been characterized by numerous delays since its inception. Despite the setbacks, however, Bogdan contends the program's leaders have reined in the finances for the production of the 5th-generation fighter.

"I have no doubt, that given the controversy on the F-35 program over the years, that there's a perception that this program is out of control," Bogdan told reporters. "That's in the past."

The program director went on to say industry partners have made necessary adjustments and cut excessive expenditures. However, he also conceded the development phase of the program could face additional delays..."

ilsm -> im1dc... , December 20, 2016 at 04:22 PM
Before Bogdan came to F-35 he sold the KC 46 (Boeing*) tanker which is going to be a $47B boondoggle.

Development delays.......

there are 160 "production" aircraft on the line and how much development is undone and more untested.

Out of control is buy something that ain't yet designed.

Control is relative.... what is 'in control' in Bogdan's staff meeting is not the real world.

*losing money on a fixed price Boeing will get bailed out like F-35, neither know the extent of the bail out.

im1dc : , December 20, 2016 at 10:46 AM
The only problem with Trump and the GOP today is what they think and what they do

THOUGHT OF THE DAY:

"There is always an easy solution for every human problem - neat, plausible, and wrong."

H.L. Mencken

RGC : , December 20, 2016 at 11:02 AM
Stuck

A Reason writer returns to Appalachia to ask: Why don't people who live in places with no opportunity just leave?
...............
So why don't people just leave? That question is actually surprisingly easy to answer: They did. After all, 80 percent of McDowell's population, including my grandparents, cleared out of the county to seek opportunities elsewhere during the last half-century.
......................

http://reason.com/archives/2016/12/10/stuck

anne -> RGC... , December 20, 2016 at 11:10 AM
So why don't people just leave? That question is actually surprisingly easy to answer: They did. After all, 80 percent of McDowell's population, including my grandparents, cleared out of the county to seek opportunities elsewhere during the last half-century.

[ This is critically important to understand. What has been and is necessary in economically depressed areas where development over several years time would be unlikely is to assist migration. This is precisely what was done in East Germany to pronounced benefit through Germany but is little recognized or accepted by American analysts. ]

anne : , December 20, 2016 at 11:14 AM
http://www.bradford-delong.com/2016/12/must-read-simon-wren-lewis-_understanding-free-trade_-there-you-have-in-one-calm-and-measured-paragraph-the-con.html

December 20, 2016

Simon Wren-Lewis: Understanding Free Trade: * "There you have, in one calm and measured paragraph, the contradiction at the heart of the argument...

...put forward by Liam Fox and others that leaving the European Union will allow the UK to become a 'champion of free trade'. You cannot be a champion of free trade, and have sovereignty in the form of taking back control. It is not a contradiction, of course, if you are happy to accept the regulatory standards of the US, China or India. That appears to be the position of Leave leaders like MP Jacob Rees Mogg. Ellie Mae O'Hagan spells out what this may mean in practice. Lead in toys--bring them in so we can sign a trade agreement with China. And you can be sure that this will be the nature of the discussion every time a trade deal is signed. In each case we will be told that we have to accept this drop in regulatory standards, because British export jobs are on the line.

This is the point of Dani Rodrik's famous impossible trilemma: ** you cannot have all three of the nation state, democratic politics and deep economic integration (aka free trade). His trilemma replaces sovereignty, by which is meant in this context the nation state being able to do what it likes, by democracy. In the past I have always found this problematic. Surely a democracy can decide to give away a bit of its sovereignty in return for the benefits of international cooperation (in the form of trade deals, or indeed any other kind of international cooperation). After all, every adult in a relationship knows that this relationship means certain restrictions on doing just what they would like...

* https://mainly macro.blogspot.com/2016/12/understanding-free-trade.html

** http://rodrik.typepad.com/dani_rodriks_weblog/2007/06/the-inescapable.html

-- Brad DeLong

anne -> anne... , December 20, 2016 at 11:15 AM
"Mainly Macro" must be divided to post a reference link.
anne -> anne... , December 20, 2016 at 11:33 AM
Having carefully read the essay by Simon Wren-Lewis, along with this passage from Brad DeLong, the argument here against leaving the European Union makes no sense. Though I think the UK would fare better in the EU, the bitter argument by Wren-Lewis leaves me indifferent. The idea that the UK apart from the EU would suddenly be exploited by the likes of India or China has no logic that I can find.

I have not understood the bitterness of Wren-Lewis to the Labour Party of Jeremy Corbyn since the Brexit vote, especially so since Corbyn wanted the UK to remain part of the EU.

im1dc : , December 20, 2016 at 11:19 AM
The Trump Two-Step

Carlos Slim travels to Trump at Mar-a-Lago yet tells the Lousiana victory rally ""Do not worry. We are going to build the wall,"

So who gets what they want Trump voters or Carlos Slim?

https://www.washingtonpost.com/politics/trump-dines-with-carlos-slim-as-relations-warm-with-mexican-leaders/2016/12/19/652ccf7c-c60f-11e6-bf4b-2c064d32a4bf_story.html

"Trump meets with Carlos Slim as Mexican leaders seek better relations"

By Philip Rucker, Robert Costa and Joshua Partlow...December 19 at 7:29 PM

"In the closing days of his campaign, Donald Trump vilified one of the world's richest men - Mexican billionaire Carlos Slim - as part of a globalist cabal conspiring to extinguish his populist candidacy.

Yet over the weekend, Slim journeyed to Mar-a-Lago, Trump's estate in Palm Beach, Fla., for what the president-elect described as "a lovely dinner with a wonderful man."

The peacemaking gesture - the culmination of weeks of back-channel negotiations that included a secret visit to Mexico City by a Trump envoy - signals a possible thawing between Trump and Mexico's business and political elite, which he had used relentlessly as a foil throughout his campaign.

The communications raised hopes in Mexico's business community that Trump might reconsider his vow to tear up the North American Free Trade Agreement and be persuaded to adopt less hard-line immigration and economic policies, which were cornerstones of his campaign..."

Fred C. Dobbs -> im1dc... , December 20, 2016 at 11:33 AM
"Do not worry. We are going to build the wall,"
Trump said, reiterating his promise to erect a
wall along the U.S.-Mexico border to keep out
undocumented immigrants and to make Mexico pay for it.
im1dc -> im1dc... , December 20, 2016 at 01:27 PM
Clarification

Carlos Slim travels to Trump at Mar-a-Lago yet Trump tells the Lousiana victory rally ""Do not worry. We are going to build the wall,"

im1dc : , December 20, 2016 at 01:36 PM
Trump running the country is a train wreck waiting to happen, imo, of course

POLITICS

"China Crisis Was Over Before Trump Even Tweeted About It
President-Elect Would Have Known If He Took Daily Intel Briefing"

ilsm -> im1dc... , December 20, 2016 at 04:26 PM
A crisis is when a CVN goes under.

Losing a less than useful drone on a mission of no consequence......

What did Trump say? Let them keep it.

Why not?

The better question is why waste your money and sailors time chasing a UUV?

To show a huge land power US is a maritime bully?

Fred C. Dobbs : , December 20, 2016 at 01:50 PM
Obama Races to Empty Guantánamo Before Term's End

Obama Administration Intends to Transfer 17 or 18
Guantánamo Detainees http://nyti.ms/2i9aL0z
NYT - CHARLIE SAVAGE - December 19, 2016

WASHINGTON - When Prime Minister Matteo Renzi of Italy visited the White House in October for a state dinner, he made a commitment to President Obama: Italy, which resettled a Yemeni detainee from Guantánamo Bay last summer, would take one more person on the transfer list. But before the deal was completed, Mr. Renzi resigned.

So a day after his successor, Paolo Gentiloni, formed a government on Dec. 14, Secretary of State John Kerry called to congratulate Mr. Gentiloni - and to urge him to follow through on the commitment, according to an official familiar with the negotiations. Mr. Gentiloni agreed, leading a rush to finalize the details and paperwork.

The effort was part of a burst of urgent, high-level diplomatic talks aimed at moving as many as possible of Guantánamo's 22 prisoners who are recommended for transfer. By law, the Pentagon must notify Congress 30 days before a transfer, so the deadline to set in motion deals before the end of the Obama administration was Monday.

By late in the day, officials said, the administration had agreed to tell Congress that it intended to transfer 17 or 18 of the 59 remaining detainees at the prison; they would go to Italy, Oman, Saudi Arabia and the United Arab Emirates. If all goes as planned, that will leave 41 or 42 prisoners in Guantánamo for Donald J. Trump's administration. Mr. Trump has vowed to keep the prison operating and "load it up with some bad dudes." ...

ilsm -> Fred C. Dobbs ... , December 20, 2016 at 04:27 PM
7.5 years too slow!

Of course we are growing his Iraq ending!

Good thing we dumped the crook!

anne : , December 20, 2016 at 01:56 PM
December 20, 2016

Valuation

The Shiller 10-year price-earnings ratio is currently 28.08, so the inverse or the earnings rate is 3.56%. The dividend yield is 1.98%. So an expected yearly return over the coming 10 years would be 3.56 + 1.98 or 5.54% provided the price-earnings ratio stays the same and before investment costs.

Against the 5.54% yearly expected return on stock over the coming 10 years, the current 10-year Treasury bond yield is 2.56%.

The risk premium for stocks is 5.54 - 2.56 = 2.98

anne : , December 20, 2016 at 01:56 PM
http://www.multpl.com/shiller-pe/

Ten Year Cyclically Adjusted Price Earnings Ratio, 1881-2016

(Standard and Poors Composite Stock Index)

December 20, 2016 PE Ratio ( 28.08)

Annual Mean ( 16.71)
Annual Median ( 16.05)

-- Robert Shiller

anne -> anne... , December 20, 2016 at 01:57 PM
http://www.multpl.com/s-p-500-dividend-yield/

Dividend Yield, 1881-2016

(Standard and Poors Composite Stock Index)

December 20, 2016 Div Yield ( 1.98)

Annual Mean ( 4.38)
Annual Median ( 4.33)

-- Robert Shiller

im1dc : , December 20, 2016 at 01:56 PM
"The Subpoena That Rocked The Election Is Legal Garbage, Experts Say"

http://www.huffingtonpost.com/entry/the-subpoena-that-rocked-the-election-is-legal-garbage-attorney-say_us_58597cd9e4b03904470b0633

"The Subpoena That Rocked The Election Is Legal Garbage, Experts Say"

'The warrant assumes that the mere existence of emails from or to Hillary Clinton is probable cause that a crime occurred'

by Matt Ferner, National Reporter, Ryan Grim, Washington bureau chief & Nick Baumann, Senior Enterprise Editor all of The Huffington Post...12/20/2016... 02:25 pm ET...Updated 16 minutes ago

"The warrant connected to the FBI search that Hillary Clinton says cost her the election shouldn't have been granted, legal experts who reviewed the document released on Tuesday told The Huffington Post.

FBI Director James Comey shook up the presidential race 11 days before the election by telling Congress the agency had discovered new evidence in its previously closed investigation into the email habits of Clinton, who was significantly ahead in the polls at the time.

When Comey made the announcement, the bureau did not have a warrant to search a laptop that agents believed might contain evidence of criminal activity. The FBI set out to rectify that two days later, on Oct. 30, when agents applied for a warrant to search the laptop, which was already in the FBI's possession. The FBI had seized the computer as part of an investigation into former Rep. Anthony Weiner, the estranged husband of Clinton aide Huma Abedin.

The unsealed warrant "reveals Comey's intrusion on the election was as utterly unjustified as we suspected at time," Brian Fallon, a Clinton campaign spokesman, said on Twitter Tuesday.

Clinton's lead in the polls shrank in the wake of Comey's announcement. Then, just days ahead of election, the FBI announced its search was complete, and it had found no evidence of criminal activity. Clinton officials believe that second announcement damaged her as much as, or more than, the first, by enraging Trump supporters who believed the fix was in.

The legal experts' argument against the validity of the subpoena boils down to this: The FBI had already publicly announced that it could not prove Clinton intended to disclose classified information. Without that intent, and without evidence of gross negligence, there was no case. The warrant offers no suggestion that proving those elements of the crime would be made easier by searching new emails.

The essence of the warrant application is merely that the FBI has discovered new emails sent between Clinton and Abedin.

That's not enough. The idea that the mere existence of emails involving Clinton may be evidence of a crime is startling, said Ken Katkin, a professor at Salmon P. Chase College of Law.

"The warrant application seems to reflect a belief that any email sent by Hillary Clinton from a private email server is probably evidence of a crime," Katkin said. "If so, then it must be seen as a partisan political act, rather than a legitimate law enforcement action."

The warrant never should have been granted, attorney Randol Schoenberg argued. "I see nothing at all in the search warrant application that would give rise to probable cause, nothing that would make anyone suspect that there was anything on the laptop beyond what the FBI had already searched and determined not to be evidence of a crime, nothing to suggest that there would be anything other than routine correspondence between Secretary Clinton and her longtime aide Huma Abedin," Schoenberg wrote in an email.

"I am appalled," he added, noting that the name of the agent in charge had been redacted in the copy of the document publicly released.

Katkin agreed. "This search warrant application appears to have been meritless. The FBI should not have sought it, and the magistrate judge should not have granted it," he :

...Federal Magistrate Judge Kevin Fox, who approved the search warrant, didn't immediately respond to a request for comment.

"The Fourth Amendment requires you to pretty much know that what you're looking for is there ― not speculation. This is just speculation," Cunningham said."

ilsm -> im1dc... , December 20, 2016 at 04:29 PM
Find an expert who actually read the Federal Records Act.

Then find another expert who has held a security clearance and stayed awake for the annual refreshed.

Appeal to unproved authority......

anne : , December 20, 2016 at 01:56 PM
http://www.multpl.com/s-p-500-dividend-yield/

Dividend Yield, 1881-2016

(Standard and Poors Composite Stock Index)

December 20, 2016 Div Yield ( 1.98)

Annual Mean ( 4.38)
Annual Median ( 4.33)

-- Robert Shiller

anne -> anne... , December 20, 2016 at 02:08 PM
Accidentally posted here, should have been and was subsequently posted above.
im1dc : , December 20, 2016 at 03:11 PM
Bogle on factoring in Total Return on stocks vs Speculative Return

http://www.marketwatch.com/story/jack-bogles-secrets-to-becoming-a-winning-investor-2016-12-20

"Jack Bogle tells you the secret to becoming a winning investor"

By Chuck Jaffe, Columnist...Dec 20, 2016...11:40 a.m. ET

..."On smart beta investing in general:

Bogle: Smart beta is stupid.

So not one of these new index products is intriguing?

Bogle: No, no, no, no, no. Academics can find anything with these masses of data they have on their computers. They can find something that works in the past, it's as easy as rolling off a log. But it almost never works in the future – and not for very long - because they all forget the most important single thing that happens in our markets reversion to the mean. As the Good Book says, 'And the first shall be last and the last shall be first.'...

On what to expect from the market:

Bogle: The key to stock market investment returns is today's dividend yield [around 2%] plus future earnings growth. Nobody knows what that earnings growth will be, but I am guessing it will be maybe in the range of 4% to 5%. That seems like an informed reasonable expectation.

You compare that with history and we are looking at something very different. An average dividend yield not of 2% but of maybe 4.5%, and earnings growth has averaged over 6% over the last 50 years.

So we have lower earnings forecast and a much lower dividend yield built in. No one is going to change that. It's like buying a bond, what is the interest rate when you buy in. So we're talking about lower returns from investment side, from what corporations do.

The other side of total return on stocks is what we call speculative return, and that's how bullish or bearish investors are, which is measured by the price/earnings multiple -- how many times earnings your companies sell at or the total stock market sells at. Over the long-term past, that number has been about 15 times earnings. Today, depending on who you are listening to, it could be as high as 25 times earnings. ...I look backward at reported earnings after all the bad stuff and I'm looking at a p/e of 25. So the market is at least fully valued and I think it is reasonable to expect possibly negative returns but certainly no positive speculative return.

So we're looking at future market returns, if we are lucky, of 4-5% before the costs of investing are deducted."

Mr. Bill : , December 20, 2016 at 03:14 PM
"So many opinions, yet, only one truth".

Mr. Bill (maybe)

Mr. Bill -> Mr. Bill... , December 20, 2016 at 03:18 PM
I mean that I am suffering, physically, about the ramifications of Donald Trump being officially elected as the next President of the United States of America. I feel despondent, looking through gloomy glass, looking for a bright shiny object to deflect, even if only for a moment.
ilsm -> Mr. Bill... , December 20, 2016 at 04:31 PM
Come to Massachusetts weed is legal!
im1dc -> Mr. Bill... , December 20, 2016 at 04:32 PM
Relax, the Republic will survive, but stay vigilant and active.
Mr. Bill : , December 20, 2016 at 03:22 PM
I mean if we immediately try to impeach him, we would have Mike Pence (ak Tung) as president. Maybe we could embroil him in a four year impeachment process.

As he slashes his way, destroying Social Security and Medicare.

Mr. Bill -> Mr. Bill... , December 20, 2016 at 03:35 PM
Oh my God, who is a female, doesn't like me much and is totally disgusted with humans, in general.

Mike Pence as president of the new nighted state of merica.

Double, or triple, the security around Trump.

im1dc : , December 20, 2016 at 03:55 PM
About the US Weekly Rig Count - DETAILS

http://maritime-executive.com/article/us-rig-count-up-on-land-flat-offshore

"U.S. Rig Count Up on Land, Flat Offshore
permian"

By MarEx...2016-12-16

"For the seventh week in a row, the benchmark Baker Hughes Rig Count trended upwards, bringing the combined count of active oil and gas rigs in the U.S. to 637. However, only 22 of these were offshore rigs, essentially unchanged from the same period last year.

The largest part of the onshore increase was in Texas, where activity in the Permian Basin and Eagle Ford fields has brought the state's count by 14 rigs in one week. Taken together, the Permian and Eagle Ford accound for nearly half of U.S. drilling activity, with 302 rigs between them. Compared with offshore projects, onshore shale drilling campaigns like those in the Eagle Ford are remarkably inexpensive and brief; a shale well's breakeven price point is typically in the range of $30-40, depending on the field, and it is often a matter of weeks between setting up a rig and pumping first oil.

West Texas Intermediate crude prices were at $52 per barrel on Friday, well above the price point that would induce shale producers to begin new drilling, analysts say. In addition, Goldman Sachs raised its outlook for crude oil prices for mid-2017, predicting WTI prices at $57.50 by the second quarter. Goldman cited the recent OPEC and non-OPEC agreements to cut production by 1.6 million barrels per day, and said that it expects compliance with the cut agreement in excess of 80 percent.

However, assuming that the OPEC agreement holds and that competitors do not raise output to offset it, a price of $57.50 is still below the level at which many offshore projects become competitive, says Wood Mackenzie. In July, the firm found that only 20 percent of deep- and ultra-deepwater projects at the pre-FID stage are commercially viable at $60 per barrel – suggesting that offshore activity may remain quiet until prices rise further."

im1dc : , December 20, 2016 at 04:19 PM
U.S. Tests Autonomous Swarmboats

aka CARACaS

http://maritime-executive.com/article/us-tests-autonomous-swarmboats

"U.S. Tests Autonomous Swarmboats"

YouTube Video link:
https://www.youtube.com/watch?v=pGsdaqpq-5w

"...The autonomy technology being developed by ONR is called Control Architecture for Robotic Agent Command and Sensing, or CARACaS. The components that make up CARACaS (some are commercial off-the-shelf) are inexpensive compared to the costs of maintaining manned vessels..."

ilsm -> im1dc... , December 20, 2016 at 04:32 PM
If they work as good as a littoral combat ship......

What could go wrong?

ilsm : , -1
Results of the coup:

Unfaithful Electors:

Clinton -5

Trump -2

Cuckoo beats crook! Again.

[Dec 21, 2016] Michigan Lame Duck Legislature

Dec 21, 2016 | angrybearblog.com

The Republican controlled House and Senate has been largely busy passing bills in the few days left in 2016. This particular one caught my eye.

Michigan had put in place a new Unemployment System (Michigan Data Automated System or MiDAS) to help in detecting unemployment fraud. With the passage of Senate Bill 1008 by the Republican led House , $10 million is transferred from the Unemployment Contingent Fund to the General Fund to be done with in the General Fund as determined by the Republican held Legislature.

Just a little history; MiDAS was put in place (2013) by Governor Rick Snyder of Flint, Michigan fame to automate the system away from the manual process. The system sends out a series of questions, which the Unemployment Applicant has to answer picking from listed answers. There is no room for explanation. The claimants chosen answers from the list of answers are then loaded into the MiDAS data base and notification is sent to the former employer who then confirms the answers the claimant has listed in the system. If there is any discrepancy, MiDAS assumes the claimant has committed a potential fraud.

Another questionnaire is then sent to the claimant, which is also limited to listed responses. If you do not respond in 10 days, it is assumed a fraud has been committed as determined by MiDAS. A notice is "supposedly" sent out and the claimant has 30 days to answer. If no notice is sent out and the claimant does not answer, MiDAS assumes fraud and the issue goes to collections where just about anything can take place to collect the unemployment funds already given to the claimant. There is little or no human interaction throughout the process and little can be done to explain circumstance during the process.

" The Michigan Unemployment Insurance Agency , partly at the request of the federal government and partly on its own, reviewed 22,427 cases in which a computer determined a claimant had committed civil fraud between October 2013 and October 2015 and found that 20,965 of those cases did not involve fraud. Unemployment Insurance Agency spokesman Dave Murray said on Wednesday. That's an error rate of more than 93%."

The $10 million will be transferred from the Unemployment Contingent Fund which had already grown by 400% after the MiDAS caused spike in fraud cases of which nearly all of them unfounded. Senate Bill 1008 is balancing the state budget on the backs of innocent citizens wrongfully accused of false unemployment claims.

Governor Rick Snyder spent $47 million of taxpayer funds to install MiDAS which has been shown to be correct in determining fraud < 7% of the time. Rather than give the funds to those who were unjustly denied Unemployment Compensation by MiDAS, the Republican led Michigan legislature and Republican governor Rick Snyder are keeping much of it in the Unemployment Contingent (used to train workers and for rainy days) and will also transfer $10 million of it to the General Fund to help balance the budget. This is the same as using the additional Medicaid funding received from the expansion to balance the budget rather than set it aside for later years which would have kept Michigan from having to add to Medicaid funding till 2027. It too was used to balance the budget. By doing so in both cases, the Republicans do not have to raise taxes on the rich in income.

Longtooth , December 18, 2016 8:14 pm

What? You mean to tell me that a conservative right wing republican controlled government is trying to eliminate or grossly reduce a valued safety net feature provided by government (public funds)?

What is the world coming to?

P.S. Did you perhaps think conservatives favor and support public funds use in safety nets for labor (as opposed to capital owner's safety nets)? Whatever gave you that idea? Reagan's "welfare queen" speech perhaps?

run75441 , December 18, 2016 10:24 pm

Actually, it is the failure of Snyder and the Repubs to acknowledge the error of "MiDAS" in swindling all Michigan citizens in general and have chosen to keep the funds they have swindled rather than acknowledge the error publically and give the funds to those hurt by "MiDAS." Mistakes do happen and it would have been easy enough to fix by adding an area for explanation and in doing two mailings of the questionnaire to the Unemployment applicant. The state is attempting to eliminate people using a computer system which does not allow for applicant error and inturn is not 100% fool-proof in mailing out notification.

The state has already acknowledged that 93% of the time it has made an error and yet they have failed to reconcile it.

beene , December 19, 2016 7:26 am

Run, if you want to correct problems like this; where error is a feature. Make it a criminal fraud to sell the state or federal government a program that the error rate is more than 4%.

Beverly Mann , December 19, 2016 9:13 am

The problem with that suggestion, Beene, is that fraud-criminal or civil-requires knowledge of falsity, or intent to steal. The idea of declaring a particular error rate a criminal fraud is a non sequitur; it's absurd.

But selling a system that so clearly had no ability to accomplish its supposed purpose, and whose purpose seems to have actually been to simply kill the unemployment compensation program-and whose method was accusing virtually everyone of fraud who applied for unemployment compensation-does not appear to be mere incompetence. It does appear to be knowing-i.e., a fraud.

And I would think it is prosecutable. The Justice Dept. apparently hasn't pursued the matter, and of course under Sessions it won't. But two years from now, there will be a Democrat about to be inaugurated as governor and, hopefully also, a Dem as AG. Ingram County (Lansing, the state capitol) is always Dem, I believe, and even now it's prosecutors probably could launch a criminal-fraud inquiry-and it should. But the statute of limitations probably will not have run by, say, mid-2019, so it will still be prosecutable then by a Dem AG's office. And presumably, this will be a big campaign issue statewide in 2018.

Which brings me to this: In virtually every instance (the one exception is Romney during his first two years as governor after running as a moderate, before starting to run as far-right presidential primary candidate) of some rightwing successful businessperson winning a state governorship (and now, president), on the claim that he's been such a success at business, and, well, shouldn't the government be run like a business, that person has proved utterly incompetent. Snyder and Illinois governor Bruce Rauner are exhibits A and B; Florida governor Rick Scott is Exhibit C.

As for people who were falsely accused of fraud under what itself was a fraudulent system, they should file a class action lawsuit in state court against the folks who sold the state that snake oil.

Warren , December 19, 2016 9:44 am

You seem to be assuming the problem is with the computer system. If the computer system is simply implementing the law, then there is no fraud by the company that created it. Perhaps the problem is in the law itself, or with the people who do not return the forms when they are supposed to.

Bill White , December 19, 2016 1:44 pm

There is a very interesting book, written by the estimable Math Babe (www.mathbabe.org), Cathie O'Neill about this phenomenon called Weapons of Math Destruction. I can't recommend it enough. Combining the supposed lack of bias of statistics, conservative's ardent desire to treat the government as just another tool for personal monetary profit and the right's natural desire to kick people when they are down and steal their lunch money means these stories will just proliferate.

The headline in last Sunday's San Jose Mercury News was all about AI as the next wave of technological profit making. The future is not likely to be comforting. Instead of asking where our jetpacks are, we will be asking where all our stuff went.

[Dec 19, 2016] Michigan unemployment agency made 20,000 false fraud accusations – report

Notable quotes:
"... One bankruptcy attorney told the Detroit Metro Times he had as many as 30 cases in 2015 tied to debt from the UIA; before the automated system was implemented, he said he would typically have at most one per year with such claims. The newspaper also found claimants who were charged with fraud despite never having received a single dollar in unemployment insurance benefits. ..."
"... A pair of lawsuits were filed in 2015 against the UIA over Midas. According to a pending federal case, in which the state revealed it had discontinued using Midas for fraud determinations, the system "resulted in countless unemployment insurance claimants being accused of fraud even though they did nothing wrong". ..."
"... Blanchard told the Guardian in February that many unemployment applicants may not have realized they were even eligible to appeal against the fraud charge, due to the setup of Midas. Attorneys representing claimants have said that many refuse to ever apply for unemployment benefits again. ..."
"... Levin, who represents part of metropolitan Detroit, said in his statement that Michigan officials had to fully account for the money that has flowed into the unemployment agency's contingent fund. ..."
Dec 18, 2016 | www.theguardian.com
Michigan government agency wrongly accused individuals in at least 20,000 cases of fraudulently seeking unemployment payments, according to a review by the state.

The review released this week found that an automated system had erroneously accused claimants in 93% of cases – a rate that stunned even lawyers suing the state over the computer system and faulty fraud claims.

"It's literally balancing the books on the backs of Michigan's poorest and jobless," attorney David Blanchard, who is pursuing a class action in federal court on behalf of several claimants, told the Guardian on Friday.

The Michigan unemployment insurance agency (UIA) reviewed 22,427 cases in which an automated computer system determined a claimant had committed insurance fraud, after federal officials, including the Michigan congressman Sander Levin, raised concerns with the system.

The review found that the overwhelming majority of claims over a two-year period between October 2013 and August 2015 were in error. In 2015, the state revised its policy and required fraud determinations to be reviewed and issued by employees. But the new data is the first indication of just how widespread the improper accusations were during that period .

The people accused lost access to unemployment payments, and reported facing fines as high as $100,000. Those who appealed against the fines fought the claims in lengthy administrative hearings. And some had their federal and state taxes garnished. Kevin Grifka, an electrician who lives in metro Detroit, had his entire federal income tax garnished by the UIA, after it accused him of fraudulently collecting $12,000 in unemployment benefits.

The notice came just weeks before Christmas in 2014.

"To be honest with you, it was really hard to see your wife in tears around Christmas time, when all of this went on for me," Grifka said.

The computer system claimed that he had failed to accurately represent his income over a 13-week period. But the system was wrong: Grifka, 39, had not committed insurance fraud.

In a statement issued on Friday, Levin called on state officials to review the remaining fraud cases that were generated by the system before the policy revision.

"While I'm pleased that a small subset of the cases has been reviewed, the state has a responsibility to look at the additional 30,000 fraud determinations made during this same time period," he said.

Figures released by the state show 2,571 individuals have been repaid a total of $5.4m. It's unclear if multiple cases were filed against the same claimants.

The findings come as Michigan's Republican-led legislature passed a bill this week to use $10m from the unemployment agency's contingent fund – which is composed mostly of fines generated by fraud claims – to balance the state's budget. Since 2011, the balance of the contingent fund has jumped from $3.1m to $155m, according to a report from a Michigan house agency.

The system, known as the Michigan Integrated Data Automated System (Midas), caused an immediate spike in claims of fraud when it was implemented in October 2013 under the state's Republican governor, Rick Snyder, at a cost of $47m.

In the run-up to a scathing report on the system issued last year by Michigan's auditor general, the UIA began requiring employees to review the fraud determinations before they were issued.

The fraud accusations can carry an emotional burden for claimants.

"These accusations [have] a pretty big burden on people," Grifka said. While he said the new findings were validating and his own case had been resolved, he called for state accountability.

"There's no recourse from the state on what they're doing to people's lives. That's my biggest problem with all of this."

Steve Gray, director of the University of Michigan law school's unemployment insurance clinic, told the Guardian earlier this year that he routinely came across claimants facing a significant emotional toll. As a result, he said, the clinic added the number for a suicide hotline to a referral resource page on the program's website.

"We had just a number of clients who were so desperate, saying that they were going to lose their house they've never been unemployed before, they didn't know," said Gray, who filed a complaint with the US labor department in 2015 about the Midas system.

The fines can be enormous. Residents interviewed by local news outlets have highlighted fraud penalties from the UIA upwards of $100,000 . Bankruptcy petitions filed as a result of unemployment insurance fraud also increased during the timeframe when Midas was in use.

One bankruptcy attorney told the Detroit Metro Times he had as many as 30 cases in 2015 tied to debt from the UIA; before the automated system was implemented, he said he would typically have at most one per year with such claims. The newspaper also found claimants who were charged with fraud despite never having received a single dollar in unemployment insurance benefits.

A pair of lawsuits were filed in 2015 against the UIA over Midas. According to a pending federal case, in which the state revealed it had discontinued using Midas for fraud determinations, the system "resulted in countless unemployment insurance claimants being accused of fraud even though they did nothing wrong".

Blanchard told the Guardian in February that many unemployment applicants may not have realized they were even eligible to appeal against the fraud charge, due to the setup of Midas. Attorneys representing claimants have said that many refuse to ever apply for unemployment benefits again.

A spokesman for the unemployment insurance agency, Dave Murray, said it appreciated Levin's work on the issue and said it was continuing "to study fraud determinations".

The agency had already made changes to the fraud determination process, he said, and "we appreciate that the state legislature this week approved a bill that codifies the reforms we've set in place".

Levin, who represents part of metropolitan Detroit, said in his statement that Michigan officials had to fully account for the money that has flowed into the unemployment agency's contingent fund.

"While I am pleased that $5m has been repaid, it strikes me as small compared to the amount of money that was collected at the time," he said. "Only a full audit will ensure the public that the problem has been fully rectified."

ManuSHeloma 12 Feb 2016 9:02

Another failure of Gov Snyder's administration: first Flint water, now this. What can the people of Michigan expect next? The recall of Snyder should be automated.
stuinmichigan pepspotbib 12 Feb 2016 10:02
It's not just Snyder and his lackies. You should see the radically gerrymanderd Michigan legislature, run by rightist extremists, directed by the Koch Brothers, the DeVos family and others, via the ALEC program that provides them with the radical right legislation they have passed and continue to pass. Snyder ran saying that sort of stuff was not really on his agenda, but continues to sign it. He's either a liar, an unprincipled idiot, or both. It's bad here. And it's getting worse.
DarthPutinbot 12 Feb 2016 9:09
What the f*ck is wrong in Michigan? Split it up among the surrounding states and call it good. Michigan destroyed Detroit and cutoff their water. Michigan deliberately poisoned the residents of Flint. Too many Michigan lawyers are crooks or basically inept. The court system screws over parents in divorce cases. And now, Michigan is wrongly trying to collect money from people on trumped up fraud charges. Stop it. The federal government needs to take over the state or bust it up.
Non de Plume 12 Feb 2016 9:23
Hell, when the system *works* it's ridiculous. Watching my Dad - who had worked continuously since 14 years old save a few months in the early 90s - sitting on hold for hours... At least once a week, to 'prove' he still deserved money from a system he paid into. Hours is not an exaggeration.

And now this. Goddammit Lansing! How many other ways can you try to save/take money from the poor and end up costing us so much more?!?

Bailey Wilkins stuinmichigan 12 Feb 2016 21:56
Nothing against The Guardian's reporting, but if you follow the links, you'll see FOX 17 has been covering the story locally since last May. It's their investigation that got the attention of all the other publications (including Detroit Metro Times.) Local papers could have done a better job though, agreed on that.
talenttruth 12 Feb 2016 12:48
Leering, Entitled Republican bastards like Governor Snyder simply HATE poor people. And THAT is because all such bullies are cowards, through-and-through, always selecting as their "victims" those who can't fight back. And, since such Puritan Cretins as Snyder "Believe" that they are rich because of their superior merit, it stands to reason (doesn't it) that "poor people" (actually, all us Little Folk) have NO merit, because we didn't inherit a Trust Fund, Daddy's Business or other anciently stolen wealth. These people deserve stunningly BAD Karma. Unfortunately, Karma has its own timeline and doesn't do what seems just, on a timely basis (usually).
Jim Uicker 12 Feb 2016 13:29
With today's sophisticated algorithms, computers are used to flag insurance claims all the time. The hit rate is usually much better than 8%. But how can they even consider automating the adjudication of fraud? Fraud is a crime; there should be a presumption of innocence and a right to due process. Without telling people they had a right to appeal, didn't this system violate the constitutional rights of Michigan's most vulnerable citizens: those with no job and therefore no money to defend themselves?

And what about the employers who paid unemployment insurance premiums month after month, expecting the system to protect their employees from business conditions that would necessitate layoffs? Michigan has defrauded them as well, by collecting premiums and not paying claims.

Jim Uicker 12 Feb 2016 13:51
Even if the problem with Midas can be entirely blamed on the tech workers who built and tested the software, there is no excuse for the behavior of the Snyder administration when they became aware of the problem. Just like the cases of legionnaires disease, where the state failed to alert the public about the outbreak and four more people died, the Snyder administration is again trying to sweep its mistakes under the rug.

Before taking Midas offline, the UIA refused to comment on the Metro Times investigation, and Snyder himself artfully avoided reporters' questions after being made aware of the result of an investigation by a local television station. Now the state only revealed that it shut down Midas to a pending lawsuit.

The state spent $47 million dollars on a computer system and then took it offline because it didn't work. The flaws in the system are now costing the state many millions more. This level of secrecy is evidence of bad government. The state is supposed to be accountable to taxpayers for that money! Even if the Snyder administration isn't responsible for all of these tragedies, it is definitely responsible for covering them up.

Jefferson78759 12 Feb 2016 13:55
This is the GOP "governing"; treat the average person like a criminal, "save" money on essential infrastructure like water treatment, regardless of the consequences.

I get why the 1% votes GOP but if you're an average person you're putting your financial and physical well being on the line if you do. Crazy.

MaryLee Sutton Henry 12 Feb 2016 22:30
I was forced to plead guilty by a public defender to the UIA fraud charge & thrown in jail for 4 days without my Diabetic meds or diet in Allegan county. As it stands right now the State of Michigan keeps sending me bills that are almost $1000 more then what the county says I own. I have done community service, and between witholding tax refunds and payments I have paid over $1200 on a $4300 total bill. I have literally spend hours on the phone with UIA and faxing judgements trying to straighten this out, yet still get bills for the higher amount from UIA. Its a nightmare, I have a misdominer, until its paid and refuse to pay no more then $50 per month until they straighten this out. Maybe joining the class action law suit would help. Does anyone have any better ideas??
Teri Roy 13 Feb 2016 13:27
My son and I both got hit, I was able to dispute mine but he has autism and they would not dismiss his, so at 24 yrs old he's paying back 20 grand in pentailies and interest. Just not right
Outragously Flawless 14 Feb 2016 9:42
I also received a letter stating I owe and hadn't file taxes since 2007. I had to find all of my taxes from 2007 to 2013 my question is why did they wait over 5yrs to contact me, or is that the set up H&R block does my taxes and they didn't have records that far back.#sneakyass government

[Dec 19, 2016] Keynes Betrayed

Notable quotes:
"... The New Keynesian agenda is the child of the neoclassical synthesis and, like the IS-LM model before it, New Keynesian economics inherits the mistakes of the bastard Keynesians. It misses two key Keynesian concepts: (1) there are multiple equilibrium unemployment rates and (2) beliefs are fundamental. My work brings these concepts back to center stage and integrates the Keynes of the General Theory with the microeconomics of general equilibrium theory in a new way. " ..."
Dec 19, 2016 | economistsview.typepad.com

RGC : December 18, 2016 at 10:13 AM , 2016 at 10:13 AM

Keynes Betrayed
December 18, 2016

" To complete the reconciliation of Keynesian economics with general equilibrium theory, Paul Samuelson introduced the neoclassical synthesis in 1955...

... In this view of the world, high unemployment is a temporary phenomenon caused by the slow adjustment of money wages and money prices. In Samuelson's vision, the economy is Keynesian in the short run, when some wages and prices are sticky. It is classical in the long run when all wages and prices have had time to adjust....

... Although Samuelson's neoclassical synthesis was tidy, it did not have much to do with the vision of the General Theory...

... In Keynes' vision, there is no tendency for the economy to self-correct. Left to itself, a market economy may never recover from a depression and the unemployment rate may remain too high forever. In contrast, in Samuelson's neoclassical synthesis, unemployment causes money wages and prices to fall. As the money wage and the money price fall, aggregate demand rises and full employment is restored, even if government takes no corrective action. By slipping wage and price adjustment into his theory, Samuelson reintroduced classical ideas by the back door-a sleight of hand that did not go unnoticed by Keynes' contemporaries in Cambridge, England. Famously, Joan Robinson referred to Samuelson's approach as 'bastard Keynesianism.'

The New Keynesian agenda is the child of the neoclassical synthesis and, like the IS-LM model before it, New Keynesian economics inherits the mistakes of the bastard Keynesians. It misses two key Keynesian concepts: (1) there are multiple equilibrium unemployment rates and (2) beliefs are fundamental. My work brings these concepts back to center stage and integrates the Keynes of the General Theory with the microeconomics of general equilibrium theory in a new way. "

Prosperity for All: Pages 25-26

http://www.rogerfarmer.com/rogerfarmerblog/2016/12/17/keynes-betrayed

[PK supports the neoclassical synthesis]

RGC -> anne... , December 18, 2016 at 10:13 AM
You could meanwhile contemplate Farmer's point that Samuelson and his MIT colleagues "bastardized" Keynes' views when they introduced them to the US.

" By slipping wage and price adjustment into his theory, Samuelson reintroduced classical ideas by the back door-a sleight of hand that did not go unnoticed by Keynes' contemporaries in Cambridge, England. Famously, Joan Robinson referred to Samuelson's approach as 'bastard Keynesianism."

RGC -> RGC... , December 18, 2016 at 10:38 AM
And then you might contemplate Samuelson's (and MIT colleagues) influence on Krugman, Blanchard, Summers and all the well-publicized mainstream economists.
anne -> RGC... , December 18, 2016 at 10:47 AM
By slipping wage and price adjustment into his theory, Samuelson reintroduced classical ideas by the back door-a sleight of hand that did not go unnoticed by Keynes' contemporaries in Cambridge, England. Famously, Joan Robinson referred to Samuelson's approach as 'bastard Keynesianism'.

-- Roger Farmer

[ A fine place to start thinking. I knew this before and read this again today, but did not think about the argument.

I am grateful for the persistence. ]

RGC -> anne... , December 18, 2016 at 11:40 AM
You might also wonder how it could happen that those "bastard Keynesians", the ones who distorted Keynes' message, came to be the ones who are well publicized, rather than more accurate interpreters.
anne -> RGC... , December 18, 2016 at 10:52 AM
http://mrzine.monthlyreview.org/2009/foster170309p.html

2009

Keynes, Capitalism, and the Crisis
Brian Ashley interviewing John Bellamy Foster

[ I will start here. ]

RGC -> anne... , December 18, 2016 at 12:20 PM
I think that is a good discussion. I also think the major weakness of both Keynes and Marx is that they underestimated the power and resilience of finance. They both thought logic dictated the "euthanasia of the rentier", while we are seeing the rentier growing ever stronger.

anne -> RGC... , December 18, 2016 at 12:31 PM
I also think the major weakness of both Keynes and Marx is that they underestimated the power and resilience of finance....

[ Really interesting comment, and directly related to a problem I am just now working through and which I can present.

Nice, nice. ]

anne -> RGC... , -1
Good grief. There we have a review from the links of Mark Thoma, while I had no idea till now:

http://www.enlightenmenteconomics.com/blog/index.php/2016/12/rescuing-macroeconomics/

December 17, 2016

Rescuing macroeconomics?

It's always with great diffidence that I write about macroeconomics. Although I'm in good company in being sceptical about much of macro (see this roundup from Bruegel and this view from Noah Smith, for instance), I'm all too well aware of the limits of my knowledge. So with that warning, here's what I made of Roger Farmer's very interesting new book, Prosperity for All: How To Prevent Financial Crises....

-- Diane Coyle

[Dec 18, 2016] US companies are addicted to stock buybacks

Notable quotes:
"... Harvard Business Review ..."
"... Buyback Quarterly ..."
"... Brother Feltner is right. Corporations are moving offshore to cut their wage bills. But they are not using that money to reinvest in their companies to improve the product and train the workforce. Instead, they are offshoring to gain cash flow to finance their fix. They want more stock buybacks which in turn enrich top executives and Wall Street investors. Automation and technology have nothing to do with this perilous addiction. ..."
"... emissions ..."
"... "The Anti-Corn Law League was a successful political movement in Great Britain aimed at the abolition of the unpopular Corn Laws, which protected landowners' interests by levying taxes on imported wheat, thus raising the price of bread at a time when factory-owners were trying to cut wages to be internationally competitive." ..."
"... Our backwards free fall from stable middle class growth and access and attainment to higher education has been precipitated and pushed by a broadcasting system and cyber platforms that have excluded the VOICE OF WORKERS ever since the first newspaper carried a BUSINESS section with no ..."
"... from being forced to compete against cheaper off-shore or south-of-the-border slave labor that formed the same COMPETITIVE ADVANTAGE now taken for granted when a subsidized start-up like NIKE decides to pursue a business model that relentlessly exploits North American running shoe and sports wear market needs by cheaply manufacturing such products off-shore via contracting agents exploiting captive Indonesian (substitute other Latin American, African or Asian ENTERPRISE aka FREE TRADE ZONES) slave laborers. ..."
"... If we aren't worth hiring at a sustainable SOCIALLY CONTRACTED WAGE aimed at developing our national resources, we should reject buying from such nationally suicidal business models and corporate LLC fictions even if they can pay-2-play legislation that removes the PROTECTIONS. We vow to never sacrifice NATIONAL SECURITY, so why have we allowed the PRIVATIZATION of our NATIONAL SECURITY STATE by corporate legal fictions? A revealing if not all-encompassing historical answer to that question is another corporate-captured and regulatory-captured Mass Media Taboo discussed one time to my knowledge on the PEOPLE'S AIRWAVES. Search Bill Moyers panel discussing the LEWIS POWELL MEMO TO THE NATIONAL CHAMBER OF COMMERCE and the Nixon appointment of LEWIS POWELL to the Supreme Court, despite his total lack of judicial experience. ..."
"... {Creative Commons Copyright} Mitch Ritter Paradigm Shifters Lay-Low Studios, Ore-Wa Media Discussion List ..."
Dec 18, 2016 | www.nakedcapitalism.com

American manufacturers have chosen a different path. Their CEOs grow wealthy by financially strip-mining their own companies, aided and abetted by elite financiers who have only one goal: extracting as much wealth as possible from the company while putting back as little as possible into production and workers.

The heroin driving their addiction is stock buybacks-a company using its own profits (or borrowed money) to buy back the company's own shares. This directly adds more wealth to the super-rich because stock buybacks inevitably increase the value of the shares owned by top executives and rich investors. Since top executives receive the vast majority of their income (often up to 95%) through stock incentives, stock buybacks are pure gold. The stock price goes up and the CEOs get richer. In this they are in harmony with top Wall Street private equity/hedge fund investors who incessantly clamor for more stock buybacks, impatient for their next fix.

For the few, this addiction is the path to vast riches. It also is the path to annihilating the manufacturing sector. (For a definitive yet accessible account see " Profits without Prosperity " by William Lazonick in the Harvard Business Review .)

Wait, wait, isn't this stock manipulation? Well, before the Reagan administration deregulated them in 1982, stock buybacks indeed were considered stock manipulation and one of the causes of the 1929 crash. Now they are so ubiquitous that upwards of 75% of all corporate profits go to stock buybacks. Over the last year, 37 companies in the S&P 500 actually spent more on buybacks than they generated in profits, according to Buyback Quarterly .

Little wonder that stock buybacks are a major driver of runaway inequality . In 1980 before the stock buyback era, the ratio of compensation between the top 100 CEOs and the average worker was 45 to 1. Today it is a whopping 844 to 1. (The German CEO gap is closer to 150 to 1.)

Germany holds down its wage gap, in part, by discouraging stock buybacks. Through its system of co-determination, workers and their unions have seats on the boards of directors and make sure profits are used to invest in productive employment. As a result, in Germany stock buybacks account for a much smaller percentage of corporate profits.

Between 2000 and 2015, 419 U.S. companies (on the S&P 500 index) spent a total of $4.7 trillion on stock buybacks (annual average of $701 million per firm). During the same period, only 33 German firms in the S&P350 Europe index conducted buybacks for a total of $111 billion (annual average of $211 million per firm). (Many thanks to Mustafa Erdem Sakinç from the Academic-Industry Research Network for providing this excellent data.)

Let's do the math: U.S. firms as a whole spent 42 times more on stock buybacks than German firms!

Little wonder that our manufacturing sector is a withering appendage of Wall Street, while German manufacturing leads the global economy.

So why does the media consistently use automation/technology to explain the loss of well-paying manufacturing jobs?

To be fair, Poppy is not alone. Virtually every elite broadcaster, journalist, pundit and columnist claims that the loss of good-paying, blue-collar jobs is somehow connected to new technologies. How can they ignore the fact that in Germany advanced technologies and good-paying jobs go hand in hand?

Part of the answer is that it is reassuring for elites to believe that job loss stems from complex "forces of production" that are far removed from human control. The inevitability of broad economic trends makes a pundit sound more sophisticated than the unschooled factory worker who thinks the company is moving to Mexico just because labor costs one-tenth as much.

Technological inevitability also fits neatly into the idea that runaway inequality in our economy is akin to an act of God, that globalization and technology move forward and no one can stop the process from anointing winners and losers. The winners-the richest of the rich-are those who have the skills needed to succeed in the international technological race. The losers-most of the rest of us without the new skills-see our jobs vaporized by technology and automation.

Too bad. Nothing to be done about it. Stop whining. Move on.

In other words, rising inequality can't be fundamentally altered.

Sinclair's Law of Human Nature

Or maybe there's another explanation suggested by Upton Sinclair's famous adage: "It is difficult to get a man to understand something, when his salary depends on his not understanding it."

The newscasters, the pundits, the top columnists and recidivist TV commentators-nearly all of them are doing very well. They may not be billionaires, but they live in a rarefied world far removed form the worries felt by Mr. Feltner and his brothers and sisters at Rexnord. From their elite vantage point, the status quo may have problems, but it is treating them remarkably well. So quite naturally they are drawn to narratives that justify their elite positions; that altering runaway inequality and its privileges would be futile at best and even harmful to society as a whole. How convenient.

Then again, American media firms are no strangers to stock buybacks. Time Warner, which owns CNN, Poppy's employer, instituted a $5 billion stock buyback in 2016. That's $5 billion that, for example, didn't go to news investigations about the perils of stock buybacks. We don't know if Poppy Harlow receives stock incentives, but her top bosses certainly do.

What about NBC/MSNBC? Comcast is the parent company which also instituted a $5 billion stock buyback in 2016.

Brother Feltner is right. Corporations are moving offshore to cut their wage bills. But they are not using that money to reinvest in their companies to improve the product and train the workforce. Instead, they are offshoring to gain cash flow to finance their fix. They want more stock buybacks which in turn enrich top executives and Wall Street investors. Automation and technology have nothing to do with this perilous addiction.

So, I'll stop yelling at Poppy, once she starts covering stock buybacks.

Lambert Strether has been blogging, managing online communities, and doing system administration 24/7 since 2003, in Drupal and WordPress. Besides political economy and the political scene, he blogs about rhetoric, software engineering, permaculture, history, literature, local politics, international travel, food, and fixing stuff around the house. The nom de plume "Lambert Strether" comes from Henry James's The Ambassadors: "Live all you can. It's a mistake not to." You can follow him on Twitter at @lambertstrether. http://www.correntewire.com View all posts by Lambert Strether → John , December 18, 2016 at 6:33 am

Now I understand. Companies off-shore their manufacturing because Mexico, as an example, has the latest in automation and the highest of high technology. Another example of the "Move alone. Nothing to see here." mantra.

Minnie Mouse , December 18, 2016 at 10:14 am

Yes, does moving to Mexico, or China, somehow enable more automation? If you are going to automate, why not automate in place and forget unnecessary long supply chains.

Dave , December 18, 2016 at 1:01 pm

There's an endless supply of Mexicans that can work cheap, can be trained and who cost far less than complicated machinery. They also have another utilitarian value: driving down wages in America.

frosty zoom , December 18, 2016 at 3:14 pm

an "endless supply", huh?

sheesh.

fresno dan , December 18, 2016 at 7:10 am

I'm glad I'm not the only one yelling at the TV ..
;)

"HARLOW: But you agree it won't save all of them, because of automation, because of technology."

SO .does it occur to this reported to ask how many jobs are moving from the US to Mexico? If so many jobs are lost to automation at this factory, why is it worthwhile to move to Mexico. HOW MANY jobs lost in the US and HOW MANY jobs gained in Mexico from this plant??? I wouldn't be surprised that there is a gain in Mexico beyond the number directly moved from Carrier .(extra maintenance, etc.)

And its a bizarre thing – 99% of "news" is in fact "analysis" – and they are remarkably wrong – yet NONE of them are ever fired

Cry Shop , December 18, 2016 at 7:18 am

What Mexico offers for some segments of the steel industry is the ability to bypass emissions controls. This, much more than labour, is a primary attraction for process industries like steel/petrochemical, where the goods are all most never touched by human hand.

While it also offers proximity to market that building a similar, high emissions plant further south into Central/South America (or further west into Asia) can't compete, even with labour cheaper than Mexico's. Because NAFTA does not require economic impact equivalents, industries with high costs of compliance will go where there is nothing to comply too.

rd , December 18, 2016 at 4:28 pm

Environmental regulations in general are lower in the off-shore areas. Those countries are where we were 50 years ago with polluted air, water, and land. However, as the citizens have better and more stable lives. they will insist on improved conditions. We are already seeing some of that start in China and other countries. We had to invent many of the technologies in the 70s-90s, so those countries will be able to improve their lot much faster if they want to because they will be able to buy off the shelf technologies.

Countries like China are moving forward with renewable energy, as much because it means clean air and water, as it does reduced reliance on the cantankerous Middle East and greenhouse gas emissions. It will be interesting to see what happens when US voters figure out that the goal of the current Republican party is to return the US environmental condition to a Third World country. Keep in mind that nearly all of the major environmental laws were signed by Republican presidents.

Cry Shop , December 18, 2016 at 6:06 pm

+1

and NAFTA pretty much is associated with a Democratic President.

Dwayne , December 18, 2016 at 7:28 am

Every buyback returns cash to the investor – who then has to re-invest in something else to continue getting returns, so to some extent equity buybacks of one company result in new investment in some other company. To the extent that a company's growth prospects are dim, there are many many situations in which buybacks make complete sense – as that company simply needs less and less capital for a shrinking industry. So why should they be heavily capitalized with low growth prospects?

Jim Thomson , December 18, 2016 at 10:27 am

It is still stock manipulation, plain and simple. And the decision to do it is made by the executives who benefit the most from it. And it was illegal for a good reason, and it was made legal for another good reason.

If the executives have so much retained earnings that they do not know how to invest them properly then they are incompetent in their jobs and should be replaced. They should not be allowed to use corporate funds to manipulate the stock price up to their own benefit.
Even worse, in some cases the company borrows money, at today's low interest rates, to buy back stock.
When this occurs pervasively, as it has been for some time now in the US, it is a sign of stagnation of the corporate sector.

Charles Fasola , December 18, 2016 at 11:40 am

@ dwayne, In which class were you "accidentally" born into. Not hard to make a guess is it. Don't bother with your already anticipated tesponse. Since I know fairwell the answer. The child of a poor substistance farmer who was made to walk five miles in knee deep snow to learn all that you now do.

Benedict@Large , December 18, 2016 at 11:43 am

Buy backs are not manipulation any more than increasing the dividend is. In both cases, the corporation is saying it has more money than it needs, and that that money should be returned to the company's stockholders, allowing them to choose how that money will be invested instead of having corporate management do it for them.

The concern over stock buy backs is simply people focusing on part of a larger transaction instead of seeing the whole thing. It is the difference between micro thinking and macro thinking, otherwise known as failing to see the bigger picture.

Paid Minion , December 18, 2016 at 12:39 pm

Of course, none of this excess money is EVER returned to the company's employees, who generated the money to begin with.

Signed,

Former employee, who listened to this BS from the suits about keeping the cost of labor "competitive" to justify no raises or COLAs.

Code Name D , December 18, 2016 at 6:37 pm

Because markets

Dwayne , December 18, 2016 at 6:54 pm

Benedict – you are spot on. Sounds like a lot of the other responders are either bitter shorts that have been burned by buybacks just generally shallow thinkers. They will be giving their same economically baseless arguments for the rest of their lives unless they learn to open their minds.

Those who are arguing for a dividend instead of a buyback are making a foolish argument – as if a significant dividend increase wouldn't see a significant rise in the stock and hence a similar effect as a buyback. Of course a dividend increase would see a significant rise in the stock price just like the buyback.

As to those whining about workers at-risk and executives with pay tied to the stock price – they mention nothing about the fact that workers risked no capital and can head for the door whenever they like, and that executives risked having part of their pay go to $0 in the event of an industry or economic downturn, and locked them into staying at that company for a period of time (if they leave, their options get taken away). The risk profile of a salaried worker and an executive are far different – and hence their economic outcomes are rightfully different depending on the financial performance of a company.

cnchal , December 18, 2016 at 7:28 pm

. . . Of course a dividend increase would see a significant rise in the stock price just like the buyback.

Why is that almost never the option taken?

As to those whining about workers at-risk and executives with pay tied to the stock price – they mention nothing about the fact that workers risked no capital and can head for the door whenever they like, and that executives risked having part of their pay go to $0 in the event of an industry or economic downturn . . .

In the event of an industry or economic downturn those workers risk all of their pay going to $0

Your argument reminds me that a rich person has just as much right to sleep under the bridge on a freezing night as the poor person.

Executives of publicly traded companies are not the owners, but act with impunity as if they are, and they risked no capital either.

a different chris , December 18, 2016 at 7:31 pm

Do you guys live in the real world? The company hires (from among their friends) a CEO, COO, whatever. These people are "granted stock options" ok, those stocks don't even exist so basically they just dilute the holdings of everybody who was working there. After a few years they "cash out" where money comes from basically the worker's pockets.

How's that for "shallow thinking"?

> that executives risked having part of their pay go to $0 in the event of an industry or economic downturn, and locked them into staying at that company for a period of time (if they leave, their options get taken away).

Sigh. How many links can NakCap readers come up with that shows that this is exactly what *doesn't* happen. Lemme guess, Dwayne, economic major?

John Wright , December 18, 2016 at 10:28 am

Why do share buy backs if growth prospects are dim?

Why not return the money as a special dividend or pay down debt?

I'd like to see share buyback proposal prefaced with a statement such as:

"We scoured the world looking for a suitable investment for our excess cash, there was no additional business enhancing technology we could justify purchasing, no additional R&D into product development we could justify, no additional investment in plant or equipment upgrades we could justify, no additional training for our employees we could justify, no prepayment of debt we could justify, no funding of university research we could justify."

"We don't see a way to use our excess cash to grow/improve our business".

"Surprisingly, from the global list of corporate securities we could find no financial security that is at a more attractive price level than our own stock."

"So we are buying back our company's stock."

"Take our word for it, it will be a great investment for the future."

"Note: our senior executives will be exercising options but not holding onto their option purchased stock."

"Personal financial diversification is important to them."

Chris , December 18, 2016 at 11:43 am

Excuse me, but isn't one of the main factors driving the buybacks contractual executive bonus payouts?

As in, if the stock price increases by X%, the CEO gets a maximum bonus Y. The people in the finance wing of these companies are simply solving for how many stocks they need to buyback in order to achieve X. Because they can spend other people's money to meet that goal, there is no technical or legal barrier to them doing this.

So, since we can't mandate more ethical and longer term thinking people become CEO's, can't we put a rule into place that no one in the organization performing the buyback is allowed to benefit from a buyback directly? That would make a buyback more like an option of last resort. Which is what it should be, given how corrosive it is to future development of a company.

Jim Haygood , December 18, 2016 at 11:08 am

" Stock buybacks inevitably increase the value of the shares owned by top executives and rich investors. "

While this is true as far as it goes, buybacks increase the value of ALL shares - including the roughly one quarter of outstanding shares owned by pension plans.

Pension plans are an important asset of the middle class. Cut their investment returns, and real people take a hit.

Charles Fasola , December 18, 2016 at 11:44 am

Because so many workers have defined pension plans today; correct? C'mon.

Propertius , December 18, 2016 at 3:47 pm

Jim's argument also applies to 401k and other defined-contribution plans, of course. You do still have a point, though – a lot of people who are eligible for such plans can't contribute to them because they don't have any surplus income to stash away – which is, of course, because wages are too low .

John Wright , December 18, 2016 at 1:35 pm

So if Company A does a share buyback, Company B, which does not buyback their own stock, sees Company B's share price increase anyway?

This is a great deal for company B as they can keep their cash while benefiting from company A's buyback.

JTMcPhee , December 18, 2016 at 1:47 pm

It's called "talking one's book," and working whenever possible to keep the flow of discourse going in the direction that supports one's wealth and interests

Mike G , December 18, 2016 at 2:21 pm

Goosing investment returns in the short term with buybacks to benefit stock-option insiders, at the expense of underinvestment in productive measures like R&D and training, eventually leads to corporate decline which does no favors for the few middle class people who still have pensions.

Vatch , December 18, 2016 at 7:05 pm

Buybacks increase the price of shares of stock, not the value. If a pension plan owns stock which has been inflated by buy-backs, the dividends paid to the pension plan won't increase. The only way that the pension plan can benefit is by selling the stock. Then the pension plan will need to use the proceeds of the sale to buy something else. But if most companies are inflating the price of their stocks with buy-backs, how does the pension plan find an appropriate stock to buy? If they buy another inflated stock, the value of the pension plan is in the same place as it was before it sold the previous stock.

It seems to me that buy-backs just cause a bubble. Short term "investors" such as executives can benefit from the bubble, but long term investors such as pension plans aren't able to benefit in that way.

Altandmain , December 18, 2016 at 5:55 pm

Executives often cash in their stock options around the time of stock buybacks.

http://www.reuters.com/investigates/special-report/usa-buybacks-pay/

It's a huge problem of principle agent. The other is that every dollar used to buy back for the company is then one less available for capital costs, R&D, employee training, etc.

The overwhelming majority of the gains to investors will go to the wealthy as well. Workers get nothing and often worse than nothing when their job security is under attack.

Sound of the Suburbs , December 18, 2016 at 8:02 am

Things were a lot more straight forward in the 18th and 19th centuries and there was far less complication to obscure the reality. In 18th and 19th century they had small state, raw capitalism when there was little Government interference to cloud the issue.

The Corn Laws and Laissez-Faire, the requirements of free trade, a historical lesson:

"The Anti-Corn Law League was a successful political movement in Great Britain aimed at the abolition of the unpopular Corn Laws, which protected landowners' interests by levying taxes on imported wheat, thus raising the price of bread at a time when factory-owners were trying to cut wages to be internationally competitive."

The landowners wanted to maintain their profit, charging a high price for corn, but this posed a barrier to international free trade in making UK wage labour uncompetitive raising the cost of living for workers and as a consequence, wages.

The anti-corn law league had to fight the vested interests of the landowners to get the UK in a position where it could engage in free trade. They had to get the cost of living down to a point where they could pay their workers internationally competitive wages.

Opposing national interests, productive industry and landowner rentiers.

It's always been that way, we just forgot.

Workers have been priced out of international markets by the high cost of living in the West and now we try and tell them that is their fault. It is the elite who do not understand the first thing about free trade unlike their 19th century predecessors.

The US has probably been the most successful in making its labour force internationally uncompetitive with soaring costs of housing, healthcare and student loan repayments. These all have to be covered by wages and US businesses are now squealing about the high minimum wage.

US investors and companies have little interest in investing in the US due to its high labour costs caused by its own national rentier interests. There are opposing national interests within the US just as there were in the UK in the 19th Century.

Most of the UK now dreams of giving up work and living off the "unearned" income from a BTL portfolio, extracting the "earned" income of generation rent. The UK dream is to be like the idle rich, rentier, living off "unearned" income and doing nothing productive.

The UK is itself atrocious and has encouraged rentier interests which oppose the interests of those who want free trade. The UK is now ramping up student loans to make things worse. High housing costs and student loan repayments will have to be covered by wages pricing UK labour out of international markets.

Things were a lot more straight forward in the 18th and 19th centuries and there was far less complication to obscure the reality. In 18th and 19th century they had small state, raw capitalism when there was little Government interference to cloud the issue.

The Classical Economists observed the situation which was a lot more clear cut in those days. The Classical Economists thought the cost of living must be kept low with free or subsidised housing, education and healthcare funded through taxes on "unearned" income. "Earned" income shouldn't be taxed as this raises the cost of doing business, real productive business that earns real wealth.

Imaginary wealth can be produced by inflating the value of a nations housing stock until the bubble bursts and all the imaginary wealth disappears (e.g. US 2008, Japan 1989, Ireland, Spain, etc ..).

Ditto all other financial assets.

The Classical Economists realised capitalism has two sides, the productive side where "earned" income is generated the unproductive, parasitic side where "unearned" income is generated. The vested interests of the two sides are opposed to each other.

If you forget you can made fundamental mistakes, like today's ideas on free trade.

The UK and US have revelled in their ignorance.

Sound of the Suburbs , December 18, 2016 at 8:06 am

Wealth – real and imaginary.

Central Banks and the wealth effect.

Real wealth comes from the real economy where real products and services are traded. This involves hard work which is something the financial sector is not interested in.

The financial sector is interested in imaginary wealth – the wealth effect.

They look for some existing asset they can inflate the price of, like the national housing stock. They then pour money into this asset to create imaginary wealth, the bubble bursts and all the imaginary wealth disappears.

1929 – US (margin lending into US stocks)
1989 – Japan (real estate)
2008 – US (real estate bubble leveraged up with derivatives for global contagion)
2010 – Ireland (real estate)
2012 – Spain (real estate)
2015 – China (margin lending into Chinese stocks)

Central Banks have now got in on the act with QE and have gone for an "inflate all financial asset prices" strategy to generate a wealth effect (imaginary wealth). The bubble bursts and all the imaginary wealth disappears.

The wealth effect – it's like real wealth but it's only temporary.

The markets are high but there is a lot of imaginary wealth there after all that QE. Get ready for when the imaginary wealth starts to evaporate, its only temporary. Refer to the "fundamentals" to gauge the imaginary wealth in the markets; it's what "fundamentals" are for.

Canadian, Australian, Swedish and Norwegian housing markets are full of imaginary wealth. Get ready for when the imaginary wealth starts to evaporate, its only temporary. Refer to the "fundamentals" to gauge the imaginary wealth in these housing markets; it's what "fundamentals" are for.

Remember when we were panicking about the Chinese stock markets falling last year?

Have a look at it on any web-site with the scale set to max. you can see the ridiculous bubble as clear as day.

The Chinese stock markets were artificially inflated creating imaginary wealth in Chinese stocks, it was only temporary and it evaporated.

It's what happens.

Charles Fasola , December 18, 2016 at 11:46 am

Hoorah!

JTMcPhee , December 18, 2016 at 1:49 pm

Did the Chinese who used the "money" they got from inflation of stock prices to buy real estate and other tangible assets, with that "money," continue to have legal ownership of said assets after the market collapsed?

If they did, it's amazing how "wealth" gets created

Outis Philalithopoulos , December 18, 2016 at 9:22 am

FYI, Sound of the Suburbs, your comment contains a duplicated paragraph. This sort of thing tends to get flagged by the computer as spam.

johnnygl , December 18, 2016 at 8:04 am

Great headline, good article. It's hard to watch CNN and avoid yelling at it.

Arizona Slim , December 18, 2016 at 8:18 am

Welcome to the fellowship of TV yellers!

Marie Parham , December 18, 2016 at 8:38 am

The good news is that my son tells me only a few old people get their news from cable news shows.

linda amick , December 18, 2016 at 9:24 am

I gave up TV 6 years ago and I am old. TV is awful for so many reasons. One of them is the fact that it dictates lifestyle and values. I hate it for children.

hidflect , December 18, 2016 at 8:43 am

Harlow is just using what I call the 3-legged stool approach which is to blunt any argument by introducing rotating facets. You see it in arguments about the West Bank. If you mention Zionist, they rebut with Israeli. If you say Israeli, they introduce Jewish. Round and round you go until the point is lost.

Aside: I'd pay money to see Lambert yelling at a TV. The way he carves some people up on this site makes my toes curl. No matter how much they deserve it, I feel really sorry for them.

ambrit , December 18, 2016 at 8:45 am

Silver lining time. Without TV to emote to, my blood pressure is lower overall. This trade off is very beneficial to me.
Also germane is that a hundred years ago, the cheap labour was pouring into America from offshore. Now that population has stabilized, the labour is no longer as cheap, (it is still too cheap, but,) in America. Companies are generally about the "bottom line." Socially conscious corporate management is feted and lionized for a reason; it's rare.
Regulation and enforcement is the key. Buy local, shop local, govern local.

a different chris , December 18, 2016 at 7:44 pm

>Buy local, shop local, govern local.

Yup. Unfortunately that can't be applied to the environment, where everybody is downstream and downwind of everybody else. I don't believe in God, but if you do then you can claim that's why he made planets spherical. :)

Carolinian , December 18, 2016 at 8:49 am

While I do have a tv I don't get CNN. Thank gawd. In fact the indignity of paying for CNN with its inane announcers and endless commercial interruptions was a big motivator for "cutting the cord."

Carl , December 18, 2016 at 9:13 am

Count me as another who doesn't have tv. The Jimmy Dore Show and various online videos make up our viewing. In fact, it's difficult to read NC and other sites and then see the drivel that passes for tv news. But just keep it up, guys (MSM); you're one of the main reasons we have a huge alienated population of have-nots, and the unwashed masses are becoming restive.

Arizona Slim , December 18, 2016 at 12:23 pm

I second the Jimmy Dore nomination.

Aumua , December 18, 2016 at 2:15 pm

Jimmy Dore makes me want to yell at his stupid face. But I'm weird, so..

John Wright , December 18, 2016 at 9:40 am

The automation=job loss meme has been picked up in other places.

On the Saturday before the election, I visited the local Democratic headquarters in my Northern California town to get a Clinton-Kaine bumper sticker for my collection.

As they wanted $1, I wanted to get some entertainment value from the purchase, so I asked one of the elderly women "What has Hillary ever done?".

She responded with "Financial reform", apparently confusing HRC with Elizabeth Warren.

I mentioned that Hillary supported the TPP, until well into her campaign, and that trade bills had cost jobs.

Her immediate response was "More jobs have been lost to automation than trade bills".

I was surprised she had this explanation at the ready, perhaps it was given to HRC campaign workers as a talking point in case someone questioned HRC's commitment to stopping the TPP.

cnchal , December 18, 2016 at 9:51 am

There is a meme being told from the people at the top, to the peasants.

Part of the answer is that it is reassuring for elites to believe that job loss stems from complex "forces of production" that are far removed from human control. The inevitability of broad economic trends makes a pundit sound more sophisticated than the unschooled factory worker who thinks the company is moving to Mexico just because labor costs one-tenth as much.

The other day someone left a link to an article by an economist named Scott Sumner, where at the end of his article the same meme is put forth, with a twist.

Automation Destroyed 20 Million Manufacturing Jobs

So what's all this really about? Perhaps the "feminization" of America. When farm work was wiped out by automation, uneducated farmers generally found factory jobs in the city. Now factory workers are being asked to transition to service sector jobs that have been traditionally seen as "women's work". Even worse, the culture is pushing back against a lot of traditionally masculine character traits (especially on campuses). The alt-right is overtly anti-feminist, and Trump ran a consciously macho themed campaign. This all may seem to be about trade , but it's actually about automation and low-skilled men who feel emasculated .

Unschooled and low skilled are code words for stupid, and the meme is, men that make stuff are stupid.

Within his article is an interview of the CEO of United Technologies by Jim Cramer in Business Insider that he quotes as confirming his reasoning that automation is solely responsible for all the job loss and that offshoring and globalization caused zero manufacturing jobs to be lost in the US.

The result of keeping the plant in Indiana open is a $16 million investment to drive down the cost of production, so as to reduce the cost gap with operating in Mexico.

What does that mean? Automation. What does that mean? Fewer jobs, Hayes acknowledged.

From the transcript (emphasis added):

GREG HAYES: Right. Well, and again, if you think about what we talked about last week, we're going to make a $16 million investment in that factory in Indianapolis to automate to drive the cost down so that we can continue to be competitive. Now is it as cheap as moving to Mexico with lower cost of labor? No. But we will make that plant competitive just because we'll make the capital investments there.

JIM CRAMER: Right.

GREG HAYES: But what that ultimately means is there will be fewer jobs .

The general theme here is something we've been writing about a lot at Business Insider. Yes, low-skilled jobs are being lost to other countries, but they're also being lost to technology.

Everyone from liberal, Nobel-winning economist Paul Krugman to Republican Sen. Ben Sasse has noted that technological developments are a bigger threat to American workers than trade. Viktor Shvets, a strategist at Macquarie, has called it the "third industrial revolution."

Economists can't add. $16 million in investment, of real goods to improve productivity to the point where air conditioner production in Indianapolis can compete with Mexican production cost using existing technologies that are ripped off the shop floor and trucked to Mexico, itself creates jobs, and the improved more highly automated plant still retains jobs here, along with the technology.

That $16 million investment happened only because Donald Trump either threatened or promised something for United Technologies, but the number of jobs lost now are not solely due to moving all production to Mexico, which would have been what happened had he not used his power of persuasion to pry some money for investment out of the United Technologies bank account.

I wonder what Scott Sumner and the rest of the economists think of the women that work in manufacturing? Are they stupid too?

Propertius , December 18, 2016 at 4:28 pm

"Uneducated farmers", huh?

How far we have apparently fallen from Jefferson's day, when American farmers apparently were in the habit of reading Homer in Greek! ( http://www.let.rug.nl/usa/presidents/thomas-jefferson/letters-of-thomas-jefferson/jefl51.php ).

If only they were as edumacated as economists or talking heads on the teevee!

Dana , December 18, 2016 at 9:51 pm

I wonder when was the last time Sumner visited a farm. Or even the ag campus of his local university.

diptherio , December 18, 2016 at 10:00 am

In 1980 before the stock buyback era, the ratio of compensation between the top 100 CEOs and the average worker was 45 to 1. Today it is a whopping 844 to 1. (The German CEO gap is closer to 150 to 1.)

45 to 1, 150 to 1, 844 to 1 .it's all ridiculous. Just because you wear a suit and have your own office to work in does not somehow entitle you to make as much in a year (or a month or a week) as much as someone else does in a lifetime.

Paul Tioxon , December 18, 2016 at 10:08 am

Stock buybacks are a problem of such proportions, that it is a subject all by itself. To connect it to Germany's Industrial policy is a perfect example of ahistorical, faulty, unempirical analysis at its worst leading to the politics of simpletons. The stock buybacks reference here are recent, 21st Century. The de-industrialization of the US goes back to the immediate post WWII policies of corporate America as well as the US Government.

Germany's industrial policy has complex contributing factors which has a more important contributing factor in its military expenditures. This of course is directly related to Germany's history. It lost WWII and was an occupied territory, eventually split into an East And West Germany. For many years, even as a NATO member, West Germany spent almost ZERO on military expenditures. This comes with being an occupied nation that lost a war. Even today, the US Marine Corps alone has a budget that exceeds all of the re-united Germany's military budget. Germany, for obvious historical reasons has been deliberately suppressed as a military power, even in meager self defense, back when a Soviet doppleganger was on its border. Of course, when the US Government stations on your soil, almost 100,000 or more military personnel, armored tank divisions and US Air Force bases for decades, you can avoid the cost of national defense.

----------

"German Chancellor Angela Merkel said on Saturday that Europe's largest economy would significantly boost defense spending in the coming years to move towards the NATO target for member states to spend 2 percent of their economic output on defense.

But Merkel, addressing a conference of the youth wing of her conservatives, did not specify by how much defense spending would rise.

Merkel said U.S. President Barack Obama had told her it could no longer be the case that the U.S. spends 3.4 percent of its gross domestic product (GDP) on security while Germany – its close NATO ally – only spends 1.2 percent of GDP on that.

"To get from 1.2 percent to 2 percent, we need to increase it by a huge amount," Merkel said.

In 2016 Germany's budget for defense spending stands at 34.3 billion euros so it would need to be increased by more than 20 billion euros to reach the 2 percent target."

http://www.reuters.com/article/us-germany-merkel-defence-idUSKBN12F0JU?il=0

-----------------

And for decades, avoid the burden of military expenses it did, to the direct contribution to its industrial manufacturing center. Chalmers Johnson reviews this critical aspect of America's Hegemony since WWII in the course of several books. He was a CIA analyst as well academic economist expert on Japan and China. The US economy suffered disinvestment in its tool and die and metal working sector to the tune of over $7Trillion while building up the Pentagon into the Global Military Hegemon that it is today. The platform of the manufacturing center dependent on tool and die to make the parts of the machinery of factories and weapons of wars was in decline and overtaken by the Japanese and the Germans. We outspent the Soviet Union and now the rest of the world by staggering margins. But, to make and maintain the machinery of war, the Great American Killing Machine, global bases and global industrial skills and equipment replaced the domestic. The US Naval bases from Boston, Brooklyn, Philadelphia-founding locale of the US Navy and US Marine Corps, Baltimore, and on and on, all gone. Replacing the base closures, Guam, Okinawa, Rota, Spain, Naples, Italy Ramstein, Germany, and on and on. And Germany and Japan, played their roles to keep up American military might in exchange for our nuclear umbrella and military protection. This to the detriment of jobs in the US.

--------------------------
"After World War II, the US reduced defense spending to 7.2 percent of GDP by 1948, boosting it to nearly 15 percent during the Korean War. During the height of the Cold War with the Soviet Union US defense spending fluctuated at around 10 percent of GDP.
At the height of the Vietnam War in 1968 defense spending was 10 percent of GDP. But then it began a rapid decline to 6 percent of GDP in the mid 1970s and hit a low of 5.5 percent of GDP in 1979 before beginning a large increase to 6.8 percent in 1986.
Starting in 1986 defense spending resumed its decline, bottoming out at 3.5 percent of GDP in 2001. After 2001, the US increased defense spending to a peak of 5.7 percent of GDP in 2010. It is expected to reduce to 4.5 percent of GDP in 2015 and 3.8 percent by 2020."

http://www.usgovernmentspending.com/defense_spending

--------------------------–

For 20 years from the end of WWII, military expenses soaked up about 10% of the annual GNP. Those amounts dwarf stock buy backs. As you can see from the excerpt above, the military bill to the US is enormous and as a global military, much of this money is spent outside of the US, employing people outside of the US, many who are not US citizens. As bad and as large as financialized capitalism is, the jobs are lost more to wasteful military "Keynesianism". The 10s of $Trillions$ for most of the 2nd half of the 20th Century explains more than stock buybacks, which of course are more than statistically significant, just not in the same league as Imperial America.

Automation, deindustrialization and run away factories together formed the basis for weakening organized labor and reducing the amount of good paying working class jobs with their good benefits and security. Job security comes in the form of unemployment benefits due to the boom/bust business cycle that has factories operating on 2 or more shifts and then cut back due to saturation and or slack demand. Mexicans thrown out of work are easier to deal with than unemployed Americans, not only due to costs but also political fallout. Unemployed Americans can still vote congressmen out of office every 24 months if they are that unhappy with the economy. You don't need a job to vote. But alas, that is also another large scale problem, all by itself that deserves focused analysis and comments.

Ted , December 18, 2016 at 11:44 am

Soooo it's back to blame the gub'ment and give Capital a pass, eh? I see what you did there nice work. I particularly enjoyed your fantasy that unhappy workers can vote their congressperson out every two years ' cause that's empirically true of the US political system.

TG , December 18, 2016 at 10:39 am

Triple kudos! Well said!

All this stuff about 'automation' killing jobs is just a distraction. It's not happening, not overall. That's why productivity figures are going down – they should be skyrocketing if automation was to blame. The number of janitors and maids that have lost their jobs to a Roomba robotic vacuum cleaner is zero. The number of truck drivers that have lost their jobs to robotic trucks is zero. Shrimp are still flown to Malaysia, peeled by hand using slave labor, and then flown back, because it's cheaper than developing and building and maintaining automated shrimp peeling machines. And so on.

Why are the elites still so set on moving jobs to low wage countries? Why are they still so set on an open-borders immigration policy? Because they know what they aren't telling us: right now general robotics is still in its infancy, it's all about cheap labor.

So many otherwise rational and skeptical people have been distracted by the false 'robots are now making human workers obsolete' meme. Congrats again on such a clearly reasoned piece.

Brad , December 18, 2016 at 11:58 am

The difference between German and US industrial manufacturing is social, not technological. It only demonstrates that in the face of the displacement of labor with machines, social measures are required to address the fact that a smaller percentage of total available labor is required to produce the necessities of life. One way Germany has addressed this is by targeting high value-added manufactures. In addition, historically manufacturing exports have always played a more important part for Germany than for the US, never a big manufacturing exporter unlike (in the 19th C) Britain, Germany, Japan and now China. US manufacturing was always primarily oriented towards the home market, beginning with the Midwestern farmers and their McCormick reapers and Montgomery Wards catalogs in the 19th C. The US has always been a primary products (oil, agri, timber, minerals) exporter. Plus weapons. Kinda like Russia. Its two biggest trading partners are its continental neighbors, Mexico and Canada.

The debate over whether job loss is due to automation or offshoring tends to be short on facts. One almost never see a statistical breakdown that might tell us how much job losses are due to one factor or another. That includes John Smith's "Imperialism in the Twenty-First Century: Globalization, Super-exploitation and Capitalism's Final Crisis" (2016), quite big on off-shoring, but never giving a concrete measure of the relative importance of one or the other.

However I put up a BLS-based chart that shows the decline in manufacturing jobs in the US in a pretty diagonal straight line down beginning well before off-shoring became a thing, well before NAFTA. Basically the manufacturing workforce peaked in the 50's. So there is always some pressure through competition to displace labor with automation. Offshoring is merely a dependent alternative to automation – reduce the labor bill with cheaper labor, not displacement. It's not "one or the other".

Technological determinism aside, a fetish is made of automation in the media because they know there is no answer that doesn't conclude with the elimination of capitalism, and that answer is out of bounds. Hence it is deployed literally as a deus ex machina that ends social debate. But clearly the question of a living income has become separated from that of productive labor.

Paid Minion , December 18, 2016 at 12:57 pm

One might say that manufacturing employment started declining, when we allowed non-reciprocal "free-trade"; access to our markets, in order to enable some other geopolitical goal.

Going something like : "Sure, go ahead and let the Japanese and Germans export their cars to our market. It will help their economies, and we'll never notice the difference. Besides, even if they didn't have various ways of restricting our exports, the size of their markets aren't worth exporting to "

Then in the 70-80s, it was "Sure, lets help all of our Allies develop an aerospace industry, and build their own F-16s. "Offsets"? No problem. No sacrifice by US workers is too much in order to fight the "Red Menace", and promote "Free Markets" "Democracy", and improve the standard of living over there.."

Johnnu lunch Box , December 18, 2016 at 1:10 pm

Millions of jobs go to Mexico and millions of Mexicans come to usa and send their millions in wages home to support their families. Meanwhile Politicians continue with Rectal Crainial Inversion while drawing huge salaries. When will the revolution begin?

Sluggeaux , December 18, 2016 at 1:16 pm

Class-hatred has been simmering in the U.S. throughout its entire history, and it manifests itself today in the anti-Americanism of our greedy elites, who would prefer to profit from the exploitation of foreign labor over living in a just and equitable society. Germany and Japan benefitted from losing the War, from Cold War trade policies that allowed them to rebuild on exports to the U.S. (subsidized in many cases, such as by container ships returning from Vietnam via Yokohama), and the creation of a manufacturing culture that continued to value workers even as their wages rose. Americans in the credentialed classes became obsessed with rock-star lifestyles, epitomized by Slick Willie bragging that his first date with Hill in 1971 involved crossing a union picket line to scab at the Yale Art Museum in order to gaze at a bunch of vacuous Rothkos. But watch out - class-hatred is a two-way street

Chicken and egg, Lambert. Stock manipulation increases the power of the 1%. I also yell at the TV "news" - probably because I didn't have one either between the critical developmental ages of 18 and 23 - so "news" broadcasts are not allowed in my house.

TheMog , December 18, 2016 at 1:48 pm

It's not all roses and unicorns either in Germany. There is outsourcing going on as well – for example both BMW and VW manufacture cars for the US market in the Southeastern US (IIRC both in Spartanburg, SC).

Yes, Germany does have a better education system for apprentices etc plus it is still socially acceptable to become an apprentice in a trade and not go to college. BMW is trying to establish something similar around Spartanburg, but apparently with mixed success. Dan Rather did a segment on this effort a few years back and interviewed a bunch of parents who said something along the lines of "nice idea, but it's for other people's kids – ours have to go to college".

Another thing to keep in mind is that large German manufacturing companies still tend to have pretty strong union representation, which of course is sorely missing in the US.

Mitch Ritter , December 18, 2016 at 2:16 pm

Two words missing from Union Reps and Wage Slaves ourselves as we flail away while falling backwards, "SOCIAL CONTRACT." Our backwards free fall from stable middle class growth and access and attainment to higher education has been precipitated and pushed by a broadcasting system and cyber platforms that have excluded the VOICE OF WORKERS ever since the first newspaper carried a BUSINESS section with no LABOR section.

Through the various historical attempts to insulate some small sliver of broadcast spectrum from advertiser pressures and market forces. Those various historical attempts now the strictest taboo on content, even stricter than sexual predation and violent aberration which comprise much of the broadcast content. Yet when or where can we find a broadcaster in the U.S. addressing issues of structural media reform to insulate some national resources from the POLITICAL E-CON-o-my that grants them to the the highest bidder.

As media scholars Robert McChesney and John Nichols have pointed out in a number of their book-length studies on this taboo U.S. history of mass media: One of the first national radio networks was designated for LABOR, there were multiple EDUCATIONAL networks and this has nothing to do with IDENTITY LABELS used to divide U.S. like Conservative or Liberal, however these shifty terms are defined. A well-rounded human has both aspects and more within them depending on circumstance, context and situation being addressed.

Another designated non-commercial broadcaster was the CATHOLIC CHURCH whose leaders were actively concerned with the use of public airwaves by Advertising Agencies using sales tactics to habituate dangerous past-times (like alcohol and tobacco) and were driven by seasonal fashions rather than values and verities such as the bible and catechism's preponderant calls to address the needs of society's most disadvantaged. Or to beat weapons into plowshares and sit under a fig tree and reason together (Isaiah) rather than to use fear to keep subsidizing the worlds largest distributor of weapons and its stealthy and steely profiteers.

Sad day when the few token representatives of U.S. Wage Slaves cannot even be counted on to voice a DEMAND much less to insert the concept of SOCIAL CONTRACT that extended humane and practical DEMAND-DRIVEN\SUPPLY LINE insights into our materialistic society's wealthiest distributors of hate and divisiveness such as Henry Ford, who while stoking anti-Semitism and disparaging independently organized labor for his MASS PRODUCTION facilities, eventually realized that if his impoverished work-force was ever to constitute the potential internal markets that became the Post WW II envy of the world, those workers would have to be paid more than slave wages, be granted access to long-term capital to purchase big-ticket items and our growing internal markets within the lower 48 states would require careful regulation and controls like tariffs and capital-flight restrictions that would protect our enviable internal markets. Nowadays whenever PROTECTIONISM is demonized by both Fair & Balanced Journalists and their Golden Rolodex of E-CON and Bid-Net experts there is nobody to note how our own late-developing working middle classes grew from the Age of the Robber Barons in which the U.S. was as feudal a society as Europe's with simple substitution of the Captains of Industry for the monopolistic and conservative royal Anglo and Euro monarchs whose crown-chartered legal anti-trust fictions dba EAST INDIA TRADING COMPANY or HUDSON BAY TRADING CORPORATION.

Our founders rebelled against these Conservative Royal Feudal Monarchs and their Royally Chartered monopolistic Corporate Legal Fictions by dumping such product into every available cartel-controlled mercantile harbor. PROTECTIONISM was what allowed our states to form that most enviable of internal national markets and prevented our SOCIALLY CONTRACTED WORK FORCE from being forced to compete against cheaper off-shore or south-of-the-border slave labor that formed the same COMPETITIVE ADVANTAGE now taken for granted when a subsidized start-up like NIKE decides to pursue a business model that relentlessly exploits North American running shoe and sports wear market needs by cheaply manufacturing such products off-shore via contracting agents exploiting captive Indonesian (substitute other Latin American, African or Asian ENTERPRISE aka FREE TRADE ZONES) slave laborers.

If we aren't worth hiring at a sustainable SOCIALLY CONTRACTED WAGE aimed at developing our national resources, we should reject buying from such nationally suicidal business models and corporate LLC fictions even if they can pay-2-play legislation that removes the PROTECTIONS. We vow to never sacrifice NATIONAL SECURITY, so why have we allowed the PRIVATIZATION of our NATIONAL SECURITY STATE by corporate legal fictions? A revealing if not all-encompassing historical answer to that question is another corporate-captured and regulatory-captured Mass Media Taboo discussed one time to my knowledge on the PEOPLE'S AIRWAVES. Search Bill Moyers panel discussing the LEWIS POWELL MEMO TO THE NATIONAL CHAMBER OF COMMERCE and the Nixon appointment of LEWIS POWELL to the Supreme Court, despite his total lack of judicial experience.

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herkie1 , December 18, 2016 at 3:00 pm

FELTNER: These companies are leaving to exploit cheap labor. That's plain and simple. If he can change those trade policies to keep those jobs here in America, that's what we need. We need American jobs, not just union jobs.

And thus we circle back to finding a way to keep manufacturing jobs in the USA. The comment by Feltner is correct, but the solution of keep jobs in the USA using more expensive labor simply means more expensive products. That is fine if you are in the top 10% and can pay anything for your purchases, but I am on a fixed income and cannot afford to pay more for anything without a 1:1 drop in my living standards.

The real macroeconomic problem is all, I repeat – ALL – new income after inflation generated by the macro economy since Bush II took office has gone to the top 10% of households by wealth. Why does NOBODY else seem to understand that you cannot run an economy without money? And the Main Street economy is strapped with 10's of millions having fallen out of the middle class even as their paper assets like home equity were stolen by the financialization of the USA and the stockholders that own the Wall Street economy.

The data coming out of the government/fed is a work of total fiction, inflation has been galloping (at least here in Oregon) at double digits since Jan 2014, rents alone are up 75% since then. Food at least 40%, both auto and healthcare insurance at least 40%, just to name three items, even a sandwich at a fast food join is nearly 100% higher than start of 2014 here. Del Taco raised it's menu prices in July by over 100%. Companies do not do that in disinflationary eras such as we are assured have existed since 2010. My veteran's disability/SS had it's first COLA increase in a while for 2017, social security disability went up $3, that is not a typo, my rent has gone up from 725 in December 2013 to $1,250 in Jan 2017 while my benefit has risen for next year by THREE dollars.

I considered myself middle class, just barely but above working class/poor, as recently as 2014. Now I am leaving for Australia on a one way ticket in 3 weeks, if I had not been invited there by a friend I would have had to give notice at this place anyway in order to live in my vehicle. Inflation is so wildly out of control that anyone taking home less than 40k a year here now needs a roommate. Is this metro Portland? No, it is far southern semi rural Jackson county hundreds of miles from the nearest major hub.

So any analysis of economic conditions in the USA have got to start with recognition that the cost of living has risen OVERALL by as much as 40-50% just in the last very few years.

WHY DO YOU THINK POPULISM RAISED IT'S VIRULENT HEAD THIS ELECTION CYCLE?

People are angry, they are broke, living paycheck to paycheck, using payday loans to feed their kids, and the entire media and government refuse to recognize price increases because those increases do not fit the Feds or government's economic models that allowed for negative real interest rates and the historic borrowing by the congress. Inflation is as bad as it ever was in the 1970's but we are told there is no inflation and so if we are not making ends meet it simply has to be a personal failing, bad habits, or profligate spending when I know for my part I have cut back on absolutely every thing I can including heat. It is not a personal failing, it is being lied to by the powers that be.

Seriously, until the contributors at Naked Capitalism finally recognize the house on fire inflation for every item you must purchase (except gasoline and flat screens) there really is nothing here worth reading.

hunkerdown , December 18, 2016 at 8:07 pm

Drive-by herkie1, do you actually read sites befpre pasting diatribes against them, or are you a bourgeois liberal?

Altandmain , December 18, 2016 at 6:07 pm

The answer is that the very rich are waging class warfare and are looking for anything to absolve them of responsibility.

If automation were responsible for unemployment, then productivity figures would be soaring. Dean Baker notes that productivity has been rising at half the rate over the past decade at just 1.5% per year, compared to 3% between 1947 and 1973.
http://cepr.net/publications/op-eds-columns/the-job-killing-robot-myth

People need a restitution for the outright looting of society from the rich. That's about it.

Spencer , December 18, 2016 at 6:42 pm

Kudos. Uncommon, common sense.

Pete Prunskunas , December 18, 2016 at 9:13 pm

"Ever Hear of Germany?"

You missed some. German companies, but also those of other European countries, generally have a seat on the board for unions. The adversarial model of management versus unions is not so common.

China has stolen a great deal of technology from Germany because it has (had?) the most advanced industrial technology in the world. Read the below articles from Der Spiegel and you will understand. Essentially, Germany is what the U.S. was in the 1980s before the various presidents, both left and right, starting with Nixon, sold us down the river.
– "Product Piracy Goes High-Tech: Nabbing Know-How in China"
– "Harmony and Ambition: China's Cut-Throat Railway Revolution"
– "Beijing's High-Tech Ambitions: The Dangers of Germany's Dependence on China"

And the following is from CNN/Money, "How to save U.S. manufacturing jobs": "High wages can't be the culprit, because wages in U.S. manufacturing are not especially high by international standards. As of 2009, 12 European countries plus Australia had higher average manufacturing wages than the United States. Norway topped the list with an average manufacturing wage of $53.89 per hour, 60 percent above the U.S. average of $33.53 Moreover, the United States lost manufacturing jobs at a faster rate since 2000 than several countries that paid manufacturing workers even more. Among the 10 countries for which the Bureau of Labor Statistics tracks manufacturing employment, Australia, France, Germany, Italy, the Netherlands and Sweden both had higher manufacturing wages and lost smaller shares of their manufacturing employment than the United States between 2000 and 2010."

Not to mention Germany's apprentice system, which works really well.

Takara Kane , December 18, 2016 at 9:49 pm

What next in the technology field? Read it and weep or if a Technology CEO – get excited

https://futurism.com/80-of-it-jobs-can-be-replaced-by-automation-and-its-exciting/

[Dec 18, 2016] The Econocracy An Interview with Cahal Mora naked capitalism

Notable quotes:
"... Cahal Moran is a member of Rethinking Economics, the worldwide student movement to reform the teaching of economics. He is the co-author, with Joe Earle and Zach Ward-Perkins of the book ..."
"... The Econocracy: The Perils of Leaving Economics to the Experts ..."
"... the authors can be followed on their Twitter account ..."
"... @TheEconocracy ..."
"... . Interview conducted by Philip Pilkington, a macroeconomist working in asset management and author of the new book ..."
"... The Reformation in Economics: A Deconstruction and Reconstruction of Economic Theory ..."
"... . The views expressed in this interview are not those of his employer. ..."
"... In the book we give a formal definition of econocracy as "a society in which political goals are defined in terms of their effect on the economy, which is believed to be a distinct system with its own logic that requires experts to manage it. " ..."
"... Economists are wheeled out to comment on all sorts of public policy issues: in the news, on the TV, online and so forth. The deference to economic expertise is something that permeates our politics and, through the use of jargon, maths and statistics, serves to exclude non-expert citizens from conversations about issues that often have a direct impact on their lives. As you imply, it is something like an ancient priesthood. In fact, in an earlier draft of the book we made a comparison to ancient medical texts, which were only written in Latin and so created a huge asymmetry between experts and non-experts, which could have awful consequences for the latter. In some senses economics in modern times goes even further than this, because it affects policy on everything from incomes and jobs to healthcare and the environment. ..."
"... I suppose that leads us pretty tidily to the title of the second chapter of your book: 'Economics as Indoctrination'. Given that you have this view of economic language – one which I concur with in that I have concluded that maybe 60-80% of formal economic language is ideology – it pretty naturally follows that there will be some attempt to indoctrinate those who wish to speak the language. I guess the natural place to start is to ask you for a flavour of what this indoctrination looks like and then maybe we will move on to what its purposes are and what ends it serves. ..."
"... We call economics education indoctrination in the book not just because students are presented with only one set of ideas – neoclassical economics – but because they are taught to accept it in an uncritical manner, as if it is all there is to economics. ..."
"... Keynes said that the real challenge lies in escaping old ways of thinking, and this is something we've all noticed in ourselves after studying economics. ..."
"... This process is indeed the main way that the econocracy reproduces itself: as the economic experts of the present train the economic experts of the future, this shapes the way the latter approach economic problems when they go on to work at powerful institutions. Broadly speaking, this education shapes the perception of economic experts in two ways. Firstly, they tend to have mechanical view of the world, thinking of economic and social problems as clearly defined technical questions. This allows them to produce clear predictions when addressing even complex political issues. Secondly, they see economics as a separate, value-free sphere which does not require ethical and political debate. Their answers to policy questions have the air of objectivity about them. ..."
"... Economists predict disaster where none occurs. They deny the possibility of events that then happen. They oppose the most basic, decent, and sensible reforms, while offering placebos instead. They are always surprised when something untoward (like a recession) actually occurs. And when finally they sense that some position cannot be sustained, they do not re-examine their ideas. Instead, they simply change the subject. ..."
"... Making central banks independent from the political process, staffing them with economists and tasking them with using interest rates to manage inflation and growth, along with a fairly hands-off approach to the financial sector (which itself used economic models such as Black-Scholes) seemed to be working. That was, until the theoretical blind spots economists had in the housing market and financial sector was revealed by the near-collapse of both of them. ..."
"... I suppose this is a variant on the classic 'who governs the governors': who teaches the teachers. ..."
"... substantive ..."
"... If economics is to function as the medium of power than its students must be made to follow blindly. Critical thinking would allow them to undermine it or manipulate it to their own ends. ..."
"... The students must be made into strict adherents before being granted access to the highest levels of information. By erecting barriers at each level (be it specialized language that must be mastered or learning contigent on prior learning) we can separate the weak from the true adherents. ..."
"... Following Adler, economics is not a science, it's a philosophy. At least economics doesn't burn its heretics, it just ignores them. Science is neither immune. Gerald Pollack has written that he was advised to avoid water as a subject of inquiry, or it could kill his career. ..."
"... File under "the creative class" writers à la Toynbee ..."
"... When you think about it economics doesn't really exist. Society does. And when economics is talked about like society doesn't exist it gets pointless. Just like some stupid software language that does basically nothing. What we need is the courage of our human convictions. I think it was Blyth in an early clip who said more or less, "Just do it." Deficit spend as necessary and the solutions will appear. That's very Zen and I love it. I mean, here's the question, What is the worst that can happen? If there is sufficient money. Great interviewer and interviewee. Thanks NC for this post. ..."
"... "Economics doesn't really exist, society does": a super obvious statement that stands in starkest distinction to NeoLib ideology that insists we are all atomistic, isolated individuals. Math and language are epiphenomena to human being that have perverted our self perception nearly to oblivion. ..."
"... Interesting thing I heard the other day, Professor Richard Wolff says he studied economics at three elite universities (Yale, Harvard, and another notable I cannot remember) and never had a course in Karl Marx. Tunnel vision for sure in the field. ..."
"... Answer to question no 2: The jargon that is being used these days by presidents, economists, talk show hosts is beyond my understanding. I have a masters degree. ..."
"... An argot (English pronunciation: /ˈɑːrɡoʊ/; from French argot [aʁˈɡo] 'slang') is a secret language used by various groups-e.g., schoolmates, outlaws, colleagues, among many others-to prevent outsiders from understanding their conversations. The term argot is also used to refer to the informal specialized vocabulary from a particular field of study, occupation, or hobby, in which sense it overlaps with jargon. ..."
"... Is the economics profession simply following the "He who has the gold, makes the rules"? Many other professions service retail customers, such as attorneys and doctors. But how many ordinary citizens ever deal with an economist on any level? ..."
"... If paycheck dependent economists know that powerful politicians, wealthy corporate leaders and wealthy donors in academia are looking over their shoulders, one could expect economists' message to be justify what their "employers" want to do. ..."
"... "Keen was formerly an associate professor of economics at University of Western Sydney, until he applied for voluntary redundancy in 2013, due to the closure of the economics program at the university. ..."
"... You will eat, by and by, when you learn how to bake and how to fry. Chop some wood, It'll do ya good. And you'll eat in that sweet by and by. ..."
"... This interview articulates an extremely important insight when it states that the economy " is believed to be a distinct system with its own logic that requires experts to manage it." ..."
"... This seeming independence of the economic and political systems has largely deceived most of modern social science. This seeming independence is not real, and in fact these spheres are deeply intertwined. ..."
"... As people llike Karl Polyani and Philip Mirowski have maintained, markets are always organized through politics and institutions and one key to understanding this reality is to keep a focus on the promulgation of the rules and regulations of a powerful state that helps to create movements for both regulation and deregulation. ..."
"... It was notable that Cathal failed to mention Marx. I don't think he realizes yet quite how fully indoctrinated he's been – as that humdinger of an analogy (gay marriage – actually a redefinition to normalize surrogacy, a eugenics-by-stealth agenda, hence it's enormous funding by the plutocracy) indicates. The economic can never be separated from the socio-political. ..."
"... Mirowski describes how the "Neoliberal Economic thought collective" captured and now dominates economic doctrine by controlling what and who can publish in the major economic journals. As a result those aspects of Neoclassical Economics remaining are being re-shaped into a Neoliberal mold. I noticed the word "neoliberal" doesn't show up anywhere in this post yet Neoliberal economic policies and rationales dominate policy in the real world. ..."
"... Mirowski points out that Neoliberal economics designs policy to apply market models to every problem based on the doctrine that markets are the most powerful information processing system available to man - a strong form of the Efficient Markets Hypothesis. The Market is the ultimate epistemological device. If the market solution doesn't satisfy the needs of the common man then satisfying those needs is simply contrary to the wisdom of the market. For other problems like externalities they just need to be properly incorporated into the market model to obtain an optimal solution to whatever problem they present. ..."
"... . Putting fins and flashy hubcaps on Neoclassical economics as it morphs into Neoliberal economics is not the answer. ..."
"... The role of Economics is simple: it should inform people of the consequences of certain decisions we make about who gets what. ..."
"... You are right, that is what it should be, unfortunately neoclassical has failed horribly in that regard. It is based on assumptions that are demonstrably false and they are never revisited to see the effect of relaxing them. You might as well be counting angels on a pin. See Roamer's take down of it for starters. ..."
Dec 18, 2016 | www.nakedcapitalism.com
Posted on December 17, 2016 by Yves Smith Cahal Moran is a member of Rethinking Economics, the worldwide student movement to reform the teaching of economics. He is the co-author, with Joe Earle and Zach Ward-Perkins of the book The Econocracy: The Perils of Leaving Economics to the Experts the authors can be followed on their Twitter account @TheEconocracy . Interview conducted by Philip Pilkington, a macroeconomist working in asset management and author of the new book The Reformation in Economics: A Deconstruction and Reconstruction of Economic Theory . The views expressed in this interview are not those of his employer.

PP: Your book starts with a quote from Albert Camus that is, in some ways, rather pessimistic. In it he says that most generations seek to reform the world but that his generation only sought to ensure that the world does not destroy itself. You and I are both of the same generation broadly speaking and I do not think it unfair that our generation is subject to some abuse and often portrayed as narcissistic, video-game obsessed, layabouts. I have always felt that the 'problem generation' are, in fact, the Baby Boomers who tag us with these clichés. It is this generation that rules the world today and this generation that gave birth to The Econocracy. Before we get too much into what The Econocracy is and how it operates, maybe you could briefly talk about this generational issue. Is it something that you have given much thought to and do you identify more so with Camus' generation?

CM: We do not focus on the generational issue too much, but it is really at the heart of the book and of the student movement more generally. Unlike the boomers, we have grown up in a world of economic and political uncertainty, with the financial crisis being the most extreme example of this (yet). The disconnect between this uncertainty and at times chaos and what we saw in the classroom really sowed the seeds for societies like Post-Crash Economics. If the boom had simply continued, perhaps we would have just shrugged our shoulders and got on with it. But we could not ignore what was going on outside the lecture theatre. In this sense, Camus' feeling of a call of duty resonated with us and that's why we chose that quote. However, we try to use this initial pessimism to build a positive vision later on.

PP: Yeah, I know the feeling. It was very hard for me to not think that something was really, really wrong with economics as I took undergraduate classes against the backdrop of the 2007-08 crisis. For me there was a lot of cognitive dissonance. I found it really weird because it seemed to me pretty obvious that economics was the language of power – the language through which our leaders communicated their plans and goals to the rest of us. But what I was learning in class did not seem up to this in any way, shape or form. I think that this is a theme in your book too. Could you explain what you mean by 'The Econocracy' and how it functions?

CM: In the book we give a formal definition of econocracy as "a society in which political goals are defined in terms of their effect on the economy, which is believed to be a distinct system with its own logic that requires experts to manage it. " In other words, the idea of 'the economy' as a separate sphere of life is dominant in politics, and this separate sphere has technical properties which can only be understood through economic expertise. The results are twofold. First, public debates about the economy are conducted in a language that most people simply do not speak – we've tried to look at this this through undertaking polling with Yougov and one of the things we found is that only 12% of respondents said they thought politicians and the media talk about economics in an accessible language.

Second, many key areas of decision making – central banks, international institutions like the IMF & World Bank, competition authorities – are delegated to people with economic expertise on the grounds that they can find what is in some sense a technically 'right' answer to economic problems in their respective domains. The rise of this idea of the economy is reflected in the increase in mentions of 'the economy' in the winning UK political party's manifestos: it was only mentioned once, for the first time, by the Conservatives in 1950, but 5 years later this rose to 10 and in the most recent Conservative party manifesto 'the economy' was mentioned 59 times.

PP: I'm getting the sense that this goes beyond a simple criticism of technocracy and bureaucracy, right? I mean a lot of aspects of society are run based on expertise of some sort or another. But you seem to be getting at something else. Is this related to the fact that, like the Scholastics of the Middle Ages, they have concocted an elite language?

CM: That's absolutely right. One could probably write a book critiquing the technocratic and bureaucratic tendencies of say, lawyers or accountants, but where economics goes one step further is the place it has in public debate. Economists are wheeled out to comment on all sorts of public policy issues: in the news, on the TV, online and so forth. The deference to economic expertise is something that permeates our politics and, through the use of jargon, maths and statistics, serves to exclude non-expert citizens from conversations about issues that often have a direct impact on their lives. As you imply, it is something like an ancient priesthood. In fact, in an earlier draft of the book we made a comparison to ancient medical texts, which were only written in Latin and so created a huge asymmetry between experts and non-experts, which could have awful consequences for the latter. In some senses economics in modern times goes even further than this, because it affects policy on everything from incomes and jobs to healthcare and the environment.

PP: Yes. I've also long thought this. My book is actually about trying to figure out what is pure ideology and mysticism and what is not within the jargon. I suppose that leads us pretty tidily to the title of the second chapter of your book: 'Economics as Indoctrination'. Given that you have this view of economic language – one which I concur with in that I have concluded that maybe 60-80% of formal economic language is ideology – it pretty naturally follows that there will be some attempt to indoctrinate those who wish to speak the language. I guess the natural place to start is to ask you for a flavour of what this indoctrination looks like and then maybe we will move on to what its purposes are and what ends it serves.

CM: It sounds like there's some crossover between our books, and this is something I've noticed with people across the movement. It's great that so many people are independently coming to similar ideas and, I think, a sign that we may just have a point.

We call economics education indoctrination in the book not just because students are presented with only one set of ideas – neoclassical economics – but because they are taught to accept it in an uncritical manner, as if it is all there is to economics. The idea that there might be criticisms of neoclassical economics, other schools of thought, and even the real world are evicted to such an extent that after a while students may find it difficult to think any other way. Keynes said that the real challenge lies in escaping old ways of thinking, and this is something we've all noticed in ourselves after studying economics.

PP: I'd tend to agree. But what I found very interesting about the book was that you looked at how economics education is structured. You paint the picture of a very odd discipline that does not appear to be taught like other disciplines, whether natural or social science. Do you think that there is something distinctly different in this regard and could you describe it briefly?

CM: Economics is definitely a law unto itself. In natural sciences, the culture is very much focused on the empirics: theory has empirical motivations, and you always come back to falsifiable predictions before too long. In other social sciences, the culture is instead focused on debate and the contested nature of knowledge. You learn not to take any of your beliefs for granted. But entering an economics degree feels a bit like being transported to another universe. Students are introduced to a fixed body of knowledge that is presented as if – in the words of one student – it "fell from heaven in an ever-true form". The focus is very much on learning this body of knowledge by rote, building up the neoclassical world from abstract axioms and solving mathematical problems with at best vague and stylised references to the real world they are supposed to represent. The commonly used phrase 'thinking like an economist' really captures the effort to indoctrinate students into this framework.

We did a curriculum review of the final exams and course outlines of 174 modules at 7 Russell Group universities (considered the 'elite' of the UK) to look systematically into how economics students are educated. Our main aim was to look for evidence of critical thinking, pluralism and real world application, all of which we would consider vital to educating the experts of the future. The results were deeply worrying: 76% of final exam questions showed no evidence of critical thinking – that is, formulating an independent, reasoned argument. When only compulsory modules (namely micro and macroeconomics) were included, this figure increased to a staggering 92%. Instead, the majority of marks are given for what we call 'operate a model' questions: working through a model mathematically without asking questions about its applicability. Of those questions which ask students to operate a model, only 3% even attempted a link to the real world. The remainder of the marks were given for simple description questions ('what is the Friedman k% rule?') or multiple choice questions, again neither of which require any critical thinking. All of this is very worrying when you consider the place economic expertise has in society.

PP: It is really very concerning. Although I would imagine that anyone who has actually taken an economics class – as many of the educated public have at some time or other – will not be surprised at what you have found. If you are correct then it seems to logically follow that the experts of the future are being trained to think in a highly abstract manner but that these abstractions need no link to the real world as it exists. What is more, if they are only being given one perspective and are told that this perspective is as true and infallible as the most rigorous of the sciences you are going to get a very high level of confidence in these abstractions by these experts. Have you thought about what this means when these people flow into the elite institutions that control important aspects of our societies? How do you think that it informs and shapes their judgements and what implications do you think this has for the rest of us?

CM: This process is indeed the main way that the econocracy reproduces itself: as the economic experts of the present train the economic experts of the future, this shapes the way the latter approach economic problems when they go on to work at powerful institutions. Broadly speaking, this education shapes the perception of economic experts in two ways. Firstly, they tend to have mechanical view of the world, thinking of economic and social problems as clearly defined technical questions. This allows them to produce clear predictions when addressing even complex political issues. Secondly, they see economics as a separate, value-free sphere which does not require ethical and political debate. Their answers to policy questions have the air of objectivity about them.

To make things more concrete consider cost-benefit analysis, an idea with its roots in economics that's used extensively by major institutions like the Government Economic Service in the UK. This calculates the 'costs' and 'benefits' of different policies by assigning a monetary value to each of them, then provides a clear decision rule: if the benefits outweigh the costs, the policy is a good one. Cost-benefit analysis is used even when the effects of a policy are not obviously monetary, such as the number of trees in an area, or mortality rates, transforming what was a multifaceted problem into a simple, seemingly objective mathematical problem. The result of this is that decisions which could concern a large range of stakeholders are made in a centralised manner behind closed doors, often without the consultation of these stakeholders (except in order to retrieve money values from them, which raises problems in itself).

PP: Right. I see what you mean. So this goes far beyond, say, the blindnesses in the theories that led to, say, economists largely missing the crisis and thinking, to quote Blanchard, that the "state of macro was good" even in the face of such problems. Have you given any consideration to these facts in the book? James Galbraith has a great quote where he says that:

Economists predict disaster where none occurs. They deny the possibility of events that then happen. They oppose the most basic, decent, and sensible reforms, while offering placebos instead. They are always surprised when something untoward (like a recession) actually occurs. And when finally they sense that some position cannot be sustained, they do not re-examine their ideas. Instead, they simply change the subject.

That seems to be another angle by which you might criticise the profession: namely, that they're not actually very good at what they claim to be specialists in. Do you and your co-authors have anything to say about that?

CM: Exactly – economics permeates our political process, from seemingly small examples like cost-benefit analysis to catastrophic events such as the financial crisis. We open the book with the former but later on we move on to several case studies of the latter, including the financial crisis but also broadening our argument to other areas where we think neoclassical economics falls short, like the environment and inequality. The kind of hubris illustrated by economists like Blanchard – as well as Robert Lucas when he claimed "the central problem of depression prevention had been solved" in 2003 – seems quite remarkable to us now, but economists really had convinced themselves that they'd found a simple, technical solution to the business cycle. Making central banks independent from the political process, staffing them with economists and tasking them with using interest rates to manage inflation and growth, along with a fairly hands-off approach to the financial sector (which itself used economic models such as Black-Scholes) seemed to be working. That was, until the theoretical blind spots economists had in the housing market and financial sector was revealed by the near-collapse of both of them.

Quite clearly, the profession has yet to find definitive answers to major economic questions like 'what causes financial crises?' This is completely understandable in itself, as these are difficult questions. But the fact that the profession also has the capacity to convince not only itself but policymakers and politicians that it has solved these problems, and therefore that its ideas should guide public policy, is extremely worrying when it can have such terrible consequences for so many people. And it is worth mentioning those non-neoclassical economists – like Hyman Minsky, Wynne Godley, and Steve Keen – who put the financial sector front and centre of their analysis and made sometimes prescient warnings about crises like the one we've just experienced. Given these examples, it actually puzzles and saddens me that the profession is not willing to accept more intellectual diversity. Galbraith's quote touches on this intellectual inertia, and one of the things we discuss in the book is macroeconomists' attempts to reassert themselves since the financial crisis, some of which have involved some impressive mental gymnastics. One example is Tom Sargent denying altogether that macroeconomists failed to foresee the crisis, which is ironic because he wrote a paper just before the crisis arguing that investors weren't taking enough risk due to their memories of the Great Depression. This kind of retrospective rewriting of history has to be fought if economics is not to slip back into old habits.

PP: The mental contortions are absolutely fascinating. I've noticed three key trends in the profession since the crisis. The first is to talk more about a phenomenon that mainstream economists call 'rational bubbles'. I mean RATIONAL bubbles. That is manifestly a doublethink word, not unlike Orwell's blackwhite. The second is to add Bayesian agents into economics models and saying that this will ensure that these models are robust in future (an absurd claim given the backward-looking nature of Bayesian agents). Bayesian agents, of course, update their beliefs in line with past events - not a bad allegory for the how the modellers see themselves! The final, and most pronounced, is to try to sweep under the carpet the fact that the Efficient Markets Hypothesis makes falsifiable (and falsified!) claims that markets integrate all relevant information and instead try to draw attention to the fact that it also states that no one can beat the markets. The idea seems to be to maintain the theory by saying that it doesn't say what it in fact says and drawing attention to a secondary prediction that it makes. What do you make of this sorry, but I have to say it dishonesty? And do you think that the next generation are by and large swallowing it?

CM: I think the issue is that many economists are stuck in their ways. It's clear these economists have been doing economics a certain way, using a certain framework, for their entire lives, so it's perhaps unsurprising that they can't think any other way. Max Planck said that science advances one funeral at a time, but the especially worrying thing given the research we've done for the book is that the next generation of economic experts are being trained to think in the exact same way. In fact, evidence we present suggests that economics education has actually become more, not less narrow over the past few decades, so if things don't change the situation could get even worse in the future. And as I mentioned earlier, that's nothing against economics students themselves – they have exams to pass, and aren't really given much opportunity to read around and question what they're taught.

The positive thing is that we are seeing these student groups spring up across the world who are all recognising the limitations of their education: the lack of pluralism, critical thinking and empiricism come up again and again in students' complaints. What's more is that we have support from big institutions like the Bank of England, Trade Union Congress and Government Economic Service, who have voiced similar concerns. If you look at things like the movement for gay marriage in the United States, it's clear the politicians were the last to change – when every other sector of civil society had been convinced and they had no choice. Perhaps if change comes to economics, academia will be the last to change – when everyone else demands it.

PP: But surely this is somewhat different from a political issue like gay marriage. Political issues have to do with changing peoples' opinions on some matter or other. That just means putting forward a persuasive argument and then waiting for it to get accepted. What we are dealing with seems like something rather different. Sure, you could convince many that some change needs to come about in the way economics is taught. But that does not produce the means by which to teach it. I think that we saw what happens there with Wendy Carlin's CORE program (an INET-funded attempt at curriculum reform). This was the economists' response to demands for a more integrated and pluralistic course but I saw it - and I think the student movement saw it - as more of the same. Yet I have no doubt that Carlin really did her best to put together something that she thought would address the concerns being raised. The problem is that Carlin et al cannot actually put together something that meets the concerns. I suppose this is a variant on the classic 'who governs the governors': who teaches the teachers.

CM: You are absolutely right about that and the example of CORE is a good one, as it demonstrates perfectly the type of limited reform which can serve as a safety valve against more radical opposition. Carlin and CORE's other proponents view the problem as one with economics education, but not economics itself – she has previously stated that "economics explains our world, economics degrees don't". Interestingly, this rhetoric is similar to the response to calls for reform in economics graduate programs in the US in the 1980s, where the need for more real world application was accepted but it was argued that programs should retain the "core [which] should be regarded as the basic unit in which those things common to all economists should be taught". We repeatedly see this disconnect between the critic's idea of reform and the mainstream's, cemented by the fact that many neoclassical economists simply do not know enough about non-neoclassical ideas to teach them. It is a vicious circle which is inevitably going to reproduce a fundamentally similar education, even if some internal attempts at reform are made along the way.

Thus in CORE the calls for history, real world applications and interdisciplinarity are all, to some degree accepted (even if they are not pursued adequately), while the calls for pluralism and critical thinking are not. The resulting education is perhaps an improvement, but the outcome is similar: instead of saying 'here is neoclassical economics, learn and then (maybe) apply it', the message of CORE is 'here is the real world, here is how neoclassical economics applies to it'. Once more, the idea that the theory and even the history itself might be contested is thrown out of the window and the result is still a narrow education. In fact, we reviewed the University College London exams for the CORE course and found that they showed a slight increase in critical thinking, but were still primarily about regurgitating models and theories. The need for pluralism is made especially apparent here, as learning about alternative ideas immediately makes students re-evaluate what they have already been taught. Students need to know more than one set of ideas if they are to judge which ideas are best suited to explaining a particular situation.

PP: My impression from the book – and please, correct me if I'm wrong – is that you want to bypass this structural constraint by making economics more democratically accessible. Personally, I think that there is a lot of merit to this idea. In my book, as I said, I try to present an ideology-neutral economics – which I think can be done to some limited extent – and what you find with such an economics is that many different worlds are possible. Economics in this regard can be a helpful guide but it cannot tell you much about where you want to go. For this reason I would much prefer to see more democratic input on economic decision-making and much less pontifications from an over-heavy technocracy. That said, however, economics is still a relatively difficult subject. It cannot be picked up without some commitment to study it. How do you square this circle – by which I mean, how do you try to increase the accessibility of economics without watering it down so much that it becomes analytically dysfunctional? And a cheeky, but related question: in the book you rightly draw attention to the fact that economics jargon is over represented in political discourse – how do you ensure that you are not increasing the volume and weight of this jargon through attempts at popularisation?

CM: We definitely view the democratisation of economics as a necessary part of the renewal of the discipline and indeed of politics, but your conception of it as a strategic way to bypass the inertia of the discipline is an interesting idea and something I hadn't thought of explicitly. I suppose this goes back to what I was saying about bottom-up approaches to reform and the value of demanding change from different angles. Unfortunately and as we've seen, one of the main response to Brexit and Trump by elites has simply been to view those who vote for it as ignorant or bigoted. The simple fact is that many peoples' lived experience of 'the economy' is completely different to the top-down, statistical and theoretical views of economists and pundits. Many have experienced huge shifts and declines in their circumstances for decades, neither of which are obvious if you only look at GDP and inflation statistics, or (worse) if you are completely lost in theory.

In the book we introduce the idea of the public interest economist, who has socially aware research topics, a commitment to public engagement and education, and who looks to hold powerful public and private institutions to account. Reconnecting economic experts with the public in this way would be a great way to temper the former's technocratic, top-down tendencies and encourage the experts to understand that people may have different, valid views to them – and this is a gateway to appreciating other approaches more generally. Of course, this doesn't eliminate the need for expertise altogether: our intuition can only go so far, and some things can only be revealed by systematic and empirical study. Economics is difficult, as you point out. But a world in which economic experts are in touch with and can be questioned by the public is one where economic expertise will naturally be more responsive to the needs of said public. We sum it up by saying that we want experts to inform our decisions, but not necessarily to make them for us.

Illustrating the magnitude of the challenge you raise about teaching economics without jargon, I'm going to have to introduce some jargon. In the book we distinguish between formal literacy, where people are taught a fixed body of knowledge; and substantive literacy, where people are encouraged to question the subject matter and form their own independent views. This is the basis for the other pillar of our proposals: citizen economists, non-experts who nevertheless have some baseline level of substantive literacy and are able to engage in economic debates. The starting point for citizen economics is to make connections between peoples' own lives and broader economic problems, encouraging their own input from the start. And an important part of being a citizen economist is not to accept the seeming authority bestowed by the use of jargon and to ask experts to say what they mean in plain language. As a student movement we have already started to put this into practice with citizens' crash courses (evening classes for adults), schools workshops, the public education website ecnmy.org and by supporting the RSA's Citizens' Economic Council, which is seeking to establish more democratic input into economic policy.

PP: Yeah, I think I see what you're saying. Anyway, I suppose we should wrap this up as it's pretty long already. Where do you see this whole thing going from here? Are you optimistic about the future, both in terms of opening up the discipline and in terms of fixing the incredibly serious economic problems that have emerged in the past 30 years?

CM: I am cautiously optimistic about the future, as I think in many ways the debate has been won over whether economics should change – the question is now what form this change should take. On top of changes we have already discussed such as CORE and the position of the Bank of England, we have seen the ESRC put aside a large pot of money for research in new ideas in macroeconomics (the question is whether this money will be used to support CORE type research or more diverse and radical ideas); Manchester council involving citizens more in the decision-making process; the director of the IFS, Paul Johnson, admitting economists' failure to communicate during Brexit; and many more emerging examples that the message is getting across to various sections of civil society. More must certainly be done and it is up to everyone to make sure that the changes are fundamental rather than incremental, but in my eyes it is starting to look possible that economics will evolve from an insular and esoteric discipline into a vibrant, pluralistic public dialogue – and we think that can only be a good thing

Pat K California , December 17, 2016 at 7:57 am

"In other social sciences, the culture is instead focused on debate and the contested nature of knowledge. You learn not to take any of your beliefs for granted. But entering an economics degree feels a bit like being transported to another universe. Students are introduced to a fixed body of knowledge that is presented as if – in the words of one student – it "fell from heaven in an ever-true form"."

How on earth did this happen?? Was the teaching of economics always this way? Or did something happen at some point along the way (say, the influence of a particular school of thought, etc.) to create a static curriculum where critical thinking is so undervalued?

"The deference to economic expertise is something that permeates our politics and, through the use of jargon, maths and statistics, serves to exclude non-expert citizens from conversations about issues that often have a direct impact on their lives."

Doesn't this sound exactly like the Clinton campaign? Technocrats all, who say to people like me, "Trust us. We're the EXPERTS. Don't even try to stretch your silly little brains. We know what's best."

GlassHammer , December 17, 2016 at 10:35 am

If economics is to function as the medium of power than its students must be made to follow blindly. Critical thinking would allow them to undermine it or manipulate it to their own ends.

The students must be made into strict adherents before being granted access to the highest levels of information. By erecting barriers at each level (be it specialized language that must be mastered or learning contigent on prior learning) we can separate the weak from the true adherents.

Steve H. , December 17, 2016 at 11:01 am

Following Adler, economics is not a science, it's a philosophy. At least economics doesn't burn its heretics, it just ignores them. Science is neither immune. Gerald Pollack has written that he was advised to avoid water as a subject of inquiry, or it could kill his career.

witters , December 17, 2016 at 4:27 pm

"At least economics doesn't burn its heretics, it just ignores them." And then "because the market", they die.

gepay , December 17, 2016 at 2:04 pm

This article highlights why I take what positions Naked Capitalism assert seriously. For instance getting input from Clive about the difficulty of the mechanics of Greece leaving the Euro. Or Yves, having knowledge from her father's work about solving problems in the real world. This problem is not just limited to economics. To get a Phd one must basically agree to what you have been taught. To get published one must undergo peer review by people who almost always believe the current mainstream ideas in that field. Remember how the nutrition experts told you margarine was good for you – butter and eggs were bad. Climate science is a good example. Reliance on models that can never be complete. In almost every conversation I have had as a climate skeptic, the strongest believers in the alarmist position rely not on their own understanding but that of experts. And those experts who are alarmist rely almost entirely on computer modeling results to buttress their position. In fact, as a skeptic I could almost rewrite the above article using climate science. In your own mind, try that. As a generalist (non climate scientist) I can read and understand most climate papers if I take the time to learn and understand the jargon as every subfield has its own. it does take a good while with considerable effort. Climate science proclaims to know with certainty what the climate future holds so they should be the experts on public policy that will affect the lives of everyone in the world. "The totally convinced and the totally stupid have too much in common for the resemblance to be accidental." Robert Anton Wilson

Dwight , December 17, 2016 at 3:46 pm

Economists writing about climate change purport to define the optimal reduction in greenhouse gases by tallying up the avoided damage, or the benefit in the cost-benefit analysis, then saying that costs of emission reduction should go no higher than this benefit. Not sure if they are still doing this, but in the past they used the ethically questionable and benefit-lessening assumption that lives in poor countries, where most people would die, should be valued much less than lives in rich countries. Worse, the entire exercise is absurd because the result of the calculation is an emissions reduction that could have no effect on the climate, because emissions don't have a simple effect as with traditional air pollutants for which the analysis was initially developed.

bmeisen , December 18, 2016 at 3:33 am

As a generalist who works for and with a climate scientist who is at the forefront of his field I am not able to understand essential details of most of his papers because he and his co-authors are in fact physicists and their analyses involve substantially more than modest calculus. Furthermore neither he nor any other of his colleagues whose work I am exposed to have proclaimed that they "know" what the future holds.

skippy , December 17, 2016 at 4:52 pm

File under "the creative class" writers à la Toynbee

sufferinsuccotash, normalized , December 17, 2016 at 8:13 am

Does anyone have any idea how many economics departments nowadays offer courses in economic history?

Uahsenaa , December 17, 2016 at 9:26 am

At the UI and when I was at Michigan, they simply don't. Anything remotely like that would be taught in the History department, and then mostly for History grad students.

Terry , December 17, 2016 at 10:46 am

At Cambridge University it was a compulsory course representing 25% of the first year curriculum (this was 1991-92). No idea if it has been downsized since then but given the "new blood" I remember entering the faculty I am pessimistic.

Moneta , December 17, 2016 at 8:15 am

I have to agree that when I studied economics, it was theory and barely any practical exercises. Lots of maximization and other But I never took this as gospel. I understood that all these economic models were a product of their time. A framework that would be adapted by those in power to fit their needs.

When my son was born with a disability, I had to turn many 15 minute errands into 2 hour adventures. It became even more evident that efficiency is relative What are we really maximizing anyway? THAT is the key question.

I guess many graduate without any critical thinking. But I tend to think that many graduates of economics like the way the world is set and feel no compulsion to change it.

susan the other , December 17, 2016 at 11:12 am

What are we really maximizing anyway? killer question Moneta.

susan the other , December 17, 2016 at 11:20 am

yes, absolutely. If it is good public policy do it. When you think about it economics doesn't really exist. Society does. And when economics is talked about like society doesn't exist it gets pointless. Just like some stupid software language that does basically nothing. What we need is the courage of our human convictions. I think it was Blyth in an early clip who said more or less, "Just do it." Deficit spend as necessary and the solutions will appear. That's very Zen and I love it. I mean, here's the question, What is the worst that can happen? If there is sufficient money. Great interviewer and interviewee. Thanks NC for this post.

jsn , December 18, 2016 at 12:42 am

"Economics doesn't really exist, society does": a super obvious statement that stands in starkest distinction to NeoLib ideology that insists we are all atomistic, isolated individuals. Math and language are epiphenomena to human being that have perverted our self perception nearly to oblivion.

Steve H. , December 17, 2016 at 12:32 pm

Bayes allows an entry to qualifying bias and uncertainty in conditional probabilities (tree diagrams). It allows an indication that the source is b.s., which is currently relevant.

It's unnecessary in terms of fudging models, we've been quite capable of that without Bayesian modifiers.

The most important bias his theorem clarifies concerns false positives, for example if a drug test is 95% accurate it can still be wrong more than half the time on a positive response.

As always, GIGO.

craazyman , December 17, 2016 at 5:32 pm

Economics wil never progress until it has a clearer grasp on the phenomenon of money. Until they do it's the same old GIGO using Newtonian metaphors prettied up with math (or let us say "arithmetic", since it's just basic calculus, linear algebra or probability/statistics).

Not to be demeaning toward Eigenvectors and matrix theory. It's amazing how recent that was in the history of math - I mean all the way back to the Greeks, Pythagoras, Archimedes, etc. It's like it's still brand new!

However, you could say a drawing by Rembrandt is just "basic pen and ink". Indeed on one level it is. On another level it's an entire self-consistent and revelatory conceptualization of infinite physical reality. That's the kind of holistic and syntheticistic ideation that economics sorely lacks.

Not only does it lack this, but the economists don't even know it's there!

craazyman , December 17, 2016 at 5:33 pm

Moderbation alert!

craazyman , December 17, 2016 at 6:52 pm

whoa you guys rock! that was faster than a New Yoarke minite. Whoa Yves would be proud. I hope you get a bonus! maybe a few million dollars.

They're not this fast in Denver. That's for sure. All those TV people and all that money they have and they fkk something up so bad they have to apologize. Wow. that really is screwing up. Not only that, They're stilll pointing a camera straight at a scene and failing to use cinematic story telling techniques invented , oh, 80 or 90 years ago!

There should be awards for excellence in fake news. The best fake news is news that's true in the most profound and highest sense of reality. it's news that captures a truth reality only approximates. It's hard to avoid Plato even when you try. I didn't mention him, OK? he's just there. He's usually there, but if you mention him every time it gets boring.

The WaPo is an example of largely fake news written and published by individuals who don't realize what's true and what's fake. You'd like to think they qualify for a fake news award, given the fakeiness of what they write (except Redskins coverage which is very good, they have some good spowtswriters for sure), but they don't because they think they're writing real news. That should be embarrasing.

Well then, how would somebody advise them to better distinguish fake news from real news? Well, how does a hawk know what to do to hunt rodents? There's no hawk scientist or hawk school or hawk instruction manual. they can't even read! But they know exactly what to do. It's like that. Everybody knows but they pretend to themselves they don't know. That's when the faking starts,

Steve H. , December 17, 2016 at 9:00 pm

: Everybody knows but they pretend to themselves they don't know.

Teddy: So you lie to yourself to be happy. There's nothing wrong with that. We all do it. [Memento, 2000]

Nice to see u back, craazyman, you were a kinda Terran it up for a bit there.

Uahsenaa , December 17, 2016 at 12:59 pm

[T]he irony is that for many upper-middle-class white gay men, the argument became that legal and economic (yes, economic) privileges of marriage were being denied. Fortunately, many people were able to keep the focus on equality and equal protection of the law, which is political argument.

On the one hand, yes, absolutely, and it remains a point of contention to this day in the gay community that the one major victory in recent memory was perfectly amenable to a patriarchal, capitalist order. People like David Brock and what have you, who saw gay liberation not as a means to transform society, which is the purpose for which the GLF was created, but rather as a means to help people like themselves become elites like anyone else.

On the other hand, and perhaps it's just the vulgar Marxist in me, but I recoil at the notion of separating economics from politics. This is why the phrase political economy even exists, to represent the notion that all decisions regarding distribution of resources are inherently political. I find it symptomatic of how entirely defanged class rhetoric is in the US (though the interviewee is British, I presume) that even the well meaning and critical thinking among us can get away with pretending that "economics" can somehow be sequestered from political decisions.

I realize that's not the point you're making, but there are moments in the interview when the subject moves in that direction. As for statistics, Mark Twain reminds us there are three kinds of lies: lies, damned lies, and statistics–or, as my spouse is fond of saying, "70% of all statistics are made up."

susan the other , December 17, 2016 at 2:41 pm

One place where social needs interfere with monetary policy, aka economics, is deficit spending wherein the underlying economy is not keeping up (because of economic malpractice usually). So that's a conflict against the oligarchy because they prevented the necessary jobs and so makes their money worth less. So, depending which side you are on, politics should have a say (force the government not to devalue the currency by inflation/deficit spending without a proper economy) or politics should serve the chronically neglected needs of the general public regardless of preliminary "inflation" – the inflation here is the most dreaded form of inflation for the rich, of course, wage inflation. I think the term 'wage inflation' qualifies as an oxymoron, but that's just me.

Lambert Strether , December 17, 2016 at 1:27 pm

> "externality," what they really mean is "how the costs get transferred onto you."

Reminds me of the saying that if you're at a poker table and you don't know who the sucker is, it's you (if I have that right; I don't play poker).

pretzelattack , December 17, 2016 at 3:41 pm

probably an apocryphal story; so a guy is playing regularly in a rigged poker game. a friend asked him, "why do you play, you know they're cheating you"? the guy shrugs, and replies "i don't have a choice, it's the only game in town".

Michael C , December 17, 2016 at 9:24 am

Interesting thing I heard the other day, Professor Richard Wolff says he studied economics at three elite universities (Yale, Harvard, and another notable I cannot remember) and never had a course in Karl Marx. Tunnel vision for sure in the field.

Terry , December 17, 2016 at 10:59 am

Yikes. I remember being taught Marx in the early 90s . But that was Cambridge ;-) and it was clearly a dying course as they were struggling to find faculty members.

pretzelattack , December 17, 2016 at 3:42 pm

i took a course in marxism, iirc it was in the philosophy department. maybe economics in general belongs there, too.

Beans , December 17, 2016 at 10:02 am

As one who is well past university age, I am excited to hear that those in the Millenial generation are organizing this movement. The (intentional?) failure of K-12 education to develop critical thinking skills and focus solely on standardized testing of fact knowledge has been deeply upsetting to me as a parent. To see that others have made it through our education system with a well developed BS detector and are not afraid to use it is welcome news.
I look forward to reading your books!

Brooklinite , December 17, 2016 at 11:13 am

Answer to question no 2: The jargon that is being used these days by presidents, economists, talk show hosts is beyond my understanding. I have a masters degree.

I believe Trump gained some supporters who were angry about the disconnect with the way they talk and the way they needed to be talked to. Simple language has its own good. That is what Trump did. Trump is just not a person. There is more to Trump that what it is. He proved so many of these experts wrong and bought back the simple language and easy straight talk to the forefront. Saying wrong things is attractive to me. More people relate to Trump in ways that he can say bad things. I relate to him because we say bad things in our every day life. We go about having a conversation after to correct them. Its that simple.

After all we are all human beings with little better instincts and rational than animals. Just because few people can speak politically correct, few can dress like they are supposed to doesn't mean that every one has to conform. I am excited to read this book.

paul , December 17, 2016 at 11:43 am

An argot (English pronunciation: /ˈɑːrɡoʊ/; from French argot [aʁˈɡo] 'slang') is a secret language used by various groups-e.g., schoolmates, outlaws, colleagues, among many others-to prevent outsiders from understanding their conversations. The term argot is also used to refer to the informal specialized vocabulary from a particular field of study, occupation, or hobby, in which sense it overlaps with jargon.

A good investment

John Wright , December 17, 2016 at 11:51 am

Is the economics profession simply following the "He who has the gold, makes the rules"? Many other professions service retail customers, such as attorneys and doctors. But how many ordinary citizens ever deal with an economist on any level?

While there may be some economists attached to labor unions, for the most part economists are employed by government, the financial industry, academia or the media.

If paycheck dependent economists know that powerful politicians, wealthy corporate leaders and wealthy donors in academia are looking over their shoulders, one could expect economists' message to be justify what their "employers" want to do.

The case of skeptical economist Steve Keen may indicate the requirement to stay on message to stay employed https://en.wikipedia.org/wiki/Steve_Keen

"Keen was formerly an associate professor of economics at University of Western Sydney, until he applied for voluntary redundancy in 2013, due to the closure of the economics program at the university.

But he did find another job. "In autumn 2014 he became a professor and Head of the School of Economics, History and Politics at Kingston University in London." Is there a large job market for skeptical economists?

Spencer , December 17, 2016 at 1:24 pm

Nothing's changed in 100 + years. American Yale Professor Irving Fisher "financial transactions aren't random": Yale Professor Irving Fisher – 1920 2nd edition: "The Purchasing Power of Money"

"If the principles here advocated are correct, the purchasing power of money - or its reciprocal, the level of prices - depends exclusively on five definite factors:

(1)the volume of money in circulation;
(2) its velocity of circulation;
(3) the volume of bank deposits subject to check;
(4) its velocity; and
(5) the volume of trade.

"Each of these five magnitudes is extremely definite, and their relation to the purchasing power of money is definitely expressed by an "equation of exchange."

"In my opinion, the branch of economics which treats of these five regulators of purchasing power ought to be recognized and ultimately will be recognized as an EXACT SCIENCE, capable of precise formulation, demonstration, and statistical verification."

And the Fed already validated the Fisherian theory: In 1931 a commission was established on member bank reserve requirements. The commission completed their recommendations after a 7 year inquiry on Feb. 5, 1938. The study was entitled "Member Bank Reserve Requirements - Analysis of Committee Proposal"

It's 2nd proposal: "Requirements against debits to deposits"

http://bit.ly/1A9bYH1

After a 45 year hiatus, this research paper was "declassified" on March 23, 1983. By the time this paper was "declassified", required reserves had become a "tax" [sic].

Monetary flows, our means-of-payment money times its transactions velocity of circulation:

http://monetaryflows.blogspot.com/2010/07/monetary-flows-mvt-1921-1950.html

The surrogate statistic for money flows after the G.6 debit and demand deposit turnover release was discontinued in 1996 (it under weights velocity)

1/1/2016 ,,,,, 0.068
2/1/2016 ,,,,, 0.020 stocks bottom
3/1/2016 ,,,,, 0.043
4/1/2016 ,,,,, 0.041
5/1/2016 ,,,,, 0.045
6/1/2016 ,,,,, 0.073
7/1/2016 ,,,,, 0.109
8/1/2016 ,,,,, 0.111
9/1/2016 ,,,,, 0.112
10/1/2016,,,,, 0.039
11/1/2016 ,,,,, 0.105
12/1/2016,,,,, 0.124 stocks peak
1/1/2017 ,,,,, 0.093
2/1/2016 ,,,,, 0.063
3/1/2016 ,,,,, 0.068
4/1/2016 ,,,,, 0.046

diptherio , December 17, 2016 at 1:33 pm

Here's my suggestion for educating economists about the fallacy of their assumption that it is in any way acceptable or even meaningful to put a monetary price on a human life.

Step 1: we ask the economist to place a monetary value on his or her own life in the same way that they feel so comfortable doing for people who are not them.

Step 2: crowdfund that amount of money.

Step 3: give said money to their next of kin and ask them to kindly follow us out to the woodshed

Ok, so let's call it a thought experiment .but I think that should make clear one of the many, many things wrong with monetizing the value of everything in existence, as is the common practice.

cnchal , December 17, 2016 at 3:54 pm

Step 1: we ask the economist to place a monetary value on his or her own life . . .

Priceless, or in economist's terms, infinity.

Step 2: crowdfund that amount of money.

Borrow from the Fed. It's fantasy money.

Step 3: give said money to their next of kin and ask them to kindly follow us out to the woodshed

That would be cruel. They always claim they are the smartest guys in the room, while also claiming men in manufacturing are low skill or put bluntly, stupid. Can we put them all on an uninhabited island with a few shovels so they can live the civilized life and dig their own latrine, after which they can bootstrap themselves to imagined wealth by inventing their own can opener? They can get there by recycling the shovels, but they would need fire for that.

diptherio , December 17, 2016 at 4:21 pm

As the old Joe Hill song goes:

You will eat, by and by,
when you learn how to bake and how to fry.
Chop some wood,
It'll do ya good.
And you'll eat in that sweet by and by.

https://www.youtube.com/watch?v=M2tyW-68iik

Jim , December 17, 2016 at 1:51 pm

This interview articulates an extremely important insight when it states that the economy " is believed to be a distinct system with its own logic that requires experts to manage it."

This seeming independence of the economic and political systems has largely deceived most of modern social science. This seeming independence is not real, and in fact these spheres are deeply intertwined.

As people llike Karl Polyani and Philip Mirowski have maintained, markets are always organized through politics and institutions and one key to understanding this reality is to keep a focus on the promulgation of the rules and regulations of a powerful state that helps to create movements for both regulation and deregulation.

It is now imperative that an alternative political movement finally take the time to carefully examine the nature and role of the State in political and economic life.

Kris Alman , December 17, 2016 at 2:02 pm

As a pre-med student of the mid 1970s, I never took an economics course. Professionally, I tried to fight the same kind of jargon that baffles the lay public in medicine. And I watched in horror how my profession became captured.

I struggle to read NC when reading jargon-filled posts. For example, I read about economic cycles and wonder why that is an acceptable concept.

But I do so because I know that ignorance is not bliss. I know the economy is rigged. Orwellian economics-speak allows the elite to configure human and social capital in their favor.

Is it time to throw this baby out with the bath water? If so, how do we conceive a baby that doesn't eventually suckle at the wrong teat?

Damson , December 17, 2016 at 4:11 pm

It was notable that Cathal failed to mention Marx. I don't think he realizes yet quite how fully indoctrinated he's been – as that humdinger of an analogy (gay marriage – actually a redefinition to normalize surrogacy, a eugenics-by-stealth agenda, hence it's enormous funding by the plutocracy) indicates. The economic can never be separated from the socio-political.

JustAnObserver , December 17, 2016 at 9:06 pm

I think its more general than that. Those that have been airbrushed out of the history of economic thought are those who never thought of economics as a separate, largely technocratic, discipline but always as political economy. Marx was just one of these following the tradition of Smith, Ricardo, Mill etc. Veblen and, to a large extent, Keynes were also following this tradition.

So sad that they lost and Walrasian physics envy ended up splitting economics from its political context.

Sue Madden , December 17, 2016 at 2:16 pm

."how do you try to increase the accessibility of economics without watering it down so much that it becomes analytically dysfunctional?"

This question makes no sense in the context of this discussion around the fact that modern "economics" (theory, courses and practice) is an ideological construct. The suggestion being the discipline as currently manifested would only become "analytically dysfunctional" if it were "watered down" ??????

This simplistic, patently failed dogma has become an almost totalitarian "pensee unique" simply because in coincided perfectly with the interests of the rich and powerful (and therefore those of their lackeys)

It`s politics stupid!!!!!

Sorry, I realise the (exceptional!) core NC community knows all this as well as anyone

Another quibble. ?technocrats? At the height of the crisis, Italy, for example, had a govt of "technocrats" foisted on the it. Monti, connections with Goldman?. Technocratic indeed!!!

Jeremy Grimm , December 18, 2016 at 12:17 am

The last couple of days I've been listening to a series of lectures by Philip Mirowski available on youtube. When I place Mirowski's ideas in opposition to the ideas expressed in this interview - the result is very different from the trend I see in the other comments here.

Mirowski describes how the "Neoliberal Economic thought collective" captured and now dominates economic doctrine by controlling what and who can publish in the major economic journals. As a result those aspects of Neoclassical Economics remaining are being re-shaped into a Neoliberal mold. I noticed the word "neoliberal" doesn't show up anywhere in this post yet Neoliberal economic policies and rationales dominate policy in the real world.

The discussion in the post makes several statements about how economics fails to make predictions about the real world and fails in designing economic policies to help the common man. Mirowski points out that Neoliberal economics designs policy to apply market models to every problem based on the doctrine that markets are the most powerful information processing system available to man - a strong form of the Efficient Markets Hypothesis. The Market is the ultimate epistemological device. If the market solution doesn't satisfy the needs of the common man then satisfying those needs is simply contrary to the wisdom of the market. For other problems like externalities they just need to be properly incorporated into the market model to obtain an optimal solution to whatever problem they present.

I don't see how "democratization" of economics teaching or eliminating jargon or deprecating experts or more emphasis on critical thinking or pointing out the abject failure of economics in solving economic problems will do much to counter the Neoliberal attack on the economics discipline. Putting fins and flashy hubcaps on Neoclassical economics as it morphs into Neoliberal economics is not the answer.

skippy , December 18, 2016 at 3:45 am

Its a hair ball that needs untangling and not a blowtorch thingy . If you are familiar with Philips past contributions to NC, his blog, social democracy blog and other media portals you would have a better understanding of the perspective forwarded.

I would sort two birds with one link – http://socialdemocracy21stcentury.blogspot.com.au/2013/07/philip-pilkington-blog-fixing-economists.html

Disheveled . Mirowski does do service here wrt the fundamental methodology and how that frames the topic, wrt base assumptions [human descriptors] and the extension of them.

Tim , December 18, 2016 at 12:50 am

The role of Economics is simple: it should inform people of the consequences of certain decisions we make about who gets what. So if you have a problem with classical economics, you really have a more fundamental problem. Economics provides many good answers; but don't expect it to also provide the right questions. A comment above asked 'maximising what?'. Good question, but not an economics question.

UserFriendly , December 18, 2016 at 1:03 am

You are right, that is what it should be, unfortunately neoclassical has failed horribly in that regard. It is based on assumptions that are demonstrably false and they are never revisited to see the effect of relaxing them. You might as well be counting angels on a pin. See Roamer's take down of it for starters.
https://paulromer.net/wp-content/uploads/2016/09/WP-Trouble.pdf

[Dec 18, 2016] Will Donald Trump Cave on Social Security

First Bush II bankrupted the country by cutting taxes for rich and unleashing Iraq war. Then Republicans want to cut Social Securty to pay for it
Notable quotes:
"... His nominee to run the Department of Health and Human Services, Tom Price, a Republican congressman from Georgia, has been a champion of cuts to all three of the nation's large social programs - Medicare, Medicaid and Social Security. When discussing reforms to Social Security, he has ignored ways to bring new revenue into the system while emphasizing possible benefit cuts through means-testing, private accounts and raising the retirement age. ..."
"... But Mr. Price, who currently heads the House Budget Committee, has found a way to cut Social Security deeply without Congress and the president ever having to enact specific benefit cuts, like raising the retirement age. ..."
"... Mr. Trump's hands-off approach to Social Security during the campaign was partly a strategic gesture to separate him from other Republican contenders who stuck to the party line on cutting Social Security. But he also noted the basic fairness of a system in which people who dutifully contribute while they are working receive promised benefits when they retire. Unfortunately, he has not surrounded himself with people who will help him follow those instincts. ..."
www.nytimes.com

Donald Trump campaigned on a promise not to cut Social Security, which puts him at odds with the Republican Party's historical antipathy to the program and the aims of today's Republican leadership. So it should come as no surprise that congressional Republicans are already testing Mr. Trump's hands-off pledge.

... ... ...

As Congress drew to a close this month, Sam Johnson, the chairman of the House Social Security subcommittee, introduced a bill that would slash Social Security benefits for all but the very poorest beneficiaries. To name just two of the bill's benefit cuts, it would raise the retirement age to 69 and reduce the annual cost-of-living adjustment, while asking nothing in the way of higher taxes to bolster the program; on the contrary, it would cut taxes that high earners now pay on a portion of their benefits. Last week, Mark Meadows, the Republican chairman of the conservative House Freedom Caucus, said the group would push for an overhaul of Social Security and Medicare in the early days of the next Congress.

... ... ...

Another sensible reform would be to bring more tax revenue into the system by raising the level of wages subject to Social Security taxes, currently $118,500. In recent decades, the wage cap has not kept pace with the income gains of high earners; if it had, it would be about $250,000 today.

The next move on Social Security is Mr. Trump's. He can remind Republicans in Congress that his pledge would lead him to veto benefit cuts to Social Security if such legislation ever reached his desk. When he nominates the next commissioner of Social Security, he can choose a competent manager, rather than someone who has taken sides in political and ideological debates over the program.

What Mr. Trump actually will do is unknown, but his actions so far don't inspire confidence. By law, the secretaries of labor, the Treasury and health and human services are trustees of Social Security. Mr. Trump's nominees to head two of these departments, Labor and Treasury - Andrew Puzder, a fast-food executive, and Steve Mnuchin, a Wall Street trader and hedge fund manager turned Hollywood producer - have no government experience and no known expertise on Social Security.

His nominee to run the Department of Health and Human Services, Tom Price, a Republican congressman from Georgia, has been a champion of cuts to all three of the nation's large social programs - Medicare, Medicaid and Social Security. When discussing reforms to Social Security, he has ignored ways to bring new revenue into the system while emphasizing possible benefit cuts through means-testing, private accounts and raising the retirement age.

There is no way to mesh those ideas with Mr. Trump's pledge. But Mr. Price, who currently heads the House Budget Committee, has found a way to cut Social Security deeply without Congress and the president ever having to enact specific benefit cuts, like raising the retirement age. Recently, he put forth a proposal to reform the budget process by imposing automatic spending cuts on most federal programs if the national debt exceeds specified levels in a given year. If Congress passed Mr. Trump's proposed tax cut, for example, the ensuing rise in debt would trigger automatic spending cuts that would slash Social Security by $1.7 trillion over 10 years, according to an analysis by the Center for American Progress, a liberal think tank. This works out to a cut of $168 a month on the average monthly benefit of $1,240. If other Trump priorities were enacted, including tax credits for private real estate development and increases in military spending, the program cuts would be even deeper.

Mr. Trump's hands-off approach to Social Security during the campaign was partly a strategic gesture to separate him from other Republican contenders who stuck to the party line on cutting Social Security. But he also noted the basic fairness of a system in which people who dutifully contribute while they are working receive promised benefits when they retire. Unfortunately, he has not surrounded himself with people who will help him follow those instincts.

Susan Anderson is a trusted commenter Boston 1 hour ago
There is a simple solution to Social Security.

Remove the cap, so it is not a regressive tax. After all, Republicans appear to be all for a "flat" tax. Then lower the rate for everyone.

There is no reason why it should only be charged on the part of income that is needed to pay for necessary expenses should as housing, food, medical care, transportation, school, communications, and such. Anyone making more than the current "cap" is actually able to afford all this.

There is no reason the costs should be born only by those at the bottom of the income pyramid.

As for Republican looting, that's just despicable, and we'll hope they are wise enough to realize that they shouldn't let government mess with people's Social Security!

Thomas Zaslavsky is a trusted commenter Binghamton, N.Y. 1 hour ago
The idea hinted in the editorial that Trump has any principle or instinct that would lead him to protect benefits for people who are not himself or his ultra-wealthy class is not worthy of consideration. No, Trump has none such and he will act accordingly. (Test my prediction at the end of 2017 or even sooner; it seems the Republicans are champing at the bit to loot the government and the country fro their backers.)
Christine McM is a trusted commenter Massachusetts 2 hours ago
I wouldn't hold Trump to any of his campaign promises, given how often he changes positions, backtracks, changes subjects, or whatever. His biggest promise of all was to "drain the swamp" and we know how that turned out.

He might have a cabinet of outsiders, but they are still creatures from outside swamps. That said, if there is even the barest of hints that this is on the agenda, I can pretty much bet that in two years, Congress will completely change parties.

Imagine: cutting benefits for people who worked all their lives and depend on that money in older age, all in order to give the wealthiest Americans another huge tax cut. For a fake populist like Trump, that might sound like a great idea (he has no fixed beliefs or principles) but to his most ardent supporters, that might be the moment they finally get it: they fell for one of the biggest cons in the universe.

Rita is a trusted commenter California 2 hours ago
Given the Republican desire to shut down Medicare and Social Security, it is not hard to predict that they will do so a little at a time so that people will not notice until its too late.

But since the Republicans have been very upfront with hostility towards the social safety net, one can conclude that their supporters want to eliminate social safety net.

Mary Ann Donahue is a trusted commenter NYS 2 hours ago

RE: "To name just two of the bill's benefit cuts, it would raise the retirement age to 69 and reduce the annual cost-of-living adjustment..."

The COLA for 2017 is .03% a paltry average increase of $5 per month. There was no increase in 2016.

The formula for how the COLA is calculated needs to be changed to allow for fair increases not reductions.

Mary Scott is a trusted commenter NY 4 hours ago
Republicans have been promising to "fix" Social Security for years and now we are seeing exactly what they mean. We can see how low they're willing to stoop by their plan to cut the taxes that high earners now pay on a portion of their benefits and decimate the program for everybody else. I wouldn't be surprised if they raised SS taxes on low and middle income earners.

There has been an easy fix for Social Security for years. Simply raise the tax on income to $250,000 thousand and retirees both present and future would be on much firmer footing. Many future retirees will be moving on to Social Security without the benefit of defined pension plans and will need a more robust SS benefit in the future, not a weaker one.

Don't count on Donald Trump to come to the rescue. He seems to hate any tax more than even the most fervent anti-tax freak like Paul Ryan. Mr. Trump admitted throughout the campaign that he avoids paying any tax at all.

The Times seems to want to give Mr. Trump limitless chances to do the right thing. "Will Donald Trump Cave on Social Security" it asks. Of course he will. One has only to look at his cabinet choices and his embrace of the Ryan budget to know the answer to that question. Better to ask, "How Long Will It Take Trump To Destroy Social Security?"

At least it would be an honest question and one that would put Mr. Trump in the center of a question that will affect the economic security of millions of Americans.

serban is a trusted commenter Miller Place 4 hours ago
Cutting benefits for upper income solves nothing since by definition upper incomes are a small percentage of the population. The obvious way to solve any problem with SS is to raise taxes on upper incomes, the present cap is preposterous. People so wealthy that SS is a pittance can show their concern by simply donating the money they get from SS to charities.
david is a trusted commenter ny 4 hours ago

We can get some perspective on what Social Security privatization schemes would mean to the average SSS recipient from Roger Lowenstein' analysis of Bush's privatization scheme.

Roger Lowenstein's Times article discusses the CBO's analysis of how the Bush privatization scheme for Social Security would reduce benefits.

http://www.nytimes.com/2005/01/16/magazine/16SOCIAL.html?_r=1&amp;pagewa...

"The C.B.O. assumes that the typical worker would invest half of his allocation in stocks and the rest in bonds. The C.B.O. projects the average return, after inflation and expenses, at 4.9 percent. This compares with the 6 percent rate (about 3.5 percent after inflation) that the trust fund is earning now.

The second feature of the plan would link future benefit increases to inflation rather than to wages. Because wages typically grow faster, this would mean a rather substantial benefit cut. In other words, absent a sustained roaring bull market, the private accounts would not fully make up for the benefit cuts. According to the C.B.O.'s analysis, which, like all projections of this sort should be regarded as a best guess, a low-income retiree in 2035 would receive annual benefits (including the annuity from his private account) of $9,100, down from the $9,500 forecast under the present program. A median retiree would be cut severely, from $17,700 to $13,600. "

[Dec 17, 2016] Paul Krugman Useful Idiots Galore

Notable quotes:
"... Shorter Paul Krugman: nobody acted more irresponsibly in the last election than the New York Times. ..."
"... Looks like Putin recruited the NYT, the FBI and the DNC. ..."
"... Dr. Krugman is feeding this "shoot first, ask questions later" mentality. He comes across as increasingly shrill and even unhinged - it's a slide he's been taking for years IMO, which is a big shame. ..."
"... It is downright irresponsible and dangerous for a major public intellectual with so little information to cast the shadow of legitimacy on a president ("And it means not acting as if this was a normal election whose result gives the winner any kind of a mandate, or indeed any legitimacy beyond the bare legal requirements.") This kind of behavior is EXACTLY what TRUMP and other authoritarians exhibit - using pieces of information to discredit institutions and individuals. Since foreign governments have and will continue to try to influence U.S. policy through increasingly sophisticated means, this opens the door for anyone to declare our elections and policies as illegitimate in the future. ..."
"... Any influence Russian hacking had was entirely a consequence of U.S. media obsession with celebrity, gotcha and horse race trivia and two-party red state/blue state tribalism. ..."
"... Without the preceding, neither Trump nor Clinton would have been contenders in the first place. Putin didn't invent super delegates, Citizens United, Fox News, talk radio, Goldman-Sachs, etc. etc. etc. If Putin exploited vulnerabilities, it is because preserving those vulnerabilities was more important to the elites than fostering a democratic political culture. ..."
"... It's not a "coup". It's an election result that didn't go the way a lot of people want. That's it. It's probably not optimal, but I'm pretty sure that democracy isn't supposed to produce optimal results. ..."
"... All this talk about "coups" and "illegitimacy" is nuts, and -- true to Dem practice -- incredibly short-sighted. For many, voting for Trump was an available way to say to those people, "We don't believe you any more. At all." Seen in that light, it is a profoundly democratic (small 'd') response to elites that have most consistently served only themselves. ..."
"... Post Truth is Pre-Fascism. The party that thinks your loyalty is suspect unless you wear a flag pin fuels itself on Post Truth. Isnt't this absurdity the gist of Obama's Russia comments today!?! ..."
"... Unless the Russians or someone else hacked the ballot box machines, it is our own damn fault. ..."
"... The ship of neo-liberal trade sailed in the mid-2000's. That you don't get that is sad. You can only milk that so far the cow had been milked. ..."
"... The people of the United States did not have much to choose between: Either a servant of the Plutocrats or a member of the Plutocratic class. The Dems brought this on us when they refused to play fair with Bernie. (Hillary would almost certainly have won the nomination anyway.) ..."
"... The Repubs brought this on, by refusing to govern. The media brought this on: I seem to remember Hillary's misfeasances, once nominated, festering in the media, while Trump's were mentioned, and then disappeared. (Correct me if I'm wrong in this.) Also, the media downplayed Bernie until he had no real chance. ..."
"... The government brought this on, by failing to pursue justice against the bankers, and failing to represent the people, especially the majority who have been screwed by trade and the plutocratic elite and their apologists. ..."
"... The educational system brought this on, by failing to educate the people to critical thought. For instance: 1) The wealthy run the country. 2) The wealthy have been doing very well. 3) Everybody else has not. It seems most people cannot draw the obvious conclusion. ..."
"... Krugman is himself one of those most useful idiots. I do not recall his clarion call to Democrats last spring that "FBI investigation" and "party Presidential nominee" was bound to be an ugly combination. Some did; right here as I recall. Or his part in the official "don't vote for third party" week in the Clinton media machine....thanks, hundreds of thousands of Trump votes got the message. ..."
"... It's too rich to complain about Russia and Wikileaks as if those elements in anyway justified Clinton becoming President. Leaks mess with our democracy? Then for darn sure do not vote for a former Sec. of State willing to use a home server for her official business. Russia is menacing? Just who has been managing US-Russia relations the past 8 years? I voted for her anyway, but the heck if I think some tragic fate has befell the nation here. Republicans picked a better candidate to win this thing than we Democrats did. ..."
"... The truth of the matter is that Clinton was a very weak candidate with nothing to offer but narcissism ("I'm with her"). It's notable that Clinton has still not accepted responsibility for her campaign, preferring to throw the blame for the loss anywhere but herself. Sociopathy much? ..."
Dec 17, 2016 | economistsview.typepad.com
Monetas Tuas Requiro -> kthomas... , December 16, 2016 at 05:10 PM
The secret story of how American advisers helped Yeltsin win

http://content.time.com/time/covers/0,16641,19960715,00.html

JohnH -> Dan Kervick... , December 16, 2016 at 11:46 AM
PK seems to be a bitter old man...
anne -> sanjait... , December 16, 2016 at 03:08 PM
Nothing to see here, say the useful idiots.

[ I find it terrifying, simply terrifying, to refer to people as "useful idiots" after all the personal destruction that has followed when the expression was specifically used in the past.

To me, using such an expression is an honored economist intent on becoming Joseph McCarthy. ]

anne -> anne... , December 16, 2016 at 03:15 PM
To demean a person as though the person were a communist or a fool of communists or the like, with all the personal harm that has historically brought in this country, is cruel beyond my understanding or imagining.

"Useful Idiots Galore," terrifying.

Necesito Dinero Tuyo -> anne... , December 16, 2016 at 05:25 PM
Dale : , December 16, 2016 at 10:51 AM
trouble is that his mind reflects an accurate perception of our common reality.
Procopius -> Dale... , December 17, 2016 at 02:37 AM
Well, not really. For example he referred to "the close relationship between Wikileaks and Russian intelligence." But Wikileaks is a channel. They don't seek out material. They rely on people to bring material to them. They supposedly make an effort to verify that the material is not a forgery, but aside from that what they release is what people bring to them. Incidentally, like so many people you seem to not care whether the material is accurate or not -- Podesta and the DNC have not claimed that any of the emails are different from what they sent.
Tom aka Rusty : , December 16, 2016 at 11:06 AM
PK's head explodes!

One thought....

When politicians and business executives and economists cuddle up to the totalitarian Chinese it is viewed as an act of enlightment and progress.

When someone cuddles up to the authoritarian thug Putin it is an act of evil.

Seems a bit of a double standard.

We are going to have to do "business" with both the Chinese and the Russians, whoever is president.

Ben Groves -> Tom aka Rusty... , December 16, 2016 at 11:07 AM
Your head should explode considering Trump's deal with the "establishment" in July was brokered by foreign agents.
ilsm -> Ben Groves... , December 16, 2016 at 04:11 PM
curiouser and curiouser! while Obama and administration arm jihadis and call its support for jihadis funded by al Qaeda a side in a civil war.

the looking glass you all went through.

Trump has more convictions than any democrat

... ... ...

Tom aka Rusty -> kthomas... , December 16, 2016 at 01:36 PM
In a theatre of the absurd sort of way.
dilbert dogbert -> Tom aka Rusty... , December 16, 2016 at 12:11 PM
One thought:
Only Nixon can go to China.
anne -> sanjait... , December 16, 2016 at 03:22 PM
Putin is a murderous thug...

http://www.nytimes.com/2014/09/23/opinion/david-brooks-snap-out-of-it.html

September 22, 2014

Snap Out of It
By David Brooks

President Vladimir Putin of Russia, a lone thug sitting atop a failing regime....

http://www.nytimes.com/2014/10/22/opinion/thomas-friedman-putin-and-the-pope.html

October 21, 2014

Putin and the Pope
By Thomas L. Friedman

One keeps surprising us with his capacity for empathy, the other by how much he has become a first-class jerk and thug....

http://www.nytimes.com/2014/12/21/opinion/sunday/thomas-l-friedman-whos-playing-marbles-now.html

December 20, 2014

Who's Playing Marbles Now?
By Thomas L. Friedman

Let us not mince words: Vladimir Putin is a delusional thug....

http://www.nytimes.com/2014/12/22/opinion/paul-krugman-putin-neocons-and-the-great-illusion.html

December 21, 2014

Conquest Is for Losers: Putin, Neocons and the Great Illusion
By Paul Krugman

Remember, he's an ex-K.G.B. man - which is to say, he spent his formative years as a professional thug....

http://www.nytimes.com/2015/01/28/opinion/thomas-friedman-czar-putins-next-moves.html

January 27, 2015

Czar Putin's Next Moves
By Thomas L. Friedman

ZURICH - If Putin the Thug gets away with crushing Ukraine's new democratic experiment and unilaterally redrawing the borders of Europe, every pro-Western country around Russia will be in danger....

anne -> anne... , December 16, 2016 at 03:23 PM
Putin is a murderous thug...

http://www.nytimes.com/2015/09/16/world/middleeast/white-house-split-on-opening-talks-with-putin.html

September 15, 2015

Obama Weighing Talks With Putin on Syrian Crisis
By PETER BAKER and ANDREW E. KRAMER

WASHINGTON - Mr. Obama views Mr. Putin as a thug, according to advisers and analysts....

http://www.nytimes.com/2015/09/21/opinion/mr-putins-mixed-messages-on-syria.html

September 20, 2015

Mr. Putin's Mixed Messages on Syria

Mr. Obama considers Mr. Putin a thug, his advisers say....

Gibbon1 -> anne... , December 16, 2016 at 07:15 PM
> By David Brooks
> By Thomas L. Friedman
> By Paul Krugman
> By Peter Baker and Andrew E. Kramer

I feel these authors have intentionally attempted to mislead in the past. They also studiously ignore the United States thuggish foreign policy.

Sandwichman : , December 16, 2016 at 11:06 AM
"...not acting as if this was a normal election..." The problem is that it WAS a "normal" U.S. election.
Ben Groves -> Sandwichman ... , December 16, 2016 at 11:09 AM
Yup, like the other elections, the bases stayed solvent and current events factored into the turnout and voting patterns which spurred the independent vote.
Gibbon1 -> Ben Groves... , December 16, 2016 at 11:57 AM
When people were claiming Clinton was going to win big, I thought no Republican and Democratic voters are going to pull the lever like a trained monkey as usual. Only difference in this election was Hillary's huge negatives due entirely by her and Bill Clinton's support for moving manufacturing jobs to Mexico and China in the 90s.
dilbert dogbert -> Sandwichman ... , December 16, 2016 at 12:13 PM
I would have thought in a "normal" murika and election, the drumpf would have gotten at most 10 million votes.
Sandwichman -> dilbert dogbert... , December 16, 2016 at 01:54 PM
The trouble with normal is it always gets worse.
Fred C. Dobbs : , December 16, 2016 at 11:08 AM
To Understand Trump, Learn Russian http://nyti.ms/2hLcrB1
NYT - Andrew Rosenthal - December 15

The Russian language has two words for truth - a linguistic quirk that seems relevant to our current political climate, especially because of all the disturbing ties between the newly elected president and the Kremlin.

The word for truth in Russian that most Americans know is "pravda" - the truth that seems evident on the surface. It's subjective and infinitely malleable, which is why the Soviet Communists called their party newspaper "Pravda." Despots, autocrats and other cynical politicians are adept at manipulating pravda to their own ends.

But the real truth, the underlying, cosmic, unshakable truth of things is called "istina" in Russian. You can fiddle with the pravda all you want, but you can't change the istina.

For the Trump team, the pravda of the 2016 election is that not all Trump voters are explicitly racist. But the istina of the 2016 campaign is that Trump's base was heavily dependent on racists and xenophobes, Trump basked in and stoked their anger and hatred, and all those who voted for him cast a ballot for a man they knew to be a racist, sexist xenophobe. That was an act of racism.

Trump's team took to Twitter with lightning speed recently to sneer at the conclusion by all 17 intelligence agencies that the Kremlin hacked Democratic Party emails for the specific purpose of helping Trump and hurting Hillary Clinton. Trump said the intelligence agencies got it wrong about Iraq, and that someone else could have been responsible for the hack and that the Democrats were just finding another excuse for losing.

The istina of this mess is that powerful evidence suggests that the Russians set out to interfere in American politics, and that Trump, with his rejection of Western European alliances and embrace of Russia's invasion of Ukraine, was their chosen candidate.

The pravda of Trump's selection of Rex Tillerson, head of Exxon Mobil, as secretary of state is that by choosing an oil baron who has made billions for his company by collaborating with Russia, Trump will make American foreign policy beholden to American corporate interests.

That's bad enough, but the istina is far worse. For one thing, American foreign policy has been in thrall to American corporate interests since, well, since there were American corporations. Just look at the mess this country created in Latin America, the Caribbean, Southeast Asia and the Middle East to serve American companies.

Yes, Tillerson has ignored American interests repeatedly, including in Russia and Iraq, and has been trying to remove sanctions imposed after Russia's seizure of Crimea because they interfered with one of his many business deals. But take him out of the equation in the Trump cabinet and nothing changes. Trump has made it plain, with every action he takes, that he is going to put every facet of policy, domestic and foreign, at the service of corporate America. The istina here is that Tillerson is just a symptom of a much bigger problem.

The pravda is that Trump was right in saying that the intelligence agencies got it wrong about Saddam Hussein and weapons of mass destruction.

But the istina is that Trump's contempt for the intelligence services is profound and dangerous. He's not getting daily intelligence briefings anymore, apparently because they are just too dull to hold his attention.

And now we know that Condoleezza Rice was instrumental in bringing Tillerson to Trump's attention. As national security adviser and then secretary of state for president George W. Bush, Rice was not just wrong about Iraq, she helped fabricate the story that Hussein had nuclear weapons.

Trump and Tillerson clearly think they are a match for the wily and infinitely dangerous Putin, but as they move foward with their plan to collaborate with Russia instead of opposing its imperialist tendencies, they might keep in mind another Russian saying, this one from Lenin.

"There are no morals in politics; there is only expedience," he wrote. "A scoundrel may be of use to us just because he is a scoundrel."

Putin has that philosophy hard-wired into his political soul. When it comes to using scoundrels to get what he wants, he is a professional, and Trump is only an amateur. That is the istina of the matter.

Fred C. Dobbs -> Fred C. Dobbs... , December 16, 2016 at 11:25 AM
If nothing else, Russia - with a notably un-free press - has shrewdly used our own 'free press' against US.

RUSSIA'S UNFREE PRESS

The Boston Globe - Marshall Goldman - January 29, 2001

AS THE BUSH ADMINISTRATION DEBATES ITS POLICY TOWARD RUSSIA, FREEDOM OF THE PRESS SHOULD BE ONE OF ITS MAJOR CONCERNS. UNDER PRESIDENT VLADIMIR PUTIN THE PRESS IS FREE ONLY AS LONG AS IT DOES NOT CRITICIZE PUTIN OR HIS POLICIES. WHEN NTV, THE TELEVISION NETWORK OF THE MEDIA GIANT MEDIA MOST, REFUSED TO PULL ITS PUNCHES, MEDIA MOST'S OWNER, VLADIMIR GUSINSKY, FOUND HIMSELF IN JAIL, AND GAZPROM, A COMPANY DOMINATED BY THE STATE, BEGAN TO CALL IN LOANS TO MEDIA MOST. Unfortunately, Putin's actions are applauded by more than 70 percent of the Russian people. They crave a strong and forceful leader; his KGB past and conditioned KGB responses are just what they seem to want after what many regard as the social, political, and economic chaos of the last decade.

But what to the Russians is law and order (the "dictatorship of the law," as Putin has so accurately put it) looks more and more like an old Soviet clampdown to many Western observers.

There is no complaint about Putin's promises. He tells everyone he wants freedom of the press. But in the context of his KGB heritage, his notion of freedom of the press is something very different. In an interview with the Toronto Globe and Mail, he said that that press freedom excludes the "hooliganism" or "uncivilized" reporting he has to deal with in Moscow. By that he means criticism, especially of his conduct of the war in Chechnya, his belated response to the sinking of the Kursk, and the heavy-handed way in which he has pushed aside candidates for governor in regional elections if they are not to Putin's liking.

He does not take well to criticism. When asked by the relatives of those lost in the Kursk why he seemed so unresponsive, Putin tried to shift the blame for the disaster onto the media barons, or at least those who had criticized him. They were the ones, he insisted, who had pressed for reduced funding for the Navy while they were building villas in Spain and France. As for their criticism of his behavior, They lie! They lie! They lie!

Our Western press has provided good coverage of the dogged way Putin and his aides have tried to muscle Gusinsky out of the Media Most press conglomerate he created. But those on the Putin enemies list now include even Boris Berezovsky, originally one of Putin's most enthusiastic promoters who after the sinking of the Kursk also became a critic and thus an opponent.

Gusinsky would have a hard time winning a merit badge for trustworthiness (Berezovsky shouldn't even apply), but in the late Yeltsin and Putin years, Gusinsky has earned enormous credit for his consistently objective news coverage, including a spotlight on malfeasance at the very top. More than that, he has supported his programmers when they have subjected Yeltsin and now Putin to bitter satire on Kukly, his Sunday evening prime-time puppet show.

What we hear less of, though, is what is happening to individual reporters, especially those engaged in investigative work. Almost monthly now there are cases of violence and intimidation. Among those brutalized since Putin assumed power are a reporter for Radio Liberty who dared to write negative reports about the Russian Army's role in Chechnia and four reporters for Novaya Gazeta. Two of them were investigating misdeeds by the FSB (today's equivalent of the KGB), including the possibility that it rather than Chechins had blown up a series of apartment buildings. Another was pursuing reports of money-laundering by Yeltsin family members and senior staff in Switzerland. Although these journalists were very much in the public eye, they were all physically assaulted.

Those working for provincial papers labor under even more pressure with less visibility. There are numerous instances where regional bosses such as the governor of Vladivostok operate as little dictators, and as a growing number of journalists have discovered, challenges are met with threats, physical intimidation, and, if need be, murder.

True, freedom of the press in Russia is still less than 15 years old, and not all the country's journalists or their bosses have always used that freedom responsibly. During the 1996 election campaign, for example, the media owners, including Gusinsky conspired to denigrate or ignore every viable candidate other than Yeltsin. But attempts to muffle if not silence criticism have multiplied since Putin and his fellow KGB veterans have come to power. Criticism from any source, be it an individual journalist or a corporate entity, invites retaliation.

When Media Most persisted in its criticism, Putin sat by approvingly as his subordinates sent in masked and armed tax police and prosecutors. When that didn't work, they jailed Gusinsky on charges that were later dropped, although they are seeking to extradite and jail him again. along with his treasurer, on a new set of charges. Yesterday the prosecutor general summoned Tatyana Mitkova, the anchor of NTV's evening news program, for questioning. Putin's aides are also doing all they can to prevent Gusinsky from refinancing his debt-ridden operation with Ted Turner or anyone else in or outside of the country.

According to one report, Putin told one official, You deal with the shares, debts, and management and I will deal with the journalists. His goal simply is to end to independent TV coverage in Russia. ...

(No link; from their archives.)

DeDude -> Fred C. Dobbs... , December 16, 2016 at 11:33 AM
"Unfortunately, Putin's actions are applauded by more than 70 percent of the Russian people"

Exactly; the majority of people are so stupid and/or lazy that they cannot be bothered understanding what is going on; and how their hard won democracy is being subjugated. But thank God that is in Russia not here in the US - right?

anne -> Fred C. Dobbs... , December 16, 2016 at 11:45 AM
https://www.gpo.gov/fdsys/pkg/CREC-2001-02-07/html/CREC-2001-02-07-pt1-PgE133-4.htm

February 7, 2001

Russia's Unfree Press
By Marshall I. Goldman

Watermelonpunch -> Fred C. Dobbs... , December 16, 2016 at 04:55 PM
"Infinitely dangerous" As in the event horizon of a black hole, for pity's sake?

Odd choice of words. Should there have been a "more" in between there? Was it a typo?

cm -> Fred C. Dobbs... , December 17, 2016 at 03:42 PM
"Pravda" is etymologically derived from "prav-" which means "right" (as opposed to "left", other connotations are "proper", "correct", "rightful", also legal right). It designates the social-construct aspect of "righteousness/truthfulness/correctness" as opposed to "objective reality" (conceptually independent of social standards, in reality anything but). In formal logic, "istina" is used to designate truth. Logical falsity is designated a "lie".

It is a feature common to most European languages that rightfulness, righteousness, correctness, and legal rights are identified with the designation for the right side. "Sinister" is Latin for "left".

Ben Groves : , December 16, 2016 at 11:18 AM
If you believe 911 was a Zionist conspiracy, so where the Paris attacks of November 2015, when Trump was failing in the polls as the race was moving toward as you would expect, toward other candidates. After the Paris attacks, his numbers reaccelerated.

If "ZOG" created the "false flag" of the Paris attacks to start a anti-Muslim fervor, they succeeded, much like 911. Bastille day attacks were likewise, a false flag. This is not new, this goes back to when the aristocracy merged with the merchant caste, creating the "bourgeois". They have been running a parallel government in the shadows to effect what is seen.

cm -> sanjait... , December 17, 2016 at 03:46 PM
There used to be something called Usenet News, where at the protocol level reader software could fetch meta data (headers containing author, (stated) origin, title, etc.) independently from comment bodies. This was largely owed to limited download bandwidth. Basically all readers had "kill files" i.e. filters where one could configure that comments with certain header parameters should not be downloaded, or even hidden.
cm -> cm... , December 17, 2016 at 03:48 PM
The main application was that the reader would download comments in the background when headers were already shown, or on demand when you open a comment.

Now you get the whole thing (or in units of 100) by the megabyte.

tew : , December 16, 2016 at 11:19 AM
A major problem is signal extraction out of the massive amounts of noise generated by the media, social media, parties, and pundits.

It's easy enough to highlight this thread of information here, but in real time people are being bombarded by so many other stories.

In particular, the Clinton Foundation was also regularly being highlighted for its questionable ties to foreign influence. And HRC's extravagant ties to Wall St. And so much more.

And there is outrage fatigue.

Ben Groves -> DeDude... , December 16, 2016 at 11:34 AM
The media's job was to sell Trump and denounce Clinton. The mistake a lot of people make is thinking the global elite are the "status quo". They are not. They are generally the ones that break the status quo more often than not.

The bulk of them wanted Trump/Republican President and made damn sure it was President. Buffering the campaign against criticism while overly focusing on Clinton's "crap". It took away from the issues which of course would have low key'd the election.

cm -> DeDude... , December 17, 2016 at 03:55 PM
Not much bullying has to be applied when there are "economic incentives". The media attention economy and ratings system thrive on controversy and emotional engagement. This was known a century ago as "only bad news is good news". As long as I have lived, the non-commercial media not subject (or not as much) to these dynamics have always been perceived as dry and boring.

I heard from a number of people that they followed the campaign "coverage" (in particular Trump) as gossip/entertainment, and those were people who had no sympathies for him. And even media coverage by outlets generally critical of Trump's unbelievable scandals and outrageous performances catered to this sentiment.

Jim Harrison : , December 16, 2016 at 11:24 AM
Shorter Paul Krugman: nobody acted more irresponsibly in the last election than the New York Times.
Sandwichman -> Jim Harrison ... , December 16, 2016 at 11:53 AM
Looks like Putin recruited the NYT, the FBI and the DNC.
DrDick -> Sandwichman ... , December 16, 2016 at 11:57 AM
Nah, Wall Street and the GOP recruited them to the effort.
Sandwichman -> DrDick... , December 16, 2016 at 01:57 PM
GOP included in FBI. Wall Street included in DNC, GOP. It's all just one big FBIDNCGOPCNNWSNYT.
sanjait -> Jim Harrison ... , December 16, 2016 at 03:06 PM
He can't say it out loud but you know he's including the NYT on his list of UIs.
tew : , December 16, 2016 at 11:26 AM
Let me also add some levelheaded thoughts:

First, let me disclose that I detest TRUMP and that the Russian meddling has me deeply concerned. Yet...

We only have assertions that the Russian hacking had some influence. We do not know whether it likely had *material* influence that could have reasonably led to a swing state(s) going to TRUMP that otherwise would have gone to HRC.

Dr. Krugman is feeding this "shoot first, ask questions later" mentality. He comes across as increasingly shrill and even unhinged - it's a slide he's been taking for years IMO, which is a big shame.

It is downright irresponsible and dangerous for a major public intellectual with so little information to cast the shadow of legitimacy on a president ("And it means not acting as if this was a normal election whose result gives the winner any kind of a mandate, or indeed any legitimacy beyond the bare legal requirements.") This kind of behavior is EXACTLY what TRUMP and other authoritarians exhibit - using pieces of information to discredit institutions and individuals. Since foreign governments have and will continue to try to influence U.S. policy through increasingly sophisticated means, this opens the door for anyone to declare our elections and policies as illegitimate in the future.

DrDick -> tew... , December 16, 2016 at 11:56 AM
It is quite clear that the Russians intervened on Trump's behalf and that this intervention had an impact. The problem is that we cannot actually quantify that impact.

https://www.washingtonpost.com/world/national-security/fbi-backs-cia-view-that-russia-intervened-to-help-trump-win-election/2016/12/16/05b42c0e-c3bf-11e6-9a51-cd56ea1c2bb7_story.html?pushid=breaking-news_1481916265&tid=notifi_push_breaking-news&utm_term=.25d35c017908

Sandwichman -> tew... , December 16, 2016 at 01:17 PM
"We only have assertions that the Russian hacking had some influence."

Any influence Russian hacking had was entirely a consequence of U.S. media obsession with celebrity, gotcha and horse race trivia and two-party red state/blue state tribalism.

Without the preceding, neither Trump nor Clinton would have been contenders in the first place. Putin didn't invent super delegates, Citizens United, Fox News, talk radio, Goldman-Sachs, etc. etc. etc. If Putin exploited vulnerabilities, it is because preserving those vulnerabilities was more important to the elites than fostering a democratic political culture.

cm -> Sandwichman ... , December 17, 2016 at 04:00 PM
But this is how influence is exerted - by using the dynamics of the adversary's/targets organization as an amplifier. Hierarchical organizations are approached through their management or oversight bodies, social networks through key influencers, etc.
David : , December 16, 2016 at 11:58 AM
I see this so much and it's so right wing cheap: I hate Trump, but assertions that Russia intervened are unproven.

First, Trump openly invited Russia to hack DNC emails. That is on its face treason and sedition. It's freaking on video. If HRC did that there would be calls of the right for her execution.

Second, a NYT story showed that the FBI knew about the hacking but did not alert the DNC properly - they didn't even show up, they sent a note to a help desk.

http://www.huffingtonpost.com/entry/fbi-probe-dnc-hacked-emails_us_57a19f22e4b08a8e8b601259

This was a serious national security breach that was not addressed properly. This is criminal negligence.

This was a hacked election by collusion of the FBI and the Russian hackers and it totally discredits the FBI as it throwed out chum and then denied at the last minute. Now the CIA comes in and says PUTIN, Trump's bff, was directly involved in manipulating the timetable that the hacked emails were released in drip drip form to cater to the media - creating story after story about emails.

It was a perfect storm for a coup. Putin played us. And he will play Trump. And God knows how it ends. But it doesn't matter b/c we're all screwed with climate change anyway.

sglover -> David... , December 16, 2016 at 02:50 PM
"It was a perfect storm for a coup. Putin played us. And he will play Trump. And God knows how it ends. But it doesn't matter b/c we're all screwed with climate change anyway."

It's not a "coup". It's an election result that didn't go the way a lot of people want. That's it. It's probably not optimal, but I'm pretty sure that democracy isn't supposed to produce optimal results.

All this talk about "coups" and "illegitimacy" is nuts, and -- true to Dem practice -- incredibly short-sighted. For many, voting for Trump was an available way to say to those people, "We don't believe you any more. At all." Seen in that light, it is a profoundly democratic (small 'd') response to elites that have most consistently served only themselves.

Trump and his gang will be deeply grateful if the left follows Krugman's "wisdom", and clings to his ever-changing excuses. (I thought it was the evil Greens who deprived Clinton of her due?)

100panthers : , December 16, 2016 at 02:17 PM
Post Truth is Pre-Fascism. The party that thinks your loyalty is suspect unless you wear a flag pin fuels itself on Post Truth. Isnt't this absurdity the gist of Obama's Russia comments today!?!
ilsm -> 100panthers... , December 16, 2016 at 04:29 PM
Obama and the Clintons are angered; Russia keeping US from giving Syria to al Qaeda. Like Clinton gave them Libya.
Jerry Brown -> sanjait... , December 16, 2016 at 04:46 PM
I agree. Unless the Russians or someone else hacked the ballot box machines, it is our own damn fault.
ilsm : , December 16, 2016 at 04:27 PM
the US media is angered putin is killing US' jihadis in Syria
Mr. Bill : , December 16, 2016 at 08:27 PM
"On Wednesday an editorial in The Times described Donald Trump as a "useful idiot" serving Russian interests." I think that is beyond the pale. Yes, I realize that Adolph Hitler was democratically elected. I agree that Trump seems like a scary monster under the bed. That doesn't mean we have too pee our pants, Paul. He's a bully, tough guy, maybe, the kind of kid that tortured you before you kicked the shit out of them with your brilliance. That's not what is needed now.
Mr. Bill -> Mr. Bill... , December 16, 2016 at 08:39 PM
What really is needed, is a watchdog, like Dean Baker, that alerts we dolts of pending bills and their ramifications. The ship of neo-liberal trade bullshit has sailed. Hell, you don't believe it yourself, you've said as much. Be gracious, and tell the truth. We can handle it.
Ben Groves -> Mr. Bill... , December 16, 2016 at 09:51 PM
The ship of neo-liberal trade sailed in the mid-2000's. That you don't get that is sad. You can only milk that so far the cow had been milked.

Trump was a coo, he was not supported by the voters. But by the global elite.

Mr. Bill : , December 16, 2016 at 10:28 PM
Hillary Clinton lost because she is truly an ugly aristocrat.
Mr. Bill -> Mr. Bill... , December 16, 2016 at 11:49 PM
The experience of voting for the Hill was painful, vs Donald Trump.

The Hill seemed like the least likely aristocrat, given two choices, to finish off all government focus on the folks that actually built this society. Two Titans of Hubris, Hillary vs Donald, each ridiculous in the concept of representing the interests of the common man.

At the end of the day. the American people decided that the struggle with the unknown monster Donald was worth deposing the great deplorable, Clinton.

Mr. Bill -> Mr. Bill... , December 17, 2016 at 12:11 AM
The real argument is whether the correct plan of action is the way of FDR, or the way of the industrialists, the Waltons, the Kochs, the Trumps, the Bushes and the outright cowards like the Cheneys and the Clintons, people that never spent a day defending this country in combat. What do they call it, the Commander in Chief.
Mr. Bill -> Mr. Bill... , December 17, 2016 at 12:29 AM
My father was awarded a silver and a bronze star for his efforts in battle during WW2. He was shot in the face while driving a tank destroyer by a German sniper in a place called Schmitten Germany.

He told me once, that he looked over at the guy next to him on the plane to the hospital in England, and his intestines were splayed on his chest. It was awful.

Mr. Bill -> Mr. Bill... , December 17, 2016 at 12:55 AM
What was he fighting for ? Freedom, America. Then the Republicans, Ronald Reagan, who spent the war stateside began the real war, garnering the wealth of the nation to the entitled like him. Ronald Reagan was a life guard.
btg : , December 16, 2016 at 11:09 PM
Other idiots...

Anthony Weiner
Podesta
Biden (for not running)
Tim Kaine (for accepting the nomination instead of deferring to a latino)
CNN and other TV news media (for giving trump so much coverage- even an empty podium)
Donna Brazile
etc.

greg : , December 16, 2016 at 11:57 PM
The people of the United States did not have much to choose between: Either a servant of the Plutocrats or a member of the Plutocratic class. The Dems brought this on us when they refused to play fair with Bernie. (Hillary would almost certainly have won the nomination anyway.)

The Repubs brought this on, by refusing to govern. The media brought this on: I seem to remember Hillary's misfeasances, once nominated, festering in the media, while Trump's were mentioned, and then disappeared. (Correct me if I'm wrong in this.) Also, the media downplayed Bernie until he had no real chance.

The government brought this on, by failing to pursue justice against the bankers, and failing to represent the people, especially the majority who have been screwed by trade and the plutocratic elite and their apologists.

The educational system brought this on, by failing to educate the people to critical thought. For instance: 1) The wealthy run the country. 2) The wealthy have been doing very well. 3) Everybody else has not. It seems most people cannot draw the obvious conclusion.

The wealthy brought this on. For 230 years they have, essentially run this country. They are too stupid to be satisfied with enough, but always want more.

The economics profession brought this on, by excusing treasonous behavior as efficient, and failing to understand the underlying principles of their profession, and the limits of their understanding. (They don't even know what money is, or how a trade deficit destroys productive capacity, and thus the very ability of a nation to pay back the debts it incurs.)

The people brought this on, by neglecting their duty to be informed, to be educated, and to be thoughtful.

Anybody else care for their share of blame? I myself deserve some, but for reasons I cannot say.

What amazes me now is, the bird having shown its feathers, there is no howl of outrage from the people who voted for him. Do they imagine that the Plutocrats who will soon monopolize the White House will take their interests to heart?

As far as I can tell, not one person of 'the people' has been appointed to his cabinet. Not one. But the oppressed masses who turned to Mr Trump seem to be OK with this.
I can only wonder, how much crap will have to be rubbed in their faces, before they awaken to the taste of what it is?

Eric377 : , -1
Krugman is himself one of those most useful idiots. I do not recall his clarion call to Democrats last spring that "FBI investigation" and "party Presidential nominee" was bound to be an ugly combination. Some did; right here as I recall. Or his part in the official "don't vote for third party" week in the Clinton media machine....thanks, hundreds of thousands of Trump votes got the message.

It's too rich to complain about Russia and Wikileaks as if those elements in anyway justified Clinton becoming President. Leaks mess with our democracy? Then for darn sure do not vote for a former Sec. of State willing to use a home server for her official business. Russia is menacing? Just who has been managing US-Russia relations the past 8 years? I voted for her anyway, but the heck if I think some tragic fate has befell the nation here. Republicans picked a better candidate to win this thing than we Democrats did.

Greg -> Eric377... , December 17, 2016 at 12:11 PM
Well said, Eric377.

The truth of the matter is that Clinton was a very weak candidate with nothing to offer but narcissism ("I'm with her"). It's notable that Clinton has still not accepted responsibility for her campaign, preferring to throw the blame for the loss anywhere but herself. Sociopathy much?

This has made me cynical. I used to think that at least *some* members of the US political elite had the best interests of ordinary households in mind, but now I see that it's just ego vs. ego, whatever the party.

As for democracy being on the edge: I believe Adam Smith over Krugman: "there is a lot of ruin in a nation". It takes more than this to overturn an entrenched institution.

I think American democracy will survive a decade of authoritarianism, and if it does not, then H. L. Mencken said it best: "The American people know what they want, and they deserve to get it -- good and hard."

[Dec 17, 2016] Responsibility for the current decline of middle class in the USA rests on neoliberals

Dec 17, 2016 | economistsview.typepad.com
Tim Duy:

Responsibility : I have been puzzling over this from Paul Krugman :

Donald Trump won the electoral college at least in part by promising to bring coal jobs back to Appalachia and manufacturing jobs back to the Rust Belt. Neither promise can be honored – for the most part we're talking about jobs lost, not to unfair foreign competition, but to technological change. But a funny thing happens when people like me try to point that out: we get enraged responses from economists who feel an affinity for the working people of the afflicted regions – responses that assume that trying to do the numbers must reflect contempt for regional cultures, or something.

Is this the right narrative? I am no longer comfortable with this line:

for the most part we're talking about jobs lost, not to unfair foreign competition, but to technological change.

Try to place that line in context with this from Noah Smith:

Then, in the 1990s and 2000s, the U.S opened its markets to Chinese goods, first with Most Favored Nation trading status, and then by supporting China's accession to the WTO. The resulting competition from cheap Chinese goods contributed to vast inequality in the United States, reversing many of the employment gains of the 1990s and holding down U.S. wages. But this sacrifice on the part of 90% of the American populace enabled China to lift its enormous population out of abject poverty and become a middle-income country.

Was this "fair" trade? I think not. Let me suggest this narrative: Sometime during the Clinton Administration, it was decided that an economically strong China was good for both the globe and the U.S. Fair enough. To enable that outcome, U.S. policy deliberately sacrificed manufacturing workers on the theory that a.) the marginal global benefit from the job gain to a Chinese worker exceeded the marginal global cost from a lost US manufacturing job, b.) the U.S. was shifting toward a service sector economy anyway and needed to reposition its workforce accordingly and c.) the transition costs of shifting workers across sectors in the U.S. were minimal.

As a consequence – and through a succession of administrations – the US tolerated implicit subsidies of Chinese industries, including national industrial policy designed to strip production from the US.

And then there was the currency manipulation. I am always shocked when international economists claim "fair trade," pretending that the financial side of the international accounts is irrelevant. As if that wasn't a big, fat thumb on the scale. Sure, "currency manipulation" is running the other way these days. After, of course, a portion of manufacturing was absorbed overseas. After the damage is done.

Yes, technological change is happening. But the impact, and the costs, were certainly accelerated by U.S. policy.

It was a great plan. On paper, at least. And I would argue that in fact points a and b above were correct.

But point c. Point c was a bad call. Point c was a disastrous call. Point c helped deliver Donald Trump to the Oval Office. To be sure, the FBI played its role, as did the Russians. But even allowing for the poor choice of Hilary Clinton as the Democratic nominee (the lack of contact with rural and semi-rural voters blinded the Democrats to the deep animosity toward their candidate), it should never have come to this.

The transition costs were not minimal.

Consider this from the New York Times :

As the opioid epidemic sweeps through rural America, an ever-greater number of drug-dependent newborns are straining hospital neonatal units and draining precious medical resources.

The problem has grown more quickly than realized and shows no signs of abating, researchers reported on Monday. Their study, published in JAMA Pediatrics, concludes for the first time that the increase in drug-dependent newborns has been disproportionately larger in rural areas.

The latest causalities in the opioid epidemic are newborns.

The transition costs were not minimal.

My take is that "fair trade" as practiced since the late 1990s created another disenfranchised class of citizens. As if we hadn't done enough of that already. Then we weaponized those newly disenfranchised citizens with the rhetoric of identity politics. That's coming back to bite us. We didn't really need a white nationalist movement, did we?

Now comes the big challenge: What can we do to make amends? Can we change the narrative? And here is where I agree with Paul Krugman:

Now, if we want to have a discussion of regional policies – an argument to the effect that my pessimism is unwarranted – fine. As someone who is generally a supporter of government activism, I'd actually like to be convinced that a judicious program of subsidies, relocating government departments, whatever, really can sustain communities whose traditional industry has eroded.

The damage done is largely irreversible. In medium-size regions, lower relative housing costs may help attract overflow from the east and west coast urban areas. And maybe a program of guaranteed jobs for small- to medium-size regions combined with relocation subsidies for very small-size regions could help. But it won't happen overnight, if ever. And even if you could reverse the patterns of trade – which wouldn't be easy given the intertwining of global supply chains – the winners wouldn't be the same current losers. Tough nut to crack.

Bottom Line: I don't know how to fix this either. But I don't absolve the policy community from their role in this disaster. I think you can easily tell a story that this was one big policy experiment gone terribly wrong.

[Dec 17, 2016] 200PM Water Cooler 12-16-2016 naked capitalism

Dec 17, 2016 | www.nakedcapitalism.com
Jim Haygood , December 16, 2016 at 4:47 pm

Basic point is that when interest rates are rising, longer-term bonds suffer capital losses. Duration (a weighted average of when the coupon payments and the final principal payment are received) allows comparing the interest rate sensitivity of different bonds.

An example of "shedding duration" would be selling 10-year Treasuries and buying 2-year Treasuries. For a graphic example of how much harder the 10-year has been hit than the 2-year, check the charts for IEF (7-10 year Treasuries) and SHY (1-3 year Treasuries).

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=ief&insttype=&freq=1&show=&time=8

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=shy&insttype=&freq=1&show=&time=8

IEF has lost about 9 percent since last July, while SHY fell a little over 1 percent. Both funds pay monthly dividends, which added about 0.7% to IEF's total return over the period, while SHY's dividends added about 0.35% to its total return.

IEF's capital loss since July represents 4-1/2 years of interest earnings.

Lee , December 16, 2016 at 6:03 pm

That was helpful. Thanks.

Jim Haygood , December 16, 2016 at 6:30 pm

Jim Haygood
December 1, 2016 at 10:23 am

Well, it's a new month. And Treasuries are getting their daily ritual beating, as the 10-year T-note - at 2.46% - seems pulled upward toward the 2.50% round number strange attractor. Ten-year yield chart:

http://tinyurl.com/jaken5c

Despite having an instinctive feeling that this bond bashing is overdone, my bond model says "Take shelter in the short end" (meaning T-bills and the like).

DJPS , December 16, 2016 at 10:04 pm

Thanks Jim.

What are your feelings about SHYG here?

Timmy , December 16, 2016 at 2:48 pm

Well here's the problem, now regulatory issues prevent The Street from warehousing any large inventories, so how is a poor asset manager going to shed their duration?

Not a complete story in my professional experience. Most of the really long stuff is held by institutions (pensions, supranationals, and insurance companies) with the capability to hedge and interest rate hedges are generally cheap and efficient. These players don't have hair triggers on their underlying holdings, particularly corporates that have value if the economy is expected to pick up. And lots of institutions and retail investors stayed short because the rise in rates has been telegraphed. Now, after rates have risen, some of those investors are extending and buying longer bonds with higher yields; so there is a two way market in that longer paper. All this said, it is likely that the Street would struggle mightily to digest real institutional selling, particularly in the event of a genuine credit event ala World Com. A symptom of indigestion would be some degree of divergence between ETF trading prices and NAV's.

griffen , December 16, 2016 at 4:18 pm

Staying short compared to duration bogeys is one thing, actually being short bonds or UST is perhaps a little different.

You allocate benefit of the doubt to retail investors more than i might. Waitll they get their year end reports, paying on distributions whilst the fund lost NAV.

[Dec 15, 2016] GOP Plans to Gut Social Security naked capitalism

Notable quotes:
"... Talking Points Memo ..."
"... Social Security has succeeded because Roosevelt insisted it be paid for by the workers who would get the benefits, "so no damn politician can take it away from them." ..."
"... "These who pant after the very dust of the earth on the head of the helpless also turn aside the way of the humble; " ..."
Dec 14, 2016 | www.nakedcapitalism.com

Originally published at Angry Bear

The Republicans have opened a new assault on Social Security. At present all I know about it is what I read in a Talking Points Memo by Tierney Sneed Key House GOPer Introduces Bill With Major Cuts To Social Security .

The trouble with Sneed's article is that she does not appear to know what she is talking about. She just wrote down what some "experts" told her with no idea what the words mean.

For example, she says,

"A 65 year-old at the top of the scale, a $118,500 average earner, would see his benefits cut by 25% when he retired, compared to the current law, and that reduction would grow to 55 percent compared to current law by the time the retiree was 85 years old."

Well, which is he, "at the top of the scale" or an "average earner"?

The point is probably trivial but I point it out so you will be on your guard if you read her article.

Additionally she quotes Paul Van de Water, who is someone who actually knows that Social Security can be fixed entirely and forever by simply raising the payrolll tax one tenth of one percent per year until the balance between wage growth and growth in the cost of retirement is restored. But somehow she doesn't bother to mention this, or maybe Van De Water forgot to mention it because he favors a "tax the rich" solution without understanding that that will turn Social Security into welfare as we knew it, and lead to its ultimate destruction by those rich who would then be paying for it.

Social Security has succeeded because Roosevelt insisted it be paid for by the workers who would get the benefits, "so no damn politician can take it away from them."

But the damn politicians keep lying and journalists keep repeating the lies without spending ten minutes thinking about them. The basic "facts" about the Republican proposal, introduced by Texas Congressman Sam Johnson appear to be :

This turns Social Security into a straight welfare plan. Most people will be paying for benefits they will never get. The very poorest are promised a larger benefit for awhile until the bogus cost of living adjustment, and increased retirement age do their work. Moreover it is not clear what happens to "the rich" who lose their "side income" as they get older. And of course there is always the fun of going to the welfare office every month to prove that you don't have any hidden assets.

Meanwhile, the CRFB (Committee for a Responsible Federal Budget). an organization dedicated to the destruction of Social Security by misrepresenting the facts, is playing cute games like "use our calculator to find out how old you will be when SS runs out of funds."

But SS will never run out of funds as long as the workers are allowed to pay in advance for their own benefits. With no change at all in SS, SS will pay 80% of "scheduled benefits," but this is 80% of scheduled benefits which meanwhile have grown 25% in real value. So the GOP "plan to save SS" is out and out theft.

CRFB has another cute game: "use our calculator to design your own plan to save social security." But when I used their calculator it did not allow "increase the payroll contribution by one tenth percent (for each the worker and the employer) per year for twenty years.

There are other ways to accomplish the same end, but this seemed to be the simplest way to fit the CRFB "calculator." Someone with more time and a newer browser might want to try seeing what they get. But look at small per year increases in payroll contribution. For example, I think a 0.4% increase (combined), about two dollars per week for each the worker and the employer, should solve the problem in ten years, but I haven't done the numbers on that myself.

Meanwhile, something that calls itself "the Bipartisan Policy Center, says "Ultimately, we are going to need something that's a little more balanced between benefits saving and revenue changes in order to get a proposal that could pass Congress and get approved by the president," said Shai Akabas, director fiscal policy at the Bipartisan Policy Center."

It's hard to see how much cuts ("benefit savings") make sense to balance a dollar a week increase in the payroll tax (revenue changes), but that's the kind of thinking that "Bipartisan" gets you. "Hey folks, we can save you a dollar a week just by gutting Social Security so it becomes meaningless as insurance so workers can retire at a reasonable age."

I am getting too discouraged. As long as no one is working to tell the people how this will work for them, we are just going to stand around like sheep and watch them cut our throats.

ambrit , December 14, 2016 at 4:28 am

As someone who grew up with the promise of Social Security as a minimal income support system for my old age I can attest to the fact that when the "average" retiree, who has almost no individual savings accrued, steps in the pile of Social Security "reforms," there will be not just a wailing and gnashing of teeth.

Modern age old people no longer can rely on extended families for support. Those extended families have been fragmented by the pressures of "modern" socio-economics. This is prime territory for a demagogue.

The Twentieth Century had World War 1.0 and a subsequent "Lost Generation." It's increasingly looking like the Twentyfirst Century will have the GFC, Social Support 'Reforms' and a subsequent "Euthanized Generation."

Remember, this process will not affect just oldsters. It will suck in those closest to said oldsters as emergency support resources. It won't be only oldesters who will be watching elites "over iron sights."

PlutoniumKun , December 14, 2016 at 6:06 am

Perhaps someone will enlighten me, but this is one thing that really puzzles me about the Republican determination over many years to gut social security. I can understand their ideological fixation with it – what I can't understand is why they are so willing to play electoral fire with it. Surely this directly attacks millions of core Republican voters?

They may be able to fool many of them with deceptive slogans, but surely when the prospect of finding their pensions slashed faces them, even the most supine and gullible middle American Republican voter in their middle to late years is going to realise they've been had. The backlash could be enormous. I find it hard to see how any rational politician would want to go near it.

Cry Shop , December 14, 2016 at 6:39 am

They will find a way to blame it on the Democrats, and more importantly, on Blacks, Hispanics and other minorities. They will sell the cuts and privatizations as the only way to save the system that has been so badly damage by the fore mentioned, and as long as their base gets their beliefs from Faux News, Bretbart, etc; it's quite probably the Republicans will succeed in getting what they want while screwing down the ever hapless Democratic party.

I've met more than a few who'd almost be pleased to suffer as long as they thought blacks were being made to suffer even more. There's no logic when hate gets this strong.

Leigh , December 14, 2016 at 7:29 am

Exactly, the same way they have mortally wounded our once stellar public education system, (a system once good enough to educate our "Greatest Generation) – is now a shell, death by a thousand cuts

Also, if you think income disparity is bad now? – hang on to your wallet, because after 4 years of Trump and his prospective cabinet picks, it will hit the stratosphere.

"There's no logic when hate gets this strong" – so true.

Scott , December 14, 2016 at 7:49 pm

Smart to point at the educational system.
I have not found many youths who can tell me what they want to do. I find this really weird.
It is true that if you know what you want to do the library will do.
Thanks to Ben Franklin, inventors, engineers had a place to hang out and collect information they could use.
Maybe you had to live in NYC to have a NYCity library card, but it is a big city.
Meantime Charter schools, which sounded great to us when at Kenwood on the Southside, are gaining ground and collecting tax money regardless of results.
They are said now in Not Conscious to be handing out diplomas same as Public Schools did to get some bodies out the door.
I was a graduate, but denied attendance at the diploma hand out thing, cause I refused to pay, for my public school diploma. Public education, supposed to be free to citizens.
People think I didn't graduate.
The Union believed in Trump. I get sick about lots of things. It will be worse than they think.
Education & Defense are what the government is for.

Steve C , December 14, 2016 at 7:50 am

Twelve years ago the Republicans needed the Democrats to actually plunge the knife on the back. Democrats like Joe Lieberman dearly wanted to lend a bipartisan hand but Pelosi and Reid actually rallied to prevent it. Talking Points Memo was all over it then. Now they're on top of Paul Ryan's machinations to privatize Medicare and this Social Security scam. Kind of raised some old feelings for TPM, but they're also heavily flogging the CIA Russian hacking dembot campaign.

About the only thing I knew about Hillary's agenda is that she wanted to means test Social Security and Medicare and start new wars. Obama wanted to do many of the cuts in Sam Johnson's bill but was foiled by Tea Partiers who couldn't take yes for an answer or were smarter than they seemed.

Both Schumer and Pelosi said the Democrats would oppose any of these current plans. We'll see.

Pat , December 14, 2016 at 8:10 am

I would hope they would realize that Social Security and Medicare are issues where the only winning move is to expand them. IOW, they need to realize this is an area where the campaign donors need to be told to pound sand, shut up and expect to pony up – as in you ARE going to be paying more into the system.
But these are people who thought there was no way that Clinton could lose, that this Russia nonsense is a winning strategy and that ACA was going to be good for Democrats once people got to know it. IOW, their grasp of reality outside their bubble might as well not exist it is so broken.
So while my fingers are crossed they still want their jobs AND aren't completely delusional, I also know we better put the fear of the voters into every member of Congress about grannies and wannabe grannies with canes beating them to a pulp any time they leave their house.

And by grannies I mean anyone on SS, and wanna be grannies everyone who someday might be able to retire or at least only work part time after retirement age because of SS.

Steve C , December 14, 2016 at 8:34 am

For Democrats it's not about winning. It's about pleasing the donors.

Pat , December 14, 2016 at 9:22 am

IF they cannot win an election they will not have any donors, and they are rapidly getting to the point where a Democrat getting elected to a national office is the exception. Not to mention there are a large number of states where that is pretty much the case. There is no reason to try to bribe people so you can have them in your pocket if they are powerless.

They are terrible at strategy, but eventually they may figure out they need voters. You do NOT alienate seniors as seniors are the most reliable voters around. Oh, and most of those seniors have grandchildren they think deserve Social Security and Medicare as well. The only winning strategy is to protect and expand.

Steve C , December 14, 2016 at 1:42 pm

I forgot to mention the consultant class. Absent a hostile takeover the Democrats may not be fixable. Their disdain for and disconnect from the voters will do them in.

Larry Motuz , December 14, 2016 at 8:16 pm

Gerry-mandering: When politicians pick the voters, instead of the voters picking the politicians.

Fixing that could fix politics.

Spring Texan , December 14, 2016 at 9:54 am

Would love to see this repeated and repeated, because although it's hard, we need to grasp this fact:
their grasp of reality outside their bubble might as well not exist it is so broken.
their grasp of reality outside their bubble might as well not exist it is so broken.
their grasp of reality outside their bubble might as well not exist it is so broken.
their grasp of reality outside their bubble might as well not exist it is so broken.
their grasp of reality outside their bubble might as well not exist it is so broken.

dontknowitall , December 14, 2016 at 8:31 am

Sam Johnson the same Sam Johnson who wrote "I spent seven years in the Hanoy Hilton. The Hanoy Hilton is no Trump hotel." back in July ? Who milks his Vietnam tour of duty like a rabid milkmaid Who says "I do not feel like a hero, and I do not call myself one" in the tones of one who thinks the exact opposite? Who is constant cahoots with McCain (who is currently trying to sink a Trump presidency) why am I not surprised that a neoliberal faction of the senatorial republican party in seeking to weaken a populist president-elect is reaching for the third rail with both hands and smearing all republicans with the same brush. I doubt very much Trump will weaken social security since he knows it is the only thing his rebellious base of Deplorables can depend on call me simple but Trump won this election against practically everyone and he knows his base is the only sure recourse he has.

Praedor , December 14, 2016 at 12:47 pm

I don't count on that (Trump knowing not to touch Social Security). I wouldn't be surprised if he went for privatization. HE will never ever need Social Security so why concern himself over it? He's already throwing his electoral base under the bus with his cabinet picks. Every single one of them is a direct violation of his pre-election promises.

oh , December 14, 2016 at 1:51 pm

I heard that there special rooms available for Johnson and McCain at the Hanoi Hilton! I urge them to take advantage of this excellent offer.

susan the other , December 14, 2016 at 12:28 pm

I think Hillary also wanted to increase the payroll tax by 3% (an enormous amount of money) and use it to privatize 3% of the SS funds to make up for shortfalls, ostensibly. They better have a good insurance policy so that'll be another 3%. All this nonsense because we refuse to admit we need social policies and social funding of the basic things. We are committing suicide 24/7 these days. Why don't we just call it all insurance?

oh , December 14, 2016 at 1:53 pm

The financial (rentier) crowd want to get their claws on the SS funds. They'll achieve their goal unless we kick their puppets out of Congress.
They already have their teeth into your IRA funds, student loans, home mortgages and your bank funds, It won't be too long before a Trojan Horse Prez signs away your SS. Beware!

Praedor , December 14, 2016 at 12:43 pm

We'll see if the Dems stand firm and fight back OR go for the old "bipartisanship!" bullcrap and instead agree to a lessor CUT. They would then promote it as the two sides working together.

Typical neoliberal Dem establishment move.

Or are the progressive forces ascendant and ready to fight absolutely?

We'll see. In any case, the House will pass it, no question. The test is in the senate where the Dems still have some teeth available (whether they USE those teeth is another thing altogether).

Steve C , December 14, 2016 at 1:44 pm

If so, the Democrats are finished.

jrs , December 14, 2016 at 9:34 pm

Yea Senate that consists of a bunch of millionaires (on both sides).

Paul P , December 14, 2016 at 2:29 pm

The Democratic Party must be made to defend Social Security as they rallied
against Bush's privatization plan. They will do so for political advantage, but they
too have attacked Social Security. Obama attacked it on three occasions–the Deficit Commission, the chained CPI added to a budget proposal, and the timing of married couples claiming benefits–and, were it not for Monica Lewinsky distracting
Bill Clinton, Bill Clinton would have been attempting to privatize Social Security, not Bush.

Now it the time to contact your senators and representatives: NO CUTS.

jawbone , December 14, 2016 at 4:34 pm

As things stand, what you recommend is the best action to take as of right now. It is not enough, but when letters come in to Dems and Repubs stating the senders will NEVER vote for anyone who votes to mess with Social Security, Medicare, Medicaid, there might be some reactions.

BUT it needs to be many, many, many people writing, calling, and meaning it when stating "Representative/Senator XXX, you mess with this and you will never, ever get a vote from me."

How do we get enough people to take action???

Is Bernie on the ball about this?

Cry Shop , December 14, 2016 at 7:17 pm

Humm, if you are depending on Bernie or any one politician to save you, then you've lost the point of Democracy. It's all of you forcing them to do the right thing.

Bernie Sanders has said it himself, even FDR said to Black Activist asking for an anti-discrimination executive order to the defense industry: "I agree with you, I want to do it, now make me do it." They did do it, by threatening a strike during WWII, for which some were sent to jail. That's what it's going to take, because voting once every 2 or 4 years isn't going to cut it.

Paul Art , December 14, 2016 at 7:24 am

They will never attack current beneficiaries. This is a lesson they have learnt over the years. This is why they changed tack in the 1980s and keep raising the eligibility age which is a very soft target. One thing the GOPers understand really well is, GOPer Seniors ALWAYS vote and some Dem Seniors vote sometimes. So they will leave current beneficiaries alone. GOPer Seniors – almost all of them are driven by the conviction (Tea Party types) that Social Security and Medicare are under jeopardy because of illegal immigration and because Social Security funds are being raided and handed over to other beneficiaries like those on Disability etc. They have plenty of traction on this because if you go ask the average 25 year old or even a 40 year old today whether they can count on Social Security, most of them being morons and having swallowed the MSM propaganda will tell you, 'I don't think it will be around when I get to 65'. I am fairly certain there are polls to back this up. This is what the Greenspan Blue Ribbon Commission cleverly did under Reagan. The people who are in their 50s today were in their late 20s in the 1980s and clueless about what exactly Greenspan did to the eligibility age. So telling current beneficiaries that its good to cut benefits for future beneficiaries makes a lot of sense to current beneficiaries. In any case SS is toast. I think we will have to wait for the entire cycle of Old Age poverty to take root again in another 50-60 years and for the tide to turn. It was wide spread old age poverty that prompted FDR and also Trueman into action for SS and Medicare respectively.

Sewer species like Pete Peterson and the Hedge Funders target SS because it is a very productive way to create mass unemployment and lower wages. They don't want people removed from the labor market by SS when they become 65. Their secret longing is to drive down wages to the point where the per hour rate will equal the human mules you see pulling overloaded hand carts in Mumbai, India or Shangai, China. This is really the agenda. This is basically the psychology of monopoly thinking. When you have captured markets up to a 95% level then you start looking like an idiot because you have closed off growth altogether. Monopolies do not grow because there are no more markets left. So the next thing to do is increase profits via driving labor costs down – standard Michael Porter Harvard Business School trick. This is what they have been doing in the last 40 years.

Cry Shop , December 14, 2016 at 8:31 am

+1

It's how they are selling every sort of deregulation. it destroys the future, but who gives a damn about their children and grand-kids, the ungrateful snots. Shipping the old folks off to the retirement home has divorced them from both the care and of caring about their descendants.

RUKidding , December 14, 2016 at 10:21 am

Your comment about the old folks home is right on target. The better class of senior housing establishments are often the most fortified of bubble worlds, and the Seniors there spend hours ranting to each other about how the younger generation has screwed them over somehow. I've witnessed it first hand. They've been carefully taught not to give a crap about future generations, including their own kids and grandkids. It's all about MEEEEEEEEEEE .

BeliTsari , December 14, 2016 at 9:11 am

Thank you, I think a lot of us have noticed the veracity of this, especially over the last four decades. Show of hands who else out there is sufficiently paranoid, to consider signing-up a year early & simply absorbing the hit, with some silly fantasy of being grandfathered-in?

RUKidding , December 14, 2016 at 10:22 am

Hand is raised in the air.

My siblings have done that for just this reason.

BeliTsari , December 14, 2016 at 11:45 am

Thanks! I was dizzy from a bad head cold, working in very bagger-ridden environs (a quite literally Dikensian hell-hole in Pennsyltucky), applying for Medicare and fishing through obfuscatory pleonasm, picking Plan D & N insurers the 2nd or 3rd page in, they ask you if you're applying for "benefits" at this time! Jesus Anybody ANYBODY??? I have some meager equity (at least, last time I looked?) sufficient for a decade or so. But with Republicans dying young?

Steve H. , December 14, 2016 at 12:01 pm

: pleonasm

New word, thank you.

You can never have too many words

BeliTsari , December 14, 2016 at 12:05 pm

I doubtless stole it from Izzy Stone or Frank Zappa, while high?

UserFriendly , December 14, 2016 at 10:49 am

Increasing the retirement age while the average life expectancy is decreasing seams especially crewel. Combine that with that piece from the times that showed people like me, born in the 80's only have a 50% chance of earning more than our parents and that we are already drowning in student debt and that is a full on assault on the youth of this country. Screw the national debt burdening future generations, this will actually burden us. This really is the worst country in the world. Fuck Patriotism.

jawbone , December 14, 2016 at 4:37 pm

Phrases to remember: "Hurry Up and Die" and "Soylent Green is People."

JTMcPhee , December 14, 2016 at 11:23 am

Anyone who has a chance of affecting the behavior of AARP when it comes to SS and Medicare needs to step up and apply whatever pressure they can to get that thing to return to its origins and "work the issue" for their members, present and future. I know, it's mostly just another front for insurance and other sales pitches and scams and "cruise packages" and other lifestyle crap, but at least there has to be some skeletal remains of the original bones of the organization in there somewhere.

Or failing that, is there another entity that might be worth supporting and joining with, to go on the offensive and fight back? I would hate to think it's all futility and "47%" from here on out.

Susan Nelson , December 14, 2016 at 7:03 pm

Alliance for Retired Americans https://retiredamericans.org/
Social Security Works http://www.socialsecurityworks.org/

JTMcPhee , December 14, 2016 at 9:17 pm

Thanks. Will examine for signs of actual utility versus collection of data and $$.

Cry Shop , December 14, 2016 at 8:42 pm

AARP's origins? It was founded by an insurance salesman as a slick way to sell, yep you guessed it, the industry's interests to a powerful bank of less than bright voters.

JL , December 14, 2016 at 11:54 am

Just want to point out that you both degrade avg 40yo for thinking they can't count on SS and in the same post claim SS is toast.

Some of us don't think we'll be able to count on SS because the elite are determined to raid that cash flow, not because we've swallowed the B's line.

jrs , December 14, 2016 at 9:43 pm

Some of us question if there won't be mass human extinction before then. Maybe there will be no old age for many people alive today including yours truly. But nonetheless, if by some miracle the worst doesn't happen then Social Security is important.

Marco , December 14, 2016 at 7:34 am

Prez Hope and Change's support for chained-CPI will certainly complicate the fight against this. If Obama and his Rubinite stable of bean-counting butt-boys were for it then it must be okay?

Steve C , December 14, 2016 at 1:51 pm

See Paul Art's comment above. Obama worked to keep wages low to please the Pete Petersons of the world.

voteforno6 , December 14, 2016 at 7:36 am

They're banking on getting some Democratic support, to make it bipartisan. With weasels like Mark Warner in the Senate, they might get some Democrats to sign on to this.

RUKidding , December 14, 2016 at 10:37 am

Eh? Democrats will line up with their Republican BFFs to screw over the proles. Given how Democrats are now a very Rump party in this nation, what have they got to lose? Why take of their alleged "constituents" in the 99% What a laugh. The constituents of the Dem pols are, have always been, and will continue to be the .01%. So the Dems will happily oblige their real constituents by screwing over the proles. Anyone who expects a different outcome is not living in reality.

Carolinian , December 14, 2016 at 8:20 am

Perhaps it's because "the banks own this place." Also the Republicans, like the Dems, are running on the fumes of past ideological obsessions and Social Security was always seen as a prime Dem vote getter and flagship of the hated New Deal. Remember Karl Rove wanted to take the country back to the McKinley administration. But mostly it's probably because people like Paul Ryan are creatures of their funders.

NotTimothyGeithner , December 14, 2016 at 9:32 am

Plenty are stupid, but the Democrats are in complete disarray. The GOP will face push back from their voters, but the Democrats as they are now are not a threat to win any time soon. AARP recognizing the interests of its members can shake Washington, but right now, the GOP sees no threat to its rule.

oh , December 14, 2016 at 2:33 pm

Many of the not so weathy Repubs are 'rich wannabes'. So they'll gladly toe the line on cut social security cuts and free market memes. They think that they have noting to worry about because they'll be wealthy before they retire and they won't need SS. Boy, do I have a few bridges and lots of swamp land to sell them!

John Wright , December 14, 2016 at 10:17 am

One can note the Social Security "reform" is usually pushed by wealthy individuals who feign concern about saving a system for the future of less well off Americans.

Also, Social Security is a system that is of little import to the wealthy as they will not be depending on it for basic living expenses.

The wealthy's real fears are of a raising of the income cap that will hit them directly or of an effort to support higher wages for the citizens currently paying into Social Security, hitting their business profits.

While it may seem unexpected they can get help from Democrats in this effort (Obama, Bill Clinton ) but I suspect this is so because wealthy donors support the effort and the Democrats can pitch the "saving" aspect while collecting campaign cash.

If a politician is not re-elected as a result, they might have a more lucrative career at a think tank or as a lobbyist.

Of course, if the wealthy are so concerned about the alleged Social Security problem that is looming in the future, where were far sighted wealthy Americans when it came to questioning the Iraq War, the drug war, the lack of financial reform, and all the USA military/covert actions that have done great harm to public finances?

Strangely, Social Security "reform" is a big concern of theirs, and the other USA efforts that have caused much harm, are not.

Then there is climate change, again, wealthy individuals are more concerned about "saving social security" than saving the planet.

Also the "reform minded" politicians do not appear to allow that current social security benefits probably are used by many entire low income families. So cutting grandma's benefits also could immediately hit her kids/grandkids financially.

A secondary effect is that lowering SS benefits means the wages of current workers can be lowered in concert as their SS payments, which flow to current recipients, can be lowered, perhaps even allowing another Social Security reform effort to be promoted.

The ability of TPTB to sell this to the American public should not be underestimated as the advertising/public relations/MSM has been successful in promoting/maintaining many bad ideas.

sharonsj , December 14, 2016 at 12:38 pm

The wealthy are not concerned about saving anything unless they can make money off it. They are already getting richer from the endless wars on terror and drugs, and taking planetary resources for themselves. The only reason they talk about "reforming" Social Security and Medicare is to get their hands on that money as well. And please do not expect the corporate media to explain any of this to the dumbed-down masses.

Michael C , December 14, 2016 at 10:25 am

The Republicans can afford to play with potential policial backlash for two reasons: First, they relentlessly beat out false narratives about the demise of SS and its inadequacies so that their flase story becomes a part of the consciousness of citizens. (This is the same thing done to attack teachers, unions, the post office, government, etc. You put out the lie long enough, it becomes the truth.) Second, they have been engaged in not one knife to the heart of the program but an attempt to promote its demise by a thousand cuts, little by little, until the program is no longer viable. I know for a fact that young people have bought into the lies put forth by them and do not think the program will be there for them because they too have bought the lie. Those pushing to kill the most effective program in US history, one that has kept the elderly from complete poverty, are nothing more than evil. They want no public programs, and all revenue funnelled into corporate models that enrich the 1%.

Deloss Brown , December 14, 2016 at 11:41 am

Sure, I can explain it.

Conservatives love destruction for its own sake. Smashing the Alaska Wildlife Refuge, smashing the ancient city of Baghdad, spilling oil all over North Dakota, wrecking Social Security, all these things have a political component, but it is the destruction itself that makes them absolutely adorable to Conservatives. Bear in mind this pervasive love of destruction, and many Conservative initiatives will become more clear.

And the "base" goes along with it, because many of them have been inculcated with the theory that it is more pleasurable to do someone else harm than to do one's self good. Given a choice to make, they will always pick the former. Hope this helps.

Me, I find NC's alarm and amazement at the Republican plans to wreck Social Security ingenuous. What did you think would happen? God knows you were warned.

diogenes , December 14, 2016 at 4:12 pm

Yeppers.

https://www.youtube.com/watch?v=FNt0anp7WK8

juliania , December 14, 2016 at 7:03 pm

Who warned us? Not the media. Not Obama. Who? I'm thinking naked capitalism.com, best Paul Revere substitute I can come up with at the moment.

Nobody here needed warning. Nobody is alarmed or amazed. And nobody stuck their heads in the sand and figured everything is going to be peachy. What we did need was a well written reminder.

And we got it. Thanks, Yves.

jrs , December 14, 2016 at 9:48 pm

People drunk a whole lot of Koolaid like "it takes a Democrat to cut social security". Koolaid was spilled all over in drunken Koolaid orgies at one point toward the end of election silly season. But the party is over and all that is left is the wreckage. Of course Hillary may have done the same thing as we weren't exactly getting any encouragement from her that she wouldn't and rather in fact got hints that she might (support for Peterson committee, her retirement plans for private investment etc. – to supplement Social Security of course). None of which were absolute certainty that she would cut it of course, but they aren't always honest about that are they, so not encouraging either.

Glen , December 14, 2016 at 12:29 pm

It's best seen as an all out effort to wreck any good that the government does for common people so that they can beat the war drum of government failure. This then serves as the smoke screen to hide just how much ultra rich directly benefit from government support through bailouts, privatization, tax cuts, subsidies, and out right theft and fraud. And just how much more they will get when Social Security and Medicare are privatized and benefits are shrunk. Those are large streams of government controlled funds, and they want it.

Social Security and Medicare work extremely well, and should be expanded. But don't delude yourself into thinking this is obvious to most people. Both political parties are dedicated to killing Social Security and Medicare and are extremely adept at spouting the " we must kill it to save it" BS.

Waldenpond , December 14, 2016 at 1:09 pm

Ds movement to the right and their continuation of R policies, no matter how vile, actually redeems the R party for the next election. If they take turns governing only on behalf of the .9, .09 and .01% they take turns redeeming the other branch of the money party. The colluding media will propagandize every bit of corruption and sleazebaggery as 'no other option' trot out imaginary deficits.

The voted out politicians will enthusiastically do it because they enter office looking for the big sellout as they will receive the only objective they ever had in achieving elected office . lucrative appointments and sinecures at parasitizing corporations, think tanks, scam foundations and presidential libraries.

Harris , December 14, 2016 at 5:11 pm

He will limit the changes to those under 50 ( ie those with much much lower voting percentages than 60+'ers ).

Johnson is 85, so I doubt any of this was his idea.

Praedor , December 14, 2016 at 12:08 pm

Screw your "iron sights". I'll use my reflex sight and hit center every time.

JTMcPhee , December 14, 2016 at 12:40 pm

Exactly. But not everyone has a reflex sight or scope. And a lot of people who do have such a very wrong notion of who the targets ought to be, the ones that actually pose the greater=st immediate threat

Though 4,000 veterans appearing at Cannon Ball with the #NoDAPL presence probably have or are developing a correct "sight picture" and target designation

ambrit , December 14, 2016 at 4:37 pm

Oh H-! Where is my 3-9X40 when I need it?
The late lamented science fiction writer Mack Reynolds penned a screed along these line a ways back about a pissed off ageing Lord Greystoke and the fate of the old in America called "Relic."

Scott Frasier , December 14, 2016 at 2:05 pm

The plan will be structured to only hurt future retirees. The solution to this political problem is to have anyone who will be affected demand that they be allowed to opt out from now on and to receive a refund, with interest, of all of their previous contributions to the system because the "earned benefits" have been taken away. Ownership in America is a sure winner politically.

I don't expect Democrats to have the balls to actually propose this, but it would leave the plans in tatters because without the tax stream and the already contributed taxes it won't be able to pay current retirees. Now that would get the current retirees attention!

Jeremy Grimm , December 14, 2016 at 2:14 pm

Not only can old people no longer depend on their extended families for support I'm afraid many young people in that extended family have had to rely on the older people for support. My young adult children are not doing terribly well in the new economy and I don't see things improving for them any time soon - if at all. I've had to step in and help a little here and little there more and more as the costs for those unplanned surprise expenses keep blindsiding my children.

juliania , December 14, 2016 at 7:08 pm

Very true!

Battaile Fauber , December 14, 2016 at 4:55 am

Well, which is he, "at the top of the scale" or an "average earner"?

I interpreted that as he earns an average of 118k, putting him at the top of the scale.

Mike , December 14, 2016 at 6:35 am

And maybe that is what the author thought, but it doesn't work. Wages above the SS max don't get taxed and don't add to the final benefit, so people who have an average salary equal to the max have a benefit that is below the max. The difference would depend on how much the salary fluctuates, year by year.

Naomi , December 14, 2016 at 9:15 am

Exactly correct. This author misinterpreted. But Sneed's original grammar was sloppy as well. Should've read, "earning an average of $118,000".

BecauseTradition , December 14, 2016 at 4:55 am

Perhaps a serious attack on welfare for the rich would persuade the enemies of Social Security that those who live in glass houses should not throw stones?

ambrit , December 14, 2016 at 5:13 am

To make such an attack, one needs must take over the "reins of power." In short, your suggestion is revolutionary. (I'm not averse to such, just observing.)

BecauseTradition , December 14, 2016 at 8:22 am

I mean an ideological attack since much welfare for the rich is not yet recognized as such (e.g. government provided deposit insurance instead of a Postal Checking Service or equivalent, e.g. interest on reserves, e.g. other positive yeilding sovereign debt).

not a rich person , December 14, 2016 at 10:06 am

government provided deposit insurance is for the rich?

who knew?

BecauseTradition , December 14, 2016 at 10:52 am

Yes it is. It is part of the means by which the poor, the least so-called creditworthy, are forced to loan to depository institutions to lower the borrowing costs of the rich, the most so-called credit worthy.

The ethical alternative is an inherently risk-free Postal Checking Service or equivalent for all citizens, their businesses, etc. Then the poor need no longer lend (a deposit is legally a loan) to banks, credit unions, etc or else be limited to unsafe, inconvenient physical fiat, aka "cash."

JTMcPhee , December 14, 2016 at 11:27 am

And of course the Few are planning to do away with "cash." Already happening several places

Higgs Boson , December 14, 2016 at 5:50 am

And yet our crumbling empire has ample treasure to play game of thrones all over the world.

JTMcPhee , December 14, 2016 at 12:13 pm

It's slightly old news, but "Congress" is also hurting the Troops (another easily cut-able bunch) that are doing that "war" thing all over the world. http://www.stripes.com/news/us/congress-passes-defense-budget-with-troop-benefit-cuts-1.319021 , and with more detail on the "sausage making" process, there's this (note the remarks about "furious lobbying" by beneficiaries and entitled persons): http://thehill.com/policy/defense/overnights/225785-overnight-defense-budget-would-cut-military-benefits The efforts to cut VA disability and health care benefits, and of course pensions and stuff, are constant. Just like SS and Medicare. Maybe there are some congruencies of interests and constituencies here? A "base," of sorts?

Interesting that maybe 4,000 veterans showed up and formed up at Cannonball/DAPL, to stand against the thugs and "government" and with the Native Americans who seem to have found a set of honest and attractive memes to present to the rest of us. The Bonus Marchers got the MacArthur Fist way back when, but I'm wondering how all those troops trained in maneuver-and-fire would take to further (planned) assaults on their livelihoods and families, while they are ever more being "deployed" to protect the as-s-ets and post-national "interests" of the Few

lyman alpha blob , December 14, 2016 at 2:25 pm

+1

Marie Parham , December 14, 2016 at 6:41 am

Not to worry. Organization is taking place. In New York State the Bernie delegates have kept in touch since the convention. They have organized into 25 affiliates state wide. We have had a conference already. The Lower Hudson Valley affiliate may be able to defeat the Trump agenda all by itself. We tuned into the Our Revolution call and decided to do our own thing. https://twitter.com/NYPANetwork

Larry , December 14, 2016 at 7:08 am

Any similar initiative in Massachusetts? The last time the Republicans tried to gut SS under Bush, the Democrats came out in force and held meetings on weekends around Rhode Island (where I was living at the time) to fire up opposition to the plan. I'm anticipating Elizabeth Warren and other MA democrats will oppose this, but want to be ahead of that by looking for other avenues of opposition like Bernie's coalition, such that it is.

Paul Art , December 14, 2016 at 7:26 am

I seriously doubt anyone would be enthused by a Democrat party still headed by that Super Frisco Water Carrier Pelosi. I know I would not for one. The bell tolls for Bernie but the man has been struck dumb.

UserFriendly , December 14, 2016 at 10:55 am

If you already have an OR local or state group and you want to be affiliated with national, or at least talk to national DM me on twitter and I can get you in touch, I have a friend who works for them.
https://twitter.com/UserFrIENDlyyy

dao , December 14, 2016 at 7:03 am

Social security has already been cut over the last several years without a peep out of anyone. No cost of living adjustments in 3 of the last 8 years. Actual inflation is at least 2 points higher than the reported figures. Social security has been cut 15-20% since the financial crisis.

RUKidding , December 14, 2016 at 10:26 am

Yep. And I have elderly friends who are suffering bc of it. But everyone is very passive having bought into the propaganda that this is "just the way it is," and "there's just not enough money" to provide anymore via SS. So we have a very passive population, who've mostly all bought the propaganda about how "broke" Soc Sec is we proles, yet again, have to suck it up bc the wealthy certainly cannot be expected to have the income cap raised heave forfend.

Gcw919 , December 14, 2016 at 11:27 am

Just got my Soc Security statement. My net gain, for 2017, after an increased deduction for MediCare, is .nothing. See, there's no inflation (except my car insurance, home insurance, health insurance, food, etc have all gone up). And to add insult to injury, our benefits (derived from involuntary deductions from our paychecks) are called "entitlements."
As our elected "representatives" are so adamantly opposed to these programs, and would like to reduce them to table scraps, I am eagerly awaiting the announcement that Congressional pensions and healthcare benefits are going to be discontinued.

Fran , December 14, 2016 at 12:47 pm

Same here. Any small gain was offset by increase in deduction for Medicare. In addition to the rising costs you cite, I find I am paying increased local taxes, among other things. So, like most people, we must contend with stagnant income to pay rising cost of living (and I mean the necessities).
I started paying into the system in 1965. Medicare used to be no cost and cover all medical expenses, so that is a cut in itself. I knew that I could not rely on SS in my old age, and I live modestly.
I agree with your last comment. I have never seen why our representatives in Congress should receive any different coverage than the citizens they are elected to represent. As individuals, they can supplement it, just as we have to.

GregL , December 14, 2016 at 12:28 pm

I was notified yesterday via letter that my SS benefits will increase 4.00 / mo next year. This will be a great help because my rent went up 7.00 / mo to 1600.00 for my studio apt.

ambrit , December 14, 2016 at 4:40 pm

Woah there. You were paying only 1593.00 a month before? You related to the landlord perhaps?

bkrasting , December 14, 2016 at 7:24 am

What is the status of SS today?

Current law says that in approximately 13 years all benefits will be cut – across the board – by 20-25%.

That is an unacceptable outcome.

What to do with this reality? The answer is "Something" must get done. The wrong answer is, "Don't do anything, wait 13 years, and then fall off a cliff".

The proposal that in the author's words "Guts" SS actually increases benefits by 9% for the bottom 20% of beneficiaries. The cost of the proposal falls on those who have high incomes before AND after reaching age 65. The proposal stabilizes SS for the next 75 years, and there are no new taxes required. Exactly what is wrong with that?

not a rich person , December 14, 2016 at 10:10 am

what is wrong with that is that far more than the "bottom 20 percent of beneficiaries" rely on Social Security income.

apparently you are not aware of that.

craazyboy , December 14, 2016 at 12:03 pm

In the post pension plan age, I think the 20%-90% bracket needs it. Maybe up to the 99% bracket once our current 401K bubble bursts and Housing Bubble II bursts.

Pat , December 14, 2016 at 11:13 am

So the only option are things that actually punish today's working class and weaken the system by eliminating the all in/all the same position? No, it isn't. The problem is that the answer is to slowly raise the payroll tax AND eliminate the cap – something that should have been done decades ago once it became clear that the people who lived the longest on SS were largely those who stopped paying payroll taxes at some point throughout the year. But we cannot consider those.

Nope we have to talk about raising the retirement age when life expectancy for most is dropping and we have to go with things that mean that you need to start living like you have to choose between drugs and eating cat food from day one because your benefit will never increase regardless of how much more your food, housing or medicare premium increase, or there even if they allow cost of living they write off things because you can give up steak for chicken over and over.

Waldenpond , December 14, 2016 at 2:21 pm

Instead of a expanding to a more universal program, you support turning SS farther into a program that categorizes individuals, assigns a hierarchy and then ranks them according to some random definition of human and who is most deserving.

There's nothing wrong at all with having nothing but contempt for others and hiding behind some made up term of 'cost'. It's perfectly reasonable to deny the means to the dignity of housing and food to others.

or .

roadrider , December 14, 2016 at 7:56 am

The fact the last two Dim-o-crat presidents (Clinton and Obama) and not a few Dim-o-crat Senators and Congressmen are in agreement about "saving" Social Security doesn't help either. Clinton's plan was derailed by the Lewinski thing and Obama's because the Republicans wouldn't take yes for an answer (didn't want him to get credit for it but don't mind doing it themselves)

mikimurphy , December 14, 2016 at 8:59 am

In case anyone has not noticed, they are already cutting SS benefits by stealth means. There have been no cost of living increases in 3 of the last 5 years, and for my personal SS benefits, the measly .3% increase next year goes away entirely with the increase in medicare payments. I suspect many folks, like my sister who is 78 and still working full time, do not realize that the increases they are receiving are due entirely to their still being in the work force. In addition, with the cutbacks that have been forced on the administrative side of SS, more mistakes are being made. A friend of mine was declared "dead" by SS (something that also happened to me with my tiny pension plan). When she attempted to correct the error, the SS employee discovered that "thousands" of people had been similarly affected. This happened last summer and my friend is finally receiving her benefits, but a month late and for some reason the agency cannot issue that catch-up check. She is still working and so not completely bereft, but what in the world are the folks doing who have no other income??? I suppose our overlords will be most pleased that the constant annoyances they are causing us will result in our passing away from sheer anger and frustration.

RUKidding , December 14, 2016 at 10:30 am

That's interesting. I have a friend, who is still in her 50s, who was working on her will, etc, and discovered that she was no longer "alive" as far as Soc Sec was concerned. She got it rectified, and it didn't have a negative impact on her (she's still comparatively young and working). But it's decidedly odd about how all these citizens are suddenly dead as far as Soc Sec is concerned. And yes, it takes some effort to get back on the database of the living. For those who are really elderly, this could be a very difficult thing to do.

Wonder why this is happening .

Susan C , December 14, 2016 at 9:00 am

It boggles my mind why any one would ever want to gut social security. Companies already push people out at 55 and then you have a good 8 to 12 years of somehow managing until social security comes to your rescue. Younger people do think social security will not be in place when they are in their 60s which makes them angry. And who can ultimately rely on the stock market etc. to give them the money they will need when older – shivers. Is the economy that sound? Plus many people cannot manage to work so long due to health reasons which do start creeping up on people in their late 50s or the work they do is too labor intensive for them to imagine keeping at it until 69 or even 67. Bodies give out at some point. That is reality. Everyone wants to work until 70 but the companies don't want older workers – they want young, fresh, vital. If anything, social security should start at 60.

BecauseTradition , December 14, 2016 at 9:22 am

"These who pant after the very dust of the earth on the head of the helpless
also turn aside the way of the humble; "
Amos 2:7

ChiGal in Carolina , December 14, 2016 at 10:17 am

Love me some of those Old T prophets. Widows and orphans, man, widows and orphans

Pat , December 14, 2016 at 9:27 am

Two reasons come to my mind, a desire to reduce or eliminate the employer half of payroll taxes AND the pool of money that the financial industry thinks should be theirs to rape and pillage. But I'm sure there are others.

Steve H. , December 14, 2016 at 9:39 am

Recent posts and comments have noted both more billionaires and a rapid concentration of wealth amongst them. But it's mo' po', too, what Turchin calls 'popular immiseration'. To decrease the effects of 'interelite competition' the wealthiest cannot just bestow unto their favorites, they must tend to the rich on the downslope. Those are the ones with resources to engage in attrition. So there is a long history of shoving the costs onto those who can't fight back, and the unlanded are easier to slap down.

A personal case: Pearl was a delightful very elderly lady a few doors down. Her house was in trust until she died, and she had a daughter and a grandaughter living with her. When she died, one of her (all over-55) children had medical debt needing paid and so he vetoed keeping the house. It sold, the land was lost to the family, and daughter and grandaughter were homeless.

That interelite competition was apparent in the election. Our choice of two New York billionaires was a choice over which aspect of the FIRE sector would dominate, Finance or Real Estate. But those differences seem to get averaged out below a scale of 10^8 or so dollars.

craazyboy , December 14, 2016 at 12:08 pm

"Everyone wants to work until 70"

Not me. I decided I hate work at the young age of 49.

neo-realist , December 14, 2016 at 3:50 pm

Re Companies that push people out at 55 and don't want older workers and prefer younger ones, this leaves a lot of people in that 55-70 age bracket in a difficult (and in some cases, a terrible) situation if they're not in the minority of those who have a secure gig until they retire (usually people that I know that have government gigs w/ pensions.) The Presidency nor the Congress have no solution for older workers who get pushed out and face discrimination due to their age when they seek employment. They would prefer to not hear about it and if they're sleeping in cars or in tents under bridges, that's their problem.

Punxsutawney , December 14, 2016 at 9:30 am

What the GOP is doing is planning "Theft", pure and simple.

The next 4 years will likely see the greatest wealth transfer of all times. To the top of course.

tegnost , December 14, 2016 at 11:10 am

continuing what's been going on for the past 8 years, ever heard of quantitative easing, the ACA, or chained CPI? Foam the runway with HAMP, maybe, or endless war as the only jobs guarantee available. Sorry, but trump is just more of the same, only a little more forthright. You should be used to it by now.

Punxsutawney , December 14, 2016 at 2:55 pm

No argument here. Put the Dems in control and they will find all kinds of excuses for doing the same thing, all bight more subtlety. Clinton was going to privatize Social Security and Obama proposed chained CPI. Not to mention the effects of TPP.

Adam Eran , December 14, 2016 at 9:55 am

Another columnist whose "answers" are predicated on the assumption that taxes provision government programs. Just one question: Where do tax payers get the dollars to pay taxes with if government doesn't spend them out into the economy first?

If that's too much thinking: Where was all this "we're out of money" talk when the Fed, according to its own audit, pushed $16 – $29 trillion out the door to save the financial sector from its own frauds? Yet government routinely denies it makes the money when the orders-of-magnitude demands of safety net programs appear. Taxes make the money valuable; they do not, and obviously cannot, provision government.

As long as this isn't common knowledge, we're all condemned to austerity. Even public policy makers sympathetic to workers (e.g. Dilma Rousseff) are in peril if they adopt the "inevitable austerity" routine.

Jerry , December 14, 2016 at 1:31 pm

Unfortunate that I had to scroll this far down to find the first person with a correct understanding of government finance. I've explained MMT point blank to people multiple times and they still cannot grasp it. Until people start caring and get a general understanding of how this thing works we are in a lot of trouble. I am hoping that Trump will be godawful enough to bring about such a conviction for revolution to the average American

As the Henry Ford saying goes (oft-quoted by Ellen Brown):

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

John Hemington , December 14, 2016 at 4:38 pm

Exactly right and if the powers that be were really concerned about funding SS from those who will receive it all they have to do is raise the income cap to cover total income for everyone - not just middle income workers. Problem solved and no need to worry about the fact that the government can't run out of dollars.

Denis Drew , December 14, 2016 at 10:13 am

I have my own weird tack on SS retirement.

I see the Trust Fund as having been accumulated over the decades by my generation - by paying higher FICA tax to purchase fed bonds with. TF running out now supposed to be the big to do? Wasn't it supposed to run out? Aren't we supposed to use what we saved?

I like to say: have an SS retirement shortfall today? Do it all over again: hike FICA, lower income tax and accumulate bonds. Mmm.

But, just yesterday I had a brainstorm. If Repubs want to cut benefits so FICA shortfall doesn't have to made up by income tax cashing bonds (covering about 25% of outgo just before our bonds run out, then, Repubs want to steal our savings that we forgave immediate gratification to accumulate all those long years.

Always suspected income tax payers who are hit for as much as 39% would balk at cashing the bonds when the time came - but on the basis of the usual world run for the haves idea. Never thought of it in terms of outright theft - before yesterday.

PS. Really shouldn't use up all bonds. Right now there are about four years of full replacement in the TF. Legal solvency is defined as one year - needed to cover temporary shortfall while Congress moves to fill in - happened couple of times.

Jim Haygood , December 14, 2016 at 12:34 pm

" Wasn't it supposed to run out? "

No. Defined benefit plans are supposed to be funded so that the assets earn enough to pay promised benefits. If the assets run out, the plan is not only mismanaged, it's bankrupt.

Seriously, if your checking account were emptied by a hacker, would you ask "Wasn't it supposed to run out?" You are a crime victim.

thoughtful person , December 14, 2016 at 10:37 am

Educate, Agitate, Organize, yup, expanding on cry shop's comment above, it's more than breitbart and Fox these days. The mainstream media may be (usually) more polite and more subtle, but they will not report the basic info accurately like Yves and Lambert do here. Our Revolution is a good start. There need to be alternative sources of information such that education can happen. That is why the "fake news" attacks on alternative media are such a big deal. The founders of the US understood the importance of information too, one reason the postal service was established with low rates for all periodicals. "Knowledge will forever govern ignorance; and a people who mean to be their own governors must arm themselves with the power which knowledge gives", wrote Madison. We really are sheep without knowledge. Some like it that way .

RUKidding , December 14, 2016 at 10:42 am

Donald Trump, at his rallies, consistently lied to his fervent fans that he was going to save Soc Sec & Medicare. What a laugh.

I've been blogging and telling people throughout the election process that Trump made a very public DEAL with Paul Ryan that he, Trump, was totally behind cutting and gutting SS & Medicare. That is the main (possibly only) reason why Ryan gave Trump his very tepid "endorsement." But this was very public knowledge and not hidden.

But of course, Trump lies constantly, so his fans were mainly enthralled with what a bully he is and believed what they wanted to believe. Made up fantasies. Some of his fans are waking up to the fact that they've been screwed over royally. Of course the M$M will happily oblige by somehow finding a way to blame it all on Obama, Clinton, the Democrats, whatever (not that the Dems aren't equally happy to cut and gut SS & Medicare, as well) and the proles will buy it.

Home and hosed. Case closed. We're screwed.

Gaylord , December 14, 2016 at 11:21 am

Republicans should offer Kevorkian "escape kits" free for the asking.

RUKidding , December 14, 2016 at 12:02 pm

Although various states have now passed laws to legalize what's called "assisted suicide," there's still a lot of resistance to it, esp from those of various religious persuasions. Also assisted death in these cases is only available for those already in the latter stages of terminal illnesses, and generally extreme poverty doesn't fall under that definition. So sucks to be you.

I guess dying from hunger and exposure, due to extreme poverty, is our just deserts. No rest for the wicked. When you die, you have to die as painfully and slowly as possible just to impress upon you how worthless and awful you truly are. The punishments will continue until morale improves.

Katharine , December 14, 2016 at 11:35 am

This was posted hours ago. How many readers have taken the time to email their congressmen? Please do! You don't have to be lengthy or learned. You can simply state a couple of talking points you all know and intimate that tampering with benefits is not going to be accepted. This is definitely one of those "if you're not with us you're against us" issues, and the sooner your elected representatives understand you mean that the better.

Jim Haygood , December 14, 2016 at 12:30 pm

"I think a 0.4% increase (combined), about two dollars per week for each the worker and the employer, should solve the problem in ten years, but I haven't done the numbers on that myself. "

WHUT? Why are space cadets like this even allowed on the internet?

Trying to patch Soc Sec's $10 trillion hole with an 0.4% FICA tax hike is like trying to empty the Atlantic Ocean with a teaspoon.

Net present value, Dale - I'm afraid you cut class that day. Now it's too late.

Benedict@Large , December 14, 2016 at 12:36 pm

Mark my words.

The attempt by the right to "fix" Social Security is nothing more than an attempt to make the trust fund disappear, and to mark all the obligations that fund was supposed to have met null and void.

If this sounds like they are trying to steal the trust fund, that is not the case. They have already stolen it. Now they just have to fix the accounting to say they didn't, which they will do by setting the system to never need to cash a bond from the trust fund.

Tin foil hat, you say? Fine, but do me a favor. Whenever a bill is introduced to "fix" Social Security, do the accounting for how it will play out. The trust fund will no longer be needed?

oh , December 14, 2016 at 4:55 pm

Yup, that's the R's plan and people will be sleeping when they play this con.

Ranger Rick , December 14, 2016 at 1:00 pm

Something about this strikes me as a hilarious farce of unintended consequences. People worried about "government debt" and demanding its reduction are getting exactly what they wished for.

Waldenpond , December 14, 2016 at 1:54 pm

I'm not quite sure of your meaning here. It sounds like you are mocking people for not being able to get out from under a propagandist educational/media system and a corrupt government. Then again, it also seems to be gloating and that people deserve to be immiserated.

Nate , December 14, 2016 at 3:38 pm

Exactly!

herkie1 , December 14, 2016 at 1:49 pm

This is called a "technical adjustment." They can pretend that the CPI is too generous and know that most people won't understand the scam.

I am a 100% disabled veteran and several years back they tied our COLA to the SS COLA.

The result is that since mid 2013 in this region we have lost about 40% of our purchasing power. Our standards of living have dropped by that much.

Of course there is NO INFLATION, the letters I have been getting actually claimed that because of this DISINFALTIONARY economic environment . That is no inflation so no raise this year.

Now, I am going to be 59 this spring, I worked at a lot of things between 1973 and 2005 when a judge ruled in my favor regarding my disability and awarded me SSD. But, because I spent so many years fighting SS and did not have the quarters of income recent enough my SSD amounts to $1,013 per month.

Now for all the republicans out there who think SS is too generous, I would ask you to stick your filthy little brains, or rather pull them out of your exhaust holes. You can claim it is too generous when you have spent a lifetime paying in and then someone tells you that 12 grand a year is too generous.

MY RENT IS MORE THAN THAT and this place s a hovel in the sticks. The only way I can have a roof over my head for less is to live in my vehicle.

Fortunately I also have a bit in VA disability and between the two I thought of myself as middle class if just barely only 36 months ago, now I would consider myself in dire poverty at 20k a year, anything less and we are talking eating at the mission and sleeping in shelters. Vehicle? Right. The fact that they refuse to acknowledge inflation and use quite literally half a dozen tricks to disappear it from the headlines does NOT mean it does not exist. If you can eat gasoline and flat screen TV's you are certainly doing great, otherwise you are experiencing something never known in the USA, structural downward mobility for 90% of us.

And it is these facts that drove the angry and the stupid to vote for Trump, they were not the majority of voters, but between them and antiquated laws giving voters in small states far more power than in urban areas (where people actually live) that Orange Hitler dude got in, and so did the GOP majority of fascists who have as a holy mission class warfare and getting rid of diversity of any kind, racial, sexual, or gender.

They are going to gut every bit of progress since Teddy Roosevelt. They are going to bring back segregation, this time though via school vouchers. They are not going to FORCE non white non middle class kids into slum condition schools, so they will plausibly claim HEY it is NOT segregation and those parents have an equal right to move their kids to private schools also. No, instead these kids will be abandoned in schools that the government will slash funding to as white upper and middle class people are partially paid the tuition to send their kids to private schools which are exempt from federal discrimination laws. I am NOT holding my breath for this, I have a one way ticket to Australia for the first week of January.

THAT is going to be the story of all government for a while, social security is just one of MANY functions of government they are going to kill off. If you think people were angry in 2016 just you wait till 2020.

It is already so bad that unless the GOP grows a conscience and a heart in the next 2-4 years the USA will break up the way the Soviet Union did. The nation now has what so many married couples cite in divorce proceedings, IRRECONCILABLE differences.

And the worst of it is that no matter if you like it or hate it the USA is the rock of stability that has keep civilization working since the end of WWII. You break up the USA and bingo there is no uni in the unipolar geopolitical world. What we will have is chaos and war and humanity will fail. USA FAIL=Humanity FAIL.

PrairieRose , December 14, 2016 at 9:43 pm

Thank you. Thank you. Thank you. For your plainspoken honesty. This should be copied and posted everywhere, starting with senators and representatives.

Nate , December 14, 2016 at 3:27 pm

Don't you love when your vote gets what you desired? No empathy. Big shoutout to U.S. congress.

Brooklinite , December 14, 2016 at 4:59 pm

They should have an option for an opt out of social security, medicare/Medicaid, Affordable Health Care. Not having that kind of freedom to me is not worth it. I am not buying any other excuses such as I am not shrewd to invest my money. Taking money is the easy part. Getting back is always laborious if you are lucky to get.

no to opting out , December 14, 2016 at 6:44 pm

right. many people opt out of "mandantory" auto insurance by just not
getting it. it's been estimated that in FL at different times as many as
one third of the drivers on the road are not insured. and really, if they
get injured, they get treated in an emergency room until they are stabilized
(the law) and if they were sued for damages, what could be recovered?

but, let's remember, while they are on their "ride" they are "free." Yep.
a lot of people think like that.

marblex , December 14, 2016 at 5:27 pm

Social Security, let's lay it to rest once and for all Social security has nothing to do with the deficit. Social Security is totally funded by the payroll tax leviedon employer and employee. If you reduce the outgo of Social Security, that money would not go into the general fund or reduce the deficit. It would go into to the Social Security Trust Fund. So Social Security has nothing to do with balancing a budget or lowering the deficit.

Ronald Reagan (first Reagan-Mondale debate 1984)

Quill , December 14, 2016 at 5:51 pm

You misunderstand the article from the beginning. When she says:

"A 65 year-old at the top of the scale, a $118,500 average earner, "

She means someone who has earned $118,500 on average over his/her career , placing him/her at the top of the scale.

I'm not sure why you are criticizing the writer of this article.

walter jahnke , December 14, 2016 at 6:14 pm

would someone explain why the greenspan changes , which were supposed to keep social security solvent, did not, I've googled the history and the only answers seem to be that the trust had trillions in surplus that were used to pay off other obligations, , which I do know that the funds were used to lower the deficits in previous years, but wouldn't the surplus still be there? Explanation please by someone knowledgeable about the history and why the problems now

Oregoncharles , December 14, 2016 at 6:45 pm

"Well, which is he, "at the top of the scale" or an "average earner"?"

Oops. Even I understand that one. It means he earned an AVERAGE of $118,500, the maximum that SS taxes.

Next question: what kind of idiot actually introduces a bill to cut Social Security? One who plans on a lucrative retirement from politics, that's what kind.

Altandmain , December 14, 2016 at 8:28 pm

Sadly the Democrats will just go along with it.

Maybe the left wing (represented by Sanders) might put up a fight, but they don't have the power to stop this.

The US is rapidly becoming a feudal society.

aab , December 14, 2016 at 8:39 pm

Protesting the proposed policies of President who owns real properties of value in media-drenched major cities that require the labor of lower income workers on a daily basis might be more effective than protesting a President whose wealth is almost entirely stored in secret, offshore bank accounts.

Let's hope, anyway.

David , December 14, 2016 at 9:44 pm

"The trouble with Sneed's article is that she does not appear to know what she is talking about. She just wrote down what some "experts" told her with no idea what the words mean."
You missed the question, is it the writer or the policy of the site?

[Dec 15, 2016] Putin Valday 2016 speeech

Dec 15, 2016 | marknesop.wordpress.com
Vladimir Putin's Valdai Speech at the XIII Meeting (Final Plenary Session) of the Valdai International Discussion Club (Sochi, 27 October 2016)

As is his usual custom, Russian President Vladimir Putin delivered a speech at the final session of the annual Valdai International Discussion Club's 13th meeting, held this year in Sochi, before an audience that included the President of Finland Tarja Halonen and former President of South Africa Thabo Mbeki. The theme for the 2016 meeting and its discussion forums was "The Future in Progress: Shaping the World of Tomorrow" which as Putin noted was very topical and relevant to current developments and trends in global politics, economic and social affairs.

Putin noted that the previous year's Valdai Club discussions centred on global problems and crises, in particular the ongoing wars in the Middle East; this fact gave him the opportunity to summarise global political developments over the past half-century, beginning with the United States' presumption of having won the Cold War and subsequently reshaping the international political, economic and social order to conform to its expectations based on neoliberal capitalist assumptions. To that end, the US and its allies across western Europe, North America and the western Pacific have co-operated in pressing economic and political restructuring including regime change in many parts of the world: in eastern Europe and the Balkans, in western Asia (particularly Afghanistan and Iraq) and in northern Africa (Libya). In achieving these goals, the West has either ignored at best or at worst exploited international political, military and economic structures, agencies and alliances to the detriment of these institutions' reputations and credibility around the world. The West also has not hesitated to dredge and drum up imaginary threats to the security of the world, most notably the threat of Russian aggression and desire to recreate the Soviet Union on former Soviet territories and beyond, the supposed Russian meddling in the US Presidential elections, and apparent Russian hacking and leaking of emails related to failed US Presidential candidate Hillary Rodham Clinton's conduct as US Secretary of State from 2008 to 2012.

After his observation of current world trends as they have developed since 1991, Putin queries what kind of future we face if political elites in Washington and elsewhere focus on non-existent problems and threats, or on problems of their own making, and ignore the very real issues and problems affecting ordinary people everywhere: issues of stability, security and sustainable economic development. The US alone has problems of police violence against minority groups, high levels of public and private debt measured in trillions of dollars, failing transport infrastructure across most states, massive unemployment that either goes undocumented or is deliberately under-reported, high prison incarceration rates and other problems and issues indicative of a highly dysfunctional society. In societies that are ostensibly liberal democracies where the public enjoys political freedoms, there is an ever-growing and vast gap between what people perceive as major problems needing solutions and the political establishment's perceptions of what the problems are, and all too often the public view and the elite view are at polar opposites. The result is that when referenda and elections are held, predictions and assurances of victory one way or another are smashed by actual results showing public preference for the other way, and polling organisations, corporate media with their self-styled "pundits" and "analysts" and governments are caught scrambling to make sense of what just happened.

Putin points out that the only way forward is for all countries to acknowledge and work together on the problems that challenge all humans today, the resolution of which should make the world more stable, more secure and more sustaining of human existence. Globalisation should not just benefit a small plutocratic elite but should be demonstrated in concrete ways to benefit all. Only by adhering to international law and legal arrangements, through the charter of the United Nations and its agencies, can all countries hope to achieve security and stability and achieve a better future for their peoples.

To this end, the sovereignty of Middle Eastern countries like Iraq, Syria and Yemen should be respected and the wars in those countries should be brought to an end, replaced by long-term plans and programs of economic and social reconstruction and development. Global economic development and progress that will reduce disparities between First World and Third World countries, eliminate notions of "winning" and "losing", and end grinding poverty and the problems that go with it should be a major priority. Economic co-operation should be mutually beneficial for all parties that engage in it.

Putin also briefly mentioned in passing the development of human potential and creativity, environmental protection and climate change, and global healthcare as important goals that all countries should strive for.

While there's not much in Putin's speech that he hasn't said before, what he says is typical of his worldview, the breadth and depth of his understanding of current world events (which very, very few Western politicians can match), and his preferred approach of nations working together on common problems and coming to solutions that benefit all and which don't advantage one party's interests to the detriment of others and their needs. Putin's approach is a typically pragmatic and cautious one, neutral with regards to political or economic ideology, but one focused on goals and results, and the best way and methods to achieve those goals.

One interesting aspect of Putin's speech comes near the end where he says that only a world with opportunities for everyone, with access to knowledge to all and many ways to realise creative potential, can be considered truly free. Putin's understanding of freedom would appear to be very different from what the West (and Americans in particular) understand to be "freedom", that is, being free of restraints on one's behaviour. Putin's understanding of freedom would be closer to what 20th-century Russian-born British philosopher Isaiah Berlin would consider to be "positive freedom", the freedom that comes with self-mastery, being able to think and behave freely and being able to choose the government of the society in which one lives.

The most outstanding point in Putin's speech, which unfortunately he does not elaborate on further, given the context of the venue, is the disconnect between the political establishment and the public in most developed countries, the role of the mass media industry in reducing or widening it, and the dangers that this disconnect poses to societies if it continues. If elites continue to pursue their own fantasies and lies, and neglect the needs of the public on whom they rely for support (yet abuse by diminishing their security through offshoring jobs, weakening and eliminating worker protection, privatising education, health and energy, and encouraging housing and other debt bubbles), the invisible bonds of society – what might collectively be called "the social contract" between the ruler and the ruled – will disintegrate and people may turn to violence or other extreme activities to get what they want.

An English-language transcript of the speech can be found at this link .

[Dec 11, 2016] Comic Book Hayek The Planners Promise Utopia

Notable quotes:
"... I had always thought Hayek made some good critical points about the illusions of socialists/utopians and then chose to ignore the fact that his criticism also applied to his ..."
"... So maybe Hayek didn't overlook the fact that his critique also applied to his utopia. Maybe he knew full well he was misrepresenting what he was selling, engaging in exactly the same propaganda techniques that he attributed to others. ..."
"... A Rovian strategy - conceal your weakness by attacking others on precisely that issue. ..."
"... The Road to Serfdom put out in the US after WWII, which was full of this inflammatory sort of thing that doing anything to ameliorate the harder edges of capitalism put one inexorably on the road to serfdom. ..."
"... In the actual RtS one finds Hayek himself supporting quite a few such amiliorations, most notably social insurance, especially national health insurance well beyond what we even have in the US now with ACA. ..."
"... The problem for lovers of Hayek, and arguably Hayek himself, is that he simply never repudiated this comic book version of his work, even as he and many of his followers got all worked up when people, such as Samuelson, would criticize Hayek for this comic book version of the RtS, pointing out his support for these ameliorations in the original non-comic book version. ..."
"... However, Samuelson in his last remarks on Hayek, which I published in JEBO some years ago, effectively said that Hayek had only himself to blame for this confusion. ..."
"... I have been thinking that maybe both "sides" in our mostly brainwashed America today could agree with the meme of "DRAIN-THE-SWAMP" and hope to see it carried proudly on protest signs by the non-zombies of both sides in the ongoing social upheaval. ..."
"... I agree that "accuse the other side of doing what you are doing" is a familiar ploy of the right. ..."
Dec 11, 2016 | angrybearblog.com

Sandwichman | December 10, 2016 12:51 am
In his neo-Confederate "Mein Kampf," Whither Solid South , Charles Wallace Collins quoted a full paragraph from Hayek's The Road to Serfdom regarding the emptying out of the meaning of words. My instinct would be not to condemn Hayek for the politics of those who quote him. Even the Devil quotes Shakespeare.

But after taking another look at the Look magazine comic book edition of Hayek's tome, I realized that Collins's depiction of full employment as a sinister Stalinist plot was, after all, remarkably faithful to the comic-book version of Hayek's argument. With only a little digging, one can readily infer that what the comic book refers to as "The Plan" is a policy also known as full employment (or, if you want to get specific, William Beveridge's Full Employment in a Free Society ). "Planners" translates as cartoon Hayek's alias for Keynesian economists and their political acolytes.


To be sure, Hayek's sole reference to full employment in the book is unobjectionable - even estimable almost:

That no single purpose must be allowed in peace to have absolute preference over all others applies even to the one aim which everybody now agrees comes in the front rank: the conquest of unemployment. There can be no doubt that this must be the goal of our greatest endeavour; even so, it does not mean that such an aim should be allowed to dominate us to the exclusion of everything else, that, as the glib phrase runs, it must be accomplished "at any price". It is, in fact, in this field that the fascination of vague but popular phrases like "full employment" may well lead to extremely short-sighted measures, and where the categorical and irresponsible "it must be done at all cost" of the single-minded idealist is likely to do the greatest harm.

Yes, single-minded pursuit at all costs of any nebulous objective will no doubt be short-sighted and possibly harmful. But is that really what "the planners" were advocating?

Hayek elaborated his views on full employment policy in a 1945 review of Beveridge's Full Employment in a Free Society, in which he glibly characterized Keynes's theory of employment as "all that was needed to maintain employment permanently at a maximum was to secure an adequate volume of spending of some kind."

Beveridge, Hayek confided, was "an out-and-out planner" who proposed to deal with the difficulty of fluctuating private investment "by abolishing private investment as we knew it." You see, single-minded pursuit of any nebulous objective will likely be short-sighted and even harmful unless that objective is the preservation of the accustomed liberties of the owners of private property, in which case it must be done at all cost!

Further insight into Hayek's objection to Keynesian full-employment policy can be found in The Constitution of Liberty . The problem with full employment is those damn unions. On this matter, he quoted Jacob Viner with approval:

The sixty-four dollar question with respect to the relations between unemployment and full employment policy is what to do if a policy to guarantee full employment leads to chronic upward pressure on money wages through the operation of collective bargaining .

and

it is a matter of serious concern whether under modern conditions, even in a socialist country if it adheres to democratic political procedures, employment can always be maintained at a high level without recourse to inflation, overt or disguised, or if maintained whether it will not itself induce an inflationary wage spiral through the operation of collective bargaining

Sharing Viner's anxiety about those damn unions inducing an inflationary wage spiral "through the operation of collective bargaining" was Professor W, H, Hutt, author of the Theory of Collective Bargaining, who "[s]hortly after the General Theory appeared argued that it was a specific for inflation."

Hutt, whose earlier book on collective bargaining "analysed [and heralded] the position of the Classical economists on the relation between unions and wage determination," had his own plan for full employment . It appeared in The South African Journal of Economics in September, 1945 under the title "Full Employment and the Future of Industry." I am posting a large excerpt from Hutt's eccentric full employment "plan" here because it makes explicit principles that are tacit in the neo-liberal pursuit of "non-inflationary growth":

Full employment and a prosperous industry might yet be achieved if what I propose to call the three "basic principles of employment" determine our planning .

The first basic principle is as follows. Productive resources of all kinds, including labour, can be fully employed when the prices of the services they render are sufficiently low to enable the people's existing purchasing power to absorb the full flow of the product.

To this must be added the second basic principle of employment. When the prices of productive service have been thus adjusted to permit full employment, the flow of purchasing power, in the form of wages and the return to property is maximised .

continued .

The assertion that unemployment is "voluntary" and can be cured by reducing wages is the classical assumption that Keynes challenged in the theory of unemployment. Hutt's second principle, that full employment, achieved by wage cuts, will maximize the total of wages, profit and rent thus would be not be likely to command "more or less universal assent," as Hutt claimed. But even if it did, Hutt's stress on maximizing a total , regardless of distribution of that total between wages and profits, is peculiar. Why would workers be eager to work more hours for less pay just to generate higher profits? Hutt's principles could only gain "more or less universal assent" if they were sufficiently opaque that no one could figure out what he was getting at, which Hutt's subsequent exposition makes highly unlikely.

Hutt's proposed full employment plan consisted of extending the hours of work, postponing retirement and encouraging married women to stay in the work force. He advertised his idea as a reverse lump-of-labor strategy. Instead of insisting - as contemporary economists do - that immigrants (older workers, automation or imports) don't take jobs, Hutt boasted they create jobs, specifically because they keep wages sufficiently low and thus maximize total returns to property and wages combined. He may have been wrong but he was consistent. Nor did he conceal his antagonism toward trade unions and collective bargaining behind hollow platitudes about inclusive growth .

The U.S. has been following Hutt-like policies for decades now and the results are in :

For the 117 million U.S. adults in the bottom half of the income distribution, growth has been non-existent for a generation while at the top of the ladder it has been extraordinarily strong.

Or perhaps Hutt was right and what has held back those at the bottom of the income distribution is that wages have not been sufficiently low to insure full employment and thus to maximize total returns to labor and capital. The incontestable thing about Hutt's theory is that no matter how low wages go, it will always be possible to claim that they didn't go sufficiently low enough to enable people's purchasing power to absorb the full flow of their services.

coberly , December 10, 2016 11:52 am

I can't claim to know all of what Hayek meant. but I did read one of his books and it was clear he did not mean what the right has taken him to not only mean, but to have proved.

In any case it is dangerous (and a bit stupid) to base policy on what someone said or is alleged to have said. Especially economists who claim to have "proved" some "law" of economics.

That said, i wonder if some of what is said here is the result of over-reading what someone (else) as said: to be concerned with policies "to the exclusion of all else" is not the same as rejecting the policies while keeping other things in mind. and to recognize the potential of labor unions to force inflationary levels of wages is not the same as opposing labor unions.

neither the advocates in favor of or those opposed to the extreme understanding of these cautions –including the authors of them if that is the case - are contributing much to the development of sane and humane policy.

Sandwichman , December 10, 2016 12:40 pm

I had always thought Hayek made some good critical points about the illusions of socialists/utopians and then chose to ignore the fact that his criticism also applied to his neo-liberal utopia. But I followed up the passage quoted by Collins and it turns out that Hayek was discussing a statement made by Karl Mannheim, which he quoted out of context and egregiously misrepresented -- a classic right-wing propaganda slander technique. So here is Hayek talking about emptying out the meaning from words and filling them with new content and he is doing just that to the words of another author.

So maybe Hayek didn't overlook the fact that his critique also applied to his utopia. Maybe he knew full well he was misrepresenting what he was selling, engaging in exactly the same propaganda techniques that he attributed to others. By accusing others first of doing what he was doing, it made it awkward for anyone to point out that he was doing it, too. A Rovian strategy - conceal your weakness by attacking others on precisely that issue.

Barkley Rosser , December 10, 2016 1:21 pm

One of the problems with Hayek is that there was always this conflict between the "comic book Hayek" and the more scholarly and careful Hayek. In fact, there really was a comic book version of The Road to Serfdom put out in the US after WWII, which was full of this inflammatory sort of thing that doing anything to ameliorate the harder edges of capitalism put one inexorably on the road to serfdom.

In the actual RtS one finds Hayek himself supporting quite a few such amiliorations, most notably social insurance, especially national health insurance well beyond what we even have in the US now with ACA.

The problem for lovers of Hayek, and arguably Hayek himself, is that he simply never repudiated this comic book version of his work, even as he and many of his followers got all worked up when people, such as Samuelson, would criticize Hayek for this comic book version of the RtS, pointing out his support for these ameliorations in the original non-comic book version.

However, Samuelson in his last remarks on Hayek, which I published in JEBO some years ago, effectively said that Hayek had only himself to blame for this confusion.

psychohistorian , December 10, 2016 3:08 pm

To me it comes down to whether government is structured to serve all or some obfuscated minority of all. With that as the divider it is easy to decipher Hayek's work and others.

I have been thinking that maybe both "sides" in our mostly brainwashed America today could agree with the meme of "DRAIN-THE-SWAMP" and hope to see it carried proudly on protest signs by the non-zombies of both sides in the ongoing social upheaval.

coberly , December 10, 2016 6:41 pm

Sammich

I agree that "accuse the other side of doing what you are doing" is a familiar ploy of the right.

I don't know what Hayek was really saying, or if he let the comic book version stand because he was so flattered to have his child receive such adulation, or just because he was in his dotage and didn't really understand how he was being misrepresented if he was.

but the fun thing to do with Hayek is to point out what he "really" said to those who have only heard the comic book version

if anyone is still talking about him at all. seems there was a big rush of talk about Hyak a few years ago and now it has faded.

[Dec 11, 2016] It is high time to put laissez faire and equilibrium doctrines firmly back in their place as Utopian constructions

Dec 11, 2016 | economistsview.typepad.com
Sandwichman : December 07, 2016 at 12:06 PM Terence Hutchison concluded his appendix on "Some postulates of economic liberalism" in Significance and Basic Postulates of Economic Theory with the admonition, "It is high time to put these theories [laissez faire and equilibrium doctrines] firmly back in their place as Utopian constructions." He cited S. Bauer's 1931 article, "Origine utopique et métaphorique de la théorie du "laissez faire" et de l'équilibre naturel."

Prominent in Bauer's discussion is the role of Baltasar Gracian's Oráculo Manual, which was translated into French by Amelot de la Houssaie in 1684, in popularizing both the notion and the term, laissez faire. Pierre le Pesant Boisguilbert is credited with introducing the term into political economic thought in a book published in 1707. It is conceivable that Keynes knew of the Gracian maxim because he used the image Gracian had used of tempestuous seas in his famous rejoinder about "the long run" being "a misleading guide to current affairs."

In his book Hutchinson noted that "several writers have argued that some such postulate as 'perfect expectations' is necessary for equilibrium theory." This observation lends a special note of irony to Gracian's coinage of laissez faire. In his discussion of Gracian's Oráculo, Jeremy Robbins highlighted the observation that:

"Gracián's prudence rests firmly on a belief that human nature is constant... In Gracián's case, human nature is viewed as a constant in so far as he believes it to act consistently contrary to reason."

In fact, Robbin's chapter on Gracian is titled "The Exploitation of Ignorance." Gracian's maxims establish "a sharp distinction between the elite and the necios [that is, fools]." Assuming that most people are fools who act contrary to reason is obviously something quite different from assuming perfect expectations. For that matter, the prudence of a courtier seeking to gain power over others is something quite distinct the foresight required of a policy professional acting ostensively on behalf of the public welfare.

That metaphorical and Utopian notions of laissez faire and natural equilibrium have managed to persist and even prevail in economics -- impervious to Hutchinson's warning (or Keynes's) -- is testimony to the perceptiveness of Gracian's estimate of human nature.

In the long run, we are all Baroque...

http://econospeak.blogspot.ca/2014/09/in-long-run-we-are-all-baroque.html anne -> Sandwichman ... , December 07, 2016 at 04:12 PM

Meticulously done, I am slowly learning how to approach your writing much to my satisfaction. I understand the argument and agree.
Sandwichman : , December 07, 2016 at 01:31 PM
"Let's stop pretending unemployment is voluntary" is the title for chapter four of Roger Farmer's book,"Prosperity for All: How to Prevent Financial Crises."

That is not good enough.

No. Let's stop pretending that the "pretending" is innocent. Let's stop pretending that it isn't a deliberate fraud that has been aided and abetted by most of the economics profession.

Sandwichman -> Sandwichman ... , December 07, 2016 at 01:36 PM
Why did they do it?

Because "equilibrium" is their shiny expert's meal ticket. Without it, they are nobody special with nothing valuable to sell to the Rich and Powerful.

fledermaus -> Sandwichman ... , December 07, 2016 at 03:31 PM
It is amusing to see a bunch of economists with physics envy totally disregard entropy w/r/t their vaunted "equilibrium" hypothesis.
Sandwichman -> fledermaus... , December 07, 2016 at 03:41 PM
It may be amusing the first time. After a while it just gets tedious.
Tom in MN : , December 07, 2016 at 03:43 PM
If you want to access the dynamical systems literature you should know the terminology that self-equilibrating systems have at least one stable equilibrium point with a non-empty domain of attraction (think downward pointing pendulum). Any state (set of variables describing the system configuration) that starts in this domain will end up at the stable equilibrium point. Non-linear systems can have several equilibria and some may be unstable as well, in that starting any small distance from those equilibria results in movement away from that equilibrium (e.g. an upside down pendulum). It is not enough to determine if a point is an equilibrium point, you must also check its stability.
reason -> Tom in MN... , December 09, 2016 at 07:27 AM
The trouble with this approach is that economics is describing a system that is not an equilibrium system in the first place. Economics is describing a system that is
1. Evolutionary
2. Dynamic. (In fact all the measurements are not measurements of a static state but of movements. Even apparently static things like asset values or the discounting sum of flow over time.)
reason -> reason... , December 09, 2016 at 07:30 AM
Just in case you don't see the relevance, just think about what happens if it is not the position that is moving but the equilibrium point (and worse the equilibrium point is not known, and perhaps unknowable).
reason : , December 08, 2016 at 12:32 AM
" If the expectations of agents are incompatible or inconsistent with the equilibrium of the model, then, since the actions taken or plans made by agents are based on those expectations, the model cannot have an equilibrium solution. ..."

There is clearly one very important word missing in this sentence.

Let me try again:

"" If the expectations of ANY agents are incompatible or inconsistent with the equilibrium of the model, then, since the actions taken or plans made by agents are based on those expectations, the model cannot have an equilibrium solution. ..."

Now what at first look seems merely far fetched, just became laughable.

reason -> reason ... , -1
I'm sorry, but this is very, very important. General equilibrium is the original sin of economics (especially Macro-economics). It is where it all went wrong. They should just drop it, and try to model the dynamic response of agents and the system to disequilibrium, which inevitably arises faster than equilibrating forces can possibly work. A more fundamental way of thinking about this is to realize that economics deals with transactions and all transactions are the result of a disequilibrium (at equilibrium all the trades are already made).

Where did the disequilibrium come from? When you understand the answer to that, you can understand what drives the economy. Not before.

[Dec 11, 2016] TIPs and gold

www.nakedcapitalism.com

Jim Haygood December 10, 2016 at 8:47 am

Barron's investment weekly has published a "Get Ready for Dow 20,000" cover today. Is that a problem for stocks, from a contrarian point of view?

Not necessarily. Paul Macrae Montgomery, who first articulated the concept of fading the always-wrong MSM, stipulated that it's widely-circulated, general-interest publications that are the best mirrors of popular sentiment.

So far, they are largely silent on the twin asset bubbles - stocks and house prices - rising ominously beneath our feet. Looks like it's gonna be awhile before we reach the supreme silliness of Time magazine's fatuous June 2005 cover "Home $weet Home: Why We're Going Gaga Over Real Estate."

That one actually scored double points, for the MSM's presumptuous habit of invoking the cozy "we" formulation to tell readers what they think. (That's why "we" hate the MSM.)

With Time reportedly on the block, maybe a sensational "Dow 36,000" cover could goose the sale price up to five dollars instead of one. It's worth a try, lads!

Arizona Slim December 10, 2016 at 10:28 am

Summer 2005 was when Tucson's housing bubble started hissing air. After years of tight inventory, there was a proliferation of properties for sale.

Some of those properties stayed on the market for years and many of them ended up in foreclosure.

Pat December 10, 2016 at 10:57 am

Jim, odd snippet from something I heard last night struck me as being right up your alley. The guy who founded Princeton Review is now some kind of investment guru. He was talking about last years announced rate hikes, and that he told his clients they weren't going up but might reach record lows. He based that on metals traders (gold, silver etc). He says they have never been wrong about the direction of rates. (I got interrupted so if he explained the signals he was seeing from them I missed it). It should be part of a pod cast from Tim Ferriss if you want to check it out, but I really did think it was one of those things you would have in your arsenal for market prediction.

His other big advice was treat investing like a poker game, don't bet on the cards bet on the players – look for their tells. And he hasn't figured out that Uber has some real issues to deal with before its 'profits' are real, so take everything with a grain of salt.

Jim Haygood December 10, 2016 at 12:01 pm

Gold is anticorrelated to TIPS (Treasury Inflation Protected Securities) yields as shown in this chart:

https://marketrealist.imgix.net/uploads/2016/09/bondvsgold.png

TIPS didn't exist before 1997. But real Treasury yields (proxied by subtracting the trailing 12-month CPI change from nominal Treasury yields) went negative in 1974 and 1979 too, during the epic gold spikes of that era.

So this seems to be an enduring anticorrelation. However, I use the yield curve in my bond model rather than gold. The pronounced serial correlation in Fed-controlled short rates is highly non-random, signaling what the cockeyed commissars are up to.

griffen December 10, 2016 at 5:45 pm

It's DOW 40,000 or bust. I'm holding out for that Weyland-Yutani merger to be announced any week now.

[Dec 11, 2016] Glencore stuns the oil-trading business with a deal to take a big stake in Rosneft

Dec 11, 2016 | discussion.theguardian.com
mrpukpuk, 9 Dec 2016 22:24
In the meanwhile: Glencore stuns the oil-trading business with a deal to take a big stake in Rosneft

http://www.economist.com/news/business/21711503-sanctions-are-not-impediment-they-were-expected-be-glencore-stuns-oil-trading

[Dec 10, 2016] On Missing Minsky

Notable quotes:
"... existing official models do not sufficiently explain the Minsky period, the runup, how things got so fragile that they could collapse so badly. ..."
"... in effect Minsky provided a model and discussion of all three stages, although his model of the Keynes stage is not really all that distinctive and is really just Keynes. ..."
"... he probably did a better job of discussing the Bagehot stage than did Bagehot, and more detailed, if less formal, than Diamond and Dybvig. ..."
"... But the essentials of what go on in a panic and crash were well understood and discussed prior to 1873, with Minsky, and Kindlegerger drawing on Minsky in his 1978 Manias, Panics, and Crashes, quoting in particular a completely modern discussion from 1848 by John Stuart Mill ..."
"... Keep in mind, there are an infinite number of models that fit the data. Science requires more that a fit. It requires that the model correspond with reality in a way that it can fill in observable data before it is observed. ..."
"... Here's a theory (not a model): the true and revolutionary insights of Veblen, Keynes, and Minsky have all failed to significantly alter the trajectory of economic thought because the discipline expects "the truth" to do the impossible. ..."
Jun 02, 2015 | econospeak.blogspot.com

Yes, we miss the late Hy Minsky, especially those of us who knew him, although I cannot claim to be one who knew him very well. But I knew him well enough to have experienced his wry wit and unique perspective. Quite aside from that, it would have been great to have had him around these last few years to comment on what has gone on, with so many invoking his name, even as they have in the end largely ended up studiously ignoring him and relegating him back into an intellectual dustbin of history, or tried to.

So, Paul Krugman has a post entitled "The Case of the Missing Minsky," which in turn comments on comments by Mark Thoma on comments by Gavyn Davis on discussions at a recent IMF conference on macroeconomic policy in light of the events of recent years, with Mark link http://economistsview.typepad.com/economistsview/2015/06/the-case-of-the-missing-minsky.htmling to Krugman's post.

He notes that there seem to be three periods of note:

Krugman argues that, despite a lot of floundering by the IMF economists, we supposedly understand the second two, with his preferred neo-ISLM approach properly explaining the final Keynes period of insufficiently strong recovery due to insufficiently strong aggregate demand stimulus, especially relying on fiscal policy (and while I do not fully buy his neo-ISLM approach, I think he is mostly right about the policy bottom line on this, as would the missing Minsky, I think).

He also says that looking at 1960s Diamond-Dybvig models of bank panics sufficiently explain the Bagehot period, and they probably do, given the application to the shadow banking system. However, he grants that existing official models do not sufficiently explain the Minsky period, the runup, how things got so fragile that they could collapse so badly.

Now I do not strongly disagree with most of this, but I shall make a few further points. The first is that in effect Minsky provided a model and discussion of all three stages, although his model of the Keynes stage is not really all that distinctive and is really just Keynes.

But he probably did a better job of discussing the Bagehot stage than did Bagehot, and more detailed, if less formal, than Diamond and Dybvig. I suspect that Bagehot got dragged in by the IMF people because he is so respectable and influential regarding central bank policymaking, given his important 1873 Lombard Street, and I am certainly not going to dismiss the importance of that work.

But the essentials of what go on in a panic and crash were well understood and discussed prior to 1873, with Minsky, and Kindlegerger drawing on Minsky in his 1978 Manias, Panics, and Crashes, quoting in particular a completely modern discussion from 1848 by John Stuart Mill (I am tempted to produce the quotation here, but it is rather long; I do so on p. 59 of my 1991 From Catastrophe to Chaos: A General Theory of Economic Discontinuities), which clearly delineates the mechanics and patterns of the crash, using the colorful language of "panic" and "revulsion" along the way. Others preceding Bagehot include the inimitable MacKay in 1852 in his Madness of Crowds book and Marx in Vol. III of Capital, although admittedly that was not published until well after Bagehot's book.

One can even find such discussions in Cantillon early in the 1700s discussing what went on in the Mississippi and South Sea bubbles, from which he made a lot of money, and then, good old Adam Smith in 1776 in WoN (pp. 703-704), who in regard to the South Sea bubble and the managers of the South Sea company declared, "They had an immense capital dividend among an immense number of proprietors. It was naturally to be expected, therefore, that folly, negligence, and profusion should prevail in the whole management of their affairs. The knavery and extravagance of their stock-jobbing operations are sufficiently known [as are] the negligence, profusion and malversation of the servants of the company."

It must be admitted that this quote from Smith does not have the sort of detailed analysis of the crash itself that one finds in Mill or Bagehot, much less Minsky or Diamond and Dybvig. But there is another reason of interest now to note these inflammatory remarks by Smith. David Warsh in his Economic Principals has posted in the last few days on "Just before the lights went up," also linked to by the inimitable Mark Thoma. Warsh discusses recent work on Smith's role in the bailout of the Ayr Bank of Scotland, whose crash in 1772 created macroeconomic instability and layoffs, with Smith apparently playing a role in getting the British parliament to bail out the bank, with its main owners, Lord Buccleuch and the Duke of Queensbury, paying Smith off with a job as Commissioner of Customs afterwards. I had always thought that it was ironic that free trader Smith ended his career in this position, but had not previously known how he got it. As it is, Warsh points out that the debate over bubbles and what the role of government should be in dealing with them was a difference between Smith and his fellow Scottish rival, Sir James Steuart, whose earlier book provided an alternative overview of political economy, now largely forgotten by most (An Inquiry into the Principles of Political Oeconomy, 1767).

I conclude this by noting that part of the problem for Krugman and also the IMF crowd with Minsky is that it is indeed hard to fit his view into a nice formal model, with various folks (including Mark Thoma) wishing it were to be done and noting that it probably involves invoking the dread behavioral economics that does not provide nice neat models. I also suspect that some of these folks, including Krugman, do not like some of the purveyors of formal models based on Minsky, notably Steve Keen, who has been very noisy in his criticism of these folks, leading even such observers as Noah Smith, who might be open to such things, to denounce Keen for his general naughtiness and to dismiss his work while slapping his hands. But, aside from what Keen has done, I note that there are other ways to model the missing Minsky more formally, including using agent-based models, if one really wants to, these do not involve putting financial frictions into DSGE models, which indeed do not successfully model the missing Minsky.

Barkley Rosser

Update: Correction from comments is that the Ayr Bank was not bailed out. It failed. However, the two dukes who were its main owners were effectively bailed out, see comments or the original Warsh piece for details. It remains the case that Adam Smith helped out with that and was rewarded with the post of Commissioner of Customs in Scotland.

Thornton Hall said... June 2, 2015 at 6:21 PM

What, exactly, is the value added of formal (or even informal) "models" in all this? That is to say, if a historian were to describe the events and responses outlined above, what would he leave out that an economist would put in?

Keep in mind, there are an infinite number of models that fit the data. Science requires more that a fit. It requires that the model correspond with reality in a way that it can fill in observable data before it is observed.

Meanwhile, Simon Wren-Lewis dismisses the policy-maker who listens to the historian as using mere "intelligent guess work", strongly suggesting that economists clearly do better. But if trying to figure out whether the current moments is Minsky, Keynes or even Keen, isn't "guesswork" then I don't know what is. Put "intelligent guess work" policy next to model guided policy in your history above. Where's the value added from modeling? It has to be useful AND the policy maker must have a scientific reason for knowing it will be useful IN REAL TIME.

Krugman frequently defends "textbook" modeling with a "nobody else has come up with anything better" response. But that's a classic "when did you stop beating your wife".

What if the economy can't be modeled? Claiming to do the impossible is deluded, even if you can correctly say: "no one has ever improved upon my method of doing the impossible."

"But we have learned so much!" People say that, but what, exactly, are they talking about?

Thornton Hall said... June 2, 2015 at 6:42 PM

Here's a theory (not a model): the true and revolutionary insights of Veblen, Keynes, and Minsky have all failed to significantly alter the trajectory of economic thought because the discipline expects "the truth" to do the impossible.

Newton faced this when his theory of universal Gravity was criticized for failing to explain the distance of the planets from the sun. The Aristotelian tradition said that a proper theory of the heavens would do this.

And so Keynes has his Aristotelian interpreter Hicks and Minsky has his Keen. Requiring the revolution to succeed in doing the impossible means that the truth gets misinterpreted or ignored. Either way, no revolution despite every generation producing a revolutionary that sees the truth.

What is the value of this theory? If true, it explains how economics can be filled with smart people seeking the truth and yet make zero progress in more than a century.

chrismealy June 2, 2015 at 8:27 PM

I get the impression that mainstream economists are generally resistant to any kind of boom-and-bust models (at least while getting a BA in econ I was never taught any). Is this the case? It's too bad, because models like Lotka–Volterra are not that hard. Just from messing around with agent-based models it seems like anything with a lag or learning generates cycles. Is it because economists are fixated on optimization and equilibrium? Are they worried about models that are too sensitive to initial conditions?

[email protected] said... June 2, 2015 at 11:24 PM

Thornton,

Maybe they should not be, but the discussion among IMF economists, Davis, Thoma, and Krugman has involved models, and in particular, conventional models. So, Krugman declares that there are conventional models as noted above to cover two of the stages, the latter two, but not the first one identified with Minsky. I think there are better models for all this, but they are not the conventional ones.

chrismealy,

The DSGE and other conventional models are able to model booms and busts, although they generally do not use the Lotka-Volterra models that such people as the late Richard Goodwin (and even Paul Samuelson) have used for modeling business cycle dynamics. The big difference is that the conventional models involve exogenous shocks to set off their busts, with cyclical reverberations that decay then following the exogenous shock, with some of the lag mechanisms operating for that.

It is not really surprising that this sort of thing does not model Minsky or the Minsky moment, which involve endogenous dynamics, the very success of the boom as during the Great Moderation itself undermining the stability and even resilience of the system as essentially endogenous psychological (and hence behavioral) factors operate to loosen requirements for lending and to use Minksy language, lending and borrowing increasingly involves highly leveraged Ponzi schemes (and I note that some more conventional economists have emphasized leverage cycles, notably John Geanakoplis, although avoiding Minsky per se in doing so).

New Deal democrat said... June 3, 2015 at 10:52 AM

This is a good post and discussion so far. So here's my $.02:

1. Maybe the behaviorists like Thaler have already explored this, but it seems to me that economists still need to learn learning theory from psychologists. Most importantly, "bservational learning," { http://psychology.about.com/od/oindex/fl/What-Is-Observational-Learning.htm ), or more simply "monkey see, monkey do." We constantly learn by observing behavior in others: our parents, our older siblings, the cool kids at school, our favorite pop icons, our professors, our business mentors, and so on. As to which,

2. Some people are better at learning than others (duh!). Some learn right away, some more slowly, some never at all. And further,

3. Some people are more persceptive than others, recognizing the importance of something earlier or later. If you recognized how important the trend change was when Volcker broke the back of inflation in the early 1980s, and simply bought 30 year treasuries and held them to maturity, you made a killing. If you discovered that in the early 1990s, you made less. And so on.

All we need, to pick up on chrismealy's comment, are time periods and learning. Incorporate variations in skill and persceptiveness into the population, and you can get a nice boom and bust model. As more and more people, with various levels of skill, learn an economic behavior (flipping houses, using leverage), they will "push the edge of the envelope" more and more -- does 2x leverage work? Yes, then how about 4x? Yes, then how about 20x? -- until the system is overwhelmed.

4. But if you don't want to incorporate imitative learning models from psychology, how about just using appraisals of short term vs. long term risk and reward. Suppose it is the 1980s, and I think treasury yields are on a securlar downtrend. But this book called "Bankruptcy 1995" just came out, based on a blue ribbon panel Reagan created to look at budget deficits. That best selling book forecasts a "hockey stick" of exploding interest rates by the mid-1990s due to ever increasing US debt. So let's say I am 50% sure of my belief that treasury yields will continue to decline for another 20 years, and I can make 10% a year if I am right. But if I am wrong .....

Meanwhile, I calculate that there is an 80% chance I can make 10% a year for the next few years by investing in this new publicly traded company named "Microsoft."

Even leaving aside behavioral finance theories about loss aversion, it's pretty clear that most investors will plump for Microsoft over treasuries, given their relative confidence in short term outcomes.

Historically, once interest rates went close to zero at the outset of the Great Depression, they stayed there for 20 years, and then gradually rose for another 30. How confident are investors that the same scenario will play out this time?

Either or both of the learning theory or the short term-long term risk reward scenario are good explanations for why backwards induction ad absurdum isn't an accurate description of behavior.

----

BTW, a nice example of a failed "backwards induction" is the "taper tantrum" of 2013. Since investors knew that the Fed was going to be raising interest rates sooner or later, they piled on and raised interest rates immediately -- and made a nice intermediate term top at 3%.

reason said... June 3, 2015 at 11:19 AM

Barkley,

I think New Deal Democrat has it here. This surely, can be covered with a simple model of asynchronous adaptive expectations with stochastic (Taleb type - big tail) risks. I wouldn't think you would even need a sophisticated agent based model. There must be plenty of ratchet type models out there to chose from.

Sandwichman said... June 3, 2015 at 11:47 AM

Thornton,

"...the true and revolutionary insights of Veblen, Keynes, and Minsky have all failed to significantly alter the trajectory of economic thought because the discipline..." sacrifices to the God, Equilibrium.

New Deal Democrat,

WRT "monkey see, monkey do" see Andred Orlean's The Empire of Value which articulates his mimetic theory of value.

[email protected] said... June 3, 2015 at 2:14 PM

To New Deal Dem and reason,

Sorry, I am not on board with this at all. Sure, I am all for incorporating learning and lags. No problem. This is good old adaptive expectations, which I have no problem with.

The problem is back to what I said earlier, that Minsky's apparatus operates endogenously without any need for exogenous shocks, although it can certainly operate within those, as his quoting of Mill shows, although I did not provide that quote, but Mill starts his story of how bubbles happen with some exogenous initial supply/demand shock in a market.

Why is what you guys talk about an exogenous shock model? Look at the example: Volcker does something and then different people figure it out at different rates. But Volcker is the exogenous shocker. If he does nothing, nothing happens.

In Minsky world, there does not need to be an exogenous shock. The system may be in a total anf full equilibrium,, but that equilibrium will disequilibrate itself as psychological attitudes and expectations endogenously change due to it. This is what the standard modelers have sush a problem with and do not like. They have no problem wiht adaptive expectations models. This is all old hat stuff for them, with only the fact that one does not know for sure what all those lags are being the problem, and what opened the door to the victory of ratex because it said there are no lags and thus no problem. Agents now what will be on average.

csissoko said... June 3, 2015 at 3:14 PM

Warsh's history of the Ayr Bank has errors. The Bank of England offered it a "bailout" in 1772 but required the personal guarantees of the two Dukes which were not forthcoming. The Ayr Bank struggled on without lender of last resort support until August 1773, when it closed for good. (This is all in Clapham's history of the Bank of England.)

What Warsh is calling a "bailout" was not a bailout of the bank, but of its proprietors who had unlimited liability and were facing the possibility of putting their estates on the market (which would have affected land prices in Scotland).

As I understand Warsh's description, Parliament granted the two Dukes a charter for a limited liability company that would sell annuities. It is entirely possible that contemporary sources would describe such an action as "indemnifying" the promoters of the company. But what is meant by this use of the term is only that Parliament authorized the formation of corporation. The actual indemnity is provided in the event the corporation fails by the members of the public who are creditors of the corporation.

In short, it is an error to claim that there was a "bailout" of the Ayr Bank.

[email protected] said... June 3, 2015 at 3:30 PM

Point taken, csissoko. I accept your corrected version. Parliament bailed out the dukes, not the Ayr Bank, which indeed failed.

Thornton Hall said... June 3, 2015 at 4:42 PM

I still don't understand what information is added by "models". Krugman has a job he has created for himself where everything he does is with an eye toward policy.

So I'm a policy maker. Explain why I need a model. in the 1930s austerity caused recessions and WWII ended the Depression. A little history of Japan's lost decade and some thinking about the implications of fiat currency, and, voilia, Krugman's policy suggestions, with no models and therefore no need to listen to economists like Mankiw or the Germans currently destroying Europe (third times a charm).

Thornton Hall said... June 3, 2015 at 4:51 PM

By the by, I have thought this thru. The head of Duke's Philosophy Department agrees: Krugman's method for using models is empty hand-waving. However he comes to his conclusions, it is not logically possible that ISLM, or any other model, has anything to do with it.
http://thorntonhalldesign.com/philosophy/2014/7/1/credentialed-person-repeats-my-critique-of-krugman

AXEC / E.K-H said... June 3, 2015 at 5:04 PM

Sitcom economics

Comment on 'On Missing Minsky'

Since Adam Smith economists have told rather enthralling stories about speculations, manias, follies, frauds, and breakdowns. The audience likes this kind of stuff. However, when it comes to how all this fits into economic theory things become a bit awkward. Of course, we have some modls -- Minsky, Diamond-Dybvig, Keynes come to mind -- but we could also think of other modls -- more agent-based or equilibrium with friction perhaps. On closer inspection, though, economists have no clue at all.

Keynes messed up the basics of macro with this faulty syllogism: "Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment." (1973, p. 63)

From I=S all variants of IS-LM models are derived including Krugman's neo-ISLM which allegedly explains the post-crash Keynes period. Let there be no ambiguity, all these models have always been conceptually and formally defective (2011).

Minsky built upon Keynes but not on I=S.

"The simple equation 'profit equals investment' is the fundamental relation for a macroeconomics that aims to determine the behavior through time of a capitalist economy with a sophisticated, complex financial structure." (Minsky, 2008, p. 161)

Here profit comes in but neither Minsky, nor Keynes, nor Krugmann, nor Keen, nor the rest of the profession can tell the fundamental difference between income and profit (2014).

The fact of the matter is that the representative economist fails to capture the essence of the market economy. This does not matter much as long as he has models and stories about crashing Ponzi schemes and bank panics. Yes, eventually we will miss them all -- these inimitable proto-scientific storytellers.

To have any number of incoherent models is not such a good thing as most economists tend to think. What is needed is the true theory.

"In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion." (Stigum, 1991, p. 30)

The true theory of financial crises presupposes the correct profit theory which is missing since Adam Smith. After this disqualifying performance nobody should expect that some Walrasian or Keynesian bearer of hope will come up with the correct modl any time soon.

Egmont Kakarot-Handtke

References

  • Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL http://ssrn.com/abstract=1966438.
  • Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2489792.
  • Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.
  • Minsky, H. P. (2008). Stabilizing an Unstable Economy. New York, NY, Chicago, IL, San Francisco, CA: McGraw Hill, 2nd edition.
  • Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge, MA: MIT Press.

New Deal democrat said... June 3, 2015 at 5:28 PM

Prof. Rosser:

In addition to my hypo re Volcker and interest rates, I also mention flipping houses and leverage.

Person A flips a house, makes $100k. Person B learns of it, figures s/he can do just as well, and flips a house. Eventually enough people are doing it that news stories are written about it. By now 1000s of people are figuring, "if they can do it, I can do it.":

So long as the trend continues, the person using financial leverage to flip houses makes even more profit. Person B uses more leverage, and so on. And since 2x leverage worked, why not 4x leverage. And if that works, why not 10x leverage?

Both the number of people engaging in the behavior, and the financial leveraging of the behavior, are endogenous, unless you are going to hang your hat on existing trend (note, not necessarily a shock - of rising house prices0.

All you need is more and more people of various skill sets at various entry points of time engaging in the behavior, and testing increasing leverage the more the behavior works.

Secondly, as to stability breeding instability, stability itself is the existing trend. Increasingly over time, more and more leverage will be used to profit off the existing trend. All it takes is learning + risk-takers successfully testing the existing limits. The more stable the system, the more risk-takers can apply leverage without rupturing it -- for a while.

New Deal democrat said... June 3, 2015 at 5:59 PM,

Let me try to express my position as a series of axioms:
1. Assume that no system, no matter how stable, can withstand infinite leverage.
2. Assume that there is a certain non-zero percentage of risk-taking individuals.
3. Assume that risk-takers will use some amount of leverage to attempt to profit within a stable system.
4. Assume that risk-takers will use increasing leverage once any given lesser percentage of leverage succeeds in rendering a profit, in order to increase profits.
5. Assume that others will learn, over various time periods, at varying levels of skill, to imitate the successful behavior of risk-takers.

Under those circumstances, it is certain that any system, no matter how stable, will ultimately succumb to leverage. And the more stable, the more leverage will have been applied to reach that breaking point. I.e., stability breeds instability.

Bruce Wilder said... June 3, 2015 at 6:50 PM

Even using history as an analogy is implicitly introducing a model. You're saying, here's my model of this history and I crank my little model to show the behavior of the model simulates the historical record, then I adapt the model to present circumstances, and crank again arguing, again by analogy.

What I would object to is the reliance on "analytic models" as opposed to operational models of the actual institutions. Economists love their analytic models, particularly axiomatic deductive "nomological machines", DSGE being the current orthodox approach. Not that there is anything wrong about analysis. My objection would be to basing policy advice on a study of analytic models to the exclusion of all else -- Krugman's approach -- rather than an empirical study of institutions in operation (which would still involve models, because that's how people think, but they might be, for example, simulation models calibrated to observed operational mechanisms).

There are reasons why economists prefer analytic models, but few of those reasons are sound. In the end, it is a matter of bad judgment fostered by a defective education and corruption or weakmindedness. Among other things, reliance on analytic models give economics an esoteric quality that privileges its elite practitioners. Ordinary people can barely understand what Krugman is talking about in the referenced piece, and that's by design. He does his bit to protect the reputations of folks like Bernanke and Blanchard, obscuring their viewpoints and the consequences of their policies.

I am not sure what can be done about it. Economists like Krugman are as arrogant as they are ignorant -- there's not enough intellectual integrity to even acknowledge fundamental errors, and that lack of integrity keeps the "orthodoxy" going in the face of manifest failures. For the conservatives on some payroll, the problem is even worse.

I am not confident that shooing economists from the policy room and encouraging politicians to discuss these matters among themselves improves the situation. In doubt, people fall back on a moral fundamentalism of the kind that gets us to "austerity" and "sacrifice" and blames the victims -- pretty much what we have now.

Re-doing Minsky as an analytic model is an impossible task almost by definition. Minsky's approach was fundamentally about abstracting from careful observation of what financial firms did, operationally. It made him a hero with many financial sector denizens, who recognized themselves in his narratives, even when he cast them in the role of bad guys. (No one is ever going to recognize himself as a representative agent in a DSGE model.)

Perhaps the hardest thing to digest from Minsky is the insight that business cycles can not be entirely mastered. The economy is fundamentally a set of disequilibrium phenomena, the instability built-in (endogenous, as they say). The New Keynesian idea is that the economy is fundamentally an equilibrium phenomenon, that occasionally needs a helping hand to recover from exogenous disturbance. These are antagonistic world views, which cannot be reconciled with each other, and the New Keynesian view can be reconciled only minimally with the observable facts of the world, by a lot of ad hoc fuzzy thinking ("frictions").

It's very ugly.

Thornton Hall said... June 3, 2015 at 7:35 PM
Bruce, I disagree with your view of politicians. The current GOP crop are essentially following the moral philosophy that, in the end, is the only content generated by economics. But it was not always thus.

I once watched Senator Kit Bond of Missouri (very-R) try to round up a quorum in the Small Business Committee. It was quite clear that the man enjoyed people. He liked the company of just about everybody. Without the strong interference from economists, that's who ends up in politics. People like that are pragmatic. They try things. They aren't there for the purpose (contra Ted Cruz) of breaking things.

You're right, my problem really is with analytic "models" which aren't really models but rather metaphors or analogies. But I don't think that's the only way reasoning from history can work.

There are lots of areas of policy, some of which continue to resist conversion to economic religion. In education policy we try interventions and see what happens. It's inductive and mostly correlation, but thru trial and error we do progress toward better policy (although schools of education are only slowly moving away from their notoriously anti-scientific past).

Politicians don't have to think about the budget like a household and tighten belts. They know that business borrow money all the time. It's actually the language of the academy that leads to "tightening belts" instead of investing in the future. Economics is the science of claiming that if you need something, and you can afford that something, you still must consider "multipliers" or "the philosophers stone" or some other nonsense before you can decide to buy what you need.

Thornton Hall said... June 3, 2015 at 7:36 PM

Mark Buchanan's book "Forecast" describes just this process.

Thornton Hall said... June 3, 2015 at 7:44 PM

What I mean to say about history: don't confuse theories with models. I have a theory about what caused what in the Great Depression. But I don't model the economy.

reason said... June 4, 2015 at 9:36 AM

Barkley,

I think I should clarify, I think endogenous and exogenous are a little bit besides the point here. I think the exact trigger that starts a "state change" in the system has a stochastic component. But the increasing vulnerability of the system is endogenous, in a very Minsky sense. What I am saying is that increasing vulnerability could be modelled without using agent based modelling (a bit like modelling landslides or earthquakes if you like). I'm not saying that the model is just being driven by exogenous shocks.

Bruce,

I think there is a bit of tendency to mischaracterise what Paul Krugman is saying. He is the last person you should be accusing of mistaking the map for the territory. He is saying that EVEN relatively simple models can make sensible suggestions about policy in some circumstances.

Yes, though I tend to agree with you that general equilibrium is the original sin in macro-economic modelling and that the system is in fact a disequilibrium system. But that doesn't imply to me at all that you can't use analytical approaches.

Thornton Hall said... June 4, 2015 at 1:57 PM

Krugman has no map. My link above demonstrates this quite conclusively.

[Dec 09, 2016] Why Trade Deficits Matter

Dec 09, 2016 | economistsview.typepad.com
Jared Bernstein and Dean Baker:
Why Trade Deficits Matter, The Atlantic : However one feels about Donald Trump, it's fair to say he has usefully elevated a long-simmering issue in American political economy: the hardship faced by the families and communities who have lost out as jobs have shifted overseas. For decades, many politicians from both parties ignored the plight of these workers, offering them bromides about the benefits of free trade and yet another trade deal, this time with some "adjustment assistance."
One of Trump's economic goals is to lower the U.S.'s trade deficit-which is to say, shrink the discrepancy between the value of the country's imports and the value of its exports. Right now, the U.S. currently imports $460 billion more than it exports, meaning it has a trade deficit that works out to about 2.5 percent of GDP. Given that the job market is still not back to full strength and the U.S. has been losing manufacturing jobs-there are 60,000 fewer now than at the beginning of this year, according to the Bureau of Labor Statistics -economists would be wise to question their assumption that such a deficit is harmless. ...
Is the U.S. trade deficit a problem whose solution would help American workers? ...

anne -> sanjait... , December 08, 2016 at 06:10 PM
Looks to me like "global power" comes from a lot more than military spending, and if its jobs we want, then military spending is a decent short run stimulus but long run waste in terms of productive expenditure.

[ Very important argument. ]

anne -> anne... , December 08, 2016 at 06:38 PM
https://en.wikipedia.org/wiki/The_Great_Illusion

The Great Illusion is a book by Norman Angell, first published in the United Kingdom in 1909 under the title Europe's Optical Illusion and republished in 1910 and subsequently in various enlarged and revised editions under the title The Great Illusion.

Angell argued that war between industrial countries was futile because conquest did not pay. J.D.B. Miller writes: "The 'Great Illusion' was that nations gained by armed confrontation, militarism, war, or conquest." The economic interdependence between industrial countries meant that war would be economically harmful to all the countries involved. Moreover, if a conquering power confiscated property in the territory it seized, "the incentive to produce [of the local population] would be sapped and the conquered area be rendered worthless. Thus, the conquering power had to leave property in the hands of the local population while incurring the costs of conquest and occupation."

Angell said that arms build-up, for example the naval race that was happening as he wrote the book in the early 1910s, was not going to secure peace. Instead, it would lead to increased insecurity and thus increase the likelihood of war. Only respect for international law, a world court, in which issues would be dealt with logically and peaceably would be the route for peace.

A new edition of The Great Illusion was published in 1933; it added "the theme of collective defence." Angell was awarded the Nobel Peace Prize in 1933. He added his belief that if France, Britain, Poland, Czechoslovakia, etc. had bound themselves together to oppose all military aggression, including that of Hitler's, and to appeal to world justice for solution to countries' grievances, then the great mass of reasonable Germans would have stepped up and stopped Hitler from leading their country into an unwinnable war, and World War II would have been avoided.

New Deal democrat -> sanjait... , December 08, 2016 at 06:11 PM
Really, go screw yourself.

In 1909 a book was published saying that free trade would make the world prosperous forever. In the U.S. It was called "the Grand Illusion." Unfortunately Kaiser Wilhelm appeared not to get the message.

If China didn't have those $$$$trillions, they wouldn't feel empowered to change boundary lines by force. We wouldn't be worried about a new arms race.

As for solutions, a trade weighted tariff that kicked in after a certain period/percentage would work just fine, probably similar to the wage equalization tariff I suggested the other day. A VAT might accomplish a similar result.

But seriously, you and everyone who thinks like you can go screw yourselves. Your myopic elitism has gotten us here. I wish you nothing but pain.

DrDick -> sanjait... , December 08, 2016 at 07:06 PM
"then military spending is a decent short run stimulus"

No it is not. It is very ineffective and wasteful. You would get much better return on your investment by spending on repairing and upgrading civic infrastructure.

DrDick -> sanjait... , December 08, 2016 at 07:02 PM
Bull. What we need is enforceable labor and environmental standards and protections so that the corporate greed heads will have less incentive to outsource their production to places lacking any of those things. This is all about maximizing rents by ruthlessly exploiting vulnerable labor in the developing world and by being able to poison and devastate their countries at will.
Victory Lap Dancer : , December 08, 2016 at 05:27 PM

U.S. currently imports $460 billion more than it exports, meaning
"
~J B & D B~~

... meaning that We the People print up t-bonds valued at $460 then trade these bonds for Federal Reserve Notes printed up by FG-s worth $460 then use same notes to buy same amount of running shoes, shot glasses, etc.

We print up genuine t-bonds for their counterfeit products that look like the real thing. Huh! The question is :

How can we do more of this without those foreigner suckers catching on, getting wise to the scam?

For one, we can make sure that we don't print up more of our genuine paper than their demand for it. Get it? So long as their demand continues to be great enough to raise the price of our tiny slips of paper, we are cool.

When we are printing too much, the price of our paper falls, buys less, has less buying power. Less buying power is what we call inflation. More buying power is what we call deflation. Got it?

Print less thus keep popularity of our printed numbers up. Tell me something!

What happens when our workers lose jobs to foreigner suckers who dig our printed numbers?

Job loss to foreigners slows down the domestic development of robotics, artificial intelligence, and the singularity that will inevitably detonate all jobs globally. What will that detonation do to our life style of excessive overpopulation.

Don't ask, but don't
tell --

Donald A. Coffin : , -1
The usual response to a trade deficit is that the country running the deficit sees its currency decline in value. This lowers the effective price of its exports and raises the effective price of its imports. Assuming nothing peculiar about the price elasticities of demand for exports and import, this should lead to a shrinking trade deficit. From 1973 to 1998, the dollar appreciated steadily, and the (nominal) trade deficit expanded only slightly. From 1998 to 2005, the dollar continued to appreciate--but the (nominal) trade deficit exploded, increasing by a factor of (roughly) 10 by 2006. Then, as the dollar began depreciating (in 2002), the trade deficit began to shrink. Since about 2008, the dollar has been appreciating again.

What needs most to be explained is the explosion of the trade deficit between 1998 and 2006; about half of the increase in the trade deficit was between 1998 and 2002; the other half between 2002 and 2006.

[Dec 09, 2016] Understanding Evil From Globalism To Pizzagate Zero Hedge

Dec 09, 2016 | www.zerohedge.com
Submitted by Brandon Smith via Alt-Market.com,

I have spent the better part of the last 10 years working diligently to investigate and relate information on economics and geopolitical discourse for the liberty movement. However, long before I delved into these subjects my primary interests of study were the human mind and the human "soul" (yes, I'm using a spiritual term).

My fascination with economics and sociopolitical events has always been rooted in the human element. That is to say, while economics is often treated as a mathematical and statistical field, it is also driven by psychology. To know the behavior of man is to know the future of all his endeavors, good or evil.

Evil is what we are specifically here to discuss. I have touched on the issue in various articles in the past including Are Globalists Evil Or Just Misunderstood , but with extreme tensions taking shape this year in light of the U.S. election as well as the exploding online community investigation of "Pizzagate," I am compelled to examine it once again.

I will not be grappling with this issue from a particularly religious perspective. Evil applies to everyone regardless of their belief system, or even their lack of belief. Evil is secular in its influence.

The first and most important thing to understand is this - evil is NOT simply a social or religious construct, it is an inherent element of the human psyche. Carl Gustav Jung was one of the few psychologists in history to dare write extensively on the issue of evil from a scientific perspective as well as a metaphysical perspective. I highly recommend a book of his collected works on this subject titled 'Jung On Evil', edited by Murray Stein, for those who are interested in a deeper view.

To summarize, Jung found that much of the foundations of human behavior are rooted in inborn psychological contents or "archetypes." Contrary to the position of Sigmund Freud, Jung argued that while our environment may affect our behavior to a certain extent, it does not make us who we are. Rather, we are born with our own individual personality and grow into our inherent characteristics over time. Jung also found that there are universally present elements of human psychology. That is to say, almost every human being on the planet shares certain truths and certain natural predilections.

The concepts of good and evil, moral and immoral, are present in us from birth and are mostly the same regardless of where we are born, what time in history we are born and to what culture we are born. Good and evil are shared subjective experiences. It is this observable psychological fact (among others) that leads me to believe in the idea of a creative design - a god. Again, though, elaborating on god is beyond the scope of this article.

To me, this should be rather comforting to people, even atheists. For if there is observable evidence of creative design, then it would follow that there may every well be a reason for all the trials and horrors that we experience as a species. Our lives, our failures and our accomplishments are not random and meaningless. We are striving toward something, whether we recognize it or not. It may be beyond our comprehension at this time, but it is there.

Evil does not exist in a vacuum; with evil there is always good, if one looks for it in the right places.

Most people are readily equipped to recognize evil when they see it directly. What they are not equipped for and must learn from environment is how to recognize evil disguised as righteousness. The most heinous acts in history are almost always presented as a moral obligation - a path towards some "greater good." Inherent conscience, though, IS the greater good, and any ideology that steps away from the boundaries of conscience will inevitably lead to disaster.

The concept of globalism is one of these ideologies that crosses the line of conscience and pontificates to us about a "superior method" of living. It relies on taboo, rather than moral compass, and there is a big difference between the two.

When we pursue a "greater good" as individuals or as a society, the means are just as vital as the ends. The ends NEVER justify the means. Never. For if we abandon our core principles and commit atrocities in the name of "peace," safety or survival, then we have forsaken the very things which make us worthy of peace and safety and survival. A monster that devours in the name of peace is still a monster.

Globalism tells us that the collective is more important than the individual, that the individual owes society a debt and that fealty to society in every respect is the payment for that debt. But inherent archetypes and conscience tell us differently. They tell us that society is only ever as healthy as the individuals within it, that society is only as free and vibrant as the participants. As the individual is demeaned and enslaved, the collective crumbles into mediocrity.

Globalism also tells us that humanity's greatest potential cannot be reached without collectivism and centralization. The assertion is that the more single-minded a society is in its pursuits the more likely it is to effectively achieve its goals. To this end, globalism seeks to erase all sovereignty. For now its proponents claim they only wish to remove nations and borders from the social equation, but such collectivism never stops there. Eventually, they will tell us that individualism represents another nefarious "border" that prevents the group from becoming fully realized.

At the heart of collectivism is the idea that human beings are "blank slates;" that we are born empty and are completely dependent on our environment in order to learn what is right and wrong and how to be good people or good citizens. The environment becomes the arbiter of decency, rather than conscience, and whoever controls the environment, by extension, becomes god.

If the masses are convinced of this narrative then moral relativity is only a short step away. It is the abandonment of inborn conscience that ultimately results in evil. In my view, this is exactly why the so called "elites" are pressing for globalism in the first place. Their end game is not just centralization of all power into a one world edifice, but the suppression and eradication of conscience, and thus, all that is good.

To see where this leads we must look at the behaviors of the elites themselves, which brings us to "Pizzagate."

The exposure by Wikileaks during the election cycle of what appear to be coded emails sent between John Podesta and friends has created a burning undercurrent in the alternative media. The emails consistently use odd and out of context "pizza" references, and independent investigations have discovered a wide array connections between political elites like Hillary Clinton and John Podesta to James Alefantis, the owner of a pizza parlor in Washington D.C. called Comet Ping Pong. Alefantis, for reasons that make little sense to me, is listed as number 49 on GQ's Most Powerful People In Washington list .

The assertion according to circumstantial evidence including the disturbing child and cannibalism artwork collections of the Podestas has been that Comet Ping Pong is somehow at the center of a child pedophilia network serving the politically connected. Both Comet Ping Pong and a pizza establishment two doors down called Besta Pizza use symbols in their logos and menus that are listed on the FBI's unclassified documentation on pedophilia symbolism , which does not help matters.

Some of the best documentation of the Pizzagate scandal that I have seen so far has been done by David Seaman, a former mainstream journalist gone rogue. Here is his YouTube page .

I do recommend everyone at least look at the evidence he and others present. I went into the issue rather skeptical, but was surprised by the sheer amount of weirdness and evidence regarding Comet Pizza. There is a problem with Pizzagate that is difficult to overcome, however; namely the fact that to my knowledge no victims have come forward. This is not to say there has been no crime, but anyone hoping to convince the general public of wrong-doing in this kind of scenario is going to have a very hard time without a victim to reference.

The problem is doubly difficult now that an armed man was arrested on the premises of Comet Ping Pong while "researching" the claims of child trafficking. Undoubtedly, the mainstream media will declare the very investigation "dangerous conspiracy theory." Whether this will persuade the public to ignore it, or compel them to look into it, remains to be seen.

I fully realize the amount of confusion surrounding Pizzagate and the assertions by some that it is a "pysop" designed to undermine the alternative media. This is a foolish notion, in my view. The mainstream media is dying, this is unavoidable. The alternative media is a network of sources based on the power of choice and cemented in the concept of investigative research. The reader participates in the alternative media by learning all available information and positions and deciding for himself what is the most valid conclusion, if there is any conclusion to be had. The mainstream media simply tells its readers what to think and feel based on cherry picked data.

The elites will never be able to deconstruct that kind of movement with something like a faked "pizzagate"; rather, they would be more inclined to try to co-opt and direct the alternative media as they do most institutions. And, if elitists are using Pizzagate as fodder to trick the alternative media into looking ridiculous, then why allow elitist run social media outlets like Facebook and Reddit to shut down discussion on the issue?

The reason I am more convinced than skeptical at this stage is because this has happened before; and in past scandals of pedophilia in Washington and other political hotbeds, some victims DID come forward.

I would first reference the events of the Franklin Scandal between 1988 and 1991. The Discovery Channel even produced a documentary on it complete with interviews of alleged child victims peddled to Washington elites for the purpose of favors and blackmail. Meant to air in 1994, the documentary was quashed before it was ever shown to the public. The only reason it can now be found is because an original copy was released without permission by parties unknown.

I would also reference the highly evidenced Westminster Pedophile Ring in the U.K. , in which the U.K. government lost or destroyed at least 114 related files related to the investigation.

Finally, it is disconcerting to me that the criminal enterprises of former Bear Sterns financier and convicted pedophile Jeffrey Epstein and his "Lolita Express" are mainstream knowledge, yet the public remains largely oblivious. Bill Clinton is shown on flight logs to have flown on Epstein's private jet at least a 26 times; the same jet that he used to procure child victims as young as 12 to entertain celebrities and billionaires on his 72 acre island called "Little Saint James". The fact that Donald Trump was also close friends with Epstein should raise some eyebrows - funny how the mainstream media attacked Trump on every cosmetic issue under the sun but for some reason backed away from pursuing the Epstein angle.

Where is the vast federal investigation into the people who frequented Epstein's wretched parties? There is none, and Epstein, though convicted of molesting a 14 year old girl and selling her into prostitution, was only slapped on the wrist with a 13 month sentence.

Accusations of pedophilia seem to follow the globalists and elitist politicians wherever they go. This does not surprise me. They often exhibit characteristics of narcissism and psychopathy, but their ideology of moral relativity is what would lead to such horrible crimes.

Evil often stems from people who are empty. When one abandons conscience, one also in many respects abandons empathy and love. Without these elements of our psyche there is no happiness. Without them, there is nothing left but desire and gluttony.

Narcissists in particular are prone to use other people as forms of entertainment and fulfillment without concern for their humanity. They can be vicious in nature, and when taken to the level of psychopathy, they are prone to target and abuse the most helpless of victims in order to generate a feeling of personal power.

Add in sexual addiction and aggression and narcissists become predatory in the extreme. Nothing ever truly satisfies them. When they grow tired of the normal, they quickly turn to the abnormal and eventually the criminal. I would say that pedophilia is a natural progression of the elitist mindset; for children are the easiest and most innocent victim source, not to mention the most aberrant and forbidden, and thus the most desirable for a psychopathic deviant embracing evil impulses.

Beyond this is the even more disturbing prospect of cultism. It is not that the globalists are simply evil as individuals; if that were the case then they would present far less of a threat. The greater terror is that they are also organized. When one confronts the problem of evil head on, one quickly realizes that evil is within us all. There will always be an internal battle in every individual. Organized evil, though, is in fact the ultimate danger, and it is organized evil that must be eradicated.

For organized evil to be defeated, there must be organized good. I believe the liberty movement in particular is that good; existing in early stages, not yet complete, but good none the less. Our championing of the non-aggression principle and individual liberty is conducive to respect for privacy, property and life. Conscience is a core tenet of the liberty ideal, and the exact counter to organized elitism based on moral relativity.

Recognize and take solace that though we live in dark times, and evil men roam free, we are also here. We are the proper response to evil, and we have been placed here at this time for a reason. Call it fate, call it destiny, call it coincidence, call it god, call it whatever you want, but the answer to evil is us.

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    AtATrESICI Dec 8, 2016 10:18 PM ,
    Wow
    eforce AtATrESICI Dec 8, 2016 10:24 PM ,
    "Out of the temporary evil we are now compelled to commit will emerge the good of an unshakable rule, which will restore the regular course of the machinery of the national life, brought to naught by liberalism. The result justifies the means. Let us, however, in our plans, direct our attention not so much to what is good and moral as to what is necessary and useful."

    --The Protocols.

    peddling-fiction eforce Dec 8, 2016 10:29 PM ,
    This rabbit hole requires a little spiritual know-how but is very blunt and direct.

    It is about EVIL this time around here in our terrarium.

    Almost Solvent peddling-fiction Dec 8, 2016 10:30 PM ,
    Only one question matters.

    Is there a basement or not?

    peddling-fiction Almost Solvent Dec 8, 2016 10:40 PM ,
    and what are chicken lovers?

    For a laugh read some real fake encyclopedia entries here-> https://en.wikipedia.org/wiki/Pizzagate_ (conspiracy_theory)

    eforce peddling-fiction Dec 8, 2016 10:42 PM ,
    I should also point out those alledgedly behind The Protocols are not the people the article is referring ie: those people are typically found in any liberal establishment.
    Fed Supporter eforce Dec 8, 2016 10:55 PM ,
    #PizzaGate New Info 12/8/16: Pizzagate SHOOTER & BROTHER Exposed Via their INSTAGRAM

    CHAOS MAYHEM https://www.youtube.com/watch?v=WHTsMWUGVeE NO KIDDING THE #PizzaGate Shooter's (KID BROTHER) HAS AN INSTAGRAM ... WTF FUBAR
    the Internet has located the Shooter's younger Transgendered BROTHER the artist from COMET ping Pong Band Nights..
    Squid-puppets a... peddling-fiction Dec 8, 2016 10:44 PM ,
    A good article, but it fails to deliver on these key aspects of the matter:

    Everyone knows from the Godfather and its genre that there is a connection between loyalty, criminality and power: Once you witness someone engaging in a criminal act, you have leverage over them and that ensures their loyalty. But what follows from that - which healthy sane minds have trouble contemplating - is that the greater the criminality the greater the leverage, and that because murderous paedophilia places a person utterly beyond any prospect of redemption in decent society, there in NO GREATER LOYALTY than those desperate to avoid being outed. These must be the three corners of the triangle - Power:Loyalty:Depravity through which the evil eys views the world.

    I always beleived in an Illuminati of sorts, however they care to self identify. Until Pizzagate, I never understood that murderous paedophilia, luciferian in style to accentuate their own depravity, is THE KEY TO RULING THE EARTH

    And another thing. If pizzagate is 'fake news' then it it inconceivably elaborate - they'd have had to fake Epstein 2008, Silsby 2010, Breitbart 2011, the 2013 portugese release of podestaesque mccann suspects, as well as the current run of wikileaks and Alefantis' instagram account - which had an avatar photo of the 13 yr old lover of a roman emperor.

    Is that much fake news a possibility? Or has this smoke been blowing for years and we've all been too distracted to stop and look for fire?

    JacksNight eforce Dec 8, 2016 10:43 PM ,
    Happy Advent everyone! "Glory to God in the highest heaven, and on earth peace to those on whom his favor rests."

    Matthew 5:43-48

    PizzaGate/TwitterGate/RedditGate repost:

    PizzaGate Infographic:

    http://sli.mg/lwgIgH

    Archived reddit thread to fellow journalists which led to the banning of r/pizzagate:

    https://archive.fo/MrsGu

    Andrew Breitbart tweets before death adds fuel to online speculation of D.C. sex-trafficking ring:

    https://i.sli.mg/C9U1nQ.jpg

    The Pedophocracy by David McGowan – Bibliography included:

    http://www.whale.to/b/pedophocracy.html

    FBI Special Agent Ted Gunderson outlines satanic pedophile elements in the United States:

    https://www.youtube.com/watch?v=BplUD6kQYuU

    Evidence regarding international pedophile rings being protected by police and intelligence agencies:

    https://www.reddit.com/r/conspiracy/comments/1cm0t3/original_research_the_mountain_of_evidence_for_a/

    // //
    Draybin Defferc... eforce Dec 8, 2016 10:30 PM ,
    What floors me about the whole pizzagate thing is the evil staring us right in the face. And then to realize that the libtards don't even believe in evil at all, only "mental illness"!
    Umh Dec 8, 2016 10:22 PM ,
    Lesson #1: Do not waste your time figuring some things out. Things like evil people are probably beyond a decent persons ability to understand and let's be honest I don't want to feel any sympathy for them anyway.
    peddling-fiction Umh Dec 8, 2016 10:30 PM ,
    Invest some time if you want to understand what is going on> http://www.bibliotecapleyades.net/sociopolitica/hiddenevil/hiddenevil.htm
    Uwantsun Dec 8, 2016 10:22 PM ,
    PIZZAGATE IS REAL. All else is intrigue.
    peddling-fiction Uwantsun Dec 8, 2016 10:34 PM ,
    PIZZAGATE

    Why does this artist paint this-> https://pbs.twimg.com/media/CyS0-oIUQAAJ7e8.jpg

    freddymercury Dec 8, 2016 10:22 PM ,
    The 'devil' is in the details
    Armadillo Bandit freddymercury Dec 8, 2016 10:33 PM ,
    Good subject to show your wit on.
    conraddobler Dec 8, 2016 10:35 PM ,
    True liberty does not exist and will never exist if the oxygen in the room is owned and rented back to you.

    Soul Glow Dec 8, 2016 10:33 PM ,
    The best thing about Pizzagate is that it vindicates Breitbart's tweets before he died about Podesta being a pedophile.

    https://i.sli.mg/C9U1nQ.jpg

    peddling-fiction Soul Glow Dec 8, 2016 10:38 PM ,
    May he rest in peace. No fear.
    JTimchenko Dec 8, 2016 10:39 PM ,
    Lots of evil going on... but people ought not to be nuts enough to go into some pizza joint with a gun firing just because rumors are flying.
    Soul Glow JTimchenko Dec 8, 2016 10:43 PM ,
    I'm all for gold manipulation. Leaves more time for me to buy it!

    ;)

    Neighbour Dec 8, 2016 10:37 PM ,
    Man knows Good and Evil, which is the tree of knowledge of Good and Evil. Man does not know God-Yet!

    When we are brought low, then we will know God, inwhich he will offer to us The Tree of Life.

    Keep your eyes open and ears tuned...our world is spinning faster and more violently then ever.

    cherry picker Neighbour Dec 8, 2016 10:54 PM ,
    The deeds of humans bring this out.

    This recent election illustrates how evil works.

    Read a book years ago by Dr. Karl Menninger, a psychiatrist, titled 'Whatever happened to Sin?'

    In it he talks of murder and that it is not a natural thing for man to do,. However, when the burden of guilt is spread over many shoulders and government condones the action, it becomes easier to bear.

    When observing the results, such as soldiers returning from war, unstable mentally, it is evident that evil has occured. It has been decades since I read the book, so the words I wrote may not be verbatim.

    dark pools of soros Dec 8, 2016 10:37 PM ,
    Good article.. must be fake

    ebworthen Dec 8, 2016 10:39 PM ,
    Wall Street, Washington, the FED, and the Kleptoligarchy are evil; Satanic.

    Was there a question in there somewhere?

    quax Dec 8, 2016 10:41 PM ,
    Unlike victimless Pizzagate a victim aledged to have been raped by Trump at the age of 13 did come forward, but this has been all but ignored here.
    kuwa mzuri quax Dec 8, 2016 10:50 PM ,
    You're saying raped, tortured, snuffed and maybe eaten child victims haven't come forward?

    You've got a point, then.

    stant Dec 8, 2016 10:41 PM ,
    Peak evil is hear , forget peak oil , peak debt etc
    Armadillo Bandit Dec 8, 2016 10:42 PM ,
    Lurked ZH for years, just started reading the comments. This is worse than Reddit's echo chamber. Bible quotes? 3 guys 1 hammer on liveleak has more productive comments. Why not mention methods you've used to help people reach their own conclusion about Pizzagate?
    Handful of Dust Dec 8, 2016 10:43 PM ,
    I had two slices of pizza for dinner. I had to try not to think of the poor children walking innocently about the store who may at any moment fall victim to a pedo. My gf said pizza places all over now need to keep a keen eye out for the Posdesta Brothers and their Gang after all the stuff that has come out from WikiLeaks and other sources about them.

    I notice the Podesta Brothers are now in hiding.

    Shameful.

    flaminratzazz Dec 8, 2016 10:51 PM ,
    The bible says God created evil and loosed it on us. The correct reading of Genesis 4;1 is from the dead sea scrolls stating :

    "And Adam knew his wife Eve, who was pregnant by Sammael [Satan] , and she conceived and bare Cain, and he was like the heavenly beings, and not like earthly beings, and she said, I have gotten a man from the angel of the Lord."

    So in Isaiah 45:7 we have this:

    I form the light, and create darkness: I make peace, and create evil: I the LORD do all these things .

    So my research shows evil was "grafted" into humans through the unholy alliance and 2 seedline of people resulted.

    US and THEM

    you can see it in their eyes

    kuwa mzuri Dec 8, 2016 10:54 PM ,
    Good article but an exception: evil doesn't reside in all of us, sin does. Evil is the expression of wanton and intentional deception, injury, degradation, and destruction and rarely self-recognizes or admits to God as supreme. It may be DNA encoded. Sociopathy certainly is.

    But you're so right about the organized nature of it all, and for thousands of years. The newly formed EU didn't advertise itself as the New Babylonia for nothing on publicty posters, heralding the coming age of one tongue out of many and fashioning its parliament building after the Tower of Bablyon:

    http://nteb-mudflowermedia.netdna-ssl.com/wp-content/uploads/2015/02/eur...

    Secret societies are cannibalizing us, and themselves, but members won't know till it's too late that they'll also be eaten fairly early on. Of all "people", they should know those in the pyramid capstone won't have enough elbow room if they let in every Tom, Dick and Harry Mason.

    HRH Feant Dec 8, 2016 10:47 PM ,
    I am sympatico with Brandon. I have always had similar interests, about the soul, about ethics, about human behavior.

    The reality is that evil is extant in other human beings. The thought that your property manager is going to piss in your OJ or fuck their BFF in your bed is abhorrent to most people, but not all. There was an article this week about a married couple that had concerns about their rental unit manager. And what did they find? He was fucking his BFF (yes, of course it was another dude) in their bed. The good news is they got it on video and moved. The bad news? This kind of attitude is rampant. People don't give a shit about other people. They think the rules don't apply to them. That they are special. The result is renting from some asshat that fucks in your bed or pisses in your OJ. Or parents that wonder why little Johnny or little Janie never move out of the house and are stoned and play video games all day.

    Evil exists, in varying forms. Sadly too many people continue to make excuses for not only bad behavior but evil behavior. I don't think that way and I don't live my life that way but I am fully aware of all the morons stumbling through the world that do.

    Ms No Dec 8, 2016 10:50 PM ,
    I think people are misunderstanding the setup theory. Nobody believes, at least I hope not, that all of this art and bizarre behavior on the part of these freaks was staged for the purposes of taking down the last of our free media, but rather, they just took advantage of a situation where they knew people were making accusations that couldn't be sufficiently backed up or even prosecuted, and yet caused proven or contrived damages to people. If this is the case, their intention, with the help of intelligence agencies , is to frame alt-media for starting vigilante violence and the destruction of innocent people's lives through promoting defamation against others.

    I have no doubt that our entire system is riddled with pedophilia and likely much worse. They have also been getting away with this forever, so when we go for the takedown we better have our ducks in a row. To do otherwise will just give these sickos complete immunity and more decades will pass with them continuing to prey on our children. Not only is this at stake but the fate of all the children of this nation is at stake if we lose our media. We are in very dangerous and treacherous times. When you go toe to toe with the professional trade crafters you have to play smart or they will have you every time.

    Once people have had enough exposure to NPDs or psychopaths you will vibe them after a while. I imagine this is likely the case for anyone who has worked as a trader, finance, politics, big commodity booms are bad, etc. We have all encountered them somewhere. People should pay attention to how they feel (yeah I know, people hate that word) when they are around people. I have to pretend that I don't notice them because it is so apparent to me and immediately.

    The last time I picked one out at work, a few months later the creepy bastard walked past me at night during a -20 blizzard, with next to no visibility, knowing that I had an hour drive, and told me in super spooky whisper.. "Don't hit a deer on your way home now." I found out later that a bunch of horses had mysteriously died in his care and a bunch of other things that confirmed my suspicions. I had a long battle with him so I eventually got to understand him pretty well. I didn't have to hear the guy state a single sentence or watch any body language, I just knew immediately because I could feel his malevolence and threat in my stomach where we have a large nerve cluster. Pay attention and you will know. Also their eye contact is all wrong and too intense.

    Aussiekiwi Dec 8, 2016 10:55 PM ,
    Globalism, is designed to make you poorer slowly over decades by allowing wages and conditions to be for ever slowly reduced under the guise of free market competition to funnel wealth ever upwards to the 1%.

    [Dec 07, 2016] Macroeconomics in the Crossfire (Again)

    ""The trouble is not so much that macroeconomists say things that are inconsistent with the facts." -- that's a clear sign of a cult.
    Notable quotes:
    "... "The trouble is not so much that macroeconomists say things that are inconsistent with the facts. The real trouble is that other economists do not care that the macroeconomists do not care about the facts. An indifferent tolerance of obvious error is even more corrosive to science than committed advocacy of error." ..."
    "... The obvious explanation is ideological. While Simon Wren Lewis cannot prove it was ideological, it is difficult to understand why one would choose to develop theories that ignore some of the existing evidence, in an area that lacks data. There is a reluctance among the majority of economists to admit that some among them may not be following the scientific method but may instead be making choices on ideological grounds. This is the essence of Romer's critique. ..."
    "... ...it is all but indistinguishable from Milton Friedman's ideologically-driven description of the macroeconomy. In particular, Milton Friedman's prohibition of fiscal policy is retained with a caveat about the zero-lower bound in recent years. To argue otherwise is to deny Keynes' dictum that 'the ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood.' ..."
    "... What I find most egregous in Neo-classicism, is it's failure to accept that people invented government to perform tasks they individually could not. ..."
    "... Economics is a foul and pestilent ghetto, an intellectual dead-end akin to Ptolemaic astronomy. The priests will continue adding epicycles to epicycles until they are dragged screaming to the asylum. ..."
    "... There is always some revered academic economist readily available to support virtually any political narrative imaginable, even if it's total rubbish. It is truly a "science" for all seasons fostered by reverend figures with authority earned by many years diligent practice in translating gibberish into runes of mathematical formulae. That's more dainty than poking about in sheep guts with a sharp stick, but of little more use in the real world which lies outside the ivied towers. ..."
    "... Diligence blesses them with tenure followed by offers to serve private or public patrons perpetually engaged in rent-seeking. These made men (and women) are essentially set for life, regardless of whatever nonsense they may forever promote thereafter. A few are blessed by the good luck of a Nobel which guarantees a prosperous sinecure and unlimited opportunity to promote their own vacuous political narratives masqueraded as "science". ..."
    "... This cult enjoys perpetual protection within public and private safe spaces created by their well-heeled paymasters. It is one of a number of deeply attached parasites which cannot be safely excised from the corrupt body of the host without killing it. ..."
    "... I should add that neoclassical economics has damaged economics by excluding explicitly the government sector in their models. As a result, the impact of government on the macroeconomy has not been properly understood ..."
    "... Do the economists he names really not understand the computer stat model they are using? Are they admitting to making up the fudge factors to make their 'data' fit their (wrong headed) totem pole, supply and demand? I mean, there it is in black and white, by the economists' own words, that their math is just flat out wrong. ..."
    "... The economics I learned in the early 1960's seems to work as well now as it did back then. I was lucky enough to be so busy at work in the decades that followed, that I did not have a chance to keep up on the mis-education of the time. When I had the time to start paying more attention to the subject again, I couldn't understand what had happened to the knowledge that I had learned that seemed to explain all that was happening in the economy. ..."
    "... The Neolib-Globalist Ministry Of Truth erased it. You must not have got the memo. ..."
    "... It's 2016 and some Dismal Scientists are still debating whether "involuntary unemployment" exists. ..."
    "... If anything, Philip Mirowski has persuasively argued that neoliberalism requires a powerful State. ..."
    "... He has shown that the neoliberal thought collective theorized an elaborate political mobilization, and recognized early on that the creation of a new market is a political process requiring the intervention of organized power. The political will to impose a market required a strong state and elaborate regulation and also that the State would need to expand its economic and political power over time. ..."
    "... The neoliberal market had to be imposed it did not just happen. A key issue for the future is defining the nature of the state–whether under neoliberalism or MMT or under Trump or Sanders, or left populist or right populist. ..."
    "... Mankiw belongs in the non-ideological camp? I don't see how anybody with a brain could read any of his work past the first page and still hold that view. ..."
    "... agreed, Mankiw is an intellectual clown and he has been mis-educating students for decades now. ..."
    Dec 07, 2016 | www.nakedcapitalism.com

    Romer kicked off the debate in an essay, stating that for more than three decades, macroeconomics has gone backwards. He finds that the treatment of identification now is no more credible than in the early 1970s, but escapes challenge because it is so much more opaque. Macroeconomic theorists dismiss mere facts by feigning an obtuse ignorance about such simple assertions as "tight monetary policy can cause a recession." For Romer, the Nobel Prize-winning crop of macroeconomic theorists who transformed the field in the late 1970s and 1980s - Robert Lucas, Edward Prescott and Thomas Sargent – are the main people to be held responsible for this this development. Their models attribute fluctuations in aggregate variables to imaginary causal forces that are not influenced by actions that any person takes. Especially when it comes to monetary policy, the belief that it has no or little effect on the economy is disturbing, or as Romer puts it:

    "The trouble is not so much that macroeconomists say things that are inconsistent with the facts. The real trouble is that other economists do not care that the macroeconomists do not care about the facts. An indifferent tolerance of obvious error is even more corrosive to science than committed advocacy of error."

    ... ... ...

    Simon Wren-Lewis identifies yet another factor which lies at the heart of macroeconomic criticism: ideology. As an example he quotes Real Business Cycle (RBC) research from a few decades ago. That was only made possible because economists chose to ignore evidence about the nature of unemployment in recessions. There is overwhelming evidence that employment declines in a recession because workers are fired rather than choosing not to work, and that the resulting increase in unemployment is involuntary (those fired would have rather retained their job at their previous wage). Both facts are incompatible with the RBC model. Why would researchers try to build models of business cycles where these cycles require no policy intervention, and ignore key evidence in doing so? The obvious explanation is ideological. While Simon Wren Lewis cannot prove it was ideological, it is difficult to understand why one would choose to develop theories that ignore some of the existing evidence, in an area that lacks data. There is a reluctance among the majority of economists to admit that some among them may not be following the scientific method but may instead be making choices on ideological grounds. This is the essence of Romer's critique.

    ...it is all but indistinguishable from Milton Friedman's ideologically-driven description of the macroeconomy. In particular, Milton Friedman's prohibition of fiscal policy is retained with a caveat about the zero-lower bound in recent years. To argue otherwise is to deny Keynes' dictum that 'the ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood.'


    PlutoniumKun, December 6, 2016 at 4:18 am

    I can recall my very first lecture in Macroeconomics back in the mid 1980's when the Prof. freely admitted that macro had very little real world validity as the models simply didn't match the real world data. He advised us to focus on economic history if we wanted to understand how the real world worked. That was the only useful thing I learned from three years studying the subject.


    Dr. George W. Oprisko, December 6, 2016 at 7:21 am

    I cut y teeth on computer models of rainfall – streamflow relationships. We always started with constants derived from experimental or theoretical bases

    Recently I was asked to critique a paper written by a colleague which reported results of a numeric model of plankton distribution in the Arabian Sea. In this paper his original constants based on known relationships gave results which did not agree with reality, so instead of looking for mistakes in his fundamentals, he massaged the constants until he got agreement. When I pointed out that he neglected the Somali Current, he was livid. That is, instead of thanking me for pointing out a glaring deficiency in his methodology, he chose to obfuscate.

    I see the same thing prevalent in macro-economics, with the sole exception of Modern Monetary Theory. I find MMT to be the only variant which concretely explains the real economy.

    What I find most egregous in Neo-classicism, is it's failure to accept that people invented government to perform tasks they individually could not.

    iNDY

    Jake, December 6, 2016 at 5:24 am

    ..and none of the economists were held responsible, refused tenure, tried in court or had their nobel prizes taken away. They continued serving their pay masters or their ideologies and nothing changed. Life went on, gradually becoming shittier, full of anxiety and ultimately meaningless. But hey atleast the great information processor is satisfying your utility!

    PlutoniumKun,

    December 6, 2016 at 6:23 am


    One Irish macro professor did quite well after the Irish economic crash (2008) informing everyone about the correct policy approaches on various public media. His university department had one of his peer reviewed papers online dating from 2005 which advocated the adoption of US style sub-prime mortgages as a 'solution' to rising housing costs. Around 2010 the paper was quietly removed from all servers. I regret not saving a copy so it could be linked to every time he popped up in public.

    UserFriendly, December 6, 2016 at 3:01 pm

    If you bookmarked it: https://archive.org/web/

    or if it was a research papser, find it here: https://scholar.google.com/

    look for the doi and plug that in here (site does not work in Chrome) http://gen.lib.rus.ec/scimag/index.php or here http://sci-hub.cc/
    The 1st has an author search too, but it isn't as good, but it might work.

    I Have Strange Dreams, December 6, 2016 at 5:43 am

    Kill it with fire!

    Economics is a foul and pestilent ghetto, an intellectual dead-end akin to Ptolemaic astronomy. The priests will continue adding epicycles to epicycles until they are dragged screaming to the asylum.

    Burn the whole subject to the ground and sow the razed economics departments with salt. Require economists to ring a bell when approaching the uninfected and cry "unclean! unclean!"

    makedoanmend December 6, 2016 at 7:58 am

    "unclean! unclean!"

    actually belly-laughed – 1st ever belly-laugh from an interweb comment – Bravisimmo!

    H/e, can't agree with you re: economics. As a historical and social area of study, it is valid in my book – even a necessity. Still, my eyes cross lately when I read the latest in economic "theory" on any scale. Such a dreary and detached subject these days. Rootless and toothless. Too bad.

    best

    Steve H. December 6, 2016 at 9:23 am

    Every time a bell rings, an angel gets his wings. That is a called a positive externality in macroeconomics, and can therefore be defined in an equation. Which makes it thus so.

    bh2 December 6, 2016 at 1:19 pm

    There is no chance of killing off this mystery cult as long as politicians rely on its ruminations and incantations to help perpetuate them in office.

    There is always some revered academic economist readily available to support virtually any political narrative imaginable, even if it's total rubbish. It is truly a "science" for all seasons fostered by reverend figures with authority earned by many years diligent practice in translating gibberish into runes of mathematical formulae. That's more dainty than poking about in sheep guts with a sharp stick, but of little more use in the real world which lies outside the ivied towers.

    Economists, like carny balloon sellers, are paid based on volume, not weight. Diligence blesses them with tenure followed by offers to serve private or public patrons perpetually engaged in rent-seeking. These made men (and women) are essentially set for life, regardless of whatever nonsense they may forever promote thereafter. A few are blessed by the good luck of a Nobel which guarantees a prosperous sinecure and unlimited opportunity to promote their own vacuous political narratives masqueraded as "science".

    This cult enjoys perpetual protection within public and private safe spaces created by their well-heeled paymasters. It is one of a number of deeply attached parasites which cannot be safely excised from the corrupt body of the host without killing it.

    Lyonwiss December 6, 2016 at 6:31 am

    We live in a post-truth or post-fact world, where truth and fact do not matter.

    But the fact is: Keynes has never gone away in the sense that governments have always been trying to manage the economy with fiscal and monetary policies – which (to me) is the essence of Keynes and macroeconomics. Most governments run budget deficits to stimulate demand. It is merely cognitive dissonance of academics to think neoclassical economics only is mainstream and solely responsible for the GFC, just because to them there is an apparent bias in research funding at universities.

    Yves Smith Post author December 6, 2016 at 6:39 am

    Have to tell you I don't agree entirely.

    First, government is such a huge portion of the economy that its actions have huge influence and therefore the impact has to be managed. Pretending you can have some type of neutral autopilot is a false idea, but that is the bedrock of economic thinking, that economies have a natural propensity to equilibrium and that equilibrium is full employment.

    Second, it's not done much these days, but the best forms of intervention are ones that are naturally countercyclical so you don't have politicians wrangling and have pork and election timing and results and inertia get in the way.

    Lyonwiss December 6, 2016 at 6:57 am

    I'm not defending neoclassical economics. In economics, the alternative to a wrong is another wrong. Governments are politically compelled to intervene. But with the Keynesian economic fallacy, their interventions make things worse in the long-run. Please visit my blog:

    http://www.asepp.com/keynesian-fallacy-collapse/

    OpenThePodBayDoorsHAL December 6, 2016 at 3:19 pm

    "The Battle of Bretton Woods" is very instructive. Start with two intellectuals (Keynes and Harry Dexter White) who were big fans of Stalinist Russia's command economy ("I've seen the future and it works!"). Last time I checked this kind of tomfoolery ("we will raise X number of cows because we think we'll need leather for Y number of shoes") has been utterly discredited. Implement for the global currency and trade systems. Fast forward to today where there are massive imbalances, global currency wars, and a race to zero and beyond that has sucked all demand from the future to the present and now the past. And the shining answer, the clarion rallying cry, is "we just need more debt, and we need some new rugs to sweep all the bad debt under".

    All while "macro-economists" propagate models that completely misunderstand how money is actually created and distributed. All I can say is "Forward Soviet!".

    Ruben December 6, 2016 at 9:17 am

    Indeed. Gov't is the biggest business in town in every economy, everything else, even giant corporations, are minuscule players in comparison. This is a large source of dynamical behavior, the swings and re-balancing as the State throw its weight around in the marketplace.

    diptherio December 6, 2016 at 10:33 am

    the bedrock of economic thinking, that economies have a natural propensity to equilibrium and that equilibrium is full employment

    And, of course, "full employment" is defined as whatever level of employment actually exists 'cause science!

    Lyonwiss December 6, 2016 at 3:52 pm

    I should add that neoclassical economics has damaged economics by excluding explicitly the government sector in their models. As a result, the impact of government on the macroeconomy has not been properly understood. The empirical facts, without theories or equilibrium assumptions etc., show the failure of government policy of demand stimulation: http://www.asepp.com/fiscal-stimulus-of-consumption/

    Foppe December 6, 2016 at 7:02 am

    It seems to me that for something to be called "keynesian", it should also mean that the aim of those policies was to help create robust private demand (though I doubt Keynes was as emotionally handicapped as today's mainstream bean-counting theorists are, if only because gdp figures didn't yet dominate macro thinking in the manner they do today, thanks to everyone having received "economics education" in school); if not, it wolud more fairly be called Marxist, because he was the one from whom Keynes (indirectly, as he refused to read Marx personally) pilfered his insights. What matters is whether we've got 'socialism for the rich / incumbents / industrial complexes', or "socialism" (well, social-democrat, liberal new-dealerism) for the "masses".

    craazyboy December 6, 2016 at 8:23 am

    Well, I have to say this article reminds me too much of the DNC sole searching over why Hillary didn't win. Just another room full of wantonly clueless people.

    Does start out on a high note where Romer states the problem is economists don't care if they are winging and slinging BS from their arses same as chimpanzees.

    I guess the article coulda ended there. But no.

    Noah Smith laments a shortage of macro data – so the who knows how many gigs at FRED are found wanting and I guess the BLS, etc aren't up to snuff either. Or maybe Noah means they are fabricating phoney data? Then Noah doubles down on the efficacy of interest rate policy – after 9 years in the liquidity trap.

    [Caution: The following is allegory – we are speaking of the high priestess here.]

    We then are treated to JYell and her discovery of the buggy whip. She states there is current research being done on buggy whips, and more research is necessary. She is able to use big words to speak of these buggy whips. Some of these words are borrowed from real science – making this more scientific. Like hysteresis – and even an example for lay-off people. It's possible you may never work again and add to the long term employment rate! Yikes. Worse yet, their definition of "long term" is longer than 6 months. After that, 7 months or retire at 30 is all the same to them. "Heterogeneity" is another good one. For use in polite company. Has an Evil Twin named inequality and a macro version called crony capitalism. JYell can keep the hits coming!

    I'm tired of typing someone else can take up the rest of it.

    craazyboy December 6, 2016 at 8:30 am

    oops. Editor asleep again. sole s/b soul. Or maybe not.

    Ruben December 6, 2016 at 9:06 am

    The complaint about not enough data struck me too; actually economist have vasts amounts of data to gain insights from and test hypothesis against because economies are well recorded human endeavours, recorded in actual painful detail thanks to the inexhaustible efforts of statemen and statewomen to know everything about the populations they control and harvest. Probably more data-oriented lines of research would lead to progress in macro-economy as a scholarly discipline?

    John Zelnicker December 6, 2016 at 9:40 am

    @Ruben – They want more data because the data that exists cannot be explained by their eloquent mathematical theories, which are based on assumptions that are ridiculous on their face e.g., rational expectations and utility maximization. The hope is that additional data will fit the theories better allowing them to remain comfortably ensconced in their fantasy world of regressions and p values.

    fledermaus December 6, 2016 at 2:37 pm

    Which is how we get adjustments to CPI based on the premise that CPI is overstating inflation. Now the hip thing is that productivity is undermeasured because economists don't like what the numbers are saying, so we can expect an upwards adjustment there as well.

    Barry December 6, 2016 at 12:52 pm

    One of the problems with all that data is that events not recorded or whose price can't be measured are defined as not really real.

    H. Alexander Ivey December 6, 2016 at 9:16 am

    I'll take up my keys then.

    Read Romer's article, twice. Will need a third try to fully get it, but as someone with a modest background in engineering and engineering mathematics, I still can't quite believe what Romer is saying. Do the economists he names really not understand the computer stat model they are using? Are they admitting to making up the fudge factors to make their 'data' fit their (wrong headed) totem pole, supply and demand? I mean, there it is in black and white, by the economists' own words, that their math is just flat out wrong.

    Now Romer is writing for the inside crowd, as an long time, connected insider himself, so don't expect an easy read. But he writes quite clearly what is the problem with economics so the main idea, that macro economics, in rejecting an early model of macro economics (Keynesian) because said model was based on a few openly stated fudge factors, have spent the last 40 years building models that are 1. full with even more fudge factors, 2. these fudge factors are never openly stated, and 3. the new models have given truly disastrous results in the real world (also known as the US economy, amoung others). Along the way, he names names and steps on some toes. Then he finishes up with a full charge of how the 'dismal science' is a lying religion, nothing at all like truth seeking science.

    Okay, I'll quit here before I hurt myself. Let someone else slam the keys. (haha)

    Steven Greenberg December 6, 2016 at 8:34 am

    The economics I learned in the early 1960's seems to work as well now as it did back then. I was lucky enough to be so busy at work in the decades that followed, that I did not have a chance to keep up on the mis-education of the time. When I had the time to start paying more attention to the subject again, I couldn't understand what had happened to the knowledge that I had learned that seemed to explain all that was happening in the economy.

    craazyboy December 6, 2016 at 6:10 pm

    The Neolib-Globalist Ministry Of Truth erased it. You must not have got the memo.

    Katharine December 6, 2016 at 10:05 am

    I was surprised to learn that Yellen had expressed any interest in the people permanently out of the labor market. I thought all the discussions of interest rates focused almost exclusively on what in my mind is the unemployment pseudo-rate, which completely ignores those people.

    Regardless of which rate is considered, I have never been able to comprehend the mind that can talk about acceptable levels of unemployment. Acceptable to whom? The people who lose their homes, and sometimes their neighborhood networks when they have to move, and may with just a little bad luck slide into still worse conditions? The communities that see more people becoming burglars, muggers, bank robbers, drug dealers, and prostitutes because only the illegal economy has any place for them? I have never seen a sustained or general effort to look at the economic consequences of those events, much less an admission of the immorality of causing so much trouble. It seems to me that a macroeconomics that divorces itself from those possibly micro concerns will be forever irrelevant to good policy.

    chuck roast December 6, 2016 at 11:50 am

    Way back prior to the great Permian-Triassic Extinction, I was fortunate enough to wander around an Economics Department where I could encounter intellectual dead-ends like Keynes, Marx, Polanyi, Kalecki, Veblen – all of whom prepared me to pump-gas at the local filling station oh wait!
    Having somehow successfully survived the subsequent big-brain epoch, I settled comfortably into making a modest annual donation to a scholarship fund for budding economists at the olde U. Then it came to my attention that not only could one still obtain a BA in Economics, but the olde school was also awarding two different Bachelor on Science degrees in Economics. Breathtaking! Economics, an actual science! Like for example physics!
    I am now in the reduced circumstance of donating only to my old high school in the doubtless vain hope that the youngsters will study enough science to be able to shoot these aspiring BS cone-heads to the moon.

    ChrisAtRU December 6, 2016 at 1:17 pm

    It's 2016 and some Dismal Scientists are still debating whether "involuntary unemployment" exists.

    #FacePalm

    Perhaps we should deploy them to that Carrier plant to investigate. So thankful for heterodox voices:
    Abba Lerner – Functional Finance
    Hyman Minsky – Financial Instability
    Wynne Godley – Sectoral Balances
    Entire MMT School – Mosler, Wray, Kelton, Tcherneva et al
    #ThereIsHope

    witters December 6, 2016 at 4:03 pm

    Gee, why attack the one healthy sector of the economy, the Wealth Defence Industry?

    (Why did so much of 'the social-democratic left' go along all this? I think John Rawls gave them the excuse. He said inequality is great if the worse off are better off under this economic system than they would be under a more equal one. The poor can therefore protest if they can show that if we did things more equally they would be better off. The task of the economist today is to ward this possibility off by ensuring that economic thought is utterly subservient to oligarchic extraction. It does this by lying – Trickle Down! Rising Tide Lifts all Boats! This has worn out. So next it does There Is No Alternative! – 'Those Jobs are Never Coming Back', 'Robots!' And finally, to make really certain, it turns the whole discipline into toadying intellectual fantasy. Romer homed in on the last.)

    Jim December 6, 2016 at 4:28 pm

    "Too much market and too little state invites a backlash."

    If anything, Philip Mirowski has persuasively argued that neoliberalism requires a powerful State.

    He has shown that the neoliberal thought collective theorized an elaborate political mobilization, and recognized early on that the creation of a new market is a political process requiring the intervention of organized power. The political will to impose a market required a strong state and elaborate regulation and also that the State would need to expand its economic and political power over time.

    The neoliberal market had to be imposed it did not just happen. A key issue for the future is defining the nature of the state–whether under neoliberalism or MMT or under Trump or Sanders, or left populist or right populist.

    ChrisPacific December 6, 2016 at 5:29 pm

    Mankiw belongs in the non-ideological camp? I don't see how anybody with a brain could read any of his work past the first page and still hold that view.

    I'm imagining them all as engineers on the deck of a half-submerged Titanic, debating about whether the hull integrity model might perhaps not have been 100% accurate.

    Robert NYC December 7, 2016 at 2:22 pm

    agreed, Mankiw is an intellectual clown and he has been mis-educating students for decades now.

    susan the other December 6, 2016 at 5:43 pm

    Ann Pettifor. give me ann pettifor always. she never puts the cart before the horse, only the ideological neoliberals try to do that while keeping a straight face – they are quintessential con artists if there ever were.

    Dick Burkhart December 6, 2016 at 10:00 pm

    Excellent article, except it failed to point out that there are realistic and successful modeling techniques, in addition to historical studies. These techniques are based on the nonlinear nature of real world economies. Just use complexity and evolutionary techniques like agent based models and nonlinear dynamical systems. Nothing new here – I still think that the limits-to-growth models ("system dynamics" = nonlinear dynamical systems) of the early 1970s represent the best mathematical economics ever done. And the economists' agent based models are just a variation on cellular automata, which have been used with notable success in other fields for many decades.

    The problem is that economists either maintained a deliberate ignorance of such methods, or have outright rejected them, like Nordhaus with system dynamics. In part this is because these techniques involve a different mind set: they trade off simplistic models that are easy to understand, but whose assumptions are demonstrably false, with complexity results that give much better real world results but have more nuanced narratives.

    RBHoughton December 6, 2016 at 10:17 pm

    Ann Pettifor is right about Brexit imo. The belief and the fact is that government is trying a fast one on the people without being straightforward in its motives or intentions and a major cause of the discontent and disillusionment seems to stem from the macro-economic error she highlights.

    People don't want this mumbo-jumbo any more. The old professions – medicine, accountancy, law – created jargons of specialist words and phrases (usually Latin) to make their speech and writings incomprehensible to the hoi polloi. Then in recent decades all sorts of trades have adopted the same jargon approach to mystifying their work. Enough already! Say what you mean, mean what you say.

    ewmayer December 7, 2016 at 4:06 am

    "Nick Bunker points out that in a recent speech, the Federal Reserve Chair Janet Yellen raised important questions about macroeconomic research in the wake of the Great Recession."

    Hint: Citing an ivory-tower twit like J-Yel as "raising important questions" is a huge bullshit tell. While she was at it, did Janet raise any important questions as to why virtually every highly credentialed macroeconomist on planet earth completely fail to foresee the global financial crisis and the massive distortions, in very large part caused by the machinations of the high priests of those "believers in the power of monetary policy", which portended its coming? But, on to the bullshit:

    "The first area of interest is the influence of aggregate demand on aggregate supply. Yellen points to research that increasingly finds so-called hysteresis effects in the macroeconomy. Hysteresis, a term borrowed from physics, is the idea that short-run shocks to the economy can alter its long-term trend. One example of hysteresis is workers who lose jobs in recessions and then are not drawn back into the labuor [sic] market but rather permanently locked out, therefore increasing the long-term unemployment rate."

    That's irreversibility, not hysteresis. The latter is a special case of the former, which the chosen example does not illustrate. An example of hysteresis from my shower's temperature control: I find the temp is a tad too high, and turn the control a bit toward the cold setting. But I overshoot my target, and now it's too cold. Nudge back toward hot, but the somewhat-sticky mechanism again overshoots and lands more or less on the starting "too hot" position. But the water is still too cold, and I find I have to nudge even further toward hot to fix that. That's hysteresis. In the context of the recession example, hysteresis would be e.g. if once the E/P ratio had recovered to its pre-recession level but growth and its correlates remained weaker than expected, say due to the "recovery jobs" being on average of poorer quality than those which were lost. Kinda like the current 8-year-long "recovery", come to think of it! But I will admit that glossing over such messy real-world details like "widespread worker immiseration" with hifalutin terminology-borrowed-form-actual-science like "hysteresis:" is a great way to make oneself sound important, cloistered there in one's ivory tower.

    "Another open research question that Yellen raises is the influence of "heterogeneity" on aggregate demand. Ignoring this heterogeneity in the housing market and its effects on economic inequality seems like something modern macroeconomics needs to resolve."

    Ah yes, "needs to resolve" - that implies lots of high-powered academic conferences and PhD theses. And it's so wonderfully wishy-washy compared to "is something only a joke pretend-scientific discipline would even need to consider stopping doing, because no self-respecting discipline would have abandoned assumptions of homogeneity in roughly Year 2 of said discipline's evolutionary history."

    "Yellen raises other areas of inquiry in her speech, including better understanding how the financial system is linked to the real economy and how the dynamics of inflation are determined.

    Hey, when y'all finally "better understand" how this whole "financial system" thingy is linked to the real economy, by all means do let us know, because it seems like such a linkage might have, like, "important ramifications", or something. As to inflation, you mean actual inflation, or the fake measures thereof the folks at the world's central banks make their stock in trade? You know, for example, "in determining house price inflation we studiously ignore actual house prices and instead use an artificial metric called Owner's Equivalent Rent, which itself studiously ignores actual prices renters pay. Ain't it cool?"

    Sorry if I sound grumpy, but this article is rather reminiscent of reading US Dem-party insiders pretending to "soul search" in re. Election 2016. Let's see:

    "Another open research question that Team HRC raises is the influence of "heterogeneity" on voting preference. Ignoring this heterogeneity in the electoral trends and its effects on election outcomes seems like something modern macroelectorodynamics needs to resolve."

    UserFriendly December 7, 2016 at 4:13 am

    Paragraph 2

    1970s and 1980s - Robert Lucas, Edward Prescott and Thomas Sargent – are the main people to be held responsible for this this development.

    Is there something I can say to make sure the automod snags me when I'm pointing out a typo so you don't have to keep the comment?

    [Dec 07, 2016] Bill Gross Reveals The Global Establishments Overall Plan In Eight Simple Steps Zero Hedge

    Dec 07, 2016 | www.zerohedge.com
    ... The full Bill Gross' latest monthly letter courtesy of Janus

    ...Well, solving the "Orange Is Not Free" dilemma may take time just as the solution to a global debt crisis (now seven years running) may take even longer. It helps though to understand what the plan is in order to invest accordingly. While I and others have been critical of its destructive, as opposed to constructive elements, it is the current global establishment's (including Trump's) overall plan, and the establishment's emphatic "whatever it takes" monetary policies are the law of our financial markets . It pays to not fight the tiger until it becomes obvious that another plan will by necessity replace it. That time is not now, but growing populism and the increasing ineffectiveness of monetary policy suggest an eventual transition. But back to the beginning which was sometime around 2009/2010:

    How policymakers plan to solve a long-term global debt crisis :

    1. As in Japan, the Eurozone, the U.S., and the UK, central banks bought/buy increasing amounts of government debt (QE), then rebate all interest to their Treasuries and eventually extend bond maturities . Someday they might even "forgive" the debt. Poof! It's gone.
    2. Keep interest rates artificially low to raise asset prices and bail out over-indebted zombie corporations and individuals . Extend and pretend.
    3. Talk about "normalization" to maintain as steep a yield curve as possible to help financial institutions with long-term liabilities , but normalize very, very slowly using financial repression.
    4. Liberalize accounting rules to make some potentially "bankrupt" insurance companies and pension funds appear solvent . Puerto Rico, anyone?
    5. Downgrade or never mention the low interest rate burden on household savers. Suggest it is a problem that eventually will be resolved by the "market".
    6. Begin to emphasize "fiscal" as opposed to "monetary" policy, but never mention Keynes or significant increases in government deficit spending. Use the buzzwords of "infrastructure" spending and "lower taxes". Everyone wants those potholes fixed, don't they? Everyone wants lower taxes too!
    7. Promote capitalism – even though government controlled, near zero percent interest rates distort markets and ultimately corrupt capitalism as we once understood it. Reintroduce Laffer Curve logic to significantly lower corporate taxes. Foster hope. Discourage acknowledgement of abysmal productivity trends which are a critical test of an economic system's effectiveness.
    8. If you are a policymaker or politician, plan to eventually retire from the Fed/Congress/ Executive Wing and claim it'll be up to the Millennials now. If you are an active as opposed to passive investment manager, fight the developing trend of low fee ETFs and index funds. But expect to retire with a nest egg.

    That's the plan dear reader, and President-elect Trump's policies fit neatly into numbers 6, 7 and 8. There's no doubt that many aspects of Trump's agenda are good for stocks and bad for bonds near term – tax cuts, deregulation, fiscal stimulus, etc. But longer term, investors must consider the negatives of Trump's anti-globalization ideas which may restrict trade and negatively affect corporate profits.

    In addition, the strong dollar weighs heavily on globalized corporations, especially tech stocks. Unconstrained strategies should increase cash and cash alternatives (such as high probability equity buy-out proposals). Bond durations and risk assets should be below benchmark targets.

    On TV, "Orange Is the New Black" yet, in the markets, " Red" (in some cases) may be the new "Green" when applied to future investment returns. Be careful – stay out of jail.


    Bill of Rights •Dec 6, 2016 9:50 AM


    As in Japan, the Eurozone, the U.S., and the UK, central banks bought/buy increasing amounts of government debt (QE), then rebate all interest to their Treasuries and eventually extend bond maturities. Someday they might even "forgive" the debt. Poof! It's gone.

    Load up folks its not gonna be paid back anyway...

    [Dec 07, 2016] Economic Growth in the United States: A Tale of Two Countries

    Notable quotes:
    "... Our first finding-a surge in income inequality ..."
    "... Our second finding-policies to ameliorate income inequality fall woefully short ..."
    "... Our third finding-comparing income inequality among countries is enlightening ..."
    Dec 07, 2016 | economistsview.typepad.com
    Thomas Piketty, Emmanuel Saez, Gabriel Zucman:

    Economic growth in the United States: A tale of two countries, by Thomas Piketty, Emmanuel Saez, Gabriel Zucman, Equitable Growth : Overview The rise of economic inequality is one of the most hotly debated issues today in the United States and indeed in the world. Yet economists and policymakers alike face important limitations when trying to measure and understand the rise of inequality.

    One major problem is the disconnect between macroeconomics and the study of economic inequality. Macroeconomics relies on national accounts data to study the growth of national income while the study of inequality relies on individual or household income, survey and tax data. Ideally all three sets of data should be consistent, but they are not. The total flow of income reported by households in survey or tax data adds up to barely 60 percent of the national income recorded in the national accounts, with this gap increasing over the past several decades. 1

    This disconnect between the different data sets makes it hard to address important economic and policy questions...

    A second major issue is that economists and policymakers do not have a comprehensive view of how government programs designed to ameliorate the worst effects of economic inequality actually affect inequality. Americans share almost one-third of the fruits of economic output (via taxes that help pay for an array of social services) through their federal, state, and local governments. ... Yet we do not have a clear measure of how the distribution of pre-tax income differs from the distribution of income after taxes are levied and after government spending is taken into account. This makes it hard to assess the extent to which governments make income growth more equal. 2

    In a recent paper , the three authors of this issue brief attempt to create inequality statistics for the United States that overcome the limitations of existing data by creating distributional national accounts. 3 We combine tax, survey, and national accounts data to build a new series on the distribution of national income. ... Our distributional national accounts enable us to provide decompositions of growth by income groups consistent with macroeconomic growth.

    In our paper, we calculate the distribution of both pre-tax and post-tax income. The post-tax series deducts all taxes and then adds back all transfers and public spending so that both pre-tax and post-tax incomes add up to national income. This allows us to provide the first comprehensive view of how government redistribution in the United States affects inequality. Our benchmark series use the adult individual as the unit of observation and split income equally among spouses in married couples. But we also produce series where each spouse is assigned their own labor income, allowing us to study gender inequality and its impact on overall income inequality. In this short summary, we would like to highlight three striking findings.

    Our first finding-a surge in income inequality

    First, our data show that the bottom half of the income distribution in the United States has been completely shut off from economic growth since the 1970s. ...

    It's a tale of two countries. For the 117 million U.S. adults in the bottom half of the income distribution, growth has been non-existent for a generation while at the top of the ladder it has been extraordinarily strong. And this stagnation of national income accruing at the bottom is not due to population aging. ...

    Our second finding-policies to ameliorate income inequality fall woefully short

    Our second main finding is that government redistribution has offset only a small fraction of the increase in pre-tax inequality. ...

    Our third finding-comparing income inequality among countries is enlightening

    Third, an advantage of our new series is that it allows us to directly compare income across countries. Our long-term goal is to create distributional national accounts for as many countries as possible; all the results will be made available online on the World Wealth and Income Database . One example of the value of these efforts is to compare the average bottom 50 percent pre-tax incomes in the United States and France. 8 In sharp contrast with the United States, in France the bottom 50 percent of real (inflation-adjusted) pre-tax incomes grew by 32 percent from 1980 to 2014, at approximately the same rate as national income per adult. While the bottom 50 percent of incomes were 11 percent lower in France than in the United States in 1980, they are now 16 percent higher. (See Figure 3.) ... Since the welfare state is more generous in France, the gap between the bottom 50 percent of income earners in France and the United States would be even greater after taxes and transfers.

    The diverging trends in the distribution of pre-tax income across France and the United States-two advanced economies subject to the same forces of technological progress and globalization-show that working-class incomes are not bound to stagnate in Western countries. In the United States, the stagnation of bottom 50 percent of incomes and the upsurge in the top 1 percent coincided with drastically reduced progressive taxation, widespread deregulation of industries and services, particularly the financial services industry, weakened unions, and an eroding minimum wage.

    Conclusion

    Given the generation-long stagnation of the pre-tax incomes among the bottom 50 percent of wage earners in the United States, we feel that the policy discussion at the federal, state, and local levels should focus on how to equalize the distribution of human capital, financial capital, and bargaining power rather than merely the redistribution of national income after taxes. Policies that could raise the pre-tax incomes of the bottom 50 percent of income earners could include:

    • Improved education and access to skills, which may require major changes in the system of education finance and admission
    • Reforms of labor market institutions to boost workers' bargaining power and including a higher minimum wage
    • Corporate governance reforms and worker co-determination of the distribution of profits
    • Steeply progressive taxation that affects the determination of pay and salaries and the pre-tax distribution of income, particularly at the top end

    The different levels of government in the United States today obviously have the power to make income distribution more unequal, but they also have the power to make economic growth in America more equitable again. Potentially pro-growth economic policies should always be discussed alongside their consequences for the distribution of national income and concrete ways to mitigate their unequalizing effects. We hope that the distributional national accounts we present today can prove to be useful for such policy evaluations. ...

    Posted by Mark Thoma on Tuesday, December 6, 2016 at 12:30 PM in Economics , Income Distribution | Permalink Comments (37)

    View blog reactions

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    Comments Feed You can follow this conversation by subscribing to the comment feed for this post. pgl : , December 06, 2016 at 12:37 PM

    Gabriel Zucman is doing excellent work on this issue as well as how the rich shift income offshore to tax havens.
    pgl : , December 06, 2016 at 12:39 PM
    "Reforms of labor market institutions to boost workers' bargaining power and including a higher minimum wage"

    The argument for this just gets stronger and stronger. Alas, I do not trust Trump to push for this agenda. I hope my distrust is misplaced.

    Denis Drew -> pgl... , December 06, 2016 at 02:44 PM
    Progressive states can push it on their own -- re-constituting union density locally. Just need to add some dimension of enforcement to what the NLRB helplessly considers illegal -- actually protect employees right to organize commercially.

    http://ontodayspage.blogspot.com/2016/11/first-100-days-progressive-states-agenda.html

    sanjait -> pgl... , December 06, 2016 at 02:54 PM
    "Alas, I do not trust Trump to push for this agenda. I hope my distrust is misplaced."

    I would hold out no hope for this. Trumputin is not going to empower the people vs the oligarchs. You can with high confidence expect he will do the opposite.

    Paul Mathis -> pgl... , December 06, 2016 at 03:35 PM
    Fox Noise Viewers and Trump Voters

    Are the folks in the bottom half who are getting screwed over. They blame the Mexicans and Chinese for their fates. They made their choice, let them live with it.

    The Rage : , December 06, 2016 at 12:43 PM
    This is just capitalism.
    DrDick -> The Rage... , December 06, 2016 at 12:46 PM
    No, it is unjust capitalism (redundant, I know).
    The Rage -> DrDick... , December 06, 2016 at 01:00 PM
    All capitalism is "unjust".
    pgl -> The Rage... , December 06, 2016 at 01:43 PM
    You left out the key line "workers of the world unite". Yep - I'm on a unionization drive.
    Peter K -> pgl... , December 06, 2016 at 01:54 PM
    Then why were you for Hillary over Sanders? Doesn't make sense.

    Did PGL get woke???

    LOL

    Or is it just that a Republican is in the White House?

    pgl -> Peter K... , December 06, 2016 at 02:34 PM
    Snore!
    DrDick -> The Rage... , December 06, 2016 at 02:40 PM
    As I said, redundant.
    anne : , December 06, 2016 at 12:45 PM
    http://www.nytimes.com/2016/12/06/business/economy/a-bigger-economic-pie-but-a-smaller-slice-for-half-of-the-us.html

    December 6, 2016

    Economic Pie Grows, but Half of U.S. Gets Smaller Slice
    By PATRICIA COHEN

    In 35 years, the U.S. economy has more than doubled, but new research shows close to zero growth for working-age adults in the bottom 50 percent of income.

    Fred C. Dobbs -> anne... , December 06, 2016 at 12:50 PM
    A Bigger Economic Pie, but a Smaller Slice
    for Half of the U.S. http://nyti.ms/2hdlnuU
    NYT - PATRICIA COHEN - December 6

    Even with all the setbacks from recessions, burst bubbles and vanishing industries, the United States has still pumped out breathtaking riches over the last three and half decades.

    The real economy more than doubled in size; the government now uses a substantial share of that bounty to hand over as much as $5 trillion to help working families, older people, disabled and unemployed people pay for a home, visit a doctor and put their children through school.

    Yet for half of all Americans, their share of the total economic pie has shrunk significantly, new research has found.

    This group - the approximately 117 million adults stuck on the lower half of the income ladder - "has been completely shut off from economic growth since the 1970s," the team of economists found. "Even after taxes and transfers, there has been close to zero growth for working-age adults in the bottom 50 percent."

    The new findings, by the economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman, provide the most thoroughgoing analysis to date of how the income kitty - like paychecks, profit-sharing, fringe benefits and food stamps - is divided among the American population.

    Inequality has been a defining national issue for nearly a decade, thanks in part to groundbreaking research done by Mr. Piketty at the Paris School of Economics and Mr. Saez at the University of California, Berkeley.

    But now a new administration in Washington is promising to reshape the government's role in curbing the intense concentration of wealth at the top and improving the fortunes of those left behind.

    During his tenure in the White House, President Obama pushed to address income stagnation by shifting more of the tax burden from the middle class to the rich and expanding public programs like universal health insurance.

    Both strategies are now targeted by President-elect Donald J. Trump and Republicans in Congress, led by House Speaker Paul Ryan. Like many conservatives, Mr. Ryan argues that aid to the poor is ultimately counterproductive because it undermines the incentive to work. Proposals put forward by Republican leaders, though short on details, make clear that they want to roll back benefits like Medicaid and the Affordable Care Act, which primarily help the poor, and direct the largest tax cuts to the wealthiest Americans.

    About 30 percent of the country's income is channeled to federal, state and local taxes. Apart from military spending and performing basic public services, much of that is distributed back to individuals through various programs and tax benefits in the form of Social Security checks, Medicare benefits and veterans' benefits. But until now, no one has truly measured the full impact that tax payments, government spending, noncash benefits and nontaxable income together have on inequality.

    Abundant documentation of income inequality already exists, but it has been challenged as incomplete. Studies have excluded the impact of taxes and value of public benefits, skeptics complained, or failed to account for the smaller size of households over time.

    This latest project tries to address those earlier criticisms. What the trio of economists found is that the spectacular growth in incomes at the peak has so outpaced the small increase at the bottom from public programs intended to ameliorate poverty and inequality that the gap between the wealthiest and everyone else has continued to widen.

    Stagnant wages have sliced the share of income collected by the bottom half of the population to 12.5 percent in 2014, from 20 percent of the total in 1980. Where did that money go? Essentially, to the top 1 percent, whose share of the nation's income nearly doubled to more than 20 percent during that same 34-year period.

    Average incomes grew by 61 percent. But nearly $7 out of every additional $10 went to those in the top tenth of the income scale.

    Inequality has soared over that period. In 1980, the researchers found, someone in the top 1 percent earned on average $428,200 a year - about 27 times more than the typical person in the bottom half, whose annual income equaled $16,000.

    Today, half of American adults are still pretty much earning that same $16,000 on average - in 1980 dollars, adjusted for inflation - while members of the top 1 percent now bring home $1,304,800 - 81 times as much.

    That ratio, the authors point out, "is similar to the gap between the average income in the United States and the average income in the world's poorest countries, the war-torn Democratic Republic of Congo, Central African Republic and Burundi."

    The growth of incomes has probably increased a bit since 2014, the latest year for which full data exists, said Mr. Zucman, who, like Mr. Saez, also teaches at the University of California, Berkeley. But it is "not enough to make any significant difference to our long-run finding, and in particular, to affect the long-run stagnation of bottom-50-percent incomes." ...

    DrDick : , December 06, 2016 at 12:46 PM
    Damn, it is even worse than I thought, and I thought I was a pessimist.
    sanjait -> DrDick... , December 06, 2016 at 02:55 PM
    Yup, hard not to get discouraged in these times...
    anne : , December 06, 2016 at 12:49 PM
    http://www.nytimes.com/2016/12/06/business/economy/a-dilemma-for-humanity-stark-inequality-or-total-war.html

    December 6, 2016

    A Dilemma for Humanity: Stark Inequality or Total War
    By EDUARDO PORTER

    Drawing on history, Walter Scheidel of Stanford argues in a coming book that only all-out war might fundamentally alter how resources are distributed.

    Fred C. Dobbs -> anne... , December 06, 2016 at 01:05 PM
    (Thinking the unthinkable.)

    NYT: Is there nothing to be done about galloping inequality?

    Last year the typical American family experienced the fastest income gains since the government started measuring them in the 1960s. But the top 1 percent did even better, raising their share of income higher than it was when President Obama took office.

    Mr. Obama has led the most progressive administration since Lyndon B. Johnson's half a century ago, raising taxes on the rich to expand the safety net for the less fortunate. Still, by the White House's own account, eight years of trench warfare in Washington trimmed the top 1-percenters' share, after taxes and transfers, to only 15.4 percent, from 16.6 percent of the nation's income. It increased the slice going to the poorest fifth of families by 0.6 percentage point, to a grand total of 4 percent.

    The policies also helped push the Republican Party even further to the right, leading to the Tea Party - whose rabid opposition to government redistribution still shakes American politics. They did nothing to salve - and perhaps even added to - the stewing resentment of white working-class Americans who feel left out of the nation's advancements, producing the electoral victory for Donald J. Trump, who has proposed a tax plan that amounts to a lavish giveaway to the rich.

    The point is not that President Obama should have done better. He probably did the best he could under the circumstances. The point is that delivering deep and lasting reductions in inequality may be impossible absent catastrophic events beyond anything any of us would wish for.

    History - from Ancient Rome through the Gilded Age; from the Russian Revolution to the Great Compression of incomes across the West in the middle of the 20th century - suggests that reversing the trend toward greater concentrations of income, in the United States and across the world, might be, in fact, nearly impossible.

    That's the bleak argument of Walter Scheidel, a professor of history at Stanford, whose new book, "The Great Leveler" (Princeton University Press), is due out next month. He goes so far as to state that "only all-out thermonuclear war might fundamentally reset the existing distribution of resources." If history is anything to go by, he writes, "peaceful policy reform may well prove unequal to the growing challenges ahead."

    Professor Scheidel does not offer a grand unified theory of inequality. But scouring through the historical record, he detects a pattern: From the Stone Age to the present, ever since humankind produced a surplus to hoard, economic development has almost always led to greater inequality. There is one big thing with the power to stop this dynamic, but it's not pretty: violence. ...

    Fred C. Dobbs -> Fred C. Dobbs... , December 06, 2016 at 01:40 PM
    Hmmm. At some point, the powers that
    be may want to organize a gigantic
    apocalyptical world-wide conflict
    that does NOT go nuclear because
    that would be Really Excessive.
    mrrunangun -> Fred C. Dobbs... , December 06, 2016 at 02:10 PM
    After his success in the Red- White civil war, Lenin began the destruction of the hereditary rich and the educated professional classes in the Soviet Union. Executions were common as were slower deaths in work camps ridden with lice and typhus. He had to cut back on the pace of destruction after a few years because he found he could not run the country without technical experts and so some of the engineers, doctors, professors, etc were allowed to live out their days and care for some of their impoverished relatives. A book on the subject, "Former People" gives details of the methods used for selecting and liquidating the pre-revolutionary Elite. Not for the squeamish.
    anne : , December 06, 2016 at 12:51 PM
    http://gabriel-zucman.eu/files/PSZ2016.pdf

    December 2, 2016

    Distributional National Accounts: Methods and Estimates for the United States
    By Thomas Piketty, Emmanuel Saez, and Gabriel Zucman

    Abstract

    This paper combines tax, survey, and national accounts data to estimate the distribution of national income in the United States since 1913. Our distributional national accounts capture 100% of national income, allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth. We estimate the distribution of both pre-tax and post-tax income, making it possible to provide a comprehensive view of how government redistribution affects inequality. Average pre-tax national income per adult has increased 60% since 1980, but we find that it has stagnated for the bottom 50% of the distribution at about $16,000 a year. The pre-tax income of the middle class- adults between the median and the 90th percentile-has grown 40% since 1980, faster than what tax and survey data suggest, due in particular to the rise of tax-exempt fringe benefits. Income has boomed at the top: in 1980, top 1% adults earned on average 27 times more than bottom 50% adults, while they earn 81 times more today. The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000. The government has offset only a small fraction of the increase in inequality. The reduction of the gender gap in earnings has mitigated the increase in inequality among adults. The share of women, however, falls steeply as one moves up the labor income distribution, and is only 11% in the top 0.1% today.

    anne -> anne... , December 06, 2016 at 03:34 PM
    http://gabriel-zucman.eu/files/PSZ2016.pdf

    December 2, 2016

    Distributional National Accounts: Methods and Estimates for the United States
    By Thomas Piketty, Emmanuel Saez, and Gabriel Zucman

    Conclusion

    This paper has combined tax, survey, and national accounts data to build series on the distribution of total National Income in the United States since 1913. Our "Distributional National Accounts" estimates capture 100% of National Income and hence provide decompositions of growth by income groups consistent with macroeconomic economic growth. We compute both pre-tax and post-tax series. Post-tax series deduct all taxes and add back all transfers and public spending so that they also aggregate to total National Income. We find an overall U-shape for pre-tax and post-tax income concentration over the century. The surge in income concentration since the 1970s was first a labor income phenomenon but has been mostly a capital income phenomenon since 2000. Since 1980, growth in real incomes for the bottom 90% adults has been only about half of the national average on pre-tax basis and about two-thirds on a post-tax basis. Median pre-tax incomes have hardly grown since 1980. The reduction of the gender gap in earnings has played an important role in mitigating the increase in inequality among adults since the late 1960s but the gender gap is far from being closed especially at the upper earnings end. Tax progressivity at the top has declined since the 1960s but the generosity of transfers at the bottom has increased hereby mitigating the dramatic worsening in inequality.

    Our objective is to extend the methods developed in this paper to as many countries as possible in the coming years. The ultimate goal is to be able to compare inequality across countries and over time rigorously. Just like we use GDP or national income to compare the macroeconomic performance of countries today, so could distributional national accounts be used to compare inequality tomorrow. We also hope that our work can contribute to foster international collaborations between academics and statistical institutes in order to produce more and more consistent and systematic "Distributional national accounts." The same methodology is currently being applied and extended to more countries.

    Peter K : , December 06, 2016 at 01:18 PM
    "Given the generation-long stagnation of the pre-tax incomes among the bottom 50 percent of wage earners in the United States, we feel that the policy discussion at the federal, state, and local levels should focus on how to equalize the distribution of human capital, financial capital, and bargaining power rather than merely the redistribution of national income after taxes."

    Krugman:

    "So what would a political manifesto aimed at winning over these voters look like? You could promise to make their lives better in ways that don't involve bringing back the old plants and mines - which, you know, Obama did with health reform and Hillary would have done with family policies and more. But that apparently isn't an acceptable answer."

    Chris Dillow:

    "I have a slightly different beef. It's that this form of centrism offers too etiolated a vision of equality. Inequality isn't simply a matter of pay packets but of power too. Centrism fails to tackle the latter. This is a big failing not least because policies to increase productivity might require greater equality of power in the workplace – something which technocratic centrism has long ignored."

    sanjait -> Peter K... , December 06, 2016 at 02:59 PM
    It's really easy to say we should "equalize" before tax outcomes, but notably, the authors don't even attempt to say with specificity how to do that.

    Not that it isn't a worthwhile endeavor, but when everyone saying we should do it fails to say how to do it, it shows there are neither obvious answers nor long hanging fruit.

    It should be noted though that in addition to after tax stuff like Obamacare and family support policies, mainstream Dems like Obama and Clinton also support education at all levels and ages and working bargaining through a friendly NLRB, which fall right into the categories the paper authors specified.

    Got better ideas? The world needs them.

    pgl -> sanjait... , December 06, 2016 at 03:07 PM
    One idea is to counter monopsony power in the labor market by increasing wage floors. But when I suggest this - baby poor PeterK gets confused (he has no idea what we are talking about as usual) so he gets all MAD.
    Peter K : , December 06, 2016 at 01:41 PM
    "You could promise to make their lives better in ways ... which, you know, Obama did with health reform and Hillary would have done with family policies and more."

    Gotta love that "and more."

    Boosting the safety net a tiny little bit does help with bargaining power but not much.

    Democrats have to be much more bold and explicit - like Bernie Sanders was - or Trump is just going to win again in 2020.

    It's not enough for Democrats to just be better than Republicans (even as Obama pushes the TPP). That's a very low bar.

    sanjait -> Peter K... , December 06, 2016 at 03:00 PM
    ACA and Hillary's family support policies were huge.

    Calling those "a little bit" shows you're one of those faux progressives who wants a "revolution" but really doesn't appreciate how actual government policies affect actual working peoples' lives.

    pgl -> sanjait... , December 06, 2016 at 03:08 PM
    "faux progressives". Bingo! But give PeterK a break - understanding how the real world works gets in the way of his day job - hurling insults.
    Peter K : , December 06, 2016 at 01:46 PM
    "Given the generation-long stagnation of the pre-tax incomes among the bottom 50 percent of wage earners in the United States, we feel that the policy discussion at the federal, state, and local levels should focus on how to equalize the distribution of human capital, financial capital, and bargaining power rather than merely the redistribution of national income after taxes."

    People have no right complain! They're just being racist and nostalgic for old days of white male hetero Christian privilege.

    EMichael wants to purge all of the Bernie Sanders voters who voted for Hillary in the general.

    He equates them with Susan Sarandon and Jill Stein, since they didn't like Hillary.

    When EMichael would defend centrist Bill Clinton and Obama's etiolated record of progressivism, he'd argue that FDR and LBJ had large marjorities of Democrats.

    Yeah but back then FDR and LBJ had to work with and compromise with racist Democrats from the South in Congress.

    That's why they New Deal and War on Poverty was imperfect but it was a lot better than what Bill Clinton or Obama left behind.

    Peter K -> Peter K... , December 06, 2016 at 01:50 PM
    http://www.cc.com/full-episodes/np0e6l/the-daily-show-with-trevor-noah-december-5--2016---van-jones-season-22-ep-22032

    Last night's Daily Show.

    Van Jones is 15 minutes in.

    sanjait -> Peter K... , December 06, 2016 at 03:02 PM
    Peter K ... light on policy, but heavy on grudges. Epitomizing the more-progressive-than-thou crowd.
    pgl -> sanjait... , December 06, 2016 at 03:09 PM
    Wow - concise and to the point writing. I should take a writing class from you.
    Denis Drew : , December 06, 2016 at 02:40 PM
    " coincided with drastically reduced progressive taxation, widespread deregulation of industries and services, particularly the financial services industry, weakened unions, and an eroding minimum wage "

    "weakened unions?"

    Read disappeared unions. 6% union density in private industry is analogous to 20/10 blood pressure -- it starves every other healthy economic and political process.

    Re-constitute union density and unions will be your social cop on every corner -- goodbye "reduced progressive tax, dereged industries and services espec' financial and the eroded minimum wage."
    ****************************
    Just happened to post this somewhere else today -- talk about eroded!!!!!!!!!!!!

    dbl-indexed is for inflation and per capita income growth -- 2013 dollars:

    yr..per capita...real..(nominal)..dbl-index...%-of
    68...15,473....10.74..(1.60)......10.74......100%
    69-70-71-72-73
    74...18,284.....9.43...(2.00)......12.61
    75...18,313.....9.08...(2.10)......12.61
    76...18,945.....9.40...(2.30)......13.04........72%
    77
    78...20,422.....9.45...(2.65)......14.11
    79...20,696.....9.29...(2.90)......14.32
    80...20,236.....8.75...(3.10)......14.00
    81...20,112.....8.57...(3.35)......13.89........62%
    82-83-84-85-86-87-88-89
    90...24,000.....6.76...(3.80)......16.56
    91...23,540.....7.26...(4.25)......16.24........44%
    92-93-94-95
    96...25,887.....7.04...(4.75)......17.85
    97...26,884.....7.46...(5.15)......19.02........39%
    98-99-00-01-02-03-04-05-06
    07...29,075.....6.56...(5.85)......20.09
    08...28,166.....7.07...(6.55)......19.45
    09...27,819.....7.86...(7.25)......19.42........40%
    10-11-12-13-14-15-16

    If we could have foretold to Americans of 1968 that by early 2007 the minimum wage would have dropped almost in half in real terms (instead of almost tripling in real terms to keep up with national productivity gains) -- what could they have possibly guessed: a comet strike, a limited nuclear exchange, multiple world plagues?

    sanjait : , December 06, 2016 at 03:06 PM
    Good and important stuff.

    Decomposed data is tremendously valuable, and making it publicly available for many countries is a huge service.

    I will again note that this piece falls into the category of diagnosing-but-not-proposing-anything-specific-to-address-the-problem, from which we are seeing many pieces of commentary these days, but I think it's a useful part of the process to collectively go through this realization phase.

    But these authors take a good half-step forward in proposing a useful framework for the *types* of policies that would be helpful. And it's a very good framework (I say with bias, because it's the same one i've long had). That's also worth something, in addition to the invaluable contribution of data.

    pgl -> sanjait... , December 06, 2016 at 03:12 PM
    Having real world data that would illuminate progressive issues is indeed a useful contribution. But those faux progressives would just call our praise for this hard yet important work centrist neoliberal elitism. Yes - they love their pointless labels as it makes actual analysis so obsolete.
    llisa2u2 : , December 06, 2016 at 03:45 PM
    How about "CAPS" on all top federal positions- presidents, vice-presidents,cabinet members, senators, representatives. There needs to be Federal and STATE "CAPS" established across the US. "CAPS" on University president wages, University coaches wages, etc. etc. THEN, minimize all the pensions that the present 5 ex-Presidents are still getting, security guards, upkeep and expense on homes etc. etc. The US citizens are really being forced to support a closed ARISTOCRACY. Just start a list of all the extra-perks that the ARISTOCRACY are receiving. Some are receiving benefits to sons, daughter, cousins, close relatives etc. etc. Just how much $$$ is given to 20 year-olds that haven't worked except through patronage positions, because of "cronies" giving them a job because of immediate family connections. The mess of political patronage on the Federal and State levels need to be discussed and dissected. If Us taxpayers had to bail out private investors, insurance companies and hedge-funds because of the TBTF fiasco, then let these companies that were bailed out come to the focus on just how much churning, and bad investment advise occurred that enabled the rape WORKERS in civil-service jobs across the US. Come on MSM and MSE start revealing the behind-the-scenes patronage that has sucked the $$ from the general public. The $$$ was sucked into the DC swamp by the Left, the Right, and the In-Betweeners that hide beyond the snow-job propaganda messages to the GP.
    llisa2u2 : , -1
    One sentence should include the words:.... the rape of WORKERS PENSIONS.......
    Just side note, the old European guilds, and unions KNEW what they were doing in their organizational structures and why. The majority of US workers today don't have a clue. Too many blue collar and white collar workers have been suckered by the New Boss, who's exactly the same as the Old Boss, if not worse!

    [Dec 05, 2016] New Class War

    This is a very weak article from a prominent paleoconservative, but it is instructive what a mess he has in his head as for the nature of Trump phenomenon. We should probably consider the tern "New Class" that neocons invented as synonym for "neoliberals". If so, why the author is afraid to use the term? Does he really so poorly educated not to understand the nature of this neoliberal revolution and its implications? Looks like he never read "Quite coup"
    That probably reflects the crisis of pealeoconservatism itself.
    Notable quotes:
    "... What do these insurgents have in common? All have called into question the interventionist consensus in foreign policy. All have opposed large-scale free-trade agreements. ..."
    "... the establishment in both parties almost uniformly favors one approach to war, trade, and immigration, while outsider candidates as dissimilar as Buchanan, Nader, Paul, and Trump, and to a lesser extent Sanders, depart from the consensus. ..."
    "... The insurgents clearly do not represent a single class: they appeal to eclectic interests and groups. The foe they have all faced down, however-the bipartisan establishment-does resemble a class in its striking unity of outlook and interest. So what is this class, effectively the ruling class of the country? ..."
    "... The archetypal model of class conflict, the one associated with Karl Marx, pits capitalists against workers-or, at an earlier stage, capitalists against the landed nobility. The capitalists' victory over the nobility was inevitable, and so too, Marx believed, was the coming triumph of the workers over the capitalists. ..."
    "... The Soviet Union had never been a workers' state at all, they argued, but was run by a class of apparatchiks such as Marx had never imagined. ..."
    "... Burnham recognized affinities between the Soviet mode of organization-in which much real power lay in the hands of the commissars who controlled industry and the bureaucratic organs of the state-and the corporatism that characterized fascist states. Even the U.S., under the New Deal and with ongoing changes to the balance between ownership and management in the private sector, seemed to be moving in the same direction. ..."
    "... concept popularized by neoconservatives in the following decade: the "New Class." ..."
    "... It consists of a goodly proportion of those college-educated people whose skills and vocations proliferate in a 'post-industrial society' (to use Daniel Bell's convenient term). We are talking about scientists, teachers, and educational administrators, journalists and others in the communication industries, psychologists, social workers, those lawyers and doctors who make their careers in the expanding public sector, city planners, the staffs of the larger foundations, the upper levels of the government bureaucracy, and so on. ..."
    "... I have felt that this 'new class' is, so far, rather thin gruel. Intellectuals, verbalists, media types, etc. are conspicuous actors these days, certainly; they make a lot of noise, get a lot of attention, and some of them make a lot of money. But, after all, they are a harum-scarum crowd, and deflate even more quickly than they puff up. On TV they can out-talk any of the managers of ITT, GM, or IBM, or the administration-managers of the great government bureaus and agencies, but, honestly, you're not going to take that as a power test. Who hires and fires whom? ..."
    "... Burnham had observed that the New Class did not have the means-either money or manpower-to wield power the way the managers or the capitalists of old did. It had to borrow power from other classes. Discovering where the New Class gets it is as easy as following the money, which leads straight to the finance sector-practically to the doorstep of Goldman Sachs. Jerry Rubin's journey from Yippie to yuppie was the paradigm of a generation. ..."
    "... Yet the New Class as a whole is less like Carl Oglesby or Karl Hess than like Hillary Clinton, who arguably embodies it as perfectly as McNamara did the managerial class. ..."
    "... Even the New Class's support for deregulation-to the advantage of its allies on Wall Street-was no sign of consistent commitment to free-market principles ..."
    "... The individual-mandate feature of Obamacare and Romneycare is a prime example of New Class cronyism: government compels individuals to buy a supposedly private product or service. ..."
    "... America's class war, like many others, is not in the end a contest between up and down. It's a fight between rival elites: in this case, between the declining managerial elite and the triumphant (for now) New Class and financial elites. ..."
    "... Donald Trump is not of the managerial class himself. But by embracing managerial interests-industrial protection and, yes, "big government"-and combining them with nationalistic identity politics, he has built a force that has potential to threaten the bipartisan establishment, even if he goes down to defeat in November. ..."
    "... The New Class, after all, lacks a popular base as well as money of its own, and just as it relies on Wall Street to underwrite its power, it depends on its competing brands of identity politics to co-opt popular support. ..."
    "... Marx taught that you identify classes by their structural role in the system of production. I'm at a loss to see how either of the 'classes' you mention here relate to the system of production. ..."
    "... [New] Class better describes the Never Trumpers. Mostly I have found them to be those involved in knowledge occupations (conservative think tanks, hedge fund managers, etc.) who have a pecuniary interest in maintaining the Global Economy as opposed to the Virtuous Intergenerational Economy that preceded. Many are dependent on funding sources for their livelihoods that are connected to the Globalized Economy and financial markets. ..."
    "... "mobilize working-class voters against the establishment in both parties. " = workers of the world unite. ..."
    "... Where the class conflict between the Working and Knowledge Classes begins is where the Knowledge Class almost unilaterally decided to shift to a global economy, at the expense of the Working Class, and to the self-benefit of the Knowledge Class. Those who designed the Global Economy like Larry Summers of Harvard did not invite private or public labor to help design the new Globalist Economy. The Working Class lost out big time in job losses and getting stuck with subprime home loans that busted their marriages and created bankruptcies and foreclosures. The Knowledge Class was mostly unscathed by this class-based economic divide. ..."
    "... Trump's distinguishing ideology, which separates him from the current elite, is something he has summed up many times – nationalism vs. Globalism. ..."
    "... The financial industry, the new tech giants, the health insurance industry are now almost indistinguishable from the government ruling elite. The old left–represented by Sanders–rails against this as big money coopting government, even while conservatives are exasperated by the unholy cabal of big business and big government in cohoots in the "progressive" remake of America. Both are right in a sense. ..."
    "... The hyperconcentration of power in Washington and a few tributary locations like Wall Street and Silicon Valley, elite academia and the media–call that the New Class if you like–means that most of America–Main Street, the flyover country has been left behind. Trump instinctively – brilliantly in some ways – tapped into the resentment that this hyperconcentration of wealth and government power has led to. That is why it cuts across right and left. The elites want to characterize this resentment as backwards and "racist," but there is also something very American from Jefferson to Jackson to Teddy Roosevelt that revolts against being lectured to and controlled by their would-be "betters." ..."
    "... The alienation of those left out is real and based on real erosion of the middle class and American dream under both parties' elites. The potentially revolutionary capabilities of a political movement that could unite right and left in restoring some equilibrium and opportunities to those left out is tremendous, but yet to be realized by either major party. The party that can harness these folks – who are after all the majority of Americans – will have a ruling coalition for decades. If neither party can productively harness this budding movement, we are headed for disarray, civil unrest, and potentially the dissolution of the USA. ..."
    "... . And blacks who cleave to the democrats despite being sold down the tubes on issues, well, for whatever reason, they just have thinner skin and the mistaken idea that the democrats deliver – thanks to Pres. Johnson. But what Pres. Johnson delivered democrats made a mockery of immediately as they stripped it of its intent and used for their own liberal ends. ..."
    "... Let's see if I can help Dreher clear up some confusion in his article. James Burnham's "Managerial Class" and the "New Class" are overlapping and not exclusive. By the Managerial Class Burnham meant both the executive and managers in the private sector and the Bureaucrats and functionaries in the public sector. ..."
    "... The rise of managers was a "revolution" because of the rise of modernization which meant the increasing mechanization, industrialization, formalization and rationalization (efficiency) of society. Burnham's concern about the rise of the managerial revolution was misplaced; what he should have focused on was modernization. ..."
    "... The old left–represented by Sanders–rails against this as big money coopting government, even while conservatives are exasperated by the unholy cabal of big business and big government in cohoots in the "progressive" remake of America ..."
    "... . Some 3 – 5% of the population facing no real opposition has decided that that their private lives needed public endorsement and have proceeded to upend the entire social order - the game has shifted in ways I am not sure most of the public fully grasps or desires ..."
    "... There has always been and will always be class conflict, even if it falls short of a war. Simply examining recent past circumstances, the wealthy class has been whooping up on all other classes. This is not to suggest any sort of remedy, but simply to observe that income disparity over the past 30 years has substantially benefitted on sector of class and political power remains in their hands today. To think that there will never be class conflict is to side with a Marxian fantasy of egalitarianism, which will never come to pass. Winners and losers may change positions, but the underlying conflict will always remain. ..."
    "... State governments have been kowtowing to big business interests for a good long while. Nothing new under the sun there. Back in the 80s when GM was deciding where to site their factory for the new Saturn car line, they issued an edict stating they would only consider states that had mandatory seat belt use laws, and the states in the running fell all over each to enact those. ..."
    "... People don't really care for the actions of the elite but they care for the consequences of these actions. During the 1960's, per capita GDP growth was around 3.5%. Today it stands at 0,49%. If you take into account inflation, it's negative. Add to this the skewed repartition of said growth and it's intuitive that many people feel the pain; whom doesn't move forward, goes backwards. ..."
    "... People couldn't care for mass immigration, nation building or the emergence of China if their personal situation was not impacted. But now, they begin to feel the results of these actions. ..."
    "... I have a simple philosophy regarding American politics that shows who is made of what, and we don't have to go through all the philosophizing in this article: Anyone who believes in same sex marriage has been brainwashed and is un-American and unreliable. Anyone who puts Israeli interests above America's is un-American. ..."
    "... Re: Anyone who believes in same sex marriage has been brainwashed and is un-American and unreliable. Anyone who puts Israeli interests above America's is un-American. ..."
    "... The first has nothing whatsoever to do with American citizenship. It's just a political issue– on which, yes, reasonable people can differ. However no American citizen should put the interests of any other country ahead of our own, except in a situation where the US was itself up to no good and deserved its comeuppance. And then the interest is not that of any particular nation, but of justice being done period. ..."
    "... A lot of this "New Class" stuff is just confusing mis-mash of this and that theory. Basically, America changed when the US dollar replace gold as the medium of exchange in the world economy. Remember when we called it the PETRO-DOLLAR. As long as the Saudis only accepted the US dollar as the medium of exchange for oil, then the American government could export it's inflation and deficit spending. Budget deficits and trade deficits are intrinsically related. It allowed America to become a nation of consumers instead of a nation of producers. ..."
    "... It's really a form of classic IMPERIALISM. To maintain this system, we've got the US military and we prop up the corrupt dictatorships in Saudi Arabia, Iraq, Libya ..."
    "... Yeah, you can talk about the "new class", the corruption of the banking system by the idiotic "libertarian" or "free market utopianism" of the Gingrich Congress, the transformation of American corporations to international corporations, and on and on. But it's the US dollar as reserve currency that has allowed it all to happen. God help us, if it ends, we'll be crippled. ..."
    "... The Clinton Class mocks The Country Class: Bill Clinton, "We all know how her opponent's done real well down in West Virginia and eastern Kentucky. Because the coal people don't like any of us anymore." "They blame the president when the sun doesn't come up in the morning now," ..."
    "... That doesn't mean they actually support Hillary's policies and position. What do they really know about either? These demographics simply vote overwhelmingly Democrat no matter who is on the ticket. If Alfred E. Newman were the candidate, this particular data point would look just the same. ..."
    "... "On the contrary, the New Class favors new kinds of crony finance capitalism, even as it opposes the protectionism that would benefit hard industry and managerial interests." This doesn't ring true. Hard industry, and the managers that run it had no problem with moving jobs and factories overseas in pursuit of cheaper labor. Plus, it solved their Union issues. I feel like the divide is between large corporations, with dilute ownership and professional managers who nominally serve the interests of stock fund managers, while greatly enriching themselves versus a multitude of smaller, locally owned businesses whose owners were also concerned with the health of the local communities in which they lived. ..."
    "... The financial elites are a consequence of consolidation in the banking and finance industry, where we now have 4 or 5 large institutions versus a multitude of local and regional banks that were locally focused. ..."
    Sep 07, 2016 | www.theamericanconservative.com

    Since the Cold War ended, U.S. politics has seen a series of insurgent candidacies. Pat Buchanan prefigured Trump in the Republican contests of 1992 and 1996. Ralph Nader challenged the Clinton wing of the Democratic Party from the outside in 2000. Ron Paul vexed establishment Republicans John McCain and Mitt Romney in 2008 and 2012. And this year, Trump was not the only candidate to confound his party's elite: Bernie Sanders harried Hillary Clinton right up to the Democratic convention.

    What do these insurgents have in common? All have called into question the interventionist consensus in foreign policy. All have opposed large-scale free-trade agreements. (The libertarian Paul favors unilateral free trade: by his lights, treaties like NAFTA and the Trans-Pacific Partnership are not free trade at all but international regulatory pacts.) And while no one would mistake Ralph Nader's or Ron Paul's views on immigration for Pat Buchanan's or Donald Trump's, Nader and Paul have registered their own dissents from the approach to immigration that prevails in Washington.

    Sanders has been more in line with his party's orthodoxy on that issue. But that didn't save him from being attacked by Clinton backers for having an insufficiently nonwhite base of support. Once again, what might have appeared to be a class conflict-in this case between a democratic socialist and an elite liberal with ties to high finance-could be explained away as really about race.

    Race, like religion, is a real factor in how people vote. Its relevance to elite politics, however, is less clear. Something else has to account for why the establishment in both parties almost uniformly favors one approach to war, trade, and immigration, while outsider candidates as dissimilar as Buchanan, Nader, Paul, and Trump, and to a lesser extent Sanders, depart from the consensus.

    The insurgents clearly do not represent a single class: they appeal to eclectic interests and groups. The foe they have all faced down, however-the bipartisan establishment-does resemble a class in its striking unity of outlook and interest. So what is this class, effectively the ruling class of the country?

    Some critics on the right have identified it with the "managerial" class described by James Burnham in his 1941 book The Managerial Revolution . But it bears a stronger resemblance to what what others have called "the New Class." In fact, the interests of this New Class of college-educated "verbalists" are antithetical to those of the industrial managers that Burnham described. Understanding the relationship between these two often conflated concepts provides insight into politics today, which can be seen as a clash between managerial and New Class elites.

    ♦♦♦

    The archetypal model of class conflict, the one associated with Karl Marx, pits capitalists against workers-or, at an earlier stage, capitalists against the landed nobility. The capitalists' victory over the nobility was inevitable, and so too, Marx believed, was the coming triumph of the workers over the capitalists.

    Over the next century, however, history did not follow the script. By 1992, the Soviet Union was gone, Communist China had embarked on market reforms, and Western Europe was turning away from democratic socialism. There was no need to predict the future; mankind had achieved its destiny, a universal order of [neo]liberal democracy. Marx had it backwards: capitalism was the end of history.

    But was the truth as simple as that? Long before the collapse of the USSR, many former communists -- some of whom remained socialists, while others joined the right-thought not. The Soviet Union had never been a workers' state at all, they argued, but was run by a class of apparatchiks such as Marx had never imagined.

    Among the first to advance this argument was James Burnham, a professor of philosophy at New York University who became a leading Trotskyist thinker. As he broke with Trotsky and began moving toward the right, Burnham recognized affinities between the Soviet mode of organization-in which much real power lay in the hands of the commissars who controlled industry and the bureaucratic organs of the state-and the corporatism that characterized fascist states. Even the U.S., under the New Deal and with ongoing changes to the balance between ownership and management in the private sector, seemed to be moving in the same direction.

    Burnham called this the "managerial revolution." The managers of industry and technically trained government officials did not own the means of production, like the capitalists of old. But they did control the means of production, thanks to their expertise and administrative prowess.

    The rise of this managerial class would have far-reaching consequences, he predicted. Burnham wrote in his 1943 book, The Machiavellians : "that the managers may function, the economic and political structure must be modified, as it is now being modified, so as to rest no longer on private ownership and small-scale nationalist sovereignty, but primarily upon state control of the economy, and continental or vast regional world political organization." Burnham pointed to Nazi Germany, imperial Japan-which became a "continental" power by annexing Korea and Manchuria-and the Soviet Union as examples.

    The defeat of the Axis powers did not halt the progress of the managerial revolution. Far from it: not only did the Soviets retain their form of managerialism, but the West increasingly adopted a managerial corporatism of its own, marked by cooperation between big business and big government: high-tech industrial crony capitalism, of the sort that characterizes the military-industrial complex to this day. (Not for nothing was Burnham a great advocate of America's developing a supersonic transport of its own to compete with the French-British Concorde.)

    America's managerial class was personified by Robert S. McNamara, the former Ford Motor Company executive who was secretary of defense under John F. Kennedy and Lyndon Johnson. In a 1966 story for National Review , "Why Do They Hate Robert Strange McNamara?" Burnham answered the question in class terms: "McNamara is attacked by the Left because the Left has a blanket hatred of the system of business enterprise; he is criticized by the Right because the Right harks back, in nostalgia if not in practice, to outmoded forms of business enterprise."

    McNamara the managerial technocrat was too business-oriented for a left that still dreamed of bringing the workers to power. But the modern form of industrial organization he represented was not traditionally capitalist enough for conservatives who were at heart 19th-century classical liberals.

    National Review readers responded to Burnham's paean to McNamara with a mixture of incomprehension and indignation. It was a sign that even readers familiar with Burnham-he appeared in every issue of the magazine-did not always follow what he was saying. The popular right wanted concepts that were helpful in labeling enemies, and Burnham was confusing matters by talking about changes in the organization of government and industry that did not line up with anyone's value judgements.

    More polemically useful was a different concept popularized by neoconservatives in the following decade: the "New Class." "This 'new class' is not easily defined but may be vaguely described," Irving Kristol wrote in a 1975 essay for the Wall Street Journal :

    It consists of a goodly proportion of those college-educated people whose skills and vocations proliferate in a 'post-industrial society' (to use Daniel Bell's convenient term). We are talking about scientists, teachers, and educational administrators, journalists and others in the communication industries, psychologists, social workers, those lawyers and doctors who make their careers in the expanding public sector, city planners, the staffs of the larger foundations, the upper levels of the government bureaucracy, and so on.

    "Members of the new class do not 'control' the media," he continued, "they are the media-just as they are our educational system, our public health and welfare system, and much else."

    Burnham, writing in National Review in 1978, drew a sharp contrast between this concept and his own ideas:

    I have felt that this 'new class' is, so far, rather thin gruel. Intellectuals, verbalists, media types, etc. are conspicuous actors these days, certainly; they make a lot of noise, get a lot of attention, and some of them make a lot of money. But, after all, they are a harum-scarum crowd, and deflate even more quickly than they puff up. On TV they can out-talk any of the managers of ITT, GM, or IBM, or the administration-managers of the great government bureaus and agencies, but, honestly, you're not going to take that as a power test. Who hires and fires whom?

    Burnham suffered a stroke later that year. Although he lived until 1987, his career as a writer was over. His last years coincided with another great transformation of business and government. It began in the Carter administration, with moves to deregulate transportation and telecommunications. This partial unwinding of the managerial revolution accelerated under Ronald Reagan. Regulatory and welfare-state reforms, even privatization of formerly nationalized industries, also took off in the UK and Western Europe. All this did not, however, amount to a restoration of the old capitalism or anything resembling laissez-faire.

    The "[neo]liberal democracy" that triumphed at "the end of history"-to use Francis Fukuyama's words-was not the managerial capitalism of the mid-20th century, either. It was instead the New Class's form of capitalism, one that could be embraced by Bill Clinton and Tony Blair as readily as by any Republican or Thatcherite.

    Irving Kristol had already noted in the 1970s that "this new class is not merely liberal but truly 'libertarian' in its approach to all areas of life-except economics. It celebrates individual liberty of speech and expression and action to an unprecedented degree, so that at times it seems almost anarchistic in its conception of the good life."

    He was right about the New Class's "anything goes" mentality, but he was only partly correct about its attitude toward economics. The young elite tended to scorn the bourgeois character of the old capitalism, and to them managerial figures like McNamara were evil incarnate. But they had to get by-and they aspired to rule.

    Burnham had observed that the New Class did not have the means-either money or manpower-to wield power the way the managers or the capitalists of old did. It had to borrow power from other classes. Discovering where the New Class gets it is as easy as following the money, which leads straight to the finance sector-practically to the doorstep of Goldman Sachs. Jerry Rubin's journey from Yippie to yuppie was the paradigm of a generation.

    Part of the tale can be told in a favorable light. New Left activists like Carl Oglesby fought the spiritual aridity and murderous militarism of what they called "corporate liberalism"-Burnham's managerialism-while sincere young libertarians attacked the regulatory state and seeded technological entrepreneurship. Yet the New Class as a whole is less like Carl Oglesby or Karl Hess than like Hillary Clinton, who arguably embodies it as perfectly as McNamara did the managerial class.

    Even the New Class's support for deregulation-to the advantage of its allies on Wall Street-was no sign of consistent commitment to free-market principles. On the contrary, the New Class favors new kinds of crony finance capitalism, even as it opposes the protectionism that would benefit hard industry and managerial interests. The individual-mandate feature of Obamacare and Romneycare is a prime example of New Class cronyism: government compels individuals to buy a supposedly private product or service.

    The alliance between finance and the New Class accounts for the disposition of power in America today. The New Class has also enlisted another invaluable ally: the managerial classes of East Asia. Trade with China-the modern managerial state par excellence-helps keep American industry weak relative to finance and the service economy's verbalist-dominated sectors. America's class war, like many others, is not in the end a contest between up and down. It's a fight between rival elites: in this case, between the declining managerial elite and the triumphant (for now) New Class and financial elites.

    The New Class plays a priestly role in its alliance with finance, absolving Wall Street for the sin of making money in exchange for plenty of that money to keep the New Class in power. In command of foreign policy, the New Class gets to pursue humanitarian ideological projects-to experiment on the world. It gets to evangelize by the sword. And with trade policy, it gets to suppress its class rival, the managerial elite, at home. Through trade pacts and mass immigration the financial elite, meanwhile, gets to maximize its returns without regard for borders or citizenship. The erosion of other nations' sovereignty that accompanies American hegemony helps toward that end too-though our wars are more ideological than interest-driven.

    ♦♦♦

    So we come to an historic moment. Instead of an election pitting another Bush against another Clinton, we have a race that poses stark alternatives: a choice not only between candidates but between classes-not only between administrations but between regimes.

    Donald Trump is not of the managerial class himself. But by embracing managerial interests-industrial protection and, yes, "big government"-and combining them with nationalistic identity politics, he has built a force that has potential to threaten the bipartisan establishment, even if he goes down to defeat in November.

    The New Class, after all, lacks a popular base as well as money of its own, and just as it relies on Wall Street to underwrite its power, it depends on its competing brands of identity politics to co-opt popular support. For the center-left establishment, minority voters supply the electoral muscle. Religion and the culture war have served the same purpose for the establishment's center-right faction. Trump showed that at least one of these sides could be beaten on its own turf-and it seems conceivable that if Bernie Sanders had been black, he might have similarly beaten Clinton, without having to make concessions to New Class tastes.

    The New Class establishment of both parties may be seriously misjudging what is happening here. Far from being the last gasp of the demographically doomed-old, racially isolated white people, as Gallup's analysis says-Trump's insurgency may be the prototype of an aggressive new politics, of either left or right, that could restore the managerial elite to power.

    This is not something that conservatives-or libertarians who admire the old capitalism rather than New Class's simulacrum-might welcome. But the only way that some entrenched policies may change is with a change of the class in power.

    Daniel McCarthy is the editor of The American Conservative .

    Johann , says: September 7, 2016 at 10:02 am
    The New Class is parasitic and will drive the country to its final third world resting place, or worse.
    Dan Phillips , says: September 7, 2016 at 11:32 am
    Excellent analysis. What is important about the Trump phenomenon is not every individual issue, it's the potentially revolutionary nature of the phenomenon. The opposition gets this. That's why they are hysterical about Trump. The conservative box checkers do not.
    g , says: September 7, 2016 at 11:51 am
    "Donald Trump is not of the managerial class himself. But by embracing managerial interests-industrial protection and, yes, "big government"-and combining them with nationalistic identity politics, he has built a force that has potential to threaten the bipartisan establishment, even if he goes down to defeat in November."

    My question is, if Trump is not himself of the managerial class, in fact, could be considered one of the original new class members, how would he govern? What explains his conversion from the new class to the managerial class; is he merely taking advantage of an opportunity or is there some other explanation?

    Richard Terrace , says: September 7, 2016 at 12:09 pm
    I'm genuinely confused by the role you ascribe to the 'managerial class' here. Going back to Berle and Means ('The Modern Corporation and Private Property') the managerial class emerged when management was split from ownership in mid C20th capitalism. Managers focused on growth, not profits for shareholders. The Shareholder revolution of the 1980s destroyed the managerial class, and destroyed their unwieldy corporations.
    You seem to be identifying the managerial class with a kind of cultural opposition to the values of [neo]liberal capitalism. And instead of identifying the 'new class' with the new owner-managers of shareholder-driven firms, you identify them by their superficial cultural effects.

    This raises a deeper problem in how you talk about class in this piece. Marx taught that you identify classes by their structural role in the system of production. I'm at a loss to see how either of the 'classes' you mention here relate to the system of production. Does the 'new class' of journalists, academics, etc. actually own anything? If not, what is the point of ascribing to them immense economic power?
    I would agree that there is a new class of capitalists in America. But they are well known people like Sheldon Adelson, the Kochs, Linda McMahon, the Waltons, Rick Scott the pharmaceutical entrepreneur, Mitt Romney, Mark Zuckerberg, and many many hedge fund gazillionaires. These people represent the resurgence of a family-based, dynastic capitalism that is utterly different from the managerial variety that prevailed in mid-century.

    If there is a current competitor to international corporate capitalism, it is old-fashioned dynastic family capitalism. Not Managerialism.

    JonF , says: September 7, 2016 at 1:13 pm
    There is no "new class". That's simply a derogatory trope of the Right. The [neo]liberal elite– educated, cosmopolitan and possessed of sufficient wealth to be influential in political affairs and claims to power grounded in moral stances– have a long pedigree in both Western and non-Western lands. They were the Scribal Class in the ancient world, the Mandarins of China, and the Clergy in the Middle Ages. This class for a time was eclipsed in the early modern period as first royal authority became dominant, followed by the power of the Capitalist class (the latter has never really faded of course). But their reemergence in the late 20th century is not a new or unique phenomenon.
    Kurt Gayle , says: September 7, 2016 at 2:03 pm
    In a year in which "trash Trump" and "trash Trump's supporters" are tricks-to-be-turned for more than 90% of mainstream journalists and other media hacks, it's good to see Daniel McCarthy buck the "trash trend" and write a serious, honest analysis of the class forces that are colliding during this election cycle.

    Two thumbs way up for McCarthy, although his fine effort cannot save the reputation of those establishment whores who call themselves journalists. Nothing can save them. They have earned the universality with which Americans hold them in contempt.

    In 1976 when Gallup began asking about "the honesty and ethical standards" of various professions only 33% of Americans rated journalists "very high or high."

    By last December that "high or very high" rating for journalists had fallen to just 27%.

    It is certain that by Election Day 2016 the American public's opinion of journalists will have fallen even further.

    lee , says: September 7, 2016 at 2:37 pm
    An article on the ruling elite that neglects to mention this ? . . . https://www.amazon.com/Revolt-Elites-Betrayal-Democracy/dp/0393313719
    david helveticka , says: September 7, 2016 at 3:24 pm
    Most of your argument is confusing. The change I see is from a production economy to a finance economy. Wall Street rules, really. Basically the stock market used to be a place where working folk invested their money for retirement, mostly through pensions from unions and corporations. Now it's become a gambling casino, with the "house"-or the big banks-putting it's finger on the roulette wheel. They changed the compensation package of CEO's, so they can rake in huge executive compensation–mostly through stock options-to basically close down everything from manufacturing to customer service, and ship it off to contract manufacturers and outside services in oligarchical countries like mainland China and India.

    I don't know what exactly you mean about the "new class", basically its the finance industry against everyone else.

    One thing you right-wingers always get wrong, is on Karl Marx he was really attacking the money-changers, the finance speculators, the banks. Back in the day, so-called "capitalists" like Henry Ford or George Eastman or Thomas Edison always complained about the access to financing through the big money finance capitalists.

    Sheree , says: September 7, 2016 at 6:16 pm
    Don't overlook the economic value of intellectual property rights (patents, in particular) in the economic equation.

    A big chunk of the 21st century economy is generated due to the intellectual property developed and owned by the New Class and its business enterprises.

    The economic value of ideas and intellectual property rights is somewhat implied in McCarthy's explanation of the New Class, but I didn't see an explicit mention (perhaps I overlooked it).

    I think the consideration of intellectual property rights and the value generated by IP might help to clarify the economic power of the New Class for those who feel the analysis isn't quite complete or on target.

    I'm not saying that IP only provides value to the New Class. We can find examples of IP throughout the economy, at all levels. It's just that the tech and financial sectors seem to focus more on (and benefit from) IP ownership, licensing, and the information captured through use of digital technology.

    Commenter Man , says: September 7, 2016 at 10:19 pm
    "What do these insurgents have in common? All have called into question the interventionist consensus in foreign policy."

    But today we have this: Trump pledges big US military expansion . Trump doesn't appear to have any coherent policy, he just says whatever seems to be useful at that particular moment.

    Wayne Lusvardi , says: September 7, 2016 at 10:37 pm
    [New] Class better describes the Never Trumpers. Mostly I have found them to be those involved in knowledge occupations (conservative think tanks, hedge fund managers, etc.) who have a pecuniary interest in maintaining the Global Economy as opposed to the Virtuous Intergenerational Economy that preceded. Many are dependent on funding sources for their livelihoods that are connected to the Globalized Economy and financial markets.
    jack , says: September 7, 2016 at 11:13 pm
    "mobilize working-class voters against the establishment in both parties. " = workers of the world unite.

    maybe Trump could use that

    Wayne Lusvardi , says: September 7, 2016 at 11:33 pm
    Being white is not the defining characteristic of Trumpers because it if was then how come there are many white working class voters for Hillary? The divide in the working class comes from being a member of a union or a member of the private non-unionized working class.

    Where the real class divide shows up is in those who are members of the Knowledge Class that made their living based on the old Virtuous Economy where the elderly saved money in banks and the banks, in turn, lent that money out to young families to buy houses, cars, and start businesses. The Virtuous Economy has been replaced by the Global Economy based on diverting money to the stock market to fund global enterprises and prop up government pension funds.

    The local bankers, realtors, private contractors, small savers and small business persons and others that depended on the Virtuous Economy lost out to the global bankers, stock investors, pension fund managers, union contractors and intellectuals that propounded rationales for the global economy as superior to the Virtuous Economy.

    Where the class conflict between the Working and Knowledge Classes begins is where the Knowledge Class almost unilaterally decided to shift to a global economy, at the expense of the Working Class, and to the self-benefit of the Knowledge Class. Those who designed the Global Economy like Larry Summers of Harvard did not invite private or public labor to help design the new Globalist Economy. The Working Class lost out big time in job losses and getting stuck with subprime home loans that busted their marriages and created bankruptcies and foreclosures. The Knowledge Class was mostly unscathed by this class-based economic divide.

    Mitzy Moon , says: September 8, 2016 at 12:32 am
    Beginning in the 50's and 60's, baby boomers were warned in school and cultural media that "a college diploma would become what a high school diploma is today." An extraordinary cohort of Americans took this advice seriously, creating the smartest and most successful generation in history. But millions did not heed that advice, cynically buoyed by Republicans who – knowing that college educated people vote largely Democrat – launched a financial and cultural war on college education. The result is what you see now: millions of people unprepared for modern employment; meanwhile we have to import millions of college-educated Asians and Indians to do the work there aren't enough Americans to do.
    Joe , says: September 8, 2016 at 1:25 am
    Have to say, this seems like an attempt to put things into boxes that don't quite fit.

    Trump's distinguishing ideology, which separates him from the current elite, is something he has summed up many times – nationalism vs. Globalism.

    The core of it is that the government no longer serves the people. In the United States, that is kind of a bad thing, you know? Like the EU in the UK, the people, who fought very hard for self-government, are seeing it undermined by the erosion of the nation state in favor of international beaurocracy run by elites and the well connected.

    Emil Mottola , says: September 8, 2016 at 2:15 am
    Both this article and many comments on it show considerable confusion, and ideological opinion all over the map. What is happening I think is that the world is changing –due to globalism, technology, and the sheer huge numbers of people on the planet. As a result some of the rigid trenches of thought as well as class alignments are breaking down.

    In America we no longer have capitalism, of either the 19th century industrial or 20th century managerial varieties. Money and big money is still important of course, but it is increasingly both aligned with and in turn controlled by the government. The financial industry, the new tech giants, the health insurance industry are now almost indistinguishable from the government ruling elite. The old left–represented by Sanders–rails against this as big money coopting government, even while conservatives are exasperated by the unholy cabal of big business and big government in cohoots in the "progressive" remake of America. Both are right in a sense.

    The hyperconcentration of power in Washington and a few tributary locations like Wall Street and Silicon Valley, elite academia and the media–call that the New Class if you like–means that most of America–Main Street, the flyover country has been left behind. Trump instinctively – brilliantly in some ways – tapped into the resentment that this hyperconcentration of wealth and government power has led to. That is why it cuts across right and left. The elites want to characterize this resentment as backwards and "racist," but there is also something very American from Jefferson to Jackson to Teddy Roosevelt that revolts against being lectured to and controlled by their would-be "betters."

    The alienation of those left out is real and based on real erosion of the middle class and American dream under both parties' elites. The potentially revolutionary capabilities of a political movement that could unite right and left in restoring some equilibrium and opportunities to those left out is tremendous, but yet to be realized by either major party. The party that can harness these folks – who are after all the majority of Americans – will have a ruling coalition for decades. If neither party can productively harness this budding movement, we are headed for disarray, civil unrest, and potentially the dissolution of the USA.

    EliteCommInc. , says: September 8, 2016 at 3:29 am
    I have one condition about which, Mr. Trump would lose my support - if he flinches on immigration, I will have to bow out.

    I just don't buy the contentions about color here. He has made definitive moves to ensure that he intends to fight for US citizens regardless of color. This nonsense about white racism, more bigotry in reality, doesn't pan out. The Republican party has been comprised of mostly whites since forever and nearly all white sine the late 1960's. Anyone attempting to make hay out of what has been the reality for than 40 years is really making the reverse pander. Of course most of those who have issues with blacks and tend to be more expressive about it, are in the Republican party. But so what. Black Republicans would look at you askance, should you attempt this FYI.

    It's a so what. The reason you joining a party is not because the people in it like you, that is really beside the point. Both Sec Rice and General Powell, are keenly aware of who's what it and that is the supposed educated elite. They are not members of the party because it is composed of some pure untainted membership. But because they and many blacks align themselves with the ideas of the party, or what the party used to believe, anyway.

    It's the issues not their skin color that matters. And blacks who cleave to the democrats despite being sold down the tubes on issues, well, for whatever reason, they just have thinner skin and the mistaken idea that the democrats deliver – thanks to Pres. Johnson. But what Pres. Johnson delivered democrats made a mockery of immediately as they stripped it of its intent and used for their own liberal ends.

    I remain convinced that if blacks wanted progress all they need do is swamp the Republican party as constituents and confront whatever they thought was nonsense as constituents as they move on policy issues. Goodness democrats have embraced the lighter tones despite having most black support. That is why the democrats are importing so many from other state run countries. They could ignore blacks altogether. Sen Barbara Jordan and her deep voiced rebuke would do them all some good.

    Let's face it - we are not going to remove the deeply rooted impact of skin color, once part of the legal frame of the country for a quarter of the nations populous. What Republicans should stop doing is pretending, that everything concerning skin color is the figment of black imagination. I am not budging an inch on the Daughters of the American Revolution, a perfect example of the kind of peculiar treatment of the majority, even to those who fought for Independence and their descendants.
    ________________

    I think that there are thousands and thousands of educated (degreed)people who now realize what a mess the educational and social services system has become because of our immigration policy. The impact on social services here in Ca is no joke. In the face of mounting deficits, the laxity of Ca has now come back to haunt them. The pressure to increase taxes weighed against the loss of manual or hard labor to immigrants legal and otherwise is unmistakable here. There's debate about rsstroom etiquette in the midst of serious financial issues - that's a joke. So this idea of dismissing people with degrees as being opposed to Mr. Trump is deeply overplayed and misunderstood. If there is a class war, it's not because of Mr. Trump, those decks were stacked in his favor long before the election cycle.
    --------

    "But millions did not heed that advice, cynically buoyed by Republicans who–knowing that college educated people vote largely Democrat–launched a financial and cultural war on college education. The result is what . . . employment; meanwhile we have to import millions of college-educated Asians and Indians to do the work there aren't enough Americans to do."

    Hmmmm,

    Nope. Republicans are notorious for pushing education on everything and everybody. It's a signature of hard work, self reliance, self motivation and responsibility. The shift that has been tragic is that conservatives and Republicans either by a shove or by choice abandoned the fields by which we turn out most future generations - elementary, HS and college education. Especially in HS, millions of students are fed a daily diet of liberal though unchecked by any opposing ideas. And that is become the staple for college education - as it cannot be stated just how tragic this has become for the nation. There are lots of issues to moan about concerning the Us, but there is far more to embrace or at the very least keep the moaning in its proper context. No, conservatives and Republicans did engage in discouraging an education.

    And there will always be a need for more people without degrees than with them. even people with degrees are now getting hit even in the elite walls of WS finance. I think I posted an article by John Maulden about the growing tensions resulting fro the shift in the way trading is conducting. I can build a computer from scratch, that's a technical skill, but the days of building computers by hand went as fast it came. The accusation that the population should all be trained accountants, book keepers, managers, data processors, programmers etc. Is nice, but hardly very realistic (despite my taking liberties with your exact phrasing). A degree is not going to stop a company from selling and moving its production to China, Mexico or Vietnam - would that were true. In fact, even high end degree positions are being outsourced, medicine, law, data processing, programming . . .

    How about the changes in economy that have forced businesses to completely disappear. We will never know how many businesses were lost in the 2007/2008 financial mess. Recovery doesn't exist until the country's growth is robust enough to put people back to work full time in a manner that enables them to sustain themselves and family.

    That income gap is real and its telling.
    ___________________

    even if I bought the Karl Marx assessment. His solutions were anything but a limited assault on financial sector oligarchs and wizards. And in practice it has been an unmitigated disaster with virtually not a single long term national benefit. It's very nature has been destructive, not only to infrastructure, but literally the lifeblood of the people it was intended to rescue.

    Wayne Lusvardi , says: September 8, 2016 at 5:36 am
    Let's see if I can help Dreher clear up some confusion in his article. James Burnham's "Managerial Class" and the "New Class" are overlapping and not exclusive. By the Managerial Class Burnham meant both the executive and managers in the private sector and the Bureaucrats and functionaries in the public sector.

    There are two middle classes in the US: the old Business Class and the New Knowledge Class. A manager would be in the Business Class and a Bureaucrat in the New Class.

    The rise of managers was a "revolution" because of the rise of modernization which meant the increasing mechanization, industrialization, formalization and rationalization (efficiency) of society. Burnham's concern about the rise of the managerial revolution was misplaced; what he should have focused on was modernization.

    The New Class were those in the mostly government and nonprofit sectors that depended on knowledge for their livelihood without it being coupled to any physical labor: teachers, intellectuals, social workers and psychiatrists, lawyers, media types, hedge fund managers, real estate appraisers, financial advisors, architects, engineers, etc. The New Knowledge Class has only risen since the New Deal created a permanent white collar, non-business class.

    The Working Class are those who are employed for wages in manual work in an industry producing something tangible (houses, cars, computers, etc.). The Working Class can also have managers, sometimes called supervisors. And the Working Class is comprised mainly of two groups: unionized workers and private sector non-unionized workers. When we talk about the Working Class we typically are referring to the latter.

    The Trumpsters should not be distinguished as being a racial group or class (white) because there are many white people who support Clinton. About 95% of Blacks vote Democratic in the US. Nowhere near that ratio of Whites are supporting Trump. So Trumps' support should not be stereotyped as White.

    The number one concern to Trumpsters is that they reflect the previous intergenerational economy where the elderly lent money to the young to buy homes, cars and start small businesses. The Global bankers have shifted money into the stock market because 0.25% per year interest rates in a bank isn't making any money at all when money inflation runs at 1% to 2% (theft). This has been replaced by a Global Economy that depends on financial bubbles and arbitraging of funds.

    William Burns , says: September 8, 2016 at 5:45 am
    How are the elites supporting Trump different from the elites supporting financier par excellence Mitt Romney?
    EliteCommInc. , says: September 8, 2016 at 6:23 am
    "The old left–represented by Sanders–rails against this as big money coopting government, even while conservatives are exasperated by the unholy cabal of big business and big government in cohoots in the "progressive" remake of America. Both are right in a sense."

    Why other couching this. Ten years ago if some Hollywood exec had said, no same sex marriage, no production company in your town, the town would have shrugged. Today before shrugging, the city clerk is checking the account balance. When the governors of Michigan, and Arizona bent down in me culpa's on related issue, because business interests piped in, it was an indication that the game had seriously changed. Some 3 – 5% of the population facing no real opposition has decided that that their private lives needed public endorsement and have proceeded to upend the entire social order - the game has shifted in ways I am not sure most of the public fully grasps or desires.

    Same sex weddings in US military chapels - the concept still turns my stomach. Advocates control the megaphones, I don't think they control the minds of the public, despite having convinced a good many people that those who have chosen this expression are under some manner of assault – that demands a legal change - intelligent well educated, supposedly astute minded people actually believe it. Even the Republican nominee believes it.

    I love Barbara Streisand, but if the election means she moves to Canada, well, so be it. Take your "drag queens" impersonators wit you. I enjoy Mr. and Mrs Pitt, I think have a social moral core but really? with millions of kids future at stake, endorsing a terminal dynamic as if it will save society's ills - Hollywood doesn't even pretend to behave royally much less embody the sensitivities of the same.

    There is a lot to challenge about supporting Mr. Trump. He did support killing children in the womb and that is tragic. Unless he has stood before his maker and made this right, he will have to answer for that. But no more than a trove of Republicans who supported killing children in the womb and then came to their senses. I guess of there is one thing he and I agree on, it's not drinking.

    As for big budget military, it seems a waste, but if we are going to waste money, better it be for our own citizens. His Achilles heel here is his intentions as to ISIS/ISIL. I think it's the big drain getting ready to suck him into the abyss of intervention creep.

    Missile defense just doesn't work. The tests are rigged and as Israel discovered, it's a hit and miss game with low probability of success, but it makes for great propaganda.

    I am supposed to be outraged by a football player stance on abusive government. While the democratic nominee is turning over every deck chair she find, leaving hundreds of thousands of children homeless - let me guess, on the bright side, George Clooney cheers the prospect of more democratic voters.

    If Mr. Trumps only achievements are building a wall, over hauling immigration policy and expanding the size of the military. He will be well on his way to getting ranked one of the US most successful presidents.

    Joe F , says: September 8, 2016 at 11:11 am
    I never understood why an analysis needs to lard in every conceivable historical reference and simply assume its relevance, when there are so many non constant facts and circumstances. There has always been and will always be class conflict, even if it falls short of a war. Simply examining recent past circumstances, the wealthy class has been whooping up on all other classes. This is not to suggest any sort of remedy, but simply to observe that income disparity over the past 30 years has substantially benefitted on sector of class and political power remains in their hands today. To think that there will never be class conflict is to side with a Marxian fantasy of egalitarianism, which will never come to pass. Winners and losers may change positions, but the underlying conflict will always remain.
    JonF , says: September 8, 2016 at 1:32 pm
    EliteCommInc,

    State governments have been kowtowing to big business interests for a good long while. Nothing new under the sun there. Back in the 80s when GM was deciding where to site their factory for the new Saturn car line, they issued an edict stating they would only consider states that had mandatory seat belt use laws, and the states in the running fell all over each to enact those.

    The split on Trump is first by race (obviously), then be gender (also somewhat obviously), and then by education. Even among self-declared conservatives it's the college educated who tend to oppose him. This is a lot broader than simply losing some "new" Knowledge Class, unless all college educated people are put in that grouping. In fact he is on track to lose among college educated whites, something no GOP candidate has suffered since the days of FDR and WWII.

    Fabian , says: September 8, 2016 at 3:35 pm
    People don't really care for the actions of the elite but they care for the consequences of these actions. During the 1960's, per capita GDP growth was around 3.5%. Today it stands at 0,49%. If you take into account inflation, it's negative. Add to this the skewed repartition of said growth and it's intuitive that many people feel the pain; whom doesn't move forward, goes backwards.

    People couldn't care for mass immigration, nation building or the emergence of China if their personal situation was not impacted. But now, they begin to feel the results of these actions.

    Gilly.El , says: September 8, 2016 at 3:36 pm
    I have a simple philosophy regarding American politics that shows who is made of what, and we don't have to go through all the philosophizing in this article: Anyone who believes in same sex marriage has been brainwashed and is un-American and unreliable. Anyone who puts Israeli interests above America's is un-American.
    Richard Wagner , says: September 8, 2016 at 5:04 pm
    EliteComic beat me to the punch. I was disappointed that Ross Perot, who won over 20% of the popular vote twice, and was briefly in the lead in early 1992, wasn't mentioned in this article.
    JonF , says: September 8, 2016 at 5:07 pm
    Re: Anyone who believes in same sex marriage has been brainwashed and is un-American and unreliable. Anyone who puts Israeli interests above America's is un-American.

    The first has nothing whatsoever to do with American citizenship. It's just a political issue– on which, yes, reasonable people can differ. However no American citizen should put the interests of any other country ahead of our own, except in a situation where the US was itself up to no good and deserved its comeuppance. And then the interest is not that of any particular nation, but of justice being done period.

    David Helveticka , says: September 8, 2016 at 6:12 pm
    A lot of this "New Class" stuff is just confusing mis-mash of this and that theory. Basically, America changed when the US dollar replace gold as the medium of exchange in the world economy. Remember when we called it the PETRO-DOLLAR. As long as the Saudis only accepted the US dollar as the medium of exchange for oil, then the American government could export it's inflation and deficit spending. Budget deficits and trade deficits are intrinsically related. It allowed America to become a nation of consumers instead of a nation of producers.

    Who really cares about the federal debt. REally? We can print dollars, exchange these worthless dollars with China for hard goods, and then China lends the dollars back to us, to pay for our government. Get it?

    It's really a form of classic IMPERIALISM. To maintain this system, we've got the US military and we prop up the corrupt dictatorships in Saudi Arabia, Iraq, Libya

    Yeah, you can talk about the "new class", the corruption of the banking system by the idiotic "libertarian" or "free market utopianism" of the Gingrich Congress, the transformation of American corporations to international corporations, and on and on. But it's the US dollar as reserve currency that has allowed it all to happen. God help us, if it ends, we'll be crippled.

    And damn the utopianism of you "libertarians" you're worse then Marxists when it comes to ideology over reality.

    Jim Houghton , says: September 8, 2016 at 6:56 pm
    Ronald Reagan confounded the GOP party elite, too. They - rightly - considered him an intellectual lightweight.
    EliteCommInc. , says: September 8, 2016 at 9:20 pm
    "State governments have been kowtowing to big business interests for a good long while. Nothing new under the sun there. Back in the 80s when GM was deciding where to site their factory for the new Saturn car line, they issued an edict stating they would only consider states that had mandatory seat belt use laws, and the states in the running fell all over each to enact those."

    Ah, not it's policy on some measure able effect. The seatbelt law was debate across the country. The data indicated that it did in fact save lives. And it's impact was universal applicable to every man women or child that got into a vehicle.

    That was not a private bedroom issue. Of course businesses have advocated policy. K street is not a K-street minus that reality. But GM did not demand having relations in parked cars be legalized or else.

    You are taking my apples and and calling them seatbelts - false comparison on multiple levels, all to get me to acknowledge that businesses have influence. It what they have chosen to have influence on -

    That is another matter.

    cecelia , says: September 9, 2016 at 1:34 am
    I do not think the issue of class is relevant here – whether it be new classes or old classes. There are essentially two classes – those who win given whatever the current economic arrangements are or those who lose given those same arrangements. People who think they are losing support Trump versus people who think they are winning support Clinton. The polls demonstrates this – Trump supporters feel a great deal more anxiety about the future and are more inclined to think everything is falling apart whereas Clinton supporters tend to see things as being okay and are optimistic about the future. The Vox work also shows this pervasive sense that life will not be good for their children and grandchildren as a characteristic of Trump supporters.

    The real shift I think is in the actual coalitions that are political parties. Both the GOP and the Dems have been coalitions – political parties usually are. Primary areas of agreement with secondary areas of disagreement. Those coalitions no longer work. The Dems can be seen as a coalition of the liberal knowledge types – who are winners in this economy and the worker types who are often losers now in this economy. The GOP also is a coalition of globalist corporatist business types (winners) with workers (losers) who they attracted in part because of culture wars and the Dixiecrats becoming GOPers. The needs of these two groups in both parties no longer overlap. The crisis is more apparent in the GOP because well – Trump. If Sanders had won the nomination for the Dems (and he got close) then their same crisis would be more apparent. The Dems can hold their creaky coalition together because Trump went into the fevered swamps of the alt. right.

    I think this is even more obvious in the UK where you have a Labor Party that allegedly represents the interests of working people but includes the cosmopolitan knowledge types. The cosmopolitans are big on the usual identity politics, unlimited immigration and staying in the EU. They benefit from the current economic arrangement. But the workers in the Labor party have been hammered by the current economic arrangements and voted in droves to get out of the EU and limit immigration. It seems pretty obvious that there is no longer a coalition to sustain the Labor Party. Same with Tories – some in the party love the EU,immigration, globalization while others voted out of the EU, want immigration restricted and support localism. The crisis is about the inability of either party to sustain its coalitions. Those in the Tory party who are leavers should be in a political party with the old Labor working class while the Tory cosmopolitans should be in a party with the Labor cosmopolitans. The current coalitions not being in synch is the political problem – not new classes etc.

    Here in the US the southern Dixiecrats who went to the GOP and are losers in this economy might find a better coalition with the black, Latino and white workers who are still in the Dem party. But as in the UK ideological culture wars have become more prominent and hence the coalitions are no longer economically based. If people recognized that politics can only address the economic issues and they aligned themselves accordingly – the membership of the parties would radically change.

    So forget about class and think coalitions.

    Clint , says: September 9, 2016 at 5:47 pm
    The Clinton Class mocks The Country Class: Bill Clinton, "We all know how her opponent's done real well down in West Virginia and eastern Kentucky. Because the coal people don't like any of us anymore." "They blame the president when the sun doesn't come up in the morning now,"
    someguy , says: September 10, 2016 at 9:25 pm
    Collin, this is straight ridiculous.

    "Trump's voters were most strongly characterized by their "racial isolation": they live in places with little ethnic diversity. "

    During the primaries whites in more diverse areas voted Trump. The only real exception was West Virginia. Utah, Wyoming, Iowa? All voted for Cruz and "muh values".

    In white enclaves like Paul Ryans district, which is 91%, whites are able to signal against white identity without having to face the consequences.

    Rick , says: September 12, 2016 at 3:05 pm
    Collin said:

    "All three major African, Hispanic, & Asian-American overwhelming support HRC in the election."

    That doesn't mean they actually support Hillary's policies and position. What do they really know about either? These demographics simply vote overwhelmingly Democrat no matter who is on the ticket. If Alfred E. Newman were the candidate, this particular data point would look just the same.

    Craig , says: September 13, 2016 at 10:11 am
    "On the contrary, the New Class favors new kinds of crony finance capitalism, even as it opposes the protectionism that would benefit hard industry and managerial interests."

    This doesn't ring true. Hard industry, and the managers that run it had no problem with moving jobs and factories overseas in pursuit of cheaper labor. Plus, it solved their Union issues. I feel like the divide is between large corporations, with dilute ownership and professional managers who nominally serve the interests of stock fund managers, while greatly enriching themselves versus a multitude of smaller, locally owned businesses whose owners were also concerned with the health of the local communities in which they lived.

    The financial elites are a consequence of consolidation in the banking and finance industry, where we now have 4 or 5 large institutions versus a multitude of local and regional banks that were locally focused.

    [Dec 05, 2016] Trump campaign is a similar to Brexit crusade by grassroots activists against big banks and global political insiders . by those who feel disaffected and disenfranchised

    Notable quotes:
    "... Speaking to a local radio station before the joint rally, Farage urged Americans to "go out and fight" against Hillary Clinton. ..."
    "... "I am going to say to people in this country that the circumstances, the similarities, the parallels between the people who voted Brexit and the people who could beat Clinton in a few weeks time here in America are uncanny," Farage told Super Talk Mississippi. "If they want things to change they have get up out of their chairs and go out and fight for it. It can happen. We've just proved it." ..."
    "... It's not for me as a foreign politician to say who you should vote for ... All I will say is that if you vote for Hillary Clinton, then nothing will change. She represents the very politics that we've just broken through the Brexit vote in the United Kingdom. ..."
    Aug 24, 2016 | www.theguardian.com

    ...the British politician, who was invited by Mississippi governor Phil Bryant, will draw parallels between what he sees as the inspirational story of Brexit and Trump's campaign. Farage will describe the Republican's campaign as a similar crusade by grassroots activists against "big banks and global political insiders" and how those who feel disaffected and disenfranchised can become involved in populist, rightwing politics. With Trump lagging in the polls, just as Brexit did prior to the vote on the referendum, Farage will also hearten supporters by insisting that they can prove pundits and oddsmakers wrong as well.

    This message resonates with the Trump campaign's efforts to reach out to blue collar voters who have become disillusioned with American politics, while also adding a unique flair to Trump's never staid campaign rallies.

    The event will mark the first meeting between Farage and Trump.

    Arron Banks, the businessman who backed Leave.EU, the Brexit campaign group associated with the UK Independence party (Ukip), tweeted that he would be meeting Trump over dinner and was looking forward to Farage's speech.

    The appointment last week of Stephen Bannon, former chairman of the Breitbart website, as "CEO" of Trump's campaign has seen the example of the Brexit vote, which Breitbart enthusiastically advocated, rise to the fore in Trump's campaign narrative.

    Speaking to a local radio station before the joint rally, Farage urged Americans to "go out and fight" against Hillary Clinton.

    "I am going to say to people in this country that the circumstances, the similarities, the parallels between the people who voted Brexit and the people who could beat Clinton in a few weeks time here in America are uncanny," Farage told Super Talk Mississippi. "If they want things to change they have get up out of their chairs and go out and fight for it. It can happen. We've just proved it."

    "I am being careful," he added when asked if he supported the controversial Republican nominee. "It's not for me as a foreign politician to say who you should vote for ... All I will say is that if you vote for Hillary Clinton, then nothing will change. She represents the very politics that we've just broken through the Brexit vote in the United Kingdom."

    [Dec 05, 2016] Failure of Globalization and the Fourth Estate

    Notable quotes:
    "... As Mr. Buffet so keenly said it, There is a war going on, and we are winning. ..."
    "... Just type `TPP editorial' into news.google.com and watch a toxic sludge of straw men, misdirection, and historical revisionism flow across your screen. And the `objective' straight news reporting is no better. ..."
    "... "Why is it afraid of us?" Because we the people are perceived to be the enemy of America the Corporation. Whistleblowers have already stated that the NSA info is used to blackmail politicians and military leaders, provide corporate espionage to the highest payers and more devious machinations than the mind can grasp from behind a single computer. 9/11 was a coup – I say that because looking around the results tell me that. ..."
    "... The fourth estate (the media) has been purchased outright by the second estate (the nobility). I guess you could call this an 'estate sale'. All power to the markets! ..."
    naked capitalism
    Free Trade," the banner of Globalization, has not only wrecked the world's economy, it has left Western Democracy in shambles. Europe edges ever closer to deflation. The Fed dare not increase interest rates, now poised at barely above zero. As China's stock market threatened collapse, China poured billions to prop it up. It's export machine is collapsing. Not once, but twice, it recently manipulated its currency to makes its goods cheaper on the world market. What is happening?

    The following two graphs tell most of the story. First, an overview of Free Trade.

    Deficit4-1024x420

    Capital fled from developed countries to undeveloped countries with slave-cheap labor, countries with no environmental standards, countries with no support for collective bargaining. Corporations, like Apple, set up shop in China and other undeveloped countries. Some, like China, manipulated its currency to make exported goods to the West even cheaper. Some, like China, gave preferential tax treatment to Western firm over indigenous firms. Economists cheered as corporate efficiency unsurprisingly rose. U.S. citizens became mere consumers.

    Thanks to Bill Clinton and the Financial Modernization Act, banks, now unconstrained, could peddle rigged financial services, offer insurance on its own investment products–in short, banks were free to play with everyone's money–and simply too big to fail. Credit was easy and breezy. If nasty Arabs bombed the Trade Center, why the solution was simple: Go to the shopping mall–and buy. That remarkable piece of advice is just what freedom has been all about.

    Next: China's export machine sputters.

    CAIXEN-1024x527

    China's problem is that there are not enough orders to keep the export machine going. There comes a time when industrialized nations simply run out of cash–I mean the little people run out of cash. CEOs and those just below them–along with slick Wall Street gauchos–made bundles on Free Trade, corporate capital that could set up shop in any impoverished nation in the world.. No worries about labor–dirt cheap–or environmental regulations–just bring your gas masks. At some point the Western consumer well was bound to run dry. Credit was exhausted; the little guy could not buy anymore. Free trade was on its last legs.

    So what did China do then? As its markets crashed, it tried to revive its export model, a model based on foreign firms exporting cheap goods to the West. China lowered its exchange rates, not once but twice. Then China tried to rescue the markets with cash infusion of billions. Still its market continued to crash. Manufacturing plants had closed–thousands of them. Free Trade and Globalization had run its course.

    And what has the Fed been doing? Why quantitative easy–increase the money supply and lower short term interest rates. Like China's latest currency manipulation, both were merely stop-gap measures. No one, least of all Obama and his corporate advisors, was ready to address corporate outsourcing that has cost millions of jobs. Prime the pump a little, but never address the real problem.

    The WTO sets the groundwork for trade among its member states. That groundwork is deeply flawed. Trade between impoverished third world countries and sophisticated first world economies is not merely a matter of regulating "dumping"-not allowing one country to flood the market with cheap goods-nor is it a matter of insuring that the each country does not favor its indigenous firms over foreign firms. Comparable labor and environmental standards are necessary. Does anyone think that a first world worker can compete with virtual slave labor? Does anyone think that a first world nation with excellent environmental regulations can compete with a third world nation that refuses to protect its environment?

    Only lately has Apple even mentioned that it might clean up its mess in China. The Apple miracle has been on the backs of the Chinese poor and abysmal environmental wreckage that is China.

    The WTO allows three forms of inequities-all of which encourage outsourcing: labor arbitrage, tax arbitrage, and environmental arbitrage. For a fuller explanation of these inequities and the "race to the bottom," see here.

    Of course now we have the mother of all Free Trade deals –the Trans-Pacific Partnership (TPP)– carefully wrapped in a black box so that none of us can see what finally is in store for us. Nothing is ever "Free"–even trade. I suspect that China is becoming a bit too noxious and poisonous. It simply has to deal with its massive environmental problems. Time to move the game to less despoiled and maybe more impoverished countries. Meanwhile, newscasters are always careful to tout TPP.

    Fast Tracking is a con man's game. Do it so fast that the marks never have a chance to watch their wallets. In hiding negotiations from prying, public eyes, Obama, has given the con men a bigger edge: A screen to hide the corporations making deals. Their interest is in profits, not in public good.

    Consider the media. Our only defense is a strong independent media. At one time, newsrooms were not required to be profitable. Reporting the news was considered a community service. Corporate ownership provided the necessary funding for its newsrooms–and did not interfere.

    But the 70′s and 80′s corporate ownership required its newsrooms to be profitable. Slowly but surely, newsrooms focused on personality, entertainment, and wedge issues–always careful not to rock the corporate boat, always careful not to tread on governmental policy. Whoever thought that one major news service–Fox–would become a breeding ground for one particular party.

    But consider CNN: It organizes endless GOP debates; then spends hours dissecting them. Create the news; then sell it–and be sure to spin it in the direction you want.

    Are matters of substance ever discussed? When has a serious foreign policy debate ever been allowed occurred–without editorial interference from the media itself. When has trade and outsourcing been seriously discussed–other than by peripheral news media?

    Meanwhile, news media becomes more and more centralized. Murdoch now owns National Geographic!

    Now, thanks to Bush and Obama, we have the chilling effect of the NSA. Just whom does the NSA serve when it collects all of our digital information? Is it being used to ferret out the plans of those exercising their right of dissent? Is it being used to increase the profits of favored corporations? Why does it need all of your and my personal information–from bank accounts, to credit cards, to travel plans, to friends with whom we chat .Why is it afraid of us?


    jefemt, October 23, 2015 at 9:43 am

    As Mr. Buffet so keenly said it, There is a war going on, and we are winning.

    If 'they' are failing, I'd hate to see success!

    Isn't it the un-collective WE who are failing?

    failing to organize,
    failing to come up with plausible, 90 degrees off present Lemming-to-Brink path alternative plans and policies,
    failing to agree on any of many plausible alternatives that might work

    Divided- for now- hopefully not conquered ..

    I gotta scoot and get back to Dancing with the Master Chefs

    allan, October 23, 2015 at 10:03 am

    Just type `TPP editorial' into news.google.com and watch a toxic sludge of straw men, misdirection, and historical revisionism flow across your screen. And the `objective' straight news reporting is no better.

    Vatch, October 23, 2015 at 10:36 am

    Don't just watch the toxic sludge; respond to it with a letter to the editor (LTE) of the offending publication! For some of those toxic editorials, and contact information for LTEs, see:

    http://www.nakedcapitalism.com/2015/10/200pm-water-cooler-10162015.html#comment-2503316

    http://www.nakedcapitalism.com/2015/10/trading-away-land-rights-tpp-investment-agreements-and-the-governance-of-land.html#comment-2502833

    A few of the editorials may now be obscured by paywalls or registration requirements, but most should still be visible. Let them know that we see through their nonsense!

    TedWa, October 23, 2015 at 10:38 am

    "Why is it afraid of us?" Because we the people are perceived to be the enemy of America the Corporation. Whistleblowers have already stated that the NSA info is used to blackmail politicians and military leaders, provide corporate espionage to the highest payers and more devious machinations than the mind can grasp from behind a single computer. 9/11 was a coup – I say that because looking around the results tell me that.

    TG, October 23, 2015 at 3:27 pm

    The fourth estate (the media) has been purchased outright by the second estate (the nobility). I guess you could call this an 'estate sale'. All power to the markets!

    Pelham, October 23, 2015 at 8:32 pm

    Even when newsrooms were more independent they probably would not, in general, have reported on free trade with any degree of skepticism. The recent disappearance of the old firewall between the news and corporate sides has made things worse, but at least since the "professionalization" of newsrooms that began to really take hold in the '60s, journalists have tended to identify far more with their sources in power than with their readers.

    There have, of course, been notable exceptions. But even these sometimes serve more to obscure the real day-to-day nature of journalism's fealty to the corporate world than to bring about any significant change.

    [Dec 05, 2016] The Great Ponzi Scheme of the Global Economy

    www.counterpunch.org
    March 25, 2016

    CHRIS HEDGES: We're going to be discussing a great Ponzi scheme that not only defines not only the U.S. but the global economy, how we got there and where we're going. And with me to discuss this issue is the economist Michael Hudson, author of Killing the Host: How Financial Parasites and Debt Destroy the Global Economy. A professor of economics who worked for many years on Wall Street, where you don't succeed if you don't grasp Marx's dictum that capitalism is about exploitation. And he is also, I should mention, the godson of Leon Trotsky.

    I want to open this discussion by reading a passage from your book, which I admire very much, which I think gets to the core of what you discuss. You write,

    "Adam Smith long ago remarked that profits often are highest in nations going fastest to ruin. There are many ways to create economic suicide on a national level. The major way through history has been through indebting the economy. Debt always expands to reach a point where it cannot be paid by a large swathe of the economy. This is the point where austerity is imposed and ownership of wealth polarizes between the One Percent and the 99 Percent. Today is not the first time this has occurred in history. But it is the first time that running into debt has occurred deliberately." Applauded. "As if most debtors can get rich by borrowing, not reduced to a condition of debt peonage."

    So let's start with the classical economists, who certainly understood this. They were reacting of course to feudalism. And what happened to the study of economics so that it became gamed by ideologues?

    HUDSON: The essence of classical economics was to reform industrial capitalism, to streamline it, and to free the European economies from the legacy of feudalism. The legacy of feudalism was landlords extracting land-rent, and living as a class that took income without producing anything. Also, banks that were not funding industry. The leading industrialists from James Watt, with his steam engine, to the railroads

    HEDGES: From your book you make the point that banks almost never funded industry.

    HUDSON: That's the point: They never have. By the time you got to Marx later in the 19th century, you had a discussion, largely in Germany, over how to make banks do something they did not do under feudalism. Right now we're having the economic surplus being drained not by the landlords but also by banks and bondholders.

    Adam Smith was very much against colonialism because that lead to wars, and wars led to public debt. He said the solution to prevent this financial class of bondholders burdening the economy by imposing more and more taxes on consumer goods every time they went to war was to finance wars on a pay-as-you-go basis. Instead of borrowing, you'd tax the people. Then, he thought, if everybody felt the burden of war in the form of paying taxes, they'd be against it. Well, it took all of the 19th century to fight for democracy and to extend the vote so that instead of landlords controlling Parliament and its law-making and tax system through the House of Lords, you'd extend the vote to labor, to women and everybody. The theory was that society as a whole would vote in its self-interest. It would vote for the 99 Percent, not for the One Percent.

    By the time Marx wrote in the 1870s, he could see what was happening in Germany. German banks were trying to make money in conjunction with the government, by lending to heavy industry, largely to the military-industrial complex.

    HEDGES: This was Bismarck's kind of social – I don't know what we'd call it. It was a form of capitalist socialism

    HUDSON: They called it State Capitalism. There was a long discussion by Engels, saying, wait a minute. We're for Socialism. State Capitalism isn't what we mean by socialism. There are two kinds of state-oriented–.

    HEDGES: I'm going to interject that there was a kind of brilliance behind Bismarck's policy because he created state pensions, he provided health benefits, and he directed banking toward industry, toward the industrialization of Germany which, as you point out, was very different in Britain and the United States.

    HUDSON: German banking was so successful that by the time World War I broke out, there were discussions in English economic journals worrying that Germany and the Axis powers were going to win because their banks were more suited to fund industry. Without industry you can't have really a military. But British banks only lent for foreign trade and for speculation. Their stock market was a hit-and-run operation. They wanted quick in-and-out profits, while German banks didn't insist that their clients pay as much in dividends. German banks owned stocks as well as bonds, and there was much more of a mutual partnership.

    That's what most of the 19th century imagined was going to happen – that the world was on the way to socializing banking. And toward moving capitalism beyond the feudal level, getting rid of the landlord class, getting rid of the rent, getting rid of interest. It was going to be labor and capital, profits and wages, with profits being reinvested in more capital. You'd have an expansion of technology. By the early twentieth century most futurists imagined that we'd be living in a leisure economy by now.

    HEDGES: Including Karl Marx.

    HUDSON: That's right. A ten-hour workweek. To Marx, socialism was to be an outgrowth of the reformed state of capitalism, as seemed likely at the time – if labor organized in its self-interest.

    HEDGES: Isn't what happened in large part because of the defeat of Germany in World War I? But also, because we took the understanding of economists like Adam Smith and maybe Keynes. I don't know who you would blame for this, whether Ricardo or others, but we created a fictitious economic theory to praise a rentier or rent-derived, interest-derived capitalism that countered productive forces within the economy. Perhaps you can address that.

    HUDSON: Here's what happened. Marx traumatized classical economics by taking the concepts of Adam Smith and John Stuart Mill and others, and pushing them to their logical conclusion. 2KillingTheHost_Cover_ruleProgressive capitalist advocates – Ricardian socialists such as John Stuart Mill – wanted to tax away the land or nationalize it. Marx wanted governments to take over heavy industry and build infrastructure to provide low-cost and ultimately free basic services. This was traumatizing the landlord class and the One Percent. And they fought back. They wanted to make everything part of "the market," which functioned on credit supplied by them and paid rent to them.

    None of the classical economists imagined how the feudal interests – these great vested interests that had all the land and money – actually would fight back and succeed. They thought that the future was going to belong to capital and labor. But by the late 19th century, certainly in America, people like John Bates Clark came out with a completely different theory, rejecting the classical economics of Adam Smith, the Physiocrats and John Stuart Mill.

    HEDGES: Physiocrats are, you've tried to explain, the enlightened French economists.

    HUDSON: The common denominator among all these classical economists was the distinction between earned income and unearned income. Unearned income was rent and interest. Earned incomes were wages and profits. But John Bates Clark came and said that there's no such thing as unearned income. He said that the landlord actually earns his rent by taking the effort to provide a house and land to renters, while banks provide credit to earn their interest. Every kind of income is thus "earned," and everybody earns their income. So everybody who accumulates wealth, by definition, according to his formulas, get rich by adding to what is now called Gross Domestic Product (GDP).

    HEDGES: One of the points you make in Killing the Host which I liked was that in almost all cases, those who had the capacity to make money parasitically off interest and rent had either – if you go back to the origins – looted and seized the land by force, or inherited it.

    HUDSON: That's correct. In other words, their income is unearned. The result of this anti-classical revolution you had just before World War I was that today, almost all the economic growth in the last decade has gone to the One Percent. It's gone to Wall Street, to real estate

    HEDGES: But you blame this on what you call Junk Economics.

    HUDSON: Junk Economics is the anti-classical reaction.

    HEDGES: Explain a little bit how, in essence, it's a fictitious form of measuring the economy.

    HUDSON: Well, some time ago I went to a bank, a block away from here – a Chase Manhattan bank – and I took out money from the teller. As I turned around and took a few steps, there were two pickpockets. One pushed me over and the other grabbed the money and ran out. The guard stood there and saw it. So I asked for the money back. I said, look, I was robbed in your bank, right inside. And they said, "Well, we don't arm our guards because if they shot someone, the thief could sue us and we don't want that." They gave me an equivalent amount of money back.

    Well, imagine if you count all this crime, all the money that's taken, as an addition to GDP. Because now the crook has provided the service of not stabbing me. Or suppose somebody's held up at an ATM machine and the robber says, "Your money or your life." You say, "Okay, here's my money." The crook has given you the choice of your life. In a way that's how the Gross National Product accounts are put up. It's not so different from how Wall Street extracts money from the economy. Then also you have landlords extracting

    HEDGES: Let's go back. They're extracting money from the economy by debt peonage. By raising

    HUDSON: By not playing a productive role, basically.

    HEDGES: Right. So it's credit card interest, mortgage interest, car loans, student loans. That's how they make their funds.

    HUDSON: That's right. Money is not a factor of production. But in order to have access to credit, in order to get money, in order to get an education, you have to pay the banks. At New York University here, for instance, they have Citibank. I think Citibank people were on the board of directors at NYU. You get the students, when they come here, to start at the local bank. And once you are in a bank and have monthly funds taken out of your account for electric utilities, or whatever, it's very cumbersome to change.

    So basically you have what the classical economists called the rentier class. The class that lives on economic rents. Landlords, monopolists charging more, and the banks. If you have a pharmaceutical company that raises the price of a drug from $12 a shot to $200 all of a sudden, their profits go up. Their increased price for the drug is counted in the national income accounts as if the economy is producing more. So all this presumed economic growth that has all been taken by the One Percent in the last ten years, and people say the economy is growing. But the economy isn't growing

    HEDGES: Because it's not reinvested.

    HUDSON: That's right. It's not production, it's not consumption. The wealth of the One Percent is obtained essentially by lending money to the 99 Percent and then charging interest on it, and recycling this interest at an exponentially growing rate.

    HEDGES: And why is it important, as I think you point out in your book, that economic theory counts this rentier income as productive income? Explain why that's important.

    HUDSON: If you're a rentier, you want to say that you earned your income by

    HEDGES: We're talking about Goldman Sachs, by the way.

    HUDSON: Yes, Goldman Sachs. The head of Goldman Sachs came out and said that Goldman Sachs workers are the most productive in the world. That's why they're paid what they are. The concept of productivity in America is income divided by labor. So if you're Goldman Sachs and you pay yourself $20 million a year in salary and bonuses, you're considered to have added $20 million to GDP, and that's enormously productive. So we're talking in a tautology. We're talking with circular reasoning here.

    So the issue is whether Goldman Sachs, Wall Street and predatory pharmaceutical firms, actually add "product" or whether they're just exploiting other people. That's why I used the word parasitism in my book's title. People think of a parasite as simply taking money, taking blood out of a host or taking money out of the economy. But in nature it's much more complicated. The parasite can't simply come in and take something. First of all, it needs to numb the host. It has an enzyme so that the host doesn't realize the parasite's there. And then the parasites have another enzyme that takes over the host's brain. It makes the host imagine that the parasite is part of its own body, actually part of itself and hence to be protected.

    That's basically what Wall Street has done. It depicts itself as part of the economy. Not as a wrapping around it, not as external to it, but actually the part that's helping the body grow, and that actually is responsible for most of the growth. But in fact it's the parasite that is taking over the growth.

    The result is an inversion of classical economics. It turns Adam Smith upside down. It says what the classical economists said was unproductive – parasitism – actually is the real economy. And that the parasites are labor and industry that get in the way of what the parasite wants – which is to reproduce itself, not help the host, that is, labor and capital.

    HEDGES: And then the classical economists like Adam Smith were quite clear that unless that rentier income, you know, the money made by things like hedge funds, was heavily taxed and put back into the economy, the economy would ultimately go into a kind of tailspin. And I think the example of that, which you point out in your book, is what's happened in terms of large corporations with stock dividends and buybacks. And maybe you can explain that.

    HUDSON: There's an idea in superficial textbooks and the public media that if companies make a large profit, they make it by being productive. And with

    HEDGES: Which is still in textbooks, isn't it?

    HUDSON: Yes. And also that if a stock price goes up, you're just capitalizing the profits – and the stock price reflects the productive role of the company. But that's not what's been happening in the last ten years. Just in the last two years, 92 percent of corporate profits in America have been spent either on buying back their own stock, or paid out as dividends to raise the price of the stock.

    HEDGES: Explain why they do this.

    HUDSON: About 15 years ago at Harvard, Professor Jensen said that the way to ensure that corporations are run most efficiently is to make the managers increase the price of the stock. So if you give the managers stock options, and you pay them not according to how much they're producing or making the company bigger, or expanding production, but the price of the stock, then you'll have the corporation run efficiently, financial style.

    So the corporate managers find there are two ways that they can increase the price of the stock. The first thing is to cut back long-term investment, and use the money instead to buy back their own stock. But when you buy your own stock, that means you're not putting the money into capital formation. You're not building new factories. You're not hiring more labor. You can actually increase the stock price by firing labor.

    HEDGES: That strategy only works temporarily.

    HUDSON: Temporarily. By using the income from past investments just to buy back stock, fire the labor force if you can, and work it more intensively. Pay it out as dividends. That basically is the corporate raider's model. You use the money to pay off the junk bond holders at high interest. And of course, this gets the company in trouble after a while, because there is no new investment.

    So markets shrink. You then go to the labor unions and say, gee, this company's near bankruptcy, and we don't want to have to fire you. The way that you can keep your job is if we downgrade your pensions. Instead of giving you what we promised, the defined benefit pension, we'll turn it into a defined contribution plan. You know what you pay every month, but you don't know what's going to come out. Or, you wipe out the pension fund, push it on to the government's Pension Benefit Guarantee Corporation, and use the money that you were going to pay for pensions to pay stock dividends. By then the whole economy is turning down. It's hollowed out. It shrinks and collapses. But by that time the managers will have left the company. They will have taken their bonuses and salaries and run.

    HEDGES: I want to read this quote from your book, written by David Harvey, in A Brief History of Neoliberalism, and have you comment on it.

    "The main substantive achievement of neoliberalism has been to redistribute rather than to generate wealth and income. [By] 'accumulation by dispossession' I mean the commodification and privatization of land, and the forceful expulsion of peasant populations; conversion of various forms of property rights (common collective state, etc.) into exclusive private property rights; suppression of rights to the commons; colonial, neocolonial, and the imperial processes of appropriation of assets (including natural resources); and usury, the national debt and, most devastating at all, the use of the credit system as a radical means of accumulation by dispossession. To this list of mechanisms, we may now add a raft of techniques such as the extraction of rents from patents, and intellectual property rights (such as the diminution or erasure of various forms of common property rights, such as state pensions, paid vacations, and access to education, health care) one through a generation or more of class struggle. The proposal to privatize all state pension rights, pioneered in Chile under the dictatorship is, for example, one of the cherished objectives of the Republicans in the US."

    This explains the denouement. The final end result you speak about in your book is, in essence, allowing what you call the rentier or the speculative class to cannibalize the entire society until it collapses.

    HUDSON: A property right is not a factor of production. Look at what happened in Chicago, the city where I grew up. Chicago didn't want to raise taxes on real estate, especially on its expensive commercial real estate. So its budget ran a deficit. They needed money to pay the bondholders, so they sold off the parking rights to have meters – you know, along the curbs. The result is that they sold to Goldman Sachs 75 years of the right to put up parking meters. So now the cost of living and doing business in Chicago is raised by having to pay the parking meters. If Chicago is going to have a parade and block off traffic, it has to pay Goldman Sachs what the firm would have made if the streets wouldn't have been closed off for a parade. All of a sudden it's much more expensive to live in Chicago because of this.

    But this added expense of having to pay parking rights to Goldman Sachs – to pay out interest to its bondholders – is counted as an increase in GDP, because you've created more product simply by charging more. If you sell off a road, a government or local road, and you put up a toll booth and make it into a toll road, all of a sudden GDP goes up.

    If you go to war abroad, and you spend more money on the military-industrial complex, all this is counted as increased production. None of this is really part of the production system of the capital and labor building more factories and producing more things that people need to live and do business. All of this is overhead. But there's no distinction between wealth and overhead.

    Failing to draw that distinction means that the host doesn't realize that there is a parasite there. The host economy, the industrial economy, doesn't realize what the industrialists realized in the 19th century: If you want to be an efficient economy and be low-priced and under-sell competitors, you have to cut your prices by having the public sector provide roads freely. Medical care freely. Education freely.

    If you charge for all of these, you get to the point that the U.S. economy is in today. What if American factory workers were to get all of their consumer goods for nothing. All their food, transportation, clothing, furniture, everything for nothing. They still couldn't compete with Asians or other producers, because they have to pay up to 43% of their income for rent or mortgage interest, 10% or more of their income for student loans, credit card debt. 15% of their paycheck is automatic withholding to pay Social Security, to cut taxes on the rich or to pay for medical care.

    So Americans built into the economy all this overhead. There's no distinction between growth and overhead. It's all made America so high-priced that we're priced out of the market, regardless of what trade policy we have.

    HEDGES: We should add that under this predatory form of economics, you game the system. So you privatize pension funds, you force them into the stock market, an overinflated stock market. But because of the way companies go public, it's the hedge fund managers who profit. And it's those citizens whose retirement savings are tied to the stock market who lose. Maybe we can just conclude by talking about how the system is fixed, not only in terms of burdening the citizen with debt peonage, but by forcing them into the market to fleece them again.

    HUDSON: Well, we talk about an innovation economy as if that makes money. Suppose you have an innovation and a company goes public. They go to Goldman Sachs and other Wall Street investment banks to underwrite the stock to issue it at $40 a share. What's considered a successful float is when, immediately, Goldman and the others will go to their insiders and tell them to buy this stock and make a quick killing. A "successful" flotation doubles the price in one day, so that at the end of the day the stock's selling for $80.

    HEDGES: They have the option to buy it before anyone else, knowing that by the end of the day it'll be inflated, and then they sell it off.

    HUDSON: That's exactly right.

    HEDGES: So the pension funds come in and buy it at an inflated price, and then it goes back down.

    HUDSON: It may go back down, or it may be that the company just was shortchanged from the very beginning. The important thing is that the Wall Street underwriting firm, and the speculators it rounds up, get more in a single day than all the years it took to put the company together. The company gets $40. And the banks and their crony speculators also get $40.

    So basically you have the financial sector ending up with much more of the gains. The name of the game if you're on Wall Street isn't profits. It's capital gains. And that's something that wasn't even part of classical economics. They didn't anticipate that the price of assets would go up for any other reason than earning more money and capitalizing on income. But what you have had in the last 50 years – really since World War II – has been asset-price inflation. Most middle-class families have gotten the wealth that they've got since 1945 not really by saving what they've earned by working, but by the price of their house going up. They've benefited by the price of the house. And they think that that's made them rich and the whole economy rich.

    The reason the price of housing has gone up is that a house is worth whatever a bank is going to lend against it. If banks made easier and easier credit, lower down payments, then you're going to have a financial bubble. And now, you have real estate having gone up as high as it can. I don't think it can take more than 43% of somebody's income to buy it. But now, imagine if you're joining the labor force. You're not going to be able to buy a house at today's prices, putting down a little bit of your money, and then somehow end up getting rich just on the house investment. All of this money you pay the bank is now going to be subtracted from the amount of money that you have available to spend on goods and services.

    So we've turned the post-war economy that made America prosperous and rich inside out. Somehow most people believed they could get rich by going into debt to borrow assets that were going to rise in price. But you can't get rich, ultimately, by going into debt. In the end the creditors always win. That's why every society since Sumer and Babylonia have had to either cancel the debts, or you come to a society like Rome that didn't cancel the debts, and then you have a dark age. Everything collapses.

    [Dec 05, 2016] A Protectionist Moment?

    Notable quotes:
    "... Furthermore, as Mark Kleiman sagely observes , the conventional case for trade liberalization relies on the assertion that the government could redistribute income to ensure that everyone wins - but we now have an ideology utterly opposed to such redistribution in full control of one party, and with blocking power against anything but a minor move in that direction by the other. ..."
    Sep 12, 2016 | economistsview.typepad.com
    Paul Krugman:
    A Protectionist Moment? : ... if Sanders were to make it to the White House, he would find it very hard to do anything much about globalization - not because it's technically or economically impossible, but because the moment he looked into actually tearing up existing trade agreements the diplomatic, foreign-policy costs would be overwhelmingly obvious. ...

    But it's also true that much of the elite defense of globalization is basically dishonest: false claims of inevitability, scare tactics ( protectionism causes depressions !), vastly exaggerated claims for the benefits of trade liberalization and the costs of protection, hand-waving away the large distributional effects that are what standard models actually predict. I hope, by the way, that I haven't done any of that...

    Furthermore, as Mark Kleiman sagely observes , the conventional case for trade liberalization relies on the assertion that the government could redistribute income to ensure that everyone wins - but we now have an ideology utterly opposed to such redistribution in full control of one party, and with blocking power against anything but a minor move in that direction by the other.

    So the elite case for ever-freer trade is largely a scam, which voters probably sense even if they don't know exactly what form it's taking.

    Ripping up the trade agreements we already have would, again, be a mess, and I would say that Sanders is engaged in a bit of a scam himself in even hinting that he could do such a thing. Trump might actually do it, but only as part of a reign of destruction on many fronts.

    But it is fair to say that the case for more trade agreements - including TPP, which hasn't happened yet - is very, very weak. And if a progressive makes it to the White House, she should devote no political capital whatsoever to such things.

    cawley : , Thursday, March 10, 2016 at 03:47 AM
    Again, just because automation has been a major factor in job loss doesn't mean "off shoring" (using the term broadly and perhaps somewhat inaccurately) is not a factor.

    The "free" trade deals suck. They are correctly diagnosed as part of the problem.

    What would you propose to fix the problems caused by automation?

    jonny bakho -> cawley... , Thursday, March 10, 2016 at 04:25 AM
    Automation frees labor to do more productive and less onerous tasks. We should expand our solar production and our mass transit. We need to start re-engineering our urban areas. This will not bring back the number of jobs it would take to make cities like Flint thrive once again.

    Flint and Detroit have severe economic problems because they were mismanaged by road building and suburbanization in the 1950s and 1960s. Money that should have been spent on maintaining and improving urban infrastructure was instead plowed into suburban development that is not dense enough to sustain the infrastructure required to support it. People moved to the suburbs, abandoned the built infrastructure of the cities and kissed them goodbye.

    Big roads polluted the cities with lead, noise, diesel particles and ozone and smog. Stroads created pedestrian kill zones making urban areas, unwalkable, unpleasant- an urban blights to drive through rather than destinations to drive to.

    Government subsidized the white flight to the suburbs that has left both the suburbs and the urban cores with too low revenue to infrastructure ratio. The inner suburbs have aged into net losers, their infrastructure must be subsidized. Big Roads were built on the Big Idea that people would drive to the city to work and play and then drive home. That Big idea has a big problem. Urban areas are only sustainable when they have a high resident density. The future of cities like Flint and Detroit will be tearing out the roads and replacing them with streets and houses and renewing the housing stock that has been abandoned. It needs to be done by infill, revitalizing inner neighborhoods and working outward. Cities like Portland have managed to protect much of their core, but even they are challenged by demands for suburban sprawl.

    Slash and burn development, creating new suburbs and abandoning the old is not a sustainable model. Not only should we put people to work replacing the Flint lead pipes, but much of the city should be rebuilt from the inside out. Flint is the leading edge of this problem that requires fundamental changes in our built environment to fix. I recommend studying Flint as an object lesson of what bad development policy could do to all of our cities.

    http://www.flintexpats.com

    jonny bakho -> jonny bakho... , Thursday, March 10, 2016 at 04:29 AM
    An Interview with Frank Popper about Shrinking Cities, Buffalo Commons, and the Future of Flint

    How does America's approach shrinking cities compare to the rest of the world?

    I think the American way is to do nothing until it's too late, then throw everything at it and improvise and hope everything works. And somehow, insofar as the country's still here, it has worked. But the European or the Japanese way would involve much more thought, much more foresight, much more central planning, and much less improvising. They would implement a more, shall we say, sustained effort. The American way is different. Europeans have wondered for years and years why cities like Detroit or Cleveland are left to rot on the vine. There's a lot of this French hauteur when they ask "How'd you let this happen?"

    Do shrinking cities have any advantages over agricultural regions as they face declining populations?

    The urban areas have this huge advantage over all these larger American regions that are going through this. They have actual governments with real jurisdiction. Corrupt as Detroit or Philadelphia or Camden may be, they have actual governments that are supposed to be in charge of them. Who's in charge of western Kansas? Who's in charge of the Great Plains? Who is in charge of the lower Mississippi Delta or central Appalachia? All they've got are these distant federal agencies whose past performance is not exactly encouraging.

    Why wasn't there a greater outcry as the agricultural economy and the industrial economy collapsed?

    One reason for the rest of the country not to care is that there's no shortage of the consumer goods that these places once produced. All this decline of agriculture doesn't mean we're running out of food. We've got food coming out of our ears. Likewise, Flint has suffered through all this, but it's not like it's hard to buy a car in this country. It's not as if Flint can behave like a child and say "I'm going to hold my nose and stop you from getting cars until you do the right thing." Flint died and you can get zero A.P.R. financing. Western Kansas is on its last legs and, gee, cereal is cheaper than ever.

    In some sense that's the genius of capitalism - it's heartless. But if you look at the local results and the cultural results and the environmental results you shake your head. But I don't see America getting away from what I would call a little sarcastically the "wisdom" of the market. I don't think it's going to change.

    So is there any large-scale economic fallout from these monumental changes?

    Probably not, and it hurts to say so. And the only way I can feel good about saying that is to immediately point to the non-economic losses, the cultural losses. The losses of ways of life. The notion of the factory worker working for his or her children. The notion of the farmer working to build up the country and supply the rest of the world with food. We're losing distinctive ways of life. When we lose that we lose something important, but it's not like The Wall Street Journal cares. And I feel uncomfortable saying that. From a purely economic point of view, it's just the price of getting more efficient. It's a classic example of Schumpeter's theory of creative destruction, which is no fun if you're on the destruction end.

    Does the decline of cities like Flint mirror the death of the middle class in the United States?

    I think it's more the decline of the lower-middle class in the United States. Even when those jobs in the auto factories paid very high wages they were still for socially lower-middle-class people. I think there was always the notion in immigrant families and working-class families who worked in those situations that the current generation would work hard so that the children could go off and not have to do those kind of jobs. And when those jobs paid well that was a perfectly reasonable ambition. It's the cutting off of that ambition that really hurts now. The same thing has been true on farms and ranches in rural parts of the united states.

    http://www.flintexpats.com/2010/05/interview-with-frank-popper-about.html

    RC AKA Darryl, Ron said in reply to jonny bakho... , Thursday, March 10, 2016 at 04:45 AM
    It is a much different thing to be small minded about trade than it is to be large minded about everything else. The short story that it is all about automation and not trade will always get a bad reception because it is small minded. When you add in the large minded story about everything else then it becomes something entirely different from the short story. We all agree with you about everything else. You are wrong about globalization though. Both financialization and globalization suck and even if we paper over them with tax and transfer then they will still suck. One must forget what it is to be a created equal human to miss that. Have you never felt the job of accomplishment? Does not pride and self-confidence matter in your life?
    RC AKA Darryl, Ron said in reply to RC AKA Darryl, Ron... , Thursday, March 10, 2016 at 06:11 AM
    "Have you never felt the joY of accomplishment?"

    [Apparently I have "jobs" on the mind even though I no longer have one nor need one in the least.]

    ken melvin -> jonny bakho... , Thursday, March 10, 2016 at 04:49 AM
    America's first course of action is denial; then, we pretend that things are different than the seem a lot.
    RC AKA Darryl, Ron said in reply to ken melvin... , Thursday, March 10, 2016 at 05:39 AM
    Priceless!
    DrDick -> jonny bakho... , Thursday, March 10, 2016 at 08:52 AM
    While automation is part of the story, offshoring is just as important. Even when there is not net loss in the numbers of jobs in aggregate, there is significant loss in better paying jobs in manufacturing. It is important to look at the distributional effects within countries, as well as between them

    http://www.statisticbrain.com/outsourcing-statistics-by-country/

    https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=12&ved=0ahUKEwjj9OK1xrbLAhUG92MKHbveBAgQFghhMAs&url=https%3A%2F%2Fwww.wto.org%2Fenglish%2Fres_e%2Fbooksp_e%2Fglob_soc_sus_e_chap1_e.pdf&usg=AFQjCNHRBtLPlhJsKMg5PfxSlUIgOsFuwA&cad=rja

    https://www.americanprogress.org/issues/economy/news/2014/07/30/94864/offshoring-work-is-taking-a-toll-on-the-u-s-economy/

    Julio -> cawley... , Thursday, March 10, 2016 at 08:24 AM
    "off shoring"

    [The trending term is "tossing it over the Wall".]

    Chris G : , Thursday, March 10, 2016 at 03:58 AM
    Legislatively, what would it take to withdraw from the WTO? NAFTA? Other trade agreements?
    RC AKA Darryl, Ron said in reply to Chris G ... , Thursday, March 10, 2016 at 04:52 AM
    It would probably be cheaper and easier to just fix them. We don't need to withdraw from trade. We just need to fix the terms of trade that cause large trade deficits and cross border capital flows and also fix the FOREX system rigging.
    JohnH -> Chris G ... , Thursday, March 10, 2016 at 08:10 AM
    What would it take to ignore trade agreements? They shouldn't be any more difficult to ignore than the Geneva Conventions, which the US routinely flaunts.
    Richard A. : , Thursday, March 10, 2016 at 04:30 AM
    In order to import we must export and in order to export we must import. The two are tied together. Suppressing imports means we export less.

    What free trade does is lower the price level relative to wages. It doesn't uniformly lower the price level but rather lowers the cost of goods that are capable of being traded internationally. It lowers the price on those goods that are disproportionately purchased by those with low incomes.

    Free trade causes a progressive decline in the price level while protectionism causes a regressive increase in the price level.

    RC AKA Darryl, Ron said in reply to Richard A.... , Thursday, March 10, 2016 at 04:56 AM
    Are you saying that free trade lowers the cost of rice in India and China and raises the cost of cell phones and autos in the US?
    pgl -> RC AKA Darryl, Ron... , Thursday, March 10, 2016 at 05:48 AM
    Funny rebuttal! Bhagwati probably has a model that says the opposite! But then he grew up in India and should one day get a Nobel Prize for his contributions to international economics.
    pgl -> Richard A.... , Thursday, March 10, 2016 at 05:47 AM
    "What free trade does is lower the price level relative to wages."

    Which price? Whose wages? Look up Stopler-Samuelson ... a 1941 classic which I suspect Greg Mankiw has never bothered to learn.

    Tom aka Rusty said in reply to Richard A.... , Thursday, March 10, 2016 at 06:54 AM
    People don't need good wages, they can buy cheap Chinese stuff at WalMart.
    JohnH -> Richard A.... , Thursday, March 10, 2016 at 08:14 AM
    "In order to import we must export and in order to export we must import." One would think. However, experience shows that that's not the case.

    Capital flows from overseas investments help balance the books. When that doesn't work, the US simply prints money to be held by foreign CBs.

    ken melvin : , Thursday, March 10, 2016 at 04:53 AM
    Our media needs to copy France 24, ... and have real debates about real issues. What we get is along the lines of ignoring the problem then attacking any effort to correct. for example, the media stayed away from the healthcare crisis, too complicated, but damn they are good at criticizing.
    JohnH -> ken melvin... , Thursday, March 10, 2016 at 08:16 AM
    France 24 promotes neocon-style jingoism...even worse than Big Media in America.

    I hope they're better on domestic social policy.

    Tom Palley : , Thursday, March 10, 2016 at 05:08 AM
    A seriously shameful article. Krugman has been a booster of trade & globalization for 30 years: marginally more nuanced than the establishment, but still a booster.

    Now, the establishment has what it wanted and the effects have been disastrous for those not in the top 20 percent of the income distribution.

    At this stage, comes insult to injury. Establishment economists (like Mr. Krugman) can reinvent themselves with "brilliant new studies" showing the costs and damage of globalization. They pay no professional costs for the grievous injuries inflicted; there is no mention of the fact that critical outsider economists have been predicting and writing about these injuries and were right; and they blithely say we must stay the course because we are locked-in and have few options.

    Forgive me while I puke.

    RC AKA Darryl, Ron said in reply to Tom Palley ... , Thursday, March 10, 2016 at 05:44 AM
    Bless you my son.

    I don't think that they think that we weebles have memories.

    Peter K. -> RC AKA Darryl, Ron... , Thursday, March 10, 2016 at 06:13 AM
    "I don't think that they think that we weebles have memories."

    They insult our intelligence and wonder why people get mad.

    pgl -> Tom Palley ... , Thursday, March 10, 2016 at 05:51 AM
    Krugman is not Greg Mankiw. Most people who actually get international economics (Mankiw does not) are not of the free trade benefits all types. Paul Samuelson certainly does not buy into Mankiw's spin. Funny thing - Mankiw recently cited an excellent piece from Samuelson only to dishonestly suggest Samuelson did not believe in what he wrote.
    Peter K. -> pgl... , Thursday, March 10, 2016 at 06:12 AM
    Why are we talking about Mankiw? You can't move the goalposts.
    pgl -> Peter K.... , Thursday, March 10, 2016 at 06:40 AM
    Why are you mischaracterizing what Krugman has written? That's my point. Oh wait - you misrepresent what people write so you can "win" a "debate". Never mind. Please proceed with the serial dishonesty.
    Peter K. -> pgl... , Thursday, March 10, 2016 at 08:55 AM
    "The truth is that if Sanders were to make it to the White House, he would find it very hard to do anything much about globalization - not because it's technically or economically impossible, but because the moment he looked into actually tearing up existing trade agreements the diplomatic, foreign-policy costs would be overwhelmingly obvious. In this, as in many other things, Sanders currently benefits from the luxury of irresponsibility: he's never been anywhere close to the levers of power, so he could take principled-sounding but arguably feckless stances in a way that Clinton couldn't and can't."

    As Dean Baker says, we need to confront Walmart and Goldman Sachs at home, who like these policies, more than the Chinese.

    The Chinese want access to our consumer market. They'd also like if we did't invade countries like Iraq.

    "so he could take principled-sounding but arguably feckless stances in a way that Clinton couldn't"

    And what is that? Tear up trade deals? It is Krugman who is engaging in straw man arguments.

    DrDick -> pgl... , Thursday, March 10, 2016 at 09:02 AM
    Krugman does indeed misrepresent Sanders' positions on trade. Sander is not against trade, he merely insists on *Fair Trade*, which incorporates human rights and environmental protections. His opposition is to the kinds of deals, like NAFTA and TPP, which effectively gut those (a central element in Kruman's own critique of the latter).
    DrDick -> pgl... , Thursday, March 10, 2016 at 08:56 AM
    Krugman has definitely backed off his (much) earlier boosterism and publicly said so. This is an excellent piece by him, though it does rather downplay his earlier stances a bit. This is one of the things I especially like about him.
    Dan Kervick -> Tom Palley ... , Thursday, March 10, 2016 at 06:11 AM
    I can get the idea that some people win, some people lose from liberalized trade. But what really bugs me about the neoliberal trade agenda is that it has been part of a larger set of economically conservative, laissez faire policies that have exacerbated the damages from trade rather than offsetting them.

    At the same time they were exposing US workers to greater competition from abroad and destroying and offshoring working class jobs via both trade and liberalized capital flows, the neoliberals were also doing things like "reinventing government" - that is, shrinking structural government spending and public investment - and ending welfare. They have done nothing serious about steering capital and job development efforts toward the communities devastated by the liberalization.

    The neoliberal position has seem to come down to "We can't make bourgeois progress without breaking a few working class eggs."

    pgl -> Dan Kervick... , Thursday, March 10, 2016 at 06:41 AM
    I guess I'm not a neoliberal. Neither is Dani Rodrik. Nor is Paul Krugman.
    Dan Kervick -> pgl... , Thursday, March 10, 2016 at 07:50 AM
    What does Dani Rodrik have to do with the above comments?
    pgl -> Dan Kervick... , Thursday, March 10, 2016 at 08:51 AM
    Read his 1997 book. Excellent stuff.
    Julio -> Dan Kervick... , Thursday, March 10, 2016 at 08:38 AM
    Great points, and a good line too.
    JohnH -> Tom Palley ... , Thursday, March 10, 2016 at 08:22 AM
    Agreed! "Krugman has been a booster of trade & globalization for 30 years: marginally more nuanced than the establishment, but still a booster.'

    Now he claims that he saw the light all along! "much of the elite defense of globalization is basically dishonest: false claims of inevitability, scare tactics (protectionism causes depressions!), vastly exaggerated claims for the benefits of trade liberalization and the costs of protection, hand-waving away the large distributional effects that are what standard models actually predict. I hope, by the way, that I haven't done any of that..."

    You would be hard pressed to find any Krugman clips that cited any of those problems in the past. Far from being an impartial economist, he was always an avid booster of free trade, overlooking those very downsides that he suddenly decides to confess.

    Dan Kervick : , Thursday, March 10, 2016 at 05:11 AM
    As far as I know, Sanders has not proposed ripping up the existing trade deals. His information page on trade emphasizes (i) his opposition to these deals when they were first negotiated and enacted, and (ii) the principles he will apply to the consideration of future trade deals. Much of his argumentation concerning past deals is put forward to motivate his present opposition to TPP.

    http://feelthebern.org/bernie-sanders-on-trade/

    So Krugman's point about how difficult it would be diplomatically to "rip up" the existing trade deals seems like a red herring.

    Dan Kervick -> Dan Kervick... , Thursday, March 10, 2016 at 05:29 AM
    Note also that Sanders connects his discussion of the harms of past trade policy to the Rebuild America Act. That is, his approach is forward facing. We can't undo most of the past damage by recreating the old working class economy we wrecked, but we can be aggressive about using government-directed national investment programs to create new, high-paying jobs in the US.
    jonny bakho -> Dan Kervick... , Thursday, March 10, 2016 at 06:16 AM
    You could have said the same about the 1920s
    We can't undo most of the past damage by recreating the old agrarian class economy we wrecked, but we can be aggressive about using government-directed national investment programs to create new, high-paying jobs in the US.

    The march of progress:
    Mechanization of agriculture with displacement of large numbers of Ag workers.
    The rise of factory work and large numbers employed in manufacturing.
    Automation of Manufacturing with large displacement of workers engaged in manufacturing.
    What do we want our workers to do? This question must be answered at the highest level of society and requires much government facilitation. The absence of government facilitation is THE problem.

    Dan Kervick -> jonny bakho... , Thursday, March 10, 2016 at 06:23 AM
    Completely agree. Countries need economic strategies that go beyond, "let the markets sort it all out."
    RC AKA Darryl, Ron said in reply to Dan Kervick... , Thursday, March 10, 2016 at 05:47 AM
    "...So Krugman's point about how difficult it would be diplomatically to "rip up" the existing trade deals seems like a red herring."

    [Win one for the kipper.]

    pgl -> Dan Kervick... , Thursday, March 10, 2016 at 05:52 AM
    Memo to Paul Krugman - lead with the economics and stay with the economics. His need to get into the dirty business of politics dilutes what he ends up sensibly writes later on.
    Peter K. -> pgl... , Thursday, March 10, 2016 at 08:56 AM
    ""The truth is that if Sanders were to make it to the White House, he would find it very hard to do anything much about globalization - not because it's technically or economically impossible, but because the moment he looked into actually tearing up existing trade agreements the diplomatic, foreign-policy costs would be overwhelmingly obvious. In this, as in many other things, Sanders currently benefits from the luxury of irresponsibility: he's never been anywhere close to the levers of power, so he could take principled-sounding but arguably feckless stances in a way that Clinton couldn't and can't."
    Chatham -> Dan Kervick... , Thursday, March 10, 2016 at 09:36 AM
    Yeah, it's pretty dishonest for Krugman to pretend that Sanders' position is "ripping up the trade agreements we already have" and then say Sanders is "engaged in a bit of a scam" because he can't do that. Sanders actual position (trying to stop new trade deals like the TPP) is something the president has a lot of influence over (they can veto the deal). Hard to tell what Krugman is doing here other than deliberately spreading misinformation.

    Also worth noting that he decides to compare Sanders' opposition to trade deals with Trump, and ignore the fact that Clinton has come out against the TPP as well .

    anne : , Thursday, March 10, 2016 at 05:26 AM
    http://krugman.blogs.nytimes.com/2016/03/09/a-protectionist-moment/

    March 9, 2016

    A Protectionist Moment?
    By Paul Krugman

    Busy with real life, but yes, I know what happened in the primaries yesterday. Triumph for Trump, and big upset for Sanders - although it's still very hard to see how he can catch Clinton. Anyway, a few thoughts, not about the horserace but about some deeper currents.

    The Sanders win defied all the polls, and nobody really knows why. But a widespread guess is that his attacks on trade agreements resonated with a broader audience than his attacks on Wall Street; and this message was especially powerful in Michigan, the former auto superpower. And while I hate attempts to claim symmetry between the parties - Trump is trying to become America's Mussolini, Sanders at worst America's Michael Foot * - Trump has been tilling some of the same ground. So here's the question: is the backlash against globalization finally getting real political traction?

    You do want to be careful about announcing a political moment, given how many such proclamations turn out to be ludicrous. Remember the libertarian moment? The reformocon moment? Still, a protectionist backlash, like an immigration backlash, is one of those things where the puzzle has been how long it was in coming. And maybe the time is now.

    The truth is that if Sanders were to make it to the White House, he would find it very hard to do anything much about globalization - not because it's technically or economically impossible, but because the moment he looked into actually tearing up existing trade agreements the diplomatic, foreign-policy costs would be overwhelmingly obvious. In this, as in many other things, Sanders currently benefits from the luxury of irresponsibility: he's never been anywhere close to the levers of power, so he could take principled-sounding but arguably feckless stances in a way that Clinton couldn't and can't.

    But it's also true that much of the elite defense of globalization is basically dishonest: false claims of inevitability, scare tactics (protectionism causes depressions! ** ), vastly exaggerated claims for the benefits of trade liberalization and the costs of protection, hand-waving away the large distributional effects that are what standard models actually predict. I hope, by the way, that I haven't done any of that; I think I've always been clear that the gains from globalization aren't all that (here's a back-of-the-envelope on the gains from hyperglobalization *** - only part of which can be attributed to policy - that is less than 5 percent of world GDP over a generation); and I think I've never assumed away the income distribution effects.

    Furthermore, as Mark Kleiman sagely observes, **** the conventional case for trade liberalization relies on the assertion that the government could redistribute income to ensure that everyone wins - but we now have an ideology utterly opposed to such redistribution in full control of one party, and with blocking power against anything but a minor move in that direction by the other.

    So the elite case for ever-freer trade is largely a scam, which voters probably sense even if they don't know exactly what form it's taking.

    Ripping up the trade agreements we already have would, again, be a mess, and I would say that Sanders is engaged in a bit of a scam himself in even hinting that he could do such a thing. Trump might actually do it, but only as part of a reign of destruction on many fronts.

    But it is fair to say that the case for more trade agreements - including Trans-Pacific Partnership, which hasn't happened yet - is very, very weak. And if a progressive makes it to the White House, she should devote no political capital whatsoever to such things.

    * https://en.wikipedia.org/wiki/Michael_Foot

    ** http://krugman.blogs.nytimes.com/2016/03/04/the-mitt-hawley-fallacy/

    *** http://krugman.blogs.nytimes.com/2013/10/01/the-gains-from-hyperglobalization-wonkish/

    **** http://www.washingtonmonthly.com/ten-miles-square/2016/03/trade_trump_and_downward_class059814.php

    anne -> anne... , Thursday, March 10, 2016 at 05:26 AM
    https://en.wikipedia.org/wiki/Michael_Foot

    Michael Mackintosh Foot (1913 – 2010) was a British Labour Party politician and man of letters who was a Member of Parliament (MP) from 1945 to 1955 and from 1960 until 1992. He was Deputy Leader of the Labour Party from 1976 to 1980, and later the Leader of the Labour Party and Leader of the Opposition from 1980 to 1983.

    Associated with the left of the Labour Party for most of his career, Foot was an ardent supporter of the Campaign for Nuclear Disarmament and British withdrawal from the European Economic Community. He was appointed to the Cabinet as Secretary of State for Employment under Harold Wilson in 1974, and he later served as Leader of the House of Commons under James Callaghan. A passionate orator, he led Labour through the 1983 general election, when the party obtained its lowest share of the vote at a general election since 1918 and the fewest parliamentary seats it had had at any time since before 1945.

    pgl -> anne... , Thursday, March 10, 2016 at 05:53 AM
    Foot sounds like he was a good leader of the Labour Party.
    anne -> anne... , Thursday, March 10, 2016 at 05:27 AM
    http://krugman.blogs.nytimes.com/2016/03/04/the-mitt-hawley-fallacy/

    March 4, 2016

    The Mitt-Hawley Fallacy
    By Paul Krugman

    There was so much wrong with Mitt Romney's Trump-is-a-disaster-whom-I-will-support-in-the-general * speech that it may seem odd to call him out for bad international macroeconomics. But this is a pet peeve of mine, in an area where I really, truly know what I'm talking about. So here goes.

    In warning about Trumponomics, Romney declared:

    "If Donald Trump's plans were ever implemented, the country would sink into prolonged recession. A few examples. His proposed 35 percent tariff-like penalties would instigate a trade war and that would raise prices for consumers, kill our export jobs and lead entrepreneurs and businesses of all stripes to flee America."

    After all, doesn't everyone know that protectionism causes recessions? Actually, no. There are reasons to be against protectionism, but that's not one of them.

    Think about the arithmetic (which has a well-known liberal bias). Total final spending on domestically produced goods and services is

    Total domestic spending + Exports – Imports = GDP

    Now suppose we have a trade war. This will cut exports, which other things equal depresses the economy. But it will also cut imports, which other things equal is expansionary. For the world as a whole, the cuts in exports and imports will by definition be equal, so as far as world demand is concerned, trade wars are a wash.

    OK, I'm sure some people will start shouting "Krugman says protectionism does no harm." But no: protectionism in general should reduce efficiency, and hence the economy's potential output. But that's not at all the same as saying that it causes recessions.

    But didn't the Smoot-Hawley tariff cause the Great Depression? No. There's no evidence at all that it did. Yes, trade fell a lot between 1929 and 1933, but that was almost entirely a consequence of the Depression, not a cause. (Trade actually fell faster ** during the early stages of the 2008 Great Recession than it did after 1929.) And while trade barriers were higher in the 1930s than before, this was partly a response to the Depression, partly a consequence of deflation, which made specific tariffs (i.e. tariffs that are stated in dollars per unit, not as a percentage of value) loom larger.

    Again, not the thing most people will remember about Romney's speech. But, you know, protectionism was the only reason he gave for believing that Trump would cause a recession, which I think is kind of telling: the GOP's supposedly well-informed, responsible adult, trying to save the party, can't get basic economics right at the one place where economics is central to his argument.

    * http://www.nytimes.com/2016/03/04/us/politics/mitt-romney-speech.html

    ** http://www.voxeu.org/article/tale-two-depressions-what-do-new-data-tell-us-february-2010-update

    anne -> anne... , Thursday, March 10, 2016 at 05:28 AM
    http://krugman.blogs.nytimes.com/2013/10/01/the-gains-from-hyperglobalization-wonkish/

    October 1, 2013

    The Gains From Hyperglobalization (Wonkish)
    By Paul Krugman

    Still taking kind of an emotional vacation from current political madness. Following up on my skeptical post on worries about slowing trade growth, * I wondered what a state-of-the-art model would say.

    The natural model to use, at least for me, is Eaton-Kortum, ** which is a very ingenious approach to thinking about multilateral trade flows. The basic model is Ricardian - wine and cloth and labor productivity and all that - except that there are many goods and many countries, transportation costs, and countries are assumed to gain productivity in any particular industry through a random process. They make some funny assumptions about distributions - hey, that's kind of the price of entry for this kind of work - and in return get a tractable model that yields gravity-type equations for international trade flows. This is a good thing, because gravity models *** of trade - purely empirical exercises, with no real theory behind them - are known to work pretty well.

    Their model also yields a simple expression for the welfare gains from trade:

    Real income = A*(1-import share)^(-1/theta)

    where A is national productivity and theta is a parameter of their assumed random process (don't ask); they suggest that theta=4 provides the best match to available data.

    Now, what I wanted to do was apply this to the rapid growth of trade that has taken place since around 1990, what Subramanian **** calls "hyperglobalization". According to Subramanian's estimates, overall trade in goods and services has risen from about 19 percent of world GDP in the early 1990s to 33 percent now, bringing us to a level of integration that really is historically unprecedented.

    There are some conceptual difficulties with using this rise directly in the Eaton-Kortum framework, because much of it has taken the form of trade in intermediate goods, and the framework isn't designed to handle that. Still, let me ignore that, and plug Subramanian's numbers into the equation above; I get a 4.9 percent rise in real incomes due to increased globalization.

    That's by no means small change, but it's only a fairly small fraction of global growth. The Maddison database ***** gives us a 45 percent rise in global GDP per capita over the same period, so this calculation suggests that rising trade was responsible for around 10 percent of overall global growth. My guess is that most people who imagine themselves well-informed would give a bigger number.

    By the way, for those critical of globalization, let me hasten to concede that by its nature the Eaton-Kortum model doesn't let us talk about income distribution, and it also makes no room for the possible role of globalization in causing secular stagnation. ******

    Still, I thought this was an interesting calculation to make - which may show more about my warped sense of what's interesting than it does about anything else.

    * http://krugman.blogs.nytimes.com/2013/09/30/should-slowing-trade-growth-worry-us/

    ** http://www.nber.org/papers/w11764

    *** https://en.wikipedia.org/wiki/Gravity_model_of_trade

    **** http://www.gcf.ch/wp-content/uploads/2013/06/GCF_Subramanian-working-paper-3_-6.17.13.pdf

    ***** http://www.ggdc.net/maddison/maddison-project/home.htm

    ****** http://krugman.blogs.nytimes.com/2013/09/26/trade-and-secular-stagnation/

    anne -> anne... , Thursday, March 10, 2016 at 05:46 AM
    http://www.nber.org/papers/w11764

    November, 2005

    General Equilibrium Analysis of the Eaton-Kortum Model of International Trade
    By Fernando Alvarez and Robert E. Lucas

    We study a variation of the Eaton-Kortum model, a competitive, constant-returns-to-scale multicountry Ricardian model of trade. We establish existence and uniqueness of an equilibrium with balanced trade where each country imposes an import tariff. We analyze the determinants of the cross-country distribution of trade volumes, such as size, tariffs and distance, and compare a calibrated version of the model with data for the largest 60 economies. We use the calibrated model to estimate the gains of a world-wide trade elimination of tariffs, using the theory to explain the magnitude of the gains as well as the differential effect arising from cross-country differences in pre-liberalization of tariffs levels and country size.

    anne -> anne... , Thursday, March 10, 2016 at 05:46 AM
    https://en.wikipedia.org/wiki/Gravity_model_of_trade

    The gravity model of international trade in international economics, similar to other gravity models in social science, predicts bilateral trade flows based on the economic sizes (often using GDP measurements) and distance between two units. The model was first used by Jan Tinbergen in 1962.

    anne -> anne... , Thursday, March 10, 2016 at 05:47 AM
    http://www.gcf.ch/wp-content/uploads/2013/06/GCF_Subramanian-working-paper-3_-6.17.13.pdf

    June, 2013

    The Hyperglobalization of Trade and Its Future
    By Arvind Subramanian and Martin Kessler

    Abstract

    The open, rules-based trading system has delivered immense benefits-for the world, for individual countries, and for average citizens in these countries. It can continue to do so, helping today's low-income countries make the transition to middle-income status. Three challenges must be met to preserve this system. Rich countries must sustain the social consensus in favor of open markets and globalization at a time of considerable economic uncertainty and weakness; China and other middle-income countries must remain open; and mega-regionalism must be prevented from leading to discrimination and trade conflicts. Collective action should help strengthen the institutional underpinnings of globalization. The world should move beyond the Doha Round dead to more meaningful multilateral negotiations to address emerging challenges, including possible threats from new mega-regional agreements. The rising powers, especially China, will have a key role to play in resuscitating multilateralism.

    anne -> anne... , Thursday, March 10, 2016 at 05:56 AM
    Real income = A*(1-import share)^(-1/theta)

    [ Help! What does this mean in words? ]

    Peter K. : , Thursday, March 10, 2016 at 05:37 AM
    "Furthermore, as Mark Kleiman sagely observes, the conventional case for trade liberalization relies on the assertion that the government could redistribute income to ensure that everyone wins"

    That was never the conventional case for trade. Plus it's kind of odd that you have to add "plus have the government redistribute" to the case your making.

    Tom Pally above is correct. Krugman has been on the wrong side of this issue. He's gotten better, but the timing is he's gotten better as the Democratic Party has moved to the left and pushed back against corporate trade deals. Even Hillary came out late against Obama's TPP.

    Sanders has nothing about ripping up trade deals. He has said he won't do any more.

    As cawley predicted, once Sanders won Michigan, Krugman started hitting him again at his blog. With cheap shots I might add. He's ruining his brand.

    Peter K. -> Peter K.... , Thursday, March 10, 2016 at 05:41 AM
    'A Protectionist Moment?'

    So for Krugman, no doing corporate trade deals means you're "protectionist?"

    It's a fair trade moment. As Dean Baker points out, corporate trade deals are protectionist:

    http://cepr.net/blogs/beat-the-press/tell-morning-edition-it-s-not-free-trade-folks

    Tell Morning Edition: It's Not "Free Trade" Folks
    by Dean Baker
    Published: 10 March 2016

    Hey, can an experienced doctor from Germany show up and start practicing in New York next week? Since the answer is no, we can say that we don't have free trade. It's not an immigration issue, if the doctor wants to work in a restaurant kitchen, she would probably get away with it. We have protectionist measures that limit the number of foreign doctors in order to keep their pay high. These protectionist measures have actually been strengthened in the last two decades.

    We also have strengthened patent and copyright protections, making drugs and other affected items far more expensive. These protections are also forms of protectionism.

    This is why Morning Edition seriously misled its listeners in an interview with ice cream barons Ben Cohen and Jerry Greenfield over their support of Senator Bernie Sanders. The interviewer repeatedly referred to "free trade" agreements and Sanders' opposition to them. While these deals are all called "free trade" deals to make them sound more palatable ("selective protectionism to redistribute income upward" doesn't sound very appealing), that doesn't mean they are actually about free trade. Morning Edition should not have used the term employed by promoters to push their trade agenda.

    pgl -> Peter K.... , Thursday, March 10, 2016 at 05:57 AM
    This has been Dean Baker's excellent theme for a very long time. And if you actually paid attention to what Krugman said about TPP - he agreed with Dean's excellent points. But do continue to set up straw man arguments so you can dishonestly attack Krugman.
    Peter K. -> pgl... , Thursday, March 10, 2016 at 06:06 AM
    Some of us have memories. Like Tom Palley up above.
    pgl -> Peter K.... , Thursday, March 10, 2016 at 06:42 AM
    Memories of things Krugman never wrote. In other words, very faulty memories.
    Julio -> pgl... , Thursday, March 10, 2016 at 09:07 AM
    No. That is not a sign of a faulty memory, quite the contrary.

    Krugman writes column after column praising trade pacts and criticizing (rightly, I might add) the yahoos who object for the wrong reasons.
    But he omits a few salient facts like
    - the gains are small,
    - the government MUST intervene with redistribution for this to work socially,
    - there are no (or minimal) provisions for that requirement in the pacts.

    I would say his omissions speak volumes and are worth remembering.

    Syaloch -> pgl... , Thursday, March 10, 2016 at 11:51 AM
    Krugman initially wrote a confused column about the TPP, treating it as a simple free trade deal which he said would have little impact because tariffs were already so low. But he did eventually look into the matter further and wound up agreeing with Baker's take.
    pgl -> Peter K.... , Thursday, March 10, 2016 at 05:56 AM
    "That was never the conventional case for trade". Actually it was. Of course Greg Mankiw never got the memo so his free trade benefits all BS confuses a lot of people. Mankiw sucks at international trade.
    Peter K. -> pgl... , Thursday, March 10, 2016 at 06:11 AM
    Actually it wasn't. I remember what Krugman and others wrote at the time about NAFTA and the WTO.

    https://uneasymoney com/2016/03/06/krugman-suffers-a-memory-lapse/

    David Glasner attacks Krugman from the right, but he doesn't whitewash the past as you do. He remembers Gore versus Perot:

    "Indeed, Romney didn't even mention the Smoot-Hawley tariff, but Krugman evidently forgot the classic exchange between Al Gore and the previous incarnation of protectionist populist outrage in an anti-establishment billionaire candidate for President:

    GORE I've heard Mr. Perot say in the past that, as the carpenters says, measure twice and cut once. We've measured twice on this. We have had a test of our theory and we've had a test of his theory. Over the last five years, Mexico's tariffs have begun to come down because they've made a unilateral decision to bring them down some, and as a result there has been a surge of exports from the United States into Mexico, creating an additional 400,000 jobs, and we can create hundreds of thousands of more if we continue this trend. We know this works. If it doesn't work, you know, we give six months notice and we're out of it. But we've also had a test of his theory.

    PEROT When?

    GORE In 1930, when the proposal by Mr. Smoot and Mr. Hawley was to raise tariffs across the board to protect our workers. And I brought some pictures, too.

    [Larry] KING You're saying Ross is a protectionist?

    GORE This is, this is a picture of Mr. Smoot and Mr. Hawley. They look like pretty good fellows. They sounded reasonable at the time; a lot of people believed them. The Congress passed the Smoot-Hawley Protection Bill. He wants to raise tariffs on Mexico. They raised tariffs, and it was one of the principal causes, many economists say the principal cause, of the Great Depression in this country and around the world. Now, I framed this so you can put it on your wall if you want to.

    You can watch it here*

    * https://uneasymoney com/2016/02/17/competitive-devaluation-plus-monetary-expansion-does-create-a-free-lunch/

    jonny bakho -> Peter K.... , Thursday, March 10, 2016 at 06:26 AM
    You obviously have not read Krugman. Here is from his 1997 Slate piece:

    But putting Greenspan (or his successor) into the picture restores much of the classical vision of the macroeconomy. Instead of an invisible hand pushing the economy toward full employment in some unspecified long run, we have the visible hand of the Fed pushing us toward its estimate of the noninflationary unemployment rate over the course of two or three years. To accomplish this, the board must raise or lower interest rates to bring savings and investment at that target unemployment rate in line with each other.

    And so all the paradoxes of thrift, widow's cruses, and so on become irrelevant. In particular, an increase in the savings rate will translate into higher investment after all, because the Fed will make sure that it does.

    To me, at least, the idea that changes in demand will normally be offset by Fed policy--so that they will, on average, have no effect on employment--seems both simple and entirely reasonable. Yet it is clear that very few people outside the world of academic economics think about things that way. For example, the debate over the North American Free Trade Agreement was conducted almost entirely in terms of supposed job creation or destruction. The obvious (to me) point that the average unemployment rate over the next 10 years will be what the Fed wants it to be, regardless of the U.S.-Mexico trade balance, never made it into the public consciousness. (In fact, when I made that argument at one panel discussion in 1993, a fellow panelist--a NAFTA advocate, as it happens--exploded in rage: "It's remarks like that that make people hate economists!")

    http://www.slate.com/articles/business/the_dismal_science/1996/10/economic_culture_wars.html

    pgl -> jonny bakho... , Thursday, March 10, 2016 at 06:44 AM
    Yes. But please do not interrupt PeterK with reality. He has important work do with his bash all things Krugman agenda. BTW - it is a riot that he cites Ross Perot on NAFTA. Perot has a self centered agenda there which Gore exposed. Never trust a corrupt business person whether it is Perot or Trump.
    Peter K. -> pgl... , Thursday, March 10, 2016 at 07:42 AM
    Did you read what Al Gore said? He said nothing about the government redistributing the gains from NAFTA?
    Peter K. -> pgl... , Thursday, March 10, 2016 at 07:44 AM
    "But please do not interrupt PeterK with reality."

    We are talking about the reality of Krugman's past support for free trade agreements.

    You can't rewrite the past.

    jonny bakho -> pgl... , Thursday, March 10, 2016 at 07:47 AM
    Yes the model PeterK is using is unclear. He doesn't seem to have a grasp on the economics of the issues. He seems to think that Sanders is a font of economic wisdom who is not to be questioned. I would hate to see the left try to make a flawed candidate into the larger than life icon that the GOP has made out of Reagan.
    Peter K. -> jonny bakho... , Thursday, March 10, 2016 at 09:15 AM
    "Yes the model PeterK is using is unclear. He doesn't seem to have a grasp on the economics of the issues."

    Dean Baker and Jared Bernstein. Like you I want full employment and rising wages. And like Krugman I am very much an internationalist. I want us to deal fairly with the rest of the world. We need to cooperate especially in the face of global warming.

    1. My first, best solution would be fiscal action. Like everyone else. I prefer Sanders's unicorn plan of $1 trillion over five years rather than Hillary's plan which is one quarter of the size. Her plan puts more pressure on the Fed and monetary policy.

    a. My preference would be to pay for it with Pigouvian taxes on the rich, corporations, and the financial sector.

    b. if not a, then deficit spending like Trudeau in Canada

    C. if the deficit hawks block that, then monetary-financing would be the way around them.

    2. close the trade deficit. Dean Baker and Bernstein have written about this a lot. Write currency agreements into trade deals. If we close the trade deficit and are at full employment, then we can import more from the rest of the world.

    3. If powerful interests block 1. and 2. then lean on monetary policy. Reduce the price of credit to boost demand. It works as a last resort.

    "I would hate to see the left try to make a flawed candidate into the larger than life icon that the GOP has made out of Reagan.'

    I haven't seen any evidence of this. It would be funny if the left made an old Jewish codger from Brooklyn into an icon. Feel the Bern!!!

    Sanders regularly points out it's not about him as President fixing everything, it's about creating a movement. It's about getting people involved. He can't do it by himself. Obama would say this too. Elizabeth Warren become popular by saying the same things Sanders is saying.

    Syaloch -> jonny bakho... , Thursday, March 10, 2016 at 12:19 PM
    The Compensation Principle certainly is part of standard Heckscher-Ohlin trade model, you can find it in any textbook:

    http://internationalecon.com/Trade/Tch60/T60-13.php

    However to say that the conventional case for trade liberalization relies on the Compensation Principle isn't quite accurate. The conventional case has traditionally relied on the assertion that "we" are better off with trade since we could *theoretically* distribute the gains. However, free trade boosters never seem to get around to worrying about distributing the gains *in practice*. In practice, free trade is typically justified simply by the net aggregate gain, regardless of how these gains are distributed or who is hurt in the process.

    To my mind, before considering some trade liberalization deal we should FIRST agree to and implement the redistribution mechanisms and only then reduce barriers. Implementing trade deals in a backward, half-assed way as has typically been the case often makes "us" worse off than autarky.

    Peter K. -> jonny bakho... , Thursday, March 10, 2016 at 07:43 AM
    From Krugman's wikipedia article:

    "Krugman has at times advocated free markets in contexts where they are often viewed as controversial. He has ... likened the opposition against free trade and globalization to the opposition against evolution via natural selection (1996),[167]

    167 167 http://web.mit.edu/krugman/www/ricardo.htm

    "Ricardo's difficult idea". Web.mit.edu. 1996. Retrieved 2011-10-04.

    pgl -> Peter K.... , Thursday, March 10, 2016 at 07:48 AM
    Wikipedia. Now there is an unimpeachable source!
    Peter K. -> pgl... , Thursday, March 10, 2016 at 09:17 AM
    what's your alternative?
    Julio -> jonny bakho... , Thursday, March 10, 2016 at 09:10 AM
    (In fact, when I made that argument at one panel discussion in 1993, a fellow panelist--a NAFTA advocate, as it happens--exploded in rage: "It's remarks like that that make people hate economists!")

    [Thanks to electoral politics, we're all fellow panelists now.]

    Peter K. -> Julio ... , Thursday, March 10, 2016 at 09:20 AM
    "To me, at least, the idea that changes in demand will normally be offset by Fed policy--so that they will, on average, have no effect on employment--seems both simple and entirely reasonable. Yet it is clear that very few people outside the world of academic economics think about things that way."

    As we've seen the Fed is overly fearful of inflation, so the Fed doesn't offset the trade deficit as quickly as it should. Instead we suffer hysteresis and reduction of potential output.

    Peter K. : , Thursday, March 10, 2016 at 06:04 AM
    "The truth is that if Sanders were to make it to the White House, he would find it very hard to do anything much about globalization - not because it's technically or economically impossible, but because the moment he looked into actually tearing up existing trade agreements the diplomatic, foreign-policy costs would be overwhelmingly obvious."

    Here Krugman is more honest. We're basically buying off the Chinese, etc. The cost for stopping this would be less cooperation from the Chinese, etc.

    This is new. He never used to say this kind of thing. Instead he'd go after "protectionists" as luddites.

    pgl -> Peter K.... , Thursday, March 10, 2016 at 06:09 AM
    "This is new. He never used to say this kind of thing. Instead he'd go after "protectionists" as luddites."

    You have Krugman confused with Greg Mankiw. Most real international economics (Mankiw is not one) recognize the distributional consequences of free trade v. protectionism. Then again - putting forth the Mankiw uninformed spin is a prerequisite for being on Team Republican. Of course Republicans will go protectionist whenever it is politically expedient as in that temporary set of steel tariffs. Helped Bush-Cheney in 2004 and right after that - no tariffs. Funny how that worked.

    Peter K. -> pgl... , Thursday, March 10, 2016 at 06:20 AM
    "Most real international economics (Mankiw is not one) recognize the distributional consequences of free trade v. protectionism."

    Obama and others don't defend the TPP that way. Krugman and Hillary don't support the TPP but only because the politics has shifted since the 1990s.

    If Krugman wrote today as he did in the 1990s, he'd completely ruin his brand as liberal economist.

    Peter K. -> Peter K.... , Thursday, March 10, 2016 at 06:22 AM
    Where is the "redistribution from government" in the TPP. There isn't any.

    Even the NAFTA side agreements on labor and the environment are toothless. The point of these corporate trade deals is to profit from the lower labor and environmental standards of poorer countries.

    pgl -> Peter K.... , Thursday, March 10, 2016 at 06:46 AM
    And where did I say TPP was a good thing? I have slammed TPP. And I never said NAFTA included this compensation thing. Nor did Mark Kleiman.

    But do continue to misrepresent what I and others have said. It is what you do.

    pgl -> Peter K.... , Thursday, March 10, 2016 at 06:12 AM
    Hat tip to my Econospeak colleague Sandwichman for noting this from Krugman:

    http://econospeak.blogspot.com/2013/06/paul-krugmans-sympathy-for-luddites.html

    Mark Thoma also noted this sympathy for the Luddites. But the professional Krugman haters have to deny he would write such things.

    Peter K. -> pgl... , Thursday, March 10, 2016 at 06:17 AM
    The fact that you resort to calling me a professional Krugman hater means you're not interested in an actual debate about actual ideas. You've lost the debate and I'm not participating.

    One is not allowed to criticize Krugman lest one be labeled a professional Krugman hater?

    Your resort to name calling just weakens the case you're making.

    pgl -> Peter K.... , Thursday, March 10, 2016 at 06:47 AM
    You of late have wasted so much space misrepresenting what Krugman has said. Maybe you don't hate him - maybe you just want to get his attention. For a date maybe. Lord - the troll in you is truly out of control.
    Peter K. -> pgl... , Thursday, March 10, 2016 at 07:29 AM
    I have not misrepresented what Krugman has said.
    pgl -> Peter K.... , Thursday, March 10, 2016 at 07:49 AM
    Who wrote?

    "This is new. He never used to say this kind of thing. Instead he'd go after "protectionists" as luddites."

    Did you even bother to read that link to what the Sandwichman posted? Didn't think so.

    Peter K. -> pgl... , Thursday, March 10, 2016 at 09:23 AM
    Sandwichman's quote is from 2013. I'm talking about before that and especially in the 1990s.

    Sandwichman says the quote is notable because Krugman has changed his views. That proves my point.

    Did you read it?

    pgl -> Peter K.... , Thursday, March 10, 2016 at 10:34 AM
    Sandwichman may think Krugman changed his views but if one actually read what he has written over the years (as opposed to your cherry picking quotes), you might have noticed otherwise. But of course you want Krugman to look bad. It is what you do.
    Syaloch -> pgl... , Thursday, March 10, 2016 at 12:31 PM
    Krugman's views have evolved quite a bit over the years. Can you envision today's Krugman singing the praises of cheap labor?

    http://www.pkarchive.org/trade/smokey.htm

    In Praise of Cheap Labor (1997)

    Peter K. -> pgl... , Thursday, March 10, 2016 at 09:25 AM
    Only recently he has begun to say that trade deals are part of diplomacy, like we're giving these countries something in order for them to cooperate.

    If we didn't do these trade deals, these countries would cooperate less.

    Peter K. -> Peter K.... , -1
    It's a legitimate point.

    [Dec 05, 2016] The conditions that produced and enabled Trump are the Democratic Party betrayal or working classes, especially its transformation into another wing of neoliberal party of the USA under Clinton. People now view a vote for Hillary as a vote for more of the same - increasing disparity in wealth and income.

    Sizeable numbers of Americans have seen wages decline in real terms for nearly 20 years. Many/most parents in many communities do not see a better future before them, or for their children.
    Notable quotes:
    "... Democracy demands that ballot access rules be selected by referendum, not by the very legacy parties that maintain legislative control by effectively denying ballot access to parties that will pose a challenge to their continued rule. ..."
    "... I think the U.S. Party system, in the political science sense, shifted to a new state during George W Bush's administration as, in Kevin Phillip's terms the Republican Party was taken over by Theocrats and Bad Money. ..."
    "... My understanding is trumps support disproportionately comes from the small business owning classes, Ie a demographic similar to the petite bourgeoisie who have often been heavily involved in reactionary movements. This gets oversold as "working class" when class is defined by education level rather than income. ..."
    "... Racism serves as an organizing principle. Politically, in an oppressive and stultifying hierarchy like the plantation South, racism not incidentally buys the loyalty of subalterns with ersatz status. ..."
    "... For a time, the balkanization of American political communities by race, religion and ethnicity was an effective means to the dominance of an tiny elite with ties to an hegemonic community, but it backfired. Dismantling that balkanization has left the country with a very low level of social affiliation and thus a low capacity to organize resistance to elite depredations. ..."
    "... Watching Clinton scoop up bankster money, welcome Republicans neocons to the ranks of her supporters does not fill me with hope. ..."
    Aug 02, 2016 | crookedtimber.org

    Glenn 08.02.16 at 5:01 pm

    @William Meyer 08.02.16 at 4:41 pm

    Legislators affiliated with the duopoly parties should not write the rules governing the ballot access of third parties. This exclusionary rule making amounts to preserving a self-dealing duopoly. Elections are the interest of the people who vote and those elected should not be able to subvert the democratic process by acting as a cartel.

    Democracy demands that ballot access rules be selected by referendum, not by the very legacy parties that maintain legislative control by effectively denying ballot access to parties that will pose a challenge to their continued rule.

    Of course any meaningful change would require a voluntary diminishment of power of the duopoly that now has dictatorial control over ballot access, and who will prevent any Constitutional Amendment that would enhance the democratic nature of the process.

    bruce wilder 08.02.16 at 8:02 pm

    I think the U.S. Party system, in the political science sense, shifted to a new state during George W Bush's administration as, in Kevin Phillip's terms the Republican Party was taken over by Theocrats and Bad Money.

    Ronan(rf) 08.04.16 at 10:35 pm

    "I generally don't give a shit about polls so I have no "data" to evidence this claim, but my guess is the majority of Trump's support comes from this broad middle"

    My understanding is trumps support disproportionately comes from the small business owning classes, Ie a demographic similar to the petite bourgeoisie who have often been heavily involved in reactionary movements. This gets oversold as "working class" when class is defined by education level rather than income.

    This would make some sense as they are generally in economically unstable jobs, they tend to be hostile to both big govt (regulations, freeloaders) and big business (unfair competition), and while they (rhetorically at least) tend to value personal autonomy and self sufficiency , they generally sell into smaller, local markets, and so are particularly affected by local demographic and cultural change , and decline. That's my speculation anyway.

    bruce wilder 08.06.16 at 4:28 pm

    I am somewhat suspicious of leaving dominating elites out of these stories of racism as an organizing principle for political economy or (cultural) community.

    Racism served the purposes of a slaveholding elite that organized political communities to serve their own interests. (Or, vis a vis the Indians a land-grab or genocide.)

    Racism serves as an organizing principle. Politically, in an oppressive and stultifying hierarchy like the plantation South, racism not incidentally buys the loyalty of subalterns with ersatz status. The ugly prejudices and resentful arrogance of working class whites is thus a component of how racism works to organize a political community to serve a hegemonic master class. The business end of racism, though, is the autarkic poverty imposed on the working communities: slaves, sharecroppers, poor blacks, poor whites - bad schools, bad roads, politically disabled communities, predatory institutions and authoritarian governments.

    For a time, the balkanization of American political communities by race, religion and ethnicity was an effective means to the dominance of an tiny elite with ties to an hegemonic community, but it backfired. Dismantling that balkanization has left the country with a very low level of social affiliation and thus a low capacity to organize resistance to elite depredations.

    bruce wilder 08.06.16 at 4:31 pm

    Watching Clinton scoop up bankster money, welcome Republicans neocons to the ranks of her supporters does not fill me with hope.

    [Dec 05, 2016] Trump and the Transformation of Politics

    Notable quotes:
    "... Journal of Democracy ..."
    "... John Feffer is the director of Foreign Policy In Focus. ..."
    Sep 04, 2016 | fpif.org
    Trump and the other illiberal populists have been benefiting from three overlapping backlashes.

    The first is cultural. Movements for civil liberties have been remarkably successful over the last 40 years. Women, ethnic and religious minorities, and the LGBTQ community have secured important gains at a legal and cultural level. It is remarkable, for instance, how quickly same-sex marriage has become legal in more than 20 countries when no country recognized it before 2001.

    Resistance has always existed to these movements to expand the realm of civil liberties. But this backlash increasingly has a political face. Thus the rise of parties that challenge multiculturalism and immigration in Europe, the movements throughout Africa and Asia that support the majority over the minorities, and the Trump/Tea Party takeover of the Republican Party with their appeals to primarily white men.

    The second backlash is economic. The globalization of the economy has created a class of enormously wealthy individuals (in the financial, technology, and communications sectors). But globalization has left behind huge numbers of low-wage workers and those who have watched their jobs relocate to other countries.

    Illiberal populists have directed all that anger on the part of people left behind by the world economy at a series of targets: bankers who make billions, corporations that are constantly looking for even lower-wage workers, immigrants who "take away our jobs," and sometimes ethnic minorities who function as convenient scapegoats. The targets, in other words, include both the very powerful and the very weak.

    The third backlash, and perhaps the most consequential, is political. It's not just that people living in democracies are disgusted with their leaders and the parties they represent. Rather, as political scientists Roberto Stefan Foa and Yascha Mounk write in the Journal of Democracy , "they have also become more cynical about the value of democracy as a political system, less hopeful that anything they do might influence public policy, and more willing to express support for authoritarian alternatives."

    Foa and Mounk are using 20 years of data collected from surveys of citizens in Western Europe and North America – the democracies with the greatest longevity. And they have found that support for illiberal alternatives is greater among the younger generation than the older one. In other countries outside Europe and North America, the disillusionment with democratic institutions often takes the form of a preference for a powerful leader who can break the rules if necessary to preserve order and stability – like Putin in Russia or Abdel Fattah el-Sisi in Egypt or Prayuth Chan-ocha in Thailand.

    These three backlashes – cultural, economic, political – are also anti-internationalist because international institutions have become associated with the promotion of civil liberties and human rights, the greater globalization of the economy, and the constraint of the sovereignty of nations (for instance, through the European Union or the UN's "responsibility to protect" doctrine).

    ... ... ....

    The current political order is coming apart. If we don't come up with a fair, Green, and internationalist alternative, the illiberal populists will keep winning. John Feffer is the director of Foreign Policy In Focus.

    [Dec 05, 2016] The most powerful force in Presidential election 2016 is the sense of betrayal pervading our politics, especially among Democratic electorate

    Notable quotes:
    "... if neo-liberalism is partly defined by the free flow of goods, labor and capital - and that has been the Republican agenda since at least Reagan - how is Trump a continuation of the same tradition?" ..."
    "... Trump is a conservative (or right populist, or whatever), and draws on that tradition. He's not a neoliberal. ..."
    "... Trump is too incoherent to really represent the populist view. He's consistent w/the trade and immigration views but (assuming you can actually figure him out) wrong on banks, taxes, etc. ..."
    "... But the next populists we see might be more full bore. When that happens, you'll see much more overlap w/Sanders economic plans for the middle class. ..."
    "... There's always tension along the lead running between the politician and his constituents. The thing that seems most salient to me at the present moment is the sense of betrayal pervading our politics. At least since the GFC of 2008, it has been hard to deny that the two Parties worked together to set up an economic betrayal. And, the long-running saga of the wars in Iraq and Afghanistan also speak to elite failure, as well as betrayal. ..."
    "... Trump is a novelty act. He represents a chance for people who feel resentful without knowing much of anything about anything to cast a middle-finger vote. They wouldn't be willing to do that, if times were really bad, instead of just disappointing and distressing. ..."
    "... There's also the fact Reagan tapped a fair number of Nixon people, as did W years later. Reagan went after Nixon in the sense of running against him, and taking the party in a much more hard-right direction, sure. But he was repudiated largely because he got caught doing dirty tricks with his pants down. ..."
    "... From what I can tell - the 1972 election gave the centrists in the democratic party power to discredit and marginalize the anti-war left, and with it, the left in general. ..."
    "... Ready even now to whine that she's a victim and that the whole community is at fault and that people are picking on her because she's a woman, rather than because she has a habit of making accusations like this every time she comments. ..."
    "... That is a perfect example of predatory "solidarity". Val is looking for dupes to support her ..."
    Aug 12, 2016 | crookedtimber.org
    Rich Puchalsky 08.12.16 at 4:15 pm 683
    "Once again, if neo-liberalism is partly defined by the free flow of goods, labor and capital - and that has been the Republican agenda since at least Reagan - how is Trump a continuation of the same tradition?"

    You have to be willing to see neoliberalism as something different from conservatism to have the answer make any sense. John Quiggin has written a good deal here about a model of U.S. politics as being divided into left, neoliberal, and conservative. Trump is a conservative (or right populist, or whatever), and draws on that tradition. He's not a neoliberal.

    ... ... ...

    T 08.12.16 at 5:52 pm

    RP @683

    That's a bit of my point. I think Corey has defined the Republican tradition solely in response to the Southern Strategy that sees a line from Nixon (or Goldwater) to Trump. But that gets the economics wrong and the foreign policy too - the repub foreign policy view has not been consistent across administrations and Trump's economic pans (to the extent he has a plan) are antithetical to the Nixon – W tradition. I have viewed post-80 Dem administrations as neoliberals w/transfers and Repub as neoliberals w/o transfers.

    Trump is too incoherent to really represent the populist view. He's consistent w/the trade and immigration views but (assuming you can actually figure him out) wrong on banks, taxes, etc.

    But the next populists we see might be more full bore. When that happens, you'll see much more overlap w/Sanders economic plans for the middle class. Populists have nothing against gov't programs like SS and Medicare and were always for things like the TVA and infrastructure spending. Policies aimed at the poor and minorities not so much.

    bruce wilder 08.12.16 at 7:47 pm 689

    T @ 685: Trump is too incoherent to really represent the populist view.

    There's always tension along the lead running between the politician and his constituents. The thing that seems most salient to me at the present moment is the sense of betrayal pervading our politics. At least since the GFC of 2008, it has been hard to deny that the two Parties worked together to set up an economic betrayal. And, the long-running saga of the wars in Iraq and Afghanistan also speak to elite failure, as well as betrayal.

    These are the two most unpopular candidates in living memory. That is different.

    I am not a believer in "the fire next time". Trump is a novelty act. He represents a chance for people who feel resentful without knowing much of anything about anything to cast a middle-finger vote. They wouldn't be willing to do that, if times were really bad, instead of just disappointing and distressing.

    Nor will Sanders be back. His was a last New Deal coda. There may be second acts in American life, but there aren't 7th acts.

    If there's a populist politics in our future, it will have to have a much sharper edge. It can talk about growth, but it has to mean smashing the rich and taking their stuff. There's very rapidly going to come a point where there's no other option, other than just accepting cramdown by the authoritarian surveillance state built by the neoliberals. that's a much taller order than Sanders or Trump have been offering.<

    Michael Sullivan 08.12.16 at 8:06 pm 690

    Corey, you write: "It's not just that the Dems went after Nixon, it's also that Nixon had so few allies. People on the right were furious with him because they felt after this huge ratification that the country had moved to the right, Nixon was still governing as if the New Deal were the consensus. So when the time came, he had very few defenders, except for loyalists like Leonard Garment and G. Gordon Liddy. And Al Haig, God bless him."

    You've studied this more than I have, but this is at least somewhat at odds with my memory. I recall some prominent attackers of Nixon from the Republican party that were moderates, at least one of whom was essentially kicked out of the party for being too liberal in later years. There's also the fact Reagan tapped a fair number of Nixon people, as did W years later. Reagan went after Nixon in the sense of running against him, and taking the party in a much more hard-right direction, sure. But he was repudiated largely because he got caught doing dirty tricks with his pants down.

    To think that something similar would happen to Clinton (watergate like scandal) that would actually have a large portion of the left in support of impeachment, she would have to be as dirty as Nixon was, *and* the evidence to really put the screws to her would have to be out, as it was against Nixon during watergate.

    OTOH, my actual *hope* would be that a similar left-liberal sea change comparable to 1980 from the right would be plausible. I don't think a 1976-like interlude is plausible though, that would require the existence of a moderate republican with enough support within their own party to win the nomination. I suppose its possible that such a beast could come to exist if Trump loses a landslide, but most of the plausible candidates have already left or been kicked out of the party.

    From what I can tell - the 1972 election gave the centrists in the democratic party power to discredit and marginalize the anti-war left, and with it, the left in general. A comparable election from the other side would give republican centrists/moderates the ability to discredit and marginalize the right wing base. But unlike Democrats in 1972, there aren't any moderates left in the Republican party by my lights. I'm much more concerned that this will simply re-empower the hard-core conservatives with plausbly-deniable dog-whistle racism who are now the "moderates", and enable them to whitewash their history.

    Unfortunately, unlike you, I'm not convinced that a landslide is possible without an appeal to Reagan/Bush republicans. I don't think we're going to see a meaningful turn toward a real left until Democrats can win a majority of statehouses and clean up the ridiculous gerrymandering.

    Rich Puchalsky 08.12.16 at 9:18 pm

    Val: "Similarly with your comments on "identity politics" where you could almost be seen by MRAs and white supremacists as an ally, from the tone of your rhetoric."

    That is 100% perfect Val. Insinuates that BW is a sort-of-ally of white supremacists - an infuriating insinuation. Does this insinuation based on a misreading of what he wrote. Completely resistant to any sort of suggestion that what she dishes out so expansively to others had better be something she should be willing to accept herself, or that she shouldn't do it. Ready even now to whine that she's a victim and that the whole community is at fault and that people are picking on her because she's a woman, rather than because she has a habit of making accusations like this every time she comments.

    That is a perfect example of predatory "solidarity". Val is looking for dupes to support her - for people to jump in saying "Why are you being hostile to women?" in response to people's response to her comment.

    [Dec 05, 2016] Yes, the System Is Rigged

    Notable quotes:
    "... More than a dozen Republican rivals, described as the strongest GOP field since 1980, were sent packing. This was the year Americans rose up to pull down the establishment in a peaceful storming of the American Bastille. ..."
    "... If 2016 taught us anything, it is that if the establishment's hegemony is imperiled, it will come together in ferocious solidarity - for the preservation of their perks, privileges and power. All the elements of that establishment - corporate, cultural, political, media - are today issuing an ultimatum to Middle America: Trump is unacceptable. Instructions are going out to Republican leaders that either they dump Trump, or they will cease to be seen as morally fit partners in power. ..."
    "... Our CIA, NGOs and National Endowment for Democracy all beaver away for "regime change" in faraway lands whose rulers displease us. How do we effect "regime change" here at home? ..."
    "... Donald Trump's success, despite the near-universal hostility of the media, even much of the conservative media, was due in large part to the public's response to the issues he raised. ..."
    Aug 12, 2016 | www.theamericanconservative.com

    "I'm afraid the election is going to be rigged," Donald Trump told voters in Ohio and Sean Hannity on Fox News. And that hit a nerve.

    "Dangerous," "toxic," came the recoil from the media.

    Trump is threatening to "delegitimize" the election results of 2016.

    Well, if that is what Trump is trying to do, he has no small point. For consider what 2016 promised and what it appears about to deliver.

    This longest of election cycles has rightly been called the Year of the Outsider. It was a year that saw a mighty surge of economic populism and patriotism, a year when a 74-year-old Socialist senator set primaries ablaze with mammoth crowds that dwarfed those of Hillary Clinton.

    It was the year that a non-politician, Donald Trump, swept Republican primaries in an historic turnout, with his nearest rival an ostracized maverick in his own Republican caucus, Senator Ted Cruz.

    More than a dozen Republican rivals, described as the strongest GOP field since 1980, were sent packing. This was the year Americans rose up to pull down the establishment in a peaceful storming of the American Bastille.

    But if it ends with a Clintonite restoration and a ratification of the same old Beltway policies, would that not suggest there is something fraudulent about American democracy, something rotten in the state?

    If 2016 taught us anything, it is that if the establishment's hegemony is imperiled, it will come together in ferocious solidarity - for the preservation of their perks, privileges and power. All the elements of that establishment - corporate, cultural, political, media - are today issuing an ultimatum to Middle America: Trump is unacceptable. Instructions are going out to Republican leaders that either they dump Trump, or they will cease to be seen as morally fit partners in power.

    It testifies to the character of Republican elites that some are seeking ways to carry out these instructions, though this would mean invalidating and aborting the democratic process that produced Trump.

    But what is a repudiated establishment doing issuing orders to anyone?

    Why is it not Middle America issuing the demands, rather than the other way around?

    Specifically, the Republican electorate should tell its discredited and rejected ruling class: If we cannot get rid of you at the ballot box, then tell us how, peacefully and democratically, we can be rid of you?

    You want Trump out? How do we get you out? The Czechs had their Prague Spring. The Tunisians and Egyptians their Arab Spring. When do we have our American Spring? The Brits had their "Brexit," and declared independence of an arrogant superstate in Brussels. How do we liberate ourselves from a Beltway superstate that is more powerful and resistant to democratic change?

    Our CIA, NGOs and National Endowment for Democracy all beaver away for "regime change" in faraway lands whose rulers displease us. How do we effect "regime change" here at home?

    Donald Trump's success, despite the near-universal hostility of the media, even much of the conservative media, was due in large part to the public's response to the issues he raised.

    By campaign's end, he had won the argument on trade, as Hillary Clinton was agreeing on TPP and confessing to second thoughts on NAFTA.

    But if TPP is revived at the insistence of the oligarchs of Wall Street, the Business Roundtable, the U.S. Chamber of Commerce - backed by conscript editorial writers for newspapers that rely on ad dollars - what do elections really mean anymore?

    And if, as the polls show we might, we get Clinton - and TPP, and amnesty, and endless migrations of Third World peoples who consume more tax dollars than they generate, and who will soon swamp the Republicans' coalition - what was 2016 all about?

    Would this really be what a majority of Americans voted for in this most exciting of presidential races?

    "Those who make peaceful revolution impossible will make violent revolution inevitable," said John F. Kennedy.

    The 1960s and early 1970s were a time of social revolution in America, and President Nixon, by ending the draft and ending the Vietnam war, presided over what one columnist called the "cooling of America."

    But if Hillary Clinton takes power, and continues America on her present course, which a majority of Americans rejected in the primaries, there is going to be a bad moon rising.

    And the new protesters in the streets will not be overprivileged children from Ivy League campuses.

    Patrick J. Buchanan is a founding editor of The American Conservative and the author of book The Greatest Comeback: How Richard Nixon Rose From Defeat to Create the New Majority .

    [Dec 05, 2016] Neoliberalism has only exacerbated falling living standards

    Notable quotes:
    "... the capitalist economy is more and more an asset driven one. This article does not even begin to address the issue of asset valuations, the explicit CB support for asset inflation and the effect on inequality, and especially generational plunder. ..."
    "... the problem of living standards is obviously a Malthusian one. despite all the progress of social media tricks, we cannot fool nature. the rate of ecological degradation is alarming, and now irreversible. "the market" is now moving rapidly to real assets. This will eventually lead to war as all war is eventually for resources. ..."
    Aug 07, 2016 | www.nakedcapitalism.com
    Sally Snyder , August 5, 2016 at 11:57 am

    Here is an article that explains the key reason why economic growth will be slow for the foreseeable future:

    http://viableopposition.blogspot.ca/2016/08/the-baby-bust-and-its-impact-on.html

    No matter what central banks do, their actions will not be able to create the same level of economic growth that we have become used to over the past seven decades.

    JEHR , August 5, 2016 at 12:57 pm

    Economic growth does not come from the central banks; if government sought to provide the basics for all its citizens, including health care, education, a home, and proper food and all the infrastructure needed to give people the basics, then you could have something akin to "growth" while at the same time making life more pleasant for the less fortunate. There seems to be no definition of economic growth that includes everyone.

    David , August 5, 2016 at 1:25 pm

    This seems a very elaborate way of stating a simple problem, that can be summarised in three points.

      The living standards of most people have fallen over the last thirty years or so because of the impact of neoliberal economic policies. Conventional politicians are promising only more of the same. Therefore people are increasingly voting for non-conventional politicians.

    And that's about it.

    jgordon , August 5, 2016 at 8:10 pm

    Neoliberalism has only exacerbated falling living standards. Living standards would be falling even without it, albeit more gradually.

    Neoliberalism itself may even be nothing more than a standard type response of species that have expanded beyond the capacity of their environment to support them. What we see as an evil ideology is only the expression of a mechanism that apportions declining resources to the elites, like shutting shutting down the periphery so the core can survive as in hypothermia.

    I Lost at Jeopardy , August 5, 2016 at 6:57 pm

    I really don't have problem with this. Let the financial sector run the world into the ground and get it over with.

    In defference to a great many knowledgable commentors here that work in the FIRE sector, I don't want to create a damning screed on the cost of servicing money, but at some point even the most considered opinions have to acknowledge that that finance is flooded with *talent* which creates a number of problems; one being a waste of intellect and education in a field that doesn't offer much of a return when viewed in an egalitarian sense, secondly; as the field grows due to, the technical advances, the rise in globilization, and the security a financial occuptaion offers in an advanced first world country nowadays, it requires substantially more income to be devoted to it's function.

    This income has to be derived somewhere, and the required sacrifices on every facet of a global economy to bolster positions and maintain asset prices has precipitated this decline in the well being of peoples not plugged-in to the consumer capitalist regime and dogma.

    Something has to give here, and I honestly couldn't care about your 401k or home resale value, you did this to yourself as much as those day-traders who got clobbered in the dot-com crash.

    nothing but the truth , August 6, 2016 at 11:46 am

    the capitalist economy is more and more an asset driven one. This article does not even begin to address the issue of asset valuations, the explicit CB support for asset inflation and the effect on inequality, and especially generational plunder.

    the problem of living standards is obviously a Malthusian one. despite all the progress of social media tricks, we cannot fool nature. the rate of ecological degradation is alarming, and now irreversible. "the market" is now moving rapidly to real assets. This will eventually lead to war as all war is eventually for resources.

    [Dec 04, 2016] Oil is facing 3 different scenarios RBC

    Blast from the past...
    Notable quotes:
    "... RBC Capital Markets' Global Head of Commodity Strategy Helima Croft outlined three potential scenarios for WTI crude on CNBC's "Fast Money" for the new year. The most bullish situation would be seeing more than a million barrels of oil pulled off the market and prices averaging in the $60 dollar range. ..."
    "... "If you are thinking about sort of about a mid-$30s average for WTI, low-$40s, I think that's a bearish scenario," said Croft, who's also a CNBC contributor. ..."
    "... "Our base case is this sort of middle range... $52 is our WTI call for next year," she said, implying that U.S. crude would be nearly one-third higher than its current trading levels. The fourth quarter "is really where you want to be looking for WTI to sort of take-off," she added. ..."
    Dec 30, 2015 | www.cnbc.com

    RBC Capital Markets' Global Head of Commodity Strategy Helima Croft outlined three potential scenarios for WTI crude on CNBC's "Fast Money" for the new year. The most bullish situation would be seeing more than a million barrels of oil pulled off the market and prices averaging in the $60 dollar range.

    The worst case scenario involves a tsunami of new production from OPEC, Saudi Arabia, Iran and Libya hitting the market -- all but certain to drive prices even lower. On Thursday, the final day of trading before the Christmas holiday, Brent and U.S. crude closed up by more than a percent, but still well under $40 per barrel.

    "If you are thinking about sort of about a mid-$30s average for WTI, low-$40s, I think that's a bearish scenario," said Croft, who's also a CNBC contributor.

    ... ... ....

    "Our base case is this sort of middle range... $52 is our WTI call for next year," she said, implying that U.S. crude would be nearly one-third higher than its current trading levels. The fourth quarter "is really where you want to be looking for WTI to sort of take-off," she added.

    [Dec 04, 2016] UK election Who really governs Britain

    But those politicians lucky enough to win discover -- if they did not know already -- that their capacity to affect even their own domestic environment is constrained by forces beyond their control.
    Notable quotes:
    "... But those politicians lucky enough to win discover -- if they did not know already -- that their capacity to affect even their own domestic environment is constrained by forces beyond their control. ..."
    "... In the case of Britain, the once-powerful centralized governments of that country are now multiply constrained. As the power of Britain in international affairs has declined, so has the British government's power within its own domain. Membership of the European Union constrains British governments' ability to determine everything from the quantities of fish British fishermen can legally catch to the amount in fees that British universities can charge students from other EU countries. ..."
    "... Not least, the EU's insistence on the free movement of labor caused the Conservative-dominated coalition that came to power in 2010 to renege on the Tories' spectacularly ill-judged pledge to reduce to "tens of thousands a year" the number of migrants coming to Britain. The number admitted in 2014 alone was nearer 300,000. ..."
    "... On top of all that, British governments -- even more than those of some other predominantly capitalist economies -- are open to being buffeted by market forces, whose winds can acquire gale force. In a world of substantially free trade, imports and exports of goods and services are largely beyond any government's control, and the Bank of England's influence over the external value of sterling is negligible. During the present election campaign, HSBC, one of the world's largest banks, indicated that it was contemplating shifting its headquarters from the City of London to Hong Kong. For good or ill, Britain's government was, and is, effectively helpless to intervene. ..."
    "... That's why we need a federal Europe. Local governments for local issues and elected by the local people and a European government for European issues elected by all Europeans. ..."
    May 04, 2015 | CNN.com

    Once upon a time, national elections were -- or seemed to be -- overwhelmingly domestic affairs, affecting only the peoples of the countries taking part in them. If that was ever true, it is so no longer. Angela Merkel negotiates with Greece's government with Germany's voters looming in the background. David Cameron currently fights an election campaign in the UK holding fast to the belief that a false move on his part regarding Britain's relationship with the EU could cost his Conservative Party seats, votes and possibly the entire election.

    Britain provides a good illustration of a general proposition. It used to be claimed, plausibly, that "all politics is local." In 2015, electoral politics may still be mostly local, but the post-electoral business of government is anything but local. There is a misfit between the two. Voters are mainly swayed by domestic issues. Vote-seeking politicians campaign accordingly. But those politicians lucky enough to win discover -- if they did not know already -- that their capacity to affect even their own domestic environment is constrained by forces beyond their control.

    Anyone viewing the UK election campaign from afar could be forgiven for thinking that British voters and politicians alike imagined they were living on some kind of self-sufficient sea-girt island. The opinion polls indicate that a large majority of voters are preoccupied -- politically as well as in other ways -- with their own financial situation, tax rates, welfare spending and the future of the National Health Service. Immigration is an issue for many voters, but mostly in domestic terms (and often as a surrogate for generalized discontent with Britain's political class). The fact that migrants from Eastern Europe and elsewhere make a positive net contribution to both the UK's economy and its social services scarcely features in the campaign.

    ... ... ...

    After polling day, all that will change -- probably to millions of voters' dismay. One American presidential candidate famously said that politicians campaign in poetry, but govern in prose. Politicians in democracies, not just in Britain, campaign as though they can move mountains, then find that most mountains are hard or impossible to move.

    In the case of Britain, the once-powerful centralized governments of that country are now multiply constrained. As the power of Britain in international affairs has declined, so has the British government's power within its own domain. Membership of the European Union constrains British governments' ability to determine everything from the quantities of fish British fishermen can legally catch to the amount in fees that British universities can charge students from other EU countries.

    Not least, the EU's insistence on the free movement of labor caused the Conservative-dominated coalition that came to power in 2010 to renege on the Tories' spectacularly ill-judged pledge to reduce to "tens of thousands a year" the number of migrants coming to Britain. The number admitted in 2014 alone was nearer 300,000.

    The UK's courts are also far more active than they were. The British parliament in 1998 incorporated the European Convention on Human Rights into British domestic law, and British judges have determinedly enforced those rights. During the 1970s, they had already been handed responsibility for enforcing the full range of EU law within the UK.

    Also, Britain's judges have, on their own initiative, exercised increasingly frequently their long-standing power of "judicial review," invalidating ministerial decisions that violated due process or seemed to them to be wholly unreasonable. Devolution of substantial powers to semi-independent governments in Scotland, Wales and Northern Ireland has also meant that the jurisdiction of many so-called UK government ministers is effectively confined to the purely English component part.

    On top of all that, British governments -- even more than those of some other predominantly capitalist economies -- are open to being buffeted by market forces, whose winds can acquire gale force. In a world of substantially free trade, imports and exports of goods and services are largely beyond any government's control, and the Bank of England's influence over the external value of sterling is negligible. During the present election campaign, HSBC, one of the world's largest banks, indicated that it was contemplating shifting its headquarters from the City of London to Hong Kong. For good or ill, Britain's government was, and is, effectively helpless to intervene.

    The heirs of Gladstone, Disraeli, Lloyd George and Winston Churchill, Britain's political leaders are understandably still tempted to talk big. But their effective real-world influence is small. No wonder a lot of voters in Britain feel they are being conned.

    ItsJustTim

    That's globalization. And it won't go away, even if you vote nationalist. The issues are increasingly international, while the voters still have a mostly local perspective. That's why we need a federal Europe. Local governments for local issues and elected by the local people and a European government for European issues elected by all Europeans.

    [Dec 04, 2016] James Pinkerton Globalism Hits a Brick Wall Now, What Will Donald Trump and Hillary Clinton Do

    Notable quotes:
    "... The Guardian ..."
    "... it seems fair to say: Globalism isn't quite the Wave of the Future that most observers thought it was, even just a year ago. And so before we attempt to divide the true intentions of Clinton and Trump, we might first step back and consider how we got to this point. ..."
    "... An Inquiry into the Nature and Causes of the Wealth of Nations . ..."
    "... Clinton will say anything then she'll sell you out. I hope we never get a chance to see how she will sell us out on TPP ..."
    "... What we would be headed for under Hillary Clinton is fascism--Mussolini's shorthand definition of fascism was the marriage of industry and commerce with the power of the State. That is what the plutocrats who run the big banks (to whom she owes her soul) aim to do. President, Thomas Jefferson knew the dangers of large European-style central banks. ..."
    Aug 30, 2016 | Breitbart
    On the surface, it appears that Hillary Clinton and Donald Trump, for all their mutual antipathy, are united on one big issue: opposition to new trade deals. Here's a recent headline in The Guardian: "Trump and Clinton's free trade retreat: a pivotal moment for the world's economic future."

    And the subhead continues in that vein:

    Never before have both main presidential candidates broken so completely with Washington orthodoxy on globalization, even as the White House refuses to give up. The problem, however, goes much deeper than trade deals.

    In the above quote, we can note the deliberate use of the loaded word, "problem." As in, it's a problem that free trade is unpopular-a problem, perhaps, that the MSM can fix. Yet in the meantime, the newspaper sighed, the two biggest trade deals on the horizon, the well-known Trans Pacific Partnership (TPP), and the lesser-known Trans Atlantic Trade Investment Partnership (TTIP), aimed at further linking the U.S. and European Union (EU), are both in jeopardy.

    Indeed, if TPP isn't doing well, TTIP might be dead: Here's an August 28 headline from the Deutsche Welle news service quoting Sigmar Gabriel, the No. 2 in the Berlin government: "Germany's Vice Chancellor Gabriel: US-EU trade talks 'have failed.'"

    So now we must ask broader questions: What does this mean for trade treaties overall? And what are the implications for globalism?

    More specifically, we can ask: Are we sure that the two main White House hopefuls, Clinton and Trump, are truly sincere in their opposition to those deals? After all, as has been widely reported, President Obama still has plans to push TPP through to enactment in the "lame duck" session of Congress after the November elections. Of course, Obama wouldn't seek to do that if the president-elect opposed it-or would he?

    Yet on August 30, Politico reminded its Beltway readership, "How Trump or Clinton could kill Pacific trade deal." In other words, even if Obama were to move TPP forward in his last two months in office, the 45th president could still block its implementation in 2017 and beyond. If, that is, she or he really wanted to.

    Indeed, as we think about Clinton and Trump, we realize that there's "opposition" that's for show and there's opposition that's for real.

    Still, given what's been said on the presidential campaign trail this year, it seems fair to say: Globalism isn't quite the Wave of the Future that most observers thought it was, even just a year ago. And so before we attempt to divide the true intentions of Clinton and Trump, we might first step back and consider how we got to this point.

    2. The Free Trade Orthodoxy

    It's poignant that the headline, "Trump and Clinton's free trade retreat", lamenting the decay of free trade, appeared in The Guardian. Until recently, the newspaper was known as The Manchester Guardian, as in Manchester, England. And Manchester is not only a big city, population 2.5 million, it is also a city with a fabled past: You see, Manchester was the cradle of the Industrial Revolution, which transformed England and the world. It was that city that helped create the free trade orthodoxy that is now crumbling.

    Yes, in the 18th and 19th centuries, Manchester was the leading manufacturing city in the world, especially for textiles. It was known as "Cottonopolis."

    Indeed, back then, Manchester was so much more efficient and effective at mass production that it led the world in exports. That is, it could produce its goods at such low cost that it could send them across vast oceans and still undercut local producers on price and quality.

    Over time, this economic reality congealed into a school of thought: As Manchester grew rich from exports, its business leaders easily found economists, journalists, and propagandists who would help advance their cause in the press and among the intelligentsia.

    The resulting school of thought became known, in the 19th century, as "Manchester Liberalism." And so, to this day, long after Manchester has lost its economic preeminence to rivals elsewhere in the world, the phrase "Manchester Liberalism" is a well-known in the history of economics, bespeaking ardent support for free markets and free trade.

    More recently, the hub for free-trade enthusiasm has been the United States. In particular, the University of Chicago, home to the Nobel Prize-winning economist Milton Friedman, became free trade's academic citadel; hence the "Chicago School" has displaced Manchesterism.

    And just as it made sense for Manchester Liberalism to exalt free trade and exports when Manchester and England were on top, so, too, did the Chicago School exalt free trade when the U.S. was unquestionably the top dog.

    So back in the 40s and 50s, when the rest of the world was either bombed flat or still under the yoke of colonialism, it made perfect sense that the U.S., as the only intact industrial power, would celebrate industrial exports: We were Number One, and it was perfectly rational to make the most of that first-place status. And if scribblers and scholars could help make the case for this new status quo, well, bring 'em aboard. Thus the Chicago School gained ascendancy in the late 20th century. And of course, the Chicagoans drew inspiration from a period even earlier than Manchesterism,

    3. On the Origins of the Orthodoxy: Adam Smith and David Ricardo

    The beginnings of an intellectually rigorous discussion of trade can be traced to 1776, when Adam Smith published his famous work, An Inquiry into the Nature and Causes of the Wealth of Nations.

    One passage in that volume considers how individuals might optimize their own production and consumption:

    It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy.

    Smith is right, of course; everyone should always be calculating, however informally, whether or not it's cheaper to make it at home or buy it from someone else.

    We can quickly see: If each family must make its own clothes and grow its own food, it's likely to be worse off than if it can buy its necessities from a large-scale producer. Why? Because, to be blunt about it, most of us don't really know how to make clothes and grow food, and it's expensive and difficult-if not downright impossible-to learn how. So we can conclude that self-sufficiency, however rustic and charming, is almost always a recipe for poverty.

    Smith had a better idea: specialization. That is, people would specialize in one line of work, gain skills, earn more money, and then use that money in the marketplace, buying what they needed from other kinds of specialists.

    Moreover, the even better news, in Smith's mind, was that this kind of specialization came naturally to people-that is, if they were free to scheme out their own advancement. As Smith argued, the ideal system would allow "every man to pursue his own interest his own way, upon the liberal plan of equality, liberty and justice."

    That is, men (and women) would do that which they did best, and then they would all come together in the free marketplace-each person being inspired to do better, thanks to, as Smith so memorably put it, the "invisible hand." Thus Smith articulated a key insight that undergirds the whole of modern economics-and, of course, modern-day prosperity.

    A few decades later, in the early 19th century, Smith's pioneering work was expanded upon by another remarkable British economist, David Ricardo.

    Ricardo's big idea built on Smithian specialization; Ricardo called it "comparative advantage." That is, just as each individual should do what he or she does best, so should each country.

    In Ricardo's well-known illustration, he explained that the warm and sunny climate of Portugal made that country ideal for growing the grapes needed for wine, while the factories of England made that country ideal for spinning the fibers needed for apparel and other finished fabrics.

    Thus, in Ricardo's view, we could see the makings of a beautiful economic friendship: The Portuguese would utilize their comparative advantage (climate) and export their surplus wine to England, while the English would utilize their comparative advantage (manufacturing) and export apparel to Portugal. Thus each would benefit from the exchange of efficiently-produced products, as each export paid for the other.

    Furthermore, in Ricardo's telling, if tariffs and other barriers were eliminated, then both countries, Portugal and England, would enjoy the maximum free-trading win-win.

    Actually, in point of fact-and Ricardo knew this-the relationship was much more of a win for England, because manufacture is more lucrative than agriculture. That is, a factory in Manchester could crank out garments a lot faster than a vineyard in Portugal could ferment wine.

    And as we all know, the richer, stronger countries are industrial, not agricultural. Food is essential-and alcohol is pleasurable-but the real money is made in making things. After all, crops can be grown easily enough in many places, and so prices stay low. By contrast, manufacturing requires a lot of know-how and a huge upfront investment. Yet with enough powerful manufacturing, a nation is always guaranteed to be able to afford to import food. And also, it can make military weapons, and so, if necessary, take foreign food and croplands by force.

    We can also observe that Ricardo, smart fellow that he was, nevertheless was describing the economy at a certain point in time-the era of horse-drawn carriages and sailing ships. Ricardo realized that transportation was, in fact, a key business variable. He wrote that it was possible for a company to seek economic advantage by moving a factory from one part of England to another. And yet in his view, writing from the perspective of the year 1817, it was impossible to imagine moving a factory from England to another country:

    It would not follow that capital and population would necessarily move from England to Holland, or Spain, or Russia.

    Why this presumed immobility of capital and people? Because, from Ricardo's early 19th-century perspective, transportation was inevitably slow and creaky; he didn't foresee steamships and airplanes. In his day, relying on the technology of the time, it wasn't realistic to think that factories, and their workers, could relocate from one country to another.

    Moreover, in Ricardo's era, many countries were actively hostile to industrialization, because change would upset the aristocratic rhythms of the old order. That is, industrialization could turn docile or fatalistic peasants, spread out thinly across the countryside, into angry and self-aware proletarians, concentrated in the big cities-and that was a formula for unrest, even revolution.

    Indeed, it was not until the 20th century that every country-including China, a great civilization, long asleep under decadent imperial misrule-figured out that it had no choice other than to industrialize.

    So we can see that the ideas of Smith and Ricardo, enduringly powerful as they have been, were nonetheless products of their time-that is, a time when England mostly had the advantages of industrialism to itself. In particular, Ricardo's celebration of comparative advantage can be seen as an artifact of his own era, when England enjoyed a massive first-mover advantage in the industrial-export game.

    Smith died in 1790, and Ricardo died in 1823; a lot has changed since then. And yet the two economists were so lucid in their writings that their work is studied and admired to this day.

    Unfortunately, we can also observe that their ideas have been frozen in a kind of intellectual amber; even in the 21st century, free trade and old-fashioned comparative advantage are unquestioningly regarded as the keys to the wealth of nations-at least in the U.S.-even if they are so no longer.

    4. Nationalist Alternatives to Free Trade Orthodoxy

    As we have seen, Smith and Ricardo were pushing an idea, free trade, that was advantageous to Britain.

    So perhaps not surprisingly, rival countries-notably the United States and Germany-soon developed different ideas. Leaders in Washington, D.C., and Berlin didn't want their respective nations to be mere dependent receptacles for English goods; they wanted real independence. And so they wanted factories of their own.

    In the late 18th century, Alexander Hamilton, the visionary American patriot, could see that both economic wealth and military power flowed from domestic industry. As the nation's first Treasury Secretary, he persuaded President George Washington and the Congress to support a system of protective tariffs and "internal improvements" (what today we would call infrastructure) to foster US manufacturing and exporting.

    And in the 19th century, Germany, under the much heavier-handed leadership of Otto von Bismarck, had the same idea: Make a concerted effort to make the nation stronger.

    In both countries, this industrial policymaking succeeded. So whereas at the beginning of the 19th century, England had led the world in steel production, by the beginning of the 20th century century, the U.S. and Germany had moved well ahead. Yes, the "invisible hand" of individual self-interest is always a powerful economic force, but sometimes, the "visible hand" of national purpose, animated by patriotism, is even more powerful.

    Thus by 1914, at the onset of World War One, we could see the results of the Smith/Ricardo model, on the one hand, and the Hamilton/Bismarck model, on the other. All three countries-Britain, the US, and Germany, were rich-but only the latter two had genuine industrial mojo. Indeed, during World War One, English weakness became glaringly apparent in the 1915 shell crisis-as in, artillery shells. It was only the massive importing of made-in-USA ammunition that saved Britain from looming defeat.

    Yet as always, times change, as do economic circumstances, as do prevailing ideas.

    As we have seen, at the end of World War II, the U.S. was the only industrial power left standing. And so it made sense for America to shift from a policy of Hamiltonian protection to a policy of Smith-Ricardian export-minded free trade. Indeed, beginning in around 1945, both major political parties, Democrats and Republicans, solidly embraced the new line: The U.S. would be the factory for the world.

    Yet if times, circumstances, and ideas change, they can always change again.

    5. The Contemporary Crack-Up

    As we have seen, in the 19th century, not every country wanted to be on the passive receiving end of England's exports. And this was true, too, in the 20th century; Japan, notably, had its own ideas.

    If Japan had followed the Ricardian doctrine of comparative advantage, it would have focused on exporting rice and tuna. Instead, by dint of hard work, ingenuity, and more than a little national strategizing, Japan grew itself into a great and prosperous industrial power. Its exports, we might note, were such high-value-adds as automobiles and electronics, not mere crops and fish.

    Moreover, according to the same theory of comparative advantage, South Korea should have been exporting parasols and kimchi, and China should have settled for exporting fortune cookies and pandas.

    Yet as the South Korean economist Ha-Joon Chang has chronicled, these Asian nations resolved, in their no-nonsense neo-Confucian way, to launch state-guided private industries-and the theory of comparative advantage be damned.

    Yes, their efforts violated Western economic orthodoxy, but as the philosopher Kant once observed, the actual proves the possible. Indeed, today, as we all know, the Asian tigers are among the richest and fastest-growing economies in the world.

    Leading them all, of course, is China. As the economic historian Michael Lind recounted recently,

    China is not only the world's largest economy in terms of purchasing power parity (PPP), but also the world's largest manufacturing nation-producing 52 percent of color televisions, 75 percent of mobile phones and 87 percent of the world's personal computers. The Chinese automobile industry is the world's largest, twice the size of America's. China leads the world in foreign exchange reserves. The United States is the main trading partner for seventy-six countries. China is the main trading partner for 124.

    In particular, we might pause over one item in that impressive litany: China makes 87 percent of the world's personal computers.

    Indeed, if it's true, as ZDNet reports, that the Chinese have built "backdoors" into almost all the electronic equipment that they sell-that is to say, the equipment that we buy-then we can assume that we face a serious military challenge, as well as a serious economic challenge.

    Yes, it's a safe bet that the People's Liberation Army has a good handle on our defense establishment, especially now that the Pentagon has fully equipped itself with Chinese-made iPhones and iPads.

    Of course, we can safely predict that Defense Department bureaucrats will always say that there's nothing to worry about, that they have the potential hacking/sabotage matter under control (although just to be sure, the Pentagon might say, give us more money).

    Yet we might note that this is the same defense establishment that couldn't keep track of lone internal rogues such as Bradley Manning and Edward Snowden. Therefore, should we really believe that this same DOD knows how to stop the determined efforts of a nation of 1.3 billion people, seeking to hack machines-machines that they made in the first place?

    Yes, the single strongest argument against the blind application of free- trade dogma is the doctrine of self defense. That is, all the wealth in the world doesn't matter if you're conquered. Even Adam Smith understood that; as he wrote, "Defense . . . is of much more importance than opulence."

    Yet today we can readily see: If we are grossly dependent on China for vital wares, then we can't be truly independent of China. In fact, we should be downright fearful.

    Still, despite these deep strategic threats, directly the result of careless importing, the Smith-Ricardo orthodoxy remains powerful, even hegemonistic-at least in the English-speaking world.

    Why is this so? Yes, economists are typically seen as cold and nerdy, even bloodless, and yet, in fact, they are actual human beings. And as such, they are susceptible to the giddy-happy feeling that comes from the hope of building a new utopia, the dream of ushering in an era of world harmony, based on untrammeled international trade. Indeed, this woozy idealism among economists goes way back; it was the British free trader Richard Cobden who declared in 1857,

    Free trade is God's diplomacy. There is no other certain way of uniting people in the bonds of peace.

    And lo, so many wars later, many economists still believe that.

    Indeed, economists today are still monolithically pro-fee trade; a recent survey of economists found that 83 percent supported eliminating all tariffs and other barriers; just 10 percent disagreed.

    We might further note that others, too, in the financial and intellectual elite are fully on board the free-trade train, including most corporate officers and their lobbyists, journalists, academics, and, of course, the mostly for-hire think-tankers.

    To be sure, there are always exceptions: As that Guardian article, the one lamenting the sharp decrease in support for free trade as a "problem," noted, not all of corporate America is on board, particularly those companies in the manufacturing sector:

    Ford openly opposes TPP because it fears the deal does nothing to stop Japan manipulating its currency at the expense of US rivals.

    Indeed, we might note that the same Guardian story included an even more cautionary note, asserting that support for free trade, overall, is remarkably rickety:

    Some suggest a "bicycle theory" of trade deals: that the international bandwagon has to keep rolling forward or else it all wobbles and falls down.

    So what has happened? How could virtually the entire elite be united in enthusiasm for free trade, and yet, even so, the free trade juggernaut is no steadier than a mere two-wheeled bike? Moreover, free traders will ask: Why aren't the leaders leading? More to the point, why aren't the followers following?

    To answer those questions, we might start by noting the four-decade phenomenon of wage stagnation-that's taken a toll on support for free trade. But of course, it's in the heartland that wages have been stagnating; by contrast, incomes for the bicoastal elites have been soaring.

    We might also note that some expert predictions have been way off, thus undermining confidence in their expertise. Remember, this spring, when all the experts were saying that the United Kingdom would fall into recession, or worse, if it voted to leave the EU? Well, just the other day came this New York Post headline: "Brexit actually boosting the UK economy."

    Thus from the Wall Street-ish perspective of the urban chattering classes, things are going well-so what's the problem?

    Yet the folks on Main Street have known a different story. They have seen, with their own eyes, what has happened to them, and no fusillade of op-eds or think-tank monographs will persuade them to change their mind.

    So we can see that there's been a standoff: Wall Street vs. Main Street; nor is this the first time this has happened.

    However, because the two parties have been so united on the issues of trade and globalization-the "Uniparty," it's sometimes called-the folks in the boonies have had no political alternative. And as they say, the only power you have in this world is the power of an alternative. And so, lacking an alternative, the working/middle class has just had to accept its fate.

    Indeed, it has been a bitter fate, particularly bitter in the former industrial heartland. In a 2013 paper, the Economic Policy Institute (EPI) came to some startling conclusions:

    Growing trade with less-developed countries lowered wages in 2011 by 5.5 percent-or by roughly $1,800-for a full-time, full-year worker earning the average wage for workers without a four-year college degree.

    The paper added, "One-third of this total effect is due to growing trade with just China."

    Continuing, EPI found that even as trade with low-wage countries caused a decrease in the incomes for lower-end workers, it had caused an increase in the incomes of high-end workers-so no wonder the high-end thinks globalism in great.

    To be sure, some in the elite are bothered by what's been happening. Peggy Noonan, writing earlier this year in The Wall Street Journal-a piece that must have raised the hackles of her doctrinaire colleagues-put the matter succinctly: There's a wide, and widening, gap between the "protected" and the "unprotected":

    The protected make public policy. The unprotected live in it. The unprotected are starting to push back, powerfully.

    Of course, Noonan was alluding to the Trump candidacy-and also to the candidacy of Sen. Bernie Sanders. Those two insurgents, in different parties, have been propelled by the pushing from all the unprotected folks across America.

    We might pause to note that free traders have arguments which undoubtedly deserve a fuller airing. Okay. However, we can still see the limits. For example, the familiar gambit of outsourcing jobs to China, or Mexico-or 50 other countries-and calling that "free trade" is now socially unacceptable, and politically unsustainable.

    Still, the broader vision of planetary freedom, including the free flow of peoples and their ideas, is always enormously appealing. The United States, as well as the world, undoubtedly benefits from competition, from social and economic mobility-and yes, from new blood.

    As Stuart Anderson, executive director of the National Foundation for American Policy, notes, "77 percent of the full-time graduate students in electrical engineering and 71 percent in computer science at U.S. universities are international students." That's a statistic that should give every American pause to ask: Why aren't we producing more engineers here at home?

    Moreover, Reuters reported in 2012 that 44 percent of all Silicon Valley startups were founded by at least one immigrant, and a 2016 study found that more than half of all billion-dollar startups were founded by immigrants. No doubt some will challenge the methodology of these studies, and that's fine; it's an important national debate in which all Americans might engage.

    We can say, with admiration, that Silicon Valley is the latest Manchester; as such, it's a powerful magnet for the best and the brightest from overseas, and from a purely dollars-and-cents point of view, there's a lot to be said for welcoming them.

    So yes, it would be nice if we could retain this international mobility that benefits the U.S.-but only if the economic benefits can be broadly shared, and patriotic assimilation of immigrants can be truly achieved, such that all Americans can feel good about welcoming newcomers.

    The further enrichment of Silicon Valley won't do much good for the country unless those riches are somehow widely shared. In fact, amidst the ongoing outsourcing of mass-production jobs, total employment in such boomtowns as San Francisco and San Jose has barely budged. That is, new software billionaires are being minted every day, but their workforces tend to be tiny-or located overseas. If that past pattern is the future pattern, well, something will have to give.

    We can say: If America is to be one nation-something Mitt "47 percent" Romney never worried about, although it cost him in the end-then we will have to figure out a way to turn the genius of the few into good jobs for the many. The goal isn't socialism, or anything like that; instead, the goal is the widespread distribution of private property, facilitated, by conscious national economic development, as I argued at the tail end of this piece.

    If we can't, or won't, find a way to expand private ownership nationwide, then the populist upsurges of the Trump and Sanders campaigns will be remembered as mere overtures to a starkly divergent future.

    6. Clinton and Trump Say They Are Trade Hawks: But Are They Sincere?

    So now we come to a mega-question for 2016: How should we judge the sincerity of the two major-party candidates, Clinton or Trump, when they affirm their opposition to TPP? And how do we assess their attitude toward globalization, including immigration, overall?

    The future is, of course, unknown, but we can make a couple of points.

    First, it is true that many have questioned the sincerity of Hillary's new anti-TPP stance, especially given the presence of such prominent free-traders as vice presidential nominee Tim Kaine and presidential transition-planning chief Ken Salazar. Moreover, there's also Hillary's own decades-long association with open-borders immigration policies, as well as past support for such trade bills as NAFTA, PNTR, and, of course, TPP. And oh yes, there's the Clinton Foundation, that global laundromat for every overseas fortune; most of those billionaires are globalists par excellence-would a President Hillary really cross them?

    Second, since there's still no way to see inside another person's mind, the best we can do is look for external clues-by which we mean, external pressures. And so we might ask a basic question: Would the 45th president, whoever she or he is, feel compelled by those external pressures to keep their stated commitment to the voters? Or would they feel that they owe more to their elite friends, allies, and benefactors?

    As we have seen, Clinton has long chosen to surround herself with free traders and globalists. Moreover, she has raised money from virtually every bicoastal billionaire in America.

    So we must wonder: Will a new President Clinton really betray her own class-all those Davos Men and Davos Women-for the sake of middle-class folks she has never met, except maybe on a rope line? Would Clinton 45, who has spent her life courting the powerful, really stick her neck out for unnamed strangers-who never gave a dime to the Clinton Foundation?

    Okay, so what to make of Trump? He, too, is a fat-cat-even more of fat-cat, in fact, than Clinton. And yet for more than a year now, he has based his campaign on opposition to globalism in all its forms; it's been the basis of his campaign-indeed, the basis of his base. And his campaign policy advisers are emphatic. According to Politico, as recently as August 30, Trump trade adviser Peter Navarro reiterated Trump's opposition to TPP, declaring,

    Any deal must increase the GDP growth rate, reduce the trade deficit, and strengthen the manufacturing base.

    So, were Trump to win the White House, he would come in with a much more solid anti-globalist mandate.

    Thus we can ask: Would a President Trump really cross his own populist-nationalist base by going over to the other side-to the globalists who voted, and donated, against him? If he did-if he repudiated his central platform plank-he would implode his presidency, the way that Bush 41 imploded his presidency in 1990 when he went back on his "read my lips, no new taxes" pledge.

    Surely Trump remembers that moment of political calamity well, and so surely, whatever mistakes he might make, he won't make that one.

    To be sure, the future is unknowable. However, as we have seen, the past, both recent and historical, is rich with valuable clues.

    [Dec 04, 2016] Democrat Tom Coyne : Trump Challenging Institutional Elites in Both Parties

    Notable quotes:
    "... Donald Trump is challenging the very fabric of the institutional elites in this country on both sides that have, quite frankly, just straight up screwed this country up and made the world a mess. ..."
    Aug 30, 2016 | www.breitbart.com
    Tom Coyne, a lifelong Democrat and the mayor of Brook Park, Ohio, spoke about his endorsement of Republican presidential nominee Donald Trump with Breitbart News Daily SiriusXM host Matt Boyle.

    Coyne said:

    The parties are blurred. What's the difference? They say the same things in different tones. At the end of the day, they accomplish nothing. Donald Trump is challenging the very fabric of the institutional elites in this country on both sides that have, quite frankly, just straight up screwed this country up and made the world a mess.

    Regarding the GOP establishment's so-called Never Trumpers, Coyne stated, "If it's their expertise that people are relying upon as to advice to vote, people should go the opposite."

    Coyne has been described as "a blue-collar populist, blunt and politically incorrect":

    In an interview last week, Coyne said that Democrats and Republicans have failed the city through inaction and bad trade policies, key themes Trump often trumpets.

    "He understands us," Coyne said of Trump. "He is saying what we feel, and therefore, let him shake the bedevils out of everyone in the canyons of Washington D.C. The American people are responding to him."

    Breitbart News Daily airs on SiriusXM Patriot 125 weekdays from 6:00 a.m. to 9:00 a.m. Eastern.

    [Dec 04, 2016] In Trump We Trust E Pluribus Awesome! Ann Coulter

    Notable quotes:
    "... Donald Trump isn't a politician -- he's a one-man wrecking ball against our dysfunctional and corrupt establishment. We're about to see the deluxe version of the left's favorite theme: Vote for us or we'll call you stupid. It's the working class against the smirking class. ..."
    "... He understands that if we're ever going to get our economy back on its feet the wage-earning middle class will have to prosper along with investors ..."
    "... Trump that really "gets" the idea that the economy is suffering because the middle class can't find employment at livable wages ..."
    "... Ms. Coulter says it more eloquently: "The Republican establishment has no idea how much ordinary voters hate both parties." Like me, she's especially annoyed with Republicans, because we think of the Republican Party as being our political "family" that has turned against us: ..."
    "... The RNC has been forcing Republican candidates to take suicidal positions forever They were happy to get 100 percent of the Business Roundtable vote and 20 percent of the regular vote. ..."
    "... American companies used free trade with low-wage countries as an opportunity to close their American factories and relocate the jobs to lower-paying foreign workers. Instead of creating product and exporting it to other countries, our American companies EXPORTED American JOBS to other countries and IMPORTED foreign-made PRODUCTS into America! Our exports have actually DECLINED during the last five years with most of the 20 countries we signed free trade with. Even our exports to Canada, our oldest free trade partner, are less than what they were five years ago. ..."
    "... Trade with Japan, China, and South Korea is even more imbalanced, because those countries actively restrict imports of American-made products. We run a 4x trade imbalance with China, which cost us $367 billion last year. We lost $69 billion to Japan and $28 billion to South Korea. Our exports to these countries are actually DECLINING, even while our imports soar! ..."
    "... Why do Establishment Republicans join with Democrats in wanting to diminish the future with the WRONG kind of "free trade" that removes jobs and wealth from the USA? As Ms. Coulter reminds us, it is because Republican Establishment, like the Democrat establishment, is PAID by the money and jobs they receive from big corporations to believe it. ..."
    "... The donor class doesn't care. The rich are like locusts: once they've picked America dry, they'll move on to the next country. A hedge fund executive quoted in The Atlantic a few years ago said, "If the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile [that] means one American drops out of the middle class, that's not such a bad trade." ..."
    "... The corporate 1% who believe that the global labor market should be tapped in order to beat American workers out of their jobs; and that corporations and the 1% who own them should be come tax-exempt organizations that profit by using cheap overseas labor to product product that is sold in the USA, and without paying taxes on the profit. Ms. Coulter calls this group of Republican Estblishmentarians "locusts: once they've picked America dry, they'll move on to the next country." ..."
    "... Pretending to care about the interests of minorities. Of course, the Republican Establishment has even less appeal to minorities than to the White Middle Class (WMC) they abandoned. Minorities are no more interested in losing their jobs to foreigners or to suffer economic stagnation while the rich have their increasing wealth (most of which is earned at the expense of the middle class) tax-sheltered, than do the WMC. ..."
    "... Trump has given Republicans a new lease on life. The Establishment doesn't like having to take a back seat to him, but perhaps they should understand that having a back seat in a popular production is so much better than standing outside alone in the cold. ..."
    Aug 26, 2016 | www.amazon.com

    Donald Trump isn't a politician -- he's a one-man wrecking ball against our dysfunctional and corrupt establishment. We're about to see the deluxe version of the left's favorite theme: Vote for us or we'll call you stupid. It's the working class against the smirking class.

    Frank A. Lewes

    No pandering! The essence of Trump in personality and issues , August 23, 2016

    Ms. Coulter explains the journey of myself and so many other voters into Trump's camp. It captures the essence of Trump as a personality and Trump on the issues. If I had to sum Ms. Coulter's view of the reason for Trump's success in two words, I'd say "No Pandering!" I've heard many people, including a Liberal tell me, "Trump says what needs to be said."

    I've voted Republican in every election going back to Reagan in 1980, except for 2012 when I supported President Obama's re-election. I've either voted for, or financially supported many "Establishment Republicans" like Mitt Romney and John McCain in 2008. I've also supported some Conservative ones like Newt Gingrich and Rudy Giuliani. In this election I'd been planning to vote for Jeb Bush, a superb governor when I lived in Florida.

    Then Trump announced his candidacy. I had seen hints of that happening as far back as 2012. In my Amazon reviews in 2012 I said that many voters weren't pleased with Obama or the Republican Establishment. So the question became: "Who do you vote for if you don't favor the agendas of either party's legacy candidates?" In November 2013 I commented on the book DOUBLE DOWN: GAME CHANGE 2012 by Mark Halperin and John Heileman:

    =====
    Mr. Trump occupies an important place in the political spectrum --- that of being a Republican Populist.

    He understands that if we're ever going to get our economy back on its feet the wage-earning middle class will have to prosper along with investors, who are recovering our fortunes in the stock market.

    IMO whichever party nominates a candidate like Trump that really "gets" the idea that the economy is suffering because the middle class can't find employment at livable wages, will be the party that rises to dominance.

    Mr. Trump, despite his flakiness, at least understood that essential fact of American economic life.

    November 7, 2013
    =====

    Ms. Coulter says it more eloquently: "The Republican establishment has no idea how much ordinary voters hate both parties." Like me, she's especially annoyed with Republicans, because we think of the Republican Party as being our political "family" that has turned against us:

    =====
    The RNC has been forcing Republican candidates to take suicidal positions forever They were happy to get 100 percent of the Business Roundtable vote and 20 percent of the regular vote.

    when the GOP wins an election, there is no corresponding "win" for the unemployed blue-collar voter in North Carolina. He still loses his job to a foreign worker or a closed manufacturing plant, his kids are still boxed out of college by affirmative action for immigrants, his community is still plagued with high taxes and high crime brought in with all that cheap foreign labor.

    There's no question but that the country is heading toward being Brazil. One doesn't have to agree with the reason to see that the very rich have gotten much richer, placing them well beyond the concerns of ordinary people, and the middle class is disappearing. America doesn't make anything anymore, except Hollywood movies and Facebook. At the same time, we're importing a huge peasant class, which is impoverishing what remains of the middle class, whose taxes support cheap labor for the rich.

    With Trump, Americans finally have the opportunity to vote for something that's popular.

    =====

    That explains how Trump won my vote --- and held on to it through a myriad of early blunders and controversies that almost made me switch my support to other candidates.

    I'm no "xenophobe isolationist" stereotype. My first employer was an immigrant from Eastern Europe. What I learned working for him launched me on my successful career. I've developed and sold computer systems to subsidiaries of American companies in Europe and Asia. My business partners have been English and Canadian immigrants. My family are all foreign-born Hispanics. Three of my college roommates were from Ecuador, Germany, and Syria.

    BECAUSE of this international experience I agree with the issues of trade and immigration that Ms. Coulter talks about that have prompted Trump's rising popularity.

    First, there is the false promise that free trade with low-wage countries would "create millions of high-paying jobs for American workers, who will be busy making high-value products for export." NAFTA was signed in 1994. GATT with China was signed in 2001. Since then we've signed free trade with 20 countries. It was said that besides creating jobs for Americans, that free trade would prosper the global economy. In truth the opposite happened:

    American companies used free trade with low-wage countries as an opportunity to close their American factories and relocate the jobs to lower-paying foreign workers. Instead of creating product and exporting it to other countries, our American companies EXPORTED American JOBS to other countries and IMPORTED foreign-made PRODUCTS into America! Our exports have actually DECLINED during the last five years with most of the 20 countries we signed free trade with. Even our exports to Canada, our oldest free trade partner, are less than what they were five years ago.

    We ran trade SURPLUSES with Mexico until 1994, when NAFTA was signed. The very next year the surplus turned to deficit, now $60 billion a year. Given that each American worker produces an average of $64,000 in value per year, that is a loss of 937,000 American jobs to Mexico alone. The problem is A) that Mexicans are not wealthy enough to be able to afford much in the way of American-made product and B) there isn't much in the way of American-made product left to buy, since so much of former American-made product is now made in Mexico or China.

    Trade with Japan, China, and South Korea is even more imbalanced, because those countries actively restrict imports of American-made products. We run a 4x trade imbalance with China, which cost us $367 billion last year. We lost $69 billion to Japan and $28 billion to South Korea. Our exports to these countries are actually DECLINING, even while our imports soar!

    Thus, free trade, except with a few fair-trading countries like Canada, Australia, and possibly Britain, has been a losing proposition. Is it coincidence that our economy has weakened with each trade deal we have signed? Our peak year of labor force participation was 1999. Then we had the Y2K collapse and the Great Recession, followed by the weakest "recovery" since WWII? As Trump would say, free trade has been a "disaster."

    Why do Establishment Republicans join with Democrats in wanting to diminish the future with the WRONG kind of "free trade" that removes jobs and wealth from the USA? As Ms. Coulter reminds us, it is because Republican Establishment, like the Democrat establishment, is PAID by the money and jobs they receive from big corporations to believe it. Ms. Coulter says:

    =====
    The donor class doesn't care. The rich are like locusts: once they've picked America dry, they'll move on to the next country. A hedge fund executive quoted in The Atlantic a few years ago said, "If the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile [that] means one American drops out of the middle class, that's not such a bad trade."
    =====

    Then there is immigration. My wife, son, and extended family legally immigrated to the USA from Latin America. The first family members were recruited by our government during the labor shortage of the Korean War. Some fought for the United States in Korea. Some of their children fought for us in Vietnam, and some grandchildren are fighting in the Middle East. Most have become successful professionals and business owners. They came here LEGALLY, some waiting in queue for up to 12 years. They were supported by the family already in America until they were on their feet.

    Illegal immigration has been less happy. Illegals are here because the Democrats want new voters and the Republicans want cheap labor. Contrary to business propaganda, illegals cost Americans their jobs. A colleague just old me, "My son returned home from California after five years, because he couldn't get construction work any longer. All those jobs are now done off the books by illegals."

    It's the same in technology. Even while our high-tech companies are laying off 260,000 American employees in 2016 alone, they are banging the drums to expand the importation of FOREIGN tech workers from 85,000 to 195,000 to replace the Americans they let go. Although the H1-B program is billed as bringing in only the most exceptional, high-value foreign engineers, in truth most visas are issued to replace American workers with young foreigners of mediocre ability who'll work for much less money than the American family bread-winners they replaced.

    Both parties express their "reverse racism" against the White Middle Class. Democrats don't like them because they tend to vote Republican. The Republican Establishment doesn't like them because they cost more to employ than overseas workers and illegal aliens. According to them the WMC is too technologically out of date and overpaid to allow our benighted business leaders to "compete internationally."

    Ms. Coulter says "Americans are homesick" for our country that is being lost to illegal immigration and the removal of our livelihoods overseas. We are sick of Republican and Democrat Party hidden agendas, reverse-racism, and economic genocide against the American people. That's why the Establishment candidates who started out so theoretically strong, like Jeb Bush, collapsed like waterlogged houses of cards when they met Donald Trump. As Ms. Coulter explains, Trump knows their hidden agendas, and knows they are working against the best interests of the American Middle Class.

    Coulter keeps coming back to Mr. Trump's "Alpha Male" personality that speaks to Americans as nation without pandering to specific voter identity groups. She contrasts his style to the self-serving "Republican (Establishment) Brain Trust that is mostly composed of comfortable, well-paid mediocrities who, by getting a gig in politics, earn salaries higher than a capitalist system would ever value their talents." She explains what she sees as the idiocy of those Republican Establishment political consultants who wrecked the campaigns of Jeb Bush and Ted Cruz by micromanaging with pandering.

    She says the Republican Establishment lost because it served itself --- becoming wealthy by serving the moneyed interests of Wall Street. Trump won because he is speaking to the disfranchised American Middle Class who loves our country, is proud of our traditions, and believes that Americans have as much right to feed our families through gainful employment as do overseas workers and illegal aliens.

    "I am YOUR voice," says Trump to the Middle Class that until now has been ignored and even sneered at by both parties' establishments.

    I've given an overview of the book here. The real delight is in the details, told as only Anne Coulter can tell them. I've quoted a few snippets of her words, that relate most specifically to my views on Trump and the issues. I wish there were space to quote many more. Alas, you'll need to read the book to glean them all!

    Frank A. Lewes
    Bruce, I would also add that the Republican Establishment chose not to represent the interests of the White Middle Class on trade, immigration, and other issues that matter to us. They chose to represent the narrow interests of:

    1. The corporate 1% who believe that the global labor market should be tapped in order to beat American workers out of their jobs; and that corporations and the 1% who own them should be come tax-exempt organizations that profit by using cheap overseas labor to product product that is sold in the USA, and without paying taxes on the profit. Ms. Coulter calls this group of Republican Estblishmentarians "locusts: once they've picked America dry, they'll move on to the next country."

    2. Pretending to care about the interests of minorities. Of course, the Republican Establishment has even less appeal to minorities than to the White Middle Class (WMC) they abandoned. Minorities are no more interested in losing their jobs to foreigners or to suffer economic stagnation while the rich have their increasing wealth (most of which is earned at the expense of the middle class) tax-sheltered, than do the WMC.

    The Republican Establishment is in a snit because Trump beat them by picking up the WMC votes that the Establishment abandoned. What would have happened if Trump had not come on the scene? The probable result is that the Establishment would have nominated a ticket of Jeb Bush and John Kasich. These candidates had much to recommend them as popular governors of key swing states. But they would have gone into the election fighting the campaign with Republican Establishment issues that only matter to the 1%. They would have lost much of the WMC vote that ultimately rallied around Trump, while gaining no more than the usual 6% of minorities who vote Republican. It would have resulted in a severe loss for the Republican Party, perhaps making it the minority party for the rest of the century.

    Trump has given Republicans a new lease on life. The Establishment doesn't like having to take a back seat to him, but perhaps they should understand that having a back seat in a popular production is so much better than standing outside alone in the cold.

    Frank A. Lewes
    It's funny how White Men are supposed to be angry. But I've never seen any White men:

    1. Running amok, looting and burning down their neighborhood, shooting police and other "angry White men." There were 50 people shot in Chicago last weekend alone. How many of those do you think were "angry white men?" Hint: they were every color EXCEPT white.

    2. Running around complaining that they aren't allowed into the other gender's bathroom, then when they barge their way in there complain about being sexually assaulted. No, it's only "angry females" (of any ethnicity) who barge their way into the men's room and then complain that somebody in there offended them.

    Those "angry white men" are as legendary as "Bigfoot." They are alleged to exist everywhere, but are never seen. Maybe that's because they mostly hang out in the quiet neighborhoods of cookie-cutter homes in suburbia, go to the lake or bar-be-que on weekends, and take their allotment of Viagra in hopes of occassionally "getting lucky" with their wives. If they're "angry" then at least they don't take their angry frustrations out on others, as so many other militant, "in-your-face" activist groups do!

    [Dec 04, 2016] Michael Hudson 2016 Is Wall Street and the Corporate Sector (Clinton) vs. the Populists (Trump)

    Notable quotes:
    "... I've tuned out Warren-she has become the "red meat" surrogate for Clinton. Just because Taibbi was excellent on exposing Wall St. doesn't mean he really knows s**t about politics. I find the depiction of Trump as some kind of monster-buffoon to be simply boring and not very helpful. ..."
    "... (might be the Trump Chaos bc Hillary will strategically turn our war machine on us can't believe this is as good as it gets, sighed out) ..."
    "... Having the establishment, the military-industrial complex and Wall Street against him helps Trump a lot. ..."
    "... You can fool part of the people all the time, and all people part of the time, but Brexit won, so will Trump, politician extraordinaire ..."
    "... Given his family, a Trump presidency may look more like JFK's, where Bobby had more power than LBJ. Also, given Trump's negotiating expertise, I would certainly not believe any assertion of support he proclaims for the VP. I expect he had little choice in the matter, and that he also plans to send the VP to the hinterlands at the first opportunity. I'm unclear why so many appear to believe the VP has any influence whatsoever; I believe GWB was the only post-WW2 president who let the VP have any power. ..."
    "... What is a populist? Somebody that tries to do what the majority want. Current examples: Less wars and military spending. More infrastructure spending. Less support for banks and corps (imagine how many votes trump would gain if he said 'as pres I will jail bankers that break the law' And how that repudiates Obama and both parties.) Gun control (but not possible from within the rep party) ..."
    "... What is a fascist? Somebody that supports corporations, military, and military adventures. ..."
    "... Actually, it sounds a whole lot like a different candidate from a different party, doesn't it? ..."
    "... Neoliberal "Goodthink" flag. What this means when neoliberals say it is not let's build a better global society for all it means Corporations and our military should be able to run roughshod over the world and the people's of other countries. Exploit their citizens for cheap Labor, destroy their environment and move on. These are the exact policies of Hillary Clinton (see TPP, increase foreign wars etc.). Hillary globalism is not about global Brotherhood it's about global economic and military exploitation. Trump is nationalist non – interventionist, which leads to less global military destruction than hillary and less global exploitation. So who is a better for those outside the US, hillary the interventionist OR trump the non-interventionist? ..."
    "... Look, the Clintons are criminals, and their affiliate entities, including the DNC, could be considered criminal enterprises or co-conspirators at this point. ..."
    "... The very fact that Establishment, Wall St and Koch bros are behind HRC is evidence that the current 'status quo' will be continued! I cannot stand another 4 years of Hilabama. ..."
    "... The striving for American empire has so totally confused the political order of the country that up is down and down is up. The idea of government for and by the people is a distant memory. Covering for lies and contradictions of beliefs has blurred any notion of principles informing public action. ..."
    "... If there is any principle that matters today, it is the pursuit of money and profit reigns supreme. Trump is populist in the sense he is talking about bringing money and wealth back to the working classes. Not by giving it directly, but by forcing businesses to turn their sights back to the US proper and return to making their profits at home. In the end, it is all nostalgia and probably impossible, but working class people remember those days so it rings true. That is hope and change in action. People also could care less if he cheats on his taxes or is found out lying about how much he is worth. Once again, fudging your net worth is something working people care little about. Having their share of the pie is all that matters and Trump is tapping into that. ..."
    "... The only crime Trump has committed so far is his language. Liberals like Clinton, Blair and Obama drip blood. ..."
    "... The 2016 election cannot be looked at in isolation. The wars for profit are spreading from Nigeria through Syria to Ukraine. Turkey was just lost to the Islamists and is on the road to being a failed state. The EU is in an existential crisis due to Brexit, the refugee crisis and austerity. Western leadership is utterly incompetent and failing to protect its citizens. Globalization is failing. Its Losers are tipping over the apple cart. Humans are returning to their tribal roots for safety. The drums for war with Russia are beating. Clinton / Kaine are 100% Status Quo Globalists. Trump / Pence are candidates of change to who knows what. Currently I am planning on voting for the Green Party in the hope it becomes viable and praying that the chaos avoids Maryland. ..."
    Jul 24, 2016 | www.nakedcapitalism.com

    naked capitalism

    Brindle, July 24, 2016 at 10:09 am

    I've tuned out Warren-she has become the "red meat" surrogate for Clinton. Just because Taibbi was excellent on exposing Wall St. doesn't mean he really knows s**t about politics. I find the depiction of Trump as some kind of monster-buffoon to be simply boring and not very helpful.

    abynormal , July 24, 2016 at 4:51 am

    for all the run around Hillary, Trump's chosen circle of allies are Wall Street and Austerity enablers. actually, Trump chaos could boost the enablers as easily as Hillary's direct mongering. War is Money low hanging fruit in this cash strapped era and either directly or indirectly neither candidate will disappoint.
    So I Ask Myself which candidate will the majority manage sustainability while assembling to create different outcomes? (might be the Trump Chaos bc Hillary will strategically turn our war machine on us can't believe this is as good as it gets, sighed out)

    Norb , July 24, 2016 at 10:54 am

    War is only good for the profiteers when it can be undertaken in another territory. Bringing the chaos home cannot be good for business. Endless calls for confidence and stability in markets must reflect the fact that disorder effects more business that the few corporations that benefit directly from spreading chaos. A split in the business community seems to be underway or at least a possible leverage point to bring about positive change.
    Even the splits in the political class reflect this. Those that benefit from spreading chaos are loosing strength because they have lost control of where that chaos takes place and who is directly effected from its implementation. Blowback and collateral damage are finally registering.

    Plenue , July 24, 2016 at 6:32 am

    Trump may be a disaster. Clinton will be a disaster. One of these two will win. I won't vote for either, but if you put a gun to my head and forced me to choose, I'd take Trump. He's certainly not a fascist (I think it was either Vice or Vox that had an article where they asked a bunch of historians of fascism if he was, the answer was a resounding no), he's a populist in the Andrew Jackson style. If nothing else Trump will (probably) not start WW3 with Russia.

    cm , July 24, 2016 at 11:28 am

    And war with Russia doesn't depend just on Hillary, it depends on us in Western Europe agreeing with it.

    A laughable proposition. The official US policy, as you may recall, is fuck the EU .

    Where was Europe when we toppled the Ukrainian govt? Get back to me when you can actually spend 2% GDP on your military. At the moment you can't even control your illegal immigrants.

    Lambert Strether Post author , July 24, 2016 at 12:46 pm

    The political parties that survive display adaptability, and ideological consistency isn't a requirement for that. Look at the party of Lincoln. Or look at the party of FDR.

    If the Democrats decapitate the Republican party by bringing in the Kagans of this world and Republican suburbanites in swing states, then the Republicans will go where the votes are; the Iron Law of Institutions will drive them to do it, and the purge of the party after Trump will open the positions in the party for people with that goal.

    In a way, what we're seeing now is what should have happened to the Republicans in 2008. The Democrats had the Republicans down on the ground with Obama's boot on their neck. The Republicans had organized and lost a disastrous war, they had lost the legislative and executive branches, they were completely discredited ideologically, and they were thoroughly discredited in the political class and in the press.

    Instead, Obama, with his strategy of bipartisanship - good faith or not - gave them a hand up, dusted them off, and let them right back in the game, by treating them as a legitimate opposition party. So the Republican day of reckoning was postponed. We got various bids for power by factions - the Tea Party, now the Liberty Caucus - but none of them came anywhere near taking real power, despite (click-driven money-raising) Democrat hysteria.

    And now the day of reckoning has arrived. Trump went through the hollow institutional shell of the Republican Party like the German panzers through the French in 1939. And here we are!

    (Needless to say, anybody - ***cough*** Ted Cruz ***cough*** - yammering about "conservative principles" is part of the problem, dead weight, part of the dead past.) I don't know if the Republicans can remake themselves after Trump; what he's doing is necessary for that, but may not be sufficient.

    Steve C , July 24, 2016 at 5:09 pm

    Republicans won Congress and the states because the Democrats handed them to them on a silver platter. To Obama and his fan club meaningful power is a hot potato, to be discarded as soon as plausible.

    Older & Wiser , July 24, 2016 at 8:37 am

    Having the establishment, the military-industrial complex and Wall Street against him helps Trump a lot.

    Pro-Sanders folks, blacks, and hispanics will mostly vote for Trump.
    Having Gov. Pence on the ticket, core Republicans and the silent majority will vote for Trump.
    Women deep inside know Trump will help their true interests better than the Clinton-Obama rinse repeat
    Young people, sick and tired of the current obviously rigged system, will vote for change.

    You can fool part of the people all the time, and all people part of the time, but Brexit won, so will Trump, politician extraordinaire
    Even Michael Moore gets it

    cm , July 24, 2016 at 11:35 am

    Trump has intimated that he is not going to deal with the nuts and bolts of government, that will be Pence's job.

    Given his family, a Trump presidency may look more like JFK's, where Bobby had more power than LBJ.

    Also, given Trump's negotiating expertise, I would certainly not believe any assertion of support he proclaims for the VP. I expect he had little choice in the matter, and that he also plans to send the VP to the hinterlands at the first opportunity. I'm unclear why so many appear to believe the VP has any influence whatsoever; I believe GWB was the only post-WW2 president who let the VP have any power.

    John k , July 24, 2016 at 10:48 am

    Minorities will benefit at least as much as whites with infrastructure spending, which trump says he wants to do It would make him popular, which he likes, why not believe him? And if pres he would be able to get enough rep votes to get it passed. No chance with Hillary, who anyway would rather spend on wars, which are mostly fought by minorities.

    What is a populist? Somebody that tries to do what the majority want. Current examples:
    Less wars and military spending. More infrastructure spending. Less support for banks and corps (imagine how many votes trump would gain if he said 'as pres I will jail bankers that break the law' And how that repudiates Obama and both parties.) Gun control (but not possible from within the rep party)

    What is a fascist? Somebody that supports corporations, military, and military adventures.

    Uahsenaa , July 24, 2016 at 12:59 pm

    I'm saying you have a much better chance to pressure Clinton

    Sorry, but this argues from facts not in evidence and closely resembles the Correct the Record troll line (now substantiated through the Wikileaks dump) that Clinton "has to be elected" because she is at least responsive to progressive concerns.

    Except she isn't, and the degree to which the DNC clearly has been trying to pander to disillusioned Republicans and the amount of bile they spew every time they lament how HRC has had to "veer left" shows quite conclusively to my mind that, in fact, the opposite of what you say is true.

    Also, when NAFTA was being debated in the '90s, the Clintons showed themselves to be remarkably unresponsive both to the concerns of organized labor (who opposed it) as well as the majority of the members of their own party, who voted against it. NAFTA was passed only with a majority of Republican votes.

    I have no way of knowing whether you're a troll or sincerely believe this, but either way, it needs to be pointed out that the historical record actually contradicts your premise. If you do really believe this, try not to be so easily taken in by crafty rhetoric.

    EndOfTheWorld , July 24, 2016 at 8:19 am

    BTW, I'll take Trump's record as a husband over HRC's record as a wife. He loves a woman, then they break up, and he finds another one. This is not unusual in the US. Hillary, OTOH, "stood by her man" through multiple publicly humiliating infidelities, including having to settle out of court for more than $800,000, and rape charges. No problem with her if her husband was flying many times on the "Lolita Express" with a child molester. Could be she had no idea where her "loved one" was at the time. Do they in fact sleep in the same bed, or even live in the same house? I don't know.

    EndOfTheWorld , July 24, 2016 at 7:12 am

    RE: calling Donald Trump a "sociopath"-this is another one of those words that is thrown around carelessly, like "nazi" and "fascist". In the Psychology Today article "How to Spot a Sociopath", they list 16 key behavioral characteristics. I can't see them in Trump-you could make a case for a few of them, but not all. For example: "failure to follow any life plan", "sex life impersonal, trivial, and poorly integrated", "poor judgment and failure to learn by experience", "incapacity for love"-–you can't reasonably attach these characteristics to The Donald, who, indeed, has a more impressive and loving progeny than any other prez candidate I can think of.

    edmondo , July 24, 2016 at 8:01 am

    Actually, it sounds a whole lot like a different candidate from a different party, doesn't it?

    HBE , July 24, 2016 at 11:06 am

    "I have a sense of international identity as well: we are all brothers and sisters."

    Neoliberal "Goodthink" flag. What this means when neoliberals say it is not let's build a better global society for all it means Corporations and our military should be able to run roughshod over the world and the people's of other countries. Exploit their citizens for cheap Labor, destroy their environment and move on. These are the exact policies of Hillary Clinton (see TPP, increase foreign wars etc.). Hillary globalism is not about global Brotherhood it's about global economic and military exploitation. Trump is nationalist non – interventionist, which leads to less global military destruction than hillary and less global exploitation. So who is a better for those outside the US, hillary the interventionist OR trump the non-interventionist?

    "And not everyone feels the same way, but for most voters there is either a strong tribal loyalty (Dem or Repub) or a weaker sense of "us" guiding the voter on that day.
    Mad as I am about the Blue Dogs, I strongly identify with the Dems."

    So you recognize you are a tribalist, and assume all the baggage and irrationality that tribalism often fosters, but instead of addressing your tribalism you embrace it. What you seem to be saying (to me)is that we should leave critical thinking at the door and become dem tribalists like you.

    "But the Repubs and Dems see Wall Street issues through different cultural prisms. Republican are more reflexively pro-business. It matters."

    Hillary Clinton's biggest donors are Wallstreet and her dem. Husband destroyed glass-steagall. Trump wants to reinstate glass-steagall, so who is more business friendly again?

    "He is racist, and so he knows how to push ugly buttons."

    This identity politics trope is getting so old. Both are racist just in different ways, Trump says in your face racist things, which ensure the injustice cannot be ignored, where hillary has and does support racist policies, that use stealth racism to incrementaly increase the misery of minorities, while allowing the majority to pretend it's not happening.

    "First, he will govern with the Republicans. Republican judges, TPP, military spending, environmental rollbacks, etc. Trump will not overrule Repubs in Congress."

    These are literally hillarys policies not trumps.
    Trump: anti TPP, stop foreign interventions, close bases use money for infrastructure.
    Hillary :Pro TPP, more interventions and military spending

    "And no, no great Left populist party will ride to the rescue. The populist tradition (identity) is mostly rightwing and racist in our society.
    People do not change political identity like their clothes. The left tradition in the US, such as it is, is in the Dem party."

    So what you are saying is quit being stupid, populism is bad and you should vote for hillarys neoliberalism. The democrats were once left so even if they are no longer left, we must continue to support them if another party or candidate that is to the left isn't a democrat? Your logic hurts my head.

    Arnold Babar , July 24, 2016 at 3:53 pm

    Look, the Clintons are criminals, and their affiliate entities, including the DNC, could be considered criminal enterprises or co-conspirators at this point. Those who haven't realized that, or worse, who shill for them are willfully ignorant, amoral, or unethical. The fact that that includes a large chunk of the population doesn't change that. I don't vote for criminals.

    sunny129 , July 24, 2016 at 2:20 pm

    DNC is no different than RNC!

    The very fact that Establishment, Wall St and Koch bros are behind HRC is evidence that the current 'status quo' will be continued! I cannot stand another 4 years of Hilabama.

    I hate Hillary more than Trump. I want to protest at the Establishment, which at this represented by Hillary.

    http://www.cnn.com/2016/07/24/politics/dnc-email-leak-wikileaks/index.html

    John k , July 24, 2016 at 11:13 am

    Populism (support for popular issues) is, well, popular.

    Fascism (support for corps and military adventures) is, at least after our ME adventures, unpopular.

    Commenters are expressing support for the person expressing popular views, such as infrastructure spending, and expressing little support for the candidate they believe is most fascist.

    Btw, Most on this site are liberals, few are reps, so to support him they have had to buck some of their long held antipathy regarding reps.

    EndOfTheWorld , July 24, 2016 at 12:14 pm

    Right, what is changing with Trump is the Republicans are going back to, say, the Eisenhower era, when Ike started the interstate highway system, a socialist program if there ever was one.

    local to oakland , July 24, 2016 at 10:48 am

    This article by Mckay Coppins was illuminating I thought.
    https://www.buzzfeed.com/mckaycoppins/how-the-haters-made-trump?utm_term=.sm0BPXq0g#.qnzvzj8aP

    It shows some of his history in a fairly sympathetic light.

    Lambert Strether Post author , July 24, 2016 at 1:23 pm

    It's a good article; this is a general observation. Sorry!

    "Hate" seems to be a continuing Democrat meme, and heck, who can be for hate? So it makes sense rhetorically, but in policy terms it's about as sensible as being against @ssh0les (since as the good book says, ye have the @ssh0les always with you). So we're really looking at virtue signaling as a mode of reinforcing tribalism, and to be taken seriously only for that reason. If you look at the political class writing about the working class - modulo writers like Chris Arnade - the hate is plain as day, though it's covered up with the rhetoric of meritocracy, taking care of losers, etc.

    Strategic hate management is a great concept. It's like hate can never be created or destroyed, and is there as a resource to be mined or extracted. The Clinton campaign is doing a great job of strategic hate management right now, by linking Putin and Trump, capitalizing on all the good work done in the press over the last year or so.

    Pat , July 24, 2016 at 12:10 pm

    For years we have been told that government should be run like a business. In truth that statement was used as a cudgel to avoid having the government provide any kind of a safety net to its citizenry because there was little or no profit in it for the people who think that government largess should only be for them.

    Here's the thing, if government had been run like a business, we the people would own huge portions of Citigroup, Goldman Sachs and Chase today. We wouldn't have bailed them out without an equity stake in them. Most cities would have a share of the gate for every stadium that was built. And rather than paying nothing to the community Walmart would have been paying a share of their profits (much as those have dropped over the years).

    I do not like Trump's business, but he truly does approach his brand and his relationships as a business. When he says he doesn't like the trade deals because they are bad business and bad deals he is correct. IF the well being of the United states and his populace are what you are interested in regarding trade deals, ours are failures. Now most of us here know that was not the point of the trade deals. They have been a spectacular success for many of our largest businesses and richest people, but for America as a whole they have increased our trade deficit and devastated our job base. When he says he won't go there, this is one I believe him on.

    I also believe him on NATO and on the whole Russian thing. Why, because of the same reasons I believe him on Trade. They are not winners for America as a whole. They are bad deals. Europe is NOT living up to their contractual agreement regarding NATO. For someone who is a believer in getting the better of the deal that is downright disgusting. And he sees no benefit in getting into a war with Russia. The whole reserve currency thing vs. nukes is not going to work for him as a cost benefit analysis of doing it. He is not going to front this because it is a business loser.

    We truly have the worst choices from the main parties in my lifetime. There are many reasons Trump is a bad candidate. But on these two, he is far more credible and on the better side of things than the Democratic nominee. And on the few where she might reasonably considered to have a better position, unfortunately I do not for a moment believe her to be doing more than giving lip service based on both her record and her character.

    GF , July 24, 2016 at 12:51 pm

    This article from Talking Points Memo was pointed to by PK in his Twitter feed today. It has some interesting background on Trump's Russian connections:
    http://talkingpointsmemo.com/edblog/trump-putin-yes-it-s-really-a-thing

    tegnost , July 24, 2016 at 1:03 pm

    Is it your opinion that to have globalisation we must marginalize russia to the extent that they realize they can't have utopia and make the practical choice of allowing finance capitalism to guide them to realistic incrementally achieved debt bondage?

    DarkMatters , July 24, 2016 at 12:11 pm

    World turned upside down.

    The Democratic Party has been inching further and further to the right. Bernie tried to arrest this drift, but his internal populist rebellion was successfully thwarted by party elite corruption. The Democratic position is now so far to the right that the Republicans will marginalize themselves if they try to keep to the right of the Democrats.

    But, despite party loyalty or PC slogans, the Democrat's rightward position is now so obvious that it can be longer disguised by spin. The Trump campaign has demonstrated, the best electoral strategy for the Republican Party is to leapfrog leftward and campaign from a less corporate position. This has given space for the re-evaluation of party positions that Trump is enunciating, and the result is that the Trump is running to the
    left of Hillary. How weird is this?

    DarkMatters , July 24, 2016 at 12:59 pm

    I meant to use right and left to refer generally to elite vs popular. The issue is too big to discuss without some simplification, and I'm sorry it has distracted from the main issue. On the face of it, judging from the primaries, the Republican candidates who represented continued rightward drift were rejected. (Indications are that the same thing happened in the Democratic Party, but party control was stronger there, and democratic primary numbers will never be known).

    The main point I was trying to make is that the Democratic party has been stretching credulity to the breaking point in claiming to be democratic in any sense, and finally the contradiction between their statements and actions has outpaced the capabilities of their propaganda. Their Orwellian program overextended itself. Popular recognition of the disparity has caused a kind of political "snap" that's initiated a radical reorganization of what used to be the party of the right (or corporations, or elites, or finance, or "your description here".)

    Besides confusion between which issues are right or left for Republicans or Democrats on the national level, internationally, the breakdown of popular trust in the elites, and the failure of their propaganda on that scale, is leading to a related worldwide distrust and rejection of elite policies. This distrust has been percolating in pockets for some time, but it seems it's now become so widespread that it's practically become a movement.

    I suspect, however, there's a Plan B for this situation to restore the proper order. Will be interesting to see how this plays out.

    Norb , July 24, 2016 at 2:01 pm

    The striving for American empire has so totally confused the political order of the country that up is down and down is up. The idea of government for and by the people is a distant memory. Covering for lies and contradictions of beliefs has blurred any notion of principles informing public action.

    If there is any principle that matters today, it is the pursuit of money and profit reigns supreme. Trump is populist in the sense he is talking about bringing money and wealth back to the working classes. Not by giving it directly, but by forcing businesses to turn their sights back to the US proper and return to making their profits at home. In the end, it is all nostalgia and probably impossible, but working class people remember those days so it rings true. That is hope and change in action. People also could care less if he cheats on his taxes or is found out lying about how much he is worth. Once again, fudging your net worth is something working people care little about. Having their share of the pie is all that matters and Trump is tapping into that.

    Clintons arrogance is worse because the transcripts probably clearly show her secretly conspiring with bankers to screw the working people of this country. Trumps misdeeds effect his relationship to other elites while Clintons directly effect working people.

    Such a sorry state of affairs. When all that matters is the pursuit of money and profit, moving forward will be difficult and full of moral contradictions. Populism needs a new goal. The political machinery that gives us two pro-business hacks and an ineffectual third party has fundamentally failed.

    The business of America must be redefined, not somehow brought back to a mythical past greatness. Talk about insanity.

    John Wright , July 24, 2016 at 3:14 pm

    Thanks for the mention of the Bob Herbert editorial.

    I found it by searching for your quoted statement at http://www.nytimes.com/2001/02/26/opinion/in-america-cut-him-loose.html

    I was published Feb 26,2001

    Herbert has some advice for the Democrats.

    "Bill Clinton has been a disaster for the Democratic Party. Send him packing."

    "There's not much the Democrats can do about Mrs. Clinton. She's got a Senate seat for six years. But there is no need for the party to look to her for leadership. The Democrats need to regroup, re-establish their strong links to middle-class and working-class Americans, and move on."

    "You can't lead a nation if you are ashamed of the leadership of your party. The Clintons are a terminally unethical and vulgar couple, and they've betrayed everyone who has ever believed in them."

    "As neither Clinton has the grace to retire from the scene, the Democrats have no choice but to turn their backs on them. It won't be easy, but the Democrats need to try. If they succeed they'll deserve the compliment Bill Clinton offered Gennifer Flowers after she lied under oath: "Good for you." "

    Amazing how the New York Times has "evolved" from Herbert's editorial stance of 15 years ago to their unified editorial/news support for HRC's candacy,

    In my view, it is not as if HRC has done anything to redeem herself in the intervening years.

    Herbert left the NY Times in 2011..

    Sound of the Suburbs , July 24, 2016 at 3:28 pm

    It takes liberals to create a refugee crisis.
    What country are we going to bomb back into the stone age this week?

    We are very squeamish about offensive language.
    We don't mind dropping bombs and ripping people apart with red hot shrapnel.
    We are liberals.

    Liberal sensibilities were on display in the film "Apocalypse Now".
    No writing four letter words on the side of aircraft.
    Napalm, white phosphorous and agent orange – no problem.

    Liberals are like the English upper class – outward sophistication hiding the psychopath underneath.
    They were renowned for their brutality towards slaves, the colonies and the English working class (men, women and children) but terribly sophisticated when with their own.

    Are you a bad language sort of person – Trump
    Or a liberal, psychopath, empire builder – Clinton

    The only crime Trump has committed so far is his language. Liberals like Clinton, Blair and Obama drip blood.

    Richard , July 24, 2016 at 3:39 pm

    Lambert strether said: my view is that the democrat party cannot be saved, but it can be seized.
    Absolutely correct.
    That is why Trump must be elected. Only then through the broken remains of both Parties can the frangible Democrat Party be seized and restored.

    VietnamVet , July 24, 2016 at 6:54 pm

    The 2016 election cannot be looked at in isolation. The wars for profit are spreading from Nigeria through Syria to Ukraine. Turkey was just lost to the Islamists and is on the road to being a failed state. The EU is in an existential crisis due to Brexit, the refugee crisis and austerity. Western leadership is utterly incompetent and failing to protect its citizens. Globalization is failing. Its Losers are tipping over the apple cart. Humans are returning to their tribal roots for safety. The drums for war with Russia are beating. Clinton / Kaine are 100% Status Quo Globalists. Trump / Pence are candidates of change to who knows what. Currently I am planning on voting for the Green Party in the hope it becomes viable and praying that the chaos avoids Maryland.

    [Dec 04, 2016] Dont blame the masses

    Notable quotes:
    "... Because we interpreted the end of the Cold War as the ultimate vindication of America's economic system, we intensified our push toward the next level of capitalism, called globalization. It was presented as a project that would benefit everyone. Instead it has turned out to be a nightmare for many working people. Thanks to "disruption" and the "global supply chain," many American workers who could once support families with secure, decent-paying jobs must now hope they can be hired as greeters at Walmart. Meanwhile, a handful of super-rich financiers manipulate our political system to cement their hold on the nation's wealth. ..."
    "... Rather than shifting to a less assertive and more cooperative foreign policy, we continued to insist that America must reign supreme. When we declared that we would not tolerate the emergence of another "peer power," we expected that other countries would blithely obey. Instead they ignore us. We interpret this as defiance and seek to punish the offenders. That has greatly intensified tensions between the United States and the countries we are told to consider our chief adversaries, Russia and China. ..."
    Aug 08, 2016 | www.bostonglobe.com
    Because we interpreted the end of the Cold War as the ultimate vindication of America's economic system, we intensified our push toward the next level of capitalism, called globalization. It was presented as a project that would benefit everyone. Instead it has turned out to be a nightmare for many working people. Thanks to "disruption" and the "global supply chain," many American workers who could once support families with secure, decent-paying jobs must now hope they can be hired as greeters at Walmart. Meanwhile, a handful of super-rich financiers manipulate our political system to cement their hold on the nation's wealth.
    Enrique Ferro's insight:
    Moments of change require adaptation, but the United States is not good at adapting. We are used to being in charge. This blinded us to the reality that as other countries began rising, our relative power would inevitably decline. Rather than shifting to a less assertive and more cooperative foreign policy, we continued to insist that America must reign supreme. When we declared that we would not tolerate the emergence of another "peer power," we expected that other countries would blithely obey. Instead they ignore us. We interpret this as defiance and seek to punish the offenders. That has greatly intensified tensions between the United States and the countries we are told to consider our chief adversaries, Russia and China.

    [Dec 04, 2016] The reason Trump and Sanders are doing well in the US while fascists are doing well in Europe is the same reason: neoliberalism has gutted, or is in the process of gutting, societies

    This is downright sickening and the people who are voting for Hillary will not even care what will happen with the USA iif she is elected.
    By attacking Trump using "Khan gambit" she risks a violent backlash (And not only via Wikileaks, which already promised to release information about her before the elections)
    People also start to understand that she is like Trump. He destroyed several hundred American lifes by robbing them, exploiting their vanity (standard practice in the USA those days) via Trump University scam. She destroyed the whole country -- Libya and is complicit in killing Khaddafi (who, while not a nice guy, was keeping the country together and providing be highest standard of living in Africa for his people).
    In other words she is a monster and sociopath. He probably is a narcissist too. So there is no much phychological difference between them. And we need tight proportions to judge this situation if we are talking about Hillary vs Trump.
    As for people voting for Trump -- yes they will. I think if Hillary goes aganst Trump, the female neoliberal monster will be trumped. She has little chances even taking into account the level of brainwashing in the USA (which actually is close to those that existed in the USSR).
    Notable quotes:
    "... The reason Trump and Sanders are doing well in the US while fascists are doing well in Europe is the same reason: neoliberalism has gutted, or is in the process of gutting, societies. Workers and other formerly "safe" white collar workers are seeing their job security, income security, retirement security all go up in smoke. Neoliberals are trying to snip and cut labor protections, healthcare, environmental regulations all for corporate profit. In Europe this is all in addition to a massive refugee crisis itself brought on by neoliberalism (neocon foreign policy is required for neoliberal social policy, they go hand-in-hand). The US and NATO destabilize countries with the intent of stealing their resources and protecting their markets, cause massive refugee flows which strain social structures in Europe (which falls right into the hands of the gutters and cutters of neoliberalism). Of course the people will lean fascist. ..."
    "... U.S. Government Tried to Tackle Gun Violence in 1960s ..."
    "... Another key feature of fascism is territorial expansionism. As far as I am aware, none of the nationalist parties advocate invading other countries or retaking former colonies. Once again, contemporary neoliberalism is far closer to fascism. But you are correct about both Israel and Turkey – our allies. They are much closer to the genuine article. But you won't hear those complaining about the rise of fascism in Europe complaining too much about them. ..."
    "... The only way they have avoided complete revolt has been endless borrowing to fund entitlements, once that one-time fix plays out the consequences will be apparent. The funding mechanism itself (The Fed) has even morphed into a neo-liberal tool designed to enrich Capital while enslaving Labor with the consequences. ..."
    "... "Every society chooses how resources are allocated between capital and labor." More specifically, isn't it a struggle between various political/economic/cultural movements within a society which chooses how resources are allocated between capital and labor. ..."
    "... My objection to imprecise language here isn't merely pedantic. The leftist dismissal of right wing populists like Trump (or increasingly influential European movements like Ukip, AfD, and the Front national) as "fascist" is a reductionist rhetorical device intended to marginalize them by implying their politics are so far outside of the mainstream that they do not need to be taken seriously. ..."
    "... " the gutters and cutters of neoliberalism" ..."
    "... The neoliberals are all too aware that the clock is ticking. In this morning's NYT, yet more talk of ramming TPP through in the lame duck. ..."
    "... The roads here are deteriorating FAST. In Price County, the road commissioner said last night that their budget allows for resurfacing all the roads on a 200 year basis. ..."
    "... This Trump support seems like a form of political vandalism with Trump as the spray paint. People generally feel frustrated with government, utterly powerless and totally left out as the ranks of the precariat continue to grow. Trump appeals to the nihilistic tendencies of some people who, like frustrated teens, have decided to just smashed things up for the hell of it. They think a presidency mix of Caligula with Earl Scheib would be a funny hoot. ..."
    "... Someone at American Conservative, when trying to get at why it's pointless to tell people Trump will wreck the place, described him as a "hand grenade" lobbed into the heart of government. You can't scare people with his crass-ness and destructive tendencies, because that's precisely what his voters are counting on when/if he gets into government. ..."
    "... In other words, the MSM's fear is the clearest sign to these voters that their ..."
    "... Your phrase "Trump is political vandalism" is great. I don't think I've seen a better description. NPR this morning was discussing Trump and his relationship with the press and the issues some GOP leaders have with him. When his followers were discussed, the speakers closely circled your vandalism point. Basically they said that his voters are angry with the power brokers and leaders in DC and regardless of whether they think Trump's statements are heartfelt or just rhetoric, they DO know he will stick it to those power brokers so that's good. Vandalism by a longer phrase. ..."
    "... Meritocracy was ALWAYS a delusional fraud. What you invariably get, after a couple of generations, is a clique of elitists who define merit as themselves and reproduce it ad nauseam. Who still believes in such laughable kiddie stories? ..."
    "... Campaign Finance Reform: If you can't walk into a voting booth you cannot contribute, or make all elections financed solely by government funds and make private contributions of any kind to any politician illegal. ..."
    "... Re-institute Glass-Steagall but even more so. Limit the number of states a bank can operate in. Make the Fed publicly owned, not privately owned by banks. Completely revise corporate law, doing away with the legal person hood of corporations and limit of liability for corporate officers and shareholders. ..."
    "... Single payer health care for everyone. Allow private health plans but do away with health insurance as a deductible for business. Remove the AMA's hold on licensing of medical schools which restricts the number of doctors. ..."
    "... Do away with the cap on Social Security wages and make all income, wages, capital gains, interest, and dividends subject to taxation. Impose tariffs to compensate for lower labor costs overseas and revise industry. ..."
    "... Cut the Defense budget by 50% and use that money for intensive infrastructure development. ..."
    "... Raise the national minimum wage to $15 and hour. ..."
    "... Severely curtail the revolving door from government to private industry with a 10 year restriction on working for an industry you dealt with in any way as a government official. ..."
    "... Free public education including college (4 year degree). ..."
    "... Obama and Holder, allowing the banks to be above the law have them demi-gods, many of whom are psychopaths and kleptocrats, and with their newly granted status, they are now re-shaping the world in their own image. Prosecute these demi-gods and restore sanity. Don't and their greed for our things will never end until nothings left. ..."
    "... This is why Hillary is so much more dangerous than trump, because she and the demi gods are all on the same page. The TPP is their holy grail so I expect heaven and earth to be moved, especially if it looks like some trade traitors are going to get knocked off in the election, scoundrels like patty murray (dino, WA) will push to get it through then line up at the feed trough to gorge on k street dough. I plan to vote stein if it's not Bernie, but am reserving commitment until I see what kind of betrayals the dems have for me, if it's bad enough I'll go with the trump hand grenade. ..."
    "... Totally agree tegnost, no more democratic neoliberals -- ..."
    "... "they are now re-shaping the world in their own image" Isn't this intrinsic to bourgeois liberalism? ..."
    "... Two things are driving our troubles: over-population and globalization. The plutocrats and kleptocrats have all the leverage over the rest of us laborers when the population of human beings has increased seven-fold in the last 70 years, from a little over a billion to seven billions (and growing) today. They are happy to let us freeze to death behind gas stations in order for them to compete with other oligarchs in excess consumption. ..."
    "... Thank you for mentioning the third rail of overpopulation. Too often, this giant category of problems is ignored, because it makes people uncomfortable. The planet is finite, resources on the planet are finite, yet the number of people keeps growing. We need to strive for a higher quality of life, not a higher quantity of people. ..."
    "... The issue goes beyond "current neoliberals up for election", it is most of our political establishment that has been corrupted by a system that provides for the best politicians money can buy. ..."
    "... America has always been a country where a majority of the population has been poor. With the exception of a fifty five year(1950-2005) year period where access to large quantities of consumer debt by households was deployed to first to provide a wealth illusion to keep socialism at bay, followed by a mortgage debt boom to both keep the system afloat and strip the accumulated capital of the working class, i.e. home equity, the history of the US has been one of poverty for the masses. ..."
    "... Further debt was foisted on the working class in the form of military Keynesianism, generating massive fiscal deficits which are to be paid for via austerity in a neo-feudal economy. ..."
    www.nakedcapitalism.com
    The first comment gives a window into the hidden desperation in America that is showing up in statistics like increasing opioid addiction and suicides, rather than in accounts of how and why so many people are suffering. I hope readers will add their own observations in comments.

    seanseamour, June 1, 2016 at 3:26 am

    We recently took three months to travel the southern US from coast to coast. As an expat for the past twenty years, beyond the eye opening experience it left us in a state of shock. From a homeless man convulsing in the last throes of hypothermia (been there) behind a fuel station in Houston (the couldn't care less attendant's only preoccupation getting our RV off his premises), to the general squalor of near-homelessness such as the emergence of "American favelas" a block away from gated communities or affluent ran areas, to transformation of RV parks into permanent residencies for the foreclosed who have but their trailer or RV left, to social study one can engage while queuing at the cash registers of a Walmart before beneficiaries of SNAP.

    Stopping to take the time to talk and attempt to understand their predicament and their beliefs as to the cause of their plight is a dizzying experience in and of itself. For a moment I felt transposed to the times of the Cold War, when the Iron Curtain dialectics fuzzed the perception of that other world to the west with a structured set of beliefs designed to blacken that horizon as well as establish a righteous belief in their own existential paradigm.

    What does that have to do with education? Everything if one considers the elitist trend that is slowly setting the framework of tomorrow's society. For years I have felt there is a silent "un-avowed conspiracy", why the seeming redundancy, because it is empirically driven as a by-product of capitalism's surge and like a self-redeeming discount on a store shelf crystalizes a group identity of think-alike know-little or nothing frustrated citizens easily corralled by a Fox or Trump piper. We have re-rcreated the conditions or rather the reality of "Poverty In America" barely half a century after its first diagnostic with one major difference : we are now feeding the growth of the "underclass" by lifting ever higher and out of reach the upward mobility ladder, once the banner of opportunity now fallen behind the supposedly sclerotic welfare states of Europe.

    Praedor, June 1, 2016 at 5:37 pm

    So Richard Cohen now fears American voters because of Trump. Well, on Diane Reem today (NPR) was a discussion on why fascist parties are growing in Europe. Both Cohen and the clowns on NPR missed the forest for the trees. The reason Trump and Sanders are doing well in the US while fascists are doing well in Europe is the same reason: neoliberalism has gutted, or is in the process of gutting, societies. Workers and other formerly "safe" white collar workers are seeing their job security, income security, retirement security all go up in smoke. Neoliberals are trying to snip and cut labor protections, healthcare, environmental regulations all for corporate profit. In Europe this is all in addition to a massive refugee crisis itself brought on by neoliberalism (neocon foreign policy is required for neoliberal social policy, they go hand-in-hand). The US and NATO destabilize countries with the intent of stealing their resources and protecting their markets, cause massive refugee flows which strain social structures in Europe (which falls right into the hands of the gutters and cutters of neoliberalism). Of course the people will lean fascist.

    In the US we don't have the refugees, but the neoliberalism is further along and more damaging. There's no mystery here or in Europe, just the natural effects of governments failing to represent real people in favor of useless eater rich.

    Make the people into commodities, endanger their washes and job security, impose austerity, and tale in floods of refugees. Of COURSE Europeans stay leaning fascist.

    Praedor , June 2, 2016 at 3:31 pm

    According to NPR's experts, many or most of those parties are "fascist". The fascist label is getting tossed around a LOT right now. It is slung at Trump, at UKIP, or any others. Fascist is what you call the opposition party to the right that you oppose. Now I don't call Trump a fascist. A buffoon, yes, even a charlatan (I still rather doubt he really originally thought he would become the GOP nominee. Perhaps I'm wrong but, like me, many seemed to think that he was pushing his "brand" – a term usage of which I HATE because it IS like we are all commodities or businesses rather than PEOPLE – and that he would drop by the wayside and profit from his publicity).

    Be that as it may, NPR and Co were discussing the rise of fascist/neofascist parties and wondering why there were doing so well. Easy answer: neoliberalism + refugee hoards = what you see in Europe.

    I've also blamed a large part of today's gun violence in the USA on the fruits of neoliberalism. Why? Same reason that ugly right-wing groups (fascist or not) are gaining ground around the Western world. Neoliberalism destroys societies. It destroys the connections within societies (the USA in this case). Because we have guns handy, the result is mass shootings and flashes of murder-suicides. This didn't happen BEFORE neoliberalism got its hooks into American society. The guns were there, always have been (when I was a teen I recall seeing gun mags advertising various "assault weapons" for sale this was BEFORE Reagan and this was BEFORE mass shootings, etc). Machine guns were much easier to come by BEFORE the 1980s yet we didn't have mass killings with machine guns, handguns, or shotguns. ALL that stuff is a NEW disease. A disease rooted in neoliberalism. Neoliberalism steals your job security, your healthcare security, your home, your retirement security, your ability to provide for your family, your ability to send your kids to college, your ability to BUY FOOD. Neoliberalism means you don't get to work for a company for 20 years and then see the company pay you back for that long, good service with a pension. You'll be lucky to hold a job at any company from month-to-month now and FORGET about benefits! Healthcare? Going by the wayside too. Workers in the past felt a bond with each other, especially within a company. Neoliberalism has turned all workers against each other because they have to fight to gain any of the scraps being tossed out by the rich overlords. You can't work TOGETHER to gain mutual benefit, you need to fight each other in a zero sum game. For ME to win you have to lose. You are a commodity. A disposable and irrelevant widget. THAT combines with guns (that have always been available!) and you get desperate acting out: mass shootings, murder suicides, etc.

    WorldBLee , June 2, 2016 at 6:06 pm

    There are actual fascist parties in Europe. To name a few in one country I've followed, Ukraine, there's Right Sector, Svoboda, and others, and that's just one country. I don't think anyone calls UKIP fascist.

    John Zelnicker , June 3, 2016 at 12:24 am

    @Praedor – Your comment that Yves posted and this one are excellent. One of the most succinct statements of neoliberalism and its worst effects that I have seen.

    As to the cause of recent mass gun violence, I think you have truly nailed it. If one thinks at all about the ways in which the middle class and lower have been squeezed and abused, it's no wonder that a few of them would turn to violence. It's the same despair and frustration that leads to higher suicide rates, higher rates of opiate addiction and even decreased life expectancy.

    Jacob , June 3, 2016 at 11:35 am

    "Machine guns were much easier to come by BEFORE the 1980s yet we didn't have mass killings with machine guns, handguns, or shotguns. ALL that stuff is a NEW disease. A disease rooted in neoliberalism."

    Easy availability of guns was seen as a serious problem long before the advent of neoliberalism. For one example of articles about this, see U.S. Government Tried to Tackle Gun Violence in 1960s . Other examples include 1920s and 1930s gangster and mob violence that were a consequence of Prohibition (of alcohol). While gun violence per-capita might be increasing, the population is far larger today, and the news media select incidents of violence to make them seem like they're happening everywhere and that everyone needs to be afraid. That, of course, instills a sense of insecurity and fear into the public mind; thus, a fearful public want a strong leader and are willing to accept the inconvenience and dangers of a police state for protection.

    Disturbed Voter , June 2, 2016 at 6:49 am

    First they came for the blue collar workers

    America has plenty of refugees, from Latin America

    Neo-liberal goes back to the Monroe Doctrine. We used to tame our native workers with immigrants, and we still do, but we also tame them by globalism in trade. So many rationalizations for this, based on political and economic propaganda. All problems caused by the same cause American predatory behavior. And our great political choice iron fist with our without velvet glove.

    Jeff , June 2, 2016 at 7:58 am

    Germany, Belgium, France, Poland, Hungary, Romania, Turkey, Israel, Australia come to mind (if one is allowed to participate in a European song contest, one is supposed to be part of Europe :) They all have more or less fascist governments.
    Once you realize that the ECB creates something like 60 billion euros a month, and gives nothing to its citizens nor its nation-states, that means the money goes to corporations, which means that the ECB, and by extension the whole EU, is a fascist construct (fascism being defined as a government running on behalf of the corporations).

    Seb , June 2, 2016 at 8:07 am

    That's a fallacy. Corporatism is a feature of fascism, not the other way around.

    None of the governments you mention, with the possible exception of Israel and Turkey, can be called fascist in any meaningful sense.

    Even the anti-immigration parties in the Western European countries you mention – AfD, Front National, Vlaams Belang – only share their nationalism with fascist movements. And they are decidedly anti-corporatist.

    BananaBreakfast , June 4, 2016 at 5:28 pm

    The problem here is one of semantics, really. You're using "fascist" interchangeably with "authoritarian", which is a misnomer for these groups. The EU is absolutely anti-democratic, authoritarian, and technocratic in a lot of respects, but it's not fascist. Both have corporatist tendencies, but fascist corporatism was much more radical, much more anti-capitalist (in the sense that the capitalist class was expected to subordinate itself to the State as the embodiment of the will of the Nation or People, as were the other classes/corporate units). EU technocratic corporatism has none of the militarism, the active fiscal policy, the drive for government supported social cohesion, the ethno-nationalism, or millenarianism of Fascism.

    The emergent Right parties like UKIP, FNP, etc. share far more with the Fascists, thought I'd say they generally aren't yet what Fascists would have recognized as other Fascists in the way that the NSDAP and Italian Fascists recognized each other -perhaps they're more like fellow travelers.

    tgs , June 2, 2016 at 9:46 am

    True, I posted a few minutes ago saying roughly the same thing – but it seems to have gone to moderation.

    Another key feature of fascism is territorial expansionism. As far as I am aware, none of the nationalist parties advocate invading other countries or retaking former colonies. Once again, contemporary neoliberalism is far closer to fascism. But you are correct about both Israel and Turkey – our allies. They are much closer to the genuine article. But you won't hear those complaining about the rise of fascism in Europe complaining too much about them.

    Jeff , June 2, 2016 at 10:05 am

    When I was young, there were 4 divisions:
    * who owned the means of production (public or private entities)
    * who decided what those means were used for.
    If it is a 'public entity' (aka government or regime) that decides what is built, we have a totalitarian state, which can be 'communist' (if the means also belong the public entities like the government or regional fractions of it) or 'fascist' (if the factories are still in private hands).
    If it is the private owner of the production capacity who decides what is built, you get capitalism. I don't recall any examples of private entities deciding what to do with public means of production (mafia perhaps).
    Sheldon Wolin introduced us to inverted totalitarism. While it is no longer the government that decides what must be done, the private 'owners' just buy the government, the judiciary, the press, or whatever is needed to achieve their means.
    When I cite Germany, it is not so much AfD, but the 2€/hour jobs I am worried about. When I cite Belgium, it is not the fools of Vlaams Belang, but rather the un-taxing of corporations and the tear-down of social justice that worries me.

    Jim , June 2, 2016 at 1:57 pm

    But Jeff, is Wolin accurate in using the term "inverted totalitarianism" to try to capture the nature of our modern extractive bureaucratic monolith that apparently functions in an environment where "it is no longer the government that decides what must be done..simply.."private owners just buy the government, the judiciary, the press, or whatever is needed to achieve their means."

    Mirowski argues quite persuasively that the neoliberal ascendency does not represent the retreat of the State but its remaking to strongly support a particular conception of a market society that is imposed with the help of the State on our society.

    For Mirowski, neoliberalism is definitely not politically libertarian or opposed to strong state intervention in the economy and society.

    TedWa , June 2, 2016 at 10:19 am

    Inverted totalitarianism is the mirror image of fascism, which is why so many are confused. Fascism is just a easier term to use and more understandable by all. There is not a strict adherence to fascism going on, but it's still totalitarian just the same.

    jan , June 2, 2016 at 10:54 am

    Hi
    I live in Europe as well, and what to think of Germany's AfD, Greece's Golden Dawn, the Wilder's party in the Netherlands etc. Most of them subscribe to the freeloading, sorry free trading economic policies of neoliberalism.

    schizosoph , June 2, 2016 at 9:28 am

    There's LePen in France and the far-right, fascist leaning party nearly won in Austria. The far right in Greece as well. There's clearly a move to the far right in Europe. And then there's the totalitarian mess that is Turkey. How much further this turn to a fascist leaning right goes and how widespread remains to be seen, but it's clearly underway.

    myshkin , June 2, 2016 at 11:28 am

    Searched 'current fascist movements europe' and got these active groups from wiki.

    National Bolshevik Party-Belarus
    Parti Communautaire National-Européen Belgium
    Bulgarian National Alliance Bulgaria
    Nova Hrvatska Desnica Croatia
    Ustaše Croatia
    National Socialist Movement of Denmark
    La Cagoule France
    National Democratic Party of Germany
    Fascism and Freedom Movement – Italy
    Fiamma Tricolore Italy
    Forza Nuova Italy
    Fronte Sociale Nazionale Italy
    Movimento Fascismo e Libertà Italy
    Pērkonkrusts Latvia
    Norges Nasjonalsosialistiske Bevegelse Norway
    National Radical Camp (ONR) Poland
    National Revival of Poland (NOP)
    Polish National Community-Polish National Party (PWN-PSN)
    Noua Dreaptă Romania
    Russian National Socialist Party(formerly Russian National Union)
    Barkashov's Guards Russia
    National Socialist Society Russia
    Nacionalni stroj Serbia
    Otačastveni pokret Obraz Serbia
    Slovenska Pospolitost Slovakia
    España 2000 Spain
    Falange Española Spain
    Nordic Realm Party Sweden
    National Alliance Sweden
    Swedish Resistance Movement Sweden
    National Youth Sweden
    Legion Wasa Sweden
    SPAS Ukraine
    Blood and Honour UK
    British National Front UK
    Combat 18 UK
    League of St. George UK
    National Socialist Movement UK
    Nationalist Alliance UK
    November 9th Society UK
    Racial Volunteer Force UK

    Lexington , June 2, 2016 at 12:50 pm

    "Fascism" has become the prefered term of abuse applied indiscriminately by the right thinking to any person or movement which they want to tar as inherently objectionable, and which can therefore be dismissed without the tedium of actually engaging with them at the level of ideas.

    Most of the people who like to throw this word around couldn't give you a coherant definition of what exactly they understand it to signify, beyond "yuck!!"

    In fairness even students of political ideology have trouble teasing out a cosistent system of beliefs, to the point where some doubt fascism is even a coherent ideology. That hardly excuses the intellectual vacuity of those who use it as a term of abuse, however.

    OpenThePodBayDoorsHAL , June 2, 2016 at 4:39 pm

    Precisely 3,248 angels can fit on the head of a pin. Parsing the true definition of "fascism" is a waste of time, broadly, fascism is an alliance of the state, the corporation, and the military, anyone who doesn't see that today needs to go back to their textbooks.

    As far as the definition "neo-liberalism" goes, yes it's a useful label. But let's keep it simple: every society chooses how resources are allocated between Capital and Labor. The needle has been pegged over on the Capital side for quite some time, my "start date" is when Reagan busted the air traffic union. The hideous Republicans managed to sell their base that policies that were designed to let companies be "competitive" were somehow good for them, not just for the owners of the means of production.

    The only way they have avoided complete revolt has been endless borrowing to fund entitlements, once that one-time fix plays out the consequences will be apparent. The funding mechanism itself (The Fed) has even morphed into a neo-liberal tool designed to enrich Capital while enslaving Labor with the consequences.

    Jim , June 2, 2016 at 7:40 pm

    PodBay stated:

    "Every society chooses how resources are allocated between capital and labor." More specifically, isn't it a struggle between various political/economic/cultural movements within a society which chooses how resources are allocated between capital and labor.

    Take, for example, the late 1880s-1890s in the U.S. During that time-frame there were powerful agrarian populists movements and the beginnings of some labor/socialist movements from below, while from above the property-production system was modified by a powerful political movement advocating for more corporate administered markets over the competitive small-firm capitalism of an earlier age.

    It was this movement for corporate administered markets which won the battle and defeated/absorbed the agrarian populists.

    What are the array of such forces in 2016? What type of movement doe Trump represent? Sanders? Clinton?

    Lexington , June 2, 2016 at 10:31 pm

    fascism is an alliance of the state, the corporation, and the military, anyone who doesn't see that today needs to go back to their textbooks

    Which textbooks specifically?

    The article I cited above in Vox canvasses the opinion of five serious students of fascism, and none of them believe Trump is a fascist. I'd be most interested in knowing what you have been reading.

    As for your definition of "fascism", it's obviously so vague and broad that it really doesn't explain anything. To the extent it contains any insight it is that public institutions (the state), private businesses (the corporation) and the armed forces all exert significant influence on public policy. That and a buck and and a half will get you a cup of coffee. If anything it is merely a very crude descriptive model of the political process. It doesn't define fascism as a particular set of beliefs that make it a distinct political ideology that can be differentiated from other ideologies (again, see the Vox article for a discussion of some of the beliefs that are arguably characteristic of fascist movements). Indeed by your standard virtually every state that has ever existed has to a greater or lesser extent been "fascist".

    My objection to imprecise language here isn't merely pedantic. The leftist dismissal of right wing populists like Trump (or increasingly influential European movements like Ukip, AfD, and the Front national) as "fascist" is a reductionist rhetorical device intended to marginalize them by implying their politics are so far outside of the mainstream that they do not need to be taken seriously. Given that these movements are only growing in strength as faith in traditional political movements and elites evaporate this is likely to produce exactly the opposite result. Right wing populism isn't going to disappear just because the left keeps trying to wish it away. Refusing to accept this basic political fact risks condemning the left rather than "the fascists" to political irrelevance.

    Roger Smith , June 2, 2016 at 7:13 am

    " the gutters and cutters of neoliberalism"

    This phrase is pure gold.

    allan , June 2, 2016 at 7:44 am

    The neoliberals are all too aware that the clock is ticking. In this morning's NYT, yet more talk of ramming TPP through in the lame duck.

    sleepy , June 2, 2016 at 7:56 am

    I moved to a small city/town in Iowa almost 20 years ago. Then, it still had something of a Norman Rockwell quality to it, particularly in a sense of egalitarianism, and also some small factory jobs which still paid something beyond a bare existence.

    Since 2000, many of those jobs have left, and the population of the county has declined by about 10%. Kmart, Penney's, and Sears have left as payday/title loan outfits, pawnshops, smoke shops, and used car dealers have all proliferated.

    Parts of the town now resemble a combination of Appalachia and Detroit. Sanders easily won the caucuses here and, no, his supporters were hardly the latte sippers of someone's imagination, but blue collar folks of all ages.

    weinerdog43 , June 2, 2016 at 8:25 am

    My tale is similar to yours. About 2 years ago, I accepted a transfer from Chicagoland to north central Wisconsin. JC Penney left a year and a half ago, and Sears is leaving in about 3-4 months. Kmart is long gone.

    I was back at the old homestead over Memorial Day, and it's as if time has stood still. Home prices still going up; people out for dinner like crazy; new & expensive automobiles everywhere. But driving out of Chicagoland, and back through rural Wisconsin it is unmistakeable.

    2 things that are new: The roads here are deteriorating FAST. In Price County, the road commissioner said last night that their budget allows for resurfacing all the roads on a 200 year basis. (Yes, that means there is only enough money to resurface all the county roads if spread out over 200 years.) 2nd, there are dead deer everywhere on the side of the road. In years past, they were promptly cleaned up by the highway department. Not any more. Gross, but somebody has to do the dead animal clean up. (Or not. Don't tell Snotty Walker though.)

    Anyway, not everything is gloom and doom. People seem outwardly happy. But if you're paying attention, signs of stress and deterioration are certainly out there.

    Jim Haygood , June 2, 2016 at 12:08 pm

    "the road commissioner said last night that their budget allows for resurfacing all the roads on a 200 year basis"

    while the fedgov spends north of 5 percent of GDP on global military dominance.

    We're the Soviets now, comrades: shiny weapons, rotting infrastructure.

    Today in San Diego, the Hildabeest will deliver a vigorous defense of this decadent, dying system.

    Mary Wehrheim , June 2, 2016 at 8:32 am

    This Trump support seems like a form of political vandalism with Trump as the spray paint. People generally feel frustrated with government, utterly powerless and totally left out as the ranks of the precariat continue to grow. Trump appeals to the nihilistic tendencies of some people who, like frustrated teens, have decided to just smashed things up for the hell of it. They think a presidency mix of Caligula with Earl Scheib would be a funny hoot.

    You also have the more gullible fundis who have actually deluded themselves into thinking the man who is ultimate symbol of hedonism will deliver them from secularism because he says he will. Authoritarians who seek solutions through strong leaders are usually the easiest to con because they desperately want to believe in their eminent deliverance by a human deus ex machina. Plus he is ostentatiously rich in a comfortably tacky way and a TV celebrity beats a Harvard law degree. And why not the thinking goes the highly vaunted elite college Acela crowd has pretty much made a pig's breakfast out of things. So much for meritocracy. Professor Harold Hill is going to give River City a boys band.

    uahsenaa , June 2, 2016 at 9:58 am

    Someone at American Conservative, when trying to get at why it's pointless to tell people Trump will wreck the place, described him as a "hand grenade" lobbed into the heart of government. You can't scare people with his crass-ness and destructive tendencies, because that's precisely what his voters are counting on when/if he gets into government.

    In other words, the MSM's fear is the clearest sign to these voters that their political revolution is working. Since TPTB decided peaceful change (i.e. Sanders) was a non-starter, then they get to reap the whirlwind.

    Praedor , June 2, 2016 at 3:41 pm

    Your phrase "Trump is political vandalism" is great. I don't think I've seen a better description. NPR this morning was discussing Trump and his relationship with the press and the issues some GOP leaders have with him. When his followers were discussed, the speakers closely circled your vandalism point. Basically they said that his voters are angry with the power brokers and leaders in DC and regardless of whether they think Trump's statements are heartfelt or just rhetoric, they DO know he will stick it to those power brokers so that's good. Vandalism by a longer phrase.

    hunkerdown , June 2, 2016 at 4:29 pm

    Meritocracy was ALWAYS a delusional fraud. What you invariably get, after a couple of generations, is a clique of elitists who define merit as themselves and reproduce it ad nauseam. Who still believes in such laughable kiddie stories?

    Besides, consumers need to learn to play the long game and suck up the "scurrilous attacks" on their personal consumption habits for the next four years. The end of abortion for four years is not important - lern2hand and lern2agency, and lern2cutyourrapist if it comes to that. What is important is that the Democratic Party's bourgeois yuppie constituents are forced to defend against GOP attacks on their personal and cultural interests with wherewithal that would have been ordinarily spent to attend to their sister act with their captive constituencies.

    If bourgeois Democrats hadn't herded us into a situation where individuals mean nothing outside of their assigned identity groups and their corporate coalition duopoly, they wouldn't be reaping the whirlwind today. Why, exactly, should I be sympathetic to exploitative parasites such as the middle class?

    Dave , June 2, 2016 at 11:04 am

    There are all good ideas. However, population growth undermines almost all of them. Population growth in America is immigrant based. Reverse immigration influxes and you are at least doing something to reduce population growth.

    How to "reverse immigration influxes"?

    • Stop accepting refugees. It's outrageous that refugees from for example, Somalia, get small business loans, housing assistance, food stamps and lifetime SSI benefits while some of our veterans are living on the street.
    • No more immigration amnesties of any kind.
    • Deport all illegal alien criminals.
    • Practice "immigrant family unification" in the country of origin. Even if you have to pay them to leave. It's less expensive in the end.
    • Eliminate tax subsidies to American corn growers who then undercut Mexican farmers' incomes through NAFTA, driving them into poverty and immigration north. Throw Hillary Clinton out on her ass and practice political and economic justice to Central America.

    I too am a lifetime registered Democrat and I will vote for Trump if Clinton gets the crown. If the Democrats want my vote, my continuing party registration and my until recently sizeable donations in local, state and national races, they will nominate Bernie. If not, then I'm an Independent forevermore. They will just become the Demowhig Party.

    Jack Heape , June 2, 2016 at 10:00 am

    Here's a start

    1. Campaign Finance Reform: If you can't walk into a voting booth you cannot contribute, or make all elections financed solely by government funds and make private contributions of any kind to any politician illegal.
    2. Re-institute Glass-Steagall but even more so. Limit the number of states a bank can operate in. Make the Fed publicly owned, not privately owned by banks.
    3. Completely revise corporate law, doing away with the legal person hood of corporations and limit of liability for corporate officers and shareholders.
    4. Single payer health care for everyone. Allow private health plans but do away with health insurance as a deductible for business. Remove the AMA's hold on licensing of medical schools which restricts the number of doctors.
    5. Do away with the cap on Social Security wages and make all income, wages, capital gains, interest, and dividends subject to taxation.
    6. Impose tariffs to compensate for lower labor costs overseas and revise industry.
    7. Cut the Defense budget by 50% and use that money for intensive infrastructure development.
    8. Raise the national minimum wage to $15 and hour.
    9. Severely curtail the revolving door from government to private industry with a 10 year restriction on working for an industry you dealt with in any way as a government official.
    10. Free public education including college (4 year degree).
    TedWa , June 2, 2016 at 10:56 am

    Obama and Holder, allowing the banks to be above the law have them demi-gods, many of whom are psychopaths and kleptocrats, and with their newly granted status, they are now re-shaping the world in their own image. Prosecute these demi-gods and restore sanity. Don't and their greed for our things will never end until nothings left.

    tegnost , June 2, 2016 at 11:56 am

    This is why Hillary is so much more dangerous than trump, because she and the demi gods are all on the same page. The TPP is their holy grail so I expect heaven and earth to be moved, especially if it looks like some trade traitors are going to get knocked off in the election, scoundrels like patty murray (dino, WA) will push to get it through then line up at the feed trough to gorge on k street dough. I plan to vote stein if it's not Bernie, but am reserving commitment until I see what kind of betrayals the dems have for me, if it's bad enough I'll go with the trump hand grenade.

    TedWa , June 2, 2016 at 12:35 pm

    Totally agree tegnost, no more democratic neoliberals -- Patty Murray (up for re-election) and Cantwell are both trade traitors and got fast track passed.

    hunkerdown , June 2, 2016 at 4:44 pm

    "they are now re-shaping the world in their own image" Isn't this intrinsic to bourgeois liberalism?

    Sluggeaux , June 2, 2016 at 9:13 am

    Two things are driving our troubles: over-population and globalization. The plutocrats and kleptocrats have all the leverage over the rest of us laborers when the population of human beings has increased seven-fold in the last 70 years, from a little over a billion to seven billions (and growing) today. They are happy to let us freeze to death behind gas stations in order for them to compete with other oligarchs in excess consumption.

    This deserves a longer and more thoughtful comment, but I don't have the time this morning. I have to fight commute traffic, because the population of my home state of California has doubled from 19M in 1970 to an estimated 43M today (if you count the Latin American refugees and H1B's).

    Vatch , June 2, 2016 at 11:04 am

    Thank you for mentioning the third rail of overpopulation. Too often, this giant category of problems is ignored, because it makes people uncomfortable. The planet is finite, resources on the planet are finite, yet the number of people keeps growing. We need to strive for a higher quality of life, not a higher quantity of people.

    seanseamour , June 3, 2016 at 7:59 am

    The issue goes beyond "current neoliberals up for election", it is most of our political establishment that has been corrupted by a system that provides for the best politicians money can buy.

    In the 1980's I worked inside the beltway witnessing the new cadre of apparatchiks that drove into town on the Reagan coattails full of moral a righteousness that became deviant, parochial, absolutist and for whom bi-partisan approaches to policy were scorned prodded on by new power brokers promoting their gospels in early morning downtown power breakfasts. Sadly our politicians no longer serve but seek a career path in our growing meritocratic plutocracy.

    paul whalen , June 2, 2016 at 9:19 am

    America has always been a country where a majority of the population has been poor. With the exception of a fifty five year(1950-2005) year period where access to large quantities of consumer debt by households was deployed to first to provide a wealth illusion to keep socialism at bay, followed by a mortgage debt boom to both keep the system afloat and strip the accumulated capital of the working class, i.e. home equity, the history of the US has been one of poverty for the masses.

    Further debt was foisted on the working class in the form of military Keynesianism, generating massive fiscal deficits which are to be paid for via austerity in a neo-feudal economy.

    http://www.counterpunch.org/2015/08/28/the-myth-of-the-middle-class-have-most-americans-always-been-poor/

    [Dec 04, 2016] Methheads as a sign of socioeconomic desperation: neoliberalism behaves much like British behaves in China during opium wars

    Notable quotes:
    "... Money, it seems to him, has somehow changed its role. It has "increased" (is that possible, he asks?) while at the same time it has become concentrated in fewer and fewer hands. It appears to seek to become an autonomous and dominating sector of economic life, functionally separated from production of real things, almost all of which seem to come from faraway places. "Real" actually begins to change its meaning, another topic more interesting still. This devotion to the world of money-making-money seems to have obsessed the lives of many of the most "important" Americans. Entire TV networks are devoted to it. They talk about esoteric financial instruments that to the ordinary citizen look more like exotically placed bets-on-credit in the casino than genuine ways to grow real-world business, jobs, wages, and family income. The few who are in position to master the game live material lives that were beyond what almost any formerly "wealthy" man or woman in Rip's prior life could even imagine ..."
    "... children gone away and lost to either the relentless rootlessness of the trans-national economy or the virtual hell-world of meth and opioids and heroin and unending underemployed hopelessness. ..."
    "... "If public life can suffer a metaphysical blow, the death of the labor question was that blow. For millions of working people, it amputated the will to resist." ..."
    "... It's a Wonderful Life ..."
    "... as educators ..."
    "... OK, so I hear some of you saying, corporate America will never let this Civic Media get off the ground. My short answer to this is that corporations do what makes money for them, and in today's despairing political climate there's money to be made in sponsoring something truly positive, patriotic and constructive. ..."
    "... I am paying an exorbitant subscription for the UK Financial Times at the moment. Anyway, the good news is that very regular articles are appearing where you can almost feel the panic at the populist uprisings. ..."
    "... The kernel of Neoliberal Ideology: "There is no such a thing as society." (Margaret Thatcher). ..."
    "... "In this postindustrial world not only is the labor question no longer asked, not only is proletarian revolution passé, but the proletariat itself seems passé. And the invisibles who nonetheless do indeed live there have internalized their nonexistence, grown demoralized, resentful, and hopeless; if they are noticed at all, it is as objects of public disdain. What were once called "blue-collar aristocrats"-skilled workers in the construction trades, for example-have long felt the contempt of the whole white-collar world. ..."
    "... Or, we could replace Western liberal culture, with its tradition to consume and expand by force an unbroken chain from the Garden of Eden to Friedrich von Hayek, with the notion of maintenance and "enough". Bourgeois make-work holds no interest to me. ..."
    "... My understanding of the data is that living standards increased around the world during the so-called golden age, not just in the U.S. (and Western Europe and Japan and Australia ). It could be that it was still imperialism at work, but the link between imperialism and the creation of the middle class is not straightforward. ..."
    "... I thought neoliberalism was just the pogrom to make everyone – rational agents – as subscribed by our genetic / heraldic betters .. putting this orbs humans and resources in the correct "natural" order . ..."
    "... Disheveled Marsupial for those thinking neoliberalism is not associated with libertarianism one only has to observe the decades of think tanks and their mouth organs roaming the planet . especially in the late 80s and 90s . bringing the might and wonders of the – market – to the great unwashed globally here libertarian priests rang in the good news to the great unwashed ..."
    "... I would argue that neoliberalism is a program to define markets as primarily engaged in information processing and to make everyone into non-agents ( as not important at all to the proper functioning of markets). ..."
    "... It also appears that neoliberals want to restrict democracy to the greatest extent possible and to view markets as the only foundation for truth without any need for input from the average individual. ..."
    Jun 02, 2016 | www.nakedcapitalism.com
    bluecollarAl , June 2, 2016 at 10:06 am

    I am almost 70 years old, born and raised in New York City, still living in a near suburb.

    Somehow, somewhere along the road to my 70th year I feel as if I have been gradually transported to an almost entirely different country than the land of my younger years. I live painfully now in an alien land, a place whose habits and sensibilities I sometimes hardly recognize, while unable to escape from memories of a place that no longer exists. There are days I feel as I imagine a Russian pensioner must feel, lost in an unrecognizable alien land of unimagined wealth, power, privilege, and hyper-glitz in the middle of a country slipping further and further into hopelessness, alienation, and despair.

    I am not particularly nostalgic. Nor am I confusing recollection with sentimental yearnings for a youth that is no more. But if I were a contemporary Rip Van Winkle, having just awakened after, say, 30-40 years, I would not recognize my beloved New York City. It would be not just the disappearance of the old buildings, Penn Station, of course, Madison Square Garden and its incandescent bulb marquee on 50th and 8th announcing NYU vs. St. John's, and the WTC, although I always thought of the latter as "new" until it went down. Nor would it be the disappearance of all the factories, foundries, and manufacturing plants, the iconic Domino Sugar on the East River, the Wonder Bread factory with its huge neon sign, the Swingline Staples building in Long Island City that marked passage to and from the East River tunnel on the railroad, and my beloved Schaeffer Beer plant in Williamsburg, that along with Rheingold, Knickerbocker, and a score of others, made beer from New York taste a little bit different.

    It wouldn't be the ubiquitous new buildings either, the Third Avenue ghostly glass erected in the 70's and 80's replacing what once was the most concentrated collection of Irish gin mills anywhere. Or the fortress-like castles built more recently, with elaborate high-ceilinged lobbies decorated like a kind of gross, filthy-wealthy Versailles, an aesthetically repulsive style that shrieks "power" in a way the neo-classical edifices of our Roman-loving founders never did. Nor would it even be the 100-story residential sticks, those narrow ground-to-clouds skyscraper condominiums proclaiming the triumph of globalized capitalism with prices as high as their penthouses, driven ever upward by the foreign billionaires and their obsession with burying their wealth in Manhattan real estate.

    It is not just the presence of new buildings and the absence of the old ones that have this contemporary Van Winkle feeling dyslexic and light-headed. The old neighborhoods have disintegrated along with the factories, replaced by income segregated swatches of homogenous "real estate" that have consumed space, air, and sunlight while sucking the distinctiveness out of the City. What once was the multi-generational home turf for Jewish, Afro-American, Puerto Rican, Italian, Polak and Bohunk families is now treated as simply another kind of investment, stocks and bonds in steel and concrete. Mom's Sunday dinners, clothes lines hanging with newly bleached sheets after Monday morning wash, stickball games played among parked cars, and evenings of sitting on the stoop with friends and a transistor radio listening to Mel Allen call Mantle's home runs or Alan Freed and Murray the K on WINS 1010 playing Elvis, Buddy Holly, and The Drifters, all gone like last night's dreams.

    Do you desire to see the new New York? Look no further than gentrifying Harlem for an almost perfect microcosm of the city's metamorphosis, full of multi-million condos, luxury apartment renovations, and Maclaren strollers pushed by white yuppie wife stay-at-homes in Marcus Garvey Park. Or consider the "new" Lower East Side, once the refuge of those with little material means, artists, musicians, bums, drug addicts, losers and the physically and spiritually broken - my kind of people. Now its tenements are "retrofitted" and remodeled into $4000 a month apartments and the new residents are Sunday brunching where we used to score some Mary Jane.

    There is the "Brooklyn brand", synonymous with "hip", and old Brooklyn neighborhoods like Red Hook and South Brooklyn (now absorbed into so desirable Park Slope), and Bushwick, another former outpost of the poor and the last place I ever imagined would be gentrified, full of artists and hipsters driving up the price of everything. Even large sections of my own Queens and the Bronx are affected (infected?). Check out Astoria, for example, neighborhood of my father's family, with more of the old ways than most but with rents beginning to skyrocket and starting to drive out the remaining working class to who knows where.

    Gone is almost every mom and pop store, candy stores with their egg creams and bubble gum cards and the Woolworth's and McCrory's with their wooden floors and aisles containing ordinary blue collar urgencies like thread and yarn, ironing boards and liquid bleach, stainless steel utensils of every size and shape. Where are the locally owned toy and hobby stores like Jason's in Woodhaven under the el, with Santa's surprises available for lay-away beginning in October? No more luncheonettes, cheap eats like Nedicks with hot dogs and paper cones of orange drink, real Kosher delis with vats of warm pastrami and corned beef cut by hand, and the sacred neighborhood "bar and grill", that alas has been replaced by what the kids who don't know better call "dive bars", the detestable simulacra of the real thing, slick rooms of long slick polished mahogany, a half-dozen wide screen TV's blaring mindless sports contests from all over the world, over-priced micro-brews, and not a single old rummy in sight?

    Old Rip searches for these and many more remembered haunts, what Ray Oldenburg called the "great good places" of his sleepy past, only to find store windows full of branded, high-priced, got-to-have luxury-necessities (necessary if he/she is to be certified cool, hip, and successful), ridiculously overpriced "food emporia", high and higher-end restaurants, and apparel boutiques featuring hardened smiles and obsequious service reserved for those recognized by celebrity or status.

    Rip notices too that the visible demographic has shifted, and walking the streets of Manhattan and large parts of Brooklyn, he feels like what walking in Boston Back Bay always felt like, a journey among an undifferentiated mass of privilege, preppy or 'metro-sexed' 20 and 30-somethings jogging or riding bicycles like lean, buff gods and goddesses on expense accounts supplemented by investments enriched by yearly holiday bonuses worth more than Rip earned in a lifetime.

    Sitting alone on a park bench by the river, Rip reflects that more than all of these individual things, however, he despairs of a city that seems to have been reimagined as a disneyfied playground of the privileged, offering endless ways to self-gratify and philistinize in a clean, safe (safest big city in U.S., he heard someone say), slick, smiley, center-of-the-world urban paradise, protected by the new centurions (is it just his paranoia or do battle-ready police seem to be everywhere?). Old ethnic neighborhoods are filled with apartment buildings that seem more like post-college "dorms", tiny studios and junior twos packed with three or four "singles" roommates pooling their entry level resources in order to pay for the right to live in "The City". Meanwhile the newer immigrants find what place they can in Kingsbridge, Corona, Jamaica, and Cambria Heights, far from the city center, even there paying far too much to the landlord for what they receive.

    New York has become an unrecognizable place to Rip, who can't understand why the accent-less youngsters keep asking him to repeat something in order to hear his quaint "Brooklyn" accent, something like the King's English still spoken on remote Smith Island in the Chesapeake, he guesses
    .
    Rip suspects that this "great transformation" (apologies to Polanyi) has coincided, and is somehow causally related, to the transformation of New York from a real living city into, as the former Mayor proclaimed, the "World Capital" of financialized commerce and all that goes with it.

    "Financialization", he thinks, is not the expression of an old man's disapproval but a way of naming a transformed economic and social world. Rip is not an economist. He reads voraciously but, as an erstwhile philosopher trained to think about the meaning of things, he often can't get his head around the mathematical model-making explanations of the economists that seem to dominate the more erudite political and social analyses these days. He has learned, however, that the phenomenon of "capitalism" has changed along with his city and his life.

    Money, it seems to him, has somehow changed its role. It has "increased" (is that possible, he asks?) while at the same time it has become concentrated in fewer and fewer hands. It appears to seek to become an autonomous and dominating sector of economic life, functionally separated from production of real things, almost all of which seem to come from faraway places. "Real" actually begins to change its meaning, another topic more interesting still. This devotion to the world of money-making-money seems to have obsessed the lives of many of the most "important" Americans. Entire TV networks are devoted to it. They talk about esoteric financial instruments that to the ordinary citizen look more like exotically placed bets-on-credit in the casino than genuine ways to grow real-world business, jobs, wages, and family income. The few who are in position to master the game live material lives that were beyond what almost any formerly "wealthy" man or woman in Rip's prior life could even imagine
    .
    Above all else is the astronomical rise in wealth and income inequality. Rip recalls that growing up in the 1950's, the kids on his block included, along with firemen, cops, and insurance men dads (these were virtually all one-parent income households), someone had a dad who worked as a stock broker. Yea, living on the same block was a "Wall Streeter". Amazingly democratic, no? Imagine, people of today, a finance guy drinking at the same corner bar with the sanitation guy. Rip recalls that Aristotle had some wise and cautionary words in his Politics concerning the stability of oligarchic regimes.

    Last year I drove across America on blue highways mostly. I stayed in small towns and cities, Zanesville, St. Charles, Wichita, Pratt, Dalhart, Clayton, El Paso, Abilene, Clarksdale, and many more. I dined for the most part in local taverns, sitting at the bar so as to talk with the local bartender and patrons who are almost always friendly and talkative in these spaces. Always and everywhere I heard similar stories as my story of my home town. Not so much the specifics (there are no "disneyfied" Lubbocks or Galaxes out there, although Oxford, MS comes close) but in the sadness of men and women roughly my age as they recounted a place and time – a way of life – taken out from under them, so that now their years are filled with decayed and dead downtowns, children gone away and lost to either the relentless rootlessness of the trans-national economy or the virtual hell-world of meth and opioids and heroin and unending underemployed hopelessness.

    I am not a trained economist. My graduate degrees were in philosophy. My old friends call me an "Eric Hoffer", who back in the day was known as the "longshoreman philosopher". I have been trying for a long time now to understand the silent revolution that has been pulled off right under my nose, the replacement of a world that certainly had its flaws (how could I forget the civil rights struggle and the crime of Viet Nam; I was a part of these things) but was, let us say, different. Among you or your informed readers, is there anyone who can suggest a book or books or author(s) who can help me understand how all of this came about, with no public debate, no argument, no protest, no nothing? I would be very much appreciative.

    tegnost , June 2, 2016 at 2:20 pm

    I'll just highlight this line for emphasis
    "there are no "disneyfied" Lubbocks or Galaxes out there, although Oxford, MS comes close) but in the sadness of men and women roughly my age as they recounted a place and time – a way of life – taken out from under them, so that now their years are filled with decayed and dead downtowns, children gone away and lost to either the relentless rootlessness of the trans-national economy or the virtual hell-world of meth and opioids and heroin and unending underemployed hopelessness."
    my best friend pretty much weeps every day.

    Michael Fiorillo , June 2, 2016 at 3:13 pm

    bluecollar Al,

    As a lifelong New Yorker, I too mourn the demise of my beloved city. Actually, that's wrong: my city didn't die, it was taken from me/us.

    But if it's any consolation, remember that Everyone Loses Their New York (even insufferable hipster colonizers)

    Left in Wisconsin , June 2, 2016 at 3:24 pm

    Beautifully said.

    I don't have a book to recommend. I do think you identify a really underemphasized central fact of recent times: the joint processes by which real places have been converted into "real estate" and real, messy lives replaced by safe, manufactured "experiences." This affects wealthy and poor neighborhoods alike, in different ways but in neither case for the better.

    I live in a very desirable neighborhood in one of those places that makes a lot of "Best of" lists. I met a new neighbor last night who told me how he and his wife had plotted for years to get out of the Chicago burbs, not only to our city but to this specific neighborhood, which they had decided is "the one." (This sentiment is not atypical.) Unsurprisingly, property values in the neighborhood have gone through the roof. Which, as far as I can tell, most everyone here sees as an unmitigated good thing.

    At the same time, several families I got to know because they moved into the neighborhood about the same time we did 15-20 years ago, are cashing out and moving away, kids off to or out of college, parents ready (and financed) to get on to the next phase and the next place. Of course, even though our children are all Lake Woebegoners, there are no next generations staying in the neighborhood, except of course the ones still living, or back, at "home." (Those families won't be going anywhere for awhile!)

    I can't argue that new money in the hood hasn't improved some things. Our formerly struggling food co-op just finished a major expansion and upgrade. Good coffee is 5 minutes closer than it used to be. But to my wife and me, the overwhelming feeling is that we are now outsiders here in this neighborhood where we know all the houses and the old trees but not what motivates our new neighbors. So I made up a word for it: unsettling (adj., verb, noun).

    Softie , June 2, 2016 at 4:14 pm

    Try to read this one:

    "If public life can suffer a metaphysical blow, the death of the labor question was that blow. For millions of working people, it amputated the will to resist."

    - Steve Fraser, The Age of Acquiescence

    Jim , June 2, 2016 at 4:25 pm

    bluecollar Al:

    Christopher Lash in "Revolt of the Elites and the Betrayal of Democracy" mentions Ray Oldenburg's "The Great Good Places: Cafes, Coffee Shops, Community Centers, Beauty Parlors, General Stores, Bars, Hangouts and How they Got You through the Day."

    He argued that the decline of democracy is directly related to the disappearance of what he called third places:,

    "As neighborhood hangouts give way to suburban shopping malls, or, on the other hand private cocktail parties, the essentially political art of conversation is replaced by shoptalk or personal gossip.

    Increasingly, conversation literally has no place in American society. In its absence how–or better, where–can political habits be acquired and polished?

    Lasch finished he essay by noting that Oldenburg's book helps to identify what is missing from our then newly emerging world (which you have concisely updated):

    "urban amenities, conviviality, conversation, politics–almost everything in part that makes life worth living."

    JDH , June 2, 2016 at 4:28 pm

    The best explainer of our modern situation that I have read is Wendell Berry. I suggest that you start with "The Unsettling of America," quoted below.

    "Let me outline briefly as I can what seem to me the characteristics of these opposite kinds of mind. I conceive a strip-miner to be a model exploiter, and as a model nurturer I take the old-fashioned idea or ideal of a farmer. The exploiter is a specialist, an expert; the nurturer is not. The standard of the exploiter is efficiency; the standard of the nurturer is care. The exploiter's goal is money, profit; the nurturer's goal is health - his land's health, his own, his family's, his community's, his country's. Whereas the exploiter asks of a piece of land only how much and how quickly it can be made to produce, the nurturer asks a question that is much more complex and difficult: What is its carrying capacity? (That is: How much can be taken from it without diminishing it? What can it produce dependably for an indefinite time?) The exploiter wishes to earn as much as possible by as little work as possible; the nurturer expects, certainly, to have a decent living from his work, but his characteristic wish is to work as well as possible. The competence of the exploiter is in organization; that of the nurturer is in order - a human order, that is, that accommodates itself both to other order and to mystery. The exploiter typically serves an institution or organization; the nurturer serves land, household, community, place. The exploiter thinks in terms of numbers, quantities, "hard facts"; the nurturer in terms of character, condition, quality, kind."

    I also think Prof. Patrick Deneen works to explain the roots (and progression) of decline. I'll quote him at length here describing the modern college student.

    "[T]he one overarching lesson that students receive is the true end of education: the only essential knowledge is that know ourselves to be radically autonomous selves within a comprehensive global system with a common commitment to mutual indifference. Our commitment to mutual indifference is what binds us together as a global people. Any remnant of a common culture would interfere with this prime directive: a common culture would imply that we share something thicker, an inheritance that we did not create, and a set of commitments that imply limits and particular devotions.

    Ancient philosophy and practice praised as an excellent form of government a res publica – a devotion to public things, things we share together. We have instead created the world's first Res Idiotica – from the Greek word idiotes, meaning "private individual." Our education system produces solipsistic, self-contained selves whose only public commitment is an absence of commitment to a public, a common culture, a shared history. They are perfectly hollowed vessels, receptive and obedient, without any real obligations or devotions.

    They won't fight against anyone, because that's not seemly, but they won't fight for anyone or anything either. They are living in a perpetual Truman Show, a world constructed yesterday that is nothing more than a set for their solipsism, without any history or trajectory."

    ekstase , June 2, 2016 at 5:55 pm

    Wow. Did this hit a nerve. You have eloquently described what was the city of hope for several generations of outsiders, for young gay men and women, and for real artists, not just from other places in America, but from all over the world. In New York, once upon a time, bumping up against the more than 50% of the population who were immigrants from other countries, you could learn a thing or two about the world. You could, for a while, make a living there at a job that was all about helping other people. You could find other folks, lots of them, who were honest, well-meaning, curious about the world. Then something changed. As you said, you started to see it in those hideous 80's buildings. But New York always seemed somehow as close or closer to Europe than to the U.S., and thus out of the reach of mediocrity and dumbing down. New York would mold you into somebody tough and smart, if you weren't already – if it didn't, you wouldn't make it there.

    Now, it seems, this dream is dreamt. Poseurs are not artists, and the greedy and smug drive out creativity, kindness, real humor, hope.

    It ain't fair. I don't know where in this world an aspiring creative person should go now, but it probably is not there.

    Dave , June 2, 2016 at 10:21 am

    Americans cannot begin to reasonably demand a living wage, benefits and job security when there is an unending human ant-line of illegals and legal immigrants willing to under bid them.

    Only when there is a parity or shortage of workers can wage demands succeed, along with other factors.

    From 1925 to 1965 this country accepted hardly any immigrants, legal or illegal. We had the bracero program where Mexican males were brought in to pick crops and were then sent home to collect paychecks in Mexico. American blacks were hired from the deep south to work defense plants in the north and west.

    Is it any coincidence that the 1965 Great Society program, initiated by Ted Kennedy to primarily benefit the Irish immigrants, then co-opted by LBJ to include practically everyone, started this process of Middle Class destruction?

    1973 was the peak year of American Society as measured by energy use per capita, expansion of jobs and unionization and other factors, such as an environment not yet destroyed, nicely measured by the The Real Progress Indicator.

    Solution? Stop importing uneducated people. That's real "immigration reform".

    Now explain to me why voters shouldn't favor Trump's radical immigration stands?

    RUKidding , June 2, 2016 at 11:06 am

    Maybe, but OTOH, who is it, exactly, who is recruiting, importing, hiring and training undocumented workers to downgrade pay scales??

    Do some homework, please. If businesses didn't actively go to Central and South America to recruit, pay to bring here, hire and employ undocumented workers, then the things you discuss would be great.

    When ICE comes a-knocking at some meat processing plant or mega-chicken farm, what happens? The undocumented workers get shipped back to wherever, but the big business owner doesn't even get a tap on the wrist. The undocumented worker – hired to work in unregulated unsafe unhealthy conditions – often goes without their last paycheck.

    It's the business owners who manage and support this system of undocumented workers because it's CHEAP, and they don't get busted for it.

    Come back when the USA actually enforces the laws that are on the books today and goes after big and small business owners who knowingly recruit, import, hire, train and employee undocumented workers you know, like Donald Trump has all across his career.

    tegnost , June 2, 2016 at 12:24 pm

    This is the mechanism by which the gov't has assisted biz in destroying the worker, competition for thee, but none for me. For instance I can't go work in canada or mexico, they don't allow it. Policy made it, policy can change it, go bernie. While I favor immigration, in it's current form it is primarily conducted on these lines of destroying workers (H1b etc and illegals combined) Lucky for the mexicans they can see the american dream is bs and can go home. I wonder who the latinos that have gained citizenship will vote for. Unlikely it'll be trump, but they can be pretty conservative, and the people they work for are pretty conservative so no guarantee there, hillary is in san diego at the tony balboa park where her supporters will feel comfortable, not a huge venue I think they must be hoping for a crowd, and if she can't get one in san diego while giving a "if we don't rule the world someone else will" speech, she can't get one anywhere. Defense contractors and military advisors and globalist biotech (who needs free money more than biotech? they are desperate for hillary) are thick in san diego.

    RUKidding , June 2, 2016 at 12:47 pm

    I live part-time in San Diego. It is very conservative. The military, who are constantly screwed by the GOP, always vote Republican. They make up a big cohort of San Diego county.

    Hillary may not get a big crowd at the speech, but that, in itself, doesn't mean that much to me. There is a segment of San Diego that is somewhat more progressive-ish, but it's a pretty conservative county with parts of eastern SD county having had active John Birch Society members until recently or maybe even ongoing.

    There's a big push in the Latino community to GOTV, and it's mostly not for Trump. It's possible this cohort, esp the younger Latino/as, will vote for Sanders in the primary, but if Clinton gets the nomination, they'll likely vote for her (v. Trump).

    I was unlucky enough to be stuck for an hour in a commuter train last Friday after Trump's rally there. Hate to sound rude, but Trump's fans were everything we've seen. Loud, rude, discourteous and an incessant litany of rightwing talking points (same old, same old). All pretty ignorant. Saying how Trump will "make us great again." I don't bother asking how. A lot of ugly comments about Obama and how Obama has been "so racially divisive and polarizing." Well, No. No, Obama has not been or done that, but the rightwing noise machine has sure ginned up your hatreds, angers and fears. It was most unpleasant. The only instructive thing about it was confirming my worst fears about this group. Sorry to say but pretty loutish and very uninformed. Sigh.

    tegnost , June 2, 2016 at 2:12 pm

    part timer in sd as well, family for hillary except for nephew and niece .I keep telling my mom she should vote bernie for their sake but it never goes over very well

    Bob Haugen , June 2, 2016 at 10:35 am

    Re Methland, we live in rural US and we got a not-very-well hidden population of homeless children. I don't mean homeless families with children, I mean homeless children. Sleeping in parks in good weather, couch-surfing with friends, etc. I think related.

    equote , June 2, 2016 at 10:43 am

    Fascism is a system of political and social order intended to reinforce the unity, energy and purity of communities in which liberal democracy stand(s) accused of producing division and decline. . . . George Orwell reminded us, clad in the mainstream patriotic dress of their own place and time, . . . an authentically popular fascism in the United States would be pious and anti-Black; in Western Europe, secular and antisemitic, or more probably, these days anti-Islamic; in Russia and Eastern Europe, religious, antisemitic, and slavophile.
    Robert O. Paxton
    In The Five Stages of Faschism

    " that eternal enemy: the conservative manipulators of privilege who damn as 'dangerous agitators' any man who menaces their fortunes" (maybe 'power and celebrity' should be added to fortunes)
    Sinclair Lewis
    It Can't Happen Here page 141

    Take the Fork , June 2, 2016 at 11:07 am

    On the Boots To Ribs Front: Anyone hereabouts notice that Captain America has just been revealed to be a Nazi? Maybe this is what R. Cohen was alluding to but I doubt it.

    pissed younger baby boomer , June 2, 2016 at 11:57 am

    The four horse men are, political , social, economic and environmental collapse . Any one remember the original Mad Max movie. A book I recommend is the Crash Of 2016 By Thom Hartmann.

    rfam , June 2, 2016 at 11:59 am

    From the comment, I agree with the problems, not the cause. We've increased the size and scope of the safety net over the last decade. We've increased government spending versus GDP. I'm not blaming government but its not neoliberal/capitalist policy either.

    1. Globalization clearly helps the poor in other countries at the expense of workers in the U.S. But at the same time it brings down the cost of goods domestically. So jobs are not great but Walmart/Amazon can sell cheap needs.

    2. Inequality started rising the day after Bretton Woods – the rich got richer everyday after "Nixon Shock"

    https://www.google.com/search?q=gini+coefficient+usa+chart&client=safari&rls=en&biw=1371&bih=793&tbm=isch&imgil=tRkxcVEo17ID8M%253A%253B-Lt3-YscSzdOaM%253Bhttp%25253A%25252F%25252Fwww.the-crises.com%25252Fincome-inequality-in-the-us-1%25252F&source=iu&pf=m&fir=tRkxcVEo17ID8M%253A%252C-Lt3-YscSzdOaM%252C_&usg=__bipTqXhWx0tXxke6Xcj5MUAcn-o%3D&ved=0ahUKEwjY18rm2onNAhUPeFIKHREjAS4QyjcILw&ei=nFdQV9iZCo_wyQKRxoTwAg#imgrc=tRkxcVEo17ID8M%3A

    TedWa , June 2, 2016 at 12:30 pm

    Hi rfam : To point 1 : Why is there a need to bring down the cost of goods? Is it because of past outsourcing and trade agreements and FR policies? I think there's a chicken and egg thing going on, ie.. which came first. Globalization is a way to bring down wages while supplying Americans with less and less quality goods supplied at the hand of global corporations like Walmart that need welfare in the form of food stamps and the ACA for their workers for them to stay viable (?). Viable in this case means ridiculously wealthy CEO's and the conglomerate growing bigger constantly. Now they have to get rid of COOL's because the WTO says it violates trade agreements so we can't trace where our food comes from in case of an epidemic. It's all downhill. Wages should have risen with costs so we could afford high quality American goods, but haven't for a long, long time.

    tegnost , June 2, 2016 at 12:35 pm

    Globalization helps the rich here way more than the poor there. The elites get more money for nothing (see QE before you respond, if you do, that's where the money for globalization came from) the workers get the husk. Also the elite gets to say "you made your choices" and other moralistic crap. The funny(?) thing is they generally claim to be atheists, which I translate into "I am God, there doesn't need to be any other" Amazon sells cheap stuff by cheating on taxes, and barely makes money, mostly just driving people out of business. WalMart has cheap stuff because they subsidise their workers with food stamps and medicaid. Bringing up bretton woods means you don't know much about money creation, so google "randy wray/bananas/naked capitalism" and you'll find a quick primer.

    RUKidding , June 2, 2016 at 12:57 pm

    The Walmart loathsome spawn and Jeff Bezos are the biggest welfare drains in our nation – or among the biggest. They woefully underpay their workers, all while training them on how to apply for various welfare benefits. Just so that their slaves, uh, workers can manage to eat enough to enable them to work.

    It slays me when US citizens – and it happens across the voting spectrum these days; I hear just as often from Democratic voters as I do from GOP voters – bitch, vetch, whine & cry about welfare abuse. And if I start to point out the insane ABUSE of welfare by the Waltons and Jeff Bezos, I'm immediately greeted with random TRUE stories about someone who knew someone who somehow made out like a bandit on welfare.

    Hey, I'm totally sure and in agreement that there are likely a small percentage of real welfare cheats who manage to do well enough somehow. But seriously? That's like a drop in the bucket. Get the eff over it!!!

    Those cheats are not worth discussing. It's the big fraud cheats like Bezos & the Waltons and their ilk, who don't need to underpay their workers, but they DO because the CAN and they get away with it because those of us the rapidly dwindling middle/working classes are footing the bill for it.

    Citizens who INSIST on focusing on a teeny tiny minority of real welfare cheats, whilst studiously ignoring the Waltons and the Bezos' of the corporate world, are enabling this behavior. It's one of my bugabears bc it's so damn frustrating when citizens refuse to see how they are really being ripped off by the 1%. Get a clue.

    That doesn't even touch on all the other tax breaks, tax loopholes, tax incentives and just general all-around tax cheating and off-shore money hiding that the Waltons and Bezos get/do. Sheesh.

    JustAnObserver , June 2, 2016 at 2:51 pm

    This statement –

    "I'm immediately greeted with random TRUE stories about someone who knew someone who somehow made out like a bandit on welfare."

    is the key and a v. long term result of the application of Bernays' to political life. Its local and hits at the gut interpersonal level 'cos the "someones" form a kind of chain of trust esp. if the the first one on the list is a friend or a credentialed media pundit. Utterly spurious I know but countering this with a *merely* rational analysis of how Walmart, Amazon abuse the welfare system to gouge profits from the rest of us just won't ever, for the large majority, get through this kind emotional wall.

    I don't know what any kind of solution might look like but, somehow, we need to find a way of seriously demonising the corporate parasites that resonates at the same emotional level as the "welfare cheat" meme that Bill Clinton and the rest of the DLC sanctified back in the '90s.

    Something like "Walmart's stealing your taxes" might work but how to get it out there in a viral way ??

    Vatch , June 2, 2016 at 6:54 pm

    "random TRUE stories about someone who knew someone who somehow made out like a bandit on welfare."

    Hmm. Your acquaintances might need to be educated about urban legends .

    Anonymous Coward , June 2, 2016 at 12:04 pm

    Wait, you mean we don't all enjoy living in Pottersville?

    For anyone missing the reference, you clearly haven't been subjected to It's a Wonderful Life enough times.

    Judith , June 2, 2016 at 12:06 pm

    People may be interested in an ongoing project by the photographer Matt Black (who was recently invited to join Magnum) called the Geography of Poverty. http://www.mattblack.com/the-geography-of-poverty/

    Steve Sewall , June 2, 2016 at 12:07 pm

    What a comment from seanseamour. And the "hoisting" of it to high visibility at the site is a testament to the worth of Naked Capitalism.

    seanseamour asks "What does that have to do with education?" and answers "Everything if one considers the elitist trend " This question & answer all but brings tears to my eyes. It is so utterly on point. My own experience of it, if I may say so, comes from inside the belly of the beast. As a child and a product of America's elite universities (I have degrees from Harvard and Yale, and my dad, Richard B. Sewall, was a beloved English prof at Yale for 42 years), I could spend all morning detailing the shameful roles played by America's torchbearing universities – Harvard, Yale, Stanford etc – in utterly abandoning their historic responsibility as educators to maintaining the health of the nation's public school system.*

    And as I suspect seanseymour would agree, when a nation loses public education, it loses everything.

    But I don't want to spend all morning doing that because I'm convinced that it's not too late for America to rescue itself from maelstrom in which it finds itself today. (Poe's "Maelstrom" story, cherished by Marshall McLuhan, is supremely relevant today.)

    To turn America around, I don't look to education – that system is too far gone to save itself, let alone the rest of the country – but rather to the nation's media: to the all-powerful public communication system that certainly has the interactive technical capabilities to put citizens and governments in touch with each other on the government decisions that shape the futures of communities large and small.

    For this to happen, however, people like the us – readers of Naked Capitalism – need to stop moaning and groaning about the damage done by the neoliberals and start building an issue-centered, citizen-participatory, non-partisan, prime-time Civic Media strong enough to give all Americans an informed voice in the government decisions that affect their lives. This Civic media would exist to make citizens and governments responsive and accountable to each other in shaping futures of all three communities – local, state and national – of which every one of us is a member.

    Pie in the sky? Not when you think hard about it. A huge majority of Americans would welcome this Civic Media. Many yearn for it. This means that a market exists for it: a Market of the Whole of all members of any community, local, state and national. This audience is large enough to rival those generated by media coverage of pro sports teams, and believe it or not much of the growth of this Civic media could be productively modeled on the growth of media coverage of pro sports teams. This Civic Media would attract the interest of major advertisers, especially those who see value in non-partisan programming dedicated to getting America moving forward again. Dynamic, issue-centered, problem-solving public forums, some modeled on voter-driven reality TV contests like The Voice or Dancing with the Stars, could be underwritten by a "rainbow" spectrum of funders, commericial, public, personal and even government sources.

    So people take hope! Be positive! Love is all we need, etc. The need for for a saving alternative to the money-driven personality contests into which our politics has descended this election year is literally staring us all in the face from our TV, cellphone and computer screens. This is no time to sit back and complain, it's a time to start working to build a new way of connecting ourselves so we can reverse America's rapid decline.

    OK, so I hear some of you saying, corporate America will never let this Civic Media get off the ground. My short answer to this is that corporations do what makes money for them, and in today's despairing political climate there's money to be made in sponsoring something truly positive, patriotic and constructive. And I hear a few others saying that Americans are too dumbed down, too busy, too polarized or too just plain stupid to make intelligent, constructive use of a non-partisan, problem-solving Civic Media. But I would not underestimate the intelligence of Americans when they can give their considered input – by vote, by comment or by active participation – in public forums that are as exciting and well managed as an NFL game or a Word Series final.

    hunkerdown , June 2, 2016 at 5:40 pm

    "Don't hate the media, become the media" -Jello Biafra

    Sound of the Suburbs , June 2, 2016 at 12:36 pm

    I am paying an exorbitant subscription for the UK Financial Times at the moment. Anyway, the good news is that very regular articles are appearing where you can almost feel the panic at the populist uprisings.

    The end is nigh for the Neo-Liberals.

    Sound of the Suburbs , June 2, 2016 at 1:04 pm

    Whatever system is put in place the human race will find a way to undermine it. I believe in capitalism because fair competition means the best and most efficient succeed.

    I send my children to private schools and universities because I want my own children at the top and not the best. Crony capitalism is inevitable, self-interest undermines any larger system that we try and impose.

    Can we design a system that can beat human self-interest? It's going to be tricky.

    "If that's the system, how can I take advantage of it?" human nature at work. "If that's the system, is it working for me or not?" those at the top.
    If not, it's time to change the system.
    If so, how can I tweak it to get more out of it?

    Neo-Liberalism

    Academics, who are not known for being street-wise, probably thought they had come up with the ultimate system using markets and numeric performance measures to create a system free from human self-interest.

    They had already missed that markets don't just work for price discovery, but are frequently used for capital gains by riding bubbles and hoping there is a "bigger fool" out there than you, so you can cash out with a handsome profit.

    (I am not sure if the Chinese realise markets are supposed to be for price discovery at all).

    Hence, numerous bubbles during this time, with housing bubbles being the global favourite for those looking for capital gains.

    If we are being governed by the markets, how do we rig the markets?
    A question successfully solved by the bankers.

    Inflation figures, that were supposed to ensure the cost of living didn't rise too quickly, were somehow manipulated to produce low inflation figures with roaring house price inflation raising the cost of living.

    What unemployment measure will best suit the story I am trying to tell?
    U3 – everything great
    U6 – it's not so good
    Labour participation rate – it hasn't been this bad since the 1970s

    Anything missing from the theory has been ruthlessly exploited, e.g. market bubbles ridden for capital gains, money creation by private banks, the difference between "earned" and "unearned" income and the fact that Capitalism trickles up through the following mechanism:

    1) Those with excess capital collect rent and interest.
    2) Those with insufficient capital pay rent and interest.

    Neo-Liberalism – It's as good as dead.

    perpetualWAR , June 2, 2016 at 1:18 pm

    I just went on a rant last week. (Not only because the judge actually LIED in court)

    I left the courthouse in downtown Seattle, to cross the street to find the vultures selling more foreclosures on the steps of the King County Administration Building, while above them, there were tents pitched on the building's perimeter. And people were walking by just like this scene was normal.

    Because the people at the entrance of the courthouse could view this, I went over there and began to rant. I asked (loudly) "Do you guys see that over there? Vultures selling homes rendering more people homeless and then the homeless encampment with tents pitched on the perimeter above them? In what world is this normal?" One guy replied, "Ironic, isn't it?" After that comment, the Marshall protecting the judicial crooks in the building came over and tried to calm me down. He insisted that the scene across the street was "normal" and that none of his friends or neighbors have been foreclosed on. I soon found out that that lying Marshall was from Pierce County, the epicenter of Washington foreclosures.

    The scene was totally surreal. And unforgettable.

    Softie , June 2, 2016 at 2:26 pm

    You need to take a photograph or two using your above words as caption.

    EGrise , June 2, 2016 at 2:31 pm

    And nobody cares
    As long as they get theirs

    Softie , June 2, 2016 at 3:09 pm

    The kernel of Neoliberal Ideology: "There is no such a thing as society." (Margaret Thatcher).

    Softie , June 2, 2016 at 2:16 pm

    "In this postindustrial world not only is the labor question no longer asked, not only is proletarian revolution passé, but the proletariat itself seems passé. And the invisibles who nonetheless do indeed live there have internalized their nonexistence, grown demoralized, resentful, and hopeless; if they are noticed at all, it is as objects of public disdain. What were once called "blue-collar aristocrats"-skilled workers in the construction trades, for example-have long felt the contempt of the whole white-collar world.

    For these people, already skeptical about who runs things and to what end, and who are now undergoing their own eviction from the middle class, skepticism sours into a passive cynicism. Or it rears up in a kind of vengeful chauvinism directed at alien others at home and abroad, emotional compensation for the wounds that come with social decline If public life can suffer a metaphysical blow, the death of the labor question was that blow. For millions of working people, it amputated the will to resist."

    - Steve Fraser, The Age of Acquiescence

    LeitrimNYC , June 2, 2016 at 2:25 pm

    One thing I don't think I have seen addressed on this site (apologies if I have missed it!) in all the commentary about the destruction of the middle class is the role of US imperialism in creating that middle class in the first place and what it is that we want to save from destruction by neo-liberalism. The US is rich because we rob the rest of the world's resources and have been doing so in a huge way since 1945, same as Britain before us. I don't think it's a coincidence that the US post-war domination of the world economy and the middle class golden age happened at the same time. Obviously there was enormous value created by US manufacturers, inventors, government scientists, etc but imperialism is the basic starting point for all of this. The US sets the world terms of trade to its own advantage. How do we save the middle class without this level of control? Within the US elites are robbing everyone else but they are taking what we use our military power to appropriate from the rest of the world.

    Second, if Bernie or whoever saves the middle class, is that so that everyone can have a tract house and two cars and continue with a massively wasteful and unsustainable lifestyle based on consumption? Or are we talking about basic security like shelter, real health care, quality education for all, etc? Most of the stories I see seem to be nostalgic for a time when lots of people could afford to buy lots of stuff and don't 1) reflect on origin of that stuff (imperialism) and 2) consider whether that lifestyle should be the goal in the first place.

    perpetualWAR , June 2, 2016 at 2:49 pm

    I went to the electronics recycling facility in Seattle yesterday. The guy at customer service told me that they receive 20 million pounds per month. PER MONTH. Just from Seattle. I went home and threw up.

    Praedor , June 2, 2016 at 3:57 pm

    It doesn't have to be that way. You can replace military conquest (overt and covert) with space exploration and science expansion. Also, instead of pushing consumerism, push contentment. Don't setup and goose a system of "gotta keep up with the Joneses!"

    In the 50s(!!!) there was a plan, proven in tests and studies, that would have had humans on the mars by 1965, out to Saturn by 72. Project Orion. Later, the British Project Daedalus was envisioned which WOULD have put space probes at the next star system within 20 years of launch. It was born of the atomic age and, as originally envisioned, would have been an ecological disaster BUT it was reworked to avoid this and would have worked. Spacecraft capable of comfortably holding 100 personnel, no need to build with paper-thin aluminum skin or skimp on amenities. A huge ship built like a large sea vessel (heavy iron/steel) accelerated at 1g (or more or slightly less as desired) so no prolonged weightlessness and concomitant loss of bone and muscle mass. It was all in out hands but the Cold War got in the way, as did the many agreements and treaties of the Cold War to avoid annihilation. It didn't need to be that way. Check it out: https://en.wikipedia.org/wiki/Project_Orion_(nuclear_propulsion)

    All that with 1950s and 60s era technology. It could be done better today and for less than your wars in the Middle East. Encourage science, math, exploration instead of consumption, getting mine before you can get yours, etc.

    hunkerdown , June 2, 2016 at 5:48 pm

    Or, we could replace Western liberal culture, with its tradition to consume and expand by force an unbroken chain from the Garden of Eden to Friedrich von Hayek, with the notion of maintenance and "enough". Bourgeois make-work holds no interest to me.

    Left in Wisconsin , June 2, 2016 at 4:12 pm

    My understanding of the data is that living standards increased around the world during the so-called golden age, not just in the U.S. (and Western Europe and Japan and Australia ). It could be that it was still imperialism at work, but the link between imperialism and the creation of the middle class is not straightforward.

    Likewise, US elites are clearly NOT robbing the manufacturing firms that have set up in China and other low-wage locations, so it is an oversimplification to say they are "robbing everyone else."

    Nostalgia is overrated but I don't sense the current malaise as a desire for more stuff. (I grew up in the 60s and 70s and I don't remember it as a time where people had, or craved, a lot of stuff. That period would be now, and I find it infects Sanders' supporters less than most.) If anything, it is nostalgia for more (free) time and more community, for a time when (many but not all) people had time to socialize and enjoy civic life.

    jrs , June 2, 2016 at 5:52 pm

    those things would be nice as would just a tiny bit of hope for the future, our own and the planet's and not an expectation of things getting more and more difficult and sometimes for entirely unnecessary reasons like imposed austerity. But being we can't have "nice things" like free time, community and hope for the future, we just "buy stuff".

    catlady , June 2, 2016 at 5:12 pm

    I live on the south side, in the formerly affluent south shore neighborhood. A teenager was killed, shot in the head in a drive by shooting, at 5 pm yesterday right around the corner from my residence. A white coworker of mine who lives in a rich northwest side neighborhood once commented to me how black people always say goodbye by saying "be safe". More easily said than done.

    Skippy , June 2, 2016 at 6:50 pm

    I thought neoliberalism was just the pogrom to make everyone – rational agents – as subscribed by our genetic / heraldic betters .. putting this orbs humans and resources in the correct "natural" order .

    Disheveled Marsupial for those thinking neoliberalism is not associated with libertarianism one only has to observe the decades of think tanks and their mouth organs roaming the planet . especially in the late 80s and 90s . bringing the might and wonders of the – market – to the great unwashed globally here libertarian priests rang in the good news to the great unwashed

    Jim , June 2, 2016 at 8:10 pm

    Hi Skippy:

    I would argue that neoliberalism is a program to define markets as primarily engaged in information processing and to make everyone into non-agents ( as not important at all to the proper functioning of markets).

    It also appears that neoliberals want to restrict democracy to the greatest extent possible and to view markets as the only foundation for truth without any need for input from the average individual.

    But as Mirowski argues–carrying their analysis this far begins to undermine their own neoliberal assumptions about markets always promoting social welfare.

    Skippy , June 2, 2016 at 10:09 pm

    Hay Jim

    When I mean – agents – I'm not referring to agency, like you say the market gawd/computer does that. I was referencing the – rational agent – that 'ascribes' the markets the right at defining facts or truth as neoliberalism defines rational thought/behavior.

    Disheveled Marsupial yes democracy is a direct threat to Hayekian et al [MPS and Friends] paranoia due to claims of irrationality vs rationally

    Rick Cass , June 2, 2016 at 7:32 pm

    Neo-liberalism could not have any power without legal and ethical positivism as the ground work of the national thought processes.

    seanseamour , June 3, 2016 at 4:32 am

    I have trouble understanding the focus on an emergence of fascism in Europe, focus that seems to dominate this entire thread when, put in perspective such splinter groups bear little weight on the European political spectrum.
    As an expat living in France, in my perception the Front National is a threat to the political establishments that occupy the center left and right and whose historically broad constituencies have been brutalized by the financial crisis borne of unbridled anglo-saxon runaway capitalism, coined neoliberalism. The resulting disaffection has allowed the growth of the FN but it is also fueled by a transfer of reactionary constituencies that have historically found identity in far left parties (communist, anti-capitalist, anarchist ), political expressions the institutions of the Republic allow and enable in the name of plurality, a healthy exultury in a democratic society.
    To consider that the FN in France, UKIP in the UK and others are a threat to democratic values any more that the far left is non-sensical, and I dare say insignificant compared to the "anchluss" our conservative right seeks to impose upon the executive, legislative and judicial branches of government.
    The reality in Europe as in America is economic. The post WWII era of reconstruction, investment and growth is behind us, the French call these years the "Trente Glorieuses" (30 glorious years) when prosperity was felt through all societal strats, consumerism for all became the panacea for a just society, where injustice prevailed welfare formulas provided a new panacea.
    As the perspective of an unravelling of this golden era began to emerge elites sought and conspired to consolidate power and wealth, under the aegis of greed is good culture by further corrupting government to serve the few, ensuring impunity for the ruling class, attempting societal cohesiveness with brash hubristic dialectics (America, the greatest this or that) and adventurism (Irak, mission accomplished), conspiring to co-opt and control institutions and the media (to understand the depth of this deception a must read is Jane Mayer in The Dark Side and in Dark Money).
    The difference between America and Europe is that latter bears of brunt of our excess.
    The 2008 Wall St / City meltdown eviscerated much of America' middle class and de-facto stalled, perhaps definitively, the vehicle of upward mobility in an increasingly wealth-ranked class structured society – the Trump phenomena feeds off the fatalistic resilience and "good book" mythologies remnant of the "go west" culture.
    In Europe where to varying degrees managed capitalism prevails the welfare state(s) provided the shock absorbers to offset the brunt of the crisis, but those who locked-in on neoliberal fiscal conservatism have cut off their nose in spite leaving scant resources to spur growth. If social mobility survives, more vibrantly than the US, unemployment and the cost thereof remains steadfast and crippling.
    The second crisis borne of American hubris is the human tidal wave resulting from the Irak adventure; it has unleashed mayhem upon the Middle East, Sub Saharan Africa and beyond. The current migrational wave Europe can not absorb is but the beginning of much deeper problem – as ISIS, Boko Haram and so many others terrorist groups destabilize the nation-states of a continent whose population is on the path to explode in the next half century.
    The icing on the cake provided by a Trump election will be a world wave of climate change refugees as the neoliberal establishment seeks to optimize wealth and power through continued climate change denial.
    Fascism is not the issue, nationalism resulting from a self serving bully culture will decimate the multilateral infrastructure responsible nation-states need to address today's problems.
    Broadly, Trump Presidency capping the neoliberal experience will likely signal the end of the US' dominant role on the world scene (and of course the immense benefits derived for the US). As he has articulated his intent to discard the art of diplomacy, from soft to institutional, in favor of an agressive approach in which the President seeks to "rattle" allies (NATO, Japan and S. Korea for example) as well as his opponents (in other words anyone who does not profess blind allegiance), expect that such modus operandi will create a deep schism accompanied by a loss of trust, already felt vis-a-vis our legislature' behavior over the last seven years.
    The US's newfound respect among friends and foes generated by President Obama' presidency, has already been undermined by the GOP primaries, if Trump is elected it will dissipate for good as other nations and groups thereof focus upon new, no-longer necessarily aligned strategic relationships, some will form as part as a means of taking distance, or protection from the US, others more opportunist with the risk of opponents such as Putin filling the void – in Europe for example.

    dk , June 3, 2016 at 8:08 am

    Neoliberalism isn't helping, but it's a population/resource ratio thing. Impacts on social orders occur well before raw supply factors kick in (and there is more than food supply to basic rations). The world population has more than doubled in the last 50 years, one doesn't get that kind of accelerated growth without profound impacts to every aspect of societies. Some of the most significant impacts are consequent to the acceleration of technological changes (skill expirations, automations) that are driven in no small part by the needs of a vast + growing population.

    https://en.wikipedia.org/wiki/Population_growth
    Note that the vertical scale in the of the first graph is logarithmic.

    I don't suggest population as a pat simplistic answer. And neoliberalism accelerates the declining performance of institutions (as in the CUNY article and that's been going on for decades already, neoliberalism just picked up where neoconservatism petered out), but we would be facing issues like homelessness, service degradation, population displacements, etc regardless of poor policies. One could argue (I do) that neoliberalism has undertaken to accelerate existing entropies for profit.

    Murica Derp , June 3, 2016 at 3:21 pm

    Thanks for soliciting reader comments on socioeconomic desperation. It's encouraging to know that I'm not the only failure to launch in this country.

    I'm a seasonal farm worker with a liberal arts degree in geology and history. I barely held on for six months as a junior environmental consultant at a dysfunctional firm that tacitly encouraged unethical and incompetent behavior at all levels. From what I could gather, it was one of the better-run firms in the industry. Even so, I was watching mid-level and senior staff wander into extended mid-life crises while our entire service line was terrorized by a badly out-of-shape, morbidly obese, erratic, vicious PG who had alienated almost the entire office but was untouchable no matter how many firing offenses she committed. Meanwhile I was watching peers in other industries (especially marketing and FIRE) sell their souls in real time. I'm still watching them do so a decade later.

    It's hard to exaggerate how atrociously I've been treated by bougie conformists for having failed/dropped out of the rat race. A family friend who got into trouble with the state of Hawaii for misclassifying direct employees of his timeshare boiler room as 1099's gave me a panic attack after getting stoned and berating me for hours about how I'd wake up someday and wonder what the fuck I'd done with my life. At the time, I had successfully completed a summer job as the de facto lead on a vineyard maintenance crew and was about to get called back for the harvest, again as the de facto lead picker.

    Much of my social life is basically my humiliation at the hands of amoral sleazeballs who presume themselves my superiors. No matter how strong an objective case I have for these people being morally bankrupt, it's impossible to really dismiss their insults. Another big component is concern-trolling from bourgeois supremacists who will do awfully little for me when I ask them for specific help. I don't know what they're trying to accomplish, and they probably don't, either. A lot of it is cognitive dissonance and incoherence.

    Some of the worst aggression has come from a Type A social climber friend who sells life insurance. He's a top producer in a company that's about a third normal, a third Willy Loman, and a third Glengarry Glen Ross. This dude is clearly troubled, but in ways that neither of us can really figure out, and a number of those around him are, too. He once admitted, unbidden, to having hazed me for years.

    The bigger problem is that he's surrounded by an entire social infrastructure that enables and rewards noxious, predatory behavior. When college men feel like treating the struggling like garbage, they have backup and social proof from their peers. It's disgusting. Many of these people have no idea of how to relate appropriately to the poor or the unemployed and no interest in learning. They want to lecture and humiliate us, not listen to us.

    Dude recently told me that our alma mater, Dickinson College, is a "grad school preparatory institution." I was floored that anyone would ever think to talk like that. In point of fact, we're constantly lectured about how versatile our degrees are, with or without additional education. I've apparently annoyed a number of Dickinsonians by bitterly complaining that Dickinson's nonacademic operations are a sleazy racket and that President Emeritus Bill Durden is a shyster who brainwashed my classmates with crude propaganda. If anything, I'm probably measured in my criticism, because I don't think I know the full extent of the fraud and sleaze. What I have seen and heard is damning. I believe that Dickinson is run by people with totalitarian impulses that are restrained only by a handful of nonconformists who came for the academics and are fed up with the propaganda.

    Meanwhile, I've been warm homeless for most of the past four years. It's absurd to get pledge drive pitches from a well-endowed school on the premise that my degree is golden when I'm regularly sleeping in my car and financially dependent on my parents. It's absurd to hear stories about how Dickinson's alumni job placement network is top-notch when I've never gotten a viable lead from anyone I know from school. It's absurd to explain my circumstances in detail to people who, afterwards, still can't understand why I'm cynical.

    While my classmates preen about their degrees, I'm dealing with stuff that would make them vomit. A relative whose farm I've been tending has dozens of rats infesting his winery building, causing such a stench that I'm just about the only person willing to set foot inside it. This relative is a deadbeat presiding over a feudal slumlord manor, circumstances that he usually justifies by saying that he's broke and just trying to make ends meet. He has rent-paying tenants living on the property with nothing but a pit outhouse and a filthy, disused shower room for facilities. He doesn't care that it's illegal. One of his tenants left behind a twenty-gallon trash can full to the brim with his own feces. Another was seen throwing newspaper-wrapped turds out of her trailer into the weeds. They probably found more dignity in this than in using the outhouse.

    When I was staying in Rancho Cordova, a rough suburb of Sacramento, I saw my next-door neighbor nearly come to blows with a man at the light rail station before apologizing profusely to me, calling me "sir," "man," "boss," and "dog." He told me that he was angry at the other guy for selling meth to his kid sister. Eureka is even worse: its west side is swarming with tweakers, its low-end apartment stock is terrible, no one brings the slumlords to heel, and it has a string of truly filthy residential motels along Broadway that should have been demolished years ago.

    A colleague who lives in Sweet Home, Oregon, told me that his hometown is swarming with druggies who try to extract opiates from local poppies and live for the next arriving shipment of garbage drugs. The berry farm where we worked had ten- and twelve-year-olds working under the table to supplement their families' incomes. A Canadian friend told me that he worked for a crackhead in Lillooet who made his own supply at home using freebase that he bought from a meathead dealer with ties to the Boston mob. Apparently all the failing mill towns in rural BC have a crack problem because there's not much to do other than go on welfare and cocaine. An RCMP sergeant in Kamloops was recently indicted for selling coke on the side.

    Uahsenaa's comment about the invisible homeless is spot on. I think I blend in pretty well. I've often stunned people by mentioning that I'm homeless. Some of them have been assholes about it, but not all. There are several cars that I recognize as regular overnighters at my usual rest area. Thank God we don't get hassled much. Oregon is about as safe a place as there is to be homeless. Some of the rest areas in California, including the ones at Kingsburg and the Sacramento Airport, end up at or beyond capacity overnight due to the homeless. CalTrans has signs reminding drivers that it's rude to hog a space that someone else will need. This austerity does not, of course, apply to stadium construction for the Kings.

    Another thing that almost slipped my mind (and is relevant to Trump's popularity): I've encountered entrenched, systemic discrimination against Americans when I've tried to find and hold menial jobs, and I've talked to other Americans who have also encountered it. There is an extreme bias in favor of Mexican peasants and against Americans in the fields and increasingly in off-farm jobs. The top quintile will be lucky not to reap the whirlwind on account of this prejudice.

    [Dec 04, 2016] Donald Trump, Brexit Are Blowback From Years of Anti-Government Rhetoric US News Opinion

    Notable quotes:
    "... The number one issue fueling the leave vote was immigration – a lot like Trump's wall against Mexico. The number two issue was lack of accountability of government: Leavers believe that the EU government in Brussels is unaccountable to voters. For Trump supporters, resentment towards a distant and unaccountable Washington government ranks high as well. The Brexit constituency and the Trump constituency are both motivated by the same sense of loss and vulnerability. ..."
    "... In both the U.S. and the U.K., a large and growing segment of voters has not prospered in today's complex, technology-driven global economy. Their wages have stagnated and in many cases fallen. Too few good-paying jobs exist for people lacking a college degree, or even people with a college degree, if the degree is not in the right field. These people are angry, frustrated, and afraid -- and with very good reason. Both countries' governments have done little to help them adapt, and little to soothe the sting of globalization. The voter's concerns in both places are mostly the same even though these concerns have coalesced around a policy issue ("leave") in the U.K. whereas here in the U.S. they have coalesced around a candidate (Trump). ..."
    "... Similarly, the elite insiders of the Republican Party and their business allies badly underestimated Trump. Establishment candidates like former Florida Gov. Jeb Bush failed terribly. Now the Republican political insiders are trying to make sense of a presumptive nominee who trashes free trade, one of the fundamental principles of the party, and openly taunts one of most important emerging voting blocks. ..."
    "... Perhaps the biggest reason for the impotence of today's political elites is that elites have trashed the very idea of competent and effective government for 35 years now, and the public has taken the message to heart. Ever since Reagan identified government as the problem, conservative elites have attacked the idea of government itself – rather than respecting the idea of government itself while criticizing the particular policies of a particular government. This is a crucial (and dangerous) distinction. In 1986, Reagan went on to say "the nine most terrifying words in the English language are 'I'm from the government and I'm here to help.'" ..."
    Aug 07, 2016 | www.usnews.com
    In addition, the issues are similar between the two campaigns: The number one issue fueling the leave vote was immigration – a lot like Trump's wall against Mexico. The number two issue was lack of accountability of government: Leavers believe that the EU government in Brussels is unaccountable to voters. For Trump supporters, resentment towards a distant and unaccountable Washington government ranks high as well. The Brexit constituency and the Trump constituency are both motivated by the same sense of loss and vulnerability.

    In both the U.S. and the U.K., a large and growing segment of voters has not prospered in today's complex, technology-driven global economy. Their wages have stagnated and in many cases fallen. Too few good-paying jobs exist for people lacking a college degree, or even people with a college degree, if the degree is not in the right field. These people are angry, frustrated, and afraid -- and with very good reason. Both countries' governments have done little to help them adapt, and little to soothe the sting of globalization. The voter's concerns in both places are mostly the same even though these concerns have coalesced around a policy issue ("leave") in the U.K. whereas here in the U.S. they have coalesced around a candidate (Trump).

    In both countries, political elites were caught flat-footed. Elites lost control over the narrative and lost credibility and persuasiveness with angry, frustrated and fearful voters. The British elites badly underestimated the intensity of public frustration with immigration and with the EU. Most expected the vote would end on the side of "remain," up to the very last moment. Now they are trying to plot their way out of something they never expected would actually happen, and never prepared for.

    Similarly, the elite insiders of the Republican Party and their business allies badly underestimated Trump. Establishment candidates like former Florida Gov. Jeb Bush failed terribly. Now the Republican political insiders are trying to make sense of a presumptive nominee who trashes free trade, one of the fundamental principles of the party, and openly taunts one of most important emerging voting blocks.

    How did the elites lose control? There are many reasons: With social media so pervasive, advertising dollars no longer controls what the public sees and hears. With unrestricted campaign spending, the party can no longer "pinch the air hose" of a candidate who strays from party orthodoxy.

    Perhaps the biggest reason for the impotence of today's political elites is that elites have trashed the very idea of competent and effective government for 35 years now, and the public has taken the message to heart. Ever since Reagan identified government as the problem, conservative elites have attacked the idea of government itself – rather than respecting the idea of government itself while criticizing the particular policies of a particular government. This is a crucial (and dangerous) distinction. In 1986, Reagan went on to say "the nine most terrifying words in the English language are 'I'm from the government and I'm here to help.'"

    Reagan booster Grover Norquist is known for saying, "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub." Countless candidates and elected officials slam "Washington bureaucrats" even though these "bureaucrats" were none other than themselves. It's not a great way to build respect. Then the attack escalated, with the aim of destroying parts of government that were actually mostly working. This was done to advance the narrative that government itself is the problem, and pave the way for privatization. Take the Transportation Security Administration for example. TSA has actually done its job. No terrorist attacks have succeeded on U.S. airplanes since it was established. But by systematically underfunding it , Congress has made the lines painfully long, so people hate it. Take the Post Office. Here Congress manufactured a crisis to force service cuts, making the public believe the institution is incompetent. But the so-called "problem" is due almost entirely to a requirement, imposed by Congress, forcing the Postal Service to prepay retiree's health care to an absurd level, far beyond what a similar private sector business would have to do. A similar dynamic now threatens Social Security. Thirty-five years have passed since Reagan first mocked the potential for competent and effective government. Years of unrelenting attack have sunk in. Many Americans now distrust government leaders and think it's pointless to demand or expect wisdom and statesmanship. Today's American voters (and their British counterparts), well-schooled in skepticism, disdain and dismiss leaders of all parties and they are ready to burn things down out of sheer frustration. The moment of blowback has arrived.

    [Dec 04, 2016] Human beings are now considered consumer goods in job market to be used and then discarded. As a consequence, a lot of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape (pope Francis)

    Aug 28, 2016 | economistsview.typepad.com

    R.L.Love : August 27, 2016 at 09:49 AM

    PK has nearly lost all of his ability to see things objectively. Ambition got him, I suppose, or maybe he has always longed to be popular. He was probably teased and ridiculed too much in his youth. He is something of a whinny sniveler after-all.

    Then too, I doubt if PK has ever used a public restroom in the Southwest, or taken his kids to a public park in one of the thousands of small towns where non-English speaking throngs take over all of the facilities and parking.Or had his children bullied at school by a gang of dark-skinned kids whose parents believe that whites took their land, or abused or enslaved their distant ansestors. It might be germane here too... to point out that some of this anti-white sentiment gets support and validation from the very rhetoric that Democrats have made integral to their campaigns.

    As for not knowing why crime rates have been falling, the incarceration rates rose in step, so duh, if you lock up those with propensities for crime, well, how could crime rates not fall? And while I'm on the subject of crime, the statistical analysis that is commonly used focuses too much on violent crime and convictions. Thus, crimes of a less serious nature, that being the type of crimes committed by poor folks, is routinely ignored. Then too, those who are here illegally are often transient and using assumed names, and so they are, presumably, more difficult to catch. So, statistics are all too often not as telling as claimed.

    And, though I'm not a Trump supporter, I fully understand his appeal. As would PK if he were more travelled and in touch with those who have seen their schools, parks, towns, and everything else turn tawdry and dysfunctional. But of course the nation that most of us live in is much different than the one that PK knows.

    likbez -> R.L.Love

    > And, though I'm not a Trump supporter, I fully understand his appeal

    I wonder why everybody is thinking about this problem only in terms of identity politics.

    This is a wrong, self-defeating framework to approach the problem. which is pushed by neoliberal MSM and which we should resist in this forum as this translates the problems that the nation faces into term of pure war-style propaganda ("us vs. them" mentality). To which many posters here already succumbed

    IMHO the November elections will be more of the referendum on neoliberal globalization (with two key issues on the ballot -- jobs and immigration) than anything else.

    If so, then the key question is whether the anger of population at neoliberal elite that stole their jobs and well-being reached the boiling point or not. The level of this anger might decide the result of elections, not all those petty slurs that neoliberal MSM so diligently use as a smoke screen.

    All those valiant efforts in outsourcing and replacing permanent jobs with temporary to increase profit margin at the end have the propensity to produce some externalities. And not only in the form "over 50 and unemployed" but also by a much more dangerous "globalization of indifference" to human beings in general.

    JK Galbraith once gave the following definition of neoliberal economics: "trickle down economics is the idea that if you feed the horse enough oats eventually some will pass through to the road for the sparrows." This is what neoliberalism is about. Lower 80% even in so-called rich countries are forced to live in "fear and desperation", forced to work "with precious little dignity".

    Human beings are now considered consumer goods in "job market" to be used and then discarded. As a consequence, a lot of people find themselves excluded and marginalized: "without work, without possibilities, without any means of escape" (pope Francis).

    And that inevitably produces a reaction. Which in extreme forms we saw during French and Bolsheviks revolutions. And in less extremist forms (not involving lampposts as the placeholders for the "Masters of the Universe" (aka financial oligarchy) and the most obnoxious part of the "creative class" aka intelligentsia https://en.wikipedia.org/wiki/Intelligentsia ) in Brexit vote.

    Hillary and Trump are just symbols here. The issue matters, not personalities.

    [Dec 04, 2016] The myth of Ronald Reagan: pragmatic moderate or radical conservative?

    Notable quotes:
    "... he changed American politics forever by demonstrating that style was more important than substance. In fact, he showed that style was everything and substance utterly unimportant. ..."
    "... Conservatives used "bracket creep" to convince the middle class that reducing marginal rates on the top tax brackets along with their own would be a good idea, then with the assistance of Democrats replaced the revenue with a huge increase in FICA so that the Social Security Trust Fund could finance the deficit in the rest of the budget. The result was a huge boon to the richest, little difference for the middle class, and a far greater burden for the working poor. ..."
    "... Any conversation about who the fantasy-projection "Reagan" was, misses an important reality: He was a hologram, fabricated by a kaleidoscope of various sorts of so-called "conservative" handlers and puppeteers. It was those "puppeteers" who ranged from heartlessly, stunningly "conservative" (destroya-tive), all the way further right to the kind of militaristic, macho, crackpots who have finally emerged from under their rocks at this year's "candidates." ..."
    The Guardian


    cgoodwood 19 Sep 2015 11:40

    Do not contradict the memories of all the old teabaggers who desperately need the myth of Saint Ronnie to justify their Greed is Good declining mentality and years.

    When Reagan cut-and-ran on Lebanon he showed rare discretion. A lot of the puffery stuff was B-Movie grade, but there was a lot of cross-the-aisle ventures, too.

    He was a politician. The current GOP is just a bunch of white Fundie bullies, actually and metaphorically (e.g., Carson).

    Zepp -> thedono 19 Sep 2015 11:37

    Well, compared to Cruz, or Santorum, or Huckabee, he's a moderate. Of course, compared to the right people, you can describe Mussolini or Khruschev as moderates...

    mastermisanthrope 19 Sep 2015 11:37

    Lifelong shill

    LostintheUS -> William J Rood 19 Sep 2015 11:36

    Reagan underwent a political conversion when Nancy broke up his marriage with Jane Wyman and married him.

    LostintheUS 19 Sep 2015 11:33

    Here is the Reagan administration in a five second video clip:
    https://www.youtube.com/watch?v=NR3RqMMIwD4

    LostintheUS -> inchoateruffian 19 Sep 2015 11:32

    Here is the video clip where Don Regan (former CEO of Merrill Lynch) tells PRESIDENT Reagan to "speed it up".

    https://www.youtube.com/watch?v=NR3RqMMIwD4

    RightSaid -> ID3732233 19 Sep 2015 11:31

    The cold war ended while Reagan was president, but he did not win the cold war. His rhetoric and strategy was wishful thinking - there's no way he could have had the definitive intelligence about the entire military-political-economic that would have justified the confidence he projected. He merely lucked out, significantly damaging the US economy by trying (and luckily succeeding) to out-militarize the soviets.

    pretzelattack -> kattw 19 Sep 2015 11:31

    both clinton and obama have showed a willingness to "reform social security". try naked capitalism, there are probably a number of articles in the archives.

    LostintheUS -> piethein 19 Sep 2015 11:29

    And that the emergency room federally funded program that saved his life was soon after defunded...by him.

    LostintheUS -> pretzelattack 19 Sep 2015 11:28

    Many of us saw through him...I noted the senility during his speeches during his first campaign...as did many people I knew.

    pretzelattack -> 4Queeen4country 19 Sep 2015 11:27

    thatcher said of reagan "bit of a dim bulb..."

    Jim Loftus 19 Sep 2015 11:26

    Dementia masquerading as politics.
    But you can't say anything negative about Saint Ronald!

    Peter Davis -> Peter Davis 19 Sep 2015 11:22

    I believe Reagan also is responsible for creating the Hollywood notion in American politics and political thinking that life works just like a movie--with good guys and bad guys. And all one needs is a gun and you can save the world. That sort of delusional thinking has been at the heart of the modern GOP ever since.

    loljahlol -> ID3732233 19 Sep 2015 11:21

    Reagan did not end the Cold War. Brezhnev rule solidified the Soviet death. Their corrupt, inefficient form of capitalism could not compete with the globalization of Western capitalism.

    John78745 19 Sep 2015 11:21

    There's not much nuance to Reagan. He was a coward, a bully and a loser. He got hundreds of U.S. Marines killed then he ran from the terrorists in Beirut and on the Archille Lauro personally creating the seeds of the morass of terrorists we now live with. He fostered the republican traditions of sending U.S. jobs overseas at the expense of U.S. taxpayers and of invading helpless, hapless nations, a tradition so adeptly followed by Bush I & II. He also promised that there would never be a need for another amnesty.

    I guess it's true that he talked mean to the Russians, broke unions, and helped make the military industrial complex into the insatiable war machine that it is today. Remember murderous Iran-Contra (a real) scandal where he and his minions worked in secret without congressional authorization to overthrow a democratically elected government while conspiring to supply arms to the dastardly Iranians!

    We could also say that he bravely fought to save the U.S. from socialized medicine and to expunge the tradition of free tuition for California students. Whatta hero!

    thankgodimanatheist 19 Sep 2015 11:19

    Reagan, the acting President, was the worst President since WWII until the Cheney/Bush debacle.

    Most of the problems we face today can be directly traced to his voodoo economics, huge deficit spending, deregulation, and in retrospect disastrous foreign policies.


    LostintheUS 19 Sep 2015 11:17

    "these days everyone seems to love Ronald."

    Absolutely, not true. The farther along we go in time, the more Americans realize the damage this man and his backers did to America and the world. The inversion of the tax tables, the undoing of union laws, the polarization of Americans against each other so the plutocrats had no real opposition and on and on. His camp stole the election in 1980 through making a back door deal with the Iranian government to hold onto the American hostages until the election when Jimmy Carter had negotiated an end to the hostage crisis, which was the undoing of Jimmy Carter's administration.

    "Behind Carter's back, the Reagan campaign worked out a deal with the leader of Iran's radical faction - Supreme Leader Ayatollah Khomeini - to keep the hostages in captivity until after the 1980 Presidential election." This is, unquestionably, treason. http://www.truth-out.org/opinion/item/20287-without-reagans-treason-iran-would-not-be-a-problem

    No, Reagan marks the downward turn for our country and has resulted in the economic and social mess we still have not clawed our way back out of. No, Reagan is no hero, he is an American nemesis and a traitor. Reagan raised taxes three times while slashing the tax rate of the super rich...starting the downward spiral of the middle-class and the funneling of money toward the 1%. Thus his reputation as a "tax cutter", yeah, if you were a multi-millionaire.

    Check this out for a synopsis of the damage: http://www.dailykos.com/story/2011/02/10/942453/-How-Ronald-Reagan-s-Policies-Destroyed-the-United-States#

    namora -> nogapsallowed 19 Sep 2015 11:15

    Never thought of Reagan as the first Shrub but it fits. I wonder if future pundits will sing the Dub's praises as well. I think I'm gonna be sick for a bit.

    kattw -> namora 19 Sep 2015 11:10

    Pretzel is maybe talking about the 'strengthen SS' bandwagon? Perhaps? Not entirely sure myself, but yeah - one of the major democrat platform planks is that SS should NOT be privatized, and that if people want to invest in stocks, they can do that on their own. The whole point of SS is to be a mattress full of cash that is NOT vulnerable to the vagaries of the market, and will always have some cash in it to be used as needed.

    SS would be totally secure, too, if congress would stop robbing it for other projects, or pay back all they've borrowed. As it is, I wish *I* was as broke as republicans claim SS is - I wouldn't mind having a few billion in the bank.

    William J Rood 19 Sep 2015 11:08

    Reagan was former president of the Screen Actors' Guild. Obviously, he thought unions for highly educated workers were great. Meatpackers? Not so much.

    RealSoothsayer 19 Sep 2015 11:04

    This article does not mention the fact that in his last couple of years as President at least, his mental state had seriously deteriorated. He could not remember his own policies, names, etc. CBS' Leslie Stahl should be prosecuted for not being honest with her everyone when she found out.

    Peter Davis 19 Sep 2015 11:04

    Reagan was a failed president who nonetheless managed to convince people that he was great. He was a professional actor, after all. And he acted his way into the White House. Most importantly, he changed American politics forever by demonstrating that style was more important than substance. In fact, he showed that style was everything and substance utterly unimportant. He was the figurehead while his handlers did the dirty work of Iran-Contra, ballooning deficits, and tanking unemployment.

    nishville 19 Sep 2015 11:03

    For me, he was a pioneer. He was the first sock-puppet president, starting a noble tradition that reached its climax with W.

    mbidding -> hackerkat 19 Sep 2015 11:03

    In addition to:

    Treasonous traitor when, as a presidential candidate, he negotiated with Khomeini to hold the hostages till after the election.

    Subverter of the Constitution via the Iran-Contra scandal.

    Destroyer of social cohesion by turning JFK's famous admonishment of "ask not what your country can do for you, ask what you can do for your country" on its head with his meme that all evil emanates from the government and taxation represents stealing rather than a social obligation for any civilized society that wishes to continue to develop in a sound fashion that lifts all boats.

    Incarcerator in Chief through his tough on crime and war on drugs policies, not to mention defunding mental health care.

    Pisser in Chief through his successful efforts to imbed trickle down economics as the economic thought du jour which even its original architects, notably Stockman, now confirm is a failed theory that we nonetheless cling to to this day.

    Ignoramus in Chief by gutting real federal financial aid for higher education leading to the obscene amounts of student debt our college students now incur.

    Terrorist creator extraordinaire not only with the creation of the Latin American death squads you note, but the creation, support, trading, and funding of the mujahedin and Bin Laden himself, now known as the Taliban, Al Qa'ida, and ISIS, only the most notable among others.

    namora -> trholland1 19 Sep 2015 10:59

    That is not taking into account his greatest role for which he was ignored for a much deserved Oscar, Golden Globe or any of the other awards passed out by the entertainment industry, President of The United States of America. He absolutely nailed that one.

    William J Rood 19 Sep 2015 10:58

    Conservatives used "bracket creep" to convince the middle class that reducing marginal rates on the top tax brackets along with their own would be a good idea, then with the assistance of Democrats replaced the revenue with a huge increase in FICA so that the Social Security Trust Fund could finance the deficit in the rest of the budget. The result was a huge boon to the richest, little difference for the middle class, and a far greater burden for the working poor.

    Tax brackets could have been indexed to inflation, but that wouldn't have been so great for Reagans real supporters.

    Doueman 19 Sep 2015 10:55

    What sad comments by these armchair experts.

    They don't gel with my experiences in North America during this period at all. When Reagan ran for the presidency he was generally ridiculed by much of the press in the US and just about all of the press in the UK for being a right wing fanatic, a lightweight, too old, uninformed and even worse an actor. I found this rather curious and watched him specifically on TV in unscripted scenarios to form my own impression as to how such a person, with supposedly limited abilities, could possibly run for President of the US. I get a bit suspicious when organisations and individuals protest and ridicule too much.

    My reaction was that he handled himself well and gradually concluded that the mainly Eastern liberal press in the US couldn't really stomach a California actor since they themselves were meant to know everything. He actually was pretty well read ( visitors were later astonished to read his multiple annotations in heavy weight books in his library). He was a clever and astute union negotiator dealing with some of the toughest Hollywood moguls who would eat most negotiators for dinner. He had become Governor of California and had done a fine job. I thought it was unlikely he was the simpleton many portrayed. He couldn't be easily categorised as he embraced many good aspects of the Democrats and the Republicans. Life wasn't so polarised then.

    The US had left leaning Republicans and right wing Democrats. A political party as Churchill noted was simply a charger to ride into action.

    In my view, his presidential record was pretty remarkable. A charming, fair minded charismatic man without the advantage of a wealthy background or influential family. The world was lucky to have him.

    raffine -> particle 19 Sep 2015 10:50

    Reagan's second term was a disaster. But as someone below mentioned, conservative pundits and their financers engaged in a campaign to make Reagan into a right-wing FDR. The most effective, albeit bogus, claim on Reagan's behalf was that he had ended the Cold War.

    jpsartreny 19 Sep 2015 14:22

    Reagan is the shadow governments greatest triumph. After the adolescent Kennedy, egomaniacs Johnson and Nixon , they needed front guys who followed orders instead .

    The experiment with the peanut farmer from Georgia provided disastrous to Zebrew Brzezinski and the liberals. The conservatives had better luck with a B- movie actor with an great talent to read of the teleprompter.

    RealSoothsayer -> semper12 19 Sep 2015 14:19

    How? By talking? Gobachev brought down the USSR with his 'Glasnost' and 'Perestroika' policies. His vision was what communist China later on achieved: mixed economy that flies a red flag. Reagan was just an observer, absolutely nothing more. Tito of Yugoslavia was even more instrumental.

    Marc Herlands 19 Sep 2015 14:17

    IMHO Reagan was the second most successful president, behind FDR and ahead of LBJ. Not that I liked anything about him, but he moved this country to the right and set the play book. He lowered taxes on the wealthy, the corporations, capital gains, and estate taxes. He reduced growth in programs for the poor, and made it impossible to increase their funding after his presidency because of he left huge federal deficits caused by lowering taxes and increasing outlays on the military. This Republican playbook still is their way of making sure that the Democrats can't give the poor more money after they lose power. Also, he enlarged the program for deregulating industries, doing away with antitrust laws, hindering labor laws, encouraged anti-union behavior, and did nothing for AIDS research. He was a scoundrel who did a deal with Iran to prevent Carter from being re-elected. He directly disobeyed Congressional laws not to intervene in Nicaragua. He set the tone for US interventions after him.


    bloggod 19 Sep 2015 14:17

    Obama, Clinton, and the Bushes all hope to be forgiven for their unpardonable crimes.

    Popularity is created. It is not populism, or informed consent of the pubic as approval for more of the same collusion.

    It is a One Party hoe down.

    bloggod -> SigmetSue 19 Sep 2015 14:12

    "they"

    the indicted Sec of Defense Weinberger; the indicted head of the CIA Casey who "died" as he was due to testify: Mcfarlane, Abrams, Clair George, Oilyver North, Richard Secord, Albert Hakim

    Reagan had no genius, he had Bush-CIA and the Jerry Falwell, Billy Graham, and the "immoral majority" of anti-abortion war profiteers.


    Marios Antoniou Lattimore 19 Sep 2015 13:52

    I agree with everything you mentioned, and I intensely dislike Reagan YET the point of the article wasn't that Reagan was good, it rather points to the fact that Republicans have shifted so far to the right that Reagan would appear moderate compared to the current batch.

    Rainer Jansohn pretzelattack 19 Sep 2015 13:52

    Interesting had been his speeches during the Cold War.Scientists have subsumed it under "Social Religion",a special form of political theology.Simple dialectical:UDSSR the incarnation of the evil/hell on the other side USA :the country of God himself.A tradition in USA working until now.There is no separation between government and church as in good old centuries sincetwo centuries resulting from enlightening per Philosophie/Voltaire/Kant/Hume/Descartes and so on.Look at Obamas speeches/God is always mixed in!

    talenttruth 19 Sep 2015 13:49

    Any conversation about who the fantasy-projection "Reagan" was, misses an important reality: He was a hologram, fabricated by a kaleidoscope of various sorts of so-called "conservative" handlers and puppeteers. It was those "puppeteers" who ranged from heartlessly, stunningly "conservative" (destroya-tive), all the way further right to the kind of militaristic, macho, crackpots who have finally emerged from under their rocks at this year's "candidates."

    The fact that Reagan was going ga-ga – definitely in his second term, and likely for part of the first – was entirely convenient for his Non-Human-Based-Crackpot-Right-Holographers, since he had was not actually "driven" to vacuousness by a tragic mental condition (dementia) – THAT change was merely a "short putt" – from his entire previous life.

    Regarding his Great Achievement, the collapse of the Soviet Union? After decades of monstrous over-spending by the USA's Military-Industrial-Complex, the bogus and equally insane USSR finally bankrupted itself trying to "compete" and fell. Reagan (and his puppeteer handlers), always excellent at Taking Credit for anything, showed up with exquisite cynical timing, and indeed Took Credit.

    Lest anyone forget, Reagan got elected in 1980, via a totally illegal and stunningly immoral "side deal" with the Iranians, in which they agreed to not release our hostages to make Carter look like a feeble old man. Then we got Reagan who WAS a "feeble old man" (ESPECIALLY intellectually and morally). Reagan "won," the hostages were "released" and he of course took credit for that too.

    So all these so-called "candidates" ARE the heirs of all the very worst of Ronald Reagan: they are all simpleminded, they are totally beholden to Hidden Sociopathic Billionaires hiding behind various curtains, and they all have NO CLUE what the word "ethics" means. Vacuous, anti-intellectual, scheming, appealing only to morons, and puppets all. Perfect "Reaganites."

    Bill Ehrhorn -> semper12 19 Sep 2015 13:32

    It seems that the teabaggers and their ilk give only Reagan credit.

    SigmetSue 19 Sep 2015 13:16

    They called him the Teflon President because nothing ever stuck. It still doesn't. That was his genius -- and I'm no fan.


    Lattimore 19 Sep 2015 13:13

    The article seems to present Reagan as an theatrical figure. I disagree. Reagan, President of the United States, was a criminal; as such, he was among the most corrupt and anti democratic person to hold the office POTUS. The fact that he tripled the national debt, raised taxes and skewed the tax schedules to benifit the wealthy, are comparitively minor.
    ,,,
    Reagan's crimes and anti democratic acts:
    1. POTUS: CIA smuggling cocaine into the U.S., passing the drug to wholesalers, who then processed the drug and distributed crack to Black communities. At the same time Reagan's "War on Crime" insured that the Black youth who bought "Central Intelligenc Agencie's" cocaine were criminalized and handed lengthy prison sentences.
    2. POTUS supported SOUTH AMERICAN terrorist, and the genocidal atrocities commited by terrorist in Chili, Guatamala, El Mazote, etc.
    3. POTUS supported SOUTH AFRICAN apartheid, and the imprisonment of Nelson Mandela as well. Vetoing a bill that would express condemnation of South Africa.
    4. POTUS sold Arms to Iran.
    5. POTUS used taxpayer dollars to influence election outcomes.
    6. POTUS rigged government grants to enrich his cronies.
    7. POTUS thew mental patients onto the streets.
    8. POTUS supported McCarthyism, witch hunts, etc.
    9. POTUS created and supported Islamic terrorist--fore runners of al Queada, ISIS, etc.

    Niko2 LostintheUS 19 Sep 2015 13:12

    I don't have much love for Nancy, but she did not break up this marriage, to be fair. And she actually got rid off the extreme right wingers in Reagan's administration, like Haig and Regan, whom she called "extra chromosome republicans". Surely she was a vain and greedy flotus with no empathy whatsoever for people not in her Bel Air circles (I can easily imagine her, "Do I really have to go and see these Aids-Babies, I'd rather shop at Rodeo Drive, lose the scheduler") but she realized at an early stage that hubbies shtick-it-to-the-commies policies would do him no favour. Maybe she's the unsung heroine of his presidency.

    tommydog -> MtnClimber 19 Sep 2015 13:04

    The principle subsidies to big oil are probably the strategic oil reserve and subsidies to low income people for winter heating oil. You can choose which of those you'd like to cut. After that you're arguing about whether exploration costs should be expensed in the year incurred or capitalized and amortized over time.

    WilliamK 19 Sep 2015 13:03

    He was one of J Edgar Hoover's red baiting fascist admiring boys along with Richard Nixon and Walt Disney used to destroy the labor unions, control the propaganda machine of Hollywood and used to knuckle under the television networks and undermine as much as possible the New Deal polices of Franklin Roosevelt. An actor groomed by the General Electric Corporation and their fellow travelers. "Living better through electricity" was his mantra and he played the role of President to push forward their right wing agenda. Now we are in new stage in our "political development" in America. The era of the "reality television star" with Hollywood in bed with the military industrial complex, selling guns, violence and sex to the fool hardy and their children and prime time television ads push pharmaceutical drugs, children hear warnings of four hour erections, pop-stars flash their tits and asses and a billionaire takes center stage as the media cashes in and goes along for the ride. Yeah Ronnie was a second tier film star and with his little starlet Nancy by his side become one of America's greatest salesman.


    Backbutton 19 Sep 2015 12:57

    LOL! Reagan was a walking script renderer, with lines written by others, and a phony because he was just acting the part of POTUS. His speeches were all crafted, and he had good writers.

    He was no Abraham Lincoln.

    And now these morons running for office all want to rub off his "great communicator" fix.

    Good help America!

    Milwaukee Broad 19 Sep 2015 12:49

    Ronald Reagan was an actor whom the depressingly overwhelming majority of American voters thought was a messiah. They so believed in him that they re-elected him to a second term. Nothing positive whatsoever became of his administration, yet he is still worshiped by millions of lost souls (conservatives).

    Have a nice day.


    Michael Williams 19 Sep 2015 12:48

    The US was the world's leading creditor when Reagan took office. The US was the world's leading debtor by the time Bush 1 was tossed out of office.

    This is what Republicans cannot seem to remember.

    All of the other scandals pale in comparison, even as we deal with the blowback from most of these original, idiotic policies.

    Reagan was an actor, mouthing words he barely understood, especially as his dementia progressed.

    This is the exact reason the history is so poorly taught in the US.
    People might make connections....

    Jessica Roth 19 Sep 2015 12:46

    Oh, he had holes in his brain long before the dementia. "Facts are stupid things", trees cause pollution, and so on.

    A pathetic turncoat who sold out his original party (the one that kept his dad in work throughout the Great Depression via a series of WPA jobs) because Nancy allegedly "gave the best head in Hollywood" and who believed that only 144,000 people were going to Heaven, presumably accounting for his uncaring treatment of the less-well-off.

    His administration was full of corruption, from Richard Allen's $1000 in an envelope (and three wristwatches) that he claimed was an inappropriate gift for Mrs. Reagan he had "intercepted" and then "forgotten" to report to William Casey trading over $3,000,000 worth of stocks while CIA director. (Knowing about changes in the oil market ahead of time sure came in handy.) You had an attorney general who took a $50,000 "severance payment" (never done before) from the board of a corporation he resigned from to avoid conflict of interest charges and this was William French Smith; his successor, Edwin Meese, was the one with real scandals (about the sale of his home).

    Hell, Reagan himself put his ranch hand (Dennis LeBlanc) on the federal payroll as an "advisor" to the Commerce Department. I didn't know the Commerce Dept needed "advice" on clearing wood from St. Ronnie's ranch, but LeBlanc got a $58,500 salary out of the deal. (Roughly £98,000 at today's prices.) Nice work if you can get it.

    Meanwhile, RR "talked tough" at the Soviets (resulting in the world nearly ending in 1983 due to a false alarm about a US nuclear attack) while propping up any rightwing dictator they could find, from the South African racists to Ferdinand and Imelda Marcos (after they had Aquino assassinated at the airport) to Roberto "Death Squad" D'Aubuisson in El Salvador (the man who masterminded the assassination of Archbishop Romero while he was performing Mass).

    Oh, and while Carter did a nice job of shooting himself in the foot, Reagan benefited in the election not only from his treasonous dealings with the Iranian hostage-takers (shades of Nixon making a deal with North Viet Nam to stall the peace talks until after the 1968 elections, promising them better terms) but through more pedestrian means such as his campaign's stealing of Carter's briefing book for the campaign's only debate, Reagan being coached for the debate by a supposedly neutral journalist (George Will, of ABC and The Washington Post), who then went on television afterwards (in the days when there were only three commercial channels) and "analysed" how successful Reagan had been in executing his "game plan" and seeming "Presidential" without either Will or ABC bothering to mention that Will had coached Reagan and designed the "game plan" in question. The "liberal bias" in the media, no doubt.

    Always a joke, only looking slightly better by the dross that has followed him. (Including Bill "Third Way" Clinton and his over-£50,000,000 in post-Presidential "speaking fees" graft, and Barack Obama, drone-murderer of children in over a dozen countries and serial-summary-executioner of U.S. citizens. When Gordon-effing-Brown is the best that's held office on either side of the Atlantic since 1979, you can see how this planet is in the state it's in.)

    pretzelattack DukeofMelbourne 19 Sep 2015 12:45

    his stand on russia was inconsistent, and he didn't cause it to collapse. his economic programs were a failure. his foreign policy generally a disaster. he set the blueprint for the current mess.


    pretzelattack semper12 19 Sep 2015 12:38

    a total crock. reagan let murdering thugs run rampant as long as they paid lip service to democracy, the world over from africa to central america. the ussr watched this coward put 240 marines to die in lebanon, and then cut and run, exactly the pattern he was so ready to condemn as treason in others, and was so ready to portray as showing weakness, and you think the ussr was terrified of him. he was a hollywood actor playing a role, and you bought it.


    Tycho1961 19 Sep 2015 12:13

    No President exists in a political vacuum. While he was in office, Reagan had a large Democrat majority in the House of Representatives and a small Republican majority in the Senate. The Supreme Court was firmly liberal. Whatever his political agenda Reagan knew he had to constructively engage with people of both parties that were in opposition to him. If he didn't he would suffer the same fate as Carter, marginalized by even his own party. His greatest strength was as a negotiator. Reagan's greatest failures were when he tried to be clever and he and his advisors were found to be rather ham handed about it.


    RichardNYC 19 Sep 2015 11:57

    The principal legacy of Ronald Reagan is the still prevalent view that corporate interests supersede individual interests.


    Harry Haff 19 Sep 2015 11:45

    Reagan did many horrible things while in office, committed felonies and supported murderous regimes in Central America that murdered tens of thousands of people with the blessing of the US chief executive. he sold arms to Iran and despoiled the natural environment whenever possible. But given those horrendous accomplishments, he could not now get a seat at the table with the current GOP. He would be considered a RINO, that most stupid and inaccurate term, at best, and a closet liberal somewhere down the line. The current GOP is more to the right than the politicians in the South after the Civil War.

    [Dec 02, 2016] Since 2014 The US Has Added 571,000 Waiters And Bartenders And Lost 34,000 Manufacturing Workers Zero Hedge

    Notable quotes:
    "... the great schism inside the American labor force get wider. We are referring to the unprecedented divergence between the total number of high-paying manufacturing jobs, and minimum-wage food service and drinking places jobs, also known as waiters and bartenders. In October, according to the BLS, while the number of people employed by "food services and drinking places" rose by another 18,900, the US workforce lost another 4,000 manufacturing workers. ..."
    "... National Restaurant Association's Restaurant performance activity index showed in October, overall industry sentiment is the worst since the financial crisis, due to declines in both same-store sales and customer traffic, suggesting that restaurant workers should now be in the line of fire for mass layoffs. ..."
    "... Putting this divergence in a long context, since the official start of the last recession in December 2007, the US has gained 1.8 million waiters and bartenders, and lost 1.5 million manufacturing workers. Worse, while the latter series had been growing, if at a slower pace than historically, it has now clearly rolled over, and in 2016, some 60,000 manufacturing jobs have been lost. ..."
    Dec 02, 2016 | www.zerohedge.com

    As another month passes, the great schism inside the American labor force get wider. We are referring to the unprecedented divergence between the total number of high-paying manufacturing jobs, and minimum-wage food service and drinking places jobs, also known as waiters and bartenders. In October, according to the BLS, while the number of people employed by "food services and drinking places" rose by another 18,900, the US workforce lost another 4,000 manufacturing workers.

    This is the fourth consecutive month of declining manufacturing workers, and the 7th decline in the past 10 months.

    The chart below puts this in context: since 2014, the US had added 571,000 waiters and bartenders, and has lost 34,000 manufacturing workers.

    While we would be the first to congratulate the new American waiter and bartender class, something does not smell quite right. On one hand, there has been a spike in recent restaurant bankruptcies or mass closures (Logan's, Fox and Hound, Bob Evans), which has failed to reflect in the government report. On the other hand, as the National Restaurant Association's Restaurant performance activity index showed in October, overall industry sentiment is the worst since the financial crisis, due to declines in both same-store sales and customer traffic, suggesting that restaurant workers should now be in the line of fire for mass layoffs.

    However, what we find more suspect, is that according to the BLS' seasonally adjusted "data", starting in March of 2010 and continuing through September of 2016, there has been just one month in which restaurant workers lost jobs, and alternatively, jobs for waiters and bartenders have increased in 80 out of the past 81 months, with just one month of job losses, something unprecedented in this series history.

    Putting this divergence in a long context, since the official start of the last recession in December 2007, the US has gained 1.8 million waiters and bartenders, and lost 1.5 million manufacturing workers. Worse, while the latter series had been growing, if at a slower pace than historically, it has now clearly rolled over, and in 2016, some 60,000 manufacturing jobs have been lost.

    Like last month, we remain curious what this "data" series will look like after it is revised by the BLS shortly after the NBER declares the official start of the next recession.

    [Dec 02, 2016] The incomes of the financial sector are mostly pure rents so there are fewer gains from trade possible here than there are for more productive sectors. Trade negotiations on this are therefore more win-lose rather than potentially win-win

    Notable quotes:
    "... The incomes of the financial sector are mostly pure rents so there are fewer gains from trade possible here than there are for more productive sectors. Trade negotiations on this are therefore more 'win-lose' rather than potentially 'win-win'. ..."
    Dec 02, 2016 | crookedtimber.org

    derrida derider 11.29.16 at 2:09 am 5

    T's right – the economic impact of Brexit on the UK will overwhelmingly depend on how the EU "passport" entitlements for the banks are negotiated. And of course the Germans (with Frankfurt) and the French (with Paris) have a strong incentive to make sure that a good slab of the City's business goes to them.

    The incomes of the financial sector are mostly pure rents so there are fewer gains from trade possible here than there are for more productive sectors. Trade negotiations on this are therefore more 'win-lose' rather than potentially 'win-win'.

    I think the result will certainly be lower aggregate GDP for the UK but it might well be better distributed (eg London property prices may be less absurd). The City has long made the rest of the UK economy suffer from a form of Dutch disease through an overvalued pound sterling. So those Sunderland Brexit voters might prove ultimately correct in their assessment of their economic interests – just not in the way they think.

    [Dec 02, 2016] Some 6 million Americans are delinquent with auto loans and it's going to get worse

    Dec 02, 2016 | www.marketwatch.com

    The number of subprime auto loans sinking into delinquency hit their highest level since 2010 in the third quarter, with roughly 6 million individuals at least 90 days late on their payments.

    It's behavior much like that seen in the months heading into the 2007-2009 recession, according to data from Federal Reserve Bank of New York researchers.

    "The worsening in the delinquency rate of subprime auto loans is pronounced, with a notable increase during the past few years," the researchers, led by Andrew Haughwout, said Wednesday in a blog on their Liberty Street Economics site .

    [Dec 02, 2016] Economists View Some Concrete Proposals for Economists and the Media

    Dec 02, 2016 | economistsview.typepad.com
    likbez : December 02, 2016 at 09:47 AM
    There is no economics, only political economy. That means that financial oligarchy under liberalism puts the political pressure and takes measures to have the final say as for who occupy top academic positions.

    Indirect negative selection under neoliberalism (much like in the USSR) occurs on multiple fronts, but especially via academic schools and indoctrination of students. The proper term for political pressure of science and creating an academic school that suppressed other is Lysenkoism.

    So far this term was not mentioned even once here. But this what we have in the USA. Of course there are some dissidents, some of them quite vocal, but in no way they can get to the level of even a department chair.

    In best traditions of Lysenkoism such people as Greg Mankiw, Krugman, DeLong and Summers after getting to their lucrative positions can do tremendous, lasting decades damage. The same is true for all other prominent neoliberal economists. It's not even about answers given, it is about questions asked and framework and terminology used.

    Fish rots from the head. It is important to understand that essentially the same game (with minor variations, and far worse remuneration for sycophantism ) was played in the USSR -- the Communist Party essentially dictated all top academic position assignments, so mostly despicable sycophants had managed to raise to the top in this environment. Some people who can well mask their views under the disguise of formal obedience also happened, but were extremely rare. Situation in the past in the USA was better and such people as Hyman Minsky (who died in 1996) while not promoted were not actively suppressed either. But He spend only the last decade of his career under neoliberal regime.

    What was really funny, is how quickly in late 80th prominent USSR economists switched to neoliberalism when the wind (and money) start flowing in this direction.

    Such despicable academic charlatans, who previously swear to dogmas of Marxism, were very receptive of foreign grants, conferences trips and cash :-). Much like Summers was receptive for sky high honorarium from various banks (see http://www.prosebeforehos.com/article-of-the-day/04/10/the-corruption-of-larry-summers/ )

    I would suggest that there are non are trivial links between Soviet political and economic science and neoclassical economics in the USA -- both are flavors of Lysenkoism.

    [Nov 30, 2016] The Electoral Consequences of Globalization

    Notable quotes:
    "... Capital in the Twenty-first Century, ..."
    Nov 29, 2016 | angrybearblog.com
    by Joseph Joyce The Electoral Consequences of Globalization

    The reasons for the election of Donald Trump as President of the U.S. will be analyzed and argued about for many years to come. Undoubtedly there are U.S.-specific factors that are relevant, such as racial divisions in voting patterns. But the election took place after the British vote to withdraw from the European Union and the rise to power of conservative politicians in continental Europe, so it is reasonable to ask whether globalization bears any responsibility.

    The years before the global financial crisis were years of rapid economic globalization. Trade flows grew on average by 7% a year over the 1987-2007 period. Financial flows also expanded, particularly amongst the advanced economies. Global financial assets increased by 8% a year between 1990 and 2007 . But all this activity was curtailed in 2008-09 when the global financial crisis pushed the world economy into a downturn. Are the subsequent rises in nationalist sentiment the product of these trends?

    Trump seized upon some of the consequences of increased trade and investment to make the case that globalization was bad for the U.S. He had great success with his claim that international trade deals are responsible for a loss of jobs in the manufacturing sector. In addition, he blamed outward foreign direct investment (FDI) by U.S. firms that opened production facilities in foreign countries for moving manufacturing jobs outside the U.S. Among the firms that Trump criticized were Ford Motor, Nabisco and the Carrier Corporation , which is moving a manufacturing operation from Indiana to Mexico.

    Have foreign workers taken the jobs of U.S. workers? Increased trade does lead to a reallocation of resources, as a country increases its output in those sectors where it has an advantage while cutting back production in other sectors. Resources should flow from the latter to the former, but in reality it can be difficult to switch employment across sectors. Daron Acemoglu and David Autor of MIT, David Dorn of the University of Zurich, Gordon Hanson of UC-San Diego and Brendan Price of MIT have found that import competition from China after 2000 contributed to reductions in U.S. manufacturing employment and weak U.S. job growth. They estimated manufacturing job losses due to Chinese competition of 2.0 – 2.4 million. Other studies find similar results for workers who do not have high school degrees.

    Moreover, multinational firms do shift production across borders in response to lower wages, among other factors. Ann E. Harrison of UC-Berkeley and Margaret S. McMillan of Tufts University looked at the hiring practices of the foreign affiliates of U.S. firms during the period of 1977 to 1999. They found that lower wages in affiliate countries where the employees were substitutes for U.S. workers led to more employment in those countries but reductions in employment in the U.S. However, when employment across geographical locations is complementary for firms that do significantly different work at home and abroad, domestic and foreign employment rise and fall together.

    Imports and foreign production, therefore, have had an impact on manufacturing employment in the U.S. But several caveats should be raised. First, as Erik Brynjolfsson and Andrew McAfee of MIT and others have pointed out, technology has had a much larger effect on jobs. The U.S. is the second largest global producer of manufactured goods, but these products are being made in plants that employ fewer workers than they did in the past. Many of the lost jobs simply do not exist any more. Second, the U.S. exports goods and services as well as purchases them. Among the manufactured goods that account for significant shares of U.S. exports are machines and engines, electronic equipment and aircraft . Third, there is inward FDI as well as outward, and the foreign-based firms hire U.S. workers. A 2013 Congressional Research Service study by James V. Jackson reported that by year-end 2011 foreign firms employed 6.1 million Americans, and 37% of this employment-2.3 million jobs-was in the manufacturing sector. More recent data shows that employment by the U.S. affiliates of multinational companies rose to 6.4 million in 2014. Mr. Trump will find himself in a difficult position if he threatens to shut down trade and investment with countries that both import from the U.S. and invest here.

    The other form of globalization that drew Trump's derision was immigration. Most of his ire focused on those who had entered the U.S. illegally. However, in a speech in Arizona he said that he would set up a commission that would roll back the number of legal migrants to "historic norms."

    The current number of immigrants (42 million) represents around 13% of the U.S. population, and 16% of the labor force. An increase in the number of foreign-born workers depresses the wages of some native-born workers, principally high-school dropouts, as well as other migrants who arrived earlier. But there are other, more significant reasons for the stagnation in working-class wages . In addition, a reduction in the number of migrant laborers would raise the ratio of young and retired people to workers-the dependency ratio-and endanger the financing of Social Security and Medicare. And by increasing the size of the U.S. economy, these workers induce expansions in investment expenditures and hiring in areas that are complementary.

    The one form of globalization that Trump has not criticized, with the exception of outward FDI, is financial. This is a curious omission, as the crisis of 2008-09 arose from the financial implosion that followed the collapse of the housing bubble in the U.S. International financial flows exacerbated the magnitude of the crisis. But Trump has pledged to dismantle the Dodd-Frank legislation, which was enacted to implement financial regulatory reform and lower the probability of another crisis. While Trump has criticized China for undervaluing its currency in order to increase its exports to the U.S., most economists believe that the Chinese currency is no longer undervalued vis-à-vis the U.S. dollar.

    Did globalization produce Trump, or lead to the circumstances that resulted in 46.7% of the electorate voting for him? A score sheet of the impact of globalization within the U.S. would record pluses and minuses. Among those who have benefitted are consumers who purchase items made abroad at cheaper prices, workers who produce export goods, and firms that hire migrants. Those who have been adversely affected include workers who no longer have manufacturing jobs and domestic workers who compete with migrants for low-paying jobs. Overall, most studies find evidence of positive net benefits from trade . Similarly, studies of the cost and benefits of immigration indicate that overall foreign workers make a positive contribution to the U.S. economy.

    Other trends have exerted equal or greater consequences for our economic welfare. First, as pointed out above, advances in automation have had an enormous impact on the number and nature of jobs, and advances in artificial intelligence wii further change the nature of work. The launch of driverless cars and trucks, for example, will affect the economy in unforeseen ways, and more workers will lose their livelihoods. Second, income inequality has been on the increase in the U.S. and elsewhere for several decades. While those in the upper-income classes have benefitted most from increased trade and finance, inequality reflects many factors besides globalization.

    Why, then, is globalization the focus of so much discontent? Trump had the insight that demonizing foreigners and U.S.-based multinationals would allow him to offer simple solutions-ripping up trade deals, strong-arming CEOs to relocate facilities-to complex problems. Moreover, it allows him to draw a line between his supporters and everyone else, with Trump as the one who will protect workers against the crafty foreigners and corrupt elite who conspire to steal American jobs. Blaming the foreign "other" is a well-trod route for those who aspire to power in times of economic and social upheaval.

    Globalization, therefore, should not be held responsible for the election of Donald Trump and those in other countries who offer similar simplistic solutions to challenging trends. But globalization's advocates did indirectly lead to his rise when they oversold the benefits of globalization and neglected the downside. Lower prices at Wal-Mart are scarce consolation to those who have lost their jobs. Moreover, the proponents of globalization failed to strengthen the safety networks and redistributive mechanisms that allow those who had to compete with foreign goods and workers to share in the broader benefits. Dani Rodrik of Harvard's Kennedy School has described how the policy priorities were changed: "The new model of globalization stood priorities on their head, effectively putting democracy to work for the global economy, instead of the other way around. The elimination of barriers to trade and finance became an end in itself, rather than a means toward more fundamental economic and social goals."

    The battle over globalization is not finished, and there will be future opportunities to adapt it to benefit a wider section of society. The goal should be to place it within in a framework that allows a more egalitarian distribution of the benefits and payment of the costs. This is not a new task. After World War II, the Allied planners sought to revive international trade while allowing national governments to use their policy tools to foster full employment. Political scientist John Ruggie of the Kennedy School called the hybrid system based on fixed exchange rates, regulated capital accounts and government programs " embedded liberalism ," and it prevailed until it was swept aside by the wave of neoliberal policies in the 1980s and 1990s.

    What would today's version of "embedded liberalism" look like? In the financial sector, the pendulum has already swung back from unregulated capital flows and towards the use of capital control measures as part of macroprudential policies designed to address systemic risk in the financial sector. In addition, Thomas Piketty of the École des hautes etudes en sciences (EHESS) and associate chair at the Paris School of Economics , and author of Capital in the Twenty-first Century, has called for a new focus in discussions over the next stage of globalization: " trade is a good thing, but fair and sustainable development also demands public services, infrastructure, health and education systems. In turn, these themselves demand fair taxation systems."

    The current political environment is not conducive toward the expansion of public goods. But it is unlikely that our new President's policies will deliver on their promise to return to a past when U.S. workers could operate without concern for foreign competition or automation. We will certainly revisit these issues, and we need to redefine what a successful globalization looks like. And if we don't? Thomas Piketty warns of the consequences of not enacting the necessary domestic policies and institutions: "If we fail to deliver these, Trump_vs_deep_state will prevail."

    cross posted with Capital Ebbs and Flows

    Comments (10) | Digg Facebook Twitter | --> --> --> Comments (10)

    1. spencer November 29, 2016 10:33 am

      Since 1980, US manufacturing output has approximately doubled while manufacturing employment fell by about a third.

      Yes, globalization impacts the composition of output and it is a contributing factor in the weaker growth of manufacturing output. but overall it has accounted for a very minor share of the weakness in manufacturing employment since 1980. Productivity has been the dominant factor driving manufacturing employment down.

    2. JimH November 29, 2016 11:11 am

      "Overall, most studies find evidence of positive net benefits from trade."

      Of course they do! And in your world, studies always Trump real world experience.

      Studies on trade can ignore the unemployed workers with a high school education or less. How were they supposed to get an equivalent paying job? EDUCATION they say! A local public university has a five year freshman graduation rate of 25%. Are those older students to eat dirt while attempting to accumulate that education!

      Studies on trade can ignore that illegal immigration increases competition for the those under educated employees. Since 1990 there has been a rising demand that education must be improved! That potential high school drop outs should be discouraged by draconian means if necessary. YET we allow immigrants to enter this country and STAY with less than the equivalent of an American high school education! Why are we spending so much on secondary education if it is not necessary!

      "In Mexico, 34% of adults aged 25-64 have completed upper secondary education, much lower than the OECD average of 76% the lowest rate amongst OECD countries."
      See: http://www.oecdbetterlifeindex.org/countries/mexico/

      Trade studies can ignore the fate of a small town when its major employer shuts down and leaves. Trade studies can assume that we are one contiguous job market. They can assume that an unemployed worker in Pennsylvania will learn of a good paying job in Washington state, submit an application, and move within 2 weeks. Or assume that the Washington state employer will hold a factory job open for a month! And they can assume that moving expenses are trivial for an unemployed person.

      Our trade partners have not attempted anything remotely resembling balanced trade with us.

      Here are the trade deficits since 1992.
      Year__________US Trade Balance with the world
      1992__________-39,212
      1993__________-70,311
      1994__________-98,493
      1995__________-96,384
      1996__________-104,065
      1997__________-108,273
      1998__________-166,140
      1999__________-258,617
      2000__________-372,517
      2001__________-361,511
      2002__________-418,955
      2003__________-493,890
      2004__________-609,883
      2005__________-714,245
      2006__________-761,716
      2007__________-705,375
      2008__________-708,726
      2009__________-383,774
      2010__________-494,658
      2011__________-548,625
      2012__________-536,773
      2013__________-461,876
      2014__________-490,176
      2015__________-500,361
      From: https://www.census.gov/foreign-trade/statistics/historical/gands.pdf

      AND there is the loss of the income from tariffs which had been going to the federal government! How has that effected our national debt?

      "However, when employment across geographical locations is complementary for firms that do significantly different work at home and abroad, domestic and foreign employment rise and fall together."

      And exactly how do you think that the US government could guarantee that complementary work at home and abroad. Corporations are profit seeking, amoral entities, which will seek profit any way they can. (Legal or illegal)

      The logical conclusion of your argument is that we could produce nothing and still have a thriving economy. How would American consumers earn an income?

      Indiana, Michigan, Ohio, Pennsylvania, and Wisconsin are RUST BELT states. Were the voters there merely ignorant or demented? You should never ever run for elected office.

    3. Beverly Mann November 29, 2016 12:30 pm

      Meanwhile, Trump today chose non-swampy Elaine Chao, Mitch McConnell's current wife and GWBush's former Labor Secretary, as Transportation Secretary, to privatize roads, bridges, etc.

    4. JimH November 29, 2016 12:36 pm

      The trade balances are in millions of dollars in the table in my last comment.

      Global trade had a chance of success beginning in 1992. But that required a mechanism which was very difficult to game. A mechanism like the one that the Obama administration advocated in October 2010.

      "At the meeting in South Korea's southern city of Gyeongju, U.S. officials sought to set a cap for each country's deficit or surplus at 4% of its economic output by 2015.
      The idea drew support from Britain, Australia, Canada and France, all of which are running trade deficits, as well as South Korea, which is hosting the G-20 meetings and hoping for a compromise among the parties.
      But the proposal got a cool reception from export powerhouses such as China, which has a current account surplus of 4.7% of its gross domestic product; Germany, with a surplus of 6.1%; and Russia, with a surplus of 4.7%, according to IMF statistics."
      See: http://articles.latimes.com/2010/oct/24/business/la-fi-g20-summit-20101024

      That cap was probably too high. But at least the Obama administration showed some realization that global trade was exhibiting serious unpredicted problems. Too bad that Hillary Clinton could not have internalized that realization enough to campaign on revamping problematic trade treaties. (And persuaded a few more of the voters in the RUST BELT to vote for her.) Elections have consequences and voters understand that, but what choice did they have?

      In your world, while American corporations act out in ways that would be diagnosed as antisocial personality disorder in a human being, American human beings are expected to wait patiently for decades while global trade is slowly adjusted into some practical system. (As one shortcoming after another is addressed.)

      Antisocial personality disorder:
      "a personality disorder that is characterized by antisocial behavior exhibiting pervasive disregard for and violation of the rights, feelings, and safety of others "
      See: http://www.merriam-webster.com/dictionary/antisocial%20personality%20disorder#medicalDictionary

    5. Ray LaPan-Love November 29, 2016 1:01 pm

      Spencer,

      The article states almost exactly what you 'add' in your comment:

      "Imports and foreign production, therefore, have had an impact on manufacturing employment in the U.S. But several caveats should be raised. First, as Erik Brynjolfsson and Andrew McAfee of MIT and others have pointed out, technology has had a much larger effect on jobs".

      So, what gives? Is there an award today for who ever gets the biggest DUH??? If there is anything worth adding, it would be a mention of the Ball St study that supports the author's claim but is somehow overlooked. But your comment, well, DUH!!

      =================================================

      JimH,

      Some good stuff there, your assessment of Economics and its penchant for ignoring variables, and your insight which states that "studies can assume that we are one contiguous job market", is all very true, and especially when it comes to immigration issues. I've lived most of my life near the Southern border and when economists claim that undocumented workers are good for our economy I can only chuckle and shake my head. I suppose I could also list all of the variables which those economists ignore, and there are many to choose from, but, there is that quote by Upton Sinclair: "You can't get a man to understand what his salary depends on his not understanding".

      In all fairness though, The Dept. of Labor does of course have its JOLTS data, and so not all such studies are based on broad assumptions, but Economics does have its blind spots, generally speaking. And of course economists apply far too much effort and energy serving their political and financial masters.

      As for your comment in regards to the the trade deficit, you might want to read up a little on the Triffin Dilemma. The essence of globalization has a lot to do with the US leadership choosing to maintain the reserve-currency status and Triffin showed that an increasing amount of dollars must supply the world's demand for dollars, or, global growth would falter. So, the trade deficit since 1975 has been intentional, for that reason, and others. Of course the cost of labor in the US was a factor too, and shipping and standards and so on. But, it is wise also, to remember that these choices were made at time, during and just after the Viet Nam war, when military recruitment was a very troubling issue for the leadership. And the option of good paying jobs for the working-class was very probably seen as in conflict with military recruitment. Accordingly, the working-class has been left with fewer options. This being accomplished in part with the historical anomaly of high immigration quotas, (and by the tolerance for illegal immigration), during periods with high unemployment, a falling participation-rate, inadequate infrastructure, and etc.

    6. Ray LaPan-Love November 29, 2016 2:18 pm

      JimH,

      After posting my earlier comment it occurred to me that I should have recommended an article by Tim Taylor that has some good info on the Triffin dilemma.

      http://conversableeconomist.blogspot.com/2013/11/the-triffin-dilemma-and-us-trade.html

      Also, it might be worth mentioning that you are making the common mistake of assigning blame to an international undertaking that would be more accurately assigned to national shortcomings. I'm referring here to what you quoted and said:

      ""Overall, most studies find evidence of positive net benefits from trade.""

      "Of course they do! And in your world, studies always Trump real world experience".

      My point being that "positive net benefits from trade" are based on just another half-baked measurement as you suggest, but the problems which result from trade-related displacements are not necessarily the fault of trade itself. There are in fact political options, for example, immigration could have been curtailed about 40 years ago and we would now have about 40 million fewer citizens, and thus there would almost certainly be more jobs available. Or, the laws pertaining to illegal immigration could have been enforced, or the 'Employee Free Choice Act could have been passed, or whatever, and then trade issues may have had much different impact.

    7. Ray LaPan-Love November 29, 2016 3:12 pm

      It seems worth mentioning here, that there are other more important goals that make globalization valuable than just matters of money or employment or who is getting what. Let us not forget the famous words of Immanuel Kant:

      "the spirit of commerce . . . sooner or later takes hold of every nation, and is incompatible with war."

    8. coberly November 29, 2016 6:33 pm

      Ray

      the spirit of commerce did not prevent WW1 or WW2.

      otherwise, thank you, and Jim H and Joseph Joyce for the first Post and Comments for grownups we've had around here in some time.

    9. Ray LaPan-Love November 29, 2016 7:03 pm

      Hey Coberly, long time no see.

      And yes, you are right, 'the spirit of commerce' theory has had some ups and downs. But, one could easily and accurately argue that the effort which began with the League of Nations, and loosely connects back to Kant's claim, has gained some ground since WW2. There has not, after-all, been a major war since.

      So, when discussing the pros and cons of globalization, that factor, as I said, is worthy of mention. And it was a key consideration in the formation of the Bretton Woods institutions, and in the globalization effort in general. This suggesting then that there are larger concerns than the unemployment-rate, or the wage levels, of the working-class folks who may, or may not, have been at the losing end of 'free-trade'.

      I've been a 'labor-lefty' since the 1970s, but I am still capable of understanding that things could have been much worse for the American working-class. Plus, if anyone must give up a job, who better than those with a fairly well-constructed safety-net. History always has its winners and losers, and progress rarely, if ever, comes in an even flow.

      Meanwhile, those living in extreme poverty, worldwide, have dropped from 40% in 1981, to about 10% in 2015 (World Bank), so, progress is occurring. But of course much of that is now being ignored by the din which has drowned out so many considerations that really do matter, and a great deal.

    10. coberly November 29, 2016 8:25 pm

      Ray

      I am inclined to agree with you, but sometimes it's hard to see the forest for the trees. Especially if one of those trees has fallen on you.

      In general I am more interested in stopping predatory business models that really hurt people than in creating cosmic justice.

      as for the relative lack of big wars since WW2, I always thought that was because of mutual assured destruction. I am sure Vietnam looked like a big enough war to the Vietnamese.

    [Nov 27, 2016] A New Movement in Liberal Economics That Could Shape Hillary Clinton's Agenda by NEIL IRWIN

    Notable quotes:
    "... Labor market monopsony is the idea that when there isn't enough competition among businesses, it is bad news for workers. When an industry includes only a few big companies, they don't have to compete with one another as hard to attract employees - and so end up paying their workers less than they would if there were true competition. It's the flip side of how monopoly power lets companies charge higher prices to consumers. ..."
    www.nytimes.com

    ... it's also worth examining a 21-page briefing paper issued on Oct. 25 by Obama White House economists about an important concept with a forbidding name: labor market monopsony. The paper is a prime example of the direction left-of-center economic policy is going, evident not just in the Obama administration's second-term priorities but in a range of work at liberal think tanks and in Mrs. Clinton's own economic proposals.

    Labor market monopsony is the idea that when there isn't enough competition among businesses, it is bad news for workers. When an industry includes only a few big companies, they don't have to compete with one another as hard to attract employees - and so end up paying their workers less than they would if there were true competition. It's the flip side of how monopoly power lets companies charge higher prices to consumers.

    It's an idea that has a long lineage in economic thought but has been barely discussed in mainstream policy-making circles until recently. Every year since 1947, White House economists have issued the "Economic Report of the President," describing in great detail the United States' strengths and challenges. The phrase "labor market monopsony" appears not once in tens of thousands of pages.

    The talk of monopsony is part of a shift in the policy tools that many left-of-center economic thinkers see as most promising for addressing the economic challenges of poor and middle-class Americans. Rather than focusing on policies that amount to redistribution - tax rates, the social welfare system - they are looking at how the rules of the economic game shape people's outcomes.

    Some use a term for this set of policies coined by the Yale political scientist Jacob Hacker: predistribution policy. This is policy that shapes how the market works in the first place, as opposed to redistribution policy, which assumes a free market will generate growth and then uses taxes and spending to give a lift to the economy's losers.

    To understand the dueling approaches, think of a professional sports league that finds that richer, big-market teams are consistently at an advantage, making games less entertaining. One approach would be to tack on a few extra points to the small-market team's score when it plays a larger rival. That's the equivalent of redistribution.

    [Nov 26, 2016] EconoSpeak Comments on Milanovic on Marx

    Nov 26, 2016 | econospeak.blogspot.com

    I am a Marxist economist (Professor of Economics, Mount Holyoke College) and I appreciate Branko Milanovic's open-mindedness and his efforts in a recent post on his blog to educate economists who often have a crude and superficial misunderstanding of Marx's labor theory of value.

    For context for my comments on Milanovic, I will first say a few words about my interpretation of Marx's labor theory of value (LTV). In my view, Marx's LTV is primarily a macro theory and the main question addressed in Marx's macro LTV is the determination of the total profit (or surplus-value) produced in the capitalist economy as a whole. Profit is the main goal of capitalist economies and should be a key variable in any theory of capitalism. Marx's theory of the total profit is that profit is the difference between the value produced by workers and the wages they are paid, i.e. that profit is produced by the "surplus labor" of workers.

    I argue that Marx's "surplus labor" theory of profit has very significant and wide-ranging explanatory power. Marx's theory provides straight-forward and robust explanations of the following important phenomena of capitalist economies: conflicts between capitalists and workers over wages, and over the length of the working day, and over the intensity of labor (i.e. how hard workers work, which determines in part how much value they produce); endogenous technological change (in order to reduce necessary labor and increase surplus labor and surplus-value); increasing concentration of capital and income(i.e. increasing inequality); the trend and fluctuations in the rate of profit over time; and endogenous cycles due to fluctuations in the rate of profit rate of profit. (A more complete discussion of the explanatory power of Marx's theory of profit is provided in my " Marx's Economic Theory: True or False? A Marxian Response to Blaug's Appraisal, " in Moseley (ed.), Heterodox Economic Theories: True or False?, Edward Elgar, 1995).

    This wide-ranging explanatory power of Marx's surplus labor theory of profit is especially impressive when compared to mainstream economics. In mainstream macroeconomics, there is no theory of profit at all; profit (or the rate of profit) is not even a variable in the theory! I was shocked when I realized in graduate school this absence of profit in mainstream macro, and am still shocked that there is no effort to include profit. Indeed, DSGE models go in the opposite direction and many models do not even have firms!

    Mainsteam micro does have a theory of profit (or interest) – the marginal productivity theory of distribution – but it is a weak and largely discredited theory. Marginal productivity theory has been shown by the capital controversy and other criticisms to have insoluble logical problems (the aggregation problem, reswitching, cannot integrate intermediate goods, etc.). And marginal productivity theory has very meager explanatory power and explains none of the important phenomena listed above that are explained by Marx's theory.

    Milanovic agrees that Marx's LTV is primarily a macro theory, but he interprets it in this post as only the assumption that "sum of values will be equal to sum of production prices". And he continues: "The former is an unobservable quantity so Marx's contention is not falsifiable. It is therefore an extra-scientific statement that we have to take on faith.

    I argue, to the contrary, that Marx's macro LTV is primarily a theory of profit and my conclusion that Marx's theory is the best theory of profit we have is not based on faith but is instead based on the standard scientific criterion of empirical explanatory power. It is much more accurate to say that marginal productivity theory is accepted by mainstream economists on faith, as Charles Ferguson famously said in his conclusion to the capital controversy.

    Now to my comments on Milanovic's three main points:

    1. Milanovic's main point is that the LTV is often misinterpreted as a simple micro theory that assumes that the prices of individual commodities are proportional to the labor-times required to produce them. Milanovic argues that is not true in a capitalist economy because of the equalization of the profit rate across industries with unequal ratios of capital to labor, so that according to Marx's theory, long-run equilibrium prices are determined by the equation: w + d + rK, where w is wages, d is depreciation and r is the economy-wide rate of profit (missing in this equation is the cost of intermediate goods, but I will ignore this).

    Milanovic emphasizes that Walras and Marshall had essentially the same equation for long-run equilibrium prices. I agree that all three theories of long-run equilibrium prices have this same form, but there is an important difference. Marx's theory provides a logically rigorous theory of the rate of profit in this equation (based on his theory of the total profit discussed above) and Walras and Marshall just take the rate of profit as given , disguised as an "opportunity cost", and thus provides no theory of profit at all . Therefore, I think Marx's theory of long-run equilibrium prices is superior to Walras' and Marshall's in this important sense.

    2. Milanovic's second main point is that Marx's theory of long-run equilibrium prices are "clearly very, very far from derisive statements that the labor theory of value means that people are just paid for their labor input regardless of what is the 'socially necessary labor' required to produce a good." I presume that this derisive statement means that workers produce more value than they are paid and thus are exploited in capitalism. But Branko is mistaken about this. Marx's theory of long-run equilibrium prices is based on his macro theory of profit according to which the source of profit is the surplus labor of workers. This conclusion is indeed derisive and that is the main (non-scientific) reason that Marx's theory of profit is rejected by mainstream economists in spite of its superior explanatory power.

    I know from previous correspondence that Milanovic understands well Marx's "exploitation" theory of profit, but he seems to overlook the connection between Marx's micro theory of prices of production and his macro theory of profit.

    3. Milanovic's third point is that Marx's labor theory of value is most helpful in understanding pre-capitalist economies and the relation between capitalism and non-capitalist economies today. I argue, to the contrary, that Marx's labor theory of value and profit is the best theory we have to understand the most important phenomena of capitalist economies, including 21 st century capitalism.

    It would be one thing if mainstream economics had a robust theory of profit with significant explanation power. But it has almost no theory of profit. Therefore it would seem to be appropriate from a scientific point of view that Marx's surplus labor theory of profit should be given more serious consideration.

    Thanks again to Milanovic and I look forward to further discussion.

    [Nov 26, 2016] Lysenkoism in the USA: Krugman and other neoliberal economists role in suppression of science.

    likbez

    I used to respect Krugman during Bush II presidency. His columns at this time looked like on target for me. No more.

    Now I view him as yet another despicable neoliberal shill. I stopped reading his columns long ago and kind of always suspect his views as insincere and unscientific.

    In this particular case the key question is about maintaining the standard of living which can be done only if manufacturing even in robotic variant is onshored and profits from it re-distributed in New Deal fashion. Technology is just a tool. There can be exception for it but generally attempts to produce everything outside the US and then sell it in the USA lead to proliferation of McJobs and lower standard of living. Creating robotic factories in the USA might not completely reverse the damage, but might be a step in the right direction. The nations can't exist by just flipping hamburgers for each other.

    Actually there is a term that explains well behavior of people like Krugman and it has certain predictive value as for the set of behaviors we observe from them. It is called Lysenkoism and it is about political control of science.

    See, for example:

    Yves in her book also touched this theme of political control of science. It might be a good time to reread it. The key ideas of "ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism " are still current.

    [Nov 24, 2016] In Last Minute Twist OPEC Demands Big Production Cuts From Non-OPEC Members; Russia Balks Zero Hedge

    ZeroHedge is usually deceiving about oil production issues, being on a short side all the time, and this exaggerating OPEC differences (Which proved to be substantial due to obstuctionalist KAS and later Iran positions)... So you need to take everything they write with a grain of salt.
    Notable quotes:
    "... Finally, adding to the complexity, there are two more wildcards: one is Iran oil production and whether Trump will seek to undo the Iranian nuclear deal . Should that happen, and if sanctions are reintroduced, some 1 million barrels in daily oil exports from Iran may go offline, further pressuring the market. ..."
    www.zerohedge.com
    ...Reuters countered that according to an OPEC source the group had yet to decide on the final figures to be discussed on Nov. 28, when OPEC and non-OPEC experts meet in Vienna. As previously reported, OPEC is expected to discuss production cuts of 4.0-4.5% among its members at the Vienna meeting to comply with the roughly 1.2mmbpd reduction as set forth in the Algiers meeting which expects total OPEC output of 32.5-33.0mmbpd, but Iran and Iraq still have reservations about how much they want to contribute.

    A cut of 880,000 bpd would represent less than 2% of current total non-OPEC output.

    Shortly after the report came out, Russian energy minister Alexander Novak said Russia was working with Kazakhstan and Mexico, though not the United States, on joint output curbs, but reiterated Moscow preferred to freeze output over cuts.

    ...Novak also said that Russia's position "has remained unchanged and consistent" (even if the algos may have misinterpreted it), and added that "as our president said earlier, we are ready to freeze production at the current levels." President Vladimir Putin on Monday reaffirmed the country is willing to freeze, adding he sees no obstacles to an OPEC agreement this month after the group made major progress in overcoming differences.

    ...Putting even a cut of 880,000 bpd in context, this would represent less than 2 percent of current total non-OPEC output.

    ... ... ...

    * * *

    Finally, adding to the complexity, there are two more wildcards: one is Iran oil production and whether Trump will seek to undo the Iranian nuclear deal. Should that happen, and if sanctions are reintroduced, some 1 million barrels in daily oil exports from Iran may go offline, further pressuring the market. The other is suddenly waning Chinese demand, on what some analysts have speculated is the result of the Chinese Strategic Petroleum Reserve approaching full status, which could eliminate as much as 1.1 million bpd in demand from the market once China stop filling up its extensive SPR.

    [Nov 21, 2016] Ron Paul Reveals Hit List Of Alleged Fake News Journalists

    Notable quotes:
    "... CNN is Paul's biggest alleged culprit, with nine entries, followed by the NY Times and MSNBC, with six each. The NY Times has recently come under fire from President-elect Donald Trump, who accuses them of being "totally wrong" on news regarding his transition team, while describing them as "failing." ..."
    "... CNN's Wolf Blitzer is also amongst those named on the list. In an email from the Democratic National Committee (DNC) released by WikiLeaks, the DNC staff discusses sending questions to CNN for an interview with Donald Trump. ..."
    "... So-called 'fake news' has been recently attacked by US President Barack Obama, who claimed that false news shared online may have played a role in Donald Trump's victory in the US presidential election. ..."
    Nov 21, 2016 | www.infowars.com

    "This list contains the culprits who told us that Iraq had weapons of mass destruction and lied us into multiple bogus wars,"according to a report on his website, Ron Paul Liberty Report. Paul claims the list is sourced and "holds a lot more water" than a list previously released by Melissa Zimdars, who is described on Paul's website as "a leftist feminist professor."

    "These are the news sources that told us 'if you like your doctor, you can keep your doctor,'" he said. "They told us that Hillary Clinton had a 98% of winning the election. They tell us in a never-ending loop that 'The economy is in great shape!'"

    Paul's list includes the full names of the "fake news" journalists as well as the publications they write for, with what appears to be hyperlinks to where the allegations are sourced from. In most cases, this is WikiLeaks, but none of the hyperlinks are working at present, leaving the exact sources of the list unknown.

    CNN is Paul's biggest alleged culprit, with nine entries, followed by the NY Times and MSNBC, with six each. The NY Times has recently come under fire from President-elect Donald Trump, who accuses them of being "totally wrong" on news regarding his transition team, while describing them as "failing."

    The publication hit back, however, saying their business has increased since his election, with a surge in new subscriptions.

    CNN's Wolf Blitzer is also amongst those named on the list. In an email from the Democratic National Committee (DNC) released by WikiLeaks, the DNC staff discusses sending questions to CNN for an interview with Donald Trump.

    Also listed is NY Times journalist Maggie Haberman, whom leaked emails showed working closely with Clinton's campaign to present the Democratic candidate in a favorable light.

    So-called 'fake news' has been recently attacked by US President Barack Obama, who claimed that false news shared online may have played a role in Donald Trump's victory in the US presidential election.

    Facebook head Mark Zuckerberg has now said that the social media site may begin entrusting third parties with filtering the news.

    [Nov 21, 2016] Bill Black Bloomberg Notices Paul Romers Indictment of Macroeconomics naked capitalism

    Notable quotes:
    "... For more than three decades, macroeconomics has gone backwards," the paper began. Romer closed out his argument, some 20 pages later, by accusing a cohort of economists of drifting away from science, more interested in preserving reputations than testing their theories against reality, "more committed to friends than facts." In between, he offers a wicked parody of a modern macro argument: "Assume A, assume B, blah blah blah and so we have proven that P is true ..."
    "... The idea that consumers and businesses always make rational choices pervades mainstream economics. Romer thinks that's not only wrong, but may lead to the misleading conclusion that government action can't fix big problems. ..."
    "... There is no better place to be writing this than from (nearly) Minneapolis, for the University of Minnesota's economics department is the most devoted coven worshipping the most extreme form of "rational expectations." The most famous cultists have now relocated, but the U. Minnesota economics department remains fanatical in its devotion to rational expectations theory. ..."
    "... All of this means that Romer's denunciations were sure to hit home far harder with mainstream and theoclassical economists than anything a heterodox economist could write. ..."
    "... What this paragraph reveals is the classic tactic of theoclassical economists – they simply ignore real criticism. Lucas, Prescott, and Sargent all care desperately about Romer's criticism – but they all refuse to engage substantively with his critique. One has to love the arrogance of Sargent in "responding" – without reading – to Romer's critique. Sargent cannot, of course, respond to a critique he has never read so he instead makes a crude attempt to insult Romer, asserting that Romer has not done any scientific work in three decades. ..."
    "... The rational expectations purists have been unable to come up with a response to their predictive failures and their false model of human behavior for thirty years. The Bloomberg article does not understand a subtle point about their non-defense defense, as shown in these key passages. ..."
    "... What the rational expectations devotees are actually saying is their standard line, which is a radical departure from the scientific method. Their mantra is "it takes a model to beat a model." That mantra violates the scientific method. Their models are designed to embody their rational expectations theory. Those models' predictive ability is pathetic, which means that their theory and models are both falsified and should be rejected. The academic proponents of modern macro models, however, assert that their models are incapable of falsification by testing and predictive failure. This is not science, but theology. ..."
    "... V.V. Chari's criticism of Romer is revealing. He complains that Romer does not want to "build on [rational expectation theory's] foundations." Why would Romer want to commit such a pointless act? Romer's point is that rational expectations is a failed theory that needs to be rejected so macroeconomics can move on to useful endeavors. ..."
    "... Rational expectations theory has no such empirical foundations. ..."
    "... Further, the dynamic stochastic general equilibrium (DSGE) models routinely fail the predictive test and, as Romer details, fail despite the use of dozens of ways in which the models are "gamed" with arbitrary inputs and restrictions that have no theoretical or empirical basis. Chari is right to describe the modern macro model as an "edifice." I would add that it is a baroque edifice top heavy with ornamental features designed to hide its lack of a foundation. Modern macro collapsed as soon as its devotees tried to build without an empirical foundation. ..."
    "... The rational expectation devotees respond that predictive failures – no matter how extreme or frequent – cannot falsify their models or their theories. The proponents claim that only a better model, with superior predictive ability can beat their model. ..."
    "... Kocherlakota's summary description is appropriately terse. He later explains the dogmatic gloss that devotees place on each of these five points. The "budget constraint," for example, means that nations with sovereign currencies such as the U.S. cannot run deficits, even to fight severe recessions or depressions. Why? Because theoclassical economists are enormous believers in austerity. As Kocherlakota archly phrased the matter, "freshwater" DSGE models were so attractive to theoclassical macro types because their model perfectly tracked their ideology. ..."
    "... Specifying household preferences and firm objectives is equally erroneous, as Akerlof and Romer's 1993 article on "Looting" demonstrated. "Firms" do not have "objectives." Employees have "objectives," and the controlling officers' "objectives" are the most powerful drivers of employee behavior. ..."
    "... Kocherlakota unintentionally highlighted modern macros' inability to incorporate even massive frauds driving national scandals and banking crises, despite the efforts of Akerlof (1970) (a market for "lemons") and Akerlof and Romer 1993: ("looting") in this passage. ..."
    "... If macroeconomics, outside the cult of modern macro, were a car, it would not be "broken." It would be episodically broken when the rational expectations devotees got hold of monetary or fiscal policy. The rational expectations model fails the most fundamental test of a financial model – people trying to make money by anticipating the macroeconomics consequences of changes in monetary and fiscal policy overwhelmingly do not use their models because they are known to have pathetic predictive ability. The alternative models that embrace Keynesian analysis and are not dependent on the fiction of rational expectations function pretty well. The real world macro car, when driven by real world drivers, works OK. Essentially, the rational expectations devotees say that we can never drive the macro "car" because the public will defeat any effort to drive the economy in any direction. Instead, the economy will lurch about n response to random technological "shocks" that cannot be predicted because they occur without any relationship to any public policy choices. ..."
    "... I am completely confused about the prediction of "rational choices". Do they include going bankrupt on purpose and letting your investors take the hit, burning your building down for the insurance money, hostile takeover behavior where businesses are run into the ground on purpose, tax strategies, people going on unemployment when they want a vacation from work, and on and on? These are decisions that have a rationale for the people who make them, and they have not been uncommon. Perhaps "economists" are best off observing not predicting "human behavior". ..."
    "... I majored in economics. as you go up higher up into the dismal science, the more deranged it gets. The reason they are vague is because they don't know what they are talking about. They don't consider the real world, and as Bill Black's so brilliantly points out, they are in no hurry to out themselves as frauds. ..."
    "... thanks, Simon. there must be something in those mental masturbation models for some people. justification for something the 99 % are all paying for most likely ..."
    "... In some natural sciences, abandoning equilibrium models and replacing them with dynamic models have led to great progress, and looking at the actual time evolution of economies, there is a great deal of dynamics, such as growth, recessions, demography, natural catastrophes, immigration/emigration, resource discovery and depletion, technological progress. ..."
    "... Since our economy has been gradually going casino for so many years, it makes sense that the folks who hold the reigns would make every effort to assure that all their key players adhere to their singular perspectives. ..."
    "... The Nobel Memorial Prize in economics promotes the illusion that economics is a science. It is better conceptualized as a literary genre, and economists should be forced to compete with other writers for the prize in literature. ..."
    "... Bill Black has a fascinating opinion on unnecessary complexity and I agree with him 200 percent. ..."
    "... interesting about Kocherlakota formerly being a rational expectations devotee just the phrase 'rational expectations' is mind boggling as if there were no reaction to any action anywhere. Jack Bogle was on the news this morning laughing about stock picking and saying that every stock picker that makes money is balanced out by another one who loses money and so the only thing that makes money net-net is the long term progress of the market, (or society I would say – and that requires planning). ..."
    "... Not one mention of Chaos or Catastrophe Theory, which are theories of systems with non linear feedback (aka: Fear and Greed), which appear to me to be fundamental aspects of Economics, especially the humans who are the Economy. ..."
    "... Two slogans I read somewhere recently seem appropriate for theoclassical economics: Ideology is easy, thinking is hard. Belief is belonging. ..."
    "... One doesn't have to have read any Reformation theology, but only to have observed more or less casually that human being are scarcely rational even about their own self-interest, and then only self-deceptively. Thomas Frank has commented effectively on that point in the political arena in What's the Matter with Kansas. To wit: Republicans have, he points out, diverted voters attention to social/cultural issues while picking their pockets. Perhaps one might sense an intersection of politics and economics on the latter point. ..."
    Nov 21, 2016 | www.nakedcapitalism.com

    By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly published at New Economic Perspectives

    Bloomberg has written an article about the origins of Paul Romer's increasingly famous critique of modern macroeconomics.

    His intention actually had been to write a paper that would celebrate advances in the understanding of what drives economic growth. But when he sat down to write it in the months before taking over as the World Bank's chief economist, Romer quickly found his heart wasn't in it. The world economy wasn't growing much anyway; and the math that many colleagues were using to model it seemed unrealistic. He watched a documentary about the Church of Scientology, and was struck by how groupthink can operate.

    So, Romer said in an interview at the Bank's Washington headquarters, "I just thought, OK, I'm going to say what I think. I don't know if I'm the right person, but no one else is going to say it. So I said it."

    The upshot was "The Trouble With Macroeconomics," a scathing critique that landed among Romer's peers like a grenade.

    A bit of background makes the first paragraph more understandable. Romer's specialty is developmental economics.

    There are many economists who have said for years that modern macroeconomics is an abject failure. But all economists are not equal, and Romer is both an extremely distinguished economist and the World Bank's chief economist. When he writes that macroeconomics is absurd his position gets vastly more attention from the field.

    The Bloomberg article humorously summarizes Romer's article.

    "For more than three decades, macroeconomics has gone backwards," the paper began. Romer closed out his argument, some 20 pages later, by accusing a cohort of economists of drifting away from science, more interested in preserving reputations than testing their theories against reality, "more committed to friends than facts." In between, he offers a wicked parody of a modern macro argument: "Assume A, assume B, blah blah blah and so we have proven that P is true."

    The idea that consumers and businesses always make rational choices pervades mainstream economics. Romer thinks that's not only wrong, but may lead to the misleading conclusion that government action can't fix big problems.

    There is no better place to be writing this than from (nearly) Minneapolis, for the University of Minnesota's economics department is the most devoted coven worshipping the most extreme form of "rational expectations." The most famous cultists have now relocated, but the U. Minnesota economics department remains fanatical in its devotion to rational expectations theory.

    A belief that consumers and businesses always make rational choices does not "pervade mainstream economics." Mainstream economics is increasingly influenced by reality, particularly in the form of behavioral economics. Behavioral economics, which has led to multiple Nobel awards, has many currents, but each of them agrees that consumers and business people typically do not make rational decisions even in simpler tasks, much less demonstrate the ability to predict the future required by rational expectations theory. Similarly, even the proponents of modern macroeconomics admit that its predictive ability – and predictive ability is supposed to be their holy grail of legitimacy – is beyond pathetic. What is true is that mainstream economics' most egregious errors have come from assuming contrary to reality in a wide range of contexts that corporate officers, consumers, and investors make optimal decisions that maximize the firm or the household's utility.

    In any real scientific field modern macro would, decades ago, have been abandoned as an abject failure. Romer, therefore, is not storming some impregnable bulwark of economics. He is calling an obvious, abject failure an obvious, abject failure. Private sector finance participants typically believe the academic proponents of rational expectations theory are delusional. Romer is calling out elites in his profession who have ignored these failures and doubled and tripled-down on their failed dogmas for decades. This makes the Bloomberg article's title deeply misleading: "The Rebel Economist Who Blew Up Macroeconomics."

    Romer is not a rebel. He did not blow up academic, mainstream macroeconomics – the academic proponents of modern macroeconomics blew it up decades ago. Romer is mainstream, and he is sympathetic on personal and ideological grounds to the theoclasscial economist most famous for developing rational expectations theory. Romer has strongly libertarian views and did his doctoral work under Robert Lucas. Romer has long been appreciative of Lucas. All of this means that Romer's denunciations were sure to hit home far harder with mainstream and theoclassical economists than anything a heterodox economist could write.

    The same Bloomberg article made a key factual claim that is literally true but misleading.

    What's at stake far exceeds hurt feelings in the ivory tower. Central banks and other policy makers use the models that Romer says are flawed.

    Central banks and private economic forecasters rarely use modern macro models, though they have begun to use New Keynesian models that are hybrids. They do not do use "freshwater" models because they are known to have terrible predictive ability and because alternative models not based on rational expectations have far superior predictive ability. The private financial sector typically does not rely on modern macro models, even the New Keynesian hybrids. Romer is not saying that the models are "flawed" – he is explaining that they are inherently failed models. Worse, he is saying that the designers of the models know they are failed and respond by gimmicking the models by littering them with myriad assumptions that have no empirical or theoretical basis and are designed to try to make the models produce less absurd results.

    I explained that Romer was far from the first to call out modern academic macroeconomics as a failure but that he is a prominent mainstream economist. The Bloomberg article's most interesting reveal was the response by the troika of economists must associated with rational expectations theory to Romer's article decrying their dogmas.

    Lucas and Prescott didn't respond to requests for comments on Romer's paper. Sargent did. He said he hadn't read it, but suggested that Romer may be out of touch with the ways that rational-expectations economists have adapted their models to reflect how people and firms actually behave. Sargent said in an e-mail that Romer himself drew heavily on the school's insights, back when he was "still doing scientific work in economics 25 or 30 years ago."

    What this paragraph reveals is the classic tactic of theoclassical economists – they simply ignore real criticism. Lucas, Prescott, and Sargent all care desperately about Romer's criticism – but they all refuse to engage substantively with his critique. One has to love the arrogance of Sargent in "responding" – without reading – to Romer's critique. Sargent cannot, of course, respond to a critique he has never read so he instead makes a crude attempt to insult Romer, asserting that Romer has not done any scientific work in three decades.

    The rational expectations purists have been unable to come up with a response to their predictive failures and their false model of human behavior for thirty years. The Bloomberg article does not understand a subtle point about their non-defense defense, as shown in these key passages.

    Allies of the three Nobelists have been more outspoken, and many of them point out that Romer - unlike Keynes in the 1930s - doesn't offer a new framework to replace the one he says has failed.

    "Burning down the edifice, and saying we'll figure out what we'll build on its foundations later, just does not seem like a constructive way to proceed," said V. V. Chari, an economics professor at the University of Minnesota.

    Romer's heard that line often, and bristles at it: "I'm saying, 'the car is broken.' And everyone's saying, 'Romer's a terrible guy, because he couldn't fix the car'."

    What the rational expectations devotees are actually saying is their standard line, which is a radical departure from the scientific method. Their mantra is "it takes a model to beat a model." That mantra violates the scientific method. Their models are designed to embody their rational expectations theory. Those models' predictive ability is pathetic, which means that their theory and models are both falsified and should be rejected. The academic proponents of modern macro models, however, assert that their models are incapable of falsification by testing and predictive failure. This is not science, but theology.

    V.V. Chari's criticism of Romer is revealing. He complains that Romer does not want to "build on [rational expectation theory's] foundations." Why would Romer want to commit such a pointless act? Romer's point is that rational expectations is a failed theory that needs to be rejected so macroeconomics can move on to useful endeavors.

    A "foundation" in such a building metaphor is the deep, well-grounded stone or reinforced concrete beneath the visible building that is attached to solid bedrock. Rational expectations theory has no such empirical foundations. It was not based on testing that found that people behaved in accordance with the theory. Behavioral economics and finance, by contrast, is based on a growing empirical base – virtually all of which refutes the first three assumptions of the models. Similarly, the work of Akerlof (1970), Akerlof & Romer (1993), and the work of white-collar criminologists has falsified each of the first three assumptions of the models.

    Further, the dynamic stochastic general equilibrium (DSGE) models routinely fail the predictive test and, as Romer details, fail despite the use of dozens of ways in which the models are "gamed" with arbitrary inputs and restrictions that have no theoretical or empirical basis. Chari is right to describe the modern macro model as an "edifice." I would add that it is a baroque edifice top heavy with ornamental features designed to hide its lack of a foundation. Modern macro collapsed as soon as its devotees tried to build without an empirical foundation.

    The rational expectation devotees respond that predictive failures – no matter how extreme or frequent – cannot falsify their models or their theories. The proponents claim that only a better model, with superior predictive ability can beat their model. That might sound acceptable to some, but there is a critical unstated twist. The many rival models actually used by the private sector and central banks that produce far superior predictive ability can never be treated as "better models" to these devotees because the models with far superior predictive powers reject rational expectations theory, rational decision-making, and the "budget constraint." To the devotees, only DSGE models that accept this trio of market fictions are eligible to be acceptable "models." Dr. Kocherlakota states that acceptable models "share five key features." These five characteristics define DSGE models.

    They specify budget constraints for households, technologies for firms, and resource constraints for the overall economy. They specify household preferences and firm objectives. They assume forward-looking behavior for firms and households. They include the shocks that firms and households face. They are models of the entire macroeconomy.

    Kocherlakota's summary description is appropriately terse. He later explains the dogmatic gloss that devotees place on each of these five points. The "budget constraint," for example, means that nations with sovereign currencies such as the U.S. cannot run deficits, even to fight severe recessions or depressions. Why? Because theoclassical economists are enormous believers in austerity. As Kocherlakota archly phrased the matter, "freshwater" DSGE models were so attractive to theoclassical macro types because their model perfectly tracked their ideology.

    [A]lmost coincidentally-in these models, all government interventions (including all forms of stabilization policy) are undesirable.

    Yes, "almost coincidentally."

    Specifying household preferences and firm objectives is equally erroneous, as Akerlof and Romer's 1993 article on "Looting" demonstrated. "Firms" do not have "objectives." Employees have "objectives," and the controlling officers' "objectives" are the most powerful drivers of employee behavior.

    As Akerlof and Romer (and every modern crisis) demonstrated, this frequently leads to firm practices that harm the firm, the consumer, and the shareholders. Such behavior, however, is impossible under the second assumption, so any model (such as control fraud or "looting") that violates the assumption is not eligible to be a rival model because it these superior models do not produce "general equilibrium." The "GE" in a "DSGE" model is general equilibrium, so rival models from economics and criminology that note that the economy is not a self-correcting apparatus that produces general equilibrium are ruled out as superior models even though they are superior in that they have an empirical and theoretical basis and demonstrate far superior predictive results.

    Kocherlakota unintentionally highlighted modern macros' inability to incorporate even massive frauds driving national scandals and banking crises, despite the efforts of Akerlof (1970) (a market for "lemons") and Akerlof and Romer 1993: ("looting") in this passage.

    In the macro models of the 1980s, all mutually beneficial trades occur without delay. This assumption of frictionless exchange made solving these models easy. However, it also made the models less compelling.

    He then goes on to a delighted description of macro economists now sometimes building in (arbitrary) lags ("frictions") in the time required to accomplish "all mutually beneficial trades." But what of the three great fraud epidemics that produced the U.S. financial crisis and the Great Recession? Sorry, that's not allowed into the "friction" canon. The market model is still one of perfection (albeit slightly delayed). It does not matter how many massive financial scandals occur in which the largest UK banks and Wells Fargo deliberately abuse their customers by encouraging them to engage in transactions that will harm them and make the bankers rich. It doesn't not matter that over ten million Americans were induced by bankers and their agents to pay excessive interest rates in return for yield spread premiums (YSP) to the bankers and brokers. None of these things are allowed to happen in these models. Your better model, which includes such frauds and abuses, is not allowed precisely because it (a) is better and (b) falsifies the theoclassical ideology underlying "rational expectations" theory.

    The assumption of "forward looking behavior" produces "expectations," which are assumed to be accurate and rational. Theoclassical proponents claim that we all have the ability to predict vast aspects of the financial future. While we are not perfect, we are optimal in our forecasts given the state of knowledge. If your rival model lacks rational expectations, it isn't a real model. Romer rejects the rational expectations myth, so he is incapable of presenting a superior model to the devotees of rational expectations.

    If macroeconomics, outside the cult of modern macro, were a car, it would not be "broken." It would be episodically broken when the rational expectations devotees got hold of monetary or fiscal policy. The rational expectations model fails the most fundamental test of a financial model – people trying to make money by anticipating the macroeconomics consequences of changes in monetary and fiscal policy overwhelmingly do not use their models because they are known to have pathetic predictive ability. The alternative models that embrace Keynesian analysis and are not dependent on the fiction of rational expectations function pretty well. The real world macro car, when driven by real world drivers, works OK. Essentially, the rational expectations devotees say that we can never drive the macro "car" because the public will defeat any effort to drive the economy in any direction. Instead, the economy will lurch about n response to random technological "shocks" that cannot be predicted because they occur without any relationship to any public policy choices.

    Romer takes particular delight in shredding the pretension to "science" in the model's abuse of shocks. Again, however, the Bloomberg article seriously misleads in making it appear that his critique of shocks is novel. Then Minneapolis Fed Chair Dr. Kocherlakota (formerly chair of the U. Minnesota economics department, where he was a "rational expectations" devotee) forcefully owned up to the egregious predictive failures of the models. He acknowledged that "macro models are driven by patently unrealistic shocks."

    It is unfortunate that Bloomberg article about Romer's article is weak. It is useful, however, because its journalistic inquiry allows us to know how deep in their bunker Sargent, Lucas, and Prescott remain. They still refuse to engage substantively with Romer's critique of not only their failures but their intellectual dishonesty and cowardice. It is astonishing that multiple economists were awarded Nobel prizes for creating the increasingly baroque failure of modern macro. In any other field it would be a scandal that would shake the discipline to the core and cause it to reexamine how it conducted research and trained faculty. In economics, however, a huge proportion of Nobel awards have gone to theoclassical economists whose predictions have been routinely falsified and whose policy recommendations have proven disastrous. Theoclassical economists, with only a handful of exceptions, express no concern about these failures.

    This entry was posted in Dubious statistics , Economic fundamentals , Guest Post , Macroeconomic policy , Market inefficiencies , Ridiculously obvious scams , The dismal science

    Portia November 21, 2016 at 11:32 am

    I am completely confused about the prediction of "rational choices". Do they include going bankrupt on purpose and letting your investors take the hit, burning your building down for the insurance money, hostile takeover behavior where businesses are run into the ground on purpose, tax strategies, people going on unemployment when they want a vacation from work, and on and on? These are decisions that have a rationale for the people who make them, and they have not been uncommon. Perhaps "economists" are best off observing not predicting "human behavior".

    shinola November 21, 2016 at 11:47 am

    I was fortunate enough to have an econ. prof. (mid 70's) who was also my student counselor tell me that unless I intended to work for the gov't or teach the subject, a degree in econ. was pointless. What's taught in class has very little to do with the real world.

    Anyone who contends that econ is a "science" rather than philosophy is deluded or just trying to protect their place in the hierarchy. Seems that "physics envy" is never going away.

    I'll see your DSGE model & raise with with the IBGYBG* model; in theory, you should win that hand but I'll be walking away with the actual money.

    *(by the time this blows up) I'll Be Gone & You'll Be Gone

    Simon November 21, 2016 at 12:17 pm

    Portia,

    I majored in economics. as you go up higher up into the dismal science, the more deranged it gets. The reason they are vague is because they don't know what they are talking about. They don't consider the real world, and as Bill Black's so brilliantly points out, they are in no hurry to out themselves as frauds.

    Portia November 21, 2016 at 12:37 pm

    thanks, Simon. there must be something in those mental masturbation models for some people. justification for something the 99 % are all paying for most likely

    diptherio November 21, 2016 at 3:14 pm

    The reason they are vague is because they don't know what they are talking about

    Which also explains about 90% of the math

    beth November 21, 2016 at 12:43 pm

    Thanks again, Bill. A thanks to Paul Romer and Bloomberg too. How long will it take for the NYT , FT, The Guardian and WSJ to understand?

    Do $$$ make one "smart?" /sarc

    Ruben November 21, 2016 at 12:51 pm

    I am not sure which is the greatest shortcoming of the macro-economy theory described by Black: rational expectations or global equilibrium?

    In some natural sciences, abandoning equilibrium models and replacing them with dynamic models have led to great progress, and looking at the actual time evolution of economies, there is a great deal of dynamics, such as growth, recessions, demography, natural catastrophes, immigration/emigration, resource discovery and depletion, technological progress.

    Jim A November 21, 2016 at 1:14 pm

    I sometimes like to use the analogy of the famous failure of the Tacoma Narrows bridge failure. The engineers calculated the maximum force that the wind would have on the bridge, but didn't calculate the dynamic aerodynamic effect as the bridge deck swayed in the wind. The result was a spectacular failure.

    Watt4Bob November 21, 2016 at 1:01 pm

    Since our economy has been gradually going casino for so many years, it makes sense that the folks who hold the reigns would make every effort to assure that all their key players adhere to their singular perspectives.

    The most important of these perspectives is that there is no higher human purpose than to make a lot of money, in essence, that greed is good.

    Thus the problem facing economists worshiping at the altar of "rational expectations" is that the only rational expectation that is accepted as 'truly rational', is first and foremost, the love of money.

    This leads to problems for businesses, as truly selfish, and money-motivated people are actually rare, as most people have a wide range of possible motivations working in their lives.

    This is why business 'leaders' give prospective employees tests to find the people they can 'trust', which is to say find those who are motivated by money, which is the only motivating factor our masters find useful.

    Of course those who are motivated exclusively by the love of money are also those who believe that austerity is the proper medicine for the rest of us.

    There's one more thing about people who are motivated only by the need to accumulate money, they also tend to steal anything that isn't tied down.

    This doesn't bother FIRE sector employers since they are only concerned to ferret-out those whose motivations might be polluted by inclinations other than greed.

    Anyway, it seems to me that the importance of 'rational expectations' is in predicting the behavior of FIRE sector employees, not the economy as a whole.

    As far as the bulk of humanity goes, the only true 'rational expectation' is that people have many and varied motivations that make it hard to predict their behavior.

    shinola November 21, 2016 at 1:21 pm

    Speaking of "going casino"

    Hey Econ. Prof. – I'll see your DSGE model & raise with my IBGYBG** model. In theory, you'll win the hand but we'll see who actually walks away the money.

    **(by the time this thing blows up) I'll Be Gone, You'll Be Gone

    shinola November 21, 2016 at 1:41 pm

    sorry for the repeat – prior disappeared then re-appeared nearly 2 hour later ???

    dutch November 21, 2016 at 1:04 pm

    The Nobel Memorial Prize in economics promotes the illusion that economics is a science. It is better conceptualized as a literary genre, and economists should be forced to compete with other writers for the prize in literature.

    Disturbed Voter November 21, 2016 at 1:10 pm

    We need to get back to basics, to the real economy of people and necessary supplies to support people. Model a simple city, with a simple agricultural hinterland. You can know how many bushels of grain equivalent are necessary for subsistence economy. You can know how many people you have in the countryside and in the city. You can know how many bushels of grain equivalent are in storage. You can estimate how much of the economy is barter and how much is cash purchase. You can know how much money is in circulation, and from those determine what velocity the money needs to have, to pay for all that bushels of grain equivalent. You don't need calculus, just arithmetic. End the sophistry and obscurity thru unnecessary complexity.

    madame de farge November 21, 2016 at 3:20 pm

    Bill Black has a fascinating opinion on unnecessary complexity and I agree with him 200 percent.

    susan the other November 21, 2016 at 1:11 pm

    interesting about Kocherlakota formerly being a rational expectations devotee just the phrase 'rational expectations' is mind boggling as if there were no reaction to any action anywhere. Jack Bogle was on the news this morning laughing about stock picking and saying that every stock picker that makes money is balanced out by another one who loses money and so the only thing that makes money net-net is the long term progress of the market, (or society I would say – and that requires planning).

    Synoia November 21, 2016 at 1:45 pm

    Not one mention of Chaos or Catastrophe Theory, which are theories of systems with non linear feedback (aka: Fear and Greed), which appear to me to be fundamental aspects of Economics, especially the humans who are the Economy.

    To me that is a large omission.

    Another Anon November 21, 2016 at 1:55 pm

    Two slogans I read somewhere recently seem appropriate for theoclassical economics: Ideology is easy, thinking is hard. Belief is belonging.

    Robin Kash November 21, 2016 at 1:57 pm

    Perhaps an approach to a solution for economists who are rightly disgusted with the continuing failures of macroeconomics is to confess that economics is theology/philosophy and not science. Economics lands on the "mammon" side of serving God or mammon.

    One doesn't have to have read any Reformation theology, but only to have observed more or less casually that human being are scarcely rational even about their own self-interest, and then only self-deceptively. Thomas Frank has commented effectively on that point in the political arena in What's the Matter with Kansas. To wit: Republicans have, he points out, diverted voters attention to social/cultural issues while picking their pockets. Perhaps one might sense an intersection of politics and economics on the latter point.

    There is less need to moralize about "sin" than to see it as an heuristic. That is, one might begin by assuming that businesses and individuals are not only guided by rationality, but to the contrary are aided by economists, say, of the U of Minnesota ilk, to rely upon the myth of rationality to cloak fundamental selfishness, which economists have neutered by casting it as "self-interest." Selfishness is the root of continuing, destructive "irrationality," because it is part of what defines a root of sin, i.e., missing the mark.

    An economics of gratitude for shared abundance would be closer to the mark.

    diptherio November 21, 2016 at 4:28 pm

    Here's the link to the paper by Romer:

    http://www.law.yale.edu/system/files/area/workshop/leo/leo16_romer.pdf

    [Nov 21, 2016] Belgiums Dutroux Pedophile, Child Rape Affair A Road Map for Deep-State Criminality

    Nov 20, 2016 | www.newnationalist.net
    Strong, credible allegations of high-level criminal activity can bring down a government. When the government lacks an effective, fact-based defense, other techniques must be employed. The success of these techniques depends heavily upon a cooperative, controlled press and a mere token opposition party.

    1. Dummy up . If it's not reported, if it's not news, it didn't happen.

    2. Wax indignant . This is also known as the "how dare you" gambit.

    3. Characterize the charges as "rumors" or, better yet, "wild rumors." If, in spite of the news blackout, the public is still able to learn about the suspicious facts, it can only be through "rumors."

    4. Knock down straw men . Deal only with the weakest aspect of the weakest charges. Even better, create your own straw men. Make up wild rumors and give them lead play when you appear to debunk all the charges, real and fanciful alike.

    5. Call the skeptics names like "conspiracy theorist," "nut," "ranter," "kook," "crackpot" and, of course, "rumor monger." You must then carefully avoid fair and open debate with any of the people you have thus maligned.

    6. Impugn motives . Attempt to marginalize the critics by suggesting strongly that they are not really interested in the truth but are simply pursuing a partisan political agenda or are out to make money.

    7. Invoke authority . Here the controlled press and the sham opposition can be very useful.

    8. Dismiss the charges as "old news."

    9. Come half-clean . This is also known as "confession and avoidance" or "taking the limited hang-out route." This way, you create the impression of candor and honesty while you admit only to relatively harmless, less-than-criminal "mistakes." This stratagem often requires the embrace of a fall-back position quite different from the one originally taken.

    10. Characterize the crimes as impossibly complex and the truth as ultimately unknowable.

    11. Reason backward , using the deductive method with a vengeance. With thoroughly rigorous deduction, troublesome evidence is irrelevant. For example: We have a completely free press. If they know of evidence that the Bureau of Alcohol, Tobacco, and Firearms (BATF) had prior knowledge of the Oklahoma City bombing they would have reported it. They haven't reported it, so there was no prior knowledge by the BATF. Another variation on this theme involves the likelihood of a conspiracy leaker and a press that would report it.

    12. Require the skeptics to solve the crime completely.

    13. Change the subject . This technique includes creating and/or reporting a distraction.

    [Nov 21, 2016] Obama crosses the line in hypocrisy when he start talking about the values of democracy, and free speech, and international norms, and rule of law, respecting the ability of other countries to determine their own destiny and preserve their sovereignty and territorial integrity. What about Libya, Syria and Yemen we would like ask this hypocrite

    www.moonofalabama.org

    Ghostship | Nov 17, 2016 10:09:56 PM | 47

    At least with Trump I expect him to talk crap but Obama talks crap as well when he should know better:

    The values that we talked about -- the values of democracy, and free speech, and international norms, and rule of law, respecting the ability of other countries to determine their own destiny and preserve their sovereignty and territorial integrity -- those things are not something that we can set aside.

    The unbridled hypocrisy makes me want to puke.

    [Nov 21, 2016] Michael Hudson Donald Trump Wants to Make the 1% Even Richer

    Notable quotes:
    "... J is for Junk Economics: A Survivor's Guide to Economic Vocabulary in an Age of Deception. ..."
    "... The stock market has gone up since 2008 in America, in Europe, all over the world because the central banks have flooded the economy with creating new money. They didn't create the money to hire workers. They didn't create the money to build infrastructure, they didn't create the money to invest in the economy. They didn't create the money to pay off the mortgages of people who had junk mortgages and were exploitive. They didn't create the money to write of student loans. All the money that was created, every penny, was created to give to the banks. To the Wall Street banks at 0.1% interests to create reserves at the Federal Reserve so that the banks could then lend out money and what did they do to ' who did they lend it to? ..."
    "... Well they lent to corporate [raiders]. So, part of the reason the stock market has gone up is that corporate [raiders] have borrowed very inexpensively 1%, say from a bank, and bought companies whose dividend rates are 3% or 4 or 5% and they get what's called the arbitrage, the difference ..."
    "... As a result of paying interest to the banks and this borrowed money, you don't have to pay income tax on it because this is counted as a cost of doing business, not as a cost of takeover. ..."
    "... The first thing they do is tighten working condition. They work the labor harder. They let the labor force go. When people retire, they don't hire new workers. They just work the remaining workers all the more. So, what's happened isn't a new investment. It's just the opposite. It's disinvestment. It's asset stripping. What creates the stock market going up is not capital formation. It's asset stripping. When Donald Trump calls that wealth creation, it means his wealth- meaning the money he's been able to make. But that money has been made by making the economy poorer. ..."
    "... Well they don't explain why it's not you. The reason they're living better is what used to be called a transfer payment. Something that is not really earned but it's just a transfer of income like from a rent when a landlord will raise the rent, all of a sudden, same house, nobody's invested more. Nobody's saying oh your rent's going up about $50 a month this month. No that's a transfer payment. You just have to pay more. The landlord didn't do anything to earn that more money. He just found that he's able to squeeze more money out of you. ..."
    "... So today when people talk about widows and orphans, they mean millionaires [widows and orphans,]. When they talk about the low interest rates that capitalists aren't making to get rich enough, that's really hurting the pension funds. ..."
    "... So, you have the economic vocabulary turning into vocabulary of deception. So, I go over what this vocabulary is and what the concepts are and I also talk about what the original concepts were in classical economics. Everyone from Adam Smith, John Stewart Mill, they were all reforms. What they wanted to reform was getting rid of this parasitic landlord class that had conquered England in 1066 and it's the heirs of the military of the warlords ended up taking the land and just making everybody pay them and all of their descendants for not doing anything. Just for being conquered. ..."
    Nov 21, 2016 | therealnews.com

    Economist Michael Hudson explains how economic terms like capital gains are deployed to mislead the public about who is benefiting from economic policy and where wealth is going Michael Hudson is a Distinguished Research Professor of Economics at the University of Missouri, Kansas City. He is the author of The Bubble and Beyond and Finance Capitalism and its Discontents . His most recent book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy .

    SHARMINI PERIES, TRNN: Welcome back to the Real News Network. I'm Sharmini Peries coming to you from Baltimore.

    Today I'm being joined in our Baltimore studio by economist Michael Hudson. Michael has a new book out J is for Junk Economics: A Survivor's Guide to Economic Vocabulary in an Age of Deception. Michael is a distinguished Research Professor of Economics at the University of Missouri, Kansas City. Thanks so much for joining us Michael.

    MICHAEL HUDSON: Good to be here in your Baltimore studio.

    PERIES: Thank you. So Michael, in the first segment we spoke more generally in terms of how people are misled through our policy makers in Washington in particular. But give us some specific examples of some of the terms used to mislead us.

    HUDSON: Well take the word capital gains. People originally think capital gaisn, you have the image of industry growing and innovation taking place. There's an indication as if somehow when real estate and housing prices go up, everybody's getting richer. When the stock prices go up, the economies got richer. So Hillary Clinton was able ot say, look at how the stock market soared in the last 8 years thanks to Mr. Obama.

    Well the stock market has soared but now the employees working conditions for the stock market. Most of these capital gains don't simply reflect what the textbooks say. The textbooks say, well a company's worth whatever it's expected future earnings are. So the reason stocks are going up and bonds are going up and real estate is rents are going to go up and profits are going up and the economy is expanding and everybody's getting richer. But that's not why the stock market goes up at all.

    The stock market has gone up since 2008 in America, in Europe, all over the world because the central banks have flooded the economy with creating new money. They didn't create the money to hire workers. They didn't create the money to build infrastructure, they didn't create the money to invest in the economy. They didn't create the money to pay off the mortgages of people who had junk mortgages and were exploitive. They didn't create the money to write of student loans. All the money that was created, every penny, was created to give to the banks. To the Wall Street banks at 0.1% interests to create reserves at the Federal Reserve so that the banks could then lend out money and what did they do to ' who did they lend it to?

    Well they lent to corporate [raiders]. So, part of the reason the stock market has gone up is that corporate [raiders] have borrowed very inexpensively 1%, say from a bank, and bought companies whose dividend rates are 3% or 4 or 5% and they get what's called the arbitrage, the difference. So all of a sudden you have the take over a company with borrowed money. As a result of paying interest to the banks and this borrowed money, you don't have to pay income tax on it because this is counted as a cost of doing business, not as a cost of takeover.

    The first thing they do is tighten working condition. They work the labor harder. They let the labor force go. When people retire, they don't hire new workers. They just work the remaining workers all the more. So, what's happened isn't a new investment. It's just the opposite. It's disinvestment. It's asset stripping. What creates the stock market going up is not capital formation. It's asset stripping. When Donald Trump calls that wealth creation, it means his wealth- meaning the money he's been able to make. But that money has been made by making the economy poorer.

    So, when people talk about the economy, they have to realize that it's actually money layers. Not everybody is a millionaire working on Wall Street. Some people actually have to work for paychecks and out of their paychecks they have to pay rising healthcare costs, rising money to the banks, rising debt service. They have to borrow more money just to break even. Their rents are going way up to larger portions of their income.

    So, what people are actually left with to spend is maybe 25 to 30% of their income on goods and services after paying taxes and after paying the FIRE sector (Finance, Insurance, Real Estate). Whether it's housing insurance or mortgage insurance. So there's an idea of distracting people. Don't think of your condition. Think of how the overall economy is doing. But don't think of the economy as an overall unit. Think of the stock market as the economy. Think of the rich people as the economy. Look at the yachts that are made. Somebody's living a lot better. Couldn't it be you?

    Well they don't explain why it's not you. The reason they're living better is what used to be called a transfer payment. Something that is not really earned but it's just a transfer of income like from a rent when a landlord will raise the rent, all of a sudden, same house, nobody's invested more. Nobody's saying oh your rent's going up about $50 a month this month. No that's a transfer payment. You just have to pay more. The landlord didn't do anything to earn that more money. He just found that he's able to squeeze more money out of you.

    So squeezing money out of you to make money for a [inaud.] class and that was a word that used to be used 100 years ago, the [inaud.] were people who lived on rents. They were coupon clippers, they were landlords, they were the idle rich who inherited money and somehow you have like even the words widows and orphans. People say you have to provide large capital gains, meaning debt financed asset price inflation so that the widows and orphans can survive. The widows and orphans are all living on trust funds. Or they're living on alimony. Or they're living on inherited wealth. People forget that before 1900, widows and orphans used to be poor people. We're talking Charles Dickens type novels. Widows and orphans were the people who needed welfare. They weren't the millionaires.

    So today when people talk about widows and orphans, they mean millionaires [widows and orphans,]. When they talk about the low interest rates that capitalists aren't making to get rich enough, that's really hurting the pension funds. Our hearts bleed for the workers. Their hearts aren't bleeding for the workers. They're trotting out pension funds in front of their factotums to say, make the pension funds richer and behind them, the fact is that 75% of all the stocks and bonds are really owned by just a small percentage of the American population they're really talking about themselves.

    So, you have the economic vocabulary turning into vocabulary of deception. So, I go over what this vocabulary is and what the concepts are and I also talk about what the original concepts were in classical economics. Everyone from Adam Smith, John Stewart Mill, they were all reforms. What they wanted to reform was getting rid of this parasitic landlord class that had conquered England in 1066 and it's the heirs of the military of the warlords ended up taking the land and just making everybody pay them and all of their descendants for not doing anything. Just for being conquered.

    You could say that the carry over of this today. The rent that people have to pay, the money they have to pay the banks instead of having a public option. That's the price they still have to pay for being conquered. The group that I'm working with is trying to promote public options. We're trying to promote public banking that would provide credit cards, banking services, [vanilla] services at a fraction of the price that Chase Manhattan or Citi Bank or Bank of America charges.

    Yea all these charges that people pay are economically unnecessary. There's no real cost behind them. There's no value behind them. So, they're what the classical economist called empty pricing. Prices with no real cost value. What they called fictitious capital. Capital that clings on junk mortgage borrowers that actually ' the pretense that all these debts can be paid but it's all fictitious because everybody knows at least on Wall Street everybody knows that debts can't be paid. That somebody has to default and Wall Street's plan is well make the government reimburse us like the bailouts that happened in 2008 so that we don't lose, let's pass all of the loss onto the tax payers without changing the banks, without throwing our guys in jail even though these were fraudulent mortgages.

    PERIES: And the government itself doesn't pay its debt.

    HUDSON: That's right. The whole idea is that it doesn't. At least if it does pay the debt, it only pays ' there are two kinds of debts that the governments have. They have a debt to the bond holders and they do pay that. They have a debt to the social security recipients. Hillary promised she was going to cut back social security. She was going to cut back social spending and social security and medical care so that the government would have enough money to pay her backers on Wall Street. So she was Obama's legacy. A standing for Wall Street.

    A stand in is a politician who can deliver her constituency to her Wall Street backers and that's what a politician does in America. You get a constituency; you make them believe your promises and then you turn them over to your financial campaign backers. That's what politics has become and that's as much an art of deception as economics is.

    PERIES: Now Donald Trump is proposing to spend trillions of dollars in terms of infrastructure development in this country. That sounds very good. Of course, in the immediate future that means jobs for people. But what is the problem with that kind of infrastructure development in the long term and what kind of plan is he thinking of when he's thinking infrastructure development?

    HUDSON: There are many ways of building infrastructure. The way Donald Trump would like, he's like to spend like aa hundred million dollars building a new bridge in the highway. Then he would like to sell it, privatize it to a private buy like himself for 10 million dollars. So, the government would spend a huge amount of money that could've been used for a free bridge or a free road. He'll then sell it for 10 million dollars to a private owner and then the private owner will put a toll booth up and charge money for coming across and make a mint.

    This is what happened in England under Margaret Thatcher. This is called Thatcherism and it's what destroyed the English economy. It's what's destroying the European economy and turning Europe into a dead zone. So, you could do infrastructure in the way of a giveaway. A real infrastructure would be the government would indeed pay for rebuilding this. But the whole idea of what mad America rich in the 19th century was the government will develop this infrastructure and it will provide these services freely to the population. Because if you begin to charge people for bridges and for roads and for parking meters as is in Chicago and for everything else that's being privatized, you're going to have even higher costs of living and the wages are going to go up and it will be even harder to compete with foreign countries and to make exports because nobody can afford to pay the prices that the American workers have to pay just to live and export in competition with Asia or even Europe or Germany.

    Germany doesn't have all of these costs. Germany has very low rental charges. Maybe 10-15% of your income. Not 40% as here. Low priced public health, free autobahn to drive on. Not at all like this. So, Donald Trump wants essentially to double the cost of living for everybody and give the capital away to his republican backers and essentially leave the whole country unemployed but the 1% is going to be very, very rich.

    PERIES: Right. Now let's go back to some specific examples in terms of the kind of infrastructure that Donald Trump wants to build. So, he wants to build new airports. He says our airports are outdated. He wants to build new roads and new bridges and build a wall over the US-Mexico border. All of these are considered infrastructure. In the past we've been told that public-private partnerships are actually a good thing. It even sounds good, public-private partnerships for the betterment of society. But it really isn't and in terms of myth making, where does this take us?

    HUDSON: The word public partnership it's really a one way partnership. The private, tells the government what to do. All of the costs are born by the government. All of the risks and the profits go to the private sector. It really means we're creating an opportunity for banks to make a killing on making loans for all of this will be financed by bank credit. That banks or bond holders are going to be paid very high interest rates on.

    The government could create all this money the same way banks do. The government has computer keyboards which is how a bank creates money. They could create their own money without having to pay interests to anyone. They could either charge the airlines for it or they could provide the airports more freely but public partnerships are designed to quadruple or quintuple the actual costs of doing business and pretend that this is in the public interests instead of just in the interests of the banks and the corporate insiders that the banks are willing to leave money to.

    If you look at investigative journalists looked at just one horror story after another of private public partnerships. Look at London's railroads. Look at what England did with the railroads. Water. Public Private partnership for water. People now have to pay huge amounts just to get water in England, that used to be free. The transportation quality goes down. The price goes way up. So the partnership is a very exploited. We're not talking about equal partnership. We're talking about a dominate submissive sadomasochistic partnership.

    PERIES: Then this point you were making about the government can print all the money they want if they want to invest it in infrastructure and own that infrastructure, they can make money to then pay back the treasury if they need to. But instead they're going to borrow the money from these banks and then be indebted. So is this kind of debt a bad thing?

    HUDSON: Well the debt is bad when you have to repay it. All new money is a kind of debt. All money is created on a computer. You can look at it in terms of a balance sheet. When you create, when you go into a bank and you want a loan, the bank will give you a bank deposit and you'll sign a promissory note. The bank has an asset and you have a debt to the bank and you can spend your deposit anyway. But the bank charges money for all of this. The government can do the same thing. The Federal Reserve and the Treasury. The Treasury can just print, issue a 1 trillion dollar coin for instance. Give it to the Federal Reserve and the Fed can issue notes about it. You could call to claim whatever you want. It's all constitutional because you can assign any level price you want to a coin. All money is just created artificially.

    So, it's a monopoly it's a legal privilege and for thousands of years from Mesopotamia through Greece and Rome, all the money was created by the temples to make sure that it was honest money. But it was all privatized after over thousands of years of history and now banks charge for something that the government can do for free.

    PERIES: Michael, for Donald Trump and the Republicans, they are against creating debt aren't they?

    HUDSON: No. They know that most people are afraid of going into debt. Because if you go into debt you actually have to repay it. Government debt doesn't have to be repaid. If you repaid government debt, there wouldn't be anymore money. What they're really looking for is - the way to cut debt is by cutting the deficit and what we want to cut is social security. We want to a sort of downsize it. Hillary wanted to put it into the stock market. We want to pay less social spending. We want less medical care. We want to spend less money on the 95% of the population so all the money gets spent on the top 5%.

    So, they're really against what debt is spent for. They're against democratic debt. They're against democracy. What they really want is oligarchic debt which used to be state socialism. Government will only give money to the banks. They're all for the kind of debt that is the bank bailout in 2008. They're all for giving money to Wall Street. They're all for giving subsidies to Donald Trump for building his buildings in New York and enabling him to make a killing. They're just against giving debt to the workers or to the middle class or to the cities or to anyone who's not one of the 5%.

    PERIES: Alright so this is the kind of austerity plan that Paul Ryan '

    HUDSON: Austerity is the word.

    PERIES: - is trying to promote that he wants Donald Trump to sign onto.

    HUDSON: Right.

    PERIES: Alright Michael I thank you so much for joining us today. And thank you for joining us on the Real News Network.

    End

    DISCLAIMER: Please note that transcripts for The Real News Network are typed from a

    recording of the program. TRNN cannot guarantee their complete accuracy.

    goedelite fjwhite link

    Take one sentence from your cited passage: "When they (Who are 'they'? The nearest plural noun is 'millionaires'. The next nearest is 'widows and orphans'. The next is 'people'. I think Prof Hudson means 'people' as the antecedent, because they are talking about widows and orphans at the start of the previous sentence. Let's go with that assumption.) talk about the low interest rates that capitalists arent (sic) making to get rich enough, thats (sic) really hurting the pension funds."

    Who are the "people" talking about the low interest rates? What is meant by "low interest rates that capitalists aren't making to get rich enough"? If the widows and orphans are now the millionaires for whom large capital gains are needed for their survival, my guess Hudson means that the millionaires cannot rely on interest income, because that has been suppressed in order to allow the banks to make low interest mortgage loans. That is for the debt financed housing industry's asset price inflation.

    That sector is supposed to be the engine of recovery, a questionable recovery to be sure. The pension funds that used to be able to rely on interest income to finance its future obligations do not have that any longer. The funds have been investing in the equity market and some in the derivative market through hedge funds. The funds are an excuse for the asset price inflation of the stock market brought on by Fed policy.

    The Fed is saying that in order for the pension funds to meet their obligations, asset prices must be inflated to make the equity positions profitable.

    It's a Ponzi scheme, a house of cards. When the next card is put in place, it may topple the entire flimsy structure. Omitted from the discussion is the global position of the US dollar, whose value is inflated by the damage that neoliberal policies have done to Europe's economy and the euro.

    I sympathize with the Professor's effort to explain a conspiratorial web of policies by the Fed, the banks, the real estate industry, and the MIC (mostly implied) to support an economic system based on the economic viability of an economy that is not productive of consumer goods and services, an economy based on the imports, an economy dedicated to global hegemony based on huge military expenditures.

    This non-productive, US economy depletes the savings of those who still have them and places at great risk the economic security of what used to be called the middle-class.

    fjwhite goedelite 38 minutes ago
    Oh, well, goedelite, your contribution clears up whatever confusion I had about MH's passage. I'm being sarcastic, of course. But your valiant effort is much appreciated. ;=)

    The good folks at TRNN should remind MH that the Real News is, I presume, for the general public -- real people not egghead economists. He must find a way to connect with us in a clear, concise, and coherent way. In listening to Michael, his spoken words don't seem able to keep pace with his racing, out-of-control brain.
    Go easy on us mere mortals, Professor Hudson.

    Capitalism's Finest link
    REAL ECONOMICS DICTIONARY
    • "Capital gains" do not apply to people who work for a living. It applies to rich people.
    • "Stock market increase" does not mean anything to you. It means better returns for rich corporations.
    • "Arbitrage" is "borrowing money for zero interest", then buying a "3-4% return investment."
    • "Asset stripping" is Trump's brand of capitalism.
    • "Paycheck workers" are invisible to banks.
    • "The economy" refers to "rich people" - not you.
    • "A transfer payment" is when a landlord raises rent for no reason.
    • "Squeezing money" out of you is how the "rentier class" and "coupon clippers" make their money.
    • "Widow and orphans" is an old excuse for capital gains tax waivers.
    • "Low interest rates" are irrelevant to "pension fund" growth. They are for "large investors."
    • "The parasitic landlord class makes people pay" for "being poor;" which is really "the banks".
    • "Public banking" eliminates "economically unnecessary empty pricing" that has "no real cost value."
    • "Fiction capital" examples include "junk mortgages" because they "can't be paid" and bring " a default".
    • "Public private partnerships" are a "myth" where "govt bears the cost" and "privateers bears the profit."
    • "The govt can print all the money it wants" to "make infrastructure" but instead "borrows from banks."
    • "Printing money is bad" by the government "only when you have to repay it."
    • "Money used to be printed in the temples" but now its "printed by banks who charge" for it.
    • "Republicans" are fine with "oligarchic debt." Yet social security and healthcare are "democratic debt."
    • "Republicans" are only against debt if it involves, "workers" or anyone "outside of the top five percent."
    • "Paul Ryan" wants "austerity debt" for workers because it does not favor "the top five percent."
    lobdillj link
    I think Hudson misspoke when at about 11:53 he says, "and the wages are going to go up".

    Matt lobdillj link

    As I understood him he spoke correctly: If the cost of living goes up, employers, in having to at least maintain a workforce, will have to pay their employers more. But this makes it harder for companies to export their goods, which leads to attrition of the workforce which he spoke of earlier.

    What I think you recognized is that 'real wages' go down.

    Anyway, it's clear that this is unsustainable. Murray Rothbard called this economic system a Ponzi Scheme.

    Ellis lobdillj link
    I'm pretty sure that he meant to say wages go down. So, I agree with you. One other thing is that countries like Brazil seemed not to understand that putting up toll booths (literally) on their roads was not the best most cost effective way to go about this. Here in California we do have toll bridges, but toll roads. We pay for our road maintenance through excise taxes on gas and tires. And it's a state function.
    elkhornsun link
    The big lie from Trump and others is referring to a corporate tax rate of 35%. Corporations are now paying far less in income taxes than at any time in the past 80 years. Companies including Apple and GE and Chevron and Verizon are paying no income taxes. Income taxes and fees (which includes payroll taxes and social security payments) are a way to have the government extract income and wealth from workers and their families and pass it along to those in the unreal economy who derive their income and wealth as rentiers or in the finance industry that turns equity into debt for millions of Americans. 40% of what is counted as part of the GDP in the United States is debt servicing which provides no real goods or real services and is only a transfer of wealth from the working classes to the one percent. That is why when government economists talk about the economy growing they are not talking about the true economic situation of workers and their families who are in no better shape today than they were in 2008 when the economy collapsed thanks to the massive fraud perpetrated by people in the banking and finance and insurance and mortgage companies, none of who were tried for their criminal actions and none went to jail (unlike many of the participants in the Savings & Loan industry collapse under Reagan).

    Trillions of dollars were stolen by the same people that are serving in the Treasury Department and in the Federal Reserve and the government (executive, supreme court, congress) is run by Wall Street for Wall Street. Millenials would be wise to emigrate to a country with a less corrupt government and people approaching retirement would do well to emigrate as well to a country where the cost of living is lower and the odds of a climate change disaster is less than in much of the Unites States.

    Rob M link
    This development of infrastructure as a public private partnership is the dark flip side of a new deal economy. What it means as Hudson points out is essentially public money used to fund the building programs, then passing the profit making over to a private company.

    The strong ties of Wall Street to the Democratic party seems to have reached the end of its credibility with the public. The money now has flipped to a more authoritarian control. This is a familiar shift throughout history when the strings of control begin to show, when the veil begins to be lifted and the liberal establishment loses its credibility, wham! their is a shift to fascism. Worryingly this shift is usually followed by war. Which forces a kind of 'reset' both economically and politically.

    This whole sequence, the rise of a faux liberal elite,(who really just serve moneyed masters) then a slow discrediting of that elite as their real motives are slowly revealed, then an angered public backlash, which importantly (this is important to understand) is still controlled by the moneyed classes. Resulting in a rise of authoritarianism and an insular tribal outlook often characterized by racism...in other words fascism.

    Kiers Rob M link
    the US has REPEATEDLY killed off it's liberal / left side (literally: Joseph McCarthy) and now we have this strange right wing world.
    Matt William W Haywood link
    That's certainly an integral part of it. Michael Hudson just focused his analysis on what one aspect* of what "capital gains" really means: it's the gains made by corporate raiders after money is printing for their sake, who then go on to essentially partake in asset stripping.

    The authoritarian part you bring up is the flip side of the coin: given the resulting damage to the general economy, for the corporate raiders to continue their raiding they'll have to keep the people in tight control.

    * That aspect is what's "traditionally" called the "economic" side, as opposed the social side. That's the tradition, anyway, that the capitalist pigs have been trying so hard to indoctrinate us with. If I recall correctly, Amartya Sen is the first (only?) "Nobel Prize" winning economist who defined "economics" to include the impact on the people's quality of life.

    [Nov 21, 2016] REVEALED The Real Fake News List

    Warning: The table was scanned from the picture might contain errors
    www.ronpaullibertyreport.com

    Ron Paul Liberty Report

    We've seen the make-shift "fake news" list created by a leftist feminist professor. Well, another fake news list has been revealed and this one holds a lot more water.

    This list contains the culprits who told us that Iraq had weapons of mass destruction and lied us into multiple bogus wars. These are the news sources that told us "if you like your doctor, you can keep your doctor." They told us that Hillary Clinton had a 98% of winning the election. They tell us in a never-ending loop that "The economy is in great shape!"

    This is the real Fake News List (and it's sourced):

    Journalist Outlet Source
    Cecilia Vega ABC WikiLeaks
    David Muir ABC WikiLeaks
    Diane Sawyer ABC WikiLeaks
    George Stephanopoulos ABC WikiLeaks
    Jon Kail ABC WikiLeaks
    John Heillman Bloomberg WikiLeaks
    Mark Halperin Bloomberg WikiLeaks
    Norah О'Donnell CBS WikiLeaks
    Vicki Gordon CBS WikiLeaks
    John Harwood CNBC WikiLeaks
    Brianna Keilar CNN WikiLeaks
    David Chalian CNN WikiLeaks
    Gloria Borger CNN WikiLeaks
    Jeff Zeleny CNN WikiLeaks
    John Berman CNN WikiLeaks
    Kate Bouldan CNN WikiLeaks
    Mark Preston CNN WikiLeaks
    Sam Feist CNN WikiLeaks
    Wolf Blitzer CNN WikiLeaks
    Jackie Kucinich Daily Beast WikiLeaks
    Whitney Snyder Huffington Post WikiLeaks
    Betsy Fisher Martin MORE WikiLeaks
    Alex Wagner MSNBC WikiLeaks
    Beth Fouhy MSNBC WikiLeaks
    Chuck Todd MSNBC WikiLeaks
    Phil Griffin MSNBC WikiLeaks
    Rachel Maddow MSNBC WikiLeaks
    Rachel Racusen MSNBC WikiLeaks
    Savannah Gutherie NBC WikiLeaks
    Jamil Smith New Republic WikiLeaks
    Amy Chozik New York Times WikiLeaks
    Gail Collins New York Times WikiLeaks
    Jonathan Martin New York Times WikiLeaks
    Maggie Habennan New York Times DNC leak
    Mark Leibovich New York Times WikiLeaks
    Pat Healey New York Times WikiLeaks
    Ryan Liza New Yorker WikiLeaks
    Sandia Sobieraj Westfall PEOPLE WikiLeaks
    Glenn Thrush POLITICO WikiLeaks
    Kenneth Vogel POLITICO WikiLeaks
    Mike Allen POLITICO WikiLeaks
    Jessica Valenti The Guardian WikiLeaks
    Monisha Rajesh The Guardian WikiLeaks
    Sidy Doyle The Guardian WikiLeaks
    Brent Budowskv The Hill WikiLeaks
    Alyssa Mastramonoco VICE WikiLeaks
    Jon Allen VOX WikiLeaks
    Karen Tumults Washington Post WikiLeaks

    [Nov 21, 2016] Beppe Grillo The Amateurs Are Conquering The World Because The Experts Destroyed It

    An interesting variant of rotation of elite...
    Notable quotes:
    "... echo chamber ..."
    "... With Trump, exactly the same thing has happened as with my Five Star Movement, which was born of the Internet: the media were taken aback and asked us where we were before. We gathered millions of people in public squares and they marvelled. We became the biggest movement in Italy and journalists and philosophers continued to say that we were benefitting from people's dissatisfaction. ..."
    "... the amateurs are the ones conquering the world and I'm rejoicing in it because the professionals are the ones who have reduced the world to this state. Hillary Clinton, Obama and all the rest have destroyed democracy and their international policies. ..."
    "... If that's the case, it signifies that the experts, economists and intellectuals have completely misunderstood everything, especially if the situation is the way it is ..."
    "... Brexit and Trump are signs of a huge change. If we manage to understand that, we'll also get to face it." ..."
    "... Until now, these anti-establishment movements have come face-to-face with their own limits: as soon as they come to power they seem to lose their capabilities and reason for being. Alexis Tsipras, in Greece, for example ..."
    "... President Juncker suggested modifying the code of ethics and lengthening the period of abstinence from any private work for former Commission members to three years. Is that enough? ..."
    "... I have serious doubts about a potential change in the code of ethics being made by a former minister of a tax haven. ..."
    "... We've always maintained this idea of total autonomy in decision-making, but we united over the common idea of a different Europe, a mosaic of autonomies and sovereignties. ..."
    "... If he wants to hold a referendum on the euro, he'll have our support. If he wants to leave the Fiscal Stability Treaty – the so-called Fiscal Compact – which was one of our battles, we'll be there ..."
    "... Renzi's negotiating power will also depend on the outcome of the constitutional referendum in December. We'll see whether he sinks or swims. ..."
    "... Neoliberal Trojan Horse Obama has quite a global legacy. ..."
    "... Maybe it's time for the Europeans to stop sucking American cock. Note that we barely follow your elections. It's time to spread your wings and fly. ..."
    "... "The Experts* Destroyed The World" - Beppe Grillo. Never a truer word spoken, Beppe! YOU DA MAN!!! And these "Experts" - these self-described "ELITE" - did so - and are STILL doing so WITH MALICIOUS INTENT - and lining their pockets every fking step of the way! ..."
    "... As the Jason Statham character says in that great Guy Richie movie "Revolver": "If there's ONE thing I've learnt about "Experts", it's that they're expert in FUCK ALL!" ..."
    "... Apart from asset-stripping the economy & robbing the populace blind that is - and giving their countries away to the invader so indigenous populations cant fight back... or PURPOSELY angling for WW3 to hide their criminality behind the ULTIMATE & FINAL smokescreen. ..."
    "... It NATO collapses so will the Euro project. The project was always American from the start. In recent years it has become a mechanism by which the Poles (and other assorted Eastern Europeans) can extract war guarantees out of the USA, UK and France. It is a total mess and people like Grillo add to the confusion by their flawed analysis. ..."
    www.zerohedge.com
    Whatever the reason, we agree with the next point he makes, namely the overthrow of "experts" by amateurs.

    euronews: "Do you think appealing to people's emotions is enough to get elected? Is that a political project?"

    Beppe Grillo: "This information never ceases to make the rounds: you don't have a political project, you're not capable, you're imbeciles, amateurs And yet, the amateurs are the ones conquering the world and I'm rejoicing in it because the professionals are the ones who have reduced the world to this state. Hillary Clinton, Obama and all the rest have destroyed democracy and their international policies. If that's the case, it signifies that the experts, economists and intellectuals have completely misunderstood everything, especially if the situation is the way it is. If the EU is what we have today, it means the European dream has evaporated. Brexit and Trump are signs of a huge change. If we manage to understand that, we'll also get to face it."

    Bingo, or as Nassim Taleb put its, the "Intellectual-Yet-Idiot" class. It is the elimination of these so-called "experts", most of whom have PhDs or other letters next to their name to cover their insecurity, and who drown every possible medium with their endless, hollow, and constantly wrong chatter, desperate to create a self-congratulatory echo chamber in which their errors are diluted with the errors of their "expert" peers, that will be the biggest challenge for the world as it seeks to break away from the legacy of a fake "expert class" which has brought the entire world to its knees, and has unleashed the biggest political tsunami in modern history.

    One thing is certain: the "experts" won't go quietly as the "amateurs" try to retake what is rightfully theirs.

    ... ... ...

    Beppe Grillo, Leader of the Five Star Movement
    "It's an extraordinary turning point. This corn cob – we can also call Trump that in a nice way – doesn't have particularly outstanding qualities. He was such a target for the media, with such terrifying accusations of sexism and racism, as well as being harassed by the establishment – such as the New York Times – but, in the end, he won.

    "That is a symbol of the tragedy and the apocalypse of traditional information. The television and newspapers are always late and they relay old information. They no longer anticipate anything and they're only just understanding that idiots, the disadvantaged, those who are marginalised – and there are millions of them – use alternative media, such as the Internet, which passes under the radar of television, a medium people no longer use.

    "With Trump, exactly the same thing has happened as with my Five Star Movement, which was born of the Internet: the media were taken aback and asked us where we were before. We gathered millions of people in public squares and they marvelled. We became the biggest movement in Italy and journalists and philosophers continued to say that we were benefitting from people's dissatisfaction. We'll get into government and they'll ask themselves how we did it."

    euronews
    "There is a gap between giving populist speeches and governing a nation."

    Beppe Grillo
    "We want to govern, but we don't want to simply change the power by replacing it with our own. We want a change within civilisation, a change of world vision.

    "We're talking about dematerialised industry, an end to working for money, the start of working for other payment, a universal citizens revenue. If our society is founded on work, what will happen if work disappears? What will we do with millions of people in flux? We have to organise and manage all that."

    euronews
    "Do you think appealing to people's emotions is enough to get elected? Is that a political project?"

    Beppe Grillo
    "This information never ceases to make the rounds: you don't have a political project, you're not capable, you're imbeciles, amateurs

    "And yet, the amateurs are the ones conquering the world and I'm rejoicing in it because the professionals are the ones who have reduced the world to this state. Hillary Clinton, Obama and all the rest have destroyed democracy and their international policies.

    "If that's the case, it signifies that the experts, economists and intellectuals have completely misunderstood everything, especially if the situation is the way it is. If the EU is what we have today, it means the European dream has evaporated. Brexit and Trump are signs of a huge change. If we manage to understand that, we'll also get to face it."

    euronews
    "Until now, these anti-establishment movements have come face-to-face with their own limits: as soon as they come to power they seem to lose their capabilities and reason for being. Alexis Tsipras, in Greece, for example "

    Beppe Grillo
    "Yes, I agree."

    euronews
    "Let's take the example of Podemos in Spain. They came within reach of power, then had to backtrack. Why?"

    Beppe Grillo
    "Because there's an outdated way of thinking. Because they think power is managed by forming coalitions or by making agreements with others.

    "From our side, we want to give the tools to the citizens. We have an information system called Rousseau, to which every Italian citizen can subscribe for free. There they can vote in regional and local elections and check what their local MPs are proposing. Absolutely any citizen can even suggest laws in their own name.

    "This is something never before directly seen in democracy and neither Tsipras nor Podemos have done it."

    euronews
    "You said that you're not interested in breaking up the European Union, but rather in profoundly changing it. What can a small group of MEPs do to put into motion such great change?"

    Beppe Grillo
    "The little group of MEPs is making its voice heard, but there are complications In parliament, there are lobby groups and commissions. Parliament decides, but at the same time doesn't decide.

    "We do what we can, in line with our vision of a world based on a circular economy. We put forward the idea of a circular economy as the energy of the future and the proposal has been adopted by the European parliament."

    euronews

    "One hot topic at the Commission at the moment is the problem of the conflicts of interest concerning certain politicians.

    "President Juncker suggested modifying the code of ethics and lengthening the period of abstinence from any private work for former Commission members to three years. Is that enough?"

    Beppe Grillo

    "I have serious doubts about a potential change in the code of ethics being made by a former minister of a tax haven."

    euronews
    "You don't think the Commission is legitimate?"

    Beppe Grillo
    "Absolutely not. Particularly because it's a Commission that no one has actually elected. That's what brought us closer to Nigel Farage: a democracy coming from the people."

    euronews
    "You don't regret being allied with Farage?"

    Beppe Grillo
    "It was an alliance of convenience, made to give us enough support to enter parliament. We've always maintained this idea of total autonomy in decision-making, but we united over the common idea of a different Europe, a mosaic of autonomies and sovereignties.

    "I'm not against Europe, but I am against the single currency. Conversely, I am for the idea of a common currency. The words are important: 'common' and 'single' are two different concepts.

    "In any case, the UK has demonstrated something that we in Italy couldn't even dream of: organising a clear 'yes-no' referendum."

    euronews
    "That is 'clear' in terms of the result and not its consequences. In reality, the population is torn. Many people's views have done u-turns."

    Beppe Grillo
    "Whatever happens, the responsibility returns entirely to the British. They made the decision."

    euronews
    "Doesn't it bother you that Italy's Prime Minister Matteo Renzi is playing the spoilsport in Europe? Criticising European institutions was your battle horse and now he is flexing his muscles in Brussels."

    Beppe Grillo
    "Renzi has to do that. But he's just copying me and in doing so, strengthens the original."

    euronews
    "Whatever it may be, his position at the head of the government can get him results."

    Beppe Grillo
    "Very well. If he wants to hold a referendum on the euro, he'll have our support. If he wants to leave the Fiscal Stability Treaty – the so-called Fiscal Compact – which was one of our battles, we'll be there."

    euronews
    "In the quarrel over the flexibility of public accounts due to the earthquake and immigration, who are you supporting?"

    Beppe Grillo
    "On that, I share Renzi's position. I have nothing against projects and ideas. I have preconceptions about him. For me, he is completely undeserving of confidence."

    euronews
    "Renzi's negotiating power will also depend on the outcome of the constitutional referendum in December. We'll see whether he sinks or swims."

    Beppe Grillo
    "It's already lost for him."

    euronews
    "If he doesn't win, will you ask for early elections?"

    Beppe Grillo
    "Whatever happens, we want elections because the government as it stands is not legitimate and, as a consequence, neither are we.

    "From this point onwards, the government moves forward simply by approving laws based on how urgent they are. And 90 percent of laws are approved using this method. So what good will it do to reform the Senate to make the process quicker?"

    euronews
    "Can you see yourself at the head of the Italian government?"

    Beppe Grillo
    "No, no. I was never in the race. Never."

    euronews
    "So, Beppe Grillo is not even a candidate to become prime minister or to take on another official role, if one day the Five Star Movement was to win the elections?"

    Beppe Grillo
    "The time is fast approaching."

    euronews
    "Really? A projection?"

    Beppe Grillo
    "People just need to go and vote. We're sure to win."

    BabaLooey -> Nemontel •Nov 21, 2016 6:27 AM

    euronews: "You don't think the Commission is legitimate?"

    Beppe Grillo: "Absolutely not. Particularly because it's a Commission that no one has actually elected. That's what brought us closer to Nigel Farage: a democracy coming from the people."

    BOILED DOWN - THAT IS ALL THAT NEEDS TO BE SAID.

    Blackhawks •Nov 21, 2016 3:15 AM

    Neoliberal Trojan Horse Obama has quite a global legacy. People all over the world are voting for conmen and clowns instead of his endorsed candidates and chosen successor. Having previously exposed the "intellectual-yet-idiot" class, Nassim Taleb unleashes his acerbic tone in 3 painfully "real news" tweets on President Obama's legacy...

    Obama:
    Protected banksters (largest bonus pool in 2010)
    "Helped" Libya
    Served AlQaeda/SaudiBarbaria(Syria & Yemen) https://t.co/bcNMhDgmuo

    - NassimNicholasTaleb (@nntaleb) November 19, 2016

    2) (Cont) But in the end what Obama did that is unforgivable is increasing centralization in a complex system.

    - NassimNicholasTaleb (@nntaleb) November 19, 2016

    3) Don't fughet Obama is leaving us a Ponzi scheme, added ~8 trillions in debt with rates at 0. If they rise, costs of deficit explode...

    - NassimNicholasTaleb (@nntaleb) November 20, 2016

    LetThemEatRand •Nov 21, 2016 3:20 AM

    Maybe it's time for the Europeans to stop sucking American cock. Note that we barely follow your elections. It's time to spread your wings and fly.

    Yen Cross -> LetThemEatRand •Nov 21, 2016 3:27 AM

    Amen~ The" European Toadies" should also institute " term limits" so those Jean Paul & Draghi][JUNKERS[]- technocratic A-Holes can be done away with!

    NuYawkFrankie •Nov 21, 2016 5:07 AM

    "The Experts* Destroyed The World" - Beppe Grillo. Never a truer word spoken, Beppe! YOU DA MAN!!! And these "Experts" - these self-described "ELITE" - did so - and are STILL doing so WITH MALICIOUS INTENT - and lining their pockets every fking step of the way!

    As the Jason Statham character says in that great Guy Richie movie "Revolver": "If there's ONE thing I've learnt about "Experts", it's that they're expert in FUCK ALL!"

    Apart from asset-stripping the economy & robbing the populace blind that is - and giving their countries away to the invader so indigenous populations cant fight back... or PURPOSELY angling for WW3 to hide their criminality behind the ULTIMATE & FINAL smokescreen.

    Yep -THAT is how F'KING sick they are. These, my friends, are your "Experts", your self-decribed "Elite" - and Soros is at the head of the parade.

    lakecity55 -> NuYawkFrankie •Nov 21, 2016 6:18 AM

    You know the old saying, "an expert's a guy from more than 20 miles outside of town."

    tuetenueggel •Nov 21, 2016 5:17 AM

    Which experts do you mean Beppe ?

    All I Kow is that those "experts" are too stupid to piss a hole in the snow.

    Oettinger ( not even speaking his mother tongue halfways correct )

    Jean clown Juncker ( always drunk too is a kind of well structured day )

    Schulz capo (who was too stupid as mayor of a german village so they fucked him out)

    Hollande ( lefts are always of lower IQ then right wing people )

    Blair ( war criminal )

    and thousands more not to be named her ( due to little space availlable )

    caesium •Nov 21, 2016 6:35 AM

    It NATO collapses so will the Euro project. The project was always American from the start. In recent years it has become a mechanism by which the Poles (and other assorted Eastern Europeans) can extract war guarantees out of the USA, UK and France. It is a total mess and people like Grillo add to the confusion by their flawed analysis.

    The bedrock of Italy was always the Catholic faith which the country has abandoned. "The Faith is Europe and Europe is the Faith" said Hilaire Belloc. A reality that Grillo is unable to grasp.

    [Nov 19, 2016] The Democratic party lost its soul. Its time to win it back

    Notable quotes:
    "... For one thing, many vested interests don't want the Democratic party to change. Most of the money it raises ends up in the pockets of political consultants, pollsters, strategists, lawyers, advertising consultants and advertisers themselves, many of whom have become rich off the current arrangement. They naturally want to keep it. ..."
    "... For another, the Democratic party apparatus is ingrown and entrenched. Like any old bureaucracy, it only knows how to do what it has done for years. Its state and quadrennial national conventions are opportunities for insiders to meet old friends and for aspiring politicians to make contacts among the rich and powerful. Insiders and the rich aren't going to happily relinquish their power and perquisites, and hand them to outsiders and the non-rich. ..."
    "... I have been a Democrat for 50 years – I have even served in two Democratic administrations in Washington, including a stint in the cabinet and have run for the Democratic nomination for governor in one state – yet I have never voted for the chair or vice-chair of my state Democratic party. That means I, too, have had absolutely no say over who the chair of the Democratic National Committee will be. To tell you the truth, I haven't cared. And that's part of the problem. ..."
    "... Finally, the party chairmanship has become a part-time sinecure for politicians on their way up or down, not a full-time position for a professional organizer. In 2011, Tim Kaine (who subsequently became Hillary Clinton's running mate in the 2016 election) left the chairmanship to run, successfully, for the Senate from Virginia. ..."
    "... The chair then went to Debbie Wasserman-Schultz, a Florida congresswoman who had co-chaired Clinton's bid for the Democratic nomination for president in 2008. This generated allegations in the 2016 race that the Democratic National Committee was siding with Clinton against Bernie Sanders – allegations substantiated by leaks of emails from the DNC. ..."
    "... So what we now have is a Democratic party that has been repudiated at the polls, headed by a Democratic National Committee that has become irrelevant at best, run part-time by a series of insider politicians. It has no deep or broad-based grass-roots, no capacity for mobilizing vast numbers of people to take any action other than donate money, no visibility between elections, no ongoing activism. ..."
    Nov 19, 2016 | www.theguardian.com

    For one thing, many vested interests don't want the Democratic party to change. Most of the money it raises ends up in the pockets of political consultants, pollsters, strategists, lawyers, advertising consultants and advertisers themselves, many of whom have become rich off the current arrangement. They naturally want to keep it.

    For another, the Democratic party apparatus is ingrown and entrenched. Like any old bureaucracy, it only knows how to do what it has done for years. Its state and quadrennial national conventions are opportunities for insiders to meet old friends and for aspiring politicians to make contacts among the rich and powerful. Insiders and the rich aren't going to happily relinquish their power and perquisites, and hand them to outsiders and the non-rich.

    Most Americans who call themselves Democrats never hear from the Democratic party except when it asks for money, typically through mass mailings and recorded telephone calls in the months leading up to an election. The vast majority of Democrats don't know the name of the chair of the Democratic National Committee or of their state committee. Almost no registered Democrats have any idea how to go about electing their state Democratic chair or vice-chair, and, hence, almost none have any influence over whom the next chair of the Democratic National Committee may be.

    I have been a Democrat for 50 years – I have even served in two Democratic administrations in Washington, including a stint in the cabinet and have run for the Democratic nomination for governor in one state – yet I have never voted for the chair or vice-chair of my state Democratic party. That means I, too, have had absolutely no say over who the chair of the Democratic National Committee will be. To tell you the truth, I haven't cared. And that's part of the problem.

    Nor, for that matter, has Barack Obama cared. He basically ignored the Democratic National Committee during his presidency, starting his own organization called Organizing for America. It was originally intended to marshal grass-roots support for the major initiatives he sought to achieve during his presidency, but morphed into a fund-raising machine of its own.

    Finally, the party chairmanship has become a part-time sinecure for politicians on their way up or down, not a full-time position for a professional organizer. In 2011, Tim Kaine (who subsequently became Hillary Clinton's running mate in the 2016 election) left the chairmanship to run, successfully, for the Senate from Virginia.

    The chair then went to Debbie Wasserman-Schultz, a Florida congresswoman who had co-chaired Clinton's bid for the Democratic nomination for president in 2008. This generated allegations in the 2016 race that the Democratic National Committee was siding with Clinton against Bernie Sanders – allegations substantiated by leaks of emails from the DNC.

    So what we now have is a Democratic party that has been repudiated at the polls, headed by a Democratic National Committee that has become irrelevant at best, run part-time by a series of insider politicians. It has no deep or broad-based grass-roots, no capacity for mobilizing vast numbers of people to take any action other than donate money, no visibility between elections, no ongoing activism.

    [Nov 19, 2016] The Origins of the Republican Media Machine

    The Republican brass degenerated into a bunch to neocon racketeers who want to impoverish regular Americans. That's why Trump won.
    Notable quotes:
    "... Indeed, in an October 1991 letter to Patrick J. Buchanan, Regnery claimed that Americans had been hornswoggled into supporting the war by "the President and those who form public opinion." ..."
    "... Everywhere he looked, the media-newspapers, network radio and television news, magazines, and journals-all seemed locked in a [neo]liberal consensus. . . . If conservatives were going to claw their way back in from the outside, they were going to need to first find a way to impair and offset liberals in the media. ..."
    Oct 16, 2016 | nationalinterest.org
    From: The Origins of the Republican Civil War

    Nicole Hemmer, Messengers of the Right: Conservative Media and the Transformation of American Politics (Philadelphia: University of Pennsylvania Press, 2016), 368 pp., $34.95.

    IN DECEMBER 1953, Henry Regnery convened a meeting in Room 2233 in New York City's Lincoln Building. Regnery, a former Democrat and head of Regnery Publishing, had moved sharply to the Right after he became disillusioned with the New Deal. His guests included William F. Buckley Jr.; Frank Hanighen, a cofounder of Human Events ; Raymond Moley, a former FDR adviser who wrote a book called After Seven Years that denounced the New Deal; and John Chamberlain, a lapsed liberal and an editorial writer for the Wall Street Journal . Regnery had not called these men together merely to discuss current events. He wanted to reshape them. "The side we represent controls most of the wealth in this country," he said. "The ideas and traditions we believe in are those which most Americans instinctively believe in also." So why was liberalism in the ascendant? Regnery explained that media bias was the problem. Anywhere you looked, the Left controlled the commanding heights-television, newspapers and universities. It was imperative, Regnery said, to establish a "counterintelligence unit" that could fight back.

    In her superb Messengers of the Right , Nicole Hemmer examines the origins of conservative media. Hemmer, who is an assistant professor at the University of Virginia, has performed extensive archival research to illuminate the furthest recesses of the Right, complementing earlier works like Geoffrey Kabaservice's Rule and Ruin . She provides much new information and penetrating observations about figures such as Clarence Manion, William Rusher and Henry Regnery. Above all, she shows that there has been a remarkable consistency to the grievances and positions, which were often one and the same, of the conservative movement over the decades.

    According to Hemmer, the modern Right first took shape in the form of the America First Committee. A number of leading conservatives saw little difference between Adolf Hitler and Franklin D. Roosevelt. Regnery recollected that "both Hitler and Roosevelt-each in his own way -- were masters of the art of manipulating the masses."

    Indeed, in an October 1991 letter to Patrick J. Buchanan, Regnery claimed that Americans had been hornswoggled into supporting the war by "the President and those who form public opinion." Others such as the gifted orator Clarence Manion, a former FDR acolyte, joined the America First Committee in 1941. After the war, Manion became the dean of the Notre Dame Law School and wrote a book called The Key to Peace , which argued that limited government was the key to American greatness, not a quest to "take off for the Mountains of the Moon in search of ways and means to pacify and unify mankind."

    While serving in the Eisenhower administration, he also became a proponent of the Bricker Amendment, which would have subjected treaties signed by the president to ratification by the states. Eisenhower demanded his resignation. An embittered Manion, Hemmer writes, concluded that columnists such as James Reston, Marquis Childs, and Joseph and Stewart Alsop had effectively operated as a united front to ruin him.

    Everywhere he looked, the media-newspapers, network radio and television news, magazines, and journals-all seemed locked in a [neo]liberal consensus. . . . If conservatives were going to claw their way back in from the outside, they were going to need to first find a way to impair and offset liberals in the media.

    In 1954, the Manion Forum of Opinion , which aired on several dozen radio stations, was born. It soon became a popular venue that allowed Manion, who was cochair of a political party called For America, to inveigh against the depredations of liberalism and preach the conservative gospel.

    ... ... ...

    With the election of Ronald Reagan in 1980, the conservative media seemed to have arrived. But as Hemmer notes, a New Right generation of activists that included figures such Terry Dolan of the National Conservative Political Action Committee and Jerry Falwell of the Moral Majority had arrived that did not have much in common with the older conservative generation. She points out that leaders of the New Right backed Republican congressman Phil Crane, then former Texas governor John Connally, only supporting Reagan during the general election. Buckley and his cohort, Hemmer writes, saw the New Right paladins as "Johnnies-come-lately to the movement, demanding rigorous fealty to social issues that had only recently become the drivers of politics." Hemmer might have noted that, although Reagan has since become a conservative icon, George F. Will and Norman Podhoretz, among others, lamented what they viewed as Reagan's concessive posture towards Mikhail Gorbachev.

    Jacob Heilbrunn is editor of the National Interest.

    [Nov 19, 2016] The global revolt against elites is not just driven by revulsion and loss of jobs. The era of neoliberalism is over. The era of neonationalism has just begun.

    It is the end of neoliberalism and the start of the era of authoritarian nationalism, and we all need to come together to stamp out the authoritarian part.
    Notable quotes:
    "... Neoliberalism has been disastrous for the Rust Belt, and I think we need to envision a new future for what was once the country's industrial heartland, now little more than its wasteland ..."
    "... The question of what the many millions of often-unionized factory workers, SMEs which supplied them, family farmers (now fully industrialized and owned by corporations), and all those in secondary production and services who once supported them are to actually do in future to earn a decent living is what I believe should really be the subject of debate. ..."
    "... two factors (or three, I guess) have contributed to this state of despair: offshoring and outsourcing, and technology. ..."
    "... Medicaid, the CHIP program, the SNAP program and others (including NGOs and private charitable giving) may alleviate some of the suffering, but there is currently no substitute for jobs that would enable men and women to live lives of dignity – a decent place to live, good educations for their children, and a reasonable, secure pension in old age. Near-, at-, and below-minimum wage jobs devoid of any benefits don't allow any of these – at most, they make possible a subsistence life, one which requires continued reliance on public assistance throughout one's lifetime. ..."
    "... In the U.S. (a neoliberal pioneer), poverty is closely linked with inequality and thus, a high GINI coefficient (near that of Turkey); where there is both poverty and a very unequal distribution of resources, this inevitably affects women (and children) and racial (and ethnic) minorities disproportionately. The economic system, racism, sexism, and xenophobia are not separate, stand-alone issues; they are profoundly intertwined. ..."
    "... But really, if you think about it, slavery was defined as ownership, ownership of human capital (which was convertible into cash), and women in many societies throughout history were acquired as part of a financial transaction (either through purchase or through sale), and control of their capital (land, property [farmland, herds], valuables and later, money) often entrusted to a spouse or male guardian. All of these practices were economically-driven, even if the driver wasn't 21st-century capitalism. ..."
    "... Let it be said at once: Trump's victory is primarily due to the explosion in economic and geographic inequality in the United States over several decades and the inability of successive governments to deal with this. ..."
    "... Both the Clinton and the Obama administrations frequently went along with the market liberalization launched under Reagan and both Bush presidencies. At times they even outdid them: the financial and commercial deregulation carried out under Clinton is an example. What sealed the deal, though, was the suspicion that the Democrats were too close to Wall Street – and the inability of the Democratic media elite to learn the lessons from the Sanders vote. ..."
    "... Regional inequality and globalization are the principal drivers in Japanese politics, too, along with a number of social drivers. ..."
    "... The tsunami/nuclear meltdown combined with the Japanese government's uneven response is an apt metaphor for the impact of neo-liberalism/globalization on Japan; and on the US. I then explained that the income inequality in the US was far more severe than that of Japan and that many Americans did not support the export of jobs to China/Mexico. ..."
    "... I contend that in some hypothetical universe the DNC and corrupt Clinton machine could have been torn out, root and branch, within months. As I noted, however, the decision to run HRC effectively unopposed was made several years, at least, before the stark evidence of the consequences of such a decision appeared in sharp relief with Brexit. ..."
    "... Just as the decline of Virginia coal is due to global forces and corporate stupidity, so the decline of the rust belt is due to long (30 year plus) global forces and corporate decisions that predate the emergence of identity politics. ..."
    "... It's interesting that the clear headed thinkers of the Marxist left, who pride themselves on not being distracted by identity, don't want to talk about these factors when discussing the plight of their cherished white working class. ..."
    "... The construction 'white working class' is a useful governing tool that splits poor people and possible coalitions against the violence of capital. Now, discussion focuses on how some of the least powerful, most vulnerable people in the United States are the perpetrators of a great injustice against racialised and minoritised groups. Such commentary colludes in the pathologisation of the working class, of poor people. Victims are inculpated as the vectors of noxious, atavistic vices while the perpetrators get off with impunity, showing off their multihued, cosmopolitan C-suites and even proposing that their free trade agreements are a form of anti-racist solidarity. Most crucially, such analysis ignores the continuities between a Trumpian dystopia and our satisfactory present. ..."
    "... Race-thinking forecloses the possibility of the coalitions that you imagine, and reproduces ideas of difference in ways that always, always privilege 'whiteness'. ..."
    "... Historical examples of ethnic groups becoming 'white', how it was legal and political decision-making that defined the present racial taxonomy, suggest that groups can also lose or have their 'whiteness' threatened. CB has written here about how, in the UK at least, Eastern and Southern Europeans are racialised, and so refused 'whiteness'. JQ has written about southern white minoritisation. Many commentators have pointed that the 'white working class' vote this year looked a lot like a minority vote. ..."
    "... Given the subordination of groups presently defined as 'white working class', I wonder if we could think beyond ethnic and epidermal definition to consider that the impossibility of the American Dream refuses these groups whiteness; i.e the hoped for privileges of racial superiority, much in the same way that African Americans, Latin Americans and other racialised minorities are denied whiteness. Can a poor West Virginian living in a toxified drugged out impoverished landscape really be defined as a carrier of 'white privilege'? ..."
    "... I was first pointed at this by the juxtapositions of racialised working class and immigrants in Imogen Tyler's Revolting Subjects – Social Abjection and Resistance in Neoliberal Britain but this below is a useful short article that takes a historical perspective. ..."
    "... In a 1990 essay, the late Yale political scientist Juan Linz observed that "aside from the United States, only Chile has managed a century and a half of relatively undisturbed constitutional continuity under presidential government - but Chilean democracy broke down in the 1970s." ..."
    "... Linz offered several reasons why presidential systems are so prone to crisis. One particularly important one is the nature of the checks and balances system. Since both the president and the Congress are directly elected by the people, they can both claim to speak for the people. When they have a serious disagreement, according to Linz, "there is no democratic principle on the basis of which it can be resolved." The constitution offers no help in these cases, he wrote: "the mechanisms the constitution might provide are likely to prove too complicated and aridly legalistic to be of much force in the eyes of the electorate." ..."
    "... In a parliamentary system, deadlocks get resolved. A prime minister who lacks the backing of a parliamentary majority is replaced by a new one who has it. If no such majority can be found, a new election is held and the new parliament picks a leader. It can get a little messy for a period of weeks, but there's simply no possibility of a years-long spell in which the legislative and executive branches glare at each other unproductively.' ..."
    "... In any case, as I pointed out before, given that the US is increasingly an urbanised country, and the Electoral College was created to protect rural (slave) states, the grotesque electoral result we have just seen is likely to recur, which means more and more Presidents with dubious democratic legitimacy. Thanks to Bush (and Obama) these Presidents will have, at the same time, more and more power. ..."
    "... To return to my original question and answer it myself: I'm forced to conclude that the Democrats did not specifically address the revitalization – rebirth of the Rust Belt in their 2016 platform. Its failure to do so carried a heavy cost that (nearly) all of us will be forced to pay. ..."
    "... This sub seems to have largely fallen into the psychologically comfortable trap of declaring that everyone who voted against their preferred candidate is racist. It's a view pushed by the neoliberals, who want to maintain he stranglehold of identity politics over the DNC, and it makes upper-class 'intellectuals' feel better about themselves and their betrayal of the filthy, subhuman white underclass (or so they see it). ..."
    "... You can scream 'those jobs are never coming back!' all you want, but people are never going to accept it. So either you come up with a genuine solution (instead of simply complaining that your opponents solutions won't work; you're partisan and biased, most voters won't believe you), you may as well resign yourself to fascism. Because whining that you don't know what to do won't stop people from lining up behind someone who says that they do have one, whether it'll work or not. Nobody trusts the elite enough to believe them when they say that jobs are never coming back. Nobody trusts the elite at all. ..."
    "... You sound just like the Wiemar elite. No will to solve the problem, but filled with terror at the inevitable result of failing to solve the problem. ..."
    "... One brutal fact tells us everything we need to know about the Democratic party in 2016: the American Nazi party is running on a platform of free health care to working class people. This means that the American Nazi Party is now running to the left of the Democratic party. ..."
    "... Back in the 1930s, when the economy collapsed, fascists appeared and took power. Racists also came out of the woodwork, ditto misogynists. Fast forward 80 years, and the same thing has happened all over again. The global economy melted down in 2008 and fascists appeared promising to fix the problems that the pols in power wouldn't because they were too closely tied to the existing (failed) system. Along with the fascists, racists gained power because they were able to scapegoat minorities as the alleged cause of everyone's misery. ..."
    "... None of this is surprising. We have seen it before. Whenever you get a depression in a modern industrial economy, you get scapegoating, racism, and fascists. We know what to do. The problem is that the current Democratic party isn't doing it. ..."
    "... . It is the end of neoliberalism and the start of the era of authoritarian nationalism, and we all need to come together to stamp out the authoritarian part. ..."
    "... This hammered people on the bottom, disproportionately African Americans and especially single AA mothers in America. It crushed the blue collar workers. It is wiping out the savings and careers of college-educated white collar workers now, at least, the ones who didn't go to the Ivy League, which is 90% of them. ..."
    "... Calling Hillary an "imperfect candidate" is like calling what happened to the Titanic a "boating accident." Trump was an imperfect candidate. Why did he win? ..."
    "... "The neoliberal era in the United States ended with a neofascist bang. The political triumph of Donald Trump shattered the establishments in the Democratic and Republican parties – both wedded to the rule of Big Money and to the reign of meretricious politicians." ..."
    "... "It is not an exaggeration to say that the Democratic Party is in shambles as a political force. Not only did it just lose the White House to a wildly unpopular farce of a candidate despite a virtually unified establishment behind it, and not only is it the minority party in both the Senate and the House, but it is getting crushed at historical record rates on the state and local levels as well. Surveying this wreckage last week, party stalwart Matthew Yglesias of Vox minced no words: `the Obama years have created a Democratic Party that's essentially a smoking pile of rubble.' ..."
    "... "One would assume that the operatives and loyalists of such a weak, defeated and wrecked political party would be eager to engage in some introspection and self-critique, and to produce a frank accounting of what they did wrong so as to alter their plight. In the case of 2016 Democrats, one would be quite mistaken." ..."
    "... Foreign Affairs ..."
    "... "At the end of World War II, the United States and its allies decided that sustained mass unemployment was an existential threat to capitalism and had to be avoided at all costs. In response, governments everywhere targeted full employment as the master policy variable-trying to get to, and sustain, an unemployment rate of roughly four percent. The problem with doing so, over time, is that targeting any variable long enough undermines the value of the variable itself-a phenomenon known as Goodhart's law. (..) ..."
    "... " what we see [today] is a reversal of power between creditors and debtors as the anti-inflationary regime of the past 30 years undermines itself-what we might call "Goodhart's revenge." In this world, yields compress and creditors fret about their earnings, demanding repayment of debt at all costs. Macro-economically, this makes the situation worse: the debtors can't pay-but politically, and this is crucial-it empowers debtors since they can't pay, won't pay, and still have the right to vote. ..."
    "... "The traditional parties of the center-left and center-right, the builders of this anti-inflationary order, get clobbered in such a world, since they are correctly identified by these debtors as the political backers of those demanding repayment in an already unequal system, and all from those with the least assets. This produces anti-creditor, pro-debtor coalitions-in-waiting that are ripe for the picking by insurgents of the left and the right, which is exactly what has happened. ..."
    "... "The global revolt against elites is not just driven by revulsion and loss and racism. It's also driven by the global economy itself. This is a global phenomenon that marks one thing above all. The era of neoliberalism is over. The era of neonationalism has just begun." ..."
    "... They want what their families have had which is secure, paid, benefits rich, blue collar work. ..."
    "... trump's campaign empathized with that feeling just by focusing on the factory jobs as jobs and not as anachronisms that are slowly fading away for whatever reason. Clinton might have been "correct", but these voters didn't want to hear "the truth". And as much as you can complain about how stupid they are for wanting to be lied to, that is the unfortunate reality you, and the Democratic party, have to accept. ..."
    "... trump was offering a "bailout" writ large. Clinton had no (good) counteroffer. It was like the tables were turned. Romney was the one talking about "change" and "restructuring" while Obama was defending keeping what was already there. ..."
    "... "Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course - the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check." http://www.nytimes.com/2008/11/19/opinion/19romney.html ..."
    "... Clinton toward the end offered tariffs. But the trump campaign hit back with what turned out to be a pretty strong counter attack – ""How's she going to get tough on China?" said Trump economic advisor Peter Navarro on CNN's Quest Means Business. He notes that some of Clinton's economic advisors have supported TPP or even worked on it. "" ..."
    Nov 19, 2016 | crookedtimber.org

    dbk 11.18.16 at 6:41 pm 130

    Bruce Wilder @102

    The question is no longer her neoliberalism, but yours. Keep it or throw it away?

    I wish this issue was being seriously discussed. Neoliberalism has been disastrous for the Rust Belt, and I think we need to envision a new future for what was once the country's industrial heartland, now little more than its wasteland (cf. "flyover zone" – a pejorative term which inhabitants of the zone are not too stupid to understand perfectly, btw).

    The question of what the many millions of often-unionized factory workers, SMEs which supplied them, family farmers (now fully industrialized and owned by corporations), and all those in secondary production and services who once supported them are to actually do in future to earn a decent living is what I believe should really be the subject of debate.

    As noted upthread, two factors (or three, I guess) have contributed to this state of despair: offshoring and outsourcing, and technology. The jobs that have been lost will not return, and indeed will be lost in ever greater numbers – just consider what will happen to the trucking sector when self-driving trucks hit the roads sometime in the next 10-20 years (3.5 million truckers; 8.7 in allied jobs).

    Medicaid, the CHIP program, the SNAP program and others (including NGOs and private charitable giving) may alleviate some of the suffering, but there is currently no substitute for jobs that would enable men and women to live lives of dignity – a decent place to live, good educations for their children, and a reasonable, secure pension in old age. Near-, at-, and below-minimum wage jobs devoid of any benefits don't allow any of these – at most, they make possible a subsistence life, one which requires continued reliance on public assistance throughout one's lifetime.

    In the U.S. (a neoliberal pioneer), poverty is closely linked with inequality and thus, a high GINI coefficient (near that of Turkey); where there is both poverty and a very unequal distribution of resources, this inevitably affects women (and children) and racial (and ethnic) minorities disproportionately. The economic system, racism, sexism, and xenophobia are not separate, stand-alone issues; they are profoundly intertwined.

    I appreciate and espouse the goals of identity politics in all their multiplicity, and also understand that the institutions of slavery and sexism predated modern capitalist economies. But really, if you think about it, slavery was defined as ownership, ownership of human capital (which was convertible into cash), and women in many societies throughout history were acquired as part of a financial transaction (either through purchase or through sale), and control of their capital (land, property [farmland, herds], valuables and later, money) often entrusted to a spouse or male guardian. All of these practices were economically-driven, even if the driver wasn't 21st-century capitalism.

    Also: Faustusnotes@100
    For example Indiana took the ACA Medicaid expansion but did so with additional conditions that make it worse than in neighboring states run by democratic governors.

    And what states would those be? IL, IA, MI, OH, WI, KY, and TN have Republican governors. Were you thinking pre-2014? pre-2012?

    To conclude and return to my original point: what's to become of the Rust Belt in future? Did the Democratic platform include a New New Deal for PA, OH, MI, WI, and IA (to name only the five Rust Belt states Trump flipped)?

    kidneystones 11.18.16 at 11:32 pm ( 135 )

    Thomas Pickety

    " Let it be said at once: Trump's victory is primarily due to the explosion in economic and geographic inequality in the United States over several decades and the inability of successive governments to deal with this.

    Both the Clinton and the Obama administrations frequently went along with the market liberalization launched under Reagan and both Bush presidencies. At times they even outdid them: the financial and commercial deregulation carried out under Clinton is an example. What sealed the deal, though, was the suspicion that the Democrats were too close to Wall Street – and the inability of the Democratic media elite to learn the lessons from the Sanders vote. "

    The Guardian

    kidneystones 11.18.16 at 11:56 pm 137 ( 137 )

    What should have been one comment came out as 4, so apologies on that front.

    I spent the last week explaining the US election to my students in Japan in pretty much the terms outlined by Lilla and PIketty, so I was delighted to discover these two articles.

    Regional inequality and globalization are the principal drivers in Japanese politics, too, along with a number of social drivers. It was therefore very easy to call for a show of hands to identify students studying here in Tokyo who are trying to decide whether or not to return to areas such as Tohoku to build their lives; or remain in Kanto/Tokyo – the NY/Washington/LA of Japan put crudely.

    I asked students from regions close to Tohoku how they might feel if the Japanese prime minister decided not to visit the region following Fukushima after the disaster, or preceding an election. The tsunami/nuclear meltdown combined with the Japanese government's uneven response is an apt metaphor for the impact of neo-liberalism/globalization on Japan; and on the US. I then explained that the income inequality in the US was far more severe than that of Japan and that many Americans did not support the export of jobs to China/Mexico.

    I then asked the students, particularly those from outlying regions whether they believe Japan needed a leader who would 'bring back Japanese jobs' from Viet Nam and China, etc. Many/most agreed wholeheartedly. I then asked whether they believed Tokyo people treated those outside Kanto as 'inferiors.' Many do.

    Piketty may be right regarding Trump's long-term effects on income inequality. He is wrong, I suggest, to argue that Democrats failed to respond to Sanders' support. I contend that in some hypothetical universe the DNC and corrupt Clinton machine could have been torn out, root and branch, within months. As I noted, however, the decision to run HRC effectively unopposed was made several years, at least, before the stark evidence of the consequences of such a decision appeared in sharp relief with Brexit.

    Faustusnotes 11.19.16 at 12:14 am 138

    Also worth noting is that the rust belts problems are as old as Reagan – even the term dates from the 80s, the issue is so uncool that there is a dire straits song about it. Some portion of the decline of manufacturing there is due to manufacturers shifting to the south, where the anti Union states have an advantage. Also there has been new investment – there were no Japanese car companies in the us in the 1980s, so they are new job creators, yet insufficient to make up the losses. Just as the decline of Virginia coal is due to global forces and corporate stupidity, so the decline of the rust belt is due to long (30 year plus) global forces and corporate decisions that predate the emergence of identity politics.

    It's interesting that the clear headed thinkers of the Marxist left, who pride themselves on not being distracted by identity, don't want to talk about these factors when discussing the plight of their cherished white working class. Suddenly it's not the forces of capital and the objective facts of history, but a bunch of whiny black trannies demanding safe spaces and protesting police violence, that drove those towns to ruin.

    And what solutions do they think the dems should have proposed? It can't be welfare, since we got the ACA (watered down by representatives of the rust belt states). Is it, seriously, tariffs? Short of going to an election promising w revolution, what should the dems have done? Give us a clear answer so we can see what the alternative to identity politics is.

    basil 11.19.16 at 5:11 am

    Did this go through?
    Thinking with WLGR @15, Yan @81, engels variously above,

    The construction 'white working class' is a useful governing tool that splits poor people and possible coalitions against the violence of capital. Now, discussion focuses on how some of the least powerful, most vulnerable people in the United States are the perpetrators of a great injustice against racialised and minoritised groups. Such commentary colludes in the pathologisation of the working class, of poor people. Victims are inculpated as the vectors of noxious, atavistic vices while the perpetrators get off with impunity, showing off their multihued, cosmopolitan C-suites and even proposing that their free trade agreements are a form of anti-racist solidarity. Most crucially, such analysis ignores the continuities between a Trumpian dystopia and our satisfactory present.

    I get that the tropes around race are easy, and super-available. Privilege confessing is very in vogue as a prophylactic against charges of racism. But does it threaten the structures that produce this abjection – either as embittered, immiserated 'white working class' or as threatened minority group? It is always *those* 'white' people, the South, the Working Class, and never the accusers some of whom are themselves happy to vote for a party that drowns out anti-war protesters with chants of USA! USA!

    Race-thinking forecloses the possibility of the coalitions that you imagine, and reproduces ideas of difference in ways that always, always privilege 'whiteness'.

    --

    Historical examples of ethnic groups becoming 'white', how it was legal and political decision-making that defined the present racial taxonomy, suggest that groups can also lose or have their 'whiteness' threatened. CB has written here about how, in the UK at least, Eastern and Southern Europeans are racialised, and so refused 'whiteness'. JQ has written about southern white minoritisation. Many commentators have pointed that the 'white working class' vote this year looked a lot like a minority vote.

    Given the subordination of groups presently defined as 'white working class', I wonder if we could think beyond ethnic and epidermal definition to consider that the impossibility of the American Dream refuses these groups whiteness; i.e the hoped for privileges of racial superiority, much in the same way that African Americans, Latin Americans and other racialised minorities are denied whiteness. Can a poor West Virginian living in a toxified drugged out impoverished landscape really be defined as a carrier of 'white privilege'?

    I was first pointed at this by the juxtapositions of racialised working class and immigrants in Imogen Tyler's Revolting Subjects – Social Abjection and Resistance in Neoliberal Britain but this below is a useful short article that takes a historical perspective.

    Why the Working Class was Never 'White'

    The 'racialisation' of class in Britain has been a consequence of the weakening of 'class' as a political idea since the 1970s – it is a new construction, not an historic one.

    .

    This is not to deny the existence of working-class racism, or to suggest that racism is somehow acceptable if rooted in perceived socio-economic grievances. But it is to suggest that the concept of a 'white working class' needs problematizing, as does the claim that the British working-class was strongly committed to a post-war vision of 'White Britain' analogous to the politics which sustained the idea of a 'White Australia' until the 1960s.

    Yes, old, settled neighbourhoods could be profoundly distrustful of outsiders – all outsiders, including the researchers seeking to study them – but, when it came to race, they were internally divided. We certainly hear working-class racist voices – often echoing stock racist complaints about over-crowding, welfare dependency or exploitative landlords and small businessmen, but we don't hear the deep pathological racial fears laid bare in the letters sent to Enoch Powell after his so-called 'Rivers of Blood' speech in 1968 (Whipple, 2009).

    But more importantly, we also hear strong anti-racist voices loudly and clearly. At Wallsend on Tyneside, where the researchers were gathering their data just as Powell shot to notoriety, we find workers expressing casual racism, but we also find eloquent expressions of an internationalist, solidaristic perspective in which, crucially, black and white are seen as sharing the same working-class interests.

    Racism is denounced as a deliberate capitalist strategy to divide workers against themselves, weakening their ability to challenge those with power over their lives (shipbuilding had long been a very fractious industry and its workers had plenty of experience of the dangers of internal sectarian battles).

    To be able to mobilize across across racialised divisions, to have race wither away entirely would, for me, be the beginning of a politics that allowed humanity to deal with the inescapable violence of climate change and corporate power.

    *To add to the bibliography – David R. Roediger, Elizabeth D. Esch – The Production of Difference – Race and the Management of Labour, and Denise Ferreira da Silva – Toward a Global Idea of Race. And I have just been pointed at Ian Haney-López, White By Law – The Legal Construction of Race.

    Hidari 11.19.16 at 8:16 am 152

    FWIW 'merica's constitutional democracy is going to collapse.

    Some day - not tomorrow, not next year, but probably sometime before runaway climate change forces us to seek a new life in outer-space colonies - there is going to be a collapse of the legal and political order and its replacement by something else. If we're lucky, it won't be violent. If we're very lucky, it will lead us to tackle the underlying problems and result in a better, more robust, political system. If we're less lucky, well, then, something worse will happen .

    In a 1990 essay, the late Yale political scientist Juan Linz observed that "aside from the United States, only Chile has managed a century and a half of relatively undisturbed constitutional continuity under presidential government - but Chilean democracy broke down in the 1970s."

    Linz offered several reasons why presidential systems are so prone to crisis. One particularly important one is the nature of the checks and balances system. Since both the president and the Congress are directly elected by the people, they can both claim to speak for the people. When they have a serious disagreement, according to Linz, "there is no democratic principle on the basis of which it can be resolved." The constitution offers no help in these cases, he wrote: "the mechanisms the constitution might provide are likely to prove too complicated and aridly legalistic to be of much force in the eyes of the electorate."

    In a parliamentary system, deadlocks get resolved. A prime minister who lacks the backing of a parliamentary majority is replaced by a new one who has it. If no such majority can be found, a new election is held and the new parliament picks a leader. It can get a little messy for a period of weeks, but there's simply no possibility of a years-long spell in which the legislative and executive branches glare at each other unproductively.'

    http://www.vox.com/2015/3/2/8120063/american-democracy-doomed

    Given that the basic point is polarisation (i.e. that both the President and Congress have equally strong arguments to be the the 'voice of the people') and that under the US appalling constitutional set up, there is no way to decide between them, one can easily imagine the so to speak 'hyperpolarisation' of a Trump Presidency as being the straw (or anvil) that breaks the camel's back.

    In any case, as I pointed out before, given that the US is increasingly an urbanised country, and the Electoral College was created to protect rural (slave) states, the grotesque electoral result we have just seen is likely to recur, which means more and more Presidents with dubious democratic legitimacy. Thanks to Bush (and Obama) these Presidents will have, at the same time, more and more power.

    Eventually something is going to break.

    dbk 11.19.16 at 10:39 am ( 153 )

    nastywoman @ 150
    Just study the program of the 'Sozialdemokratische Partei Deutschland' or the Program of 'Die Grünen' in Germany (take it through google translate) and you get all the answers you are looking for.

    No need to run it through google translate, it's available in English on their site. [Or one could refer to the Green Party of the U.S. site/platform, which is very similar in scope and overall philosophy. (www.gp.org).]

    I looked at several of their topic areas (Agricultural, Global, Health, Rural) and yes, these are general theses I would support. But they're hardly policy/project proposals for specific regions or communities – the Greens espouse "think global, act local", so programs and projects must be tailored to individual communities and regions.

    To return to my original question and answer it myself: I'm forced to conclude that the Democrats did not specifically address the revitalization – rebirth of the Rust Belt in their 2016 platform. Its failure to do so carried a heavy cost that (nearly) all of us will be forced to pay.

    Soullite 11.19.16 at 12:46 pm 156

    This sub seems to have largely fallen into the psychologically comfortable trap of declaring that everyone who voted against their preferred candidate is racist. It's a view pushed by the neoliberals, who want to maintain he stranglehold of identity politics over the DNC, and it makes upper-class 'intellectuals' feel better about themselves and their betrayal of the filthy, subhuman white underclass (or so they see it).

    I expect at this point that Trump will be reelected comfortably. If not only the party itself, but also most of its activists, refuse to actually change, it's more or less inevitable.

    You can scream 'those jobs are never coming back!' all you want, but people are never going to accept it. So either you come up with a genuine solution (instead of simply complaining that your opponents solutions won't work; you're partisan and biased, most voters won't believe you), you may as well resign yourself to fascism. Because whining that you don't know what to do won't stop people from lining up behind someone who says that they do have one, whether it'll work or not. Nobody trusts the elite enough to believe them when they say that jobs are never coming back. Nobody trusts the elite at all.

    You sound just like the Wiemar elite. No will to solve the problem, but filled with terror at the inevitable result of failing to solve the problem.

    mclaren 11.19.16 at 2:37 pm 160

    One brutal fact tells us everything we need to know about the Democratic party in 2016: the American Nazi party is running on a platform of free health care to working class people. This means that the American Nazi Party is now running to the left of the Democratic party.

    Folks, we have seen this before. Let's not descend in backbiting and recriminations, okay? We've got some commenters charging that other commenters are "mansplaining," meanwhile we've got other commenters claiming that it's economics and not racism/misogyny. It's all of the above.

    Back in the 1930s, when the economy collapsed, fascists appeared and took power. Racists also came out of the woodwork, ditto misogynists. Fast forward 80 years, and the same thing has happened all over again. The global economy melted down in 2008 and fascists appeared promising to fix the problems that the pols in power wouldn't because they were too closely tied to the existing (failed) system. Along with the fascists, racists gained power because they were able to scapegoat minorities as the alleged cause of everyone's misery.

    None of this is surprising. We have seen it before. Whenever you get a depression in a modern industrial economy, you get scapegoating, racism, and fascists. We know what to do. The problem is that the current Democratic party isn't doing it.

    Instead, what we're seeing is a whirlwind of finger-pointing from the Democratic leadership that lost this election and probably let the entire New Deal get rolled back and wiped out. Putin is to blame! Julian Assange is to blame! The biased media are to blame! Voter suppression is to blame! Bernie Sanders is to blame! Jill Stein is to blame! Everyone and anyone except the current out-of-touch influence-peddling elites who currently have run the Democratic party into the ground.

    We need the feminists and the black lives matter groups and we also need the green party people and the Bernie Sanders activists. But everyone has to understand that this is not an isolated event. Trump did not just happen by accident. First there was Greece, then there was Brexit, then there was Trump, next it'll be Renzi losing the referendum in Italy and a constitutional crisis there, and after that, Marine Le Pen in France is going to win the first round of elections. (Probably not the presidency, since all the other French parties will band together to stop her, but the National Front is currently polling at 40% of all registered French voters.) And Marine LePen is the real deal, a genuine full-on out-and-out fascist. Not a closet fascist like Steve Bannon, LePen is the full monty with everything but a Hugo Boss suit and the death's heads on the cap.

    Does anyone notice a pattern here?

    This is an international movement. It is sweeping the world . It is the end of neoliberalism and the start of the era of authoritarian nationalism, and we all need to come together to stamp out the authoritarian part.

    Feminists, BLM, black bloc anarchiest anti-globalists, Sandernistas, and, yes, the former Hillary supporters. Because it not just a coincidence that all these things are happening in all these countries at the same time. The bottom 90% of the population in the developed world has been ripped off by a managerial and financial and political class for the last 30 years and they have all noticed that while the world GDP was skyrocketing and international trade agreements were getting signed with zero input from the average citizen, a few people were getting very very rich but nobody else was getting anything.

    This hammered people on the bottom, disproportionately African Americans and especially single AA mothers in America. It crushed the blue collar workers. It is wiping out the savings and careers of college-educated white collar workers now, at least, the ones who didn't go to the Ivy League, which is 90% of them.

    And the Democratic party is so helpless and so hopeless that it is letting the American Nazi Party run to the left of them on health care, fer cripes sake! We are now in a situation where the American Nazi Party is advocating single-payer nationalized health care, while the former Democratic presidential nominee who just got defeated assured everyone that single-payer "will never, ever happen."

    C'mon! Is anyone surprised that Hillary lost? Let's cut the crap with the "Hillary was a flawed candidate" arguments. The plain fact of the matter is that Hillary was running mainly on getting rid of the problems she and her husband created 25 years ago. Hillary promised criminal justice reform and Black Lives Matter-friendly policing policies - and guess who started the mass incarceration trend and gave speeches calling black kids "superpredators" 20 years ago? Hillary promised to fix the problems with the wretched mandate law forcing everyone to buy unaffordable for-profit private insurance with no cost controls - and guess who originally ran for president in 2008 on a policy of health care mandates with no cost controls? Yes, Hillary (ironically, Obama's big surge in popularity as a candidate came when he ran against Hillary from the left, ridiculing helath care mandates). Hillary promises to reform an out-of-control deregulated financial system run amok - and guess who signed all those laws revoking Glass-Steagal and setting up the Securities Trading Modernization Act? Yes, Bill Clinton, and Hillary was right there with him cheering the whole process on.

    So pardon me and lots of other folks for being less than impressed by Hillary's trustworthiness and honesty. Run for president by promising to undo the damage you did to the country 25 years ago is (let say) a suboptimal campaign strategy, and a distinctly suboptimal choice of presidential candidate for a party in the same sense that the Hiroshima air defense was suboptimal in 1945.

    Calling Hillary an "imperfect candidate" is like calling what happened to the Titanic a "boating accident." Trump was an imperfect candidate. Why did he win?

    Because we're back in the 1930s again, the economy has crashed hard and still hasn't recovered (maybe because we still haven't convened a Pecora Commission and jailed a bunch of the thieves, and we also haven't set up any alphabet government job programs like the CCC) so fascists and racists and all kinds of other bottom-feeders are crawling out of the political woodwork to promise to fix the problems that the Democratic party establishment won't.
    Rule of thumb: any social or political or economic writer virulently hated by the current Democratic party establishment is someone we should listen to closely right now.

    Cornel West is at the top of the current Democratic establishment's hate list, and he has got a great article in The Guardian that I think is spot-on:

    "The neoliberal era in the United States ended with a neofascist bang. The political triumph of Donald Trump shattered the establishments in the Democratic and Republican parties – both wedded to the rule of Big Money and to the reign of meretricious politicians."

    https://www.theguardian.com/commentisfree/2016/nov/17/american-neoliberalism-cornel-west-2016-election

    Glenn Greenwald is another writer who has been showered with more hate by the Democratic establishment recently than even Trump or Steve Bannon, so you know Greenwald is saying something important. He has a great piece in The Intercept on the head-in-the-ground attitude of Democratic elites toward their recent loss:

    "It is not an exaggeration to say that the Democratic Party is in shambles as a political force. Not only did it just lose the White House to a wildly unpopular farce of a candidate despite a virtually unified establishment behind it, and not only is it the minority party in both the Senate and the House, but it is getting crushed at historical record rates on the state and local levels as well. Surveying this wreckage last week, party stalwart Matthew Yglesias of Vox minced no words: `the Obama years have created a Democratic Party that's essentially a smoking pile of rubble.'

    "One would assume that the operatives and loyalists of such a weak, defeated and wrecked political party would be eager to engage in some introspection and self-critique, and to produce a frank accounting of what they did wrong so as to alter their plight. In the case of 2016 Democrats, one would be quite mistaken."

    https://theintercept.com/2016/11/18/the-stark-contrast-between-the-gops-self-criticism-in-2012-and-the-democrats-blame-everyone-else-posture-now/

    Last but far from least, Scottish economist Mark Blyth has what looks to me like the single best analysis of the entire global Trump_vs_deep_state tidal wave in Foreign Affairs magazine:

    "At the end of World War II, the United States and its allies decided that sustained mass unemployment was an existential threat to capitalism and had to be avoided at all costs. In response, governments everywhere targeted full employment as the master policy variable-trying to get to, and sustain, an unemployment rate of roughly four percent. The problem with doing so, over time, is that targeting any variable long enough undermines the value of the variable itself-a phenomenon known as Goodhart's law. (..)

    " what we see [today] is a reversal of power between creditors and debtors as the anti-inflationary regime of the past 30 years undermines itself-what we might call "Goodhart's revenge." In this world, yields compress and creditors fret about their earnings, demanding repayment of debt at all costs. Macro-economically, this makes the situation worse: the debtors can't pay-but politically, and this is crucial-it empowers debtors since they can't pay, won't pay, and still have the right to vote.

    "The traditional parties of the center-left and center-right, the builders of this anti-inflationary order, get clobbered in such a world, since they are correctly identified by these debtors as the political backers of those demanding repayment in an already unequal system, and all from those with the least assets. This produces anti-creditor, pro-debtor coalitions-in-waiting that are ripe for the picking by insurgents of the left and the right, which is exactly what has happened.

    "In short, to understand the election of Donald Trump we need to listen to the trumpets blowing everywhere in the highly indebted developed countries and the people who vote for them.

    "The global revolt against elites is not just driven by revulsion and loss and racism. It's also driven by the global economy itself. This is a global phenomenon that marks one thing above all. The era of neoliberalism is over. The era of neonationalism has just begun."

    https://www.foreignaffairs.com/articles/2016-11-15/global-Trump_vs_deep_state

    efcdons 11.19.16 at 3:07 pm 161 ( 161 )

    Faustusnotes @147

    You don't live here, do you? I'm really asking a genuine question because the way you are framing the question ("SPECIFICS!!!!!!) suggests you don't. (Just to show my background, born and raised in Australia (In the electoral division of Kooyong, home of Menzies) but I've lived in the US since 2000 in the midwest (MO, OH) and currently in the south (GA))

    If this election has taught us anything it's no one cared about "specifics". It was a mood, a feeling which brought trump over the top (and I'm not talking about the "average" trump voter because that is meaningless. The average trunp voter was a republican voter in the south who the Dems will never get so examining their motivations is immaterial to future strategy. I'm talking about the voters in the Upper Midwest from places which voted for Obama twice then switched to trump this year to give him his margin of victory).

    trump voters have been pretty clear they don't actually care about the way trump does (or even doesn't) do what he said he would do during the campaign. It was important to them he showed he was "with" people like them. They way he did that was partially racialized (law and order, islamophobia) but also a particular emphasis on blue collar work that focused on the work. Unfortunately these voters, however much you tell them they should suck it up and accept their generations of familial experience as relatively highly paid industrial workers (even if it is something only their fathers and grandfathers experienced because the factories were closing when the voters came of age in the 80s and 90s) is never coming back and they should be happy to retrain as something else, don't want it. They want what their families have had which is secure, paid, benefits rich, blue collar work.

    trump's campaign empathized with that feeling just by focusing on the factory jobs as jobs and not as anachronisms that are slowly fading away for whatever reason. Clinton might have been "correct", but these voters didn't want to hear "the truth". And as much as you can complain about how stupid they are for wanting to be lied to, that is the unfortunate reality you, and the Democratic party, have to accept.

    The idea they don't want "government help" is ridiculous. They love the government. They just want the government to do things for them and not for other people (which unfortunately includes blah people but also "the coasts", "sillicon valley", etc.). Obama won in 2008 and 2012 in part due to the auto bailout.

    trump was offering a "bailout" writ large. Clinton had no (good) counteroffer. It was like the tables were turned. Romney was the one talking about "change" and "restructuring" while Obama was defending keeping what was already there.

    "Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course - the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check."
    http://www.nytimes.com/2008/11/19/opinion/19romney.html

    So yes. Clinton needed vague promises. She needed something more than retraining and "jobs of the future" and "restructuring". She needed to show she was committed to their way of life, however those voters saw it, and would do something, anything, to keep it alive. trump did that even though his plan won't work. And maybe he'll be punished for it. In 4 years. But in the interim the gop will destroy so many things we need and rely on as well as entrench their power for generations through the Supreme Court.

    But really, it was hard for Clinton to be trusted to act like she cared about these peoples' way of life because she (through her husband fairly or unfairly) was associated with some of the larger actions and choices which helped usher in the decline.

    Clinton toward the end offered tariffs. But the trump campaign hit back with what turned out to be a pretty strong counter attack – ""How's she going to get tough on China?" said Trump economic advisor Peter Navarro on CNN's Quest Means Business. He notes that some of Clinton's economic advisors have supported TPP or even worked on it. ""

    http://money.cnn.com/2016/08/11/news/economy/hillary-clinton-trade/

    [Nov 19, 2016] How Inequality Found a Political Voice

    Nov 19, 2016 | www.project-syndicate.org

    In the United States, rising inequality has been a fact of life at least since the 1970s, when the relatively equitable distribution of economic benefits from the early post-World War II era started to become skewed. In the late 1990s, when digital technologies began to automate and disintermediate more routine jobs, the shift toward higher wealth and income inequality became turbocharged.

    Globalization played a role. In the 20 years before the 2008 financial crisis, manufacturing employment in the US rapidly declined in every sector except pharmaceuticals, even as added value in manufacturing rose. Net jobs loss was kept roughly at zero only because employment in services increased.

    In fact, much of the added value in manufacturing actually comes from services such as product design, research and development, and marketing. So, if we account for this value-chain composition, the decline in manufacturing – the production of tangible goods – is even more pronounced.

    Economists have been tracking these trends for some time. Massachusetts Institute of Technology economist David Autor and his colleagues have carefully documented the impact of globalization and labor-saving digital technologies on routine jobs. More recently, French economist Thomas Piketty 's international bestseller, Capital in the Twenty-First Century , dramatically widened our awareness of wealth inequality and described possible underlying forces driving it. The brilliant, award-winning young economists Raj Chetty and Emmanuel Saez have enriched the discussion with new research. And I have written about some of the structural economic shifts associated with these problems.

    Eventually, journalists picked up on these trends, too, and it would now be hard to find anyone who has not heard of the "1%" – shorthand for those at the top of the global wealth and income scales. Many people now worry about a bifurcated society: a thriving global class of elites at the top and a stressed-out class comprising everyone else. Still, despite these long trends, the political and policy status quo remained largely unchallenged until 2008.

    To understand why it took politics so long to catch up to economic realities, we should look at incentives and ideology. With respect to incentives, politicians have not been given a good enough reason to address unequal distribution patterns. The US has relatively weak campaign-finance limits, so corporations and wealthy individuals – neither of which generally prioritizes income redistribution – have contributed a disproportionate share to politicians' campaign war chests.

    Ideologically, many people are simply suspicious of expansive government. They recognize inequality as a problem, and in principle they support government policies that provide high-quality education and health-care services, but they do not trust politicians or bureaucrats. In their eyes, governments are inefficient and self-interested at best, and dictatorial and oppressive at worst.

    All of this began to change with the rise of digital technologies and the Internet, but especially with the advent of social media. As US President Barack Obama showed in the 2008 election cycle – followed by Bernie Sanders and Donald Trump in the current cycle – it is now possible to finance a very expensive campaign without "big money."

    As a result, there is a growing disconnect between big money and political incentives; and while money is still a part of the political process, influence itself no longer belongs exclusively to corporations and wealthy individuals. Social-media platforms now enable large groups of people to mobilize in ways reminiscent of mass political movements in earlier eras. Such platforms may have reduced the cost of political organizing, and thus candidates' overall dependence on money, while providing an efficient alternative fund-raising channel.

    This new reality is here to stay, and, regardless of who wins the US election this year, anyone who is unhappy with high inequality will have a voice, the ability to finance it, and the power to affect policymaking. So, too, will other groups that focus on similar issues, such as environmental sustainability, which has not been a major focus in the current US presidential campaign (the three debates between the candidates included no discussion of climate change, for example), but surely will be in the future.

    All told, digital technology is shuffling economic structures and rebalancing power relationships in the world's democracies – even in institutions once thought to be dominated by money and wealth.

    A large, newly influential constituency should be welcomed. But it cannot be a substitute for wise leadership, and its existence does not guarantee prudent policies. As political priorities continue to rebalance, we will need to devise creative solutions to solve our hardest problems, and to prevent populist misrule. One hopes that this is the course we are on now.

    Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU's Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, Senior Fellow at the Hoover Institution at Stanford University, Academic Board Chairman of the Asia Global Institute in Hong Kong, and Chair of the World Economic Forum Global Agenda Council on New Growth Models. He was the chairman of the independent Commission on Growth and Development, an international body that from 2006-2010 analyzed opportunities for global economic growth, and is the author of The Next Convergence – The Future of Economic Growth in a Multispeed World

    [Nov 19, 2016] Men arent interested in working at McDonalds for $15 per hour instead of $9.50. What they want is... steady, stable, full-time jobs that deliver a solid middle-class life

    Notable quotes:
    "... The economic point is that globalisation has boosted trade and overall wealth, but it has also created a dog eat dog world where western workers compete with, and lose jobs to, people far away who will do the work for much less. ..."
    "... But neither Trump nor Farage have shown any evidence of how realistically they can recreate those jobs in the west. And realistically god knows how you keep the wealth free trade and globalisation brings but avoid losing the good jobs? At least the current mess has focused attention on the question and has said that patience has run out. ..."
    "... Compared to the real economic problems, the identity politics is minor, but it is still an irritant that explains why this revolution is coming from the right not from the left. ..."
    "... And what "age" has that been Roy? The "age" of: climate change, gangster bankers, tax heavens, illegal wars, nuclear proliferation, grotesque inequality, the prison industrial complex to cite just a few. That "age"? ..."
    "... the right wing press detest one kind of liberalism, social liberalism, they hate that, but they love economic liberalism, which has done much harm to the working class. ..."
    "... Most of the right wing press support austerity measures, slashing of taxes and, smaller and smaller governments. Yet apparently, its being socially liberal that is the problem ..."
    Nov 19, 2016 | profile.theguardian.com
    goodtable, 3d ago

    A crucial point "WWC men aren't interested in working at McDonald's for $15 per hour instead of $9.50. What they want is... steady, stable, full-time jobs that deliver a solid middle-class life."

    The economic point is that globalisation has boosted trade and overall wealth, but it has also created a dog eat dog world where western workers compete with, and lose jobs to, people far away who will do the work for much less.

    But neither Trump nor Farage have shown any evidence of how realistically they can recreate those jobs in the west. And realistically god knows how you keep the wealth free trade and globalisation brings but avoid losing the good jobs? At least the current mess has focused attention on the question and has said that patience has run out.

    Compared to the real economic problems, the identity politics is minor, but it is still an irritant that explains why this revolution is coming from the right not from the left.

    If you're white and male it's bad enough losing your hope of economic security, but then to be repeatedly told by the left that you're misogynist, racist, sexist, Islamophobic, transgenderphobic etc etc is just the icing on the cake. If the author wants to see just how crazy identity politics has become go to the Suzanne Moore piece from yesterday accusing American women of being misogynist for refusing to vote for Hillary. That kind of maniac 'agree with me on everything or you're a racist, sexist, homophobe' identity politics has to be ditched. Reply

    EnglishMike -> goodtable 3d ago
    Funny, I've been a white male my whole life and not once have I been accused of being a misogynist, racist, sexist, Islamophobic, or transgenderphobic. I didn't think being a white male was so difficult for some people... Reply
    garrylee 3d ago
    "Are we turning our backs on the age of enlightenment?".

    And what "age" has that been Roy? The "age" of: climate change, gangster bankers, tax heavens, illegal wars, nuclear proliferation, grotesque inequality, the prison industrial complex to cite just a few. That "age"?

    Bazz Leaveblank -> garrylee 3d ago
    I agree hardly an age of enlightenment. My opinion... the so called Liberal Elite are responsible for many of the issues in the list. The poor and the old in this country are not being helped by the benefits system. Yet the rich get richer beyond the dreams of the ordinary man.

    I would pay more tax if I thought it might be spent more wisely...but can you trust politicians who are happy to spend 50 billion on a railway line that 98% of the population will never use.

    No solutions from me ...an old hippy from the 60s "Love and peace man " ...didn't work did it :)

    aronDi 3d ago
    I have come under the impression that the right wing press detest one kind of liberalism, social liberalism, they hate that, but they love economic liberalism, which has done much harm to the working class.

    Most of the right wing press support austerity measures, slashing of taxes and, smaller and smaller governments. Yet apparently, its being socially liberal that is the problem.

    [Nov 19, 2016] We should not use the term capital when referring to credit/lending that is not related to economically real outputs

    Notable quotes:
    "... "And even though neoliberals and international banks would have you believe otherwise, a fall in these money movements is entirely a good thing. As Ken Rogoff and Carmen Reinhart found in their study of 800 years of financial crises, high levels of international capital flows are correlated with more frequent and severe financial crises. Similarly, a 2010 Bank of International Settlements study by Claudio Borio and Petit Disyatat ascertained that cross border capital flows were over 60 times trade flows, meaning they had almost nothing to do with them. " ..."
    "... I think it is apparent that the entire edifice of finance has been jiggered to benefit, Davos man and NO ONE ELSE. ..."
    "... hy shouldn't Davos man want it to continue – the aftermath was set right for the 0.1% remarkably fast in the aftermath of the Great Recession – by HUGE infusions of government money, guarantees, credit, forbearance, etcetera – which for some reason can NEVER be made available to the 90% ..."
    "... This is probably the most salient reason Hillary lost, but it can never, ever be proffered as a reason for it would reveal that ALL our problems are due to the rich . ..."
    "... I've often wondered how "The Multiplier Effect" of money, [not] circulating and recirculating in our local economies, at the consumer level, is affected by money sent out of the country by "immigrants"? ..."
    "... Is this such a small amount as not to be considered part of "cross border capital flows"? How does it affect local economies that are more important to us than what happens on Wall Street? ..."
    Nov 19, 2016 | www.nakedcapitalism.com
    Sound of the Suburbs November 19, 2016 at 8:27 am

    You can only pillage the world once, though I think they are going for second helpings in Brazil right now.

    tegnost November 19, 2016 at 11:13 am

    m'kay so kind of like robbing peter (emerging markets with growth potential) to pay paul (goldman et.al.) until peter goes broke (asset bubble collapse) so paul can't be paid until he "natural" growth potential of emerging markets recovers (peters growth potential recovers from the asset bubble/debt overhang with best performance to those with more flexible currency) so that paying paul (new grifts, oops financial innovations) can be foisted on them again leading to, in hindsight only of course, and notably after paul has been paid, another collapse? rinse and repeat .is there any sense to this postulation?

    JF November 19, 2016 at 11:47 am

    Why do you use the term 'capital' when referring to credit/lending that is not related to economically real outputs. The rest of the article tells this story but the lead groups it all as 'capital' flows.

    This is an editorial suggestion really one that does not conflate or mislead when treating credit creation used for financial asset trading as if it were the same general thing as FDI, that is, direct investment.

    We have seen the financial system react to the crisis by recognizing their own unhinged behavior, and doing much less of it for good reasons. They know their credit creating behavior was nit coverting Savings into Investment, they know it was not 'capital' – so editors, let us help our writers to bring more clarity.

    Grebo November 19, 2016 at 1:19 pm

    I agree. We need a separate word for 'financial capital'. I am thinking 'ante' or 'stake' or some similar word from the world of gambling and confidence tricks.

    fresno dan November 19, 2016 at 11:56 am

    "And even though neoliberals and international banks would have you believe otherwise, a fall in these money movements is entirely a good thing. As Ken Rogoff and Carmen Reinhart found in their study of 800 years of financial crises, high levels of international capital flows are correlated with more frequent and severe financial crises. Similarly, a 2010 Bank of International Settlements study by Claudio Borio and Petit Disyatat ascertained that cross border capital flows were over 60 times trade flows, meaning they had almost nothing to do with them. "

    ================================================================

    This is probably something that not one in 10,000 people understand (I don't really either) – but I think it is apparent that the entire edifice of finance has been jiggered to benefit, Davos man and NO ONE ELSE. And why shouldn't Davos man want it to continue – the aftermath was set right for the 0.1% remarkably fast in the aftermath of the Great Recession – by HUGE infusions of government money, guarantees, credit, forbearance, etcetera – which for some reason can NEVER be made available to the 90%

    This is probably the most salient reason Hillary lost, but it can never, ever be proffered as a reason for it would reveal that ALL our problems are due to the rich .

    Dave November 19, 2016 at 12:31 pm

    I've often wondered how "The Multiplier Effect" of money, [not] circulating and recirculating in our local economies, at the consumer level, is affected by money sent out of the country by "immigrants"?

    Is this such a small amount as not to be considered part of "cross border capital flows"? How does it affect local economies that are more important to us than what happens on Wall Street?

    Three numbers hopefully to provide 'balance':

    [Nov 19, 2016] How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer

    Nov 19, 2016 | economistsview.typepad.com

    anne -> anne... November 18, 2016 at 05:07 AM

    http://deanbaker.net/images/stories/documents/Rigged.pdf

    October, 2016

    Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer
    By Dean Baker

    Introduction: Trading in Myths

    In winter 2016, near the peak of Bernie Sanders' bid for the Democratic presidential nomination, a new line became popular among the nation's policy elite: Bernie Sanders is the enemy of the world's poor. Their argument was that Sanders, by pushing trade policies to help U.S. workers, specifically manufacturing workers, risked undermining the well-being of the world's poor because exporting manufactured goods to the United States and other wealthy countries is their path out of poverty. The role model was China, which by exporting has largely eliminated extreme poverty and drastically reduced poverty among its population. Sanders and his supporters would block the rest of the developing world from following the same course.

    This line, in its Sanders-bashing permutation, appeared early on in Vox, the millennial-oriented media upstart, and was quickly picked up elsewhere (Beauchamp 2016). After all, it was pretty irresistible. The ally of the downtrodden and enemy of the rich was pushing policies that would condemn much of the world to poverty.

    The story made a nice contribution to preserving the status quo, but it was less valuable if you respect honesty in public debate.

    The problem in the logic of this argument should be apparent to anyone who has taken an introductory economics course. It assumes that the basic problem of manufacturing workers in the developing world is the need for someone who will buy their stuff. If people in the United States don't buy it, then the workers will be out on the street and growth in the developing world will grind to a halt. In this story, the problem is that we don't have enough people in the world to buy stuff. In other words, there is a shortage of demand. But is it really true that no one else in the world would buy the stuff produced by manufacturing workers in the developing world if they couldn't sell it to consumers in the United States? Suppose people in the developing world bought the stuff they produced raising their living standards by raising their own consumption.

    That is how the economics is supposed to work. In the standard theory, general shortages of demand are not a problem. Economists have traditionally assumed that economies tended toward full employment. The basic economic constraint was a lack of supply. The problem was that we couldn't produce enough goods and services, not that we were producing too much and couldn't find anyone to buy them. In fact, this is why all the standard models used to analyze trade agreements like the Trans-Pacific Partnership assume trade doesn't affect total employment. Economies adjust so that shortages of demand are not a problem.

    In this standard story (and the Sanders critics are people who care about textbook economics), capital flows from slow-growing rich countries, where it is relatively plentiful and so gets a low rate of return, to fast-growing poor countries, where it is scarce and gets a high rate of return.

    [Figure 1-1] Theoretical and actual capital flows.

    So the United States, Japan, and the European Union should be running large trade surpluses, which is what an outflow of capital means. Rich countries like ours should be lending money to developing countries, providing them with the means to build up their capital stock and infrastructure while they use their own resources to meet their people's basic needs.

    This wasn't just theory. That story accurately described much of the developing world, especially Asia, through the 1990s. Countries like Indonesia and Malaysia were experiencing rapid annual growth of 7.8 percent and 9.6 percent, respectively, even as they ran large trade deficits, just over 2 percent of GDP each year in Indonesia and almost 5 percent in Malaysia.

    These trade deficits probably were excessive, and a crisis of confidence hit East Asia and much of the developing world in the summer of 1997. The inflow of capital from rich countries slowed or reversed, making it impossible for the developing countries to sustain the fixed exchange rates most had at the time. One after another, they were forced to abandon their fixed exchange rates and turn to the International Monetary Fund (IMF) for help.

    Rather than promulgating policies that would allow developing countries to continue the textbook development path of growth driven by importing capital and running trade deficits, the IMF made debt repayment a top priority. The bailout, under the direction of the Clinton administration Treasury Department, required developing countries to switch to large trade surpluses (Radelet and Sachs 2000, O'Neil 1999).

    The countries of East Asia would be far richer today had they been allowed to continue on the growth path of the early and mid-1990s, when they had large trade deficits. Four of the five would be more than twice as rich, and the fifth, Vietnam, would be almost 50 percent richer. South Korea and Malaysia would have higher per capita incomes today than the United States.

    [Figure 1-2] Per capita income of East Asian countries, actual vs. continuing on 1990s growth path.

    In the wake of the East Asia bailout, countries throughout the developing world decided they had to build up reserves of foreign exchange, primarily dollars, in order to avoid ever facing the same harsh bailout terms as the countries of East Asia. Building up reserves meant running large trade surpluses, and it is no coincidence that the U.S. trade deficit has exploded, rising from just over 1 percent of GDP in 1996 to almost 6 percent in 2005. The rise has coincided with the loss of more than 3 million manufacturing jobs, roughly 20 percent of employment in the sector.

    There was no reason the textbook growth pattern of the 1990s could not have continued. It wasn't the laws of economics that forced developing countries to take a different path, it was the failed bailout and the international financial system. It would seem that the enemy of the world's poor is not Bernie Sanders but rather the engineers of our current globalization policies.

    There is a further point in this story that is generally missed: it is not only the volume of trade flows that is determined by policy, but also the content. A major push in recent trade deals has been to require stronger and longer patent and copyright protection. Paying the fees imposed by these terms, especially for prescription drugs, is a huge burden on the developing world. Bill Clinton would have much less need to fly around the world for the Clinton Foundation had he not inserted the TRIPS (Trade Related Aspects of Intellectual Property Rights) provisions in the World Trade Organization (WTO) that require developing countries to adopt U.S.-style patent protections. Generic drugs are almost always cheap - patent protection makes drugs expensive. The cancer and hepatitis drugs that sell for tens or hundreds of thousands of dollars a year would sell for a few hundred dollars in a free market. Cheap drugs would be more widely available had the developed world not forced TRIPS on the developing world.

    Of course, we have to pay for the research to develop new drugs or any innovation. We also have to compensate creative workers who produce music, movies, and books. But there are efficient alternatives to patents and copyrights, and the efforts by the elites in the United States and other wealthy countries to impose these relics on the developing world is just a mechanism for redistributing income from the world's poor to Pfizer, Microsoft, and Disney. Stronger and longer patent and copyright protection is not a necessary feature of a 21st century economy.

    In textbook trade theory, if a country has a larger trade surplus on payments for royalties and patent licensing fees, it will have a larger trade deficit in manufactured goods and other areas. The reason is that, in theory, the trade balance is fixed by national savings and investment, not by the ability of a country to export in a particular area. If the trade deficit is effectively fixed by these macroeconomic factors, then more exports in one area mean fewer exports in other areas. Put another way, income gains for Pfizer and Disney translate into lost jobs for workers in the steel and auto industries....

    reason : , November 18, 2016 at 05:14 AM

    I thought this from Dean Baker was interesting:
    http://cepr.net/blogs/beat-the-press/if-you-thought-a-trump-presidency-was-bad?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+beat_the_press+%28Beat+the+Press%29

    It includes this interesting piece on international trade:

    "I'll start with my favorite, the complaint that the trade policy advocating by Warren and Sanders would hurt the poor in the developing world, or to use their words:


    "And their ostensible protection of American workers leaves no room to consider the welfare of poor people elsewhere in the world."

    I like this one because it turns standard economic theory on its head to advance the interests of the rich and powerful. In the economic textbooks, rich countries like the United States are supposed to be exporting capital to the developing world. This provides them the means to build up their capital stock and infrastructure, while maintaining the living standards of their populations. This is the standard economic story where the problem is scarcity.

    But to justify trade policies that have harmed tens of millions of U.S. workers, either by costing them jobs or depressing their wages, the Post discards standard economics and tells us the problem facing people in the developing world is that there is too much stuff. If we didn't buy the goods produced in the developing world then there would just be a massive glut of unsold products.

    In the standard theory the people in the developing world buy their own stuff, with rich countries like the U.S. providing the financing. It actually did work this way in the 1990s, up until the East Asian financial crisis in 1997. In that period, countries like Malaysia, Vietnam, and Indonesia were growing very rapidly while running large trade deficits. This pattern of growth was ended by the terms of the bailout imposed on these countries by the U.S. Treasury Department through the International Monetary Fund.

    The harsh terms of the bailout forced these and other developing countries to reverse the standard textbook path and start running large trade surpluses. This post-bailout period was associated with slower growth for these countries. In other words, the poor of the developing world suffered from the pattern of trade the Post advocates. If they had continued on the pre-bailout path they would be much richer today. In fact, South Korea and Malaysia would be richer than the United States if they had maintained their pre-bailout growth rate over the last two decades. (This is the topic of the introduction to my new book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer, it's free.)"

    Not sure that I fully agree with him, but I do agree that trade imbalances and mercantilism is a large part of the problem.

    Oh I see Anne posted this in parallel.

    anne -> reason ... , November 18, 2016 at 05:59 AM
    http://cepr.net/blogs/beat-the-press/if-you-thought-a-trump-presidency-was-bad?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+beat_the_press+%28Beat+the+Press%29

    November 15, 2016

    If You Thought a Trump Presidency Was Bad .

    The Washington Post editorial page decided to lecture readers * on the meaning of progressivism. Okay, that is nowhere near as bad as a Trump presidency, but really, did we need this?

    The editorial gives us a potpourri of neo-liberal (yes, the term is appropriate here) platitudes, all of which we have heard many times before and are best half true. For framing, the villains are Bernie Sanders and Elizabeth Warren who it tells us "are embracing principles that are not genuinely progressive."

    I'll start with my favorite, the complaint that the trade policy advocating by Warren and Sanders would hurt the poor in the developing world, or to use their words:

    "And their ostensible protection of American workers leaves no room to consider the welfare of poor people elsewhere in the world."

    I like this one because it turns standard economic theory on its head to advance the interests of the rich and powerful. In the economic textbooks, rich countries like the United States are supposed to be exporting capital to the developing world. This provides them the means to build up their capital stock and infrastructure, while maintaining the living standards of their populations. This is the standard economic story where the problem is scarcity.

    But to justify trade policies that have harmed tens of millions of U.S. workers, either by costing them jobs or depressing their wages, the Post discards standard economics and tells us the problem facing people in the developing world is that there is too much stuff. If we didn't buy the goods produced in the developing world then there would just be a massive glut of unsold products.

    In the standard theory the people in the developing world buy their own stuff, with rich countries like the U.S. providing the financing. It actually did work this way in the 1990s, up until the East Asian financial crisis in 1997. In that period, countries like Malaysia, Vietnam, and Indonesia were growing very rapidly while running large trade deficits. This pattern of growth was ended by the terms of the bailout imposed on these countries by the U.S. Treasury Department through the International Monetary Fund.

    The harsh terms of the bailout forced these and other developing countries to reverse the standard textbook path and start running large trade surpluses. This post-bailout period was associated with slower growth for these countries. In other words, the poor of the developing world suffered from the pattern of trade the Post advocates. If they had continued on the pre-bailout path they would be much richer today. In fact, South Korea and Malaysia would be richer than the United States if they had maintained their pre-bailout growth rate over the last two decades. (This is the topic of the introduction to my new book, "Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer," ** it's free.)

    It is also important to note that the Post is only bothered by forms of protection that might help working class people. The United States prohibits foreign doctors from practicing in the United States unless they complete a U.S. residency program. (The total number of slots are tightly restricted with only a small fraction open to foreign trained doctors.) This is a classic protectionist measure. No serious person can believe that the only way for a person to be a competent doctor is to complete a U.S. residency program. It costs the United States around $100 billion a year ($700 per family) in higher medical expenses. Yet, we never hear a word about this or other barriers that protect the most highly paid professionals from the same sort of international competition faced by steelworkers and textile workers.

    Moving on, we get yet another Post tirade on Social Security.

    "You can expand benefits for everyone, as Ms. Warren favors. Prosperous retirees who live mostly off their well-padded 401(k)s will appreciate what to them will feel like a small bonus, if they notice it. But spreading wealth that way will make it harder to find the resources for the vulnerable elderly who truly depend on Social Security.

    "But demographics - the aging of the population - cannot be wished away. In the 1960s, about five taxpayers were helping to support each Social Security recipient, and the economy was growing about 6 percent annually. Today there are fewer than three workers for each pensioner, and the growth rate even following the 2008 recession has averaged about 2 percent . On current trends, 10 years from now the federal government will be spending almost all its money on Medicare, Social Security and other entitlements and on interest payments on the debt, leaving less and less for schools, housing and job training. There is nothing progressive about that."

    There are all sorts of misleading or wrong claims here. First, the economy did not grow "about 6 percent annually" in the 1960s. There were three years in which growth did exceed 6.0 percent, and it was a very prosperous decade, but growth only averaged 4.6 percent from 1960 to 1970.

    I suppose we should be happy that the Post is at least getting closer to the mark. A 2007 editorial *** praising The North American Free Trade Agreement told readers that Mexico's GDP "has more than quadrupled since 1987." The International Monetary Fund data **** put the gain at 83 percent. So by comparison, they are doing pretty good with the 6 percent growth number for the sixties.

    But getting to the demographics, we did go from more than five workers for every retiree to less than three today, and this number is projected to fall further to around 2.0 workers per retiree in the next fifteen years. This raises the obvious question, so what?

    The economy did not collapse even as we saw the fall from 5 workers per retiree to less than 3, so something really really bad happens when it falls further? We did raise taxes to cover the additional cost and we will probably have to raise taxes in the future.

    We get that the Post doesn't like tax increases (no one does), but this hardly seems like the end of the world. The Social Security Trustees project ***** that real wages will rise on average by more than 34 percent over the next two decades. Suppose we took back 5–10 percent of these projected wage gains through tax increases (still leaving workers with wages that are more than 30 percent higher than they are today), what is the big problem?

    Of course most workers have not seen their wages rise in step with the economy's growth over the last four decades. This is a huge issue which is the sort of thing that progressives should be and are focusing on. But the Post would rather distract us with the possibility that at some point in the future we may be paying a somewhat higher Social Security tax.

    The Post's route for savings is also classic misdirection. It tells how about high-living seniors who get so much money from their 401(k)s they don't even notice their Social Security checks. Only a bit more than 4.0 percent of the over 65 population has non-Social Security income of more than $80,000 a year. If the point is to have substantial savings from means-testing it would be necessary to hit people with incomes around $40,000 a year or even lower. That is not what most people consider wealthy.

    We could have substantial savings on Medicare by pushing down the pay of doctors and reducing the prices of drugs and medical equipment. The latter could be done by substituting public financing for research and development for government granted patent monopolies (also discussed in Rigged). These items would almost invariably be cheap in a free market. But the Post seems uninterested in ways to save money that could affect the incomes of the rich.

    One can quibble with whether the current benefits for middle income people are right or should be somewhat higher or lower, but it is ridiculous to argue that raising them $50 a month, as proposed by Senator Warren, will break the bank.

    Then we have the issue of free college. The Post raises the issue, pushed by Senator Sanders in his presidential campaign, and then tells readers:

    "Our answer - we would argue, the progressive answer - is that there are people in society with far greater needs than that upper-middle-class family in Fairfax County that would be relieved of its tuition burden at the College of William & Mary if Mr. Sanders got his wish."

    There are two points to be made here. First there is extensive research ****** showing that many children from low- and moderate-income families hugely over-estimate the cost of college, failing to realize that they would be eligible for financial aid that would make it free or nearly free. This means that the current structure is preventing many relatively disadvantaged children from attending college. Arguably better education on the opportunities to get aid would solve this problem, but the problem has existed for a long time and better education has not done much to change the picture thus far.

    The second point is that the process of determining eligibility for aid is itself costly. Many children have divorced parents, with a non-custodial parent often not anxious to pay for their children's college. Perhaps it is appropriate that they should pay, but forcing payment is not an easy task and it doesn't make sense to make the children in such situations suffer.

    In many ways, the free college solution is likely to be the easiest, with the tax coming out of the income of higher earners, the vast majority of whom will be the beneficiaries of this policy. There are ways to save on paying for college. My favorite is limiting the pay of anyone at a public school to the salary of the president of the United States ($400,000 a year). We can also deny the privilege of tax exempt status to private universities or other non-profits that don't accept a similar salary cap. These folks can pay their top executives whatever they want, but they shouldn't ask the taxpayers to subsidize their exorbitant pay packages.

    There is one final issue in the column worth noting. At one point it makes a pitch for the virtues of economic growth then tells readers:

    "It's not in conflict with the goal of redistribution."

    At least some of us progressive types are not particularly focused on "redistribution." The focus of my book and much of my other writing is on the way that the market has been structured to redistribute income upward, compared with the structures in place in the quarter century after World War II. Is understandable that people who are basically very satisfied with this upward redistribution of market income would not want this rigging of the market even to be discussed, but serious progressives do.

    * https://www.washingtonpost.com/opinions/what-does-it-mean-to-be-progressive/2016/11/14/469662fe-9c8d-11e6-b3c9-f662adaa0048_story.html

    ** http://deanbaker.net/images/stories/documents/Rigged.pdf

    *** http://www.washingtonpost.com/wp-dyn/content/article/2007/12/02/AR2007120201588.html

    **** http://www.imf.org/external/pubs/ft/weo/2016/02/weodata/weorept.aspx?pr.x=44&pr.y=2&sy=1987&ey=2007&scsm=1&ssd=1&sort=country&ds=.&br=1&c=273&s=NGDP_R&grp=0&a=

    ***** https://www.ssa.gov/oact/tr/2015/index.html

    ****** http://www.allhallows.org/ourpages/auto/2012/9/7/43578201/Real%20and%20Imagined%20barriers.pdf

    -- Dean Baker

    anne -> reason ... , November 18, 2016 at 06:01 AM
    I thought this from Dean Baker was interesting...

    [ And, I think, especially important. ]

    reason -> anne... , November 18, 2016 at 06:19 AM
    Although I like much of what Dean Baker, I don't like his term "loser liberalism", nor do I think his de-emphasis on redistribution useful. Au contraire, I think talking about redistribution is absolutely essential if we are to move to sustainable world. We can no longer be certain that per person GDP growth will be sufficient to be able to ignore distribution or to rely on "predistribution".
    anne -> reason ... , November 18, 2016 at 06:35 AM
    "Although I like much of what Dean Baker, I don't like his term 'loser liberalism', nor do I think his de-emphasis on redistribution useful...."

    http://www.cepr.net/blogs/beat-the-press/ending-loser-liberalism-why-a-market-based-approach-makes-sense

    November 18, 2015

    Ending Loser Liberalism: Why a Market Based Approach Makes Sense

    -- Dean Baker

    [ Well worth arguing about. ]

    anne -> reason ... , November 18, 2016 at 07:19 AM
    http://deanbaker.net/images/stories/documents/End-of-Loser-Liberalism.pdf

    2011

    The End of Loser Liberalism: Making Markets Progressive
    By Dean Baker

    Upward Redistribution of Income: It Didn't Just Happen

    Money does not fall up. Yet the United States has experienced a massive upward redistribution of income over the last three decades, leaving the bulk of the workforce with little to show from the economic growth since 1980. This upward redistribution was not the result of the natural workings of the market. Rather, it was the result of deliberate policy, most of which had the support of the leadership of both the Republican and Democratic parties.

    Unfortunately, the public and even experienced progressive political figures are not well informed about the key policies responsible for this upward redistribution, even though they are not exactly secrets. The policies are so well established as conventional economic policy that we tend to think of them as incontrovertibly virtuous things, but each has a dark side. An anti-inflation policy by the Federal Reserve Board, which relies on high interest rates, slows growth and throws people out of work. Major trade deals hurt manufacturing workers by putting them in direct competition with low-paid workers in the developing world. A high dollar makes U.S. goods uncompetitive in world markets.

    Almost any economist would acknowledge these facts, but few economists have explored their implications and explained them to the general public. As a result, most of us have little understanding of the economic policies that have the largest impact on our jobs, our homes, and our lives. Instead, public debate and the most hotly contested legislation in Congress tend to be about issues that will have relatively little impact.

    This lack of focus on crucial economic issues is a serious problem from the standpoint of advancing a progressive agenda....

    Johannes Y O Highness -> anne... , November 18, 2016 at 06:25 AM
    Awareness is the first step forward. Foreign workers is just another name for workers, just another

    name for My
    People --

    anne -> Johannes Y O Highness... , November 18, 2016 at 06:36 AM
    Foreign workers is just another name for workers...

    [ Nicely expressed. ]

    [Nov 19, 2016] Helicopter money by Stefan Gerlach

    www.project-syndicate.org

    Years of low interest rates and quantitative easing have not restored growth to developed countries, and many observers lately have been calling on central banks to inject stimulus into economies directly. But do the rewards of "helicopter money" outweigh the risks?

    ZURICH – The world has been on pins and needles since Donald Trump's upset victory over Hillary Clinton in the United States' presidential election last week. No one – including, perhaps, the president-elect himself – quite knows what shape the next US administration will take, or what its policy priorities will be.


    Compounding this uncertainty is the fact that, around the world, geopolitical tensions are rising, with developed economies continuing to experience tepid growth, even after years of record-low interest rates. For Trump to stimulate enough activity in the US economy to satisfy his zealous base, he will have to find the right balance between fiscal measures and monetary-policy tools.

    Whether Trump continues the post-1945 US tradition of international leadership, or instead chooses an "America first" approach, he will not be alone in his quest for growth: Japan and eurozone countries are also struggling to bring about sustainable recoveries and meet central banks' inflation targets. Project Syndicate commentators have been at the forefront of the ongoing debate about what policymakers can do to achieve these goals. In particular, while Trump and policymakers elsewhere are embracing fiscal activism, how far they are willing or able to go remains uncertain, raising the question of what more central banks could do to stimulate demand and boost growth.

    Spinning in Circles

    The recent shift toward fiscal expansion reflects widespread agreement that policymakers are running out of stimulus options. Central banks can no longer rely on "forward guidance," such as half-promises that interest rates will remain low indefinitely. And quantitative easing (QE) is quickly losing its potency, perhaps because it is inherently more effective as a crisis-response mechanism than as a long-term fix.

    [Nov 19, 2016] What Did Draghi Know About Potential Loss And Abuses At Italys Largest Bank

    Notable quotes:
    "... Apparently lax and/or incompetent regulation of systemically important banks by bureaucrats, central bankers, and politicians may not be just a recent American phenomenon. ..."
    "... He related how he was not only ignored by his bank, the Irish regulator but also all the major political parties. He then pointed out that the Irish regulator claims that it always – and it is the law after all – informs the regulator of the home country of banks which have subsidiaries in Ireland, about any serious problems. ..."
    "... Mr Sugarman suggested Mr Draghi should be asked point-blank of he did or if he did not know . If he did not then the Irish regulator was at least incompetent, and may have lied, misled and perhaps even broken Irish laws. If he was told and did know, then Mr Draghi has serious questions to answer regarding his own dereliction of duty. ..."
    Nov 19, 2016 | www.zerohedge.com
    Via Jesse's Cafe Americain blog,

    Apparently lax and/or incompetent regulation of systemically important banks by bureaucrats, central bankers, and politicians may not be just a recent American phenomenon.

    As we read this, it could imperil the soundness of the financial system in Europe as well, as is still apparently the case with The Banks in the states, despite assurances to the contrary.

    Golem XIV asks some very good questions in the article below, recently posted on his blog here.

    Whistleblowers Testify in EU Parliament

    Yesterday a very high-powered panel of international banking whistleblowers met and told their stories in the European parliament . The questions raised were important. Among them was the Irish Whistleblower, Jonathan Sugarman, who when UniCredit Ireland was breaking the law in very serious ways reported it to the Irish regulator.

    He related how he was not only ignored by his bank, the Irish regulator but also all the major political parties. He then pointed out that the Irish regulator claims that it always – and it is the law after all – informs the regulator of the home country of banks which have subsidiaries in Ireland, about any serious problems.

    In the case of UniCredit that would mean the Italian Central bank would have been told that Italy's largest Bank was in serious breach of Irish law in ways that could endanger the whole banking system. The head of the Italian Central Bank at the time was a certain Mr Mario Draghi.

    Mr Sugarman suggested Mr Draghi should be asked point-blank of he did or if he did not know . If he did not then the Irish regulator was at least incompetent, and may have lied, misled and perhaps even broken Irish laws. If he was told and did know, then Mr Draghi has serious questions to answer regarding his own dereliction of duty.

    Surely not I hear you say. Well perhaps someone might ask him? Or is he above the law?

    http://www.guengl.eu/news/article/whistleblower-protection-what-must-be-done

    [Nov 19, 2016] Trump's Win, Brexit Vote Stem From Mishandling of Globalization, Obama Says

    www.wsj.com

    President Barack Obama said Wednesday that America's election of Donald Trump and the U.K.'s vote to leave the European Union reflect a political uprising in the West over economic inequities spawned by leaders' mishandling of globalization.

    [Nov 19, 2016] Globalizations Last Gasp by Barry Eichengreen

    Notable quotes:
    "... Already, motor-vehicle manufacturers ship an automotive transmission back and forth across the US-Mexican border several times in the course of production. At some point, unpacking that production process still further will reach the point of diminishing returns. ..."
    "... The story for cross-border flows of financial capital is even more dramatic. Gross capital flows – the sum of inflows and outflows – are not just growing more slowly; they are down significantly in absolute terms from 2009 levels. ..."
    "... ... cross-border bank lending and borrowing that have fallen. Foreign direct investment – financial flows to build foreign factories and acquire foreign companies – remains at pre-crisis levels. ..."
    "... This difference reflects regulation. Having concluded, rightly, that cross-border bank lending is especially risky, regulators clamped down on banks' international operations. ..."
    Nov 19, 2016 | www.project-syndicate.org

    Does Donald Trump's election as United States president mean that globalization is dead, or are reports of the process' demise greatly exaggerated? If globalization is only partly incapacitated, not terminally ill, should we worry? How much will slower trade growth, now in the offing, matter for the global economy?

    World trade growth would be slowing down, even without Trump in office. Its growth was already flat in the first quarter of 2016, and it fell by nearly 1% in the second quarter. This continues a prior trend: since 2010, global trade has grown at an annual rate of barely 2%. Together with the fact that worldwide production of goods and services has been rising by more than 3%, this means that the trade-to-GDP ratio has been falling, in contrast to its steady upward march in earlier years.

    ... the resurgent protectionism manifest in popular opposition to the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP),

    Causality in economics may be elusive, but in this case it is clear. So far, slower trade growth has been the result of slower GDP growth, not the other way around.

    This is particularly evident in the case of investment spending, which has fallen sharply since the global financial crisis. Investment spending is trade-intensive, because countries rely disproportionately on a relatively small handful of producers, like Germany, for technologically sophisticated capital goods.

    In addition, slower trade growth reflects China's economic deceleration. Until 2011 China was growing at double-digit rates, and Chinese exports and imports were growing even faster. China's growth has now slowed by a third, leading to slower growth of Chinese trade.

    China's growth miracle, benefiting a fifth of the earth's population, is the most important economic event of the last quarter-century. But it can happen only once. And now that the phase of catch-up growth is over for China, this engine of global trade will slow.

    The other engine of world trade has been global supply chains. Trade in parts and components has benefited from falling transport costs, reflecting containerization and related advances in logistics. But efficiency in shipping is unlikely to continue to improve faster than efficiency in the production of what is being shipped. Already, motor-vehicle manufacturers ship an automotive transmission back and forth across the US-Mexican border several times in the course of production. At some point, unpacking that production process still further will reach the point of diminishing returns.

    The story for cross-border flows of financial capital is even more dramatic. Gross capital flows – the sum of inflows and outflows – are not just growing more slowly; they are down significantly in absolute terms from 2009 levels.

    ... cross-border bank lending and borrowing that have fallen. Foreign direct investment – financial flows to build foreign factories and acquire foreign companies – remains at pre-crisis levels.

    This difference reflects regulation. Having concluded, rightly, that cross-border bank lending is especially risky, regulators clamped down on banks' international operations.

    In response, many banks curtailed their cross-border business. But, rather than alarming anyone, this should be seen as reassuring, because the riskiest forms of international finance have been curtailed without disrupting more stable and productive forms of foreign investment.

    We now face the prospect of the US government revoking the Dodd-Frank Act and rolling back the financial reforms of recent years. Less stringent financial regulation may make for the recovery of international capital flows. But we should be careful what we wish for.

    [Nov 18, 2016] Study Finds 1 in 3 Student Loan Holders With Payments Due Are Late With Payments and More Than Half Regret Their Borrowing

    Notable quotes:
    "... "Nearly half of young Americans start their working lives with student debt, and 43 million Americans carry student loans. A new study by the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business found that many borrowers are struggling to make student loan payments and regret their borrowing. ..."
    "... GFLEC's newly published policy brief reports that most borrowers did not fully understand what they were taking on when they obtained student loans. Additionally, 54 percent of student loan holders did not try to figure out what their monthly payments would be before taking out loans. And 53 percent said that if they could go back and redo the process of taking out loans, they would do things differently. " ..."
    Nov 18, 2016 | www.nakedcapitalism.com

    FreeMarketApologist November 17, 2016 at 8:11 am

    In other news (but isn't everything political?):

    Released earlier this week from George Washington University School of Business: "Study Finds 1 in 3 Student Loan Holders With Payments Due Are Late With Payments and More Than Half Regret Their Borrowing"

    "Nearly half of young Americans start their working lives with student debt, and 43 million Americans carry student loans. A new study by the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business found that many borrowers are struggling to make student loan payments and regret their borrowing.

    GFLEC's newly published policy brief reports that most borrowers did not fully understand what they were taking on when they obtained student loans. Additionally, 54 percent of student loan holders did not try to figure out what their monthly payments would be before taking out loans. And 53 percent said that if they could go back and redo the process of taking out loans, they would do things differently. "

    (via the securities regulator, FINRA): http://www.finra.org/newsroom/2016/study-finds-1-3-student-loan-holders-payments-due-are-late-payments-and-more-half

    Direct link to the paper: http://gflec.org/wp-content/uploads/2016/11/GFLEC-Brief-Student-loan-debt.pdf )

    Benedict@Large November 17, 2016 at 9:29 am

    Odd. I was looking at the comment by Bannon about Spanish young adult unemployment (a serious problem, as he says) and thinking, well, at least we don't have anything like that here.

    No, our young adults aren't unemployed, are they? They are simply working to hand over major parts of their future to their debt bosses.

    And it really is so much better that way. After all, if ours were unemployed, they might take to the streets like the Spaniards are doing.

    [Nov 18, 2016] Privatization of education, Chicago way

    Notable quotes:
    "... For over a decade now, Chicago has been the epicenter of the fashionable trend of "privatization"-the transfer of the ownership or operation of resources that belong to all of us, like schools, roads and government services, to companies that use them to turn a profit. Chicago's privatization mania began during Mayor Richard M. Daley's administration, which ran from 1989 to 2011. Under his successor, Rahm Emanuel, the trend has continued apace. For Rahm's investment banker buddies, the trend has been a boon. For citizens? Not so much. ..."
    "... the English word "privatization" derives from a coinage, Reprivatisierung, formulated in the 1930s to describe the Third Reich's policy of winning businessmen's loyalty by handing over state property to them. ..."
    "... As president, Bill Clinton greatly expanded a privatization program begun under the first President Bush's Department of Housing and Urban Development. "Hope VI" aimed to replace public-housing high-rises with mixed-income houses, duplexes and row houses built and managed by private firms. ..."
    "... The fan was Barack Obama, then a young state senator. Four years later, he cosponsored a bipartisan bill to increase subsidies for private developers and financiers to build or revamp low-income housing. ..."
    "... However, the rush to outsource responsibility for housing the poor became a textbook example of one peril of privatization: Companies frequently get paid whether they deliver the goods or not (one of the reasons investors like privatization deals). For example, in 2004, city inspectors found more than 1,800 code violations at Lawndale Restoration, the largest privately owned, publicly subsidized apartment project in Chicago. Guaranteed a steady revenue stream whether they did right by the tenants or not-from 1997 to 2003, the project generated $4.4 million in management fees and $14.6 million in salaries and wages-the developers were apparently satisfied to just let the place rot. ..."
    Nov 18, 2016 | economistsview.typepad.com

    Peter K. :

    http://econospeak.blogspot.com/2016/11/privatization-of-public-infrastructure.html

    PGL on Chicago's parking meters. Yes Democratic Mayor Daley made a bad deal. If Trump does invest in infrastructure is this the kind of thing he'll be doing, selling off public assets and leasing them back again, aka privatization?

    Seems like two different things. Here's an In These Time article from January 2015 by the smart Rick Perlstein.

    http://inthesetimes.com/article/17533/how_to_sell_off_a_city

    How To Sell Off a City

    Welcome to Rahm Emanuel's Chicago, the privatized metropolis of the future.

    BY RICK PERLSTEIN

    In June of 2013, Chicago Mayor Rahm Emanuel made a new appointment to the city's seven-member school board to replace billionaire heiress Penny Pritzker, who'd decamped to run President Barack Obama's Department of Commerce. The appointee, Deborah H. Quazzo, is a founder of an investment firm called GSV Advisors, a business whose goal-her cofounder has been paraphrased by Reuters as saying-is to drum up venture capital for "an education revolution in which public schools outsource to private vendors such critical tasks as teaching math, educating disabled students, even writing report cards."

    GSV Advisors has a sister firm, GSV Capital, that holds ownership stakes in education technology companies like "Knewton," which sells software that replaces the functions of flesh-and-blood teachers. Since joining the school board, Quazzo has invested her own money in companies that sell curricular materials to public schools in 11 states on a subscription basis.

    In other words, a key decision-maker for Chicago's public schools makes money when school boards decide to sell off the functions of public schools.

    She's not alone. For over a decade now, Chicago has been the epicenter of the fashionable trend of "privatization"-the transfer of the ownership or operation of resources that belong to all of us, like schools, roads and government services, to companies that use them to turn a profit. Chicago's privatization mania began during Mayor Richard M. Daley's administration, which ran from 1989 to 2011. Under his successor, Rahm Emanuel, the trend has continued apace. For Rahm's investment banker buddies, the trend has been a boon. For citizens? Not so much.

    They say that the first person in any political argument who stoops to invoking Nazi Germany automatically loses. But you can look it up: According to a 2006 article in the Journal of Economic Perspectives, the English word "privatization" derives from a coinage, Reprivatisierung, formulated in the 1930s to describe the Third Reich's policy of winning businessmen's loyalty by handing over state property to them.

    In the American context, the idea also began on the Right (to be fair, entirely independent of the Nazis)-and promptly went nowhere for decades. In 1963, when Republican presidential candidate Barry Goldwater mused "I think we ought to sell the TVA"-referring to the Tennessee Valley Authority, the giant complex of New Deal dams that delivered electricity for the first time to vast swaths of the rural Southeast-it helped seal his campaign's doom. Things only really took off after Prime Minister Margaret Thatcher's sale of U.K. state assets like British Petroleum and Rolls Royce in the 1980s made the idea fashionable among elites-including a rightward tending Democratic Party.

    As president, Bill Clinton greatly expanded a privatization program begun under the first President Bush's Department of Housing and Urban Development. "Hope VI" aimed to replace public-housing high-rises with mixed-income houses, duplexes and row houses built and managed by private firms.

    Chicago led the way. In 1999, Mayor Richard M. Daley, a Democrat, announced his intention to tear down the public-housing high-rises his father, Mayor Richard J. Daley, had built in the 1950s and 1960s. For this "Plan for Transformation," Chicago received the largest Hope VI grant of any city in the nation. There was a ration of idealism and intellectual energy behind it: Blighted neighborhoods would be renewed and their "culture of poverty" would be broken, all vouchsafed by the honorable desire of public-spirited entrepreneurs to make a profit. That is the promise of privatization in a nutshell: that the profit motive can serve not just those making the profits, but society as a whole, by bypassing inefficient government bureaucracies that thrive whether they deliver services effectively or not, and empower grubby, corrupt politicians and their pals to dip their hands in the pie of guaranteed government money.

    As one of the movement's fans explained in 1997, his experience with nascent attempts to pay private real estate developers to replace public housing was an "example of smart policy."

    "The developers were thinking in market terms and operating under the rules of the marketplace," he said. "But at the same time, we had government supporting and subsidizing those efforts."

    The fan was Barack Obama, then a young state senator. Four years later, he cosponsored a bipartisan bill to increase subsidies for private developers and financiers to build or revamp low-income housing.

    However, the rush to outsource responsibility for housing the poor became a textbook example of one peril of privatization: Companies frequently get paid whether they deliver the goods or not (one of the reasons investors like privatization deals). For example, in 2004, city inspectors found more than 1,800 code violations at Lawndale Restoration, the largest privately owned, publicly subsidized apartment project in Chicago. Guaranteed a steady revenue stream whether they did right by the tenants or not-from 1997 to 2003, the project generated $4.4 million in management fees and $14.6 million in salaries and wages-the developers were apparently satisfied to just let the place rot.

    Meanwhile, the $1.6 billion Plan for Transformation drags on, six years past deadline and still 2,500 units from completion, while thousands of families languish on the Chicago Housing Authority's waitlist.

    Be that as it may, the Chicago experience looks like a laboratory for a new White House pilot initiative, the Rental Assistance Demonstration Program (RAD), which is set to turn over some 60,000 units to private management next year. Lack of success never seems to be an impediment where privatization is concerned.

    ...

    [Nov 18, 2016] Privatization of education, Chicago way

    Notable quotes:
    "... For over a decade now, Chicago has been the epicenter of the fashionable trend of "privatization"-the transfer of the ownership or operation of resources that belong to all of us, like schools, roads and government services, to companies that use them to turn a profit. Chicago's privatization mania began during Mayor Richard M. Daley's administration, which ran from 1989 to 2011. Under his successor, Rahm Emanuel, the trend has continued apace. For Rahm's investment banker buddies, the trend has been a boon. For citizens? Not so much. ..."
    "... the English word "privatization" derives from a coinage, Reprivatisierung, formulated in the 1930s to describe the Third Reich's policy of winning businessmen's loyalty by handing over state property to them. ..."
    "... As president, Bill Clinton greatly expanded a privatization program begun under the first President Bush's Department of Housing and Urban Development. "Hope VI" aimed to replace public-housing high-rises with mixed-income houses, duplexes and row houses built and managed by private firms. ..."
    "... The fan was Barack Obama, then a young state senator. Four years later, he cosponsored a bipartisan bill to increase subsidies for private developers and financiers to build or revamp low-income housing. ..."
    "... However, the rush to outsource responsibility for housing the poor became a textbook example of one peril of privatization: Companies frequently get paid whether they deliver the goods or not (one of the reasons investors like privatization deals). For example, in 2004, city inspectors found more than 1,800 code violations at Lawndale Restoration, the largest privately owned, publicly subsidized apartment project in Chicago. Guaranteed a steady revenue stream whether they did right by the tenants or not-from 1997 to 2003, the project generated $4.4 million in management fees and $14.6 million in salaries and wages-the developers were apparently satisfied to just let the place rot. ..."
    Nov 18, 2016 | economistsview.typepad.com

    Peter K. :

    http://econospeak.blogspot.com/2016/11/privatization-of-public-infrastructure.html

    PGL on Chicago's parking meters. Yes Democratic Mayor Daley made a bad deal. If Trump does invest in infrastructure is this the kind of thing he'll be doing, selling off public assets and leasing them back again, aka privatization?

    Seems like two different things. Here's an In These Time article from January 2015 by the smart Rick Perlstein.

    http://inthesetimes.com/article/17533/how_to_sell_off_a_city

    How To Sell Off a City

    Welcome to Rahm Emanuel's Chicago, the privatized metropolis of the future.

    BY RICK PERLSTEIN

    In June of 2013, Chicago Mayor Rahm Emanuel made a new appointment to the city's seven-member school board to replace billionaire heiress Penny Pritzker, who'd decamped to run President Barack Obama's Department of Commerce. The appointee, Deborah H. Quazzo, is a founder of an investment firm called GSV Advisors, a business whose goal-her cofounder has been paraphrased by Reuters as saying-is to drum up venture capital for "an education revolution in which public schools outsource to private vendors such critical tasks as teaching math, educating disabled students, even writing report cards."

    GSV Advisors has a sister firm, GSV Capital, that holds ownership stakes in education technology companies like "Knewton," which sells software that replaces the functions of flesh-and-blood teachers. Since joining the school board, Quazzo has invested her own money in companies that sell curricular materials to public schools in 11 states on a subscription basis.

    In other words, a key decision-maker for Chicago's public schools makes money when school boards decide to sell off the functions of public schools.

    She's not alone. For over a decade now, Chicago has been the epicenter of the fashionable trend of "privatization"-the transfer of the ownership or operation of resources that belong to all of us, like schools, roads and government services, to companies that use them to turn a profit. Chicago's privatization mania began during Mayor Richard M. Daley's administration, which ran from 1989 to 2011. Under his successor, Rahm Emanuel, the trend has continued apace. For Rahm's investment banker buddies, the trend has been a boon. For citizens? Not so much.

    They say that the first person in any political argument who stoops to invoking Nazi Germany automatically loses. But you can look it up: According to a 2006 article in the Journal of Economic Perspectives, the English word "privatization" derives from a coinage, Reprivatisierung, formulated in the 1930s to describe the Third Reich's policy of winning businessmen's loyalty by handing over state property to them.

    In the American context, the idea also began on the Right (to be fair, entirely independent of the Nazis)-and promptly went nowhere for decades. In 1963, when Republican presidential candidate Barry Goldwater mused "I think we ought to sell the TVA"-referring to the Tennessee Valley Authority, the giant complex of New Deal dams that delivered electricity for the first time to vast swaths of the rural Southeast-it helped seal his campaign's doom. Things only really took off after Prime Minister Margaret Thatcher's sale of U.K. state assets like British Petroleum and Rolls Royce in the 1980s made the idea fashionable among elites-including a rightward tending Democratic Party.

    As president, Bill Clinton greatly expanded a privatization program begun under the first President Bush's Department of Housing and Urban Development. "Hope VI" aimed to replace public-housing high-rises with mixed-income houses, duplexes and row houses built and managed by private firms.

    Chicago led the way. In 1999, Mayor Richard M. Daley, a Democrat, announced his intention to tear down the public-housing high-rises his father, Mayor Richard J. Daley, had built in the 1950s and 1960s. For this "Plan for Transformation," Chicago received the largest Hope VI grant of any city in the nation. There was a ration of idealism and intellectual energy behind it: Blighted neighborhoods would be renewed and their "culture of poverty" would be broken, all vouchsafed by the honorable desire of public-spirited entrepreneurs to make a profit. That is the promise of privatization in a nutshell: that the profit motive can serve not just those making the profits, but society as a whole, by bypassing inefficient government bureaucracies that thrive whether they deliver services effectively or not, and empower grubby, corrupt politicians and their pals to dip their hands in the pie of guaranteed government money.

    As one of the movement's fans explained in 1997, his experience with nascent attempts to pay private real estate developers to replace public housing was an "example of smart policy."

    "The developers were thinking in market terms and operating under the rules of the marketplace," he said. "But at the same time, we had government supporting and subsidizing those efforts."

    The fan was Barack Obama, then a young state senator. Four years later, he cosponsored a bipartisan bill to increase subsidies for private developers and financiers to build or revamp low-income housing.

    However, the rush to outsource responsibility for housing the poor became a textbook example of one peril of privatization: Companies frequently get paid whether they deliver the goods or not (one of the reasons investors like privatization deals). For example, in 2004, city inspectors found more than 1,800 code violations at Lawndale Restoration, the largest privately owned, publicly subsidized apartment project in Chicago. Guaranteed a steady revenue stream whether they did right by the tenants or not-from 1997 to 2003, the project generated $4.4 million in management fees and $14.6 million in salaries and wages-the developers were apparently satisfied to just let the place rot.

    Meanwhile, the $1.6 billion Plan for Transformation drags on, six years past deadline and still 2,500 units from completion, while thousands of families languish on the Chicago Housing Authority's waitlist.

    Be that as it may, the Chicago experience looks like a laboratory for a new White House pilot initiative, the Rental Assistance Demonstration Program (RAD), which is set to turn over some 60,000 units to private management next year. Lack of success never seems to be an impediment where privatization is concerned.

    ...

    [Nov 18, 2016] The statecraft of neoliberalism: the elimination of political agency and responsibility for economic performance and outcomes by Bruce Wilder

    Notable quotes:
    "... The New Deal did not seek to overthrow the plutocracy, but it did seek to side-step and disable their dominance. ..."
    "... It seems to me that while neoliberalism on the right was much the same old same old, the neoliberal turn on the left was marked by a measured abandonment of this struggle over the distribution of income between the classes. In the U.S., the Democrats gradually abandoned their populist commitments. In Europe, the labour and socialist parties gradually abandoned class struggle. ..."
    "... When Obama came in, in 2008 amid the unfolding GFC, one of the most remarkable features of his economic team was the extent to which it conceded control of policy entirely to the leading money center banks. Geithner and Bernanke continued in power with Geithner moving from the New York Federal Reserve (where he served as I recall under a Chair from Goldman Sachs) to Treasury in the Obama Administration, but Geithner's Treasury was staffed from Goldman Sachs, JP Morgan Chase and Citibank. The crisis served to concentrate banking assets in the hands of the top five banks, but it seemed also to transfer political power entirely into their hands as well. Simon Johnson called it a coup. ..."
    "... Here's the thing: the globalization and financialization of the economy from roughly 1980 drove both increasingly extreme distribution of income and de-industrialization. ..."
    "... It was characteristic of neoliberalism that the policy, policy intention and policy consequences were hidden behind a rhetoric of markets and technological inevitability. Matt Stoller has identified this as the statecraft of neoliberalism: the elimination of political agency and responsibility for economic performance and outcomes. Globalization and financialization were just "forces" that just happened, in a meteorological economics. ..."
    "... This was not your grandfather's Democratic Party and it was a Democratic Party that could aid the working class and the Rust Belt only within fairly severe and sometimes sharply conflicting constraints. ..."
    "... No one in the Democratic Party had much institutional incentive to connect the dots, and draw attention to the acute conflicts over the distribution of income and wealth involved in financialization of the economy (including financialization as a driver of health care costs). And, that makes the political problem that much harder, because there are no resources for rhetorical and informational clarity or coherence. ..."
    "... If Obama could not get a very big stimulus indeed thru a Democratic Congress long out of power, Obama wasn't really trying. And, well-chosen spending on pork barrel projects is popular and gets Congressional critters re-elected. So, again, if the stimulus is small and the Democratic Congress doesn't get re-elected, Obama isn't really trying. ..."
    "... Again, it comes down to: by 2008, the Democratic Party is not a fit vehicle for populism, because it has become a neoliberal vehicle for giant banks. Turns out that makes a policy difference. ..."
    Nov 18, 2016 | crookedtimber.org

    bruce wilder 11.16.16 at 10:07 pm 30

    At the center of Great Depression politics was a political struggle over the distribution of income, a struggle that was only decisively resolved during the War, by the Great Compression. It was at center of farm policy where policymakers struggled to find ways to support farm incomes. It was at the center of industrial relations politics, where rapidly expanding unions were seeking higher industrial wages. It was at the center of banking policy, where predatory financial practices were under attack. It was at the center of efforts to regulate electric utility rates and establish public power projects. And, everywhere, the clear subtext was a struggle between rich and poor, the economic royalists as FDR once called them and everyone else.

    FDR, an unmistakeable patrician in manner and pedigree, was leading a not-quite-revolutionary politics, which was nevertheless hostile to and suspicious of business elites, as a source of economic pathology. The New Deal did not seek to overthrow the plutocracy, but it did seek to side-step and disable their dominance.

    It seems to me that while neoliberalism on the right was much the same old same old, the neoliberal turn on the left was marked by a measured abandonment of this struggle over the distribution of income between the classes. In the U.S., the Democrats gradually abandoned their populist commitments. In Europe, the labour and socialist parties gradually abandoned class struggle.

    In retrospect, though the New Deal did use direct employment as a means of relief to good effect economically and politically, it never undertook anything like a Keynesian stimulus on a Keynesian scale - at least until the War.

    Where the New Deal witnessed the institution of an elaborate system of financial repression, accomplished in large part by imposing on the financial sector an explicitly mandated structure, with types of firms and effective limits on firm size and scope, a series of regulatory reforms and financial crises beginning with Carter and Reagan served to wipe this structure away.

    When Obama came in, in 2008 amid the unfolding GFC, one of the most remarkable features of his economic team was the extent to which it conceded control of policy entirely to the leading money center banks. Geithner and Bernanke continued in power with Geithner moving from the New York Federal Reserve (where he served as I recall under a Chair from Goldman Sachs) to Treasury in the Obama Administration, but Geithner's Treasury was staffed from Goldman Sachs, JP Morgan Chase and Citibank. The crisis served to concentrate banking assets in the hands of the top five banks, but it seemed also to transfer political power entirely into their hands as well. Simon Johnson called it a coup.

    I don't know what considerations guided Obama in choosing the size of the stimulus or its composition (as spending and tax cuts). Larry Summers was identified at the time as a voice of caution, not "gambling", but not much is known about his detailed reasoning in severely trimming Christina Romer's entirely conventional calculations. (One consideration might well have been worldwide resource shortages, which had made themselves felt in 2007-8 as an inflationary spike in commodity prices.) I do not see a case for connecting stimulus size policy to the health care reform. At the time the stimulus was proposed, the Administration had also been considering whether various big banks and other financial institutions should be nationalized, forced to insolvency or otherwise restructured as part of a regulatory reform.

    Here's the thing: the globalization and financialization of the economy from roughly 1980 drove both increasingly extreme distribution of income and de-industrialization. Accelerating the financialization of the economy from 1999 on made New York and Washington rich, but the same economic policies and process were devastating the Rust Belt as de-industrialization. They were two aspects of the same complex of economic trends and policies. The rise of China as a manufacturing center was, in critical respects, a financial operation within the context of globalized trade that made investment in new manufacturing plant in China, as part of globalized supply chains and global brand management, (arguably artificially) low-risk and high-profit, while reinvestment in manufacturing in the American mid-west became unattractive, except as a game of extracting tax subsidies or ripping off workers.

    It was characteristic of neoliberalism that the policy, policy intention and policy consequences were hidden behind a rhetoric of markets and technological inevitability. Matt Stoller has identified this as the statecraft of neoliberalism: the elimination of political agency and responsibility for economic performance and outcomes. Globalization and financialization were just "forces" that just happened, in a meteorological economics.

    It is conceding too many good intentions to the Obama Administration to tie an inadequate stimulus to a Rube Goldberg health care reform as the origin story for the final debacle of Democratic neoliberal politics. There was a delicate balancing act going on, but they were not balancing the recovery of the economy in general so much as they were balancing the recovery from insolvency of a highly inefficient and arguably predatory financial sector, which was also not incidentally financing the institutional core of the Democratic Party and staffing many key positions in the Administration and in the regulatory apparatus.

    This was not your grandfather's Democratic Party and it was a Democratic Party that could aid the working class and the Rust Belt only within fairly severe and sometimes sharply conflicting constraints.

    No one in the Democratic Party had much institutional incentive to connect the dots, and draw attention to the acute conflicts over the distribution of income and wealth involved in financialization of the economy (including financialization as a driver of health care costs). And, that makes the political problem that much harder, because there are no resources for rhetorical and informational clarity or coherence.

    bruce wilder 11.16.16 at 10:33 pm ( 31 )

    The short version of my thinking on the Obama stimulus is this: Keynesian stimulus spending is a free lunch; it doesn't really matter what you spend money on up to a very generous point, so it seems ready-made for legislative log-rolling. If Obama could not get a very big stimulus indeed thru a Democratic Congress long out of power, Obama wasn't really trying. And, well-chosen spending on pork barrel projects is popular and gets Congressional critters re-elected. So, again, if the stimulus is small and the Democratic Congress doesn't get re-elected, Obama isn't really trying.

    Again, it comes down to: by 2008, the Democratic Party is not a fit vehicle for populism, because it has become a neoliberal vehicle for giant banks. Turns out that makes a policy difference.

    likbez 11.18.16 at 4:48 pm 121

    bruce wilder 11.16.16 at 10:07 pm 30

    Great comment. Simply great. Hat tip to the author !

    Notable quotes:

    "… The New Deal did not seek to overthrow the plutocracy, but it did seek to side-step and disable their dominance. …"

    "… It seems to me that while neoliberalism on the right was much the same old same old, the neoliberal turn on the left was marked by a measured abandonment of this struggle over the distribution of income between the classes. In the U.S., the Democrats gradually abandoned their populist commitments. In Europe, the labour and socialist parties gradually abandoned class struggle. …"

    "… When Obama came in, in 2008 amid the unfolding GFC, one of the most remarkable features of his economic team was the extent to which it conceded control of policy entirely to the leading money center banks. Geithner and Bernanke continued in power with Geithner moving from the New York Federal Reserve (where he served as I recall under a Chair from Goldman Sachs) to Treasury in the Obama Administration, but Geithner's Treasury was staffed from Goldman Sachs, JP Morgan Chase and Citibank. The crisis served to concentrate banking assets in the hands of the top five banks, but it seemed also to transfer political power entirely into their hands as well. Simon Johnson called it a coup. … "

    "… Here's the thing: the globalization and financialization of the economy from roughly 1980 drove both increasingly extreme distribution of income and de-industrialization. …"

    "… It was characteristic of neoliberalism that the policy, policy intention and policy consequences were hidden behind a rhetoric of markets and technological inevitability. Matt Stoller has identified this as the statecraft of neoliberalism: the elimination of political agency and responsibility for economic performance and outcomes. Globalization and financialization were just "forces" that just happened, in a meteorological economics. …"

    "… This was not your grandfather's Democratic Party and it was a Democratic Party that could aid the working class and the Rust Belt only within fairly severe and sometimes sharply conflicting constraints. …"

    "… No one in the Democratic Party had much institutional incentive to connect the dots, and draw attention to the acute conflicts over the distribution of income and wealth involved in financialization of the economy (including financialization as a driver of health care costs). And, that makes the political problem that much harder, because there are no resources for rhetorical and informational clarity or coherence. …"

    "… If Obama could not get a very big stimulus indeed thru a Democratic Congress long out of power, Obama wasn't really trying. And, well-chosen spending on pork barrel projects is popular and gets Congressional critters re-elected. So, again, if the stimulus is small and the Democratic Congress doesn't get re-elected, Obama isn't really trying. …"

    "… Again, it comes down to: by 2008, the Democratic Party is not a fit vehicle for populism, because it has become a neoliberal vehicle for giant banks. Turns out that makes a policy difference. …"

    [Nov 16, 2016] The New Red Scare: Reviving the art of threat inflation

    Notable quotes:
    "... Reviving the art of threat inflation ..."
    "... "Welcome to the world of strategic analysis," Ivan Selin used to tell his team during the Sixties, "where we program weapons that don't work to meet threats that don't exist." Selin, who would spend the following decades as a powerful behind-the-scenes player in the Washington mandarinate, was then the director of the Strategic Forces Division in the Pentagon's Office of Systems Analysis. "I was a twenty-eight-year-old wiseass when I started saying that," he told me, reminiscing about those days. "I thought the issues we were dealing with were so serious, they could use a little levity." ..."
    Nov 16, 2016 | marknesop.wordpress.com
    et Al , November 16, 2016 at 2:51 am
    Harpers Magazine via Antiwar.com: The New Red Scare
    http://harpers.org/archive/2016/12/the-new-red-scare/?single=1

    Reviving the art of threat inflation

    By Andrew Cockburn

    "Welcome to the world of strategic analysis," Ivan Selin used to tell his team during the Sixties, "where we program weapons that don't work to meet threats that don't exist." Selin, who would spend the following decades as a powerful behind-the-scenes player in the Washington mandarinate, was then the director of the Strategic Forces Division in the Pentagon's Office of Systems Analysis. "I was a twenty-eight-year-old wiseass when I started saying that," he told me, reminiscing about those days. "I thought the issues we were dealing with were so serious, they could use a little levity."

    ####

    While I do have some quibbles with the piece (RuAF pilots are getting much more than 90 hours a year flight time & equipment is overrated and unaffordable in any decent numbers), it is pretty solid.

    [Nov 16, 2016] Being now a party of Wall street, neolibral democrats did not learn the lesson and do not want to: they attempt to double down on the identity politics, keep telling the pulverized middle class how great the economy is

    Notable quotes:
    "... I know what it is like to have to juggle creditors to make it through a week. I know what it is like to have to swallow my pride and constantly dun people to pay me so that I can pay others. ..."
    "... I know what it is like to dread going to the mailbox, because there will always be new bills to pay but seldom a check with which to pay them. I know what it is like to have to tell my daughter that I didn't know if I would be able to pay for her wedding; it all depended on whether something good happened. And I know what it is like to have to borrow money from my adult daughters because my wife and I ran out of heating oil ..."
    "... Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000 emergency, according to an exclusive poll released Thursday, a signal that despite years after the Great Recession, Americans' finances remain precarious as ever. ..."
    "... These difficulties span all incomes, according to the poll conducted by The Associated Press-NORC Center for Public Affairs Research. Three-quarters of people in households making less than $50,000 a year and two-thirds of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill. ..."
    "... Even for the country's wealthiest 20 percent - households making more than $100,000 a year - 38 percent say they would have at least some difficulty coming up with $1,000 ..."
    "... Chronicle for Higher Education: ..."
    "... Meanwhile, 91% of all the profits generated by the U.S. economy from 2009 through 2012 went to the top 1%. As just one example, the annual bonuses (not salaries, just the bonuses) of all Wall Street financial traders last year amounted to 28 billion dollars while the total income of all minimum wage workers in America came to 14 billion dollars. ..."
    "... "Between 2009 and 2012, according to updated data from Emmanuel Saez, overall income per family grew 6.9 percent. The gains weren't shared evenly, however. The top 1 percent saw their real income grow by 34.7 percent while the bottom 99 percent only saw a 0.8 percent gain, meaning that the 1 percent captured 91 percent of all real income. ..."
    "... Adjusting for inflation and excluding anything made from capital gains investments like stocks, however, shows that even that small gains for all but the richest disappears. According to Justin Wolfers, adjusted average income for the 1 percent without capital gains rose from $871,100 to $968,000 in that time period. For everyone else, average income actually fell from $44,000 to $43,900. Calculated this way, the 1 percent has captured all of the income gains." ..."
    "... There actually is a logic at work in the Rust Belt voters for voted for Trump. I don't think it's good logic, but it makes sense in its own warped way. The calculation the Trump voters seem to be making in the Rust Belt is that it's better to have a job and no health insurance and no medicare and no social security, than no job but the ACA (with $7,000 deductibles you can't afford to pay for anyway) plus medicare (since most of these voters are healthy, they figure they'll never get sick) plus social security (most of these voters are not 65 or older, and probably think they'll never age - or perhaps don't believe that social security will be solvent when they do need it). ..."
    "... It's the same twisted logic that goes on with protectionism. Rust Belt workers figure that it's better to have a job and not be able to afford a Chinese-made laptop than not to have a job but plenty of cheap foreign-made widgets you could buy if you had any money (which you don't). That logic doesn't parse if you run through the economics (because protectionism will destroy the very jobs they think they're saving), but it can be sold as a tweet in a political campaign. ..."
    "... The claim "Trump's coalition is composed of overt racists and people who are indifferent to overt racism" is incomplete. Trump's coalition actually consists of 3 parts and it's highly unstable: [1] racists, [2] plutocrats, [3] working class people slammed hard by globalization for whom Democrats have done little or nothing. ..."
    "... The good news is that Trump's coalition is unstable. The plutocrats and Rust Belters are natural enemies. ..."
    "... Listen to Steve Bannon, a classic stormfront type - he says he wants to blow up both the Democratic and the Republican party. He calls himself a "Leninist" in a recent interview and vows to wreck all elite U.S. institutions (universities, giant multinationals), not just the Democratic party. ..."
    "... Again, it comes down to: by 2008, the Democratic Party is not a fit vehicle for populism, because it has become a neoliberal vehicle for giant banks. Turns out that makes a policy difference. ..."
    Nov 16, 2016 | crookedtimber.org

    mclaren 11.16.16 at 9:52 am 7

    Eric places the blame for this loss squarely on economics, which, it seems to me, gets the analysis exactly right. And the statistics back up his analysis, I believe.

    It's disturbing and saddening to watch other left-wing websites ignore those statistics and charge off the cliff into the abyss, screaming that this election was all about racism/misogyny/homophobia/[fill in the blank with identity politics demonology of your choice]. First, the "it's all racism" analysis conveniently lets the current Democratic leadership off the hook. They didn't do anything wrong, it was those "deplorables" (half the country!) who are to blame. Second, the identity politics blame-shifting completely overlooks and short-circuits any real action to fix the economy by Democratic policymakers or Democratic politicians or the Democratic party leadership. That's particularly convenient for the Democratic leadership because these top-four-percenter professionals "promise anything and change nothing" while jetting between Davos and Martha's Vineyard, ignoring the peons who don't make $100,000 or more a year because the peons all live in flyover country.

    "Trump supporters were on average affluent, but they are always Republican and aren't numerous enough to deliver the presidency (538 has changed their view in the wake of the election result). Some point out that looking at support by income doesn't show much distinctive support for Trump among the "poor", but that's beside the point too, as it submerges a regional phenomenon in a national average, just as exit polls do. (..)
    "When commentators like Michael Moore and Thomas Frank pointed out that there was possibility for Trump in the Rust Belt they were mostly ignored or, even more improbably, accused of being apologists for racism and misogyny. But that is what Trump did, and he won. Moreover, he won with an amateurish campaign against a well-funded and politically sophisticated opponent simply because he planted his flag where others wouldn't.

    "Because of the obsession with exit polls, post-election analysis has not come to grips with the regional nature of the Trump phenomenon. Exit polls divide the general electorate based on individual attributes: race, gender, income, education, and so on, making regional distinctions invisible. Moreover, America doesn't decide the presidential election that way. It decides it based on the electoral college, which potentially makes the characteristics of individual states decisive. We should be looking at maps, not exit polls for the explanation. Low black turnout in California or high Latino turnout in Texas do not matter in the slightest in determining the election, but exit polls don't help us see that. Exit polls deliver a bunch of non-explanatory facts, in this election more than other recent ones."
    http://blogs.lse.ac.uk/usappblog/2016/11/11/23174/

    "Donald Trump performed best on Tuesday in places where the economy is in worse shape, and especially in places where jobs are most at risk in the future.

    "Trump, who in his campaign pledged to be a voice for `forgotten Americans,' beat Hillary Clinton in counties with slower job growth and lower wages. And he far outperformed her in counties where more jobs are threatened by automation or offshoring, a sign that he found support not just among workers who are struggling now but among those concerned for their economic future."

    http://fivethirtyeight.com/features/trump-was-stronger-where-the-economy-is-weaker/

    Meanwhile, the neoliberal Democrats made claims about the economy that at best wildly oversold the non-recovery from the 2009 global financial meltdown, and at worst flat-out misrepresented the state of the U.S. economy. For example, president Obama in his June 1 2016 speech in Elkhart Indiana, said:

    "Now, one of the reasons we're told this has been an unusual election year is because people are anxious and uncertain about the economy. And our politics are a natural place to channel that frustration. So I wanted to come to the heartland, to the Midwest, back to close to my hometown to talk about that anxiety, that economic anxiety, and what I think it means. (..) America's economy is not just better than it was eight years ago - it is the strongest, most durable economy in the world. (..) Unemployment in Elkhart has fallen to around 4 percent. (Applause.) At the peak of the crisis, nearly one in 10 homeowners in the state of Indiana were either behind on their mortgages or in foreclosure; today, it's one in 30. Back then, only 75 percent of your kids graduated from high school; tomorrow, 90 percent of them will. (Applause.) The auto industry just had its best year ever. (..) So that's progress.(..) We decided to invest in job training so that folks who lost their jobs could retool. We decided to invest in things like high-tech manufacturing and clean energy and infrastructure, so that entrepreneurs wouldn't just bring back the jobs that we had lost, but create new and better jobs By almost every economic measure, America is better off than when I came here at the beginning of my presidency. That's the truth. That's true. (Applause.) It's true. (Applause.) Over the past six years, our businesses have created more than 14 million new jobs - that's the longest stretch of consecutive private sector job growth in our history. We've seen the first sustained manufacturing growth since the 1990s."

    None of this is true. Not is a substantive sense, not in the sense of being accurate, not in the sense of reflecting the facts on the ground for real working people who don't fly their private jets to Davos.

    The claim that "America's economy is the strongest and most durable economy in the world" is just plain false. China has a much higher growth rate, at 6.9% nearly triple the U.S.'s - and America's GDP growth is trending to historic long-term lows, and still falling. Take a look at this chart of the Federal Reserve board's projections of U.S. GDP growth since 2009 compared with the real GDP growth rate:

    http://www.frbsf.org/economic-research/files/2015-03-2.png

    "[In the survey] [t]he Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?

    "Well, I knew. I knew because I am in that 47 percent.

    " I know what it is like to have to juggle creditors to make it through a week. I know what it is like to have to swallow my pride and constantly dun people to pay me so that I can pay others. I know what it is like to have liens slapped on me and to have my bank account levied by creditors. I know what it is like to be down to my last $5-literally-while I wait for a paycheck to arrive, and I know what it is like to subsist for days on a diet of eggs.

    I know what it is like to dread going to the mailbox, because there will always be new bills to pay but seldom a check with which to pay them. I know what it is like to have to tell my daughter that I didn't know if I would be able to pay for her wedding; it all depended on whether something good happened. And I know what it is like to have to borrow money from my adult daughters because my wife and I ran out of heating oil ."

    http://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/

    " Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000 emergency, according to an exclusive poll released Thursday, a signal that despite years after the Great Recession, Americans' finances remain precarious as ever.

    " These difficulties span all incomes, according to the poll conducted by The Associated Press-NORC Center for Public Affairs Research. Three-quarters of people in households making less than $50,000 a year and two-thirds of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill.

    " Even for the country's wealthiest 20 percent - households making more than $100,000 a year - 38 percent say they would have at least some difficulty coming up with $1,000 .

    "`The more we learn about the balance sheets of Americans, it becomes quite alarming,' said Caroline Ratcliffe, a senior fellow at the Urban Institute focusing on poverty and emergency savings issues."

    http://bigstory.ap.org/article/965e48ed609245539ed315f83e01b6a2

    The rest of Obama's statistics are deceptive to the point of being dissimulations - unemployment has dropped to 4 percent because so many people have stopped looking for work and moved into their parents' basements that the Bureau of Labor Statistics no longer counts them as unemployed. Meanwhile, the fraction of working-age adults who are not in the workforce has skyrocketed to an all-time high. Few homeowners are now being foreclosed in 2016 compared to 2009 because the people in 2009 who were in financial trouble all lost their homes. Only rich people and well-off professionals were able to keep their homes through the 2009 financial collapse. Since 2009, businesses did indeed create 14 million new jobs - mostly low-wage junk jobs, part-time minimum-wage jobs that don't pay a living wage.

    "The deep recession wiped out primarily high-wage and middle-wage jobs. Yet the strongest employment growth during the sluggish recovery has been in low-wage work, at places like strip malls and fast-food restaurants.

    "In essence, the poor economy has replaced good jobs with bad ones."

    http://www.nytimes.com/2014/04/28/business/economy/recovery-has-created-far-more-low-wage-jobs-than-better-paid-ones.html

    And the jobs market isn't much better for highly-educated workers:

    New research released Monday says nearly half of the nation's recent college graduates work jobs that don't require a degree.

    The report, from the Center for College Affordability and Productivity, concludes that while college-educated Americans are less likely to collect unemployment, many of the jobs they do have aren't worth the price of their diplomas.

    The data calls into question a national education platform that says higher education is better in an economy that favors college graduates.

    http://www.huffingtonpost.com/2013/01/29/underemployed-overeducated_n_2568203.html

    Don't believe it? Then try this article, from the Chronicle for Higher Education:

    Approximately 60 percent of the increase in the number of college graduates from 1992 to 2008 worked in jobs that the BLS considers relatively low skilled-occupations where many participants have only high school diplomas and often even less. Only a minority of the increment in our nation's stock of college graduates is filling jobs historically considered as requiring a bachelor's degree or more.

    http://www.chronicle.com/blogs/innovations/the-great-college-degree-scam/28067

    As for manufacturing, U.S. manufacturing lost 35,000 jobs in 2016, and manufacturing employment remains 2.2% below what it was when Obama took office.

    Meanwhile, 91% of all the profits generated by the U.S. economy from 2009 through 2012 went to the top 1%. As just one example, the annual bonuses (not salaries, just the bonuses) of all Wall Street financial traders last year amounted to 28 billion dollars while the total income of all minimum wage workers in America came to 14 billion dollars.

    "Between 2009 and 2012, according to updated data from Emmanuel Saez, overall income per family grew 6.9 percent. The gains weren't shared evenly, however. The top 1 percent saw their real income grow by 34.7 percent while the bottom 99 percent only saw a 0.8 percent gain, meaning that the 1 percent captured 91 percent of all real income.

    Adjusting for inflation and excluding anything made from capital gains investments like stocks, however, shows that even that small gains for all but the richest disappears. According to Justin Wolfers, adjusted average income for the 1 percent without capital gains rose from $871,100 to $968,000 in that time period. For everyone else, average income actually fell from $44,000 to $43,900. Calculated this way, the 1 percent has captured all of the income gains."

    https://thinkprogress.org/the-1-percent-have-gotten-all-the-income-gains-from-the-recovery-6bee14aab1#.1frn3lu8y

    http://www.nytimes.com/2015/03/14/upshot/wall-street-bonuses-vs-total-earnings-of-full-time-minimum-wage-workers.html

    Does any of this sound like "the strongest, most durable economy in the world"? Does any of this square with the claims by Hillary Clinton and Barack Obama that "By almost every economic measure, America is better off "? The U.S. economy is only better off in 2016 by disingenuous comparison with the stygian depths of the 2009 economic collapse.

    Hillary Clinton tied herself to Barack Obama's economic legacy, and the brutal reality for working class people remains that the economy today has barely improved for most workers to what it was in 2009, and is in many ways worse. Since 2009, automation + outsourcing/offshoring has destroyed whole classes of jobs, from taxi drivers (wiped out by Uber and Lyft) to warehoues stock clerks (getting wiped out by robots) to paralegals and associates at law firms (replaced by databases and legal search algorithms) to high-end programmers (wiped out by an ever-increasing flood of H1B via workers from India and China).

    Yet vox.com continues to run article after article proclaiming "the 2016 election was all about racism." And we have a non-stop stream of this stuff from people like Anne Laurie over at balloon-juice.com:

    "While the more-Leftist-than-thou "progressives" - including their latest high-profile figurehead - are high-fiving each other in happy anticipation of potential public-outrage gigs over the next four years, at least some people are beginning to push back on the BUT WHITE WORKING CLASS HAS ALL THE SADS!!! meme so beloved of Very Serious Pundits."

    That's the ticket, Democrats double down on the identity politics, keep telling the pulverized middle class how great the economy is. Because that worked so well for you this election.

    Cranky Observer 11.16.16 at 12:34 pm ( 11 )

    = = = mclaren@9:52 am: The rest of Obama's statistics are deceptive to the point of being dissimulations -[ ] Only rich people and well-off professionals were able to keep their homes through the 2009 financial collapse. = = =

    Some food for thought in your post, but you don't help your argument with statements such as this one. Rich people and well-off professionals make up at most 10% of the population. US homeownership rate in 2005 was 68.8%, in 2015 is 63.7. That's a big drop and unquestionably represents a lot of people losing their houses involuntarily. Still, even assuming no "well-off professionals" lost their houses in the recession that still leaves the vast majority of the houses owned by the middle class. Which is consistent with foreclosure and sales stats in middle class areas from 2008-2014. Remember that even with 20% unemployment 80% of the population still has a job.

    Similarly, I agree that the recession and job situation was qualitatively worse than the quantitative stats depicted. Once you start adding in hidden factors not captured by the official stats, though, where do you stop? How do you know the underground economy isn't doing far better than it was in the boom years of the oughts, thus reducing actual unemployment? Etc.

    Finally, you need to address the fundamental question: assuming all you say is true (arguendo), how does destroying the Affordable Care Act, Social Security, and Medicare help those in the economically depressed areas? I got hit bad by the recession myself. Know what helped from 2010 forward? Knowing that I could change jobs, keep my college-age children on my spouse's heath plan, not get hit with pre-existing condition fraud, and that if worse came to worse in a couple years I would have the plan exchange to fall back on. Kansas has tried the Ryan/Walker approach, seen it fail, doubled down, and seen that fail 4x as badly. Now we're going to make it up on unit sales by trying the Ryan plan nationally? How do you expect that to "work out for you"?

    WLGR 11.16.16 at 4:11 pm

    mclaren @ 7: "high-end programmers (wiped out by an ever-increasing flood of H1B via workers from India and China)"

    I'm on board with the general thrust of what you're saying, but this is way, way over the line separating socialism from barbarism. The fact that it's not even true is beside the point, as is the (quite frankly) fascist metaphor of "flood" to describe human fucking beings traveling in search of economic security, at least as long as you show some self-awareness and contrition about your language. Some awareness about the insidious administrative structure of the H1-B program would also be nice - the way it works is, an individual's visa status more or less completely depends on remaining in the good graces of their employer, meaning that by design these employees have no conceivable leverage in any negotiation over pay or working conditions, and a program of unconditional residency without USCIS as a de facto strikebreaker would have much less downward pressure on wages - but anti-immigration rhetoric remaining oblivious to actual immigration law is par for the course.

    No, the real point of departure here from what deserves to be called "socialism" is in the very act of blithely combining effects of automation (i.e. traditional capitalist competition for productive efficiency at the expense of workers' economic security) and effects of offshoring/outsourcing/immigration (i.e. racialized fragmentation of the global working class by accident of birth into those who "deserve" greater economic security and those who don't) into one and the same depiction of developed-world economic crisis. In so many words, you're walking right down neoliberal capitalism's ideological garden path: the idea that it's not possible to be anticapitalist without being an economic nationalist, and that every conceivable alternative to some form of Hillary Clinton is ultimately reducible to some form of Donald Trump. On the contrary, those of us on the socialism side of "socialism or barbarism" don't object to capitalism because it's exploiting American workers , we object because it's exploiting workers , and insisting on this crucial point against all chauvinist pressure ("workers of all lands , unite!") is what fundamentally separates our anticapitalism from the pseudo-anticapitalism of fascists.

    marku52 11.16.16 at 5:01 pm 16

    Maclaren: I'm with you. I well remember Obama and his "pivot to deficit reduction" and "green shoots" while I was screaming at the TV 'No!! Not Now!"

    And then he tried for a "grand bargain" with the Reps over chained CPI adjustment for SS, and he became my active enemy. I was a Democrat. Where did my party go?

    politicalfootball 11.16.16 at 5:27 pm ( 17 )

    Just chiming in here: The implicit deal between the elites and the hoi polloi was that the economy would be run with minimal competence. Throughout the west, those elites have broken faith with the masses on that issue, and are being punished for it.

    I'm less inclined to attach responsibility to Obama, Clinton or the Democratic Party than some. If Democrats had their way, the economy would have been managed considerably more competently.

    Always remember that the rejection of the elites wasn't just a rejection of Democrats. The Republican elite also took it in the neck.

    I'll also dissent from the view that race wasn't decisive in this election. Under different circumstances, we might have had Bernie's revolution rather than Trump's, but Trump's coalition is composed of overt racists and people who are indifferent to overt racism.

    engels 11.16.16 at 7:12 pm 18

    I find the discussions over identity politics so intensely frustrating. A lot of people on the left have gone all-in on self-righteous anger

    Identity politics (and to some extent probably the rhetorical style that goes with it) isn't a 'left' thing, it's a liberal thing. It's a bête noire for many on the left-see eg. Nancy Fraser's work.

    The Anglo/online genus what you get when you subtract class, socialism and real-world organisation from politics and add in a lot of bored students and professionals with internet connections in the context of a political culture (America's) that already valorises individual aggression to a unique degree.

    Omega Centauri 11.16.16 at 7:15 pm ( 19 )

    As polticalfoorball @15 says. The Democrats just didn't have the political muscle to deliver on those things. There really is a dynamic thats been playing out: Democrats don't get enough governing capacity because they did poorly in the election, which means their projects to improve the economy are neutered or allowed through only in a very weakened form. Then the next election cycle the neuterers use that failure as a weapon to take even more governing capacity away. Its not a failure of will, its a failure to get on top of the political feedback loop.

    Manta 11.16.16 at 7:32 pm 20

    @15 politicalfootball 11.16.16 at 5:27 pm
    "Throughout the west, those elites have broken faith with the masses on that issue, and are being punished for it."

    Could you specify some "elite" that has been punished?

    nastywoman 11.16.16 at 7:36 pm ( 21 )

    @13
    'I'm not sure what the thinking is here.'

    The definition of 'Keynesianism' is:

    'the economic theories and programs ascribed to John M. Keynes and his followers; specifically : the advocacy of monetary and fiscal programs by government to increase employment and spending'

    – and if it is done wisely – like in most European countries before 2000 it is one of the least 'braindead' things.

    But with the introduction of the Euro – some governmental programs – lead (especially in Spain) to horrendous self-destructive housing and building bubbles – which lead to the conclusion that such programs – which allow 'gambling with houses' are pretty much 'braindead'.

    Or shorter: The quality of Keynesianism depends on NOT doing it 'braindead'.

    mclaren 11.16.16 at 8:28 pm ( 25 )

    Cranky Observer in #11 makes some excellent points. Crucially, he asks: "Finally, you need to address the fundamental question: assuming all you say is true (arguendo), how does destroying the Affordable Care Act, Social Security, and Medicare help those in the economically depressed areas?"

    There actually is a logic at work in the Rust Belt voters for voted for Trump. I don't think it's good logic, but it makes sense in its own warped way. The calculation the Trump voters seem to be making in the Rust Belt is that it's better to have a job and no health insurance and no medicare and no social security, than no job but the ACA (with $7,000 deductibles you can't afford to pay for anyway) plus medicare (since most of these voters are healthy, they figure they'll never get sick) plus social security (most of these voters are not 65 or older, and probably think they'll never age - or perhaps don't believe that social security will be solvent when they do need it).

    It's the same twisted logic that goes on with protectionism. Rust Belt workers figure that it's better to have a job and not be able to afford a Chinese-made laptop than not to have a job but plenty of cheap foreign-made widgets you could buy if you had any money (which you don't). That logic doesn't parse if you run through the economics (because protectionism will destroy the very jobs they think they're saving), but it can be sold as a tweet in a political campaign.

    As for 63.7% home ownership stats in 2016, vast numbers of those "owned" homes were snapped up by giant banks and other financial entities like hedge funds which then rented those homes out. So the home ownership stats in 2016 are extremely deceptive. Much of the home-buying since the 2009 crash has been investment purchases. Foreclosure home purchases for rent is now a huge thriving business, and it's fueling a second housing bubble. Particularly because in many ways it repeats the financially frothy aspects of the early 2000s housing bubble - banks and investment firms are issuing junks bonds based on rosy estimates of ever-escalating rents and housing prices, they use those junk financial instruments (and others like CDOs) to buy houses which then get rented out at inflated prices, the rental income gets used to fund more tranches of investment which fuels more buy-to-rent home buying. Rents have already skyrocketed far beyond incomes on the East and West Coast, so this can't continue. But home prices and rents keep rising. There is no city in the United States today where a worker making minimum wage can afford to rent a one-bedroom apartment and have money left over to eat and pay for a car, health insurance, etc. If home ownership were really so robust, this couldn't possibly be the case. The fact that rents keep skyrocketing even as undocumented hispanics return to Mexico in record numbers while post-9/11 ICE restrictions have hammered legal immigration numbers way, way down suggests that home ownership is not nearly as robust as the deceptive numbers indicate.

    Political football in #15 remarks: "I'll also dissent from the view that race wasn't decisive in this election. Under different circumstances, we might have had Bernie's revolution rather than Trump's, but Trump's coalition is composed of overt racists and people who are indifferent to overt racism."

    Race was important, but not the root cause of the Trump victory. How do we know this? Tump himself is telling us. Look at Trump's first announced actions - deport 3 million undocumented immigrants who have committed crimes, ram through vast tax cuts for the rich, and end the inheritance tax.

    If Trump's motivation (and his base's motivation) was pure racism, Trump's first announced action would be something like passing laws that made it illegal to marry undocumented workers. His first act would be to roll back the legalization of black/white marriage and re-instate segregation. Trump isn't promising any of that.

    Instead Trump's (bad) policies are based around enriching billionaires and shutting down immigration. Bear in mind that 43% of all new jobs created since 2009 went to immigrants and you start to realize that Trump's base is reacting to economic pressure by scapegoating immigrants, not racism by itself. If it were pure racism we'd have Trump and Ryan proposing a bunch of new Nuremberg laws. Make it illegal to have sex with muslims, federally fund segregated black schools and pass laws to force black kids to get bussed to them, create apartheid-style zones where only blacks can live, that sort of thing. Trump's first announced actions involve enriching the fantastically wealthy and enacting dumb self-destructive protectionism via punitive immigration control. That's protectionism + class war of the rich against everyone else, not racism. The protectionist immigration-control + deportation part of Trump's program is sweet sweet music to the working class people in the Rust Belt. They think the 43% of jobs taken by immigrants will come back. They don't realize that those are mostly jobs no one wants to do anyway, and that most of those jobs are already in the process of getting automated out of existence.

    The claim "Trump's coalition is composed of overt racists and people who are indifferent to overt racism" is incomplete. Trump's coalition actually consists of 3 parts and it's highly unstable: [1] racists, [2] plutocrats, [3] working class people slammed hard by globalization for whom Democrats have done little or nothing.

    Here's an argument that may resonate: the first two groups in Trump's coalition are unreachable. Liberal Democrats can't sweet-talk racists out of being racist and we certainly have nothing to offer the plutocrats. So the only part of Trump's coalition that is really reachable by liberal Democrats is the third group. Shouldn't we be concentrating on that third group, then?

    The good news is that Trump's coalition is unstable. The plutocrats and Rust Belters are natural enemies. Since the plutocrats are perceived as running giant corporations that import large numbers of non-white immigrants to lower wages, the racists are not big fans of that group either.

    Listen to Steve Bannon, a classic stormfront type - he says he wants to blow up both the Democratic and the Republican party. He calls himself a "Leninist" in a recent interview and vows to wreck all elite U.S. institutions (universities, giant multinationals), not just the Democratic party.

    Why? Because the stormfront types consider elite U.S. institutions like CitiBank as equally culpable with Democrats in supposedly destroying white people in the U.S. According to Bannon's twisted skinhead logic, Democrats are allegedly race traitors for cultural reasons, but big U.S. corporations and elite institutions are supposedly equally guilty of economic race treason by importing vast numbers of non-white immigrants via H1B visas, by offshoring jobs from mostly caucasian-populated red states to non-white countries like India, Africa, China, and by using elite U.S. universities to trawl the world for the best (often non-white) students, etc. Bannon's "great day of the rope" includes the plutocrats as well as people of color.

    These natural fractures in the Trump coalition are real, and Democrats can exploit them to weaken and destroy Republicans. But we have to get away from condemning all Republicans as racists because if we go down that route, we won't realize how fractured and unstable the Trump coalition really is.

    bruce wilder 11.16.16 at 10:33 pm 31 ( 31 )

    The short version of my thinking on the Obama stimulus is this: Keynesian stimulus spending is a free lunch; it doesn't really matter what you spend money on up to a very generous point, so it seems ready-made for legislative log-rolling. If Obama could not get a very big stimulus indeed thru a Democratic Congress long out of power, Obama wasn't really trying. And, well-chosen spending on pork barrel projects is popular and gets Congressional critters re-elected. So, again, if the stimulus is small and the Democratic Congress doesn't get re-elected, Obama isn't really trying.

    Again, it comes down to: by 2008, the Democratic Party is not a fit vehicle for populism, because it has become a neoliberal vehicle for giant banks. Turns out that makes a policy difference.

    engels 11.16.16 at 10:33 pm 32

    Ps. Should prob add that identity politics isn't the same thing as feminism, anti-racism, LGBT politics, etc. They're all needed now more than ever.

    What we don't need more of imo is a particular liberal/middle-class form of those things with particular assumptions (meritocratic and individualist), epistemology (strongly subjectivist) and rhetorical style (which often aims humiliating opponents from a position of relative knowledge/status rather than verbal engagement).

    Helen 11.16.16 at 10:35 pm ( 33 )

    I don't know why I'm even having to say this, as it's so obvious. The "leftists" (for want of a better word) and feminists who I know are also against neoliberalism. They are against the selloff of public assets to enterprises for private profit. They want to see a solution to the rapidly shrinking job market as technology replaces jobs (no, it's not enough for the Heroic Workers to Seize the Means of Production – the means of production are different now and the solution is going to have to be more complex than just "bring back manufacturing" or "introduce tariffs".) They want to roll back the tax cuts for the rich which have whittled down our revenue base this century. They want corporations and the top 10% to pay their fair share, and concomitantly they want pensioners, the unemployed and people caring for children to have a proper living wage.

    They support a universal "single payer" health care system, which we social democratic squishy types managed to actually introduce in the 1970s, but now we have to fight against right wing governments trying to roll it back They support a better system of public education. They support a science-based approach to climate change where it is taken seriously for the threat it is and given priority in Government policy. They support spending less on the Military and getting out of international disputes which we (Western nations) only seem to exacerbate.

    This is not an exhaustive list.

    Yet just because the same people say that the dominant Western countries (and my own) still suffer from institutionalised racism and sexism, which is not some kind of cake icing but actually ruin lives and kill people, we are "all about identity politics" and cannot possibly have enough brain cells to think about the issues I described in para 1.

    I don't find it instructive or useful.

    Main Street Muse 11.16.16 at 10:54 pm 34

    The slow recovery was only one factor. Wages have been stagnant since Reagan. And honestly, if a white Republican president had stabilized the economy, killed Osama Bin Laden and got rid of pre-existing condition issue with healthcare, the GOP would be BRAGGING all over it. Let's remember that we have ONE party that has been devoted to racist appeals, lying and putting party over country for decades.

    Obama entered office as the economy crashed over a cliff. Instead of reforming the banks and punishing the bankers who engaged in fraudulent activities, he waded into healthcare reform. Banks are bigger today than they were in 2008. And tell me again, which bankers were punished for the fraud? Not a one All that Repo 105 maneuvering, stuffing the retirement funds with toxic assets – etc. and so on – all of that was perfectly legal? And if legal, all of that was totally bonusable? Yes! In America, such failure is gifted with huge bonuses, thanks to the American taxpayer.

    Meanwhile, homeowners saw huge drops the value of their homes. Some are still underwater with the mortgage. It's a shame that politicians and reporters in DC don't get out much.

    Concurrently, right before the election, ACA premiums skyrocketed. If you are self-insured, ACA is NOT affordable. It doesn't matter that prior to ACA, premiums increased astronomically. Obama promised AFFORDABLE healthcare. In my state, we have essentially a monopoly on health insurance, and the costs are absurd. But that's in part because the state Republicans refused to expand Medicaid.

    Don't underestimate HRC's serious issues. HRC had one speech for the bankers and another for everyone else. Why didn't she release the GS transcripts? When did the Democrats become the party of Wall Street?

    She also made the same idiotic mistake that Romney did – disparage a large swathe of American voters (basket of deplorables is this year's 47%.)

    And then we had a nation of voters intent on the outsider. Bernie Sanders had an improbable run at it – the Wikileaks emails showed that the DNC did what they could to get rid of him as a threat.

    Well America has done and gone elected themselves an outsider. Lucky us.

    [Nov 16, 2016] We need the adoption of a federal job guarantee, a policy that would insure the option for anyone to work in a public sector program, similar to what the Works Progress Administration established in the 1930s.

    Notable quotes:
    "... Each job offered under a federal employment assurance would be at a wage rate above the poverty threshold, and would include benefits like health insurance. A public sector job guarantee would establish a quality of work and the level of compensation offered for all jobs. The program would be great for the country: It could meet a wide range of the nation's physical and human infrastructure needs, ranging from the building and maintenance of roads, bridges and highways, to school upkeep and the provision of quality child care services"" ..."
    Nov 16, 2016 | www.nakedcapitalism.com
    financial matters November 16, 2016 at 8:30 am

    Not sure if Trump realizes this but there is already a blueprint for creating infrastructure jobs. (hat tip SK)

    http://www.nytimes.com/roomfordebate/2016/07/11/are-we-ready-for-the-next-recession/a-guaranteed-federal-jobs-program-is-needed

    ""A lot of this has to do with the fact that Americans continue to be subjected to bad jobs or unstable employment - and those who are employed often face stagnant or even declining wages. The fragility of Americans' economic well-being is epitomized by the National Coalition for the Homeless' estimate that 44 percent of homeless persons actually have jobs, albeit poorly paid jobs.

    The expansion of "flex work" arrangements, which make work hours uncertain, contribute significantly to income volatility for workers in low-pay sectors of the economy. Around 50 percent of Americans could not meet a $400 emergency expense by drawing upon their personal savings if they had to.

    An alternative to these conditions is the adoption of a federal job guarantee, a policy that would insure the option for anyone to work in a public sector program, similar to what the Works Progress Administration established in the 1930s.

    Each job offered under a federal employment assurance would be at a wage rate above the poverty threshold, and would include benefits like health insurance. A public sector job guarantee would establish a quality of work and the level of compensation offered for all jobs. The program would be great for the country: It could meet a wide range of the nation's physical and human infrastructure needs, ranging from the building and maintenance of roads, bridges and highways, to school upkeep and the provision of quality child care services""

    [Nov 16, 2016] The my way or the highway rhetoric from Clinton supporters on the campaign was sickening

    Notable quotes:
    "... The "my way" or the highway rhetoric from Clinton supporters on the campaign was sickening. When Bush was called a warmonger for Iraq, that was fine. When Clinton was called a warmonger for Iraq and Libya, the Clintonites went on the offensive, often throwing around crap like "if she was a man, she wouldn't be a warmonger!" ..."
    "... On racism: "what I can say, from personal experience, is that the racism of my youth was always one step removed. I never saw a family member, friend, or classmate be mean to the actual black people we had in town. We worked with them, played video games with them, waved to them when they passed. What I did hear was several million comments about how if you ever ventured into the city, winding up in the "wrong neighborhood" meant you'd get dragged from your car, raped, and burned alive. Looking back, I think the idea was that the local minorities were fine as long as they acted exactly like us." ..."
    "... I'm telling you, the hopelessness eats you alive. And if you dare complain, some liberal elite will pull out their iPad and type up a rant about your racist white privilege. Already, someone has replied to this with a comment saying, "You should try living in a ghetto as a minority!" Exactly. To them, it seems like the plight of poor minorities is only used as a club to bat away white cries for help. Meanwhile, the rate of rural white suicides and overdoses skyrockets. Shit, at least politicians act like they care about the inner cities." ..."
    "... And the rural folk are called a "basket of deplorables" and other names. If you want to fight racism, a battle that is Noble and Honorable, you have to understand the nuances between racism and hopelessness. The wizard-wannabe idiots are a tiny fringe. The "deplorables" are a huge part of rural America. If you alienate them, you're helping the idiots mentioned above. ..."
    Nov 16, 2016 | marknesop.wordpress.com
    ucgsblog, November 14, 2016 at 3:50 pm
    Erm, atheist groups are known to target smaller Christian groups with lawsuits. A baker was sued for refusing to bake a cake for a Gay Wedding. She was perfectly willing to serve the couple, just not at the wedding. In California we had a lawsuit over a cross in a park. Atheists threatened a lawsuit over a seal. Look, I get that there are people with no life out there, but why are they bringing the rest of us into their insanity, with constant lawsuits. There's actually a concept known as "Freedom from Religion" – what the heck? Can you imagine someone arguing about "Freedom from Speech" in America? But it's ok to do it to religious folk! And yes, that includes Muslims, who had to fight to build a Mosque in New York. They should've just said it was a Scientology Center

    The "my way" or the highway rhetoric from Clinton supporters on the campaign was sickening. When Bush was called a warmonger for Iraq, that was fine. When Clinton was called a warmonger for Iraq and Libya, the Clintonites went on the offensive, often throwing around crap like "if she was a man, she wouldn't be a warmonger!"

    The problem with healthcare in the US deserves its own thread, but Obamacare did not fix it; Obamacare made it worse, especially in the rural communities. The laws in schools are fundamentally retarded. A kid was suspended for giving a friend Advil. Another kid suspended for bringing in a paper gun. I could go on and on. A girl was expelled from college for trying to look gangsta in a L'Oreal mask. How many examples do you need? Look at all of the new "child safety laws" which force kids to leave in a bubble. And when they enter the Real World, they're fucked, so they pick up the drugs. In cities it's crack, in farmvilles it's meth.

    Hillary didn't win jack shit. She got a plurality of the popular vote. She didn't win it, since winning implies getting the majority. How many Johnson votes would've gone to Trump if it was based on popular vote, in a safe state? Of course the biggest issue is the attack on the way of life, which is all too real. I encourage you to read this, in order to understand where they're coming from: http://www.cracked.com/blog/6-reasons-trumps-rise-that-no-one-talks-about/

    "Nothing that happens outside the city matters!" they say at their cocktail parties, blissfully unaware of where their food is grown. Hey, remember when Hurricane Katrina hit New Orleans? Kind of weird that a big hurricane hundreds of miles across managed to snipe one specific city and avoid everything else. To watch the news (or the multiple movies and TV shows about it), you'd barely hear about how the storm utterly steamrolled rural Mississippi, killing 238 people and doing an astounding $125 billion in damage. But who cares about those people, right? What's newsworthy about a bunch of toothless hillbillies crying over a flattened trailer? New Orleans is culturally important. It matters. To those ignored, suffering people, Donald Trump is a brick chucked through the window of the elites. "Are you assholes listening now?"

    On racism: "what I can say, from personal experience, is that the racism of my youth was always one step removed. I never saw a family member, friend, or classmate be mean to the actual black people we had in town. We worked with them, played video games with them, waved to them when they passed. What I did hear was several million comments about how if you ever ventured into the city, winding up in the "wrong neighborhood" meant you'd get dragged from your car, raped, and burned alive. Looking back, I think the idea was that the local minorities were fine as long as they acted exactly like us."

    "They're getting the shit kicked out of them. I know, I was there. Step outside of the city, and the suicide rate among young people fucking doubles. The recession pounded rural communities, but all the recovery went to the cities. The rate of new businesses opening in rural areas has utterly collapsed."

    ^ That, I'd say, is known as destroying their lives. Also this:

    "In a city, you can plausibly aspire to start a band, or become an actor, or get a medical degree. You can actually have dreams. In a small town, there may be no venues for performing arts aside from country music bars and churches. There may only be two doctors in town - aspiring to that job means waiting for one of them to retire or die. You open the classifieds and all of the job listings will be for fast food or convenience stores. The "downtown" is just the corpses of mom and pop stores left shattered in Walmart's blast crater, the "suburbs" are trailer parks. There are parts of these towns that look post-apocalyptic.

    I'm telling you, the hopelessness eats you alive. And if you dare complain, some liberal elite will pull out their iPad and type up a rant about your racist white privilege. Already, someone has replied to this with a comment saying, "You should try living in a ghetto as a minority!" Exactly. To them, it seems like the plight of poor minorities is only used as a club to bat away white cries for help. Meanwhile, the rate of rural white suicides and overdoses skyrockets. Shit, at least politicians act like they care about the inner cities."

    And the rural folk are called a "basket of deplorables" and other names. If you want to fight racism, a battle that is Noble and Honorable, you have to understand the nuances between racism and hopelessness. The wizard-wannabe idiots are a tiny fringe. The "deplorables" are a huge part of rural America. If you alienate them, you're helping the idiots mentioned above.

    [Nov 16, 2016] Black Lives Matter actually means Black Lives Matter First

    Notable quotes:
    "... "Class first" amongst men of the left has always signaled "ME first." What else could it mean? ..."
    "... So "Black Lives Matter" actually means "Black Lives Matter First". Got it. So damn tired of identity politics. ..."
    "... Meanwhile, in the usual way of such things, #BlackLivesMatter hashtag activism became fashionable, as the usual suspects were elevated to celebrity status by elites. Nothing, of course, was changed in policy, and so in a year or so, matters began to bubble on the ground again. ..."
    "... I'm not tired of identity politics. I'm just tired of some identity-groups accusing other identity-groups of "identity-politics". I speak in particular of the Identity Left. ..."
    "... Identity politics, any identity, is going to automatically split voters into camps and force people to 'pick' a side. ..."
    "... The Faux Feminism of Hillary Rodham Clinton, I and many other writers argued that the bourgeois feminism Clinton represents works against the interests of the vast majority of women. This has turned out to be even more true than we anticipated. That branding of feminism has delivered to us the most sexist and racist president in recent history: Donald Trump. ..."
    "... Hillary spoke to the million-dollar feminists-of-privilege who identified with her multi-million dollar self and her efforts to break her own Tiffany Glass ceiling. And she worked to get many other women with nothing to gain to identify with Hillary's own breaking of Hillary's own Tiffany Glass ceiling. ..."
    "... For me (at least) the essence of the "Left" is justice. When we speak of Class we are putting focus on issues of economic justice. Class is the material expression of economic (and therefore political) stratification. Class is the template for analysing the power dynamics at play in such stratification. ..."
    "... in the absence of economic justice, it's very difficult to obtain ANY kind of justice - whether such justice be of race, gender, legal, religious or sexual orientation. ..."
    "... I find it indicative that the 1% (now) simply don't care one way or another about race or gender etc, PROVIDED it benefits or, has no negative effects on their economic/political interests. ..."
    "... "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." ..."
    "... In ship sinking incidents, where a lot of people are dumped in the water, many adopt the strategy of trying to use others as flotation devices, pushing them under while the "rich class" tootle off in the lifeboats. Sounds like a winner, all right. ..."
    "... The rich class has enlisted the white indentured servants as their Praetorian Guard. The same play as after Bacon's Rebellion. ..."
    "... Is what is actually occurring another Kristallnacht, or the irreducible susurrus of meanness and idiocy that is part of every collection of humans? It would be nice not to get suckered into elevating the painful minima over the importance of getting ordinary people to agree on a real common enemy, and organizing to claim and protect. ..."
    "... If even one single banker had gone to jail for the mess (fed by Bush I, Clinton, and Bush II) that blew up in 2008, we would be having a different conversation. We are in a huge legitimacy crisis, in part because justice was never served on those who made tens of millions via fraud. ..."
    "... The Malignant Overlords - the King or Queen, the Financial Masters of the Universe,, the tribal witch doctor- live by grazing on the wealth of the natural world and the productivity of their underlings. There are only a few thousand of them but they control finance and the Money system, propaganda organizations (in the USA called the Media) land and agriculture, "educational" institutions and entire armies of Homeland Insecurity police. ..."
    "... Under them there are the sycophants– generals and officers, war profiteers and corporate CEO's, the intelligentsia, journalists, fake economists, and entertainment and sports heroes who grow fat feasting on the morsels left over after the .0001% have fed. And far below the Overlords are the millions of professional Bureaucrats whose job security requires unquestioning servitude. ..."
    "... Race, gender identity, religion, etc. are the false dichotomies by which the oligarchs divide us. Saudi princes, African American millionaires, gay millionaires etc. are generally treated the same by the oligarchs as wasp millionaires. The true dichotomy is class, that is the dichotomy which dare not speak its name. ..."
    "... For Trump it was so easy. He just says something that could be thought of as racist and then his supporters watch as the media morphs his words, removes context, or just ignores any possible non-racist motivations for his words. ..."
    "... Just read the actual Mexican- rapists quote. Completely different then reported by the media. Fifteen years ago my native born Mexican friend said almost exactlly the same thing. ..."
    "... whilst his GOP colleagues publicly recoiled in horror, there is no question that Trump was merely making explicit what Republicans had been doing for decades – since the days of Nixon in 1968. The dog whistle was merely replaced by a bull horn. ..."
    "... Yes, class identity can be a bond that unites. However, in the US the sense of class identity remains underdeveloped. In fact, it is only with the Sanders campaign that large swaths of the American public have had practical and sustained exposure to the concept of class as a political force. For most of the electorate, the language of class is still rather alien, particularly since the "equality of opportunity" narrative even now is not completely overthrown. ..."
    "... It seems inevitable that populist sentiment, which both Sanders and Trump have used to electoral advantage, will spill over into a variety of economic nationalism. ..."
    "... Obama was a perfect identity candidate, i.e., not only capable of getting the dem nomination, but the presidency and than not jailing banksters NO MATTER WHAT THEY DID, OR WILL DO… ..."
    "... One truism about immigration, to pick a topical item, is that uncontrolled immigration leads to overwhelming an area whether city, state or country. Regardless of how one feels about the other aspects of immigration, there are some real, unacknowledged limits to the viability of the various systems that must accommodate arrivals, particularly in the short term. Too much of a perceived ..."
    "... There is an entrenched royal court, not unlike Versailles in some respects, where the sinecures, access to the White House tennis court (remember Jimmy Carter and his forest for the trees issues) or to paid "lunches in Georgetown" or similar trappings. Inflow of populist or other foreign ideas behind the veil of media and class secrecy represents a threat to overwhelm, downgrade (Sayeth Yogi Berra: It is so popular that nobody goes there anymore) or remove those perks, and to cause some financial, psychic or other pain to the hangers-on. ..."
    "... Pretty soon, word filters out through WikiLeaks, or just on the front page of a newspaper in the case of the real and present corruption (What do you mean nobody went to jail for the frauds?). In those instances, the tendency of a populace to remain aloof with their bread and circuses and reality shows and such gets strained. ..."
    "... Some people began noticing and the cognitive dissonance became to great to ignore no matter how many times the messages were delivered from on high. That led to many apparent outbursts of rational behavior ..."
    Nov 16, 2016 | www.nakedcapitalism.com
    pretzelattack November 15, 2016 at 6:03 pm

    if poor whites were being shot by cops at the rate urban blacks are, they would be screaming too. blm is not a corporate front to divide us, any more than acorn was a scam to help election fraud.

    Kukulkan November 15, 2016 at 9:37 pm

    They are. Why #BlackLivesMatter should be #PoorLivesMatter.

    Also available as a video .

    Jay Mani November 15, 2016 at 9:41 am

    It's lazy analysis to suggest Race was a contributing factor. On the fringes, Trump supporters may have racial overtones, but this election was all about class. I applaud sites like NC in continually educating me. What you do is a valuable service.

    JTFaraday November 15, 2016 at 1:02 pm

    "We won't need a majority of the dying "white working class" in our present and future feminine, multiracial American working class. Just a minority."

    Indeed, this site has featured links to articles elaborating the demographic composition of today's "working class". And yet we still have people insisting that appeals to the working class, and policies directed thereof, must "transcend" race and gender.

    JTFaraday November 15, 2016 at 1:11 pm

    And, of course this "class first" orientation became a bone of contention between some loud mouthed "men of the left" during the D-Party primary and "everyone else" and that's why the "Bernie Bro" label stuck. It didn't help the Sanders campaign either.

    "Class first" amongst men of the left has always signaled "ME first." What else could it mean?

    Fieryhunt November 15, 2016 at 6:22 pm

    So "Black Lives Matter" actually means "Black Lives Matter First". Got it. So damn tired of identity politics.

    Lambert Strether November 15, 2016 at 11:16 pm

    This is, actually, complicated. It's a reasonable position that black lives don't matter because they keep getting whacked by cops and the cops are never held accountable. Nobody else did anything, so people on the ground stood up, asserted themselves, and as part of that created #BlackLivesMatter as an online gathering point; all entirely reasonable. #AllLivesMatter was created, mostly as deflection/distraction, by people who either didn't like the movement, or supported cops, and of course if all lives did matter to this crowd, they would have done something about all the police killings in the first place.

    Meanwhile, in the usual way of such things, #BlackLivesMatter hashtag activism became fashionable, as the usual suspects were elevated to celebrity status by elites. Nothing, of course, was changed in policy, and so in a year or so, matters began to bubble on the ground again.

    Activist time (we might say) is often slower than electoral time. But sometimes it's faster; see today's Water Cooler on the #AllOfUs people who occupied Schumer's office (and high time, too). To me, that's a very hopefully sign. Hopefully, not a bundle of groups still siloed by identity (and if that's to happen, I bet that will happen by working together. Nothing abstract).

    different clue November 16, 2016 at 3:18 am

    I'm not tired of identity politics. I'm just tired of some identity-groups accusing other identity-groups of "identity-politics". I speak in particular of the Identity Left.

    pretzelattack November 15, 2016 at 10:04 pm

    what "men of the left"? the "bernie bro" label only stuck for Clinton supporters who had already had the kool aid. Much like the "putin stooge" label.

    Knot Galt November 15, 2016 at 1:52 pm

    "We won't need a majority of the dying "white working class" in our present and future feminine, multiracial American working class. Just a minority."

    That statement is as myopic a vision as the current political class is today. The statement offends another minority, or even a possible majority. Identity politics, any identity, is going to automatically split voters into camps and force people to 'pick' a side.

    Focus! The larger battle is is about Class.

    Knot Galt November 15, 2016 at 2:06 pm

    To clarify, from Links:

    In False Choices: The Faux Feminism of Hillary Rodham Clinton, I and many other writers argued that the bourgeois feminism Clinton represents works against the interests of the vast majority of women. This has turned out to be even more true than we anticipated. That branding of feminism has delivered to us the most sexist and racist president in recent history: Donald Trump.

    different clue November 16, 2016 at 3:21 am

    I wonder if there is an even simpler more colorful way to say that. Hillary spoke to the million-dollar feminists-of-privilege who identified with her multi-million dollar self and her efforts to break her own Tiffany Glass ceiling. And she worked to get many other women with nothing to gain to identify with Hillary's own breaking of Hillary's own Tiffany Glass ceiling.

    If the phrase "Tiffany Glass ceiling" seems good enough to re-use, feel free to re-use it one and all.

    animalogic November 15, 2016 at 8:58 pm

    For me (at least) the essence of the "Left" is justice. When we speak of Class we are putting focus on issues of economic justice. Class is the material expression of economic (and therefore political) stratification. Class is the template for analysing the power dynamics at play in such stratification.

    Class is the primary political issue because it not only affects everyone, but in the absence of economic justice, it's very difficult to obtain ANY kind of justice - whether such justice be of race, gender, legal, religious or sexual orientation.

    I find it indicative that the 1% (now) simply don't care one way or another about race or gender etc, PROVIDED it benefits or, has no negative effects on their economic/political interests.

    JTMcPhee November 15, 2016 at 12:01 pm

    "Just how large a spike in hate crime there has been remains uncertain, however. Several reports have been proven false, and Potok cautioned that most incidents reported to the Southern Poverty Law Center did not amount to hate crime.

    Levin of California State University added that there was no "independent evidence to sustain the contention that there were more [hate crimes] in the days after the Trump election than after 9/11."" http://www.voanews.com/a/hate-crimes-surge-after-donald-trump-victory/3596298.html

    All us ordinary people are insecure. Planet is becoming less habitable, war everywhere, ISDS whether we want it or not, group sentiments driving mass behaviors with extra weapons from our masters, soil depletion, water becoming a Nestle subsidiary, all that. But let us focus on maintaining our favored position as more insecure than others, with a "Yes, but" response to what seems to me the fundamental strategic scene:

    "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."

    Those mostly white guys, but a lot of women too, the "rich classs," are ORGANIZED, they have a pretty simple organizing principle ("Everything belong us") that leads to straightforward strategies and tactics to control all the levers and fulcrums of power. The senators in Oregon are "on the right side" of a couple of social issues, but they both are all in for "trade deals" and other big pieces of the "rich class's" ground game. In ship sinking incidents, where a lot of people are dumped in the water, many adopt the strategy of trying to use others as flotation devices, pushing them under while the "rich class" tootle off in the lifeboats. Sounds like a winner, all right.

    TarheelDem November 15, 2016 at 12:43 pm

    The comparison with 9/11 is instructive. That is not minimizing hate crimes. Within days after 9/11, my Sikh neighbor was assaulted and called a "terrorist". He finally decided to stop wearing a turban, cut his hair, and dress "American". My neighborhood was not ethnically tense, but it is ethnically diverse, and my neighbor had never seen his assailant before.

    Yes, the rich classes are organized…organized to fleece us with unending wars. But don't minimize other people's experience of what constitutes a hate crime.

    In 1875, the first step toward the assassination of a black, "scalawag", or "carpetbagger" public official in the South was a friendly visit from prominent people asking him to resign, the second was night riders with torches, the third was night riders who killed the public official. Jury nullification (surprise, surprise) made sure that no one was punished at the time. In 1876, the restoration of "home rule' in Southern states elected in a bargain Rutherford B. Hayes, who ended Reconstruction and the South entered a period that cleansed "Negroes, carpetbaggers, and scalawags" from their state governments and put the Confederate generals and former plantation owners back in charge. That was then called The Restoration. Coincidence that that is the name of David Horowitz's conference where Donna Brazile was hobnobbing with James O'Keefe?

    The rich class has enlisted the white indentured servants as their Praetorian Guard. The same play as after Bacon's Rebellion.

    JTMcPhee November 15, 2016 at 5:02 pm

    Not minimizing - my very peaches-and-cream Scots-English daughter is married to a gentleman from Ghana whose skin tones are about as dark as possible.
    the have three beautiful children, and are fortunate to live in an area that is a hotbed of "tolerance." I have many anecdotes too.

    Do anecdotes = reality in all its complexity? Do anecdotes = policy? Is what is actually occurring another Kristallnacht, or the irreducible susurrus of meanness and idiocy that is part of every collection of humans? It would be nice not to get suckered into elevating the painful minima over the importance of getting ordinary people to agree on a real common enemy, and organizing to claim and protect.

    readerOfTeaLeaves November 15, 2016 at 12:13 pm

    If even one single banker had gone to jail for the mess (fed by Bush I, Clinton, and Bush II) that blew up in 2008, we would be having a different conversation. We are in a huge legitimacy crisis, in part because justice was never served on those who made tens of millions via fraud.

    When there's no justice, its as if the society's immune system is not functioning.

    Expect more strange things to appear, almost all of them aimed at sucking the remaining resources out of the system with the knowledge that they'll never face consequences for looting. The fact that they're killing the host does not bother them.

    animalogic November 15, 2016 at 9:09 pm

    Corruption is both cause & effect of gross wealth inequities. Of course to the 1% it's not corruption so much as merely what is owed as of a right to the privileged. (Thus, the most fundamental basis of liberal democracy turns malignant: that ALL, even rulers & law makers are EQUALLY bound by the Law).

    Crazy Horse November 15, 2016 at 12:14 pm

    Here is the way it works:

    The Malignant Overlords - the King or Queen, the Financial Masters of the Universe,, the tribal witch doctor- live by grazing on the wealth of the natural world and the productivity of their underlings. There are only a few thousand of them but they control finance and the Money system, propaganda organizations (in the USA called the Media) land and agriculture, "educational" institutions and entire armies of Homeland Insecurity police.

    Under them there are the sycophants– generals and officers, war profiteers and corporate CEO's, the intelligentsia, journalists, fake economists, and entertainment and sports heroes who grow fat feasting on the morsels left over after the .0001% have fed. And far below the Overlords are the millions of professional Bureaucrats whose job security requires unquestioning servitude.

    Once upon a time there was what was known as the Middle Class who taught school or built things in factories, made mortgage payments on a home, and bought a new Ford every other year. But they now are renters, moving from one insecure job in one state to an insecure one across the country. How else are they to maintain their sense of self-worth except by identifying a tribe that is under them? If the members of the inferior tribe look just like you they might actually be more successful and not a proper object of scorn. But if they have a black or brown skin and speak differently they are the perfect target to make you feel that your life is not a total failure.

    It's either that or go home and kick the dog or beat the wife. Or join the Army where you can go kill a few foreigners and will always know your place in the hierarchy.

    Class "trumps" race, but racial prejudice has its roots far back in human social history as a tribal species where the "other" was always a threat to the tribe's existence.

    Elizabeth Burton November 15, 2016 at 12:46 pm

    Anyone who thinks it is only class and not also race is wearing some very strange blinders

    No one with any sense is saying that, Katharine, and constantly bringing it up as some kind of necessary argument (which, you may recall, was done as a way of trying to persuade people of color Sanders wasn't working for them in the face of his entire history) perpetuates the falsehood dichotomy that it has to be one or the other.

    I can understand the desire to reduce the problems to a single issue that can then be subjected to our total focus, but that's what's been done for the last fifty years; it doesn't work. Life is too complex and messy to be fixed using magic pills, and Trump's success because those who've given up hope of a cure are still enormously vulnerable to snake oil.

    mark ó dochartaigh November 15, 2016 at 11:04 pm

    Race, gender identity, religion, etc. are the false dichotomies by which the oligarchs divide us. Saudi princes, African American millionaires, gay millionaires etc. are generally treated the same by the oligarchs as wasp millionaires. The true dichotomy is class, that is the dichotomy which dare not speak its name.

    kramer November 15, 2016 at 1:34 pm

    yes, racism still exist, but the Democrats want to make it the primary issue of every election because it is costs them nothing. I've never liked the idea of race based reparations because they seem like another form of racism.

    However, if the neolibs really believe racial disparity and gender issues are the primary problems, why don't they ever support reparations or a large tax on rich white people to pay the victims of racism and sexism and all the other isms?

    Perhaps its because that would actually cost them something. I think what bothers most of the Trumpets out here in rural America is not race but the elevation of race to the top of the political todo list.

    For Trump it was so easy. He just says something that could be thought of as racist and then his supporters watch as the media morphs his words, removes context, or just ignores any possible non-racist motivations for his words.

    Just read the actual Mexican- rapists quote. Completely different then reported by the media. Fifteen years ago my native born Mexican friend said almost exactlly the same thing. Its a trap the media walks right into. I think most poor people of whiteness do see racism as a sin, just not the only or most awful sin. As for Trump being a racist, I think he would have to be human first.

    sinbad66 November 15, 2016 at 9:43 am

    whilst his GOP colleagues publicly recoiled in horror, there is no question that Trump was merely making explicit what Republicans had been doing for decades – since the days of Nixon in 1968. The dog whistle was merely replaced by a bull horn.

    Spot-on statement. Was watching Fareed Zakaria (yeah, I know, but he makes legit points from time to time) and was pleasantly surprised that he called Bret Stephens, who was strongly opposed to Trump, out on this. To see Stephens squirm like a worm on a hook was priceless.

    JW November 15, 2016 at 9:46 am

    "…what divides people rather than what unites people…"

    Yes, class identity can be a bond that unites. However, in the US the sense of class identity remains underdeveloped. In fact, it is only with the Sanders campaign that large swaths of the American public have had practical and sustained exposure to the concept of class as a political force. For most of the electorate, the language of class is still rather alien, particularly since the "equality of opportunity" narrative even now is not completely overthrown.

    Sanders and others on an ascendant left in the Democratic Party - and outside the Party - will continue to do the important work of building a sense of class consciousness. But more is needed, if the left wants to transform education into political power. Of course, organizing and electing candidates at the local and state level is enormously important both to leverage control of local institutions and - even more important - train and create leaders who can effectively use the tools of political power. But besides this practical requirement, the left also needs to address - or co-opt, if you will - the language of economic populism, which sounds a lot like economic nationalism.

    It seems inevitable that populist sentiment, which both Sanders and Trump have used to electoral advantage, will spill over into a variety of economic nationalism. Nationalist sentiment is the single most powerful unifying principle available, certainly more so than the concept of class, at least in America. I don't see that changing anytime soon, and I do see the Alt-Right using nationalism as a lever to try to coax the white working class into their brand of identity politics. But America's assimilationist, "melting pot" narrative continues to be attractive to most people, even if it is under assault in some quarters. So I think moving from nationalism to white identity politics will not so easy for the Alt-Right. On the other hand, picking up the thread of economic nationalism can provide the left with a powerful tool for bringing together women, minorities and all who are struggling in this economy. This becomes particularly important if it is the case that technology already makes the ideal of full (or nearly full) employment nothing more than a chimera, thus forcing the question of a guaranteed annual income. Establishing that kind of permanent safety net will only be possible in a polity where there are firm bonds between citizens and a marked sense of responsibility for the welfare of all.

    fresno dan November 15, 2016 at 10:05 am

    And if the Democratic Party is honest, it will have to concede that even the popular incumbent President has played a huge role in contributing to the overall sense of despair that drove people to seek a radical outlet such as Trump. The Obama Administration rapidly broke with its Hope and "Change you can believe in" the minute he appointed some of the architects of the 2008 crisis as his main economic advisors, who in turn and gave us a Wall Street friendly bank bailout that effectively restored the status quo ante (and refused to jail one single banker, even though many were engaged in explicitly criminal activity).

    ====================================================================
    For those who think its just Hillary, its not. There is no way there will ever be any acknowledgement of Obama;s real failures – he will no more be viewed honestly by dems than he could be viewed honestly by repubs. Obama was a perfect identity candidate, i.e., not only capable of getting the dem nomination, but the presidency and than not jailing banksters NO MATTER WHAT THEY DID, OR WILL DO…
    I imagine Trump will be one term, and I imagine we return in short order to our nominally different parties squabbling but in lock step with regard to their wall street masters…

    Altandmain November 15, 2016 at 10:09 am

    That's the problem though – the Democrats are not honest and have not been for a very long time.

    Enquiring Mind November 15, 2016 at 12:30 pm

    Democrats seem to be the more visible or clumsy in their attempts to govern themselves and the populace, let alone understand their world. By way of illustration, consider the following.

    One truism about immigration, to pick a topical item, is that uncontrolled immigration leads to overwhelming an area whether city, state or country. Regardless of how one feels about the other aspects of immigration, there are some real, unacknowledged limits to the viability of the various systems that must accommodate arrivals, particularly in the short term. Too much of a perceived good thing may be hazardous to one's health. Too much free stuff exhausts the producers, infrastructure and support networks.

    To extend and torture that concept further, just because, consider the immigration of populist ideas to Washington. There is an entrenched royal court, not unlike Versailles in some respects, where the sinecures, access to the White House tennis court (remember Jimmy Carter and his forest for the trees issues) or to paid "lunches in Georgetown" or similar trappings. Inflow of populist or other foreign ideas behind the veil of media and class secrecy represents a threat to overwhelm, downgrade (Sayeth Yogi Berra: It is so popular that nobody goes there anymore) or remove those perks, and to cause some financial, psychic or other pain to the hangers-on.

    Pretty soon, word filters out through WikiLeaks, or just on the front page of a newspaper in the case of the real and present corruption (What do you mean nobody went to jail for the frauds?). In those instances, the tendency of a populace to remain aloof with their bread and circuses and reality shows and such gets strained.

    Some people began noticing and the cognitive dissonance became to great to ignore no matter how many times the messages were delivered from on high. That led to many apparent outbursts of rational behavior (What, you sold my family and me out and reduced our prospects, so why should we vote for a party that takes us for granted, at best), which would be counter-intuitive by some in our media.

    [Nov 16, 2016] If the unsecured credit lines that make the payments system function smoothly are liquidity, then are these credit lines also money?

    Notable quotes:
    "... ""This analysis raises a host of questions: If the unsecured credit lines that make the payments system function smoothly are liquidity, then are these credit lines also money? Should they be money? If these credit lines that are so important to the operation of the payments system are not money, then what is the point of defining money at all? I am still puzzling over these questions so I only ask them and don't pretend to answer them here."" ..."
    "... Sissoko acknowledges the role that sovereign governments play in establishing money systems but I think gives too much credit :) to private bank credit creation. ..."
    "... If money grew on trees it would be worth very little (Wray 2004) ..."
    "... Money is the result of the struggle between debtors' demand for money and creditors' belief that the state can service its debt, which in turn depends on tax revenues. And it is the need to work for a taxable income that gives it value. (Ingham) ..."
    "... Taxes don't finance spending but are necessary for money to have state backed value. They are also an important way for the state to transfer resources whether for bank bailouts, wars, social security, health care or whatever the state deems important. ..."
    Nov 16, 2016 | www.nakedcapitalism.com

    financial matters November 16, 2016 at 7:50 am

    Carolyn Sissoko has an interesting new paper out, Financial Stability , in which she takes on the nature of money problem.

    I think her concluding paragraph is interesting

    ""This analysis raises a host of questions: If the unsecured credit lines that make the payments system function smoothly are liquidity, then are these credit lines also money? Should they be money? If these credit lines that are so important to the operation of the payments system are not money, then what is the point of defining money at all? I am still puzzling over these questions so I only ask them and don't pretend to answer them here.""

    As a derivatives expert she takes on the interesting question of how these complex sources of credit function, they provide credit but are they really money.

    I think Ingham makes a great point relevant to this, "all money is credit but not all credit is money"

    Sissoko acknowledges the role that sovereign governments play in establishing money systems but I think gives too much credit :) to private bank credit creation.

    If money grew on trees it would be worth very little (Wray 2004)

    Money is the result of the struggle between debtors' demand for money and creditors' belief that the state can service its debt, which in turn depends on tax revenues. And it is the need to work for a taxable income that gives it value. (Ingham)

    Taxes don't finance spending but are necessary for money to have state backed value. They are also an important way for the state to transfer resources whether for bank bailouts, wars, social security, health care or whatever the state deems important.

    BecauseTradition November 16, 2016 at 8:55 am

    If money grew on trees it would be worth very little (Wray 2004)

    That would depend on the rate of growth and, assuming every citizen had an equal number and quality of such trees, be an ethical means to create fiat apart from normal deficit spending for the general welfare.

    Of course there are no such trees but equal fiat distributions to all adult citizens could have the same effect.

    [Nov 16, 2016] Neoliberal MSM use identity politics as a stalking horse to rob the public blind, while spewing invectives about racism and mysogony when the public stops buying their neoliberal propaganda

    Notable quotes:
    "... The funny thing is that they've so learned to love the smell of their own farts (or propaganda) that they internalized an image of enlightened progressivism for themselves. This Trump election was probably the first clue that their self image is faulty and not widely shared by others. They are not taking it well. ..."
    Nov 16, 2016 | www.nakedcapitalism.com

    sleepy November 16, 2016 at 7:31 am

    NYTimes still blames race on Trump's winning over Obama supporters in Iowa:

    Trump clearly sensed the fragility of the coalition that Obama put together - that the president's support in heavily white areas was built not on racial egalitarianism but on a feeling of self-interest. Many white Americans were no longer feeling that belonging to this coalition benefited them.

    http://www.nytimes.com/interactive/2016/11/20/magazine/donald-trumps-america-iowa-race.html

    Racial egalitarianism wasn't the reason for white support for Obama in 2008 and 2012 in Iowa. It reflected racial egalitarianism, but that support had to do with perceived economic self-interest, just as the switch to Trump in 2016 did.

    And what on earth is wrong with self-interest as a reason for voting?

    jgordon November 16, 2016 at 8:39 am

    Right. These corporatists use identity politics as a stalking horse to rob the public blind, and then they spew invectives about racism and mysogony wherever the public stops buying the bullcrap.

    The funny thing is that they've so learned to love the smell of their own farts (or propaganda) that they internalized an image of enlightened progressivism for themselves. This Trump election was probably the first clue that their self image is faulty and not widely shared by others. They are not taking it well.

    Leigh November 16, 2016 at 8:59 am

    Yup, it's not the self-interest in voting – it's the self-interest in Governing

    nycTerrierist November 16, 2016 at 8:32 am

    Obama: "Let them eat p.r.!"

    [Nov 16, 2016] Ultimately the Establishment Democrats have nobody but themselves to blame for this one

    Notable quotes:
    "... Judging by the volume of complaints from Clinton sycophants insisting that people did not get behind Clinton or that it was purely her gender, they won't. Why would anyone get behind Clinton save the 1%? Her policies were pro-war, pro-Wall Street, and at odds with what the American people needed. Also, we should judge based on policy, not gender and Clinton comes way short of Sanders in that regard – in many regards, she is the antithesis of Sanders. ..."
    "... "Establishment Democrats have nobody but themselves to blame for this one. The only question is whether or not they are willing to take responsibility" I disagree. In my view, it is not a question at all. They have never taken responsibility for anything, and they never will. ..."
    "... What would make Democrats focus on the working class? Nothing. They have lost and brought about destruction of the the Unions, which was the Democratic Base, and have become beholden to the money. The have noting in common with the working class, and no sympathy for their situation, either. ..."
    "... What does Bill Clinton, who drive much of the policy in the '90s, and spent his early years running away form the rural poor in Arkansas (Law School, Rhodes Scholarship), have in common with working class people anywhere? ..."
    "... Iron law of institutions applies. Position in the D apparatus is more important than political power – because with power come blame. ..."
    "... I notice Obama worked hard to lose majorities in the house and Senate so he could point to the Republicans and say "it was their fault" except when he actually wanted something, and made it happen (such as TPP). ..."
    "... Agreed with the first but not the second. It's typical liberal identity politics guilt tripping. That won't get you too far on the "white side" of Youngstown Ohio. ..."
    "... Also suspect that the working-class, Rust-Belt Trump supporters will soon be thrown under the bus by their Standard Bearer, if the Transition Team appointments are any indicator: e.g. Privateers at SSA. ..."
    "... My wife teaches primary grades in an inner city school. She has made it clear to me over the years that the challenges her children are facing are related to poverty, not race. She sees a big correlation between the financial status of a family and its family structure (one or more parents not present or on drugs) and the kids' success in school. Race is a minor factor. ..."
    "... The problem with running on a class based platform in America is, well, it's America; and in good ol' America, we are taught that anyone can become a successful squillionare – ya know, hard work, nose-to-the-grindstone, blah, blah, blah. ..."
    "... The rags to riches American success fable is so ingrained that ideas like taxing the rich a bit more fall flat because everyone thinks "that could be me someday. Just a few house flips, a clever new app, that ten-bagger (or winning lottery ticket) and I'm there" ("there" being part of the 1%). ..."
    "... The idea that anyone can be successful (i.e. rich) is constantly promoted. ..."
    "... I think this fantasy is beginning to fade a bit but the "wealth = success" idea is so deeply rooted in the American psyche I don't think it will ever fade completely away. ..."
    "... If you spend time in hardscrabble, white upstate New York, or eastern Kentucky, or my own native West Texas, and you take an honest look at the welfare dependency, the drug and alcohol addiction, the family anarchy - which is to say, the whelping of human children with all the respect and wisdom of a stray dog - you will come to an awful realization. It wasn't Beijing. It wasn't even Washington, as bad as Washington can be. It wasn't immigrants from Mexico, excessive and problematic as our current immigration levels are. It wasn't any of that. ..."
    "... Nothing happened to them. There wasn't some awful disaster. There wasn't a war or a famine or a plague or a foreign occupation. Even the economic changes of the past few decades do very little to explain the dysfunction and negligence - and the incomprehensible malice - of poor white America. So the gypsum business in Garbutt ain't what it used to be. There is more to life in the 21st century than wallboard and cheap sentimentality about how the Man closed the factories down. ..."
    "... The truth about these dysfunctional, downscale communities is that they deserve to die. Economically, they are negative assets. Morally, they are indefensible. Forget all your cheap theatrical Bruce Springsteen crap. Forget your sanctimony about struggling Rust Belt factory towns and your conspiracy theories about the wily Orientals stealing our jobs. Forget your goddamned gypsum, and, if he has a problem with that, forget Ed Burke, too. The white American underclass is in thrall to a vicious, selfish culture whose main products are misery and used heroin needles. Donald Trump's speeches make them feel good. So does OxyContin. ..."
    "... White Trash: The 400-Year Untold History of Class in America ..."
    "... Poor or Poorer whites have been demonised since the founding of the original Colonies, and were continuously pushed west to the frontiers by the ruling elites of New England and the South as a way of ridding themselves of "undesirables", who were then left to their own resources, and clung together for mutual assistance. ..."
    "... White trash is a central, if disturbing, thread in our national narrative. The very existence of such people – both in their visibility and invisibility – is proof that American society obsesses over the mutable labels we give to the neighbors we wish not to notice. "They are not who we are". But they are who we are and have been a fundamental part of our history, whether we like it or not". ..."
    "... "To be sure, Donald Trump did make a strong appeal to racists, homophobes, and misogynists " ..."
    "... working class white women ..."
    "... Obama is personally likeable ..."
    "... History tells us the party establishment will move further right after election losses. And among the activist class there are identity purity battles going on. ..."
    "... Watch as this happens yet again: "In most elections, U.S. politicians of both parties pretend to be concerned about their issues, then conveniently ignore them when they reach power and implement policies from the same Washington Consensus that has dominated the past 40 years." That is why we need a strong third party, a reformed election system with public support of campaigns and no private money, and free and fair media coverage. But it ain't gonna happen. ..."
    "... Obviously, if the Democrats nominate yet another Clintonite Obamacrat all over again, I may have to vote for Trump all over again . . . to stop the next Clintonite before it kills again. ..."
    www.nakedcapitalism.com
    Altandmain November 15, 2016 at 10:08 am

    Ultimately the Establishment Democrats have nobody but themselves to blame for this one. The only question is whether or not they are willing to take responsibility for what happened.

    Judging by the volume of complaints from Clinton sycophants insisting that people did not get behind Clinton or that it was purely her gender, they won't. Why would anyone get behind Clinton save the 1%? Her policies were pro-war, pro-Wall Street, and at odds with what the American people needed. Also, we should judge based on policy, not gender and Clinton comes way short of Sanders in that regard – in many regards, she is the antithesis of Sanders.

    Class trumps race, to make a pun. If the left doesn't take the Democratic Party back and clean house, I expect that there is a high probability that 2020's election will look at lot like the 2004 elections.

    I'd recommend someone like Sanders to run. Amongst the current crop, maybe Tulsi Gabbard or Nina Turner seem like the best candidates.

    Carla November 15, 2016 at 10:42 am

    "Establishment Democrats have nobody but themselves to blame for this one. The only question is whether or not they are willing to take responsibility" I disagree. In my view, it is not a question at all. They have never taken responsibility for anything, and they never will.

    Synoia November 15, 2016 at 10:13 am

    What would make Democrats focus on the working class? Nothing. They have lost and brought about destruction of the the Unions, which was the Democratic Base, and have become beholden to the money. The have noting in common with the working class, and no sympathy for their situation, either.

    What does Bill Clinton, who drive much of the policy in the '90s, and spent his early years running away form the rural poor in Arkansas (Law School, Rhodes Scholarship), have in common with working class people anywhere?

    The same question applies to Hillary, to Trump and the remainder of our "representatives" in Congress.

    Without Unions, how are US Representatives from the working class elected?

    What we are seeing is a shift in the US for the Republicans to become the populist party. They already have the churches, and with Trump they can gain the working class – although I do not underestimate the contempt help by our elected leaders for the Working Class and poor.

    The have forgotten, if they ever believed: "There, but for the grace of God, go I".

    Lambert Strether November 15, 2016 at 2:22 pm

    > What would make Democrats focus on the working class?

    The quest for political power.

    Synoia November 15, 2016 at 11:19 pm

    Iron law of institutions applies. Position in the D apparatus is more important than political power – because with power come blame.

    I notice Obama worked hard to lose majorities in the house and Senate so he could point to the Republicans and say "it was their fault" except when he actually wanted something, and made it happen (such as TPP).

    James Dodd November 15, 2016 at 10:46 am

    What So Many People Don't Get About the U.S. Working Class – Harvard Business Review

    anonymouse November 15, 2016 at 11:07 am

    We know that class and economic insecurity drove many white people to vote for Trump. That's understandable. And now we are seeing a rise in hate incidents inspired by his victory. So obviously there is a race component in his support as well. So, if you, white person, didn't vote for Trump out of white supremacy, would you consider making a statement that disavows the acts of extremist whites? Do you vow to stand up and help if you see people being victimized? Do you vow not to stay silent when you encounter Trump supporters who ARE obviously in thrall to the white supremacist siren call?

    Brad November 15, 2016 at 11:45 am

    Agreed with the first but not the second. It's typical liberal identity politics guilt tripping. That won't get you too far on the "white side" of Youngstown Ohio.

    And I wouldn't worry about it. When I worked at the at the USX Fairless works in Levittown PA in 1988, I was befriended by one steelworker who was a clear raving white supremacist racist. (Actually rather nonchalant about about it). However he was the only one I encountered who was like this, and eventually I figured out that he befriended a "newbie" like me because he had no friends among the other workers, including the whites. He was not popular at all.

    Harold November 15, 2016 at 11:14 am

    Left-wing populism unites people of all classes and all identities by emphasizing policies. That was what Bernie Sanders meant to me, at least.

    Citizen Sissy November 15, 2016 at 11:38 am

    I've always thought that Class, not Race, was the Third Rail of American Politics, and that the US was fast-tracking to a more shiny, happy feudalism.

    Also suspect that the working-class, Rust-Belt Trump supporters will soon be thrown under the bus by their Standard Bearer, if the Transition Team appointments are any indicator: e.g. Privateers at SSA.

    Gonna get interesting very quickly.

    rd November 15, 2016 at 11:47 am

    My wife teaches primary grades in an inner city school. She has made it clear to me over the years that the challenges her children are facing are related to poverty, not race. She sees a big correlation between the financial status of a family and its family structure (one or more parents not present or on drugs) and the kids' success in school. Race is a minor factor.

    She also makes it clear to me that the Somali/Syrian/Iraqi etc. immigrant kids are going to do very well even though they come in without a word of English because they are working their butts off and they have the full support of their parents and community. These people left bad places and came to their future and they are determined to grab it with both hands. 40% of her class this year is ENL (English as a non-native language). Since it is an inner city school, they don't have teacher's aides in the class, so it is just one teacher in a class of 26-28 kids, of which a dozen struggle to understand English. Surprisingly, the class typically falls short of the "standards" that the state sets for the standardized exams. Yet many of the immigrant kids end up going to university after high school through sheer effort.

    Bullying and extreme misbehavior (teachers are actually getting injured by violent elementary kids) is largely done by kids born in the US. The immigrant kids tend to be fairly well-behaved.

    On a side note, the CSA at our local farmer's market said they couldn't find people to pick the last of their fall crops (it is in a rural community so a car is needed to get there). So the food bank was going out this week to pick produce like squash, onions etc. and we were told we could come out and pick what we wanted. Full employment?

    Dave November 15, 2016 at 11:55 am

    "Women and minorities encouraged to apply" is a Class issue?

    shinola November 15, 2016 at 12:13 pm

    The problem with running on a class based platform in America is, well, it's America; and in good ol' America, we are taught that anyone can become a successful squillionare – ya know, hard work, nose-to-the-grindstone, blah, blah, blah.

    The rags to riches American success fable is so ingrained that ideas like taxing the rich a bit more fall flat because everyone thinks "that could be me someday. Just a few house flips, a clever new app, that ten-bagger (or winning lottery ticket) and I'm there" ("there" being part of the 1%).

    The idea that anyone can be successful (i.e. rich) is constantly promoted.

    I think this fantasy is beginning to fade a bit but the "wealth = success" idea is so deeply rooted in the American psyche I don't think it will ever fade completely away.

    Lambert Strether November 15, 2016 at 2:15 pm

    I'm recalling (too lazy to find the link) a poll a couple years ago that showed the number of American's identifying as "working class" increased, and the number as "middle class" decreased.

    Vatch November 15, 2016 at 2:19 pm

    Here ya go!

    http://www.gallup.com/poll/182918/fewer-americans-identify-middle-class-recent-years.aspx

    jrs November 15, 2016 at 6:11 pm

    even working class is a total equivocation. A lot of them are service workers period.

    TarheelDem November 15, 2016 at 12:24 pm

    It is both. And it is a deliberate mechanism of class division to preserve power. Bill Cecil-Fronsman,

    Common Whites: Class and Culture in Antebellum North Carolina identifies nine classes in the class structure of a state that mixed modern capitalist practice (plantations), agrarian YOYO independence (the non-slaveowning subsistence farms), town economies, and subsistence (farm labor). Those classes were typed racially and had certain economic, power, and social relations associated with them. For both credit and wages, few escaped the plantation economy and being subservient to the planter capitalists locally.

    Moreover, ethnic identity was embedded in the law as a class marker. This system was developed independently or exported through imitation in various ways to the states outside North Carolina and the slave-owning states. The abolition of slavery meant free labor in multiple senses and the capitalist use of ethnic minorities and immigrants as scabs integrated them into an ethnic-class system, where it was broad ethnicity and not just skin-color that defined classes. Other ethnic groups, except Latinos and Muslim adherents, now have earned their "whiteness".

    One suspects that every settler colonial society develops this combined ethnic-class structure in which the indigenous ("Indians" in colonial law) occupy one group of classes and imported laborers or slaves or intermixtures ("Indian", "Cape Colored" in South Africa) occupy another group of classes available for employment in production. Once employed, the relationship is exactly that of the slaveowner to the slave no matter how nicely the harsh labor management techniques of 17th century Barbados and Jamaica have been made kinder and gentler. But outside the workplace (and often still inside) the broader class structure applies even contrary to the laws trying to restrict the relationship to boss and worker.

    Blacks are not singling themselves out to police; police are shooting unarmed black people without punishment. The race of the cop does not matter, but the institution of impunity makes it open season on a certain class of victims.

    It is complicated because every legal and often managerial attempt has been made to reduce the class structure of previous economies to the pure capitalism demanded by current politics.

    So when in a post Joe McCarthy, post-Cold War propaganda society, someone wants to protest the domination of capitalism, attacking who they perceive as de facto scabs to their higher incomes (true or not) is the chosen mode of political attack. Not standing up for the political rights of the victims of ethnically-marked violence and discrimination allows the future depression of wages and salaries by their selective use as a threat in firms. And at the individual firm and interpersonal level even this gets complicated because in spite of the pressure to just be businesslike, people do still care for each other.

    This is a perennial mistake. In the 1930s Southern Textile Strike, some organizing was of both black and white workers; the unions outside the South rarely stood in solidarity with those efforts because they were excluding ethnic minorities from their unions; indeed, some locals were organized by ethnicity. That attitude also carried over to solidarity with white workers in the textile mills. And those white workers who went out on a limb to organize a union never forgot that failure in their labor struggle. It is the former textile areas of the South that are most into Trump's politics and not so much the now minority-majority plantation areas.

    It still is race in the inner ring suburbs of ethnically diverse cities like St. Louis that hold the political lock on a lot of states. Because Ferguson to them seems like an invasion of the lower class. Class politics, of cultural status, based on ethnicity. Still called by that 19h century scientific racism terminology that now has been debunked - race - Caucasoid, Mongoloid, Negroid. Indigenous, at least in the Americas, got stuck under Mongoloid.

    You go organize the black, Latino, and white working class to form unions and gain power, and it will happen. It is why Smithfield Foods in North Carolina had to negotiate a contract. Race can be transcended in action.

    Pretending the ethnic discrimination and even segregation does not exist and have its own problems is political suicide in the emerging demographics. Might not be a majority, but it is an important segment of the vote. Which is why the GOP suppressed minority voters through a variety of legal and shady electoral techniques. Why Trump wants to deport up to 12 million potential US citizens and some millions of already birthright minor citizens. And why we are likely to see the National Labor Review Board gutted of what little power it retains from 70 years of attack. Interesting what the now celebrated white working class was not offered in this election, likely because they would vote it down quicker because, you know, socialism.

    armchair November 15, 2016 at 2:50 pm

    Your comment reminded me of an episode in Seattle's history. Link . The unions realized they were getting beat in their strikes, by scabs, who were black. The trick was for the unions to bring the blacks into the union. This was a breakthrough, and it worked in Seattle, in 1934. There is a cool mural the union commissioned by, Pablo O'Higgins , to celebrate the accomplishment.

    barrisj November 15, 2016 at 12:49 pm

    Speaking of class, and class contempt , one must recall the infamous screed published by National Review columnist Kevin Williamson early this year, writing about marginalised white people here is a choice excerpt:

    If you spend time in hardscrabble, white upstate New York, or eastern Kentucky, or my own native West Texas, and you take an honest look at the welfare dependency, the drug and alcohol addiction, the family anarchy - which is to say, the whelping of human children with all the respect and wisdom of a stray dog - you will come to an awful realization. It wasn't Beijing. It wasn't even Washington, as bad as Washington can be. It wasn't immigrants from Mexico, excessive and problematic as our current immigration levels are. It wasn't any of that.

    Nothing happened to them. There wasn't some awful disaster. There wasn't a war or a famine or a plague or a foreign occupation. Even the economic changes of the past few decades do very little to explain the dysfunction and negligence - and the incomprehensible malice - of poor white America. So the gypsum business in Garbutt ain't what it used to be. There is more to life in the 21st century than wallboard and cheap sentimentality about how the Man closed the factories down.

    The truth about these dysfunctional, downscale communities is that they deserve to die. Economically, they are negative assets. Morally, they are indefensible. Forget all your cheap theatrical Bruce Springsteen crap. Forget your sanctimony about struggling Rust Belt factory towns and your conspiracy theories about the wily Orientals stealing our jobs. Forget your goddamned gypsum, and, if he has a problem with that, forget Ed Burke, too. The white American underclass is in thrall to a vicious, selfish culture whose main products are misery and used heroin needles. Donald Trump's speeches make them feel good. So does OxyContin.

    http://crasstalk.com/2016/03/poor-white-america-deserves-to-die-says-national-review/

    Now it's not too much of a stretch of the imagination to state that Williamson's animus can be replicated amongst many of the moneyed elite currently pushing and shoving their way into a position within the incoming Trump Administration. The Trump campaign has openly and cynically courted and won the votes of white people similar to those mentioned in Williamson's article, and who – doubtlessly – will be stiffed by policies vigourously opposed to their welfare that will be enacted during the Trump years. The truly intriguing aspect of the Trump election is: what will be the consequences of further degradation of the "lower orders' " quality of life by such actions? Wholesale retreat from electoral politics? Further embitterment and anger NOT toward those in Washington responsible for their lot but directed against ethnic and racial minorities "stealing their jawbs" and "getting welfare while we scrounge for a living"? I sincerely doubt whether the current or a reconstructed Democratic Party can at all rally this large chunk of white America by posing as their "champions" the class divide in the US is as profound as the racial chasm, and neither major party – because of internal contradictions – can offer a credible answer.

    Waldenpond November 15, 2016 at 1:25 pm

    [In addition to the growing inequality and concomitant wage stagnation for the middle and working classes, 9/11 and its aftermath has certainly has contributed to it as well, as, making PEOPLE LONG FOR the the Golden Age of Managerial Capitalism of the post-WWII era,]

    Oh yeah, I noticed a big ol' hankerin' for that from the electorate. What definition could the author be using for Managerial Capitalism that could make it the opposite of inequality? The fight for power between administration and shareholders does not lead to equality for workers.

    [So this gave force to the idea that the government was nothing but a viper's nest full of crony capitalist enablers,]

    I don't think it's an 'idea' that the govt is crony capitalists and enablers. Ds need to get away from emotive descriptions. Being under/unemployed, houseless, homeless, unable to pay for rent, utilities, food . aren't feelings/ideas. When that type of language is used, it comes across as hand waving. There needs to be a shift of talking to rather than talking about.

    If crony capitalism is an idea, it's simply a matter for Ds to identify a group (workers), create a hierarchy (elite!) and come up with a propaganda campaign (celebrities and musicians spending time in flyover country-think hanging out in coffee shops in a flannel shirt) to get votes. Promise to toss them a couple of crumbs with transfer payments (retraining!) or a couple of regulations (mandatory 3 week severance!) and bring out the obligatory D fall back- it would be better than the Rs would give them. On the other hand, if it's factual, the cronies need to be stripped of power and kicked out or the nature of the capitalist structure needs to be changed. It's laughable to imagine liberals or progressives would be open to changing the power and nature of the corporate charter (it makes me smile to think of the gasps).

    The author admits that politicians lie and continue the march to the right yet uses the ACA, a march to the right, as a connection to Obama's (bombing, spying, shrinking middle class) likability.

    [[But emphasizing class-based policies, rather than gender or race-based solutions, will achieve more for the broad swathe of voters, who comprehensively rejected the "neo-liberal lite" identity politics]

    Oops. I got a little lost with the neo-liberal lite identity politics. Financialized identity politics? Privatized identity politics?

    I believe women and poc have lost ground (economic and rights) so I would like examples of successful gender and race-based (liberal identity politics) solutions that would demonstrate that identity politics targeting is going to work on the working class.

    If workers have lost power, to balance that structure, you give workers more power (I predict that will fail as unions fall under the generic definition of corporatist and the power does not rest with the members but with the CEOs of the unions – an example is a union that block the members from voting to endorse a candidate, go against the member preference and endorse the corporatist candidate), or you remove power from the corporation. Libs/progs can't merely propose something like vesting more power with shareholders to remove executives as an ameliorating maneuver which fails to address the power imbalance.

    [This is likely only to accelerate the disintegration of the political system and economic system until the elephant in the room – class – is honestly and comprehensively addressed.]

    barrisj November 15, 2016 at 1:41 pm

    For a thorough exposition of lower-class white America from the inception of the Republic to today, a must-read is Nancy Isenberg's White Trash: The 400-Year Untold History of Class in America . Poor or Poorer whites have been demonised since the founding of the original Colonies, and were continuously pushed west to the frontiers by the ruling elites of New England and the South as a way of ridding themselves of "undesirables", who were then left to their own resources, and clung together for mutual assistance.

    Thus became the economic and cultural subset of "crackers", "hillbillies", "rednecks", and later, "Okies", a source of contempt and scorn by more economically and culturally endowed whites. The anti-bellum white Southern aristocracy cynically used poor whites as cheap tenant farming, all the while laying down race-based distinctions between them and black slaves – there is always someone lower on the totem pole, and that distinction remains in place today. Post-Reconstruction, the South maintained the cult of white superiority, all the while preserving the status of upper-class whites, and, by race-based public policies, assured lower-class whites that such "superiority" would be maintained by denying the black populations access to education, commerce, the vote, etc. And today, "white trash", or "trailer trash", or poorer whites in general are ubiquitous and as American as apple pie, in the North, the Midwest, and the West, not just the South. Let me quote Isenberg's final paragraph of her book:

    White trash is a central, if disturbing, thread in our national narrative. The very existence of such people – both in their visibility and invisibility – is proof that American society obsesses over the mutable labels we give to the neighbors we wish not to notice. "They are not who we are". But they are who we are and have been a fundamental part of our history, whether we like it or not".

    Enquiring Mind November 15, 2016 at 5:56 pm

    Also read Albion's Seed for interesting discussion about the waves of immigration and how those went on to impact subsequent generations.

    vegeholic November 15, 2016 at 2:04 pm

    Presenting a plan for the future, which has a chance to be supported by the electorate, must start with scrupulous, unwavering honesty and a willingness to acknowledge inconvenient facts. The missing topic from the 2016 campaigns was declining energy surpluses and their pervasive, negative impact on the prosperity to which we feel entitled. Because of the energy cost of producing oil, a barrel today represents a declining fraction of a barrel in terms of net energy. This is the major factor in sluggish economic performance. Failing to make this case and, at the same time, offering glib and vacuous promises of growth and economic revival, are just cynical exercises in pandering.

    Our only option is to mange the coming decline in a way that does not descend into chaos and anarchy. This can only be done with a clear vision of causes and effects and the wisdom and courage to accept facts. The alternative is yet more delusions and wishful thinking, whose shelf life is getting shorter.

    ChrisAtRU November 15, 2016 at 2:26 pm

    Marshall is awesome.

    To be fair to the article, Marshall did in fact say:

    "To be sure, Donald Trump did make a strong appeal to racists, homophobes, and misogynists "

    IMO the point Marshall is making that race was not the primary reason #DJT won. And I concur.

    This is borne out by the vote tallies which show that the number of R voters from 2012 to 2016 was pretty much on the level (final counts pending):
    2016 R Vote: 60,925,616
    2012 R Vote: 60,934,407
    (Source: US Election Atlas )

    Stop and think about this for a minute. Every hard core racist had their guy this time around; and yet, the R's could barely muster the same amount of votes as Mittens in 2012. This is huge, and supports the case that other things contributed far more than just race.

    Class played in several ways:
    Indifference/apathy/fatigue: Lambert posted some data from Carl Beijer on this yesterday in his Clinton Myths piece yesterday.
    Anger: #HRC could not convince many people who voted for Bernie that she was interested in his outreach to the working class. More importantly, #HRC could not convince working class white women that she had anything other than her gender and Trump's boorishness as a counterpoint to offer.
    Outsider v Insider: Working class people skeptical of political insiders rejected #HRC.

    TG November 15, 2016 at 3:00 pm

    Kudos. Well said.

    If black workers were losing ground and white workers were gaining, one could indeed claim that racism is a problem. However, both black and white workers are losing ground – racism simply cannot be the major issue here. It's not racism, it's class war.

    The fixation on race, the corporate funding of screaming 'black lives matter' agitators, the crude attempts to tie Donald Trump to the KKK (really? really?) are just divide and conquer, all over again.

    Whatever his other faults, Donald Trump has been vigorous in trying to reach out to working class blacks, even though he knew he wouldn't get much of their vote and he knew that the media mostly would not cover it. Last I heard, he was continuing to try and reach out, despite the black 'leadership' class demanding that he is a racist. Because as was so well pointed out here, the one thing the super-rich fear is a united working class.

    Divide and conquer. It's an old trick, but a powerful one.

    Suggestion: if (and it's a big if) Trump really does enact policies that help working class blacks, and the Republicans peel away a significant fraction of the black vote, that would set the elites' hair on fire. Because it would mean that the black vote would be in play, and the Neoliberal Democrats couldn't just take their votes for granted. And wouldn't that be a thing.

    pretzelattack November 16, 2016 at 3:09 am

    that was good for 2016. I will look to see if he has stats for other years. i certainly agree that poor whites are more likely to be shot; executions of homeless people by police are one example. the kind of system that was imposed on the people of ferguson has often been imposed on poor whites, too. i do object to the characterization of black lives matter protestors as "screaming agitators"; that's all too reminiscent of the meme of "outside agitators" riling up the local peaceful black people to stand up for their rights that was characteristically used to smear the civil rights movement in the 60's.

    tongorad November 15, 2016 at 3:18 pm

    I might not have much in common at all with certain minorities, but it's highly likely that we share class status.
    That's why the status quo allows identity politics and suppresses class politics.

    Sound of the Suburbs November 15, 2016 at 5:02 pm

    Having been around for sometime, I often wonder what The Guardian is going on about in the UK as it is supposed to be our left wing broadsheet.

    It isn't a left I even recognised, what was it?

    I do read it to try and find out what nonsense it is these people think.

    Having been confused for many a year, I think I have just understood this identity based politics as it is about to disappear.

    I now think it was a cunning ploy to split the electorate in a different way, to leave the UK working class with no political outlet.

    Being more traditional left I often commented on our privately educated elite and private schools but the Guardian readership were firmly in favour of them.

    How is this left?

    Thank god this is now failing, get back to the old left, the working class and those lower down the scale.

    It was clever while it lasted in enabling neoliberalism and a neglect of the working class, but clever in a cunning, nasty and underhand way.

    Sound of the Suburbs November 15, 2016 at 5:33 pm

    Thinking about it, so many of these recent elections have been nearly 50% / 50% splits, has there been a careful analysis of who neoliberalism disadvantages and what minorities need to be bought into the fold to make it work in a democracy.

    Women are not a minority, but obviously that is a big chunk if you can get them under your wing. The black vote is another big group when split away and so on.

    Brexit nearly 50/50; Austria nearly 50/50; US election nearly 50/50.

    giovanni zibordi November 15, 2016 at 5:56 pm

    So, 85% of Blacks vote Hillary against Sanders (left) and 92% vote Hillary against Trump (right), but is no race. It's the class issue that sends them to the Clintons. Kindly explain how.

    dk November 15, 2016 at 7:54 pm

    Obama is personally likeable

    Funny think about likeability, likeable people can be real sh*ts. So I started looking into hanging out with less likeable people. I found that they can be considerably more appreciative of friendship and loyalty, maybe because they don't have such easy access to it.

    Entertainment media has cautiously explored some aspect so fthis, but in politics, "nice" is still disproportionately values, and not appreciated as a possible flag.

    Erelis November 15, 2016 at 10:59 pm

    Watch out buddy. They are onto you. I have seen some comments on democratic party sites claiming the use of class to explain Hillary's loss is racist. The democratic party is a goner. History tells us the party establishment will move further right after election losses. And among the activist class there are identity purity battles going on.

    Gaylord November 15, 2016 at 11:24 pm

    Watch as this happens yet again: "In most elections, U.S. politicians of both parties pretend to be concerned about their issues, then conveniently ignore them when they reach power and implement policies from the same Washington Consensus that has dominated the past 40 years." That is why we need a strong third party, a reformed election system with public support of campaigns and no private money, and free and fair media coverage. But it ain't gonna happen.

    different clue November 16, 2016 at 3:47 am

    Well it certainly won't happen by itself. People are going to have to make it happen. Here in Michigan we have a tiny new party called Working Class Party running 3 people here and there. I voted for two of them. If the Democrats run somebody no worse than Trump next time, I will be free to vote Working Class Party to see what happens.

    Obviously, if the Democrats nominate yet another Clintonite Obamacrat all over again, I may have to vote for Trump all over again . . . to stop the next Clintonite before it kills again.

    [Nov 16, 2016] Identity politics divides just as well as class politics. It simply divides into smaller (less powerful) groups. The reason the elites don't like class politics is that the class division that forms against their class, once organized, is large enough to take them on.

    Notable quotes:
    "... when "capitalism" failed to remedy class inequity, in fact worked to cause it, propaganda took over and focused on all sorts of things that float around the edges of class like race, opportunity, civil rights, etc – but not a word about money. ..."
    "... "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." ..."
    "... "The reason the elites don't like class politics is that the class division that forms against their class, once organized, is large enough to take them on." ..."
    "... Class divides the 99% from the small elite who lead both political parties. That makes it an explosive threat. I'm speaking of actual economic class, not the media BS of pork rinds and NASCAR versus brie and art museums. ..."
    "... I've always maintained that Class is the real third rail of American politics, and the US is fast tracking to a shiny, prettified version of feudalism. ..."
    "... There are two elephants in the room, class and technology. Both are distorted by those in power in order to ensure their continued rule. It seems to me the technology adopted by a society determines its class structure. ..."
    "... Add to that HRC's neocon foreign policy instincts ..."
    "... This goes beyond corruption. It is one thing to be selling public infrastructure construction contracts to crony capitalist contributors (in the Clintons' case do we call them philanthropists?) – entirely another to be selling guns and bombs used by Middle Eastern despots to grind down (IOW blow up, murder) opposition to their corrupt regimes. ..."
    "... In fact, most of Western Civilization (sic?) seems to be happy with the status quo of a 'post-industrial' America as the "exceptional nation" whose only two functions are consuming the world's wealth and employing military Keynesianism to maintain a global social order based on money created ex nihilo by US and international bankers and financiers. ..."
    "... What we are witnessing is a political crisis because the system is geared against the citizen. ..."
    "... And journalists/media are complicit. Where is the cutting investigative journalism? There is none – the headlines should be screaming it. Thanks God (or whoever) for blogs like these. ..."
    "... Sooo, they spent a generation telling the white worker that he was a racist, sexist bigot, mocking his religion, making his kids read "Heather Has Two Mommies" in school, and blaming him for economic woes caused in New York and DC. ..."
    "... Tryng lately to get my terminology straight, and I think the policies you itemized should be labeled neoliberal, not liberal/progressive. Neoliberalism seems to be the one that combines the worst features of the private sector with the worst features of the public sector, without the good points of either one. ..."
    Nov 16, 2016 | www.nakedcapitalism.com
    susan the other November 15, 2016 at 12:26 pm

    when "capitalism" failed to remedy class inequity, in fact worked to cause it, propaganda took over and focused on all sorts of things that float around the edges of class like race, opportunity, civil rights, etc – but not a word about money. That's why Hillary was so irrelevant and boring. If class itself (money) becomes a topic of discussion, the free-market orgy will be seen as a last ditch effort to keep the elite in a class by themselves by "trading" stuff that can just as easily be made domestically, and just not worth the effort anymore.

    Benedict@Large November 15, 2016 at 10:37 am

    Identity politics divides just as well as class politics. It simply divides into smaller (less powerful) groups. The reason the elites don't like class politics is that the class division that forms against their class, once organized, is large enough to take them on.

    JTMcPhee November 15, 2016 at 11:06 am

    "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."

    Yep.

    And once again: What outcomes do "we" want from "our" political economy?

    Ulysses November 15, 2016 at 11:25 am

    "The reason the elites don't like class politics is that the class division that forms against their class, once organized, is large enough to take them on."

    BINGO!!!

    XR November 15, 2016 at 8:10 pm

    I believe there is another aspect to the shift we are seeing, and it is demographics.

    Specifically deplorable demographics.

    It should be noted that the deplorable generation, gen x, are very much a mixed racial cohort. They have not participated in politics much because they have been under attack since they were children. They have been ignored up to now.

    Deplorable means wretched, poor.

    This non participation is what has begun to change, and will accelerate for the next 20 years and beyond.

    Demographically speaking, with analysis of the numbers right now are approximately…

    GEN GI and Silent Gen – 22,265,021

    Baby Boomers 50,854,027

    Gen X 90,010,283

    Millenials 62,649,947 18 Years to 34
    25,630,521 (12-17 Years old)
    Total 88,280,468

    Artist Gen 48,820,896 and growing…

    * Using the Fourth Turning Cultural Demographic Measurement vs. the politically convenient, MSM supported, propaganda demographics. They would NEVER do such a thing right? Sure.

    GI 92–114 Silent 74–91 Boomer 55–72 Gen-X 35–55 Millennial 12–34 Homeland 0–11

    https://en.wikipedia.org/wiki/Strauss%E2%80%93Howe_generational_theory

    * Source Demographic Numbers (Approximate)

    https://en.wikipedia.org/wiki/Demography_of_the_United_States

    We are in the Fourth Turning, the Crisis. Gen X will take it on – head on.

    https://scholarsandrogues.com/2014/04/10/how-generation-x-will-save-the-world/

    Have a nice day.

    redleg November 15, 2016 at 2:37 pm

    The reason they like it is that the different groups can be set against each other.

    Mike G November 15, 2016 at 1:31 pm

    Class divides the 99% from the small elite who lead both political parties. That makes it an explosive threat. I'm speaking of actual economic class, not the media BS of pork rinds and NASCAR versus brie and art museums.

    tongorad November 15, 2016 at 2:17 pm

    Class divides people; more decisively than race or gender.

    Really? There's so few of him/her, and so many of us.

    When we reach the day when people self-describe themselves as working class FIRST, rather than Catholic or Asian, etc, then we might get somewhere.

    CitizenSissy November 15, 2016 at 8:24 am

    Hi Yves – great post! I've always maintained that Class is the real third rail of American politics, and the US is fast tracking to a shiny, prettified version of feudalism.

    I suspect that the working-class Trump voters in the Rust Belt will eventually disappointed in their standard bearer, Transition Team staffing is any indication: e.g. Privateers back at SSA.

    Nels Nelson November 15, 2016 at 8:38 am

    In the post-Reconstruction South poor whites and blacks alike were the victims of political and legal institutions designed to create a divided and disenfranchised work force for the benefit of landlords, capitalists and corporations. Poor whites as well as poor blacks were ensnared in a system of sharecropping and debt peonage. Poll taxes, literacy tests and other voter restrictions disenfranchised blacks and almost all poor whites creating an electorate dominated by a white southern gentry class.

    Martin Luther King, Jr. clarified this at the end of his address at the conclusion of the Selma March on March 25, 1965.

    …You see, it was a simple thing to keep the poor white masses working for near-starvation wages in the years that followed the Civil War. Why, if the poor white plantation or mill worker became dissatisfied with his low wages, the plantation or mill owner would merely threaten to fire him and hire former Negro slaves and pay him even less. Thus, the southern wage level was kept almost unbearably low.

    Toward the end of the Reconstruction era, something very significant happened. That is what was known as the Populist Movement. The leaders of this movement began awakening the poor white masses and the former Negro slaves to the fact that they were being fleeced by the emerging Bourbon interests. Not only that, but they began uniting the Negro and white masses into a voting bloc that threatened to drive the Bourbon interests from the command posts of political power in the South.

    To meet this threat, the southern aristocracy began immediately to engineer this development of a segregated society…. If it may be said of the slavery era that the white man took the world and gave the Negro Jesus, then it may be said of the Reconstruction era that the southern aristocracy took the world and gave the poor white man Jim Crow. He gave him Jim Crow. And when his wrinkled stomach cried out for the food that his empty pockets could not provide, he ate Jim Crow, a psychological bird that told him that no matter how bad off he was, at least he was a white man, better than the black man. And he ate Jim Crow. And when his undernourished children cried out for the necessities that his low wages could not provide, he showed them the Jim Crow signs on the buses and in the stores, on the streets and in the public buildings. And his children, too, learned to feed upon Jim Crow, their last outpost of psychological oblivion.

    Thus, the threat of the free exercise of the ballot by the Negro and the white masses alike resulted in the establishment of a segregated society. They segregated southern money from the poor whites; they segregated southern mores from the rich whites; they segregated southern churches from Christianity; they segregated southern minds from honest thinking; and they segregated the Negro from everything. That's what happened when the Negro and white masses of the South threatened to unite and build a great society: a society of justice where none would prey upon the weakness of others; a society of plenty where greed and poverty would be done away; a society of brotherhood where every man would respect the dignity and worth of human personality.

    Joan November 15, 2016 at 7:36 pm

    Lovely! Thanks,

    JTMcPhee November 15, 2016 at 9:52 pm

    The MLK so few remember, the obscuring of his real message has been so very effective.

    Norb November 15, 2016 at 8:46 am

    There are two elephants in the room, class and technology. Both are distorted by those in power in order to ensure their continued rule. It seems to me the technology adopted by a society determines its class structure.

    So much of todays discussion revolves around justifying the inappropriate use of technology, it seems inevitable that only a major breakdown of essential technological systems will afford the necessary space to address growing social problems.

    E.F. Schumacher addressed all this in the 70's with his work on appropriate technologies. Revisiting the ideas of human scale systems offers a way to actively and effectively deal with todays needs while simultaneously trying to change larger perspectives and understanding of the citizenry. While Schumacher's work was directed at developing countries, the impoverishment of the working class makes it relevant in the US today.

    Addressing our technology question honestly will lead to more productive changes in class structure than taking on the class issue directly. Direct class confrontation is violent. Adopting human scale technology is peaceful. In the end what stands for a good life will win out. I'm working for human scale.

    Lambert Strether November 15, 2016 at 2:32 pm

    Why do you think class and technology are separate?

    ScottW November 15, 2016 at 8:49 am

    Thought experiment: If you opposed Clarence Thomas and Sarah Palin does that make you a racist and a sexist?
    Or, is it only when someone votes against a supposed liberal? And when Hillary supported Cuomo over Teachout for NY Governor, none of her supporters labeled her a Cuomobros.

    Hillary received millions fewer votes than Obama because she was a seriously flawed candidate who could not muster any excitement. The only reason she received 60 million is because she was running against Trump. The play on identity politics was pure desperation.

    readerOfTeaLeaves November 15, 2016 at 12:05 pm

    I think this part of the post nails a whole lot:

    "So this gave force to the idea that the government was nothing but a viper's nest full of crony capitalist enablers , which in turn helped to unleash populism on the right (the Left being marginalised or co-opted by their Wall Street/Silicon Valley donor class). And this gave us Trump. Add to that HRC's neocon foreign policy instincts , which could have got us in a war with Russia and maybe the American electorate wasn't so dumb after all."

    I voted for Hillary, but it was not easy.
    I agree that identity politics of the DNC variety have passed their pull date. Good riddance.

    Jim November 15, 2016 at 3:11 pm

    Here's another thought experiment: were voters who chose Obama over Hillary in the 2008 primary sexists? Were Hillary's voters racists?

    I don't think you give the Democratic establishment enough credit for obtuseness by characterizing their identity politics play as "desperation". I have several sisters who were sucked in by Hillary's "woman" card, and it made them less than receptive to hearing about her record of pay-for-play, proxy warmongering, and baseless Russia-bashing.

    And it turned people like me – who would choose a woman over a man, other things being equal – into sexists for not backing Hillary (I voted for Stein).

    financial matters November 15, 2016 at 8:55 am

    Yes. If Hillary had been elected I felt like we would have been played by someone who is corrupt and with no real interest in the working/middle class. We would have slogged through another 4 years with someone who arrogantly had both a private and public position and had no real interest in climate change (she was very pro fracking), financial change (giving hour long $250,000 speeches to banks) or health care (she laughed at the idea of single payer although that's what most people want).

    Sanders had opposite views on these 3 issues and would have been an advocate of real change which is why he was so actively opposed by the establishment and very popular with the people as evidenced by his huge rallies.

    Trump was seen by many as the only real hope for some change. As mentioned previously we've already seen 2 very beneficial outcomes of his being elected by things calming down with Syria and Russia and with TPP apparently being dead in the water.

    Another positive could be a change in the DOJ to go after white collar criminals of which we have a lot.

    Climate change is I think an important blind spot but he has shown the capacity to be flexible and not as much of an ideologue as some. It's possible that as he sees some of his golf courses go under water he could change his mind. It can be helpful if someone in power changes his mind on an important issue as this can relate better to other doubters to come to the same conclusion.

    Getting back to class I watched the 2003 movie Seabiscuit a few days ago. This film was set in the depression period and had clips of FDR putting people back to work. It emphasized the dignity that this restored to them. It's a tall order but I think that's what much of Trump's base is looking for.

    Si November 15, 2016 at 9:20 am

    Whilst I agree with the points made, there is a BIG miss for me.

    Unless I missed it – where are the comments on corruption? This is not a partisan point of view, but to make the issue entirely focussed on class misses the point that the game is rigged.

    Holder, an Obama pick, unless I am mistaken, looked the other way when it came to investigating and prosecuting miscreants on Wall Street. The next in line for that job was meeting Bill behind closed so that Hillary could be kept safe. Outrageous.

    The Democratic party's attempts to make this an issue about race is so obviously a crass attempt at manipulation that only the hard of thinking could swallow it.

    The vote for Trump was a vote against corrupt insiders. Maybe he will turn out to be the same.

    Time will tell……

    Leigh November 15, 2016 at 9:37 am

    Paragraph 7, I believe.

    To your point; dumbfounded that a country that proposes to be waging a "War on Drugs" pardons home grown banking entities that laundered money for drug dealers.

    If you or I attempted such foolishness – we'd be incarcerate in a heartbeat.

    Monty Python (big fan), at it's most silly and sophomoric – could not write this stuff…

    Leight November 15, 2016 at 10:01 am

    Clarification: "this stuff' meaning what's transpired in the U.S. over the last 10-20 years -NOT Yves post.

    polecat November 15, 2016 at 12:43 pm

    Don't expect all the disheartened university SJW snowflaks to get that …or much else of import --

    Si November 16, 2016 at 1:52 am

    Yep – para 7. A bit of a passing reference to the embedded corruption and payola for congress and the writing of laws by lobbyists.

    And yes, war on drugs is pretty much a diversionary tactic to give the impression that the rule of law is still in force. It is for you an me……. for the connected, corrupt, not so much!

    Carla November 15, 2016 at 10:25 am

    @Si - "the hard of thinking" - I like it!

    Steven November 15, 2016 at 11:09 am

    This goes beyond corruption. It is one thing to be selling public infrastructure construction contracts to crony capitalist contributors (in the Clintons' case do we call them philanthropists?) – entirely another to be selling guns and bombs used by Middle Eastern despots to grind down (IOW blow up, murder) opposition to their corrupt regimes.

    In fact, most of Western Civilization (sic?) seems to be happy with the status quo of a 'post-industrial' America as the "exceptional nation" whose only two functions are consuming the world's wealth and employing military Keynesianism to maintain a global social order based on money created ex nihilo by US and international bankers and financiers.

    As for a "crass attempt at manipulation", have you seen this:
    Martin Armstrong Exposes "The Real Clinton Conspiracy" Which Backfired Dramatically

    A couple of paragraphs…

    This conspiracy has emerged from the Podesta emails. It was Clinton conspiring with mainstream media to elevate Trump and then tear him down. We have to now look at all the media who endorsed Hillary as simply corrupt. Simultaneously, Hillary said that Bernie had to be ground down to the pulp. Further leaked emails showed how the Democratic National Committee sabotaged Sanders' presidential campaign. It was Hillary manipulating the entire media for her personal gain. She obviously did not want a fair election because she was too corrupt.

    What is very clear putting all the emails together, the rise of Donald Trump was orchestrated by Hillary herself conspiring with mainstream media, and they they sought to burn him to the ground. Their strategy backfired and now this is why she has not come out to to speak against the violence she has manipulated and inspired.

    It seems to be clear the Democratic Party needs to purge itself of the Clinton – Obama influence. Is Sanders' suggestion for the DNC head a good start or do we need to look elsewhere?

    Si November 16, 2016 at 2:08 am

    Exactly my point.

    What are are getting now are attempts by the Dems (and let me state here I am not fan of the Repubs – the distinction is a false one) to point to anything other than the problem that is right in front of them.

    What we are witnessing is a political crisis because the system is geared against the citizen.

    And journalists/media are complicit. Where is the cutting investigative journalism? There is none – the headlines should be screaming it. Thanks God (or whoever) for blogs like these.

    There has been a coup I believe. The cooperation and melding of corporate and political power, and the interchange of power players between the two has left the ordinary person nowhere to go. This is not a left vs right, Dem vs Repub argument. Those are distinctions are there to keep us busy and to provide the illusion.

    Chris Hedges likend politics to American Pro Wrestling – that is what we are watching!

    kgw November 15, 2016 at 12:17 pm

    Class is corruption. . .

    Mike G November 15, 2016 at 2:11 pm

    The idea that a guy who ran casinos in New Jersey, and whose background was too murky to get a casino license in Nevada, will be the one to clean up corruption in DC is a level of gullibility beyond my comprehension.

    Si November 16, 2016 at 2:11 am

    And nor will it be cleaned up by lawyers who promise hopey changey b.s.

    Or lawyers who clearly see themselves above the law….

    different clue November 16, 2016 at 3:07 am

    Not that it would have been cleaned up by President Hillary Shyster and First Shyster Husband Bill either.

    craazyman November 15, 2016 at 9:21 am

    a lot of people out there need 10 baggers. I sure do.

    Why work? I mean really. It sucks but what's your choice? The free market solution is to kill yourself - that's what slaves could have done. If you don't like slavery, then just kill yourself! Why complain? You're your own boss of "You Incorporated" and you can choose who to work for! Even nobody.

    the 10-bagger should be just for billionaires. Even a millionaire has a hard time because there's only so much you can lose before you're not a millionaire. Then you might have to work!

    If most jobs didn't suck work wouldn't be so bad. That's the main thing, make jobs that don't suck so you don't drown yourself in tattoos and drugs. It's amazing how many people have tattoos. Drugs are less "deplorable" haha. Some are good - like alcohol, Xanax, Tylenol, red wine, beer, caffeine, sugar, donuts, cake, cookies, chocolate. Some are bad, like the shlt stringy haired meth freaks take. If they had good jobs it might give them something better to do,

    How do you get good jobs and not shlt jobs? That's not entirely self evident. In the meantime, the 10 bagger at least gets you some breathing room so you can think about it. Even if you think for free, it's OK since you don't have to work. Working gets in the way of a lot of stuff that you'd rather be doing. Like nothing,

    The amazing thing is this: no matter how much we whinge, whine, bitch moan, complain, rant, rail, fulminate, gripe, huarrange (that mght be speled wrong), incite, joculate, kriticize, lambaste, malign, naysay, prevaricate, query, ridicule, syllogize, temporize, ululate (even Baudelaire did that I red on the internet), yell and (what can "Z" be? I don't want to have to look something up I'm too lazy, how about "zenophobiasize" hahahahahahahah,

    The amazing thing is: million of fkkkers want to come here and - get this! - THEY WON'T COMPLAIN ABOUT ANY OF THE SHT WE DO!

    How about that?

    casino implosion November 15, 2016 at 9:26 am

    ""By making him aware he has more in common with the black steel workers by being a worker, than with the boss by being white."

    Sooo, they spent a generation telling the white worker that he was a racist, sexist bigot, mocking his religion, making his kids read "Heather Has Two Mommies" in school, and blaming him for economic woes caused in New York and DC.

    How'd that work out for ya?

    sharonsj November 15, 2016 at 11:34 am

    Actually, too many white workers are racist, sexist, and think everyone is a rabid Christian just like them. I ought to know because I live in red rural Pennsylvania. I'm not mocking you folks, but I am greatly pissed off that you just don't mind your own damn business and stop trying to force your beliefs on others. And I don't want to hear that liberals are forcing their beliefs on others; we're just asking you follow our laws and our Constitution when it comes to liberty and justice for all.

    And for every school that might have copies of "Heather Has Two Mommies," I can give you a giant list of schools that want to ban a ton of titles because some parent is offended. One example is the classic "Brave New World" by Aldus Huxley. "Challenged in an Advanced Placement language composition class at Cape Henlopen High School in Lewes, Del. (2014). Two school board members contend that while the book has long been a staple in high school classrooms, students can now grasp the sexual and drug-related references through a quick Internet search." Source: Newsletter on Intellectual Freedom, May 2014, p. 80.

    Quick internet search, my ass. Too many conservatives won't even use the internet to find real facts because that would counter the right-wing meme.

    tongorad November 15, 2016 at 2:38 pm

    And for every school that might have copies of "Heather Has Two Mommies," I can give you a giant list of schools that want to ban a ton of titles because some parent is offended.

    And for every liberal/progressive politician, I can give a you basket of shitty policies, such as charter schools, shipping jobs overseas, cutting social security, austerity, the grand bargain, Obamacare, drones, etc.

    Great. So the library has a copy of "Heather Has Two Mommies." Or not. Who cares? The United Colors of Benetton worldview doesn't matter a fig when I'm trying to pay for rising health care, rent, College education, retirement costs, etc.

    J Bookly November 15, 2016 at 4:18 pm

    Tryng lately to get my terminology straight, and I think the policies you itemized should be labeled neoliberal, not liberal/progressive. Neoliberalism seems to be the one that combines the worst features of the private sector with the worst features of the public sector, without the good points of either one.

    tongorad November 15, 2016 at 10:20 pm

    It seems to me that you're referencing a certain historical model of "liberal" that doesn't, nay, cannot exist anymore. A No-True-Scotsman fallacy, as I see it.
    We can only deal with what we have in play, not some pure historical abstraction.

    But for the sake of argument, let's say that a distinction can be made between neoliberal and "real" liberalism. Both entities, however you want to differentiate/describe them, serve as managers to capital. In other words, they just want to manage things, to fiddle with the levers at the margin.

    We need a transfer of power, not a new set of smart managers.

    mark ó dochartaigh November 15, 2016 at 10:53 pm

    Yes, liberal intolerance of intolerance is not the same as conservative intolerance of tolerance.

    Mike G November 15, 2016 at 2:22 pm

    The right has spent a generation supporting rabidly bigoted media like Rush Limbaugh and Fox News making sure the white working class blame all their ills on immigrants, minorities, feminists and stirring up a Foaming Outrage of the Week at what some sociology professor said at a tiny college somewhere.

    Kiss up, kick down authoritarianism. It's never the fault of the people with all the money and all the power who control their economic lives.

    [Nov 15, 2016] Suspected 5th Column blogger Streetwise Professor Defends Elites

    Notable quotes:
    "... Earning your living in finance or the related co-dependent fields such as economics, business management, certain areas of law and, most especially, information technology, you quickly pick up on the cult mentality that pervades it. ..."
    "... When, like so many of us, you're desperate to try to cling onto some semblance of middle class status, you're an easy and, although I'd strongly qualify this statement, understandable, target for buying into the group-think. ..."
    "... " Markets " do not " demand " anything. ..."
    "... But a "market" can - at the very most, through the use of pricing signals - induce actors to consider entering into a transaction. ..."
    "... They provided credit to low income customers because it was insanely profitable. The reason it was insanely profitable was that the loans to the low income customers could be securitised and the commissions the banks earned on the sale of those securities paid for massive bonus pools which directly benefitted bank employees. ..."
    "... Yes, I'd always be the first to agree with the proverb "In Heaven you get justice, here on Earth we have the law". The law and our legal systems are not perfect. But they are not that shabby either. ..."
    "... If it is regulatory interventions, rather than criminal indictments, that the Streetwise Professor is referring to, the banks can and do leave no political stone unturned in their efforts to water down, delay and neuter regulatory bodies. Look , if you can do so without wincing, at what has happened to the SEC. ..."
    "... It wasn't a " pre-crisis political bargain " that caused the Global Financial Crisis. It was financial innovation that was supposed to "free" the financial services industry to allow it to soar to ever greater heights, heights that couldn't be reached with cumbersome "legacy" thinking. If that sounds a lot like Mike Hearn's Blockchain justifications, it's because it is exactly the same thing. ..."
    "... Innovation must never be viewed only through separate, disconnected lenses of "technology", "politics", "ethics", "economics", "power relationships" and "morality". Each specific innovation is subject to and either lives or dies by the interplay between these forces." ..."
    "... I agree - however, "I don't mind people doing dangerous things" should require a little elucidation. What you likely meant to say was you don't mind people doing dangerous things, WITHIN REASON. ..."
    "... Also, there is the rank unwillingness on the part of regulators to, you know, actually do their jobs. I can no longer count the number of times Yellen has sat in front of the Senate banking committee like a deer in headlights ..."
    "... Excellent points, I thought that the Bush Wars were initiated to alleviate an oncoming recession as well as ensure W's reelection ..."
    "... It did take them a while to get the pieces in place, the Banksters Real Estate Fraud Appraisals were identified as early as 2000, then the Banksters Fraudulent Loans peaked in 2006, and then we had the Banksters Fraudulent Reps and Warranties . ..."
    "... Ah, the neo-liberals and the libertarians make their arguments by redefining terms and eliding facts. Once the audience agrees that up is down, why then their arguments are reasonable, dispassionate, and offered in dulcet tones of humble sincerity and objectivity. ..."
    "... What a pleasure, then, to read your cold water smack-down of their confidence game. Perhaps they believed their own nonsense. Who knows. ..."
    "... A third consequence of modern-day liberals' unquestioning, reflexive respect for expertise is their blindness to predatory behavior if it comes cloaked in the signifiers of professionalism. ..."
    "... The difference in interpretation carries enormous consequences: Did Wall Street commit epic fraud, or are they highly advanced professionals who fell victim to epic misfortune? modern day liberals pretty much insist on the later view . Wall Street's veneer of professionalism is further buttressed by its technical jargon, which the financial industry uses to protect itself from the scrutiny of the public ..."
    Nov 15, 2016 | www.nakedcapitalism.com
    Posted on November 14, 2016 by Clive

    Earning your living in finance or the related co-dependent fields such as economics, business management, certain areas of law and, most especially, information technology, you quickly pick up on the cult mentality that pervades it.

    When, like so many of us, you're desperate to try to cling onto some semblance of middle class status, you're an easy and, although I'd strongly qualify this statement, understandable, target for buying into the group-think. Or at least going along with it on the promise of continued employment. While I'm letting myself off the hook in the process, I think that's forgivable. I and others like me need the money. Besides, in our spare time, we might try to atone for our misdeeds by using whatever means we have available, such as contributing to Naked Capitalism in whatever way we can, to try to set the record straight.

    Not quite so easily forgivable, though, are the members of an altogether different cadre who don't give the impression of having to live paycheck to paycheck. What is it that motivates them? Why do they willingly devise clever - and, I have to say it, some are exceptionally adept - ruses to defend and further the causes of our élites?

    ... ... ...

    As readers with not-so-long memories will recall, in the run-up to the Global Financial Crisis, the TBTFs did indeed exercise the " FU Option ". As asset prices for the securities they held fell precipitously, they held more and more of those assets on their balance sheets, refusing to - or unable to - off-load them into a market that was shunning them. Eventually their capital cushions were so depleted because of this, they became insolvent. Staring catastrophe in the face, governments were put into a double-bind by the TBTFs: Rescue us through bail-outs or stand by and see our societies suffer major collateral damage (bank runs, a collapse of world trade, ruining of perfectly good and solvent businesses with the likelihood of mass unemployment and civil unrest).

    In that situation, who was the " U " who was being " F "'ed? It was governments and the public.

    Faced with an asymmetry of power, in a reverse of the scenario painted by the Streetwise Professor for OTC trading (where a notional seller tells a theoretical buyer they can go to Hell if they don't want to pay the price the seller is asking), governments - and us - found themselves on the buy-side of an " FU Option ". "F the-rest-of-us By Necessity" was a better description as we were turned into forced buyers of what no other "market participant" would touch.

    My dear Professor, allow me to give you , if I may risk the label of being impudent, a lesson. If I am selling my prized Diana, Princess of Wales tea cups in a yard sale and you make me a offer for them, that - I'm sure we'd agree on this point - is an OTC transaction. There's no exchange (mercifully) for Diana, Princess of Wales tea cups. I put a price sticker on them. If you want them, you pay the price I'm asking. Or else, you make me a different offer. If you don't pay the price I want, or I don't accept the price you're offering, we do, indeed, have a genuine " FU Option " scenario. But if instead my mother-in-law threatens to saw your face off with her cheese grater if you don't buy my Diana, Princess of Wales tea cups at the price shown on the sticker, then we no longer have an OTC transaction. We have extortion. See the difference?

    That's not all. The piece discusses the differences between a proposed smart-contract based settlement compared with a centralised counterparty which brings up some very valid points. But then it makes a serious blunder which is introduced with some subtly but is all the more dangerous because of it. I'll highlight the problem:

    So the proposal does some of the same things as a CCP, but not all of them, and in fact omits the most important bits that make central clearing central clearing. To the extent that these other CCP services add value–or regulation compels market participants to utilize a CCP that offers these services–market participants will choose to use a CCP, rather than this service. It is not a perfect substitute for central clearing, and will not disintermediate central clearing in cases where the services it does not offer and the functions it does not perform are demanded by market participants , or by regulators.

    Did you catch what is the most troubling thing in that paragraph? The technicalities of it are fine, but the bigger framing is perilous. "Market participants" is given agency. And put on the same level as actions taken by regulators. This is at best unintentionally misleading and at worse an entirely deliberate falsehood.

    The fallacious thinking which caused it is due to a traditional economist's mind-set. But this mind-set is hopelessly wrong and every time we encounter it, we must challenge it. Regardless of what other progressive goodies it is being bundled up with.

    " Markets " do not " demand " anything.

    A regulator or central bank can demand that a bank hold more capital and open its books to check the underlying asset quality. The CFPB can demand that Wells Fargo stops opening fake accounts. Even I can demand a pony. The power structures, laws, enforcement and levels of trust (to name the main constraints) governing who is demanding what from whom determine how likely they will be to have their demands met.

    But a "market" can - at the very most, through the use of pricing signals - induce actors to consider entering into a transaction. The pricing signal cannot make any potential actor participate in that transaction. Not, probably, that it would have helped her much, but Hillary Clinton could have created a market for left-wing bloggers to shill for Obamacare by offering Lambert $1million to start churning out pro-ACA posts on his blog. But that market which Hillary could create could not "demand" Lambert accept her offer. Lambert would not take that, or any other monetary amount, and would never enter such a transaction. Markets have limits.

    Whether unintentionally or by design, we have a nice example of bait and switch in the Streetwise Professor's Blockchain article. If you run a critique of Blockchain, you'll likely attract an anti-libertarian audience. It's a classic example of nudge theory . If you can lure readers in with the promise of taking a swipe at disruptive innovation nonsense but then lead them to being suckered into a reinforcement of failed conventional free-market hogwash, that can be a powerful propaganda tool.

    But perhaps the Blockchain feature was an aberration, just a one-off? No.

    Take, for example, this feature on Deutsche Bank from earlier this month which I'll enter as Exhibit B - It's not the TBTFs Fault, the Regulators / Governments / Some Guy / Made Us Do It

    I'll leave the worst 'til last, but for now let's start with this little treasure:

    the pre-crisis political bargain was that banks would facilitate income redistribution policy by provide credit to low income individuals. This seeded the crisis (though like any complex event, there were myriad other contributing causal factors), the political aftershocks of which are being felt to this day. Banking became a pariah industry, as the very large legal settlements extracted by governments indicate.

    No, Streetwise Professor, banks did not provide credit to low income individuals as part of some "political bargain". They provided credit to low income customers because it was insanely profitable. The reason it was insanely profitable was that the loans to the low income customers could be securitised and the commissions the banks earned on the sale of those securities paid for massive bonus pools which directly benefitted bank employees.

    Almost unimaginable wealth could be generated by individuals (the Naked Capitalism archive details the full sordid story of the likes of Magnetar). The fact that this would all blow up eventually was certainly predicable and even known by many actors in the prevailing milieu but they didn't care. They knew they'd have already set themselves up for life financially even after just a few years in that "game". Politics, for once, had nothing to do with it, save perhaps that regulators, which are the politicians' responsibility, should have been better able to spot what was going on.

    But the Streetwise Professor is only just getting started with the counterfactual misinformation:

    It is definitely desirable to have mechanisms to hold financial malfeasors accountable, but the Deutsche episode illustrates several difficulties. The first is that even the biggest entities can be judgment proof, and imposing judgments on them can have disastrous economic externalities. Another is that there is a considerable degree of arbitrariness in the process, and the results of the process. There is little due process here, and the risks and costs of litigation mean that the outcome of attempts to hold bankers accountable is the result of a negotiation between the state and large financial institutions that is carried out in a highly politicized environment in which emotions and narratives are likely to trump facts. There is room for serious doubt about the quality of justice that results from this process.

    A casual skim could leave the reader with the impression that the Streetwise Professor is lamenting, rightly, the persistency of the TBTF model. But there's something really dastardly being concocted here - the notion that in our societies, the rule of law is always and inevitably fallible and not fit for the purpose of bringing errant TBTFs to justice. And that, if a case is brought against a TBTF like Deutsche, then it can't help but become a political football.

    Yes, I'd always be the first to agree with the proverb "In Heaven you get justice, here on Earth we have the law". The law and our legal systems are not perfect. But they are not that shabby either. Any quick parse through the judgments which the U.S. Supreme Court, the U.K. Supreme Court or the European Court of Justice (to name only a few) hand down on complex cases - often running to hundreds or even a thousand pages - demonstrates that courts can and do consider fairly and justly the evidence that prosecutors present and make balanced rulings. And banks can utilize the same legal safeguards that the law provides - they're not likely to be short of good legal advice options. Trying, as the Steetwise Professor does, to claim that the TBTFs can't get justice is an insult to our judicial systems and acceptance of this notion followed by any routine repetition serves to undermine faith in the rule of law.

    If it is regulatory interventions, rather than criminal indictments, that the Streetwise Professor is referring to, the banks can and do leave no political stone unturned in their efforts to water down, delay and neuter regulatory bodies. Look , if you can do so without wincing, at what has happened to the SEC.

    It wasn't a " pre-crisis political bargain " that caused the Global Financial Crisis. It was financial innovation that was supposed to "free" the financial services industry to allow it to soar to ever greater heights, heights that couldn't be reached with cumbersome "legacy" thinking. If that sounds a lot like Mike Hearn's Blockchain justifications, it's because it is exactly the same thing.

    In summary, when you throw brickbats at a fellow blogger, it seems to me that you have a moral obligation to put your cards on the table, to explain your motivations. I don't have to write for a living ("just as well", I hear forbearing readers shout back). I don't take a penny from Naked Capitalism's hard-wrung fundraisers, although Yves has generously offered a very modest stipend in line with other contributors, I cannot conscientiously take anything for what I submit. I write in the hope that I have some small insights that would help to undo some of the damage which big finance has done to our cultures, our shared values and our aspirations for what we hope the future will be for us and others.

    That's what motivates me, anyway. After reading his output, I'm really still not at all sure what is motivating the Streetwise Professor. Certainly there is nothing at all to suggest that he is interested in rebuking or revising any of the traditional thought-forms which pass for the so-called science of economics. Conventional economic theory is the ultimate in betrayal of the use of rational methodology to provide air-cover for élite power grabs. It'll take more than a refutation of Blockchain spin to convince me that the Streetwise Professor is ready to kick away the more odious ladders - like being a professional economist - that have given him the leg-ups to the lofty perch he enjoys occupying.

    About Clive

    Survivor of nearly 30 years in a TBTF bank. Also had the privilege of working in Japan, which was great, selling real estate, which was an experience bordering on the psychedelic. View all posts by Clive →

    vlade November 14, 2016 at 7:15 am

    I disagree on the first bit. Even at this blog, Yves mentiones not quite rarely the dangers of tight coupling. The central exchanges create exactly that. Yes, the FU option of OTC is dangerous. But then, everything is dangerous, and if I have to choose between tight coupling dangerous option and loose coupling one, I'll chose the lose coupling one.

    The problem is that the regulators refused to recognise that the institutions gamed the regulations – moving stuff from trading to banking books. It is recognised now, under the new regulation, although I still have some doubts about its effectivness.

    To me all the para says is: markets demand services, and CCP don't offer them – and don't have to. Regulators demand services (to be offered by CCP), and CCP deliver.

    And sorry, I also disagree with your "markets participants demand". The text says "services [ ] are demanded [by potential clients and by regulators]". I can't honestly see what's the problem with that. Of course, regulatory demand, and a client demand are two different things – the former you ignore at your peril, the second you can ignore to your heart's content.

    But markets (or, I'd say agents that want to purchase – or sell) _always_ demand something, and always offer something – otherwise there would not be any market or exchange of services (it doesn't have to be there even with offer and demand, but in the absence of one it definitely won't be there).

    You could happily change the word to "require" "want" etc. and the meaning of the para would remain unchanged.

    Clive Post author November 14, 2016 at 8:20 am

    The problem I had with the notion that OTC reduces tight coupling is that it gives the appearance of reducing tight couple but doesn't actually do this. While "the market" is functioning within its expected parameters, OTC is less tightly coupled than an Exchange. But as we saw first-hand in the GFC, those markets function, right up until the point where they don't. By continuing to function, or certainly giving the appearances of continuing to be functioning, they hide the stresses which are building up within them but no-one can see. Unless you are deeply plumbed in to the day-to-day operational activities of the OTC market and can spot signs - and that's all they are, signs, you don't get to take a view of the whole edifice - you simply don't have a clue. There were, at most, only a couple of dozen people in the organisation itself and outside it who knew that my TBTF was a day away from being unable to open for business. That was entirely down to information asymmetry and that asymmetry was 100% down to OTC prevalence.

    And all the while TBTF isn't fixed, then as soon as the OTC market(s) fall off a cliff, the public provision backstops can be forced to kick in. Yes, everything is dangerous. I don't mind people doing dangerous things. But I do mind an awful lot being asked to pick up the pieces when their dangerous things blow up in their faces and they expect me to sort the mess out. If that is the dynamic, and to me, it most definitely is, then I want the actors who are engaged in the dangerous things to be highly visible, I want them right where I can see them. Not hiding their high-risk activities in an OTC venue that I'm not privy to.

    And I stick by my objection to the - what I can't see how it isn't being deliberate - fuzziness or obfuscation about who gets to "demand" and who is merely allowed "invite" parties to a transaction to either perform or not perform of their own volition. This isn't an incidental semantic about vocabulary. It goes to the heart of what's wrong with the Streetwise Professor's assessment of innovation.

    Innovation must never be viewed only through separate, disconnected lenses of "technology", "politics", "ethics", "economics", "power relationships" and "morality". Each specific innovation is subject to and either lives or dies by the interplay between these forces. My biggest lambaste of the Streetwise Professor's commentaries is that he examines them only in terms of "technology" and "economics". In doing so, he reaches partial and inaccurate conclusions.

    A 10 year old child might "demand", "require", "ask for", "insist", "claim a right to have" (use whatever word or phrase you like there) a gun and live ammunition. But they are not, and should not be, permitted to enter into a transaction to obtain the said gun and ammo based only on the availability of the technology and the economics that would allow them to satisfy the seller's market clearing sale price if they saved their pocket money for a sufficient amount of time. The other forces I listed in my above paragraph are also involved, and just as well.

    Ulysses November 14, 2016 at 9:30 am

    "Innovation must never be viewed only through separate, disconnected lenses of "technology", "politics", "ethics", "economics", "power relationships" and "morality". Each specific innovation is subject to and either lives or dies by the interplay between these forces."

    Very well said. I would argue further that "power relationships" structure how all the other lenses actually operate. In the early sixteenth century the power relationship between the Church, and Martin Luther, was such that the latter had an opening to redefine "morality"– in such a way that the Pope's moral opinion was eventually no longer dispositive for Protestants.

    In other words, the French invasion of Italy, late in the fifteenth century, weakened the papal states enough to allow for defiance.

    Ulysses November 14, 2016 at 10:02 am

    That last sentence, is of course a gross over-simplification! Anyone wishing to know the nitty-gritty details of how foreign domination over the Italian peninsula was established by the middle of the sixteenth century should read Machiavelli and Guicciardini.

    The latter author's appeal to skepticism, when interpreting the actions and motivations of powerful people, rings very true five centuries later:

    " perché di accidenti tanto memorabili si intendino i consigli e i fondamenti; i quali spesso sono occulti, e divulgati il più delle volte in modo molto lontano da quell che è vero."

    ( Storia d'Italia , XVI, vi)

    animalogic November 15, 2016 at 5:12 am

    "Yes, everything is dangerous. I don't mind people doing dangerous things. But I do mind an awful lot being asked to pick up the pieces when their dangerous things blow up in their faces".

    I agree - however, "I don't mind people doing dangerous things" should require a little elucidation. What you likely meant to say was you don't mind people doing dangerous things, WITHIN REASON.

    And let's face it, much of the prior GFC behaviour was unreasonably dangerous. As it turned out, not that dangerous to its perpetrators .

    Danger, like risk, is a cost-benefit calculation. When that calculation ONLY includes benefits for its originator & suppresses any (real & calculatable) cost for the community it's already looking suspiciously like an unreasonable danger .

    Uahsenaa November 14, 2016 at 9:04 am

    The problem is that the regulators refused to recognise that the institutions gamed the regulations – moving stuff from trading to banking books. It is recognised now, under the new regulation, although I still have some doubts about its effectivness.

    Also, there is the rank unwillingness on the part of regulators to, you know, actually do their jobs. I can no longer count the number of times Yellen has sat in front of the Senate banking committee like a deer in headlights as Warren tries to get her to give anything like a straight answer as to why, to this day, many if not most TBTFs have no rapid selloff/solvency plan (which is required by the Dodd-Frank law) or why those banks that fail their stress tests (again and again) suffer no consequences as a result.

    How is any of this supposed to work when so many are clearly acting in bad faith?

    bmeisen November 14, 2016 at 9:06 am

    Bravo bravo encore encore! Especially the characterization of Sorkin and the account of the crisis at the start of exhibit B. Clive for President!

    Synoia November 14, 2016 at 9:44 am

    Earning your living in finance or the related co-dependent fields such as economics, business management, certain areas of law and, most especially, information technology, you quickly pick up on the cult mentality that pervades it.

    If you do not subscribe to the "cult mentality," although I'd prefer to call it a dogma, because it is a unswerving belief in an unproven fact in the face of evidence the fact is not only unproven, but wrong, one is "not a team player" and then penalized.

    If these libertarian want "open markets" and innovation they have to shed the human response to proof. In their behavior they are no better than the medieval pope, and his court, who did not want to believe a the earth travels around the sun.

    WJ November 14, 2016 at 8:32 pm

    Medieval popes were probably more open to Pythagorean/Copernican cosmologies than early 17th century Jesuits (i.e. Bellarmine); the opposition of the latter to Galileo had nothing to do with science and everything to do with Protestantism and Protestant biblical interpretation. Bellarmine was wrong and what happened to Galileo was shameful. But many of the best astronomers of the time were in fact Jesuits, and the traditional way the story is told is inaccurate on almost every level (and a product of late 19th century Italian nationalism).

    susan the other November 14, 2016 at 12:02 pm

    this was very interesting stuff. Since a lot of things were coming together in the 90s and 2000s that were all connected in a mess too big to understand simply as immoral banking (freeing up capital like that was crazy but there must have been a reason to try it besides windfall profiteering and flat-out gambling), I imagine the following: Greenspan and the TBTFs knew returns were diminishing and set out to do something about it. Because growth and expanding markets were the only thing that could keep up with a demand by pension funds (and then little Bush's idiotic war) for a minimum 8% return. But growth was slowing down so the situation required clever manipulations and incomprehensible things like financial derivatives. Makes sense to me. And if this is even partially true then there was a political mandate all mixed up with the GFC. The banks really did crazy stuff, but with the blessing of the Fed. Later when Bernanke said about QE and nirp: "now we are in uncharted territory" he was fibbing – the Fed had been in uncharted territory, trying to make things work, for almost 20 years. And failing.

    madame de farge November 14, 2016 at 12:47 pm

    Excellent points, I thought that the Bush Wars were initiated to alleviate an oncoming recession as well as ensure W's reelection

    It did take them a while to get the pieces in place, the Banksters Real Estate Fraud Appraisals were identified as early as 2000, then the Banksters Fraudulent Loans peaked in 2006, and then we had the Banksters Fraudulent Reps and Warranties .

    WORSE then a bunch of Used Car Salesman, but what else would you expect from people who KEEP the State Income taxes withheld from their employees checks

    Lambert Strether November 15, 2016 at 12:00 am

    > "how long does that take" and he said "minimum of ten years, 15 is better"

    Via Extra, Extra – Read All About It: Nearly All Binary Searches and Mergesorts are Broken Google Research, 2006:

    This bug can manifest itself for arrays whose length (in elements) is 230 or greater (roughly a billion elements). This was inconceivable back in the '80s, when Programming Pearls was written, but it is common these days at Google and other places. In Programming Pearls, Bentley says "While the first binary search was published in 1946, the first binary search that works correctly for all values of n did not appear until 1962." The truth is, very few correct versions have ever been published, at least in mainstream programming languages.

    Sorting is, or ought to be, basic blocking and tackling. Very smart, not corrupt people worked on this. And yet, 2006 – 1946 = 60 years later, bugs are still being discovered.

    The nice thing about putting your cash in a coffee can in the back yard is that it won't evaporate because some hacker gets clever about big numbers.

    flora November 14, 2016 at 7:30 pm

    Ah, the neo-liberals and the libertarians make their arguments by redefining terms and eliding facts. Once the audience agrees that up is down, why then their arguments are reasonable, dispassionate, and offered in dulcet tones of humble sincerity and objectivity.

    What a pleasure, then, to read your cold water smack-down of their confidence game. Perhaps they believed their own nonsense. Who knows.

    flora November 14, 2016 at 8:28 pm

    What is the Streetwise Professor's (note the word "professor") real view? Has he thought much about it or simply imbibed his "owners'" views, making him a useful tool. I don't know.

    From the book "Listen, Liberal."

    " A third consequence of modern-day liberals' unquestioning, reflexive respect for expertise is their blindness to predatory behavior if it comes cloaked in the signifiers of professionalism. Take the sort of complexity we saw in the financial instruments that drove the last financial crisis. For old-school regulators, I am told, undue financial complexity was an indication of likely fraud. But for the liberal class, it is the opposite: an indicator of sophistication. Complexity is admirable in its own right. The difference in interpretation carries enormous consequences: Did Wall Street commit epic fraud, or are they highly advanced professionals who fell victim to epic misfortune? modern day liberals pretty much insist on the later view . Wall Street's veneer of professionalism is further buttressed by its technical jargon, which the financial industry uses to protect itself from the scrutiny of the public. "
    -Thomas Frank

    [Nov 15, 2016] Trump in the White House by Noam Chomsky

    Notable quotes:
    "... The angry and disaffected are victims of the neoliberal policies of the past generation, the policies described in congressional testimony by Fed chair Alan Greenspan ..."
    "... As Greenspan explained during his glory days, his successes in economic management were based substantially on "growing worker insecurity." Intimidated working people would not ask for higher wages, benefits, and security but would be satisfied with the stagnating wages and reduced benefits that signal a healthy economy by neoliberal standards. ..."
    "... in 2007, at the peak of the neoliberal miracle, real wages for non-supervisory workers were lower than they had been years earlier, or that real wages for male workers are about at 1960s levels while spectacular gains have gone to the pockets of a very few at the top, disproportionately a fraction of 1%. Not the result of market forces, achievement, or merit, but rather of definite policy decisions, matters reviewed carefully by economist Dean Baker in recently published work. ..."
    Nov 15, 2016 | www.defenddemocracy.press
    According to current information, Trump broke all records in the support he received from white voters, working class and lower middle class, particularly in the $50,000 to $90,000 income range, rural and suburban, primarily those without college education. These groups share the anger throughout the West at the centrist establishment, revealed as well in the unanticipated Brexit vote and the collapse of centrist parties in continental Europe. The angry and disaffected are victims of the neoliberal policies of the past generation, the policies described in congressional testimony by Fed chair Alan Greenspan – St. Alan as he was called reverentially by the economics profession and other admirers until the miraculous economy he was supervising crashed in 2007-8, threatening to bring the whole world economy down with it. As Greenspan explained during his glory days, his successes in economic management were based substantially on "growing worker insecurity." Intimidated working people would not ask for higher wages, benefits, and security but would be satisfied with the stagnating wages and reduced benefits that signal a healthy economy by neoliberal standards.

    Working people who have been the subjects of these experiments in economic theory are, oddly, not particularly happy about the outcome. They are not, for example, overjoyed at the fact that in 2007, at the peak of the neoliberal miracle, real wages for non-supervisory workers were lower than they had been years earlier, or that real wages for male workers are about at 1960s levels while spectacular gains have gone to the pockets of a very few at the top, disproportionately a fraction of 1%. Not the result of market forces, achievement, or merit, but rather of definite policy decisions, matters reviewed carefully by economist Dean Baker in recently published work.

    The fate of the minimum wage illustrates what has been happening. Through the periods of high and egalitarian growth in the '50s and '60s, the minimum wage – which sets a floor for other wages – tracked productivity. That ended with the onset of neoliberal doctrine. Since then the minimum wage has stagnated (in real value). Had it continued as before, it would probably be close to $20 per hour. Today it is considered a political revolution to raise it to $15.

    With all the talk of near-full employment today, labor force participation remains below the earlier norm. And for a working man, there is a great difference between a steady job in manufacturing with union wages and benefits, as in earlier years, and a temporary job with little security in some service profession. Apart from wages, benefits, and security, there is a loss of dignity, of hope for the future, of a sense that this is a world in which I belong and play a worthwhile role.

    The impact is captured well in Arlie Hochschild's sensitive and illuminating portrayal of a Trump stronghold in Louisiana, where she lived and worked for many years. She uses the image of a line in which these people are standing, expecting to move forward steadily as they work hard and keep to all the conventional values. But their position in the line has stalled. Ahead of them, they see people leaping forward, but that does not cause much distress, because it is "the American way" for (alleged) merit to be rewarded. What does cause real distress is what is happening behind them.

    ... ... ...

    These are just samples of the real lives of Trump supporters, who are deluded to believe that Trump will do something to remedy their plight, though the merest look at his fiscal and other proposals demonstrates the opposite – posing a task for activists who hope to fend off the worst and to advance desperately needed changes.

    Exit polls reveal that the passionate support for Trump was inspired primarily by the belief that he represented change, while Clinton was perceived as the candidate who would perpetuate their distress. The "change" that Trump is likely to bring will be harmful or worse, but it is understandable that the consequences are not clear to isolated people in an atomized society lacking the kinds of associations (like unions) that can educate and organize. That is a crucial difference between today's despair and the generally hopeful attitudes of many working people under much greater duress during the great depression of the 1930s.

    [Nov 14, 2016] Clintons electoral defeat is bound up with the nature of the Democratic Party, an alliance of Wall Street and the military-intelligence apparatus with privileged sections of the upper-middle class based on the politics of race, gender and sexual orientation

    Notable quotes:
    "... The affluent and rich voted for Clinton by a much broader margin than they had voted for the Democratic candidate in 2012. Among those with incomes between $100,000 and $200,000, Clinton benefited from a 9-point Democratic swing. Voters with family incomes above $250,000 swung toward Clinton by 11 percentage points. The number of Democratic voters amongst the wealthiest voting block increased from 2.16 million in 2012 to 3.46 million in 2016-a jump of 60 percent. ..."
    "... Clinton's electoral defeat is bound up with the nature of the Democratic Party, an alliance of Wall Street and the military-intelligence apparatus with privileged sections of the upper-middle class based on the politics of race, gender and sexual orientation ..."
    "... Over the course of the last forty years, the Democratic Party has abandoned all pretenses of social reform, a process escalated under Obama. Working with the Republican Party and the trade unions, it is responsible for enacting social policies that have impoverished vast sections of the working class, regardless of race or gender. ..."
    Nov 14, 2016 | www.wsws.org
    The elections saw a massive shift in party support among the poorest and wealthiest voters. The share of votes for the Republicans amongst the most impoverished section of workers, those with family incomes under $30,000, increased by 10 percentage points from 2012. In several key Midwestern states, the swing of the poorest voters toward Trump was even larger: Wisconsin (17-point swing), Iowa (20 points), Indiana (19 points) and Pennsylvania (18 points).

    The swing to Republicans among the $30,000 to $50,000 family income range was 6 percentage points. Those with incomes between $50,000 and $100,000 swung away from the Republicans compared to 2012 by 2 points.

    The affluent and rich voted for Clinton by a much broader margin than they had voted for the Democratic candidate in 2012. Among those with incomes between $100,000 and $200,000, Clinton benefited from a 9-point Democratic swing. Voters with family incomes above $250,000 swung toward Clinton by 11 percentage points. The number of Democratic voters amongst the wealthiest voting block increased from 2.16 million in 2012 to 3.46 million in 2016-a jump of 60 percent.

    Clinton was unable to make up for the vote decline among women (2.1 million), African Americans (3.2 million), and youth (1.2 million), who came overwhelmingly from the poor and working class, with the increase among the rich (1.3 million).

    Clinton's electoral defeat is bound up with the nature of the Democratic Party, an alliance of Wall Street and the military-intelligence apparatus with privileged sections of the upper-middle class based on the politics of race, gender and sexual orientation.

    Over the course of the last forty years, the Democratic Party has abandoned all pretenses of social reform, a process escalated under Obama. Working with the Republican Party and the trade unions, it is responsible for enacting social policies that have impoverished vast sections of the working class, regardless of race or gender.

    [Nov 14, 2016] Three Myths About Clintons Defeat in Election 2016 Debunked

    Notable quotes:
    "... Because the following talking points prevent a (vulgar) identity politics -dominated Democrat Party from owning its loss, debunking them is then important beyond winning your Twitter wars. I'm trying to spike the Blame Cannons! ..."
    "... Remember, Trump won Wisconsin by a whisker. So for this talking point to be true, we have to believe that black voters stayed home because they were racist, costing Clinton Wisconsin. ..."
    "... These former Obama strongholds sealed the election for Trump. Of the nearly 700 counties that twice sent Obama to the White House, a stunning one-third flipped to support Trump . ..."
    "... The Obama-Trump counties were critical in delivering electoral victories for Trump. Many of them fall in states that supported Obama in 2012, but Trump in 2016. In all, these flipped states accounted for 83 electoral votes. (Michigan and New Hampshire could add to this total, but their results were not finalized as of 4 p.m. Wednesday.) ..."
    "... And so, for this talking point to be true, we have to believe that counties who voted for the black man in 2012 were racist because they didn't vote for the white women in 2016. Bringing me, I suppose, to sexism. ..."
    "... These are resilient women, often working two or three jobs, for whom boorish men are an occasional occupational hazard, not an existential threat. They rolled their eyes over Trump's unmitigated coarseness, but still bought into his spiel that he'd be the greatest job producer who ever lived. Oh, and they wondered why his behaviour was any worse than Bill's. ..."
    "... pink slips have hit entire neighbourhoods, and towns. The angry white working class men who voted in such strength for Trump do not live in an emotional vacuum. They are loved by white working class women – their wives, daughters, sisters and mothers, who participate in their remaindered pain. I t is everywhere in the interviews. "My dad lost his business", "My husband hasn't been the same since his job at the factory went away" . ..."
    "... So, for this talking point to be true, you have to believe that sexism simultaneously increased the male vote for Trump, yet did not increase the female vote for Clinton. Shouldn't they move in opposite directions? ..."
    "... First, even assuming that the author's happy but unconscious conflation of credentials with education is correct, it wasn't the "dunces" who lost two wars, butchered the health care system, caused the financial system to collapse through accounting control fraud, or invented the neoliberal ideology that was kept real wages flat for forty years and turned the industrial heartland into a wasteland. That is solely, solely down to - only some , to be fair - college-educated voters. It is totally and 100% not down to the "dunces"; they didn't have the political or financial power to achieve debacles on the grand scale. ..."
    "... Second, the "dunces" were an important part of Obama's victories ..."
    "... Not only has polling repeatedly underplayed the importance of white voters without college degrees, it's underplayed their importance to the Obama coalition: They were one-third of Obama votes in 2012. They filled the gap between upper-class whites and working-class nonwhites. Trump gained roughly 15 percentage points with them compared to Romney in 2012. ..."
    "... "No, you are ignorant! You threw away the vote and put Trump in charge." Please, it will be important to know what derogatory camp you belong in when the blame game swings into full gear. *snark ..."
    "... 'Stupid' was the word I got very tired of in my social net. Two variant targets: ..."
    "... 1) Blacks for not voting their interests. The responses included 'we know who our enemies are' and 'don't tell me what to think.' ..."
    "... Mostly it was vs rural, non-college educated. iirc, it was the Secretary of Agriculture, pleading for funds, who said the rural areas were where military recruits came from. A young fella I know, elite football player on elite non-urban HS team, said most of his teammates had enlisted. So they are the ones getting shot at, having relatives and friends come back missing pieces of body and self. ..."
    "... My guy in the Reserves said the consensus was that if HRC got elected, they were going to war with Russia. Not enthused. Infantry IQ is supposedly average-80, but they know who Yossarian says the enemy is, e'en if they hant read the book. ..."
    Nov 14, 2016 | www.nakedcapitalism.com
    by Lambert Strether By Lambert Strether of Corrente .

    This post is not an explainer about why and how Clinton lost (and Trump won). I think we're going to be sorting that out for awhile. Rather, it's a simple debunking of common talking points by Clinton loyalists and Democrat Establishment operatives; the sort of talking point you might hear on Twitter, entirely shorn of caveats and context. For each of the three talking points, I'll present an especially egregious version of the myth, followed by a rebuttals.

    Realize that Trump's margin of victory was incredibly small. From the Washington Post :

    How Trump won the presidency with razor-thin margins in swing states

    Of the more than 120 million votes cast in the 2016 election, 107,000 votes in three states [Michigan, Wisconsin and Pennsylvania] effectively decided the election.

    Of course, America's first-past-the-post system and the electoral college amplify small margins into decisive results. And it was the job of the Clinton campaign to find those 107,000 votes and win them; the Clinton operation turned out to be weaker than anyone would have imagined when it counted . However, because Trump has what might be called an institutional mandate - both the executive and legislative branches and soon, perhaps, the judicial - the narrowness of his margin means he doesn't have a popular mandate. Trump has captured the state, but by no means civil society; therefore, the opposition that seeks to delegitimize him is in a stronger position than it may realize.

    Hence the necessity for reflection; seeking truth from facts, as the saying goes. Because the following talking points prevent a (vulgar) identity politics -dominated Democrat Party from owning its loss, debunking them is then important beyond winning your Twitter wars. I'm trying to spike the Blame Cannons!

    Talking Point: Clinton was Defeated by Racism

    Here's a headline showing the talking point from a Vox explainer :

    Trump's win is a reminder of the incredible, unbeatable power of racism

    The subtext here is usually that if you don't chime in with vehement agreement, you're a racist yourself, and possibly a racist Trump supporter. There are two reasons this talking point is false.

    First, voter caring levels dropped from 2012 to 2016, especially among black Democrats . Carl Beijer :

    From 2012 to 2016, both men and women went from caring about the outcome to not caring. Among Democratic men and women, as well as Republican women, care levels dropped about 3-4 points; Republican men cared a little less too, but only by one point. Across the board, in any case, the plurality of voters simply didn't care.

    Beijer includes the following chart (based on Edison exit polling cross-referenced with total population numbers from the US Census):

    Beijer interprets:

    White voters cared even less in 2016 then in 2012, when they also didn't care; most of that apathy came from white Republicans compared to white Democrats, who dropped off a little less. Voters of color, in contrast, continued to care – but their care levels dropped even more, by 8 points (compared to the 6 point drop-off among white voters). Incredibly, that drop was driven entirely by a 9 point drop among Democratic voters of color which left Democrats with only slim majority 51% support; Republicans, meanwhile, actually gained support among people of color.

    Beijer's data is born out by anecdote from Milwaukee, Wisconsin :

    Urban areas, where black and Hispanic voters are concentrated along with college-educated voters, already leaned toward the Democrats, but Clinton did not get the turnout from these groups that she needed. For instance, black voters did not show up in the same numbers they did for Barack Obama, the first black president, in 2008 and 2012.

    Remember, Trump won Wisconsin by a whisker. So for this talking point to be true, we have to believe that black voters stayed home because they were racist, costing Clinton Wisconsin.

    Second, counties that voted for Obama in 2012 voted for Trump in 2016 . The Washington Post :

    These former Obama strongholds sealed the election for Trump. Of the nearly 700 counties that twice sent Obama to the White House, a stunning one-third flipped to support Trump .

    The Obama-Trump counties were critical in delivering electoral victories for Trump. Many of them fall in states that supported Obama in 2012, but Trump in 2016. In all, these flipped states accounted for 83 electoral votes. (Michigan and New Hampshire could add to this total, but their results were not finalized as of 4 p.m. Wednesday.)

    Here's the chart:

    And so, for this talking point to be true, we have to believe that counties who voted for the black man in 2012 were racist because they didn't vote for the white women in 2016. Bringing me, I suppose, to sexism.

    Talking Point: Clinton was Defeated by Sexism

    Here's an article showing the talking point from Newsweek :

    This often vitriolic campaign was a national referendum on women and power.

    (The subtext here is usually that if you don't join the consensus cluster, you're a sexist yourself, and possibly a sexist Trump supporter). And if you only look at the averages this claim might seem true :

    On Election Day, women responded accordingly, as Clinton beat Trump among women 54 percent to 42 percent. They were voting not so much for her as against him and what he brought to the surface during his campaign: quotidian misogyny.

    There are two reasons this talking point is not true. First, averages conceal, and what they conceal is class . As you read further into the article, you can see it fall apart:

    In fact, Trump beat Clinton among white women 53 percent to 43 percent, with white women without college degrees going for [Trump] two to one .

    So, taking lack of a college degree as a proxy for being working class, for Newsweek's claim to be true, you have to believe that working class women don't get a vote in their referendum, and for the talking point to be true, you have to believe that working class women are sexist. Which leads me to ask: Who died and left the bourgeois feminists in Clinton's base in charge of the definition of sexism, or feminism? Class traitor Tina Brown is worth repeating:

    Here's my own beef. Liberal feminists, young and old, need to question the role they played in Hillary's demise. The two weeks of media hyperventilation over grab-her-by-the-pussygate, when the airwaves were saturated with aghast liberal women equating Trump's gross comments with sexual assault, had the opposite effect on multiple women voters in the Heartland.

    These are resilient women, often working two or three jobs, for whom boorish men are an occasional occupational hazard, not an existential threat. They rolled their eyes over Trump's unmitigated coarseness, but still bought into his spiel that he'd be the greatest job producer who ever lived. Oh, and they wondered why his behaviour was any worse than Bill's.

    Missing this pragmatic response by so many women was another mistake of Robbie Mook's campaign data nerds. They computed that America's women would all be as outraged as the ones they came home to at night. But pink slips have hit entire neighbourhoods, and towns. The angry white working class men who voted in such strength for Trump do not live in an emotional vacuum. They are loved by white working class women – their wives, daughters, sisters and mothers, who participate in their remaindered pain. I t is everywhere in the interviews. "My dad lost his business", "My husband hasn't been the same since his job at the factory went away" .

    Second, Clinton in 2016 did no better than Obama in 2008 with women (although she did better than Obama in 2012). From the New York Times analysis of the exit polls, this chart...

    So, for this talking point to be true, you have to believe that sexism simultaneously increased the male vote for Trump, yet did not increase the female vote for Clinton. Shouldn't they move in opposite directions?

    Talking Point: Clinton was Defeated by Stupidity

    Here's an example of this talking point from Foreign Policy , the heart of The Blob. The headline:

    Trump Won Because Voters Are Ignorant, Literally

    And the lead:

    OK, so that just happened. Donald Trump always enjoyed massive support from uneducated, low-information white people. As Bloomberg Politics reported back in August, Hillary Clinton was enjoying a giant 25 percentage-point lead among college-educated voters going into the election. (Whether that trend held up remains to be seen.) In contrast, in the 2012 election, college-educated voters just barely favored Barack Obama over Mitt Romney. Last night we saw something historic: the dance of the dunces. Never have educated voters so uniformly rejected a candidate. But never before have the lesser-educated so uniformly supported a candidate.

    The subtext here is usually that if you don't accept nod your head vigorously, you're stupid, and possibly a stupid Trump supporter. There are two reasons this talking point is not true.

    First, even assuming that the author's happy but unconscious conflation of credentials with education is correct, it wasn't the "dunces" who lost two wars, butchered the health care system, caused the financial system to collapse through accounting control fraud, or invented the neoliberal ideology that was kept real wages flat for forty years and turned the industrial heartland into a wasteland. That is solely, solely down to - only some , to be fair - college-educated voters. It is totally and 100% not down to the "dunces"; they didn't have the political or financial power to achieve debacles on the grand scale.

    Second, the "dunces" were an important part of Obama's victories . From The Week :

    Not only has polling repeatedly underplayed the importance of white voters without college degrees, it's underplayed their importance to the Obama coalition: They were one-third of Obama votes in 2012. They filled the gap between upper-class whites and working-class nonwhites. Trump gained roughly 15 percentage points with them compared to Romney in 2012.

    So, to believe this talking point, you have to believe that voters who were smart when they voted for Obama suddenly became stupid when it came time to vote for Clinton. You also have to believe that credentialed policy makers have an unblemished record of success, and that only they are worth paying attention to.

    Conclusion

    Of course, Clinton ran a miserable campaign, too, which didn't help. Carl Beijer has a bill of particulars :

    By just about every metric imaginable, Hillary Clinton led one of the worst presidential campaigns in modern history. It was a profoundly reactionary campaign, built entirely on rolling back the horizons of the politically possible, fracturing left solidarity, undermining longstanding left priorities like universal healthcare, pandering to Wall Street oligarchs, fomenting nationalism against Denmark and Russia, and rehabilitating some of history's greatest monsters – from Bush I to Kissinger. It was a grossly unprincipled campaign that belligerently violated FEC Super PAC coordination rules and conspired with party officials on everything from political attacks to debate questions. It was an obscenely stupid campaign that all but ignored Wisconsin during the general election, that pitched Clinton to Latino voters as their abuela, that centered an entire high-profile speech over the national menace of a few thousand anime nazis on Twitter, and that repeatedly deployed Lena Dunham as a media surrogate.

    Which is rather like running a David Letterman ad in a Pennsylvania steel town. It must have seemed like a good idea in Brooklyn. After all, they had so many celebrities to choose from.

    * * *

    All three talking points oversimplify. I'm not saying racism is not powerful; of course it is. I'm not saying that sexism is not powerful; of course it is. But monocausal explanations in an election this close - and in a country this vast - are foolish. And narratives that ignore economics and erase class are worse than foolish; buying into them will cause us to make the same mistakes over and over and over again.[1] The trick will be to integrate multiple causes, and that's down to the left; identity politics liberals don't merely not want to do this; they actively oppose it. Ditto their opposite numbers in America's neoliberal fun house mirror, the conservatives.

    NOTES

    [1] For some, that's not a bug. It's a feature.

    NOTE

    You will have noticed that I haven't covered economics (class), or election fraud at all. More myths are coming.

    Lambert Strether has been blogging, managing online communities, and doing system administration 24/7 since 2003, in Drupal and WordPress. Besides political economy and the political scene, he blogs about rhetoric, software engineering, permaculture, history, literature, local politics, international travel, food, and fixing stuff around the house. The nom de plume "Lambert Strether" comes from Henry James's The Ambassadors: "Live all you can. It's a mistake not to." You can follow him on Twitter at @lambertstrether. http://www.correntewire.com

    TK421 November 14, 2016 at 1:03 pm

    Yes, I'm a sexist because I voted for Jill Stein instead of Hillary Clinton.

    Knot Galt November 14, 2016 at 1:23 pm

    "No, you are ignorant! You threw away the vote and put Trump in charge." Please, it will be important to know what derogatory camp you belong in when the blame game swings into full gear. *snark

    IdahoSpud November 14, 2016 at 1:07 pm

    Is it sexist, racist, and/or stupid to conclude that one awful candidate is less likely to betray you than a different awful candidate?

    rwv November 14, 2016 at 1:21 pm

    Didn't feel the Bern, and if you burn your ass you'll have to sit on the blisters

    Steve H. November 14, 2016 at 1:26 pm

    Talking Point: Clinton was Defeated by Stupidity

    'Stupid' was the word I got very tired of in my social net. Two variant targets:

    1) Blacks for not voting their interests. The responses included 'we know who our enemies are' and 'don't tell me what to think.'

    2) Mostly it was vs rural, non-college educated. iirc, it was the Secretary of Agriculture, pleading for funds, who said the rural areas were where military recruits came from. A young fella I know, elite football player on elite non-urban HS team, said most of his teammates had enlisted. So they are the ones getting shot at, having relatives and friends come back missing pieces of body and self.

    My guy in the Reserves said the consensus was that if HRC got elected, they were going to war with Russia. Not enthused. Infantry IQ is supposedly average-80, but they know who Yossarian says the enemy is, e'en if they hant read the book.

    Maybe not so stupid after all.

    Jason Boxman November 14, 2016 at 1:26 pm

    Thanks so much for this!

    [Nov 14, 2016] Trump and Brexit Defeat Globalism, but For How Long

    Notable quotes:
    "... There are some who believe the elites are actually splintered into numerous groups and that domestic US elites have positioned themselves against the banking elites in London's City. ..."
    "... US elites are basically in the employ of a handful of families, individuals and institutions in our view. It is confusing because it is hard to tell if Hillary, for instance, is operating on her own accord or at the behest of higher and more powerful authorities. ..."
    "... It is probably a combination of both but at root those who control central banks are managing the world's move towards globalism. ..."
    "... The vote to propel Trump to the US presidency reflects a profound backlash against open markets and borders, and the simmering anger of millions of blue-collar white and working-class people who blame their economic woes on globalisation and multiculturalism. ..."
    "... If indeed Trump's election has damped the progress of TPP, and TTIP, this is a huge event. As we've pointed out, both agreements effectively substituted technocratic corporatism for the current sociopolitical model of "democracy." ..."
    "... one of the elite's most powerful, operative memes today is "populism vs. globalism" ..."
    "... No matter what, the reality of these two events, the victories of both Trump and Brexit, stand as signal proof that elite stratagems have been defeated, at least temporarily. Though whether these defeats have been self-inflicted as part of a change in tactics remains to be seen. ..."
    Nov 14, 2016 | www.zerohedge.com

    Via The Daily Bell

    ... ... ...

    Was Trump's victory actually created by the very globalist elites that Trump is supposed to have overcome? There are some who believe the elites are actually splintered into numerous groups and that domestic US elites have positioned themselves against the banking elites in London's City. We see no fundamental evidence of this.

    The world's real elites in our view may have substantive histories in the hundreds and thousands of years. US elites are basically in the employ of a handful of families, individuals and institutions in our view. It is confusing because it is hard to tell if Hillary, for instance, is operating on her own accord or at the behest of higher and more powerful authorities.

    It is probably a combination of both but at root those who control central banks are managing the world's move towards globalism. History easily shows us who these groups are – and they are not located in America.

    This is a cynical perspective to be sure, and certainly doesn't remove the impact of Trump's victory or his courage in waging his election campaign despite what must surely be death threats to himself and his family..

    But if true, this perspective corresponds to predictions that we've been making for nearly a decade now, suggesting that sooner or later elites – especially those in London's City – would have to "take a step back."

    More:

    The vote to propel Trump to the US presidency reflects a profound backlash against open markets and borders, and the simmering anger of millions of blue-collar white and working-class people who blame their economic woes on globalisation and multiculturalism.

    "There are a few parallels to Switzerland – that the losers of globalisation find somebody who is listening to them," said Swiss professor and lawyer Wolf Linder, a former director of the University of Bern's political science institute.

    "Trump is doing his business with the losers of globalisation in the US, like the Swiss People's Party is doing in Switzerland," he said. "It is a phenomenon which touches all European nations."

    ... ... ...

    If indeed Trump's election has damped the progress of TPP, and TTIP, this is a huge event. As we've pointed out, both agreements effectively substituted technocratic corporatism for the current sociopolitical model of "democracy." The elites were trying to move toward a new model of world control with these two agreements. ...

    Additionally, one of the elite's most powerful, operative memes today is "populism vs. globalism" that seeks to contrast the potentially freedom-oriented events of Trump and Brexit to the discarded wisdom of globalism. See here and here.

    No matter what, the reality of these two events, the victories of both Trump and Brexit, stand as signal proof that elite stratagems have been defeated, at least temporarily. Though whether these defeats have been self-inflicted as part of a change in tactics remains to be seen.

    Conclusion: But the change has come. One way or another the Internet and tens of millions or people talking, writing and acting has forced new trends. This can be hardly be emphasized enough. Globalism has been at least temporarily redirected.

    Editor's Note: The Daily Bell is giving away a silver coin and a silver "white paper" to subscribers. If you enjoy DB's articles and want to stay up-to-date for free, please subscribe here .

    spqrusa Nov 14, 2016 8:28 PM ,

    The analysis is flawed in that it fails to understand the context for power and influence in the western alliance. The Crowns in contest are seeking coordinated domination through political proxy, i.e. the force behind the EU and the UN. The problem is the most influential crown was not in a mind to destroy the fabric of their civilization and more importantly to continue to bail-out the "socialist" paradises in the continent and beyond. Britannia has its own socialism to support much less that of the world.

    Trump represents keeping the Colony in line with a growing interest in keeping traditions intact and in more direct control of Anglo values. Europe has this insane multi-culturalism that is fundamentally incompatible with a "free" and robust civilization. The whole goal of detente with China was to convert them to our values via proxy institutions and that is working in the long-run. In the short-run, the Empire must reunite and solidify its value bulwark against the coming storm from China and to a lesser extend from the expanded EU states. Russia is playing out on its own.

    [Nov 14, 2016] Working class wages destroyed. The wages of the low paid lowered. Ordinary people robbed of holiday and sickness pay

    Most commenters do not realise that it is neoliberalism that caused the current suffering of working people in the USA and elsewhere...
    Notable quotes:
    "... Working class wages destroyed. The wages of the low paid lowered. Ordinary people robbed of holiday and sickness pay. Working people priced out of ever owning their own home. Our city centers socially cleansed of the working class. Poor people forced to fight like rats in sacks with even poorer foreigners for jobs, housing, school places and social and health services. ..."
    "... Keep going mate. Continue to pump out that snobbish attitude because every time you do you've bagged Mr Trump, Mr Farage and Ms LePen another few votes. ..."
    "... I recall a time when any suggestion that immigration may be too high was silenced by cries of racism, eventually that label was misused so often that it lost its potency, one gets the sense that this trend for dubbing those who hold certain opinions as somehow unintelligent will go the same way. People are beginning to see through this most hateful tactic of the Modern Left. ..."
    "... Which is why I think Mr D'Ancona and many others are wrong to say that Farage and Trump will face the whirlwind when voters realise that their promises were all unachievable. The promises were much less important than the chance to slap the political world in the face. Given another chance, a lot of voters will do the same again. ..."
    "... I think the author completely misses the most salient point from the two events he cites: simply that the *vast* majority of people have become completely disenfranchised with the utter corruption that is mainstream politics today. ..."
    "... It doesn't matter who is voted in, the status quo [big business and the super-rich get wealthier whilst the middle is squeezed and the poorest are destroyed] remains. ..."
    "... The votes for Brexit and Trump are as much a rejection of "establishment" as anything else. Politicians in both countries heed these warnings at their peril... ..."
    "... The majority of the people are sick and tired of PC ism and the zero hour, minimum wage economy that both Britain and America have suffered under "globalisation". And of the misguided "[neo]liberal" agenda of much of the media which simply does not speak to or for society. ..."
    "... People in western democracies are rising up through the ballot box to defeat PC [neo]liberalism and globalisation that has done so much to impoverish Europe and America morally and economically. To the benefit of the tax haven corporates. ..."
    "... Globalisation disembowelled American manufacturing so the likes of Blair and the Clintons could print money. The illimitable lives they destroyed never entered their calculus. ..."
    "... I have stood in the blue lane in Atlanta waiting for my passport to be processed; in the adjoining lane was a young British female student (so she said to the official). The computer revealed she had overstayed her visa by 48 hours the last time she visited. She was marched out by two armed tunics to the next plane home. That's how Europeans get treated if they try to enter America illegally. Why the demented furor over returning illegal Hispanics or anyone else? ..."
    Nov 14, 2016 | www.theguardian.com

    IanPitch 12h ago

    Surely the people who voted for Trump and Farage are too stupid to realise the sheer, criminal folly of their decision...

    thoughtcatcher -> IanPitch 12h ago

    Working class wages destroyed. The wages of the low paid lowered. Ordinary people robbed of holiday and sickness pay. Working people priced out of ever owning their own home. Our city centers socially cleansed of the working class. Poor people forced to fight like rats in sacks with even poorer foreigners for jobs, housing, school places and social and health services.

    But yeah, they voted against the elite because they are "stupid".

    attila9000 -> IanPitch 11h ago

    I think at some point a lot of them will realize they have been had, but then they will probably just blame immigrants, or the EU. Anything that means they don't have to take responsibility for their own actions. It would appear there is a huge pool of people who can be conned into acting against their own self interest.

    jonnyoyster -> IanPitch 11h ago

    Keep going mate. Continue to pump out that snobbish attitude because every time you do you've bagged Mr Trump, Mr Farage and Ms LePen another few votes. Most people don't appreciate being talked down to and this arrogant habit of calling those who hold views contrary to your own 'stupid' is encouraging more and more voters to ditch the established parties in favour of the new.

    I recall a time when any suggestion that immigration may be too high was silenced by cries of racism, eventually that label was misused so often that it lost its potency, one gets the sense that this trend for dubbing those who hold certain opinions as somehow unintelligent will go the same way. People are beginning to see through this most hateful tactic of the Modern Left.

    DilemmataDocta -> IanPitch 11h ago

    A lot of the people who put their cross against Brexit or Trump weren't actually voting for anything. They were just voting against this, that or the other thing about the world that they disliked. It was voting as a gesture.

    Which is why I think Mr D'Ancona and many others are wrong to say that Farage and Trump will face the whirlwind when voters realise that their promises were all unachievable. The promises were much less important than the chance to slap the political world in the face. Given another chance, a lot of voters will do the same again.


    Sproggit 12h ago

    I think the author completely misses the most salient point from the two events he cites: simply that the *vast* majority of people have become completely disenfranchised with the utter corruption that is mainstream politics today.

    It doesn't matter who is voted in, the status quo [big business and the super-rich get wealthier whilst the middle is squeezed and the poorest are destroyed] remains.

    The votes for Brexit and Trump are as much a rejection of "establishment" as anything else. Politicians in both countries heed these warnings at their peril...

    NotoBlair 11h ago

    OMG, the lib left don't Geddit do they?

    The majority of the people are sick and tired of PC ism and the zero hour, minimum wage economy that both Britain and America have suffered under "globalisation". And of the misguided "[neo]liberal" agenda of much of the media which simply does not speak to or for society.

    People in western democracies are rising up through the ballot box to defeat PC [neo]liberalism and globalisation that has done so much to impoverish Europe and America morally and economically. To the benefit of the tax haven corporates.

    The sour grapes bleating of the lib left who refuse to accept the democratic will of the people is a movement doomed failure.

    Frankincensedabit 11h ago

    Malign to whom? Wall Street and people who want us all dead?

    Globalisation disembowelled American manufacturing so the likes of Blair and the Clintons could print money. The illimitable lives they destroyed never entered their calculus.

    I have stood in the blue lane in Atlanta waiting for my passport to be processed; in the adjoining lane was a young British female student (so she said to the official). The computer revealed she had overstayed her visa by 48 hours the last time she visited. She was marched out by two armed tunics to the next plane home. That's how Europeans get treated if they try to enter America illegally. Why the demented furor over returning illegal Hispanics or anyone else?

    I likely wouldn't have voted at all. But all my life the occupants of the White House represented the interests of those nobody could ever identify. The owners of the media and the numbered accounts who took away the life-chances of U.S. citizens by the million and called any of them who objected a thick white-trash bigot. Whatever Trump is, he will be different.

    [Nov 14, 2016] In-Person Coaching at University versus Technology Proactive, Constant Contact Matters naked capitalism

    Nov 13, 2016 | www.nakedcapitalism.com
    by Lambert Strether Lambert here: Apparently, then, Neoliberal U plans to build "trust-based relations" and offer "personalised attention" by gutting tenured faculty, shifting the teaching load to contingent faculty, redistributing salaries to administrators, and socking money into fancy facilities. Let me know how that works out.

    By Philip Oreopoulos, Professor of Economics and Public Policy, University of Toronto, and Uros Petronijevic, Assistant Professor, Department of Economics, York University. Originally published at VoxEU .

    Questions over the value of a university education are underscored by negative student experiences. Personalised coaching is a promising, but costly, tool to improve student experiences and performance. This column presents the results from an experiment comparing coaching with lower cost 'nudge' interventions. While coaching led to a significant increase in average course grades, online and text message interventions had no effect. The benefits of coaching appear to derive from the trust-based nature of relationships and personalised attention.

    Policymakers and academics share growing concerns about stagnating college completion rates and negative student experiences. Recent figures suggest that only 56% of students who pursue a bachelors' degree complete it within six years (Symonds et al. 2011), and it is increasingly unclear whether students who attain degrees acquire meaningful new skills along the way (Arum and Roska 2011). Students enter college underprepared, with those who procrastinate, do not study enough, or have superficial attitudes about success performing particularly poorly (Beattie et al 2016).

    Personalised Coaching to Improve Outcomes

    A promising tool for improving students' college outcomes and experiences is personalised coaching. At both the high school and college levels, an emerging recent literature demonstrates the benefits of helping students foster motivation, effort, good study habits, and time-management skills through structured tutoring and coaching. Cook et al. (2014) find that cognitive behavioural therapy and tutoring generate large improvements in maths scores and high school graduation rates for troubled youth in Chicago, while Oreopoulos et al. (forthcoming) show that coaching, tutoring, and group activities lead to large increases in high school graduation and college enrolment among youth in a Toronto public housing project. At the college level, Scrivener and Weiss (2013) find that the Accelerated Study in Associates Program – a bundle of coaching, tutoring, and student success workshops – in CUNY community colleges nearly doubled graduation rates and Bettinger and Baker (2014) show that telephone coaching by Inside Track professionals boosts two-year college retention by 15% across several higher-education institutions.

    While structured, one-on-one support can have large effects on student outcomes, it is often costly to implement and difficult to scale up to the student population at large (Bloom 1984). Noting this challenge, we set out to build on recent advances in social-psychology and behavioural economics, investigating whether technology – specifically, online exercises, and text and email messaging – can be used to generate comparable benefits to one-on-one coaching interventions but at lower costs among first-year university students (Oreopoulos and Petronijevic 2016).

    Several recent studies in social-psychology find that short, appropriately timed interventions can have lasting effects on student outcomes (Yeager and Walton 2011, Cohen and Garcia 2014, Walton 2014). Relatively large improvements on academic performance have been documented from interventions that help students define their long-run goals or purpose for learning (Morisano et al. 2010, Yeager et al. 2014), teach the 'growth mindset' idea that intelligence is malleable (Yeager et al. 2016), and help students keep negative events in perspective by self-affirming their values (Cohen and Sherman 2014). In contrast to these one-time interventions, other studies in education and behavioural economics attempt to maintain constant, low-touch contact with students or their parents at a low cost by using technology to provide consistent reminders aimed at improving outcomes. Providing text, email, and phone call updates to parents about their students' progress in school has been shown to boost both parental engagement and student performance (Kraft and Dougherty 2013, Bergman 2016, Kraft and Rogers 2014, Mayer et al. 2015), while direct text-message communication with college and university students has been used in attempts to increase financial aid renewal (Castleman and Page 2014) and improve academic outcomes (Castleman and Meyer 2016).

    Can Lower-Cost Alternatives to One-On-One Coaching Be Effective?

    We examine whether benefits comparable to those obtained from one-on-one coaching can be achieved at lower cost by either of two specific interventions (Oreopoulos and Petronijevic 2016). We examine a one-time online intervention designed to affirm students' goals and purpose for attending university, and a full-year text and email messaging campaign that provides weekly reminders of academic advice and motivation to students. We work with a sample of more than 4,000 undergraduate students who are enrolled in introductory economics courses at a large representative college in Canada, randomly assigning students to one of three treatment groups or a control group. The treatment groups consist of:

    A one-time, online exercise completed during the first two weeks of class in the autumn; The online intervention plus text and email messaging throughout the full academic year; and The online intervention plus one-on-one coaching in which students are assigned to upper-year undergraduate students who act as coaches.

    Students in the control group are given a personality test measuring the Big Five personality traits.

    Figure 1 summarises our main results on course grades. Overall, we find large positive effects from the coaching programme, amounting to approximately a 4.92 percentage-point increase in average course grades; we also find that coached students experience a 0.35 standard-deviation increase in GPA. In contrast, we find no effects on academic outcomes from either the online exercise or the text messaging campaign, even after investigating potentially heterogeneous treatment effects across several student characteristics, including gender, age, incoming high school average, international-student status, and whether students live on residence.

    Figure 1 . Main effects of interventions

    Our results suggest that the benefits of personal coaching are not easily replicated by low-cost interventions using technology. Many successful coaching programmes involve regular student-coach interaction facilitated either by mandatory meetings between coaches and students or proactive coaches regularly initiating contact (Scrivener and Weiss 2013, Bettinger and Baker 2014, Cook et al. 2014, Oreopoulos et al. forthcoming). Our coaches initiated contact and built trust with students over time, in person and through text messaging. Through a series of gentle, open-ended questions, the coaches could understand the problems students were facing and provide clear advice, ending most conversations with students being able to take at least one specific action to help solve their current problems.

    Our text messaging campaign offered weekly academic advice, resource information, and motivation, but did not initiate communication with individual students about specific issues (e.g. help with writing or an upcoming mid-term). The text-messaging team often invited students to reply to messages and share their concerns but was unable to do this with the same efficacy as a coach, nor were we able to establish the same rapport with students. Our inability to reach out to all students and softly guide the conversation likely prevented us from learning the important details of their specific problems. Although we provided answers and advice to the questions we received, we did not have as much information on the students' backgrounds as our coaches did, and thus could not tailor our responses to each student's specific circumstances.

    Our coaches were also able to build trust with students by fulfilling a support role. Figure 2 provides an example of how the coaching service was more effective than the text messaging campaign in this respect. The text messages attempted to nudge students in the right direction, rather than provide tailored support. The left panel of Figure 2 shows three consecutive text messages, in which we provide a tip on stress management, an inspirational quote, and a time-management tip around the exam period. As in this example, it was often the case that students would not respond to such messages. In contrast, the student-coach interaction in the right panel shows our coaches offering more of a supportive role rather than trying to simply nudge the student in a specific direction. The coach starts by asking an open-ended question, to which the student responds, and the coach then guides the conversation forward. In this example, the coach assures the student that they will be available to help with a pending deadline and shows a genuine interest in the events in the student's life.

    Figure 2 . Distinguishing the text-messaging campaign and the coaching programme

    Coaches also kept records of their evolving conversations with students and could check in to ask how previously discussed issues were being resolved. Although we kept a record of all text message conversations, a lack of resources prevented us from conducting regular check-ups to see how previous events had unfolded, which likely kept us from helping students effectively with their problem and from establishing the trust required for students to share additional problems.

    Concluding Remarks

    In sum, the two key features that distinguish the coaching service from the texting campaign are that coaches proactively initiated discussion with students about their problems and could establish relationships based on trust in which students felt comfortable to openly discuss their issues. Future work attempting to improve academic outcomes in higher education by using technology to maintain constant contact with students may need to acknowledge that simply nudging students in the right direction is not enough. A more personalised approach is likely required, in which coaches or mentors initially guide students through a series of gentle conversations and subsequently show a proactive interest in students' lives. These conversations need not necessarily occur during face-to-face meetings, but the available evidence suggests that they should occur frequently and be initiated by the coaches. While such an intervention is likely to be costlier than the text messaging campaign in our study, it is also likely to be more effective but still less costly than the personalised coaching treatment.

    References in the original post . allan November 13, 2016 at 7:00 am

    "Personalised coaching is a promising, but costly, tool to improve student experiences …"

    … that used to be called, in the long ago time before the App Store, office hours.
    Back in the day when there were these non-administrative inefficiencies called tenure track faculty.
    Surely Mechanical Turk can find a disruptive application in this space.

    lyle November 13, 2016 at 8:25 am

    However also way back when few students bothered to go to faculty office hours. (early 1970s) . In addition how many students go to the departmental seminars in their major field? Again undergraduate attendance at them is low.

    Or join clubs in their major field that invite faculty to come talk about their research (which is easy to get a prof to do to talk about his research). (Today of course you could do seminars and the like via podcasts etc).

    However of course the mentoring also takes student time which may also be scarce.

    [Nov 12, 2016] Do Economists Promote Ideology as Science?

    Nov 12, 2016 | economistsview.typepad.com
    Economist's View Do Economists Promote Ideology as Science

    My latest column:

    Do Economists Promote Ideology as Science? : Which is more important in determining the policy positions of economists, ideology or evidence? Is economics, as some assert, little more than a means of dressing up ideological arguments in scientific clothing?
    This certainly happens, especially among economists connected to politically driven think tanks – places like the Heritage Foundation come to mind. Economists who work for businesses also have a tendency to present evidence more like a lawyer advocating a particular position than a scientist trying to find out how the economy really works. But what about academic economists who are supposed to be searching for the truth no matter the political implications? Can we detect the same degree of bias in their research and policy positions? ...

    rayward :

    Thoma's assessment seems fair enough. I'd make the point that, for some academic economists, no amount of evidence is sufficient to overcome their bias. "Where's the proof" is the refrain one hears often. And then there's the question: what is evidence? The availability of lots of data is often used to "prove" this or that theory, even when the "proof" is contrary to the historical evidence one can see with her own eyes. Data used as obfuscation rather than clarification. I appreciate that one historical event following another historical event does not prove causation, but what's better proof than history.

    RogerFox : , -1
    "Shouldn't theory be a guide when the empirical evidence is unconvincing one way or the other?"

    No - we don't allow MDs to prescribe or treat on the basis of theory alone. It's unethical for any professional practitioner to give advice that is not supported by compelling evidence demonstrating that the advise is both safe and effective - 'First, do no harm.'

    To a man, professional economists shill for the view that they are morally free to treat real economies and real people as their personal lab rats. As a group, economists are an ethically challenged bunch in this respect, and probably in other respects too.

    anne -> RogerFox... , -1
    To a man, professional economists shill...

    [ This phrase begins a mean-spirited lie, no matter how the sentence is finished. The point of the malicious post however is only to be destructive. ]

    Avraam Jack Dectis : , -1
    .
    Economics is the most interesting science because it is not settled and has great effect upon the affairs of man.

    One of the things that make it interesting is the number of variables that exist in most economic situations as well as the strong psychological and sociological component to the science, due to its attempts to predict the actions of humans, a hierarchical herd based status insane animal.

    Undoubtedly, the desire to promote personally attractive policies is something everyone must fight.

    On a side note, having seen this blog referenced elsewhere and finally starting to read it regularly, truly a nice thing, I notice that Dr. Thoma and I are the same age for about three months per year. I suspect that is about all we have in common since I just spent the last 18+ years getting openly and notoriously poisoned by a stalker gang, have hit men following me and am so unpopular and poorly connected that I seem remarkably unable to engage any law enforcement on the issue.

    Which leads into the next point-> Is the dynamism of an economy a function of freedom of speech, riule of law, security of the citizen and so forth. For decades the USA, as it fought two opposing powerful systems, made that case yet now that no longer seems to be the case in the USA and in fact this is confirmed by the fact that nobody makes that case convincingly anymore.

    Can this deterioration of culture and embrace of expediency have a stifling economic effect?

    DeDude : , -1
    Economics as a science is mainly hurt by two things.

    1. The rich plutocrats have a major stake in advocating very specific narratives, so they will throw large sums behind those narratives (and the fight against anything conflicting with them).

    2. Economics does not have anything resembling the double blind placebo controlled trials that help medicine fight off the narratives of those with money and power.

    RGC : , -1
    What sort of opinions are economists allowed to have if they want tenure, want to be published in the major journals or want to make a living?

    Keynes concluded that government direction was necessary for a viable economy. Keynes' "interpreters" in the US buried that idea, and thus became very important economists - guys like Paul Samuelson. The first ( and only) US book to faithfully represent Keynes' ideas faded away soon after publication.

    http://news.stanford.edu/pr/93/931011Arc3112.html

    pete : , -1
    I did not know there was a debate. Krugman summed it all up in Peddling Prosperity. Folks know who pays the rent, and opine accordingly.
    Syaloch : , -1
    I think problems arise when economists are called upon by politicians or the media to give expert advice.

    Within the sciences, "We don't know the answer to that" is a perfectly acceptable response, and in scientific fields where the stakes are low that response is generally accepted by the public as well. "What is dark matter made of?" "We don't know yet, but we're working on it." But in politics, where the stakes are higher, not having a definitive answer is viewed as a sign of weakness. How often do you hear a politician responding to a "gotcha" question admit that they don't know the answer rather than trying to BS their way through?

    Given the timeliness of news coverage the media prefer to consult experts who offer definitive answers, especially given their preference for pro/con type interviews which require experts on both sides of an issue. Economists who are put on the spot this way feel pressured to ditch the error bars and give unambiguous answers, even answers based purely on theory with little to no empirical backing, and the more often they do this the more often they're invited back.

    Sandwichman : , November 03, 2015 at 08:47 AM
    It is impossible to talk about economics without making essentially ideological distinctions. Private property and wage labor are not "natural" categories. Their adequacy as human practices therefore needs to be either defended or criticized. To simply take them "as given" is an ideological waffle that begs THE question.

    Economists thus SHOULD have, acknowledge and fully disclose their ideological biases. When evaluating evidence they should make every effort to set aside and overcome their biases. And they need to stay humble about how Sisyphean, incongruous and incomplete their attempts at objectivity are.

    Let's not forget that "The End of Ideology" was a polemical tract aimed at designating the ideology of the managers and symbol manipulators "above" and beyond ideology. Similarly, Marx's brilliant critique of ideology degenerated into polemic as its practitioners adopted the mantle of "science."

    anne -> Sandwichman ... , November 03, 2015 at 08:56 AM
    Really excellent, and why I am immediately wary of self-described "technocrats."
    anne -> Sandwichman ... , November 03, 2015 at 08:58 AM
    https://en.wikipedia.org/wiki/The_End_of_Ideology

    The End of Ideology: On the Exhaustion of Political Ideas in the Fifties is a collection of essays published in 1960 by Daniel Bell, who described himself as a "socialist in economics, a liberal in politics, and a conservative in culture". He suggests that the older, grand-humanistic ideologies derived from the nineteenth and early twentieth centuries had been exhausted, and that new, more parochial ideologies would soon arise. He argues that political ideology has become irrelevant among "sensible" people, and that the polity of the future would be driven by piecemeal technological adjustments of the extant system.

    anne -> Sandwichman ... , November 03, 2015 at 09:00 AM
    What precisely is "Marx's critique of ideology ?"
    Sandwichman said in reply to anne... , November 03, 2015 at 09:54 AM
    A very big question! Like "what is the meaning of life?" At least a semester-long upper division seminar course. ;-)

    In a nutshell (to put it crudely), Marx labelled as ideologists a cohort of German followers of Hegel's philosophy who envisioned historical progress as the result of the progressive refinement of intellectual ideas. Marx argued instead that historical change resulted from struggle between social classes over the material conditions of life, fundamental to which was the transformation of nature through human intervention into means of subsistence.

    anne -> Sandwichman ... , November 03, 2015 at 10:26 AM
    Marx labelled as ideologists a cohort of German followers of Hegel's philosophy who envisioned historical progress as the result of the progressive refinement of intellectual ideas. Marx argued instead that historical change resulted from struggle between social classes over the material conditions of life, fundamental to which was the transformation of nature through human intervention into means of subsistence.

    [ What a superb introductory or summary explanation. I could not be more impressed or grateful. ]

    anne -> Sandwichman ... , November 03, 2015 at 10:27 AM
    I intend to quote this passage, crediting and thanking you.
    DrDick -> Sandwichman ... , November 03, 2015 at 11:02 AM
    Well said. I would add "markets" to that list of rleatively recent cultural constructs that needs greater scrutiny.
    Chuck : , November 03, 2015 at 09:10 AM
    "And so - though we proceed slowly because of our ideologies, we might not proceed at all without them."
    - Joseph Schumpeter, "Science and Ideology," The American Economic Review 39:2 (March 1949), at 359
    http://www.jstor.org/stable/1812737
    Sandwichman said in reply to Chuck... , November 03, 2015 at 10:09 AM
    Indeed.
    Ignacio : , November 03, 2015 at 10:11 AM
    Many guys are not driven by ideology, rather than evidence. The problem with this article is that we cannot compare with other professions and say "economists are more/less prone to promote ideology than the average".
    DrDick -> Ignacio... , November 03, 2015 at 11:04 AM
    All human endeavors are shaped by "ideology" in many different ways. What is important is to be aware of and explicit about their influences on our thought and action.
    RC AKA Darryl, Ron : , November 03, 2015 at 11:12 AM
    Yes.
    RC AKA Darryl, Ron said in reply to RC AKA Darryl, Ron... , November 03, 2015 at 11:24 AM
    If there are two sides to an argument that radically disagree then it is possible that both sides may be ideology, but both sides cannot be science. Only the correct argument can be science. Of course ideology is a bit too kind of a word since the incorrect argument is actually just a con game by people out to lay claim on greater unearned wealth.
    ken melvin : , November 03, 2015 at 11:22 AM
    Economists seem content with trying to figure out how to make 'it' work. Far better, I think, to try and figure out how it should be.
    It was philosophers such as Hume, Locke, Marx, Smith, Rawls, ... who asked the right questions. Laws and economics come down to us according to how we think about such things; they change when we change the way we think. Seems we're in a bit of a philosophical dry patch, here. Someday, we will have to develop a better economic system, might be now. Likewise, there are laws rooted in antiquity that were wrong then and are wrong still.
    RC AKA Darryl, Ron said in reply to ken melvin... , November 03, 2015 at 11:25 AM
    Exactly! They all know what they are doing. Some of them are just trying to do the wrong thing.
    Arne : , November 03, 2015 at 12:12 PM
    "Ideology certainly influences which questions academic researchers believe are the most important, but there is nothing wrong with that."

    No "experiment" in economics comes with the degree of control that experiments in physical sciences take for granted, so there is tremendous room for ideology to come into the discussion of whether a data set really represents the conditions the model is supposed to consider. Since reviewing another economist's study entails asking questions those questions...

    DrDick -> Arne... , -1
    Please describe the "experimentation" which takes place in astronomy and geology. Ideologies also play important roles in experimental sciences, such as biology (for which we have a lot of evidence.

    http://www.amazon.com/Anne-Fausto-Sterling/e/B001ILMB3E

    http://www.nature.com/news/let-s-think-about-cognitive-bias-1.18520

    http://annals.org/article.aspx?articleid=733696

    [Nov 11, 2016] Hey, Midwestern and Rust Belt Blue-Collar Voters: Hows THIS Workin Out for Ya So Far? by Beverly Mann

    Nov 11, 2016 | angrybearblog.com

    President-­elect Donald J. Trump, who campaigned against the corrupt power of special interests, is filling his transition team with some of the very sort of people who he has complained have too much clout in Washington: corporate consultants and lobbyists.

    Jeffrey Eisenach, a consultant who has worked for years on behalf of Verizon and other telecommunications clients, is the head of the team that is helping to pick staff members at the Federal Communications Commission.

    Michael Catanzaro, a lobbyist whose clients include Devon Energy and Encana Oil and Gas, holds the "energy independence" portfolio.

    Michael Torrey, a lobbyist who runs a firm that has earned millions of dollars helping food industry players such as the American Beverage Association and the dairy giant Dean Foods, is helping set up the new team at the Department of Agriculture.

    Trump Campaigned Against Lobbyists, but Now They're on His Transition Team , Eric Lipton, New York Times, today

    What? No steelworker? No auto-plant worker? Not even a family farmer? Might y'all have been had ?

    Who'd a thunk?

    Bernie and Elizabeth to the rescue. Now, please . Now .

    But, hey, white blue collar folks: You get what you vote for. The problem for me is that I get what you vote for. I said roughly 540 times here at AB in the last year: Trump isn't conquering the Republican Party; he's the Republican Party's Trojan Horse. What was that y'all were saying about wanting change so badly? Here it is.

    Welcome to the concept of industry regulatory capture . Perfected to a science, and jaw-droppingly brazen. LOL . Funny, but Bernie talked about this. Some of you listened. Then. Elizabeth Warren has talked about it, a lot. Some of you listened. Back then. But she wasn't running for president. Hillary Clinton was, instead. And she couldn't talk about it because she had needed all those speaking fees , all the way up to about a minute before she announced her candidacy.

    Aaaaand, here come the judges. And of course the justices. Industry regulatory capture of the judicial-branch variety.

    I called this one right, in the title of this post yesterday . I mean, why even wait until the body is buried? No reason at all.

    So he thinks. But what if he's wrong?

    Anyway can't wait for the political cartoons showing Trump on Ryan's lap, with Ryan's arm showing reaching up under Trump's suit jacket.

    Edgar Ryan and Charlie Trump.

    Oh, and I do want to add this: If one more liberal pundit or feminism writer publishes something claiming that Clinton lost because of all those sexist men out there who couldn't handle the idea of a woman president , or claims she ran a remarkable campaign cuz of all that tenacity and stamina she showed in the face of what was thrown at her from wherever, see, or makes both claims (if not necessarily in the same columns or blog posts or tweeter comments), and I read so much as the title of it, I'm gonna something .

    It's effing asinine . Everyone's entitled to their little personal delusions, but why the obsessiveness about this patent silliness? What is exactly is the emotional hold that Hillary Clinton holds on these people? It's climate-change-denial-like.

    Elizabeth Warren would have beaten Donald Trump in a landslide. So would have Bernie Sanders. And brought in a Democratic-controlled Senate and House. Because both would have run a remarkably campaign, under normal standards, not a special low bar.

    That's the efffing truth .

    UPDATE: From a new blog post by Paul Waldman titled " If you voted for Trump because he's 'anti-establishment,' guess what: You got conned ":

    An organizational chart of Trump's transition team shows it to be crawling with corporate lobbyists, representing such clients as Altria, Visa, Coca-Cola, General Electric, Verizon, HSBC, Pfizer, Dow Chemical, and Duke Energy. And K Street is positively salivating over all the new opportunities they'll have to deliver goodies to their clients in the Trump era. Who could possibly have predicted such a thing?

    The answer is, anyone who was paying attention. Look at the people Trump is considering for his cabinet, and you won't find any outside-the-box thinkers burning to work for the little guy. It's a collection of Republican politicians and corporate plutocrats - not much different from who you'd find in any Republican administration.

    And from reader EMichael in the Comments thread to this post about 35 minutes ago:

    OH, it will be worse than that, much worse.

    Bank regulation will go back to the "glory days" of the housing bubble, and Warren's CFPB will be toast.

    Buddy of mine works HR for a large bank. He has been flooded with resumes from current employees of the CFPB the last couple of days.

    Yup. HSBC ain't in that list for nothing. But, not to worry. Trump's kids will pick up lots of real estate on the (real) cheap, after the crash. Their dad will give them all the tips, from experience.

    And the breaking news this afternoon is that Pence–uh-ha; this Mike Pence –has replaced Christie as transition team head. Wanna bet that Comey told Trump today that Christie is likely to be indicted in Bridgegate?

    Next up, although down the road a few months: rumors that a grand jury has been convened to try to learn how, exactly, Giuliani got all that info from inside the FBI two weeks ago. Once the FBI inspector general completes his investigation. Or once New York's attorney general, Eric Schneiderman, begins looking into violations of NY state criminal law.

    How downright sick. And how pathetic.

    [Nov 11, 2016] Democratic coalition of Wall Street, Silicon Valley and Identity Politics is imploding, because it cant deliver goodies to people outside top ten percent

    Notable quotes:
    "... my equation of Neoliberalism (or Post-Capitalism) = Wall Street + Identity Politics generated by the dematerialization of Capital. CDO's are nothing but words on paper or bytes in the stream; and identity politics has much less to do with the Body than the culture and language. Trumpists were interpellated as White by the Democrats and became ideological. Capital is Language. ..."
    "... "Sanders and Trump inflamed their audiences with searing critiques of Capitalism's unfairness. Then what? Then Trump's response to what he has genuinely seen is, analytically speaking, word salad. Trump is sound and fury and garble. Yet - and this is key - the noise in his message increases the apparent value of what's clear about it. The ways he's right seem more powerful, somehow, in relief against the ways he's blabbing." ..."
    "... But Trump's people don't use suffering as a metric of virtue. They want fairness of a sort, but mainly they seek freedom from shame. Civil rights and feminism aren't just about the law after all, they are about manners, and emotions too: those "interest groups" get right in there and reject what feels like people's spontaneous, ingrained responses. People get shamed, or lose their jobs, for example, when they're just having a little fun making fun. Anti-PC means "I feel unfree. ..."
    "... The Trump Emotion Machine is delivering feeling ok, acting free. Being ok with one's internal noise, and saying it, and demanding that it matter. Internal Noise Matters. " my emp ..."
    Nov 11, 2016 | crookedtimber.org

    bob mcmanus 11.10.16 at 1:45 pm 172

    I thought someone above talked about Trump's rhetoric

    1) Tom Ferguson at Real News Network post at Naked Capitalism says (and said in 2014) that the Democratic coalition of Wall Street (Silicon Valley) + Identity Politics is imploding, because it can't deliver populist goodies without losing part of it's core base.

    Noted no for that, but for my equation of Neoliberalism (or Post-Capitalism) = Wall Street + Identity Politics generated by the dematerialization of Capital. CDO's are nothing but words on paper or bytes in the stream; and identity politics has much less to do with the Body than the culture and language. Trumpists were interpellated as White by the Democrats and became ideological. Capital is Language.

    2) Consider the above an intro to

    Lauren Berlant at the New Inquiry "Trump or Political Emotions" which I think is smart. Just a phrase cloud that stood out for me. All following from Berlant, except parenthetical

    It is a scene where structural antagonisms - genuinely conflicting interests - are described in rhetoric that intensifies fantasy.

    People would like to feel free. They would like the world to have a generous cushion for all their aggression and inclination. They would like there to be a general plane of okayness governing social relations

    ( Safe Space defined as the site where being nasty to those not inside is admired and approved. We all have them, we all want them, we create our communities and identities for this purpose.)

    "Sanders and Trump inflamed their audiences with searing critiques of Capitalism's unfairness. Then what? Then Trump's response to what he has genuinely seen is, analytically speaking, word salad. Trump is sound and fury and garble. Yet - and this is key - the noise in his message increases the apparent value of what's clear about it. The ways he's right seem more powerful, somehow, in relief against the ways he's blabbing."

    (Wonderful, and a comprehension of New Media I rarely see. Cybernetics? Does noise increase the value of signal? The grammatically correct tight argument crowd will not get this. A problem I have with CT's new policy)

    "You watch him calculating, yet not seeming to care about the consequences of what he says, and you listen to his supporters enjoying the feel of his freedom. "

    (If "civil speech" is socially approved signal, then noise = freedom and feeling. Every two year old and teenage guitarist understands)

    "But Trump's people don't use suffering as a metric of virtue. They want fairness of a sort, but mainly they seek freedom from shame. Civil rights and feminism aren't just about the law after all, they are about manners, and emotions too: those "interest groups" get right in there and reject what feels like people's spontaneous, ingrained responses. People get shamed, or lose their jobs, for example, when they're just having a little fun making fun. Anti-PC means "I feel unfree."

    The Trump Emotion Machine is delivering feeling ok, acting free. Being ok with one's internal noise, and saying it, and demanding that it matter. Internal Noise Matters. " my emp

    Noise again. Berlant worth reading, and thinking about.

    [Nov 11, 2016] neoliberalism = identity politics

    Nov 11, 2016 | www.nakedcapitalism.com

    hunkerdown November 10, 2016 at 4:02 pm

    Hoisted from over there:

    What's bought [sic] us to this stage is a policy – whether it's been intentional or unintentional or a mixture of both – of divide and rule, where society is broken down into neat little boxes and were told how to behave towards the contents of each one rather than, say, just behaving well towards all of them.

    And this right here is why neoliberalism = identity politics and why both ought to be crushed ruthlessly.

    [Nov 11, 2016] Hey, Midwestern and Rust Belt Blue-Collar Voters: How's THIS Workin' Out for Ya So Far? by Beverly Mann

    Nov 11, 2016 | angrybearblog.com

    President-­elect Donald J. Trump, who campaigned against the corrupt power of special interests, is filling his transition team with some of the very sort of people who he has complained have too much clout in Washington: corporate consultants and lobbyists.

    Jeffrey Eisenach, a consultant who has worked for years on behalf of Verizon and other telecommunications clients, is the head of the team that is helping to pick staff members at the Federal Communications Commission.

    Michael Catanzaro, a lobbyist whose clients include Devon Energy and Encana Oil and Gas, holds the "energy independence" portfolio.

    Michael Torrey, a lobbyist who runs a firm that has earned millions of dollars helping food industry players such as the American Beverage Association and the dairy giant Dean Foods, is helping set up the new team at the Department of Agriculture.

    Trump Campaigned Against Lobbyists, but Now They're on His Transition Team , Eric Lipton, New York Times, today

    What? No steelworker? No auto-plant worker? Not even a family farmer? Might y'all have been had ?

    Who'd a thunk?

    Bernie and Elizabeth to the rescue. Now, please . Now .

    But, hey, white blue collar folks: You get what you vote for. The problem for me is that I get what you vote for. I said roughly 540 times here at AB in the last year: Trump isn't conquering the Republican Party; he's the Republican Party's Trojan Horse. What was that y'all were saying about wanting change so badly? Here it is.

    Welcome to the concept of industry regulatory capture . Perfected to a science, and jaw-droppingly brazen. LOL . Funny, but Bernie talked about this. Some of you listened. Then. Elizabeth Warren has talked about it, a lot. Some of you listened. Back then. But she wasn't running for president. Hillary Clinton was, instead. And she couldn't talk about it because she had needed all those speaking fees , all the way up to about a minute before she announced her candidacy.

    Aaaaand, here come the judges. And of course the justices. Industry regulatory capture of the judicial-branch variety.

    I called this one right, in the title of this post yesterday . I mean, why even wait until the body is buried? No reason at all.

    So he thinks. But what if he's wrong?

    Anyway … can't wait for the political cartoons showing Trump on Ryan's lap, with Ryan's arm showing reaching up under Trump's suit jacket.

    Edgar Ryan and Charlie Trump.

    Oh, and I do want to add this: If one more liberal pundit or feminism writer publishes something claiming that Clinton lost because of all those sexist men out there who couldn't handle the idea of a woman president , or claims she ran a remarkable campaign cuz of all that tenacity and stamina she showed in the face of what was thrown at her from wherever, see, or makes both claims (if not necessarily in the same columns or blog posts or tweeter comments), and I read so much as the title of it, I'm gonna … something .

    It's effing asinine . Everyone's entitled to their little personal delusions, but why the obsessiveness about this patent silliness? What is exactly is the emotional hold that Hillary Clinton holds on these people? It's climate-change-denial-like.

    Elizabeth Warren would have beaten Donald Trump in a landslide. So would have Bernie Sanders. And brought in a Democratic-controlled Senate and House. Because both would have run a remarkably campaign, under normal standards, not a special low bar.

    That's the efffing truth .

    UPDATE: From a new blog post by Paul Waldman titled " If you voted for Trump because he's 'anti-establishment,' guess what: You got conned ":

    An organizational chart of Trump's transition team shows it to be crawling with corporate lobbyists, representing such clients as Altria, Visa, Coca-Cola, General Electric, Verizon, HSBC, Pfizer, Dow Chemical, and Duke Energy. And K Street is positively salivating over all the new opportunities they'll have to deliver goodies to their clients in the Trump era. Who could possibly have predicted such a thing?

    The answer is, anyone who was paying attention. Look at the people Trump is considering for his cabinet, and you won't find any outside-the-box thinkers burning to work for the little guy. It's a collection of Republican politicians and corporate plutocrats - not much different from who you'd find in any Republican administration.

    And from reader EMichael in the Comments thread to this post about 35 minutes ago:

    OH, it will be worse than that, much worse.

    Bank regulation will go back to the "glory days" of the housing bubble, and Warren's CFPB will be toast.

    Buddy of mine works HR for a large bank. He has been flooded with resumes from current employees of the CFPB the last couple of days.

    Yup. HSBC ain't in that list for nothing. But, not to worry. Trump's kids will pick up lots of real estate on the (real) cheap, after the crash. Their dad will give them all the tips, from experience.

    And the breaking news this afternoon is that Pence–uh-ha; this Mike Pence –has replaced Christie as transition team head. Wanna bet that Comey told Trump today that Christie is likely to be indicted in Bridgegate?

    Next up, although down the road a few months: rumors that a grand jury has been convened to try to learn how, exactly, Giuliani got all that info from inside the FBI two weeks ago. Once the FBI inspector general completes his investigation. Or once New York's attorney general, Eric Schneiderman, begins looking into violations of NY state criminal law.

    How downright sick. And how pathetic.

    [Nov 08, 2016] Like rapists neoliberals do not take no for the answer and will push Britain back in the EU again until the right result was achieved.

    Nov 08, 2016 | www.nakedcapitalism.com

    Carolinian November 7, 2016 at 3:11 pm

    Raimondo–globalism is the issue

    That's why a British court has effectively overturned the results of the Brexit vote – in a lawsuit brought by a hedge fund manager and former model – and thrown the fate of the country into the hands of pro-EU Tories, and their Labor and Liberal Democrat collaborators.

    This stunning reversal was baked in to the legislation that enabled the referendum to begin with, and is par for the course as far as EU referenda are concerned: in 1992,

    Danish voters rejected the EU, only to have the Euro-crats demand a rematch with a "modified" EU treaty which won narrowly. There have been repeated attempts to modify the modifications, which have all failed. Ireland voted against both the Lisbon Treaty and the Nice Treaty, only to have the issue brought up again until the "right" result was achieved.

    http://original.antiwar.com/justin/2016/11/06/bringing-globalist-monster/

    [Nov 08, 2016] The real danger of serious election-rigging: electronic voting machines. How do we know the machine *really* recorded everyones votes correctly? Insrtead we have anti-russian hysteria fed to us 24 x 7

    Notable quotes:
    "... "Yet commentators who have been ready and willing to attribute Donald Trump's success to anger, authoritarianism, or racism rather than policy issues have taken little note of the extent to which Mr. Sanders's support is concentrated not among liberal ideologues but among disaffected white men." ... ..."
    "... poor pk a leader of the Stalinist press ..."
    "... the surprising success of Bernie Sanders -- a Brooklyn-born, Jewish socialist -- in the primaries is solid proof that the electorate was open to a coherent argument for genuine progressive change, and that a substantial portion of that electorate is not acting on purely racist and sexist impulses, as so many progressive commentators say. ..."
    "... "I will live my life calmly and my children will be just fine. I will live my life calmly and my children will be just fine." That assumes you're about 85 years old...and don't have long to live! ..."
    "... Laid out by whom? By the commercial "media" hype machine that has 12-16 hours of airtime to fill every day with the as sensationalized as possible gossip (to justify the price for the paid advertisements filling the remaining hours). ..."
    "... Killary Clinton got no closer than Ann Arbor this weekend, a message! ..."
    "... Mr. Krugman forgot to list the collusion of the DNC and the Clinton campaign to work against Sanders. ..."
    "... putting crooked in the same sentence as Clinton or DNC is duplicative wording. This mortification is brought to US by the crooked and the stalinist press that calls crooked virtue. ..."
    "... Krugman did so much to help create the mass of white working class discontent that is electing Trump. Krugman and co cheering on NAFTA/PNTR/WTO etc, US deindustrialization, collapse of middle class... ..."
    "... Hopefully the working class masses will convince our rulers to abandon free trade before every last factory is sold off or dismantled and the US falls to the depths of a Chad or an Armenia. ..."
    economistsview.typepad.com

    anne -> anne... , November 07, 2016 at 01:47 PM

    http://krugman.blogs.nytimes.com/2016/05/23/the-truth-about-the-sanders-movement/

    May 23, 2016

    The Truth About the Sanders Movement
    By Paul Krugman

    In short, it's complicated – not all bad, by any means, but not the pure uprising of idealists the more enthusiastic supporters imagine.

    The political scientists Christopher Achen and Larry Bartels have an illuminating discussion of Sanders support. The key graf that will probably have Berniebros boiling is this:

    "Yet commentators who have been ready and willing to attribute Donald Trump's success to anger, authoritarianism, or racism rather than policy issues have taken little note of the extent to which Mr. Sanders's support is concentrated not among liberal ideologues but among disaffected white men." ...

    [ Yes, I do find defaming people by speculation or stereotype to be beyond saddening. ]

    ilsm -> anne... , November 07, 2016 at 03:53 PM
    poor pk a leader of the Stalinist press
    anne -> Chris Lowery ... , November 07, 2016 at 10:28 AM
    The fact that Obama either won, or did so much better than Hillary appears to be doing with, the white working-class vote in so many key battleground states, as well as the surprising success of Bernie Sanders -- a Brooklyn-born, Jewish socialist -- in the primaries is solid proof that the electorate was open to a coherent argument for genuine progressive change, and that a substantial portion of that electorate is not acting on purely racist and sexist impulses, as so many progressive commentators say.

    And her opponent was/is incapable of debating on substance, as there was/is neither coherence nor consistency in any part of his platform -- nor that of his party....

    [ Compelling argument. ]

    JohnH : , November 07, 2016 at 10:26 AM
    Question is, will Krugman be able to move on after the election...and talk about something useful? Like how to get Hillary to recognize and deal with inequality...
    JohnH : , November 07, 2016 at 10:29 AM
    Barbara Ehrenreich: "Forget fear and loathing. The US election inspires projectile vomiting. The most sordid side of our democracy has been laid out for all to see. But that's only the beginning: whoever wins, the mutual revulsion will only intensify... With either Clinton or Trump, we will be left to choke on our mutual revulsion."
    JohnH -> JohnH... , November 07, 2016 at 10:29 AM
    Link: https://www.theguardian.com/commentisfree/2016/nov/03/us-election-projectile-vomiting-barbara-ehrenreich
    JohnH -> Bloix... , November 07, 2016 at 04:59 PM
    "I will live my life calmly and my children will be just fine. I will live my life calmly and my children will be just fine." That assumes you're about 85 years old...and don't have long to live!
    ilsm -> JohnH... , November 07, 2016 at 03:54 PM
    the great mortification, these two.
    cm -> JohnH... , November 07, 2016 at 11:11 PM
    Laid out by whom? By the commercial "media" hype machine that has 12-16 hours of airtime to fill every day with the as sensationalized as possible gossip (to justify the price for the paid advertisements filling the remaining hours).
    Tom aka Rusty : , November 07, 2016 at 11:17 AM
    Something interesting today.... President Obama came to Michigan. I fully expected him to speak in Detroit with a get out the vote message. Instead he is in Ann Arbor, speaking to an overwhelmingly white and white-collar audience. On a related note, the Dems have apparently written off the white blue collar vote in Michigan, even much of the union vote. the union leaders are pro Clinton, but the workers not so much. Strange year.
    ilsm -> Tom aka Rusty... , November 07, 2016 at 03:55 PM
    Killary Clinton got no closer than Ann Arbor this weekend, a message!
    John M : , November 07, 2016 at 11:26 AM
    The real danger of serious election-rigging: electronic voting machines. How do we know the machine *really* recorded everyone's votes correctly? (Did any Florida county ever give Al Gore negative something votes?)
    Julio -> John M ... , November 08, 2016 at 06:42 AM
    That's a big subject but you are right, that is the biggest risk of significant fraud. Not just the voting machines, but the automatic counting systems. Other forms of possible election fraud are tiny by comparison.
    Enquiring Mind : , November 07, 2016 at 11:48 AM
    Here is the transcript from 60 Minutes about the Luntz focus group rancor. Instructive to read about the depth of feeling in case you didn't see the angry, disgusted faces of citizens.

    http://www.cbsnews.com/news/60-minutes-american-voters-on-trump-clinton/

    ScottB : , November 07, 2016 at 12:08 PM
    Mr. Krugman forgot to list the collusion of the DNC and the Clinton campaign to work against Sanders.
    ilsm -> ScottB... , November 07, 2016 at 03:57 PM
    putting crooked in the same sentence as Clinton or DNC is duplicative wording. This mortification is brought to US by the crooked and the stalinist press that calls crooked virtue.
    Before the 1970s the US was both rich and protectionist - no look at our horrible roads and hopeless people - the miracle of free trade! : , November 07, 2016 at 07:13 PM
    Krugman did so much to help create the mass of white working class discontent that is electing Trump. Krugman and co cheering on NAFTA/PNTR/WTO etc, US deindustrialization, collapse of middle class...

    Hopefully the working class masses will convince our rulers to abandon free trade before every last factory is sold off or dismantled and the US falls to the depths of a Chad or an Armenia.

    [Nov 07, 2016] Inside that Great Wage Growth Number

    Notable quotes:
    "... In our artificial economy real things do not matter so much, but politics and managing the perceptions of the public are of paramount importance. And so the 'Goldilocks' Jobs Report, which is how the business TV channels described that lukewarm piece of dreck, did little to rally the markets except fleetingly intraday. ..."
    "... The headline includes ALL employees, but if you take out the top 15-20% of managers, the average hourly earning growth showed a pronounced downward divergence to a lower growth rate. The BLS switched to this number including all employees a few years ago from the non-supervisory number. As a rule of thumb, when someone shows you the 'average' number, find out the median number for the same sample. Especially in these days of historically high inequality. ..."
    Nov 07, 2016 | jessescrossroadscafe.blogspot.com

    "The wealth of another region excites their greed; and if it is weak, their lust for power as well. Nothing from the rising to the setting of the sun is enough for them.

    Among all others only they are compelled to attack the poor as well as the rich. Robbery, rape, and slaughter they falsely call empire; and where they make a desert, they call it peace."

    Tacitus


    "He who makes a beast of himself gets rid of the pain of being a man."

    Samuel Johnson

    In our artificial economy real things do not matter so much, but politics and managing the perceptions of the public are of paramount importance. And so the 'Goldilocks' Jobs Report, which is how the business TV channels described that lukewarm piece of dreck, did little to rally the markets except fleetingly intraday.

    In the first chart below I take a look inside that 'average hourly earnings growth' number.

    The headline includes ALL employees, but if you take out the top 15-20% of managers, the average hourly earning growth showed a pronounced downward divergence to a lower growth rate. The BLS switched to this number including all employees a few years ago from the non-supervisory number. As a rule of thumb, when someone shows you the 'average' number, find out the median number for the same sample. Especially in these days of historically high inequality.

    Be that as it may, the markets overall were in a flight to safety as the financiers bowed to their fears of the upcoming presidential election, that something might happen that will upset their status quo.

    Not the status quo- theirs.

    ... ... ...

    [Nov 07, 2016] More Jobs, a Strong Economy, and a Threat to Institutions

    Notable quotes:
    "... it's easy to imagine a President Trump refusing to heed our own highest court, which, as President Andrew Jackson observed, has no way, other than respect of institutions, to enforce its decisions. ..."
    "... It's easy to carp like this but the sclerotic elite in charge of the country has failed to address demographic concerns, and has stamped out any politically incorrect thoughts as being signs of baseness. ..."
    "... Now they are so upset that a challenger has arisen. It's unfortunate that this particular challenger has no background in government and will probably harm our economic growth with his lack of skill, but the elites will have to eat the cake they baked. ..."
    "... Economists told us that free trade deals and open borders would make us prosperous and yet that hasn't happens. ..."
    "... The technicians running trade policy, monetary policy and fiscal policy haven't held up their end of the bargain. ..."
    "... Wealth and power has been redistributed upwards. ..."
    "... The union movement has been destroyed in outright class war. ..."
    "... The corporate media spread lies and distraction. It induces both apathy and a rat race/dog-eat-dog mentality. ..."
    "... Consider how far we've moved right, so that Nixon e.g. would be considered hopelessly and radically leftist today. Given that, moving left should be one of the first things you consider. ..."
    "... Yes, we've seen right wing policies killing jobs and steering wealth to the wealthy, and that's bad policy. But unfortunately it seems it's always possible to do *worse*. ..."
    "... Trump's policies would double down on wealth transfer, while he spouts the typical RW mantra of "(my dopey policy which would destroy jobs) would be good for jobs." ..."
    "... Economic growth fueled by foreign oil is nice while it lasts but what will happen to the country when the oil runs out or we are forced to fight a war that disrupts the supply? ..."
    Nov 07, 2016 | economistsview.typepad.com
    Adam Davidson in the New Yorker:
    More Jobs, a Strong Economy, and a Threat to Institutions : ...Institutions are significant to economists, who have come to see that countries become prosperous not because they have bounteous natural resources or an educated population or the most advanced technology but because they have good institutions. Crucially, formal structures are supported by informal, often unstated, social agreements. A nation not only needs courts; its people need to believe that those courts can be fair. ...

    Over most of history, a small élite confiscated wealth from the poor. Subsistence farmers lived under rules designed to tax them so that the rulers could live in palaces and pay for soldiers to maintain their power. Every now and then, though, a system appeared in which leaders were forced to accommodate the needs of at least some of their citizens. ... The societies with the most robust systems for forcing the powerful to accommodate some of the needs of the powerless became wealthier and more peaceful. ... Most nations without institutions to check the worst impulses of the rich and powerful stay stuck in poverty and dysfunction. ...

    This year's Presidential election has alarmed economists for several reasons. No economist, save one , supports Donald J. Trump's stated economic plans, but an even larger concern is that, were he elected, Trump would attack the very institutions that have provided our economic stability. In his campaign, Trump has shown outright contempt for courts, free speech, international treaties, and many other pillars of the American way of life. There is little reason to think that, if granted the Presidency, Trump would soften his stand. ...

    ...it's easy to imagine a President Trump refusing to heed our own highest court, which, as President Andrew Jackson observed, has no way, other than respect of institutions, to enforce its decisions. No one knows what Trump would do as President, but, based on his statements on the campaign trail, it's possible to imagine a nation where people have less confidence in the courts, the military, and their rights to free speech and assembly. When this happens, history tells us, people stop dreaming about what they could have if they invest in education, new businesses, and new ideas. They focus, instead, on taking from others and holding tightly to what they've already amassed. Those societies, without the institutions that protect us from our worst impulses, become poorer, uglier, more violent. That is how nations fail.

    Alex S : , November 05, 2016 at 01:15 PM
    It's easy to carp like this but the sclerotic elite in charge of the country has failed to address demographic concerns, and has stamped out any politically incorrect thoughts as being signs of baseness.

    Now they are so upset that a challenger has arisen. It's unfortunate that this particular challenger has no background in government and will probably harm our economic growth with his lack of skill, but the elites will have to eat the cake they baked.

    Peter K. : , November 05, 2016 at 01:23 PM
    "No one knows what Trump would do as President, but, based on his statements on the campaign trail, it's possible to imagine a nation where people have less confidence in the courts, the military, and their rights to free speech and assembly. When this happens, history tells us, people stop dreaming about what they could have if they invest in education, new businesses, and new ideas. They focus, instead, on taking from others and holding tightly to what they've already amassed. Those societies, without the institutions that protect us from our worst impulses, become poorer, uglier, more violent. That is how nations fail."

    This is all true but let's provide a little more context than the totebaggers' paint-by-numbers narrative.

    • Economists told us that free trade deals and open borders would make us prosperous and yet that hasn't happens.
    • The technicians running trade policy, monetary policy and fiscal policy haven't held up their end of the bargain.
    • Wealth and power has been redistributed upwards.
    • The union movement has been destroyed in outright class war.
    • The corporate media spread lies and distraction. It induces both apathy and a rat race/dog-eat-dog mentality.

    The Democratic Party has been moved to right as the middle class has struggled.

    And more and more people become susceptible to demagogues like Trump as Democrats try to play both sides of the fence, instead of standing foresquarely behind the job class.

    Let's hope we don't find out what Trump does if elected. My guess is that he'd delegate foreign and domestic policy to Mike Pence as Trump himself would be free to pursue his own personal grudges via whatever means are available.

    Alex S -> Peter K.... , -1
    As we can see here, through leftist glasses, the only possible remedy for solving a problem is moving left.
    Julio -> Alex S... , November 05, 2016 at 03:02 PM
    Consider how far we've moved right, so that Nixon e.g. would be considered hopelessly and radically leftist today.
    Given that, moving left should be one of the first things you consider.
    anne -> Julio ... , November 05, 2016 at 03:26 PM
    Consider how far we've moved right, so that Nixon e.g. would be considered hopelessly and radically leftist today. Given that, moving left should be one of the first things you consider.

    [ An important criticism. ]

    Alex S -> Julio ... , November 05, 2016 at 03:50 PM
    We have moved left. The gays and blacks are treated better. We no longer tolerate wars like Vietnam. The Iraq war was an order of magnitude smaller. War helps scientific discovery and progress. http://www.nytimes.com/2014/06/14/upshot/the-lack-of-major-wars-may-be-hurting-economic-growth.html?_r=0 For more capable nations to help civilize weaker and more chaotic ones is helpful, but leftists won't accept that.
    Peter K. -> Alex S... , November 05, 2016 at 03:12 PM
    As Julio points out, under any objective analysis, politics have moved to the right.

    Rightwing policy solutions have been tried: tax cuts for the rich, deregulation, breaking of unions, etc.

    We've seen the results. Stagnation and slow growth.

    The social democratic post-war years were much better with shared prosperity for all citizens.

    JohnH -> Peter K.... , November 05, 2016 at 03:53 PM
    "It's possible to imagine a nation where people have less confidence in the courts."

    When Obama refuses to jail torturers or those responsible for mortgage fraud, we the people are justified in having less confidence in the courts.

    Peter Liepmann -> Peter K.... , November 05, 2016 at 05:52 PM
    Yes, we've seen right wing policies killing jobs and steering wealth to the wealthy, and that's bad policy. But unfortunately it seems it's always possible to do *worse*.

    Trump's policies would double down on wealth transfer, while he spouts the typical RW mantra of "(my dopey policy which would destroy jobs) would be good for jobs."

    Tim Harford made a good case for trust accounting for 99% of the difference in per capita GNP between the US and Somalia.

    ""If you take a broad enough definition of trust, then it would explain basically all the difference between the per capita income of the United States and Somalia," ventures Steve Knack, a senior economist at the World Bank who has been studying the economics of trust for over a decade. That suggests that trust is worth $12.4 trillion dollars a year to the U.S., which, in case you are wondering, is 99.5% of this country's income (2006 figures). If you make $40,000 a year, then $200 is down to hard work and $39,800 is down to trust.

    How could that be? Trust operates in all sorts of ways, from saving money that would have to be spent on security to improving the functioning of the political system. But above all, trust enables people to do business with each other. Doing business is what creates wealth." goo.gl/t3OqHc

    anne -> Peter Liepmann... , November 05, 2016 at 06:38 PM
    Precise references, including links are necessary.
    anne : , November 05, 2016 at 01:49 PM
    Adam Davidson in the essay refers to this paper, which is well worth reading:

    https://www.aeaweb.org/articles?id=10.1257/aer.20140913

    April, 2016

    Presidents and the US Economy: An Econometric Exploration
    By Alan S. Blinder and Mark W. Watson

    Abstract

    The US economy has performed better when the president of the United States is a Democrat rather than a Republican, almost regardless of how one measures performance. For many measures, including real GDP growth (our focus), the performance gap is large and significant. This paper asks why. The answer is not found in technical time series matters nor in systematically more expansionary monetary or fiscal policy under Democrats. Rather, it appears that the Democratic edge stems mainly from more benign oil shocks, superior total factor productivity (TFP) performance, a more favorable international environment, and perhaps more optimistic consumer expectations about the near-term future.

    Alex S -> anne... , November 05, 2016 at 02:59 PM
    Economic growth fueled by foreign oil is nice while it lasts but what will happen to the country when the oil runs out or we are forced to fight a war that disrupts the supply?
    pgl -> Alex S... , November 05, 2016 at 03:03 PM
    I was in college in the mid 1970's and we asked this question a lot. Some think this worry has gone away. I don't agree with those types. Which is why a green technology investment drive makes a lot of sense for so many reasons.
    Alex S -> anne... , November 05, 2016 at 04:03 PM
    Quote from the paper you linked to: "Arguably, oil shocks have more to do with US foreign policy than with US economic policy-the two Gulf Wars being prominent examples. That said, several economists have claimed that US monetary policy played an important role in bringing on the oil shocks. See, for example, Barsky and Kilian (2002)."
    anne -> Alex S... , November 05, 2016 at 04:13 PM
    Do set down a link to a reference when possible:

    http://www.nber.org/papers/w8389

    July, 2001

    Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative
    By Robert B. Barsky and Lutz Kilian

    Abstract

    This paper argues that major oil price increases were not nearly as essential a part of the causal mechanism that generated the stagflation of the 1970s as is often thought. There is neither a theoretical presumption that oil supply shocks are stagflationary nor robust empirical evidence for this view. In contrast, we show that monetary expansions and contractions can generate stagflation of realistic magnitude even in the absence of supply shocks. Furthermore, monetary fluctuations help to explain the historical movements of the prices of oil and other commodities, including the surge in the prices of industrial commodities that preceded the 1973/74 oil price increase. Thus, they can account for the striking coincidence of major oil price increases and worsening stagflation.

    Alex S -> Alex S... , November 05, 2016 at 04:22 PM
    My quote dragged on too long. I should have ended it with the first sentence. Monetary policy could play a role but foreign policy could still be the biggest factor.
    Peter K. -> anne... , November 05, 2016 at 03:09 PM
    http://www.bloomberg.com/news/articles/2016-10-25/fed-inclined-to-raise-rates-if-next-president-pumps-up-budget

    "Former Fed Vice Chairman Alan Blinder said he's skeptical that fiscal policy will be loosened a great deal if Clinton wins the election, as seems likely based on recent voter surveys.

    "She is promising not to make budget deficits bigger by her programs," said Blinder, who is now a professor at Princeton University. "Whatever fiscal stimulus there is ought to be small enough for the Fed practically to ignore it."

    PGL told us that Hillary's fiscal program would be YUGE.

    Like with Trump everything he says is a lie.

    anne -> Peter K.... , November 05, 2016 at 03:56 PM
    Dean Baker in "Rigged" * reminds me of the lasting limits to growth that appear to follow the sacrifice of growth, especially to the extent of allowing a recession, for the sake of budget balancing during a time of surrounding economic weakness:

    * http://deanbaker.net/images/stories/documents/Rigged.pdf

    October, 2016

    Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer
    By Dean Baker

    anne -> Peter K.... , November 05, 2016 at 04:01 PM
    Simply excellent:

    http://deanbaker.net/images/stories/documents/Rigged.pdf

    October, 2016

    Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer
    By Dean Baker

    Introduction: Trading in Myths

    In winter 2016, near the peak of Bernie Sanders' bid for the Democratic presidential nomination, a new line became popular among the nation's policy elite: Bernie Sanders is the enemy of the world's poor. Their argument was that Sanders, by pushing trade policies to help U.S. workers, specifically manufacturing workers, risked undermining the well-being of the world's poor because exporting manufactured goods to the United States and other wealthy countries is their path out of poverty. The role model was China, which by exporting has largely eliminated extreme poverty and drastically reduced poverty among its population. Sanders and his supporters would block the rest of the developing world from following the same course.

    This line, in its Sanders-bashing permutation, appeared early on in Vox, the millennial-oriented media upstart, and was quickly picked up elsewhere (Beauchamp 2016). After all, it was pretty irresistible. The ally of the downtrodden and enemy of the rich was pushing policies that would condemn much of the world to poverty.

    The story made a nice contribution to preserving the status quo, but it was less valuable if you respect honesty in public debate.

    The problem in the logic of this argument should be apparent to anyone who has taken an introductory economics course. It assumes that the basic problem of manufacturing workers in the developing world is the need for someone who will buy their stuff. If people in the United States don't buy it, then the workers will be out on the street and growth in the developing world will grind to a halt. In this story, the problem is that we don't have enough people in the world to buy stuff. In other words, there is a shortage of demand. But is it really true that no one else in the world would buy the stuff produced by manufacturing workers in the developing world if they couldn't sell it to consumers in the United States? Suppose people in the developing world bought the stuff they produced raising their living standards by raising their own consumption.

    That is how the economics is supposed to work. In the standard theory, general shortages of demand are not a problem. Economists have traditionally assumed that economies tended toward full employment. The basic economic constraint was a lack of supply. The problem was that we couldn't produce enough goods and services, not that we were producing too much and couldn't find anyone to buy them. In fact, this is why all the standard models used to analyze trade agreements like the Trans-Pacific Partnership assume trade doesn't affect total employment. Economies adjust so that shortages of demand are not a problem.

    In this standard story (and the Sanders critics are people who care about textbook economics), capital flows from slow-growing rich countries, where it is relatively plentiful and so gets a low rate of return, to fast-growing poor countries, where it is scarce and gets a high rate of return....

    pgl -> Peter K.... , November 06, 2016 at 03:37 AM
    It is yuuuuge - and no I did not say anything of the sort. Rather I noted it would be less than 1% of GDP. This is what I get for trying to get the facts right. It gets too complicated for you even when we simplify things so you get angry and start screaming "liar". Grow up.
    mrrunangun : , November 05, 2016 at 06:23 PM
    Per capta GDP grew from $51,100 to $51,400 between July 1 2015 and July 1 2016. This 0.6% growth does not seem to me to be a statistic supporting claims of improving employment and improving wage growth.

    Dean has suggested in one of his commentaries that wage growth may be an artifact of a decline in the quality of health insurance coverage. Wage growth is not figured net of increased outlays for deductibles and copays related to changes in health insurance. PPACA discourages low deductible and low copay health plans by placing a "Cadillac tax" on them, or at least threatening to do so. The consequent rise in wage workers' outlays for copays and deductibles are not captured in the statistics that claim to measure wage gains. This results in an income transfer from the well to the sick, but can produce statistics that can be interpreted in politically convenient ways by those so inclined

    anne -> mrrunangun... , November 05, 2016 at 06:33 PM
    https://fred.stlouisfed.org/graph/?g=8cpp

    August 4, 2014

    Real per capita Gross Domestic Product for United States and United Kingdom, 2007-2015

    (Percent change)


    https://fred.stlouisfed.org/graph/?g=8cpv

    August 4, 2014

    Real per capita Gross Domestic Product for United States and United Kingdom, 2007-2015

    (Indexed to 2007)

    anne -> mrrunangun... , November 05, 2016 at 06:35 PM
    https://fred.stlouisfed.org/graph/?g=8bue

    January 15, 2016

    Employment Cost Indexes for Wages and Salaries & Benefits, 2007-2016

    (Percent change)


    https://fred.stlouisfed.org/graph/?g=8bua

    January 15, 2016

    Employment Cost Indexes for Wages and Salaries & Benefits, 2002-2016

    (Percent change)

    pgl -> mrrunangun... , November 06, 2016 at 03:38 AM
    Excellent perspective. Let me say well done before PeterK gets angry and calls you a liar.
    ilsm -> mrrunangun... , November 06, 2016 at 05:10 AM
    I had a job offer about 15 years ago, the quoted salary was not to my liking so the HR type told me how much the Cadillac insurance was "worth".

    I do not think you 'get' why Cadillac plans are taxed............

    or

    'income transfers'......

    mrrunangun -> ilsm... , November 06, 2016 at 12:25 PM
    I get why the plans are taxed. I don't believe that the results of that policy have been beneficial for the bulk of the population. Most of the good done by PPACA was done by the expansion of Medicaid eligibility. I believe that requiring the working poor people to settle for high deductible high copay policies has had the practical effect of requiring them to choose between adequate medical and further impoverishment. I do not believe that the PPACA could not have been financed in a way less injurious to the working poor. As the insurers have been unable to make money in this deal, the hospital operators seem to have been the only winners in that their bad debt problems have been ameliorated.
    cm : , November 05, 2016 at 11:09 PM
    "people stop dreaming about what they could have if they invest in education, new businesses, and new ideas"

    And this is entirely rational, as in the situation described, the fruits of their efforts will likely be siphoned from their pockets by the elites and generally rent-seekers with higher social standing and leverage, or at best their efforts will amount to too little to be worth the risk (including the risk of wasting one's time i.e. opportunity cost). It also becomes correspondingly harder to convince and motivate others to join or fund any worthwhile efforts. What also happens (and has happened in "communism") is that people take their interests private, i.e. hidden from the view of those who would usurp or derail them.

    Chris G : , -1
    "Those who witness extreme social collapse at first hand seldom describe any deep revelation about the truths of human existence. What they do mention, if asked, is their surprise at how easy it is to die.

    The pattern of ordinary life, in which so much stays the same from one day to the next, disguises the fragility of its fabric. How many of our activities are made possible by the impression of stability that pattern gives? So long as it repeats, or varies steadily enough, we are able to plan for tomorrow as if all the things we rely on and don't think about too carefully will still be there. When the pattern is broken, by civil war or natural disaster or the smaller-scale tragedies that tear at its fabric, many of those activities become impossible or meaningless, while simply meeting needs we once took for granted may occupy much of our lives.

    What war correspondents and relief workers report is not only the fragility of the fabric, but the speed with which it can unravel. As we write this, no one can say with certainty where the unraveling of the financial and commercial fabric of our economies will end. Meanwhile, beyond the cities, unchecked industrial exploitation frays the material basis of life in many parts of the world, and pulls at the ecological systems which sustain it.

    Precarious as this moment may be, however, an awareness of the fragility of what we call civilisation is nothing new.

    'Few men realise,' wrote Joseph Conrad in 1896, 'that their life, the very essence of their character, their capabilities and their audacities, are only the expression of their belief in the safety of their surroundings.' Conrad's writings exposed the civilisation exported by European imperialists to be little more than a comforting illusion, not only in the dark, unconquerable heart of Africa, but in the whited sepulchres of their capital cities. The inhabitants of that civilisation believed 'blindly in the irresistible force of its institutions and its morals, in the power of its police and of its opinion,' but their confidence could be maintained only by the seeming solidity of the crowd of like-minded believers surrounding them. Outside the walls, the wild remained as close to the surface as blood under skin, though the city-dweller was no longer equipped to face it directly.

    Bertrand Russell caught this vein in Conrad's worldview, suggesting that the novelist 'thought of civilised and morally tolerable human life as a dangerous walk on a thin crust of barely cooled lava which at any moment might break and let the unwary sink into fiery depths.' What both Russell and Conrad were getting at was a simple fact which any historian could confirm: human civilisation is an intensely fragile construction. It is built on little more than belief: belief in the rightness of its values; belief in the strength of its system of law and order; belief in its currency; above all, perhaps, belief in its future.

    Once that belief begins to crumble, the collapse of a civilisation may become unstoppable. That civilisations fall, sooner or later, is as much a law of history as gravity is a law of physics. What remains after the fall is a wild mixture of cultural debris, confused and angry people whose certainties have betrayed them, and those forces which were always there, deeper than the foundations of the city walls: the desire to survive and the desire for meaning."

    Source - http://dark-mountain.net/about/manifesto/

    [Nov 07, 2016] How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer

    economistsview.typepad.com

    anne -> Peter K.... , November 05, 2016 at 04:01 PM

    Simply excellent:

    http://deanbaker.net/images/stories/documents/Rigged.pdf

    October, 2016

    Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer
    By Dean Baker

    Introduction: Trading in Myths

    In winter 2016, near the peak of Bernie Sanders' bid for the Democratic presidential nomination, a new line became popular among the nation's policy elite: Bernie Sanders is the enemy of the world's poor. Their argument was that Sanders, by pushing trade policies to help U.S. workers, specifically manufacturing workers, risked undermining the well-being of the world's poor because exporting manufactured goods to the United States and other wealthy countries is their path out of poverty. The role model was China, which by exporting has largely eliminated extreme poverty and drastically reduced poverty among its population. Sanders and his supporters would block the rest of the developing world from following the same course.

    This line, in its Sanders-bashing permutation, appeared early on in Vox, the millennial-oriented media upstart, and was quickly picked up elsewhere (Beauchamp 2016). After all, it was pretty irresistible. The ally of the downtrodden and enemy of the rich was pushing policies that would condemn much of the world to poverty.

    The story made a nice contribution to preserving the status quo, but it was less valuable if you respect honesty in public debate.

    The problem in the logic of this argument should be apparent to anyone who has taken an introductory economics course. It assumes that the basic problem of manufacturing workers in the developing world is the need for someone who will buy their stuff. If people in the United States don't buy it, then the workers will be out on the street and growth in the developing world will grind to a halt. In this story, the problem is that we don't have enough people in the world to buy stuff. In other words, there is a shortage of demand. But is it really true that no one else in the world would buy the stuff produced by manufacturing workers in the developing world if they couldn't sell it to consumers in the United States? Suppose people in the developing world bought the stuff they produced raising their living standards by raising their own consumption.

    That is how the economics is supposed to work. In the standard theory, general shortages of demand are not a problem. Economists have traditionally assumed that economies tended toward full employment. The basic economic constraint was a lack of supply. The problem was that we couldn't produce enough goods and services, not that we were producing too much and couldn't find anyone to buy them. In fact, this is why all the standard models used to analyze trade agreements like the Trans-Pacific Partnership assume trade doesn't affect total employment. Economies adjust so that shortages of demand are not a problem.

    In this standard story (and the Sanders critics are people who care about textbook economics), capital flows from slow-growing rich countries, where it is relatively plentiful and so gets a low rate of return, to fast-growing poor countries, where it is scarce and gets a high rate of return....

    [Nov 07, 2016] Economists View More Jobs, a Strong Economy, and a Threat to Institutions

    Nov 07, 2016 | economistsview.typepad.com
    Adam Davidson in the New Yorker:
    More Jobs, a Strong Economy, and a Threat to Institutions : ...Institutions are significant to economists, who have come to see that countries become prosperous not because they have bounteous natural resources or an educated population or the most advanced technology but because they have good institutions. Crucially, formal structures are supported by informal, often unstated, social agreements. A nation not only needs courts; its people need to believe that those courts can be fair. ...

    Over most of history, a small élite confiscated wealth from the poor. Subsistence farmers lived under rules designed to tax them so that the rulers could live in palaces and pay for soldiers to maintain their power. Every now and then, though, a system appeared in which leaders were forced to accommodate the needs of at least some of their citizens. ... The societies with the most robust systems for forcing the powerful to accommodate some of the needs of the powerless became wealthier and more peaceful. ... Most nations without institutions to check the worst impulses of the rich and powerful stay stuck in poverty and dysfunction. ...

    This year's Presidential election has alarmed economists for several reasons. No economist, save one , supports Donald J. Trump's stated economic plans, but an even larger concern is that, were he elected, Trump would attack the very institutions that have provided our economic stability. In his campaign, Trump has shown outright contempt for courts, free speech, international treaties, and many other pillars of the American way of life. There is little reason to think that, if granted the Presidency, Trump would soften his stand. ...

    ...it's easy to imagine a President Trump refusing to heed our own highest court, which, as President Andrew Jackson observed, has no way, other than respect of institutions, to enforce its decisions. No one knows what Trump would do as President, but, based on his statements on the campaign trail, it's possible to imagine a nation where people have less confidence in the courts, the military, and their rights to free speech and assembly. When this happens, history tells us, people stop dreaming about what they could have if they invest in education, new businesses, and new ideas. They focus, instead, on taking from others and holding tightly to what they've already amassed. Those societies, without the institutions that protect us from our worst impulses, become poorer, uglier, more violent. That is how nations fail.

    Alex S : , November 05, 2016 at 01:15 PM
    It's easy to carp like this but the sclerotic elite in charge of the country has failed to address demographic concerns, and has stamped out any politically incorrect thoughts as being signs of baseness. Now they are so upset that a challenger has arisen. It's unfortunate that this particular challenger has no background in government and will probably harm our economic growth with his lack of skill, but the elites will have to eat the cake they baked.
    pgl -> Alex S... , November 05, 2016 at 01:51 PM
    Agreed. You should have seen Peter Navarro latest performance. He may be ruder than Trump himself and he certainly babbles gibberish.
    Peter K. : , November 05, 2016 at 01:23 PM
    "No one knows what Trump would do as President, but, based on his statements on the campaign trail, it's possible to imagine a nation where people have less confidence in the courts, the military, and their rights to free speech and assembly. When this happens, history tells us, people stop dreaming about what they could have if they invest in education, new businesses, and new ideas. They focus, instead, on taking from others and holding tightly to what they've already amassed. Those societies, without the institutions that protect us from our worst impulses, become poorer, uglier, more violent. That is how nations fail."

    This is all true but let's provide a little more context than the totebaggers' paint-by-numbers narrative.

    • Economists told us that free trade deals and open borders would make us prosperous and yet that hasn't happens.
    • The technicians running trade policy, monetary policy and fiscal policy haven't held up their end of the bargain.
    • Wealth and power has been redistributed upwards.
    • The union movement has been destroyed in outright class war.
    • The corporate media spread lies and distraction. It induces both apathy and a rat race/dog-eat-dog mentality.

    The Democratic Party has been moved to right as the middle class has struggled.

    And more and more people become susceptible to demagogues like Trump as Democrats try to play both sides of the fence, instead of standing foresquarely behind the job class.

    Let's hope we don't find out what Trump does if elected. My guess is that he'd delegate foreign and domestic policy to Mike Pence as Trump himself would be free to pursue his own personal grudges via whatever means are available.

    Peter K. -> Peter K.... , November 05, 2016 at 01:29 PM
    As Bernie Sanders's campaign demonstrated, there is still hope. In fact hope is growing.

    Lucky for us Sanders campaigned hard for Hillary, knowing what the stakes are.

    Given the way people like PGL treated Sanders during the campaign and given what Wikileaks showed, I doubt the reverse would have been true had Sanders won the primary.

    Peter K. -> Peter K.... , November 05, 2016 at 01:30 PM
    But then Sanders still would have beaten Trump easily.
    Gerri -> Peter K.... , November 06, 2016 at 06:39 AM
    The reverse would have been true, because we Democrats would have voted party above all else and especially in this election year. Remember "party" the thing that Bernie supporters and Bernie himself denigrated? I believe the term
    "elites" was used more than once to describe the party faithful.
    Alex S -> Peter K.... , -1
    As we can see here, through leftist glasses, the only possible remedy for solving a problem is moving left.
    Julio -> Alex S... , November 05, 2016 at 03:02 PM
    Consider how far we've moved right, so that Nixon e.g. would be considered hopelessly and radically leftist today.
    Given that, moving left should be one of the first things you consider.
    anne -> Julio ... , November 05, 2016 at 03:26 PM
    Consider how far we've moved right, so that Nixon e.g. would be considered hopelessly and radically leftist today.

    Given that, moving left should be one of the first things you consider.

    [ An important criticism. ]

    Alex S -> Julio ... , November 05, 2016 at 03:50 PM
    We have moved left. The gays and blacks are treated better. We no longer tolerate wars like Vietnam. The Iraq war was an order of magnitude smaller. War helps scientific discovery and progress. http://www.nytimes.com/2014/06/14/upshot/the-lack-of-major-wars-may-be-hurting-economic-growth.html?_r=0 For more capable nations to help civilize weaker and more chaotic ones is helpful, but leftists won't accept that.
    anne -> Alex S... , November 05, 2016 at 04:08 PM
    Oh, I understand:

    http://www.nytimes.com/2014/06/14/upshot/the-lack-of-major-wars-may-be-hurting-economic-growth.html

    June 13, 2014

    The Lack of Major Wars May Be Hurting Economic Growth
    By Tyler Cowen

    [ Who else could possibly have written such an essay? The guy is really, really scary. ]

    anne -> anne... , November 05, 2016 at 04:20 PM
    http://www.cepr.net/index.php/blogs/beat-the-press/does-the-right-hold-the-economy-hostage-to-advance-its-militarist-agenda

    June 14, 2014

    Does the Right Hold the Economy Hostage to Advance Its Militarist Agenda?

    That's one way to read Tyler Cowen's New York Times column * noting that wars have often been associated with major economic advances which carries the headline "the lack of major wars may be hurting economic growth." Tyler lays out his central argument:

    "It may seem repugnant to find a positive side to war in this regard, but a look at American history suggests we cannot dismiss the idea so easily. Fundamental innovations such as nuclear power, the computer and the modern aircraft were all pushed along by an American government eager to defeat the Axis powers or, later, to win the Cold War. The Internet was initially designed to help this country withstand a nuclear exchange, and Silicon Valley had its origins with military contracting, not today's entrepreneurial social media start-ups. The Soviet launch of the Sputnik satellite spurred American interest in science and technology, to the benefit of later economic growth."

    This is all quite true, but a moment's reflection may give a bit different spin to the story. There has always been substantial support among liberals for the sort of government sponsored research that he describes here. The opposition has largely come from the right. However the right has been willing to go along with such spending in the context of meeting national defense needs. Its support made these accomplishments possible.

    This brings up the suggestion Paul Krugman made a while back (jokingly) that maybe we need to convince the public that we face a threat from an attack from Mars. Krugman suggested this as a way to prompt traditional Keynesian stimulus, but perhaps we can also use the threat to promote an ambitious public investment agenda to bring us the next major set of technological breakthroughs.

    * http://www.nytimes.com/2014/06/14/upshot/the-lack-of-major-wars-may-be-hurting-economic-growth.html

    -- Dean Baker

    Alex S -> anne... , November 05, 2016 at 05:15 PM
    Three points

    1. Baker's peaceful spending scenario is not likely because of human nature.

    2. Even if Baker's scenario happened, a given dollar will be used more efficiently in a war. If there is a threat of losing, you have an incentive to cut waste and spend on what produces results.

    3. The United States would not exist at all if we had not conquered the territory.

    anne -> anne... , November 05, 2016 at 04:24 PM
    http://watson.brown.edu/costsofwar/files/cow/imce/papers/2016/Costs%20of%20War%20through%202016%20FINAL%20final%20v2.pdf

    September, 2016

    US Budgetary Costs of Wars through 2016: $4.79 Trillion and Counting
    Summary of Costs of the US Wars in Iraq, Syria, Afghanistan and Pakistan and Homeland Security
    By Neta C. Crawford

    Summary

    Wars cost money before, during and after they occur - as governments prepare for, wage, and recover from them by replacing equipment, caring for the wounded and repairing the infrastructure destroyed in the fighting. Although it is rare to have a precise accounting of the costs of war - especially of long wars - one can get a sense of the rough scale of the costs by surveying the major categories of spending.

    As of August 2016, the US has already appropriated, spent, or taken on obligations to spend more than $3.6 trillion in current dollars on the wars in Iraq, Afghanistan, Pakistan and Syria and on Homeland Security (2001 through fiscal year 2016). To this total should be added the approximately $65 billion in dedicated war spending the Department of Defense and State Department have requested for the next fiscal year, 2017, along with an additional nearly $32 billion requested for the Department of Homeland Security in 2017, and estimated spending on veterans in future years. When those are included, the total US budgetary cost of the wars reaches $4.79 trillion.

    But of course, a full accounting of any war's burdens cannot be placed in columns on a ledger....

    anne -> anne... , November 05, 2016 at 04:27 PM
    http://www.nytimes.com/2014/06/14/upshot/the-lack-of-major-wars-may-be-hurting-economic-growth.html

    June 13, 2014

    The Lack of Major Wars May Be Hurting Economic Growth
    By Tyler Cowen

    [ Guy is really, really, really scary. ]

    Peter K. -> Alex S... , November 05, 2016 at 03:12 PM
    As Julio points out, under any objective analysis, politics have moved to the right.

    Rightwing policy solutions have been tried: tax cuts for the rich, deregulation, breaking of unions, etc.

    We've seen the results. Stagnation and slow growth.

    The social democratic post-war years were much better with shared prosperity for all citizens.

    JohnH -> Peter K.... , November 05, 2016 at 03:53 PM
    "It's possible to imagine a nation where people have less confidence in the courts."

    When Obama refuses to jail torturers or those responsible for mortgage fraud, we the people are justified in having less confidence in the courts.

    Peter Liepmann -> Peter K.... , November 05, 2016 at 05:52 PM
    Yes, we've seen right wing policies killing jobs and steering wealth to the wealthy, and that's bad policy. But unfortunately it seems it's always possible to do *worse*. Trump's policies would double down on wealth transfer, while he spouts the typical RW mantra of "(my dopey policy which would destroy jobs) would be good for jobs." Tim Harford made a good case for trust accounting for 99% of the difference in per capita GNP between the US and Somalia.
    ""If you take a broad enough definition of trust, then it would explain basically all the difference between the per capita income of the United States and Somalia," ventures Steve Knack, a senior economist at the World Bank who has been studying the economics of trust for over a decade. That suggests that trust is worth $12.4 trillion dollars a year to the U.S., which, in case you are wondering, is 99.5% of this country's income (2006 figures). If you make $40,000 a year, then $200 is down to hard work and $39,800 is down to trust.

    How could that be? Trust operates in all sorts of ways, from saving money that would have to be spent on security to improving the functioning of the political system. But above all, trust enables people to do business with each other. Doing business is what creates wealth." goo.gl/t3OqHc

    anne -> Peter Liepmann... , November 05, 2016 at 06:38 PM
    Precise references, including links are necessary.
    anne : , November 05, 2016 at 01:49 PM
    Adam Davidson in the essay refers to this paper, which is well worth reading:

    https://www.aeaweb.org/articles?id=10.1257/aer.20140913

    April, 2016

    Presidents and the US Economy: An Econometric Exploration
    By Alan S. Blinder and Mark W. Watson

    Abstract

    The US economy has performed better when the president of the United States is a Democrat rather than a Republican, almost regardless of how one measures performance. For many measures, including real GDP growth (our focus), the performance gap is large and significant. This paper asks why. The answer is not found in technical time series matters nor in systematically more expansionary monetary or fiscal policy under Democrats. Rather, it appears that the Democratic edge stems mainly from more benign oil shocks, superior total factor productivity (TFP) performance, a more favorable international environment, and perhaps more optimistic consumer expectations about the near-term future.

    Alex S -> anne... , November 05, 2016 at 02:59 PM
    Economic growth fueled by foreign oil is nice while it lasts but what will happen to the country when the oil runs out or we are forced to fight a war that disrupts the supply?
    pgl -> Alex S... , November 05, 2016 at 03:03 PM
    I was in college in the mid 1970's and we asked this question a lot. Some think this worry has gone away. I don't agree with those types. Which is why a green technology investment drive makes a lot of sense for so many reasons.
    anne -> Alex S... , November 05, 2016 at 03:40 PM
    Economic growth fueled by foreign oil is nice while it lasts but what will happen to the country when the oil runs out or we are forced to fight a war that disrupts the supply?

    [ Having read and reread this question, I do not begin to understand what it means. There is oil here, there is oil all about us, there is oil in Canada and Mexico and on and on, and the supply of oil about us is not about to be disrupted by any conceivable war and an inconceivable war is never going to be fought. ]

    anne -> anne... , November 05, 2016 at 03:50 PM
    Economic growth fueled by foreign oil is nice while it lasts but what will happen to the country when the oil runs out or we are forced to fight a war that disrupts the supply?

    [ My guess is that this is a way of scarily pitching for fracking for oil right in my garden, but I like my azealia bushes and mocking birds. ]

    Alex S -> anne... , November 05, 2016 at 04:03 PM
    Quote from the paper you linked to: "Arguably, oil shocks have more to do with US foreign policy than with US economic policy-the two Gulf Wars being prominent examples. That said, several economists have claimed that US monetary policy played an important role in bringing on the oil shocks. See, for example, Barsky and Kilian (2002)."
    anne -> Alex S... , November 05, 2016 at 04:13 PM
    Do set down a link to a reference when possible:

    http://www.nber.org/papers/w8389

    July, 2001

    Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative
    By Robert B. Barsky and Lutz Kilian

    Abstract

    This paper argues that major oil price increases were not nearly as essential a part of the causal mechanism that generated the stagflation of the 1970s as is often thought. There is neither a theoretical presumption that oil supply shocks are stagflationary nor robust empirical evidence for this view. In contrast, we show that monetary expansions and contractions can generate stagflation of realistic magnitude even in the absence of supply shocks. Furthermore, monetary fluctuations help to explain the historical movements of the prices of oil and other commodities, including the surge in the prices of industrial commodities that preceded the 1973/74 oil price increase. Thus, they can account for the striking coincidence of major oil price increases and worsening stagflation.

    Alex S -> Alex S... , November 05, 2016 at 04:22 PM
    My quote dragged on too long. I should have ended it with the first sentence. Monetary policy could play a role but foreign policy could still be the biggest factor.
    Peter K. -> anne... , November 05, 2016 at 03:09 PM
    http://www.bloomberg.com/news/articles/2016-10-25/fed-inclined-to-raise-rates-if-next-president-pumps-up-budget

    "Former Fed Vice Chairman Alan Blinder said he's skeptical that fiscal policy will be loosened a great deal if Clinton wins the election, as seems likely based on recent voter surveys.

    "She is promising not to make budget deficits bigger by her programs," said Blinder, who is now a professor at Princeton University. "Whatever fiscal stimulus there is ought to be small enough for the Fed practically to ignore it."

    PGL told us that Hillary's fiscal program would be YUGE.

    Like with Trump everything he says is a lie.

    anne -> Peter K.... , November 05, 2016 at 03:56 PM
    Dean Baker in "Rigged" * reminds me of the lasting limits to growth that appear to follow the sacrifice of growth, especially to the extent of allowing a recession, for the sake of budget balancing during a time of surrounding economic weakness:

    * http://deanbaker.net/images/stories/documents/Rigged.pdf

    October, 2016

    Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer
    By Dean Baker

    anne -> Peter K.... , November 05, 2016 at 04:01 PM
    Simply excellent:

    http://deanbaker.net/images/stories/documents/Rigged.pdf

    October, 2016

    Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer
    By Dean Baker

    Introduction: Trading in Myths

    In winter 2016, near the peak of Bernie Sanders' bid for the Democratic presidential nomination, a new line became popular among the nation's policy elite: Bernie Sanders is the enemy of the world's poor. Their argument was that Sanders, by pushing trade policies to help U.S. workers, specifically manufacturing workers, risked undermining the well-being of the world's poor because exporting manufactured goods to the United States and other wealthy countries is their path out of poverty. The role model was China, which by exporting has largely eliminated extreme poverty and drastically reduced poverty among its population. Sanders and his supporters would block the rest of the developing world from following the same course.

    This line, in its Sanders-bashing permutation, appeared early on in Vox, the millennial-oriented media upstart, and was quickly picked up elsewhere (Beauchamp 2016). After all, it was pretty irresistible. The ally of the downtrodden and enemy of the rich was pushing policies that would condemn much of the world to poverty.

    The story made a nice contribution to preserving the status quo, but it was less valuable if you respect honesty in public debate.

    The problem in the logic of this argument should be apparent to anyone who has taken an introductory economics course. It assumes that the basic problem of manufacturing workers in the developing world is the need for someone who will buy their stuff. If people in the United States don't buy it, then the workers will be out on the street and growth in the developing world will grind to a halt. In this story, the problem is that we don't have enough people in the world to buy stuff. In other words, there is a shortage of demand. But is it really true that no one else in the world would buy the stuff produced by manufacturing workers in the developing world if they couldn't sell it to consumers in the United States? Suppose people in the developing world bought the stuff they produced raising their living standards by raising their own consumption.

    That is how the economics is supposed to work. In the standard theory, general shortages of demand are not a problem. Economists have traditionally assumed that economies tended toward full employment. The basic economic constraint was a lack of supply. The problem was that we couldn't produce enough goods and services, not that we were producing too much and couldn't find anyone to buy them. In fact, this is why all the standard models used to analyze trade agreements like the Trans-Pacific Partnership assume trade doesn't affect total employment. Economies adjust so that shortages of demand are not a problem.

    In this standard story (and the Sanders critics are people who care about textbook economics), capital flows from slow-growing rich countries, where it is relatively plentiful and so gets a low rate of return, to fast-growing poor countries, where it is scarce and gets a high rate of return....

    pgl -> Peter K.... , November 06, 2016 at 03:37 AM
    It is yuuuuge - and no I did not say anything of the sort. Rather I noted it would be less than 1% of GDP. This is what I get for trying to get the facts right. It gets too complicated for you even when we simplify things so you get angry and start screaming "liar". Grow up.
    mrrunangun : , November 05, 2016 at 06:23 PM
    Per capta GDP grew from $51,100 to $51,400 between July 1 2015 and July 1 2016. This 0.6% growth does not seem to me to be a statistic supporting claims of improving employment and improving wage growth.

    Dean has suggested in one of his commentaries that wage growth may be an artifact of a decline in the quality of health insurance coverage. Wage growth is not figured net of increased outlays for deductibles and copays related to changes in health insurance. PPACA discourages low deductible and low copay health plans by placing a "Cadillac tax" on them, or at least threatening to do so. The consequent rise in wage workers' outlays for copays and deductibles are not captured in the statistics that claim to measure wage gains. This results in an income transfer from the well to the sick, but can produce statistics that can be interpreted in politically convenient ways by those so inclined

    anne -> mrrunangun... , November 05, 2016 at 06:33 PM
    https://fred.stlouisfed.org/graph/?g=8cpp

    August 4, 2014

    Real per capita Gross Domestic Product for United States and United Kingdom, 2007-2015

    (Percent change)


    https://fred.stlouisfed.org/graph/?g=8cpv

    August 4, 2014

    Real per capita Gross Domestic Product for United States and United Kingdom, 2007-2015

    (Indexed to 2007)

    anne -> mrrunangun... , November 05, 2016 at 06:35 PM
    https://fred.stlouisfed.org/graph/?g=8bue

    January 15, 2016

    Employment Cost Indexes for Wages and Salaries & Benefits, 2007-2016

    (Percent change)


    https://fred.stlouisfed.org/graph/?g=8bua

    January 15, 2016

    Employment Cost Indexes for Wages and Salaries & Benefits, 2002-2016

    (Percent change)

    pgl -> mrrunangun... , November 06, 2016 at 03:38 AM
    Excellent perspective. Let me say well done before PeterK gets angry and calls you a liar.
    ilsm -> mrrunangun... , November 06, 2016 at 05:10 AM
    I had a job offer about 15 years ago, the quoted salary was not to my liking so the HR type told me how much the Cadillac insurance was "worth".

    I do not think you 'get' why Cadillac plans are taxed............

    or

    'income transfers'......

    mrrunangun -> ilsm... , November 06, 2016 at 12:25 PM
    I get why the plans are taxed. I don't believe that the results of that policy have been beneficial for the bulk of the population. Most of the good done by PPACA was done by the expansion of Medicaid eligibility. I believe that requiring the working poor people to settle for high deductible high copay policies has had the practical effect of requiring them to choose between adequate medical and further impoverishment. I do not believe that the PPACA could not have been financed in a way less injurious to the working poor. As the insurers have been unable to make money in this deal, the hospital operators seem to have been the only winners in that their bad debt problems have been ameliorated.
    cm : , November 05, 2016 at 11:09 PM
    "people stop dreaming about what they could have if they invest in education, new businesses, and new ideas"

    And this is entirely rational, as in the situation described, the fruits of their efforts will likely be siphoned from their pockets by the elites and generally rent-seekers with higher social standing and leverage, or at best their efforts will amount to too little to be worth the risk (including the risk of wasting one's time i.e. opportunity cost). It also becomes correspondingly harder to convince and motivate others to join or fund any worthwhile efforts. What also happens (and has happened in "communism") is that people take their interests private, i.e. hidden from the view of those who would usurp or derail them.

    Chris G : , -1
    "Those who witness extreme social collapse at first hand seldom describe any deep revelation about the truths of human existence. What they do mention, if asked, is their surprise at how easy it is to die.

    The pattern of ordinary life, in which so much stays the same from one day to the next, disguises the fragility of its fabric. How many of our activities are made possible by the impression of stability that pattern gives? So long as it repeats, or varies steadily enough, we are able to plan for tomorrow as if all the things we rely on and don't think about too carefully will still be there. When the pattern is broken, by civil war or natural disaster or the smaller-scale tragedies that tear at its fabric, many of those activities become impossible or meaningless, while simply meeting needs we once took for granted may occupy much of our lives.

    What war correspondents and relief workers report is not only the fragility of the fabric, but the speed with which it can unravel. As we write this, no one can say with certainty where the unraveling of the financial and commercial fabric of our economies will end. Meanwhile, beyond the cities, unchecked industrial exploitation frays the material basis of life in many parts of the world, and pulls at the ecological systems which sustain it.

    Precarious as this moment may be, however, an awareness of the fragility of what we call civilisation is nothing new.

    'Few men realise,' wrote Joseph Conrad in 1896, 'that their life, the very essence of their character, their capabilities and their audacities, are only the expression of their belief in the safety of their surroundings.' Conrad's writings exposed the civilisation exported by European imperialists to be little more than a comforting illusion, not only in the dark, unconquerable heart of Africa, but in the whited sepulchres of their capital cities. The inhabitants of that civilisation believed 'blindly in the irresistible force of its institutions and its morals, in the power of its police and of its opinion,' but their confidence could be maintained only by the seeming solidity of the crowd of like-minded believers surrounding them. Outside the walls, the wild remained as close to the surface as blood under skin, though the city-dweller was no longer equipped to face it directly.

    Bertrand Russell caught this vein in Conrad's worldview, suggesting that the novelist 'thought of civilised and morally tolerable human life as a dangerous walk on a thin crust of barely cooled lava which at any moment might break and let the unwary sink into fiery depths.' What both Russell and Conrad were getting at was a simple fact which any historian could confirm: human civilisation is an intensely fragile construction. It is built on little more than belief: belief in the rightness of its values; belief in the strength of its system of law and order; belief in its currency; above all, perhaps, belief in its future.

    Once that belief begins to crumble, the collapse of a civilisation may become unstoppable. That civilisations fall, sooner or later, is as much a law of history as gravity is a law of physics. What remains after the fall is a wild mixture of cultural debris, confused and angry people whose certainties have betrayed them, and those forces which were always there, deeper than the foundations of the city walls: the desire to survive and the desire for meaning."

    Source - http://dark-mountain.net/about/manifesto/

    [Nov 07, 2016] Neoliberalisms Border Guard

    Notable quotes:
    "... fundamentally antiracism and other identitarian programs are not only the left wing of neoliberalism but active agencies in its imposition of a notion of the boundaries of the politically thinkable " ..."
    "... Feminism…? gender discrimination….? racial equality ? …. racism ? Yes, OK, looks good, let's see what works best for us…. ..."
    "... There is still the issue that some professions are more prestigious or lucrative than others and attract many individuals with a skill set that would better serve other functions. ..."
    "... Valuing people for who they are and integrating them into the social order implies that they have something to contribute and that they have a responsibility for making things better for others, not just making themselves more comfortable in public. ..."
    "... The idea that we have progressed past prior barbarisms … we have forgotten that "the past is prologue" among other things. ..."
    "... This label of progressivism is just so coy and unconvincing in the face of neoliberalism's full spectrum dominance of all facets of society and culture. ..."
    "... I know Reagan was no conservative and Thatcher lost all moorings as an enlightened Tory as the "project" became all consuming to the detriment of all else. The Tory today isn't conservative – far from it – a real ideolgical zealot for the promotion of "me, myself and (at most) my class" in most cases. ..."
    "... Is Progressivism just a balm for those who want to feel good about themselves but don't want to do think about anything in particular? In fact, it is just a cover for I'm ok, screw you pal when the chips are down? ..."
    Nov 07, 2016 | www.nakedcapitalism.com
    animalogic November 7, 2016 at 7:10 am

    "These responses [show] how fundamentally antiracism and other identitarian programs are not only the left wing of neoliberalism but active agencies in its imposition of a notion of the boundaries of the politically thinkable "

    Yes: there we have it.

    Neoliberalism (unlike conservatism, often mistaken for each other) has NO social/cultural values…or, perhaps, more precisely, it has ANY social/cultural values which directly/indirectly advance the 0.1%'s Will to wealth & power. (Likely, "wealth" is redundant, as it's a manifestation of power). Neoliberalism is powerful, like all great "evils" because it is completely protean.

    ( It makes the Nazi's look child-like & naive: after all, the Nazi's actually "believed" in certain things… [ evil nonsense, but that's not the point at the moment].

    Feminism…? gender discrimination….? racial equality ? …. racism ? Yes, OK, looks good, let's see what works best for us….

    Moneta November 7, 2016 at 7:40 am

    I often wonder if liberalism goes hand in hand with the availability of energy and resources… shrink these and witness a surge in all types of discrimination.

    You will notice that genocides are closely tied to the availability and distribution of resources… we humans seem to be masters at inventing all kinds of reasons to explain why we deserve the loot and not others.

    Moneta November 7, 2016 at 7:13 am

    There is still the issue that some professions are more prestigious or lucrative than others and attract many individuals with a skill set that would better serve other functions. And we do this under the guise that we can do whatever we want if we try hard enough.

    There is a difference between PC and truly valuing every individual in society no matter their job or profession.

    Uahsenaa November 7, 2016 at 8:49 am

    There is a difference between PC and truly valuing every individual in society no matter their job or profession.

    This.

    Mere inclusiveness, while not in itself a bad thing–being aware of other people's circumstances is simply polite–it doesn't really get you much further past where you already are and in large part can be satisfied with better rhetoric (or better PR, if you insist on being cynical about such things), all the while capitalism goes on its merry way, because no real pressure to change has been applied. Valuing people for who they are and integrating them into the social order implies that they have something to contribute and that they have a responsibility for making things better for others, not just making themselves more comfortable in public.

    What so often gets lost in these conversations about safe spaces and what have you is that we should have a sense of shared responsibility, responding TO others' circumstances while also being responsible FOR the conditions that oppress us all to greater and lesser degrees.

    In other words, it's about checking your privilege AND seizing the means of production, because without the second one, the first just ends up being mere window dressing.

    EATF – I really like these. I'll be sad when they conclude!

    Disturbed Voter November 7, 2016 at 7:20 am

    The idea that we have progressed past prior barbarisms … we have forgotten that "the past is prologue" among other things. Progressives think that if we completely forget the past, then the memes that created the sins of the past will become unthinkable, that like interrupted family violence, a chain will be broken and we can heal. Such people don't believe in the existence of Evil.

    Moneta November 7, 2016 at 7:49 am

    Is a lion eating an antelope evil?

    makedoanmend November 7, 2016 at 7:44 am

    As a socialist, what I miss is the conservative (small c) conversation in our daily affairs. This label of progressivism is just so coy and unconvincing in the face of neoliberalism's full spectrum dominance of all facets of society and culture. The conservative gave voice and depth to our internal doubts about how the future was all brite and new – at least the few conservatives I knew.

    I wonder would a conservative voice (seemingly non-existent any more) have argued for a more instructive change from industrialisation into what we've now become – might they have mitigated the course and provided pointers to alternatives?

    Maybe they did and I wasn't listening.

    I know Reagan was no conservative and Thatcher lost all moorings as an enlightened Tory as the "project" became all consuming to the detriment of all else. The Tory today isn't conservative – far from it – a real ideolgical zealot for the promotion of "me, myself and (at most) my class" in most cases.

    Is Progressivism just a balm for those who want to feel good about themselves but don't want to do think about anything in particular? In fact, it is just a cover for I'm ok, screw you pal when the chips are down?

    I never really liked Disney films as a kid and I certainly don't like them now – but each to their own.

    diptherio November 7, 2016 at 8:49 am

    I'm glad you're making these points. The arc of the story mirrors a number of conversations I've been having lately with people from poor, white, rural backgrounds. The insistence by good liberals of making a show of their concern for, and outrage over, both major and minor affronts to people of color, women, LGBTQI people, etc., while at the same time making jokes about toothless, inbred trailer-trash, is starting to really piss some people off. These are not conservative people. These are people to the left of Chomsky.

    For some reason, you can slander and shame poor white folks all you want…oh yeah, it's because they're deplorable racist, fundamentalist Christians who vote for evil Republicans and probably don't even have a GED, much less a college degree…so f- 'em. The good liberals, on the other hand, are highly-educated, fundamentalist secular humanists, who've been to college and vote for evil Democrats…which makes them God's chosen people, apparently. The rest are blasphemers, barely even human, and deserve whatever they get.

    Until we make a real commitment to both listening to everyone's suffering and then to doing practical things, now, to remedy that suffering, we'll be doomed to Dollary Clump elections and divide-and-conquer tactics forever after. Let's not go down that road, how about? How's about let's try treating each other with respect and compassion for once, just to see how it goes? Every other way lies damnation, imho.

    DJG November 7, 2016 at 9:02 am

    Sorry: I'm not buying this episode: For instance, maybe the reason for the stress on smartness is plain old class warfare.

    The U.S. slavishly follows English fashions, and one of the fashions in England (with which we have that Special Relationship) is that the upper classes made sure that their kids got into Eton, Cambridge, Oxford–the whole self-perpetuating educational system of the Pythonesque English "smart" twit.

    So the U S of A has imitated its betters in producing a lot of Tony Blairs. Exhibit A: Chelsea Clinton.

    This has little to do with smartness. It is all about class privilege. (Which has little to do with postmodernism and its supposed piercing insights.)

    flora November 7, 2016 at 9:02 am

    The title- Neoliberalisms Boarder Guard" – and this quote:

    "Looking now at the other two principles – postmodernism and suffering – Wendy Brown foretold that, as foci, they would be unable to coexist. Since the time of her prediction, the balance between the two has shifted dramatically, and it has become clear that Brown was rooting for the losing side. "

    combine to make me wonder. Does liberalism simply accommodate itself to the prevailing ruling power structure, regardless of that structure's philosophy? Is liberalism today a philosophy or a social emollient? Desirable social traits do not challenge the ruling neoliberal philosophy, although they make create a nice space within neoliberalism.

    DJG November 7, 2016 at 9:05 am

    Not buying this episode: "High profile instances of genocide and torture don't appear every day, and commitment flags without regular stimulation. And so we have taken seriously at least one idea from postmodernism, the fascination with slight conceptual nuances, and the faith or fear that these nuances can produce enormously consequential effects."

    Oh really?

    This sentence is on the order of, Who speaks of the Armenians?

    Guantanamo is high profile. Homan Square is high profile. Yemen is genocide. What are the Dakota Pipeline protests about? Genocide. Your bourgeois eyeglasses just don't allow you to look. It has nothing to do with micro-aggressions.

    [Nov 06, 2016] Trump vs. the REAL Nuts -- the GOP Uniparty Establishment

    Notable quotes:
    "... An awful lot of people out there think we live in a one-party state-that we're ruled by what is coming to be called the "Uniparty." ..."
    "... There is a dawning realization, ever more widespread among ordinary Americans, that our national politics is not Left versus Right or Republican versus Democrat; it's we the people versus the politicians. ..."
    "... Donald Trump is no nut. If he were a nut, he would not have amassed the fortune he has, nor nurtured the capable and affectionate family he has. ..."
    "... To be conservative, then, is to prefer the familiar to the unknown, to prefer the tried to the untried, fact to mystery, the actual to the possible, the limited to the unbounded, the near to the distant, the sufficient to the superabundant, the convenient to the perfect, present laughter to utopian bliss. ..."
    "... Trump has all the right instincts. And he's had the guts and courage-and, just as important, the money -to do a thing that has badly needed doing for twenty years: to smash the power of the real nuts in the GOP Establishment. ..."
    Oct 29, 2016 | www.unz.com
    54 Comments Credit: VDare.com.

    A couple of remarks in Professor Susan McWillams' recent Modern Age piece celebrating the 25th anniversary of Christopher Lasch's 1991 book The True and Only Heaven , which analyzed the cult of progress in its American manifestation, have stuck in my mind. Here's the first one:

    In the most recent American National Election Studies survey, only 19 percent of Americans agreed with the idea that the government, "is run for the benefit of all the people." [ The True and Only Lasch: On The True and Only Heaven, 25 Years Later , Fall 2016]

    McWilliams adds a footnote to that: The 19 percent figure is from 2012, she says. Then she tells us that in 1964, 64 percent of Americans agreed with the same statement.

    Wow. You have to think that those two numbers, from 64 percent down to 19 percent in two generations, tell us something important and disturbing about our political life.

    Second McWilliams quote:

    In 2016 if you type the words "Democrats and Republicans" or "Republicans and Democrats" into Google, the algorithms predict your next words will be "are the same".

    I just tried this, and she's right. These guesses are of course based on the frequency with which complete sentences show up all over the internet. An awful lot of people out there think we live in a one-party state-that we're ruled by what is coming to be called the "Uniparty."

    There is a dawning realization, ever more widespread among ordinary Americans, that our national politics is not Left versus Right or Republican versus Democrat; it's we the people versus the politicians.

    Which leads me to a different lady commentator: Peggy Noonan, in her October 20th Wall Street Journal column.

    The title of Peggy's piece was: Imagine a Sane Donald Trump . [ Alternate link ]Its gravamen: Donald Trump has shown up the Republican Party Establishment as totally out of touch with their base, which is good; but that he's bat-poop crazy, which is bad. If a sane Donald Trump had done the good thing, the showing-up, we'd be on course to a major beneficial correction in our national politics.

    It's a good clever piece. A couple of months ago on Radio Derb I offered up one and a half cheers for Peggy, who gets a lot right in spite of being a longtime Establishment Insider. So it was here. Sample of what she got right last week:

    Mr. Trump's great historical role was to reveal to the Republican Party what half of its own base really thinks about the big issues. The party's leaders didn't know! They were shocked, so much that they indulged in sheer denial and made believe it wasn't happening.

    The party's leaders accept more or less open borders and like big trade deals. Half the base does not! It is longtime GOP doctrine to cut entitlement spending. Half the base doesn't want to, not right now! Republican leaders have what might be called assertive foreign-policy impulses. When Mr. Trump insulted George W. Bush and nation-building and said he'd opposed the Iraq invasion, the crowds, taking him at his word, cheered. He was, as they say, declaring that he didn't want to invade the world and invite the world. Not only did half the base cheer him, at least half the remaining half joined in when the primaries ended.

    I'll just pause to note Peggy's use of Steve Sailer' s great encapsulation of Bush-style NeoConnery: "Invade the world, invite the world." Either Peggy's been reading Steve on the sly, or she's read my book We Are Doomed , which borrows that phrase. I credited Steve with it, though, so in either case she knows its provenance, and should likewise have credited Steve.

    End of pause. OK, so Peggy got some things right there. She got a lot wrong, though

    Start with the notion that Trump is crazy. He's a nut, she says, five times. His brain is "a TV funhouse."

    Well, Trump has some colorful quirks of personality, to be sure, as we all do. But he's no nut. A nut can't be as successful in business as Trump has been.

    I spent 32 years as an employee or contractor, mostly in private businesses but for two years in a government department. Private businesses are intensely rational, as human affairs go-much more rational than government departments. The price of irrationality in business is immediate and plainly financial. Sanity-wise, Trump is a better bet than most people in high government positions.

    Sure, politicians talk a good rational game. They present as sober and thoughtful on the Sunday morning shows.

    Look at the stuff they believe, though. Was it rational to respond to the collapse of the U.S.S.R. by moving NATO right up to Russia's borders? Was it rational to expect that post-Saddam Iraq would turn into a constitutional democracy? Was it rational to order insurance companies to sell healthcare policies to people who are already sick? Was the Vietnam War a rational enterprise? Was it rational to respond to the 9/11 attacks by massively increasing Muslim immigration?

    Make your own list.

    Donald Trump displays good healthy patriotic instincts. I'll take that, with the personality quirks and all, over some earnest, careful, sober-sided guy whose head contains fantasies of putting the world to rights, or flooding our country with unassimilable foreigners.

    I'd add the point, made by many commentators, that belongs under the general heading: "You don't have to be crazy to work here, but it helps." If Donald Trump was not so very different from run-of-the-mill politicians-which I suspect is a big part of what Peggy means by calling him a nut-would he have entered into the political adventure he's on?

    Thor Heyerdahl sailed across the Pacific on a hand-built wooden raft to prove a point, which is not the kind of thing your average ethnographer would do. Was he crazy? No, he wasn't. It was only that some feature of his personality drove him to use that way to prove the point he hoped to prove.

    And then there is Peggy's assertion that the Republican Party's leaders didn't know that half the party's base were at odds with them.

    Did they really not? Didn't they get a clue when the GOP lost in 2012, mainly because millions of Republican voters didn't turn out for Mitt Romney? Didn't they, come to think of it, get the glimmering of a clue back in 1996, when Pat Buchanan won the New Hampshire primary?

    Pat Buchanan is in fact a living counter-argument to Peggy's thesis-the "sane Donald Trump" that she claims would win the hearts of GOP managers. Pat is Trump without the personality quirks. How has the Republican Party treated him ?

    Our own Brad Griffin , here at VDARE.com on October 24th, offered a couple more "sane Donald Trumps": Ron Paul and Mike Huckabee. How did they fare with the GOP Establishment?

    Donald Trump is no nut. If he were a nut, he would not have amassed the fortune he has, nor nurtured the capable and affectionate family he has. Probably he's less well-informed about the world than the average pol. I doubt he could tell you what the capital of Burkina Faso is. That's secondary, though. A President has people to look up that stuff for him. The question that's been asked more than any other about Donald Trump is not, pace Peggy Noonan, "Is he nuts?" but, " Is he conservative? "

    I'm sure he is. But my definition of "conservative" is temperamental, not political. My touchstone here is the sketch of the conservative temperament given to us by the English political philosopher Michael Oakeshott :

    To be conservative, then, is to prefer the familiar to the unknown, to prefer the tried to the untried, fact to mystery, the actual to the possible, the limited to the unbounded, the near to the distant, the sufficient to the superabundant, the convenient to the perfect, present laughter to utopian bliss.

    Rationalism in Politics and other essays (1962)

    That fits Trump better than it fits any liberal you can think of-better also than many senior Republicans.

    For example, it was one of George W. Bush's senior associates-probably Karl Rove-who scoffed at opponents of Bush's delusional foreign policy as "the reality-based community." It would be hard to think of a more un -Oakeshottian turn of phrase.

    Trump has all the right instincts. And he's had the guts and courage-and, just as important, the money -to do a thing that has badly needed doing for twenty years: to smash the power of the real nuts in the GOP Establishment.

    I thank him for that, and look forward to his Presidency.

    [Nov 06, 2016] Bernie Sanders Supporter Bashes Hillary Clinton from Her Own Stage 'Trapped in World of Elite,' 'Lost Grip of Average Person'

    Notable quotes:
    "... He opened his remarks by bashing Donald Trump on student loan debt, but then surprisingly turned to bashing Hillary Clinton from her own stage. "Unfortunately, Hillary doesn't really care about this issue either," Vanfosson said. "The only thing she cares about is pleasing her donors, the billionaires who fund her campaign. The only people that really trust Hillary are Goldman Sachs, CitiGroup can trust Hillary, the military industrial complex can trust Hillary. Her good friend Henry Kissinger can trust Hillary." ..."
    "... "She is so trapped in the world of the elite that she has completely lost grip on what it's like to be an average person," Vanfosson continued. "She doesn't care. Voting for another lesser of two evils, there's no point." ..."
    www.breitbart.com

    Just a few days before the general election, Democratic presidential nominee Hillary Rodham Clinton and her running mate Sen. Tim Kaine (D-VA) still can't unite her party. Supporters of Sen. Bernie Sanders of Vermont, her Democratic primary rival, are disrupting her campaign's efforts to take on GOP nominee Donald J. Trump, and in Iowa on Saturday one prominent Sanders backer was actually escorted out of a Clinton campaign event for urging those present not to vote for Clinton-for which he was cheered by the crowd.

    Kaleb Vanfosson, the president of Iowa State University's Students for Bernie chapter, bashed Hillary Clinton and told rally-goers at her own campaign event not to vote for her. He was cheered.

    He opened his remarks by bashing Donald Trump on student loan debt, but then surprisingly turned to bashing Hillary Clinton from her own stage. "Unfortunately, Hillary doesn't really care about this issue either," Vanfosson said. "The only thing she cares about is pleasing her donors, the billionaires who fund her campaign. The only people that really trust Hillary are Goldman Sachs, CitiGroup can trust Hillary, the military industrial complex can trust Hillary. Her good friend Henry Kissinger can trust Hillary."

    The crowd at the Clinton-Kaine event erupted in applause.

    "She is so trapped in the world of the elite that she has completely lost grip on what it's like to be an average person," Vanfosson continued. "She doesn't care. Voting for another lesser of two evils, there's no point."

    At that point, a Clinton staffer rushed on stage and grabbed the young man by the arm to escort him off the stage and out of the event.

    [Nov 06, 2016] Michael Hudson on Meet the Renegades

    Notable quotes:
    "... In fact, I would posit that the Ivy League, especially Yale, Princeton, Harvard and MIT, are the principal crime factories in America today. ..."
    "... Brownback is in Kansas; UMKC is in Missouri. There is a Kansas City in Kansas, and another Kansas City in Missouri. Missouri is not as red as KS, but it's still a red state. ..."
    "... UMKC is part of the state system and most likely receives no funding from the city. It was home to New Letters, a respected literary magazine edited by poet John Ciardi. I hail from Kanasa City and always thought of UMKC as a decent commuter school, mostly catering to the educational needs of adult city dwellers. But the evolution of both the Econ and jazz studies departments lead me to suspect things have changed. Whether that's by design or through organic happenstance I don't know. ..."
    "... Couldn't a Marxian analysis of capitalism as a whole also shed some light on this issue? I think Hudson is pretty much right but I think, like Sanders, he's offering a reformist option as opposed to a full on critique of the entire system. ..."
    "... Not that a revolution is the option you necessarily want to go with, I just think that Marx's criticism of capitalism has useful information that could help with shaping the perspective here. ..."
    Nov 05, 2016 | www.nakedcapitalism.com
    Michael Hudson spends a half hour with Meet the Renegades explaining his views on money, finance, economic training, rentier capitalism, and how debt overhangs operate. Hudson fans will recognize his regular themes. This is a good segment for introducing people you know to Hudson and to heterodox economic ideas.

    EndOfTheWorld November 5, 2016 at 5:52 am

    I've always found it interesting that both Hudson and Bill Black are on the faculty of UMKC, which is a state university in a pretty conservative state. It's possible that some of the funding for UMKC comes from the municipality of Kansas City, MO, but that town has never been known as a hotbed of radical intellectuality either.

    Distrubed Voter November 5, 2016 at 6:21 am

    Joseph Campbell didn't teach at an Ivy League either. Conformity starts with the faculty in your own department … and the Ivy League is as status quo and status conscious as it gets.

    craazyboy November 5, 2016 at 8:43 am

    The Ivy League are not much different than privately held corporations when you consider who their alma materi are, how much money the alma materi have, and where Ivy League endowments come from.

    sgt_doom November 5, 2016 at 1:31 pm

    In fact, I would posit that the Ivy League, especially Yale, Princeton, Harvard and MIT, are the principal crime factories in America today.

    Please recall that the dood who financed Liberty Lobby and other white supremacist nonsense was Koch family patriarch, Fred Koch, who was a trustee at MIT. (Ever hear Noam Chomsky complain about that????? Of course not!)

    a different chris November 5, 2016 at 8:40 am

    Ah but is it really an inherently conservative state fiscally, or just socially? That is, are the people like Brownback appealing to one sort of conservatism and using that to do a "trust me" on the other sort?

    I would say it's not unreasonable for anybody to delegate something they are not so sure of to somebody they trust for other reasons.

    EndOfTheWorld November 5, 2016 at 11:11 am

    Brownback is in Kansas; UMKC is in Missouri. There is a Kansas City in Kansas, and another Kansas City in Missouri. Missouri is not as red as KS, but it's still a red state.

    Randy November 5, 2016 at 8:53 am

    UMKC is part of the state system and most likely receives no funding from the city. It was home to New Letters, a respected literary magazine edited by poet John Ciardi. I hail from Kanasa City and always thought of UMKC as a decent commuter school, mostly catering to the educational needs of adult city dwellers. But the evolution of both the Econ and jazz studies departments lead me to suspect things have changed. Whether that's by design or through organic happenstance I don't know.

    Moneta November 5, 2016 at 8:59 am

    If you are not on the money makers' distribution list, it would make sense to find other ways to get some of that loot if you can't the traditional way…

    You can be conservative in your social values but want change, i.e. liberalism, in the way the monetary system distributes the money.

    Steve H. November 5, 2016 at 10:47 am

    Thank Warren Mosler, wouldn't be there without his direct support.

    EndOfTheWorld November 5, 2016 at 7:32 am

    Well, little UMKC can claim to be pretty much "cutting edge" in economics with these two stalwarts on their faculty.

    Benedict@Large November 5, 2016 at 9:32 am

    The UMKC is also the home of the Kansas City School of Economics, more commonly known as the MMT School. Neither Hudson nor Black are MMTers per se, but both have grown by their affiliation with the school.

    Amateur Socialist November 5, 2016 at 9:14 am

    Thanks for sharing this excellent interview. Watching it I realized the people I actually admire more than Hudson are his students. They must care more about learning the truth than securing wealth and job prospects on wall street.

    susan the other November 5, 2016 at 11:04 am

    fun to learn how Hudson fired Greenspan way back when

    EndOfTheWorld November 5, 2016 at 11:08 am

    lol "Free trade" is Orwellian word usage.

    King Arthur November 5, 2016 at 11:49 am

    Couldn't a Marxian analysis of capitalism as a whole also shed some light on this issue? I think Hudson is pretty much right but I think, like Sanders, he's offering a reformist option as opposed to a full on critique of the entire system.

    Not that a revolution is the option you necessarily want to go with, I just think that Marx's criticism of capitalism has useful information that could help with shaping the perspective here.

    BecauseTradition November 5, 2016 at 12:29 pm

    The solution is write down the debt. Michael Hudson

    Why not Steve Keen's "A Modern Jubilee" since non-debtors have been cheated by the system too?

    Steve in Dallas November 5, 2016 at 12:46 pm

    I asked Yves Smith at the Dallas meetup last week (paraphrasing) "Do you meet with Michael Hudson and Bill Black… is the independent media community, or any community, organizing around Michael Hudson and Bill Black… to not only support and promote Hudson's and Black's perspectives but to help develop their concepts and 'fine tune' their messaging?" I said to Yves "Hudson and Black are clearly the leaders we desperately need to rally behind and push into Washington… they clearly know what needs to be done… a PR machine needs to be developed… to get their messages out to our families, friends, and acquaintances… unfortunately, the current messaging is not good enough… I can't get my family, friends, and others to engage and echo the messaging to their family, friends, etc."

    Michael Hudson has been good at repeating his central message… 'by increasing land, monopoly, and finance rent costs… the 1% are a highly organized mafia methodically looting our economy… effectively raping, pillaging and consequently destroying every component of our social structures'.

    Very unfortunately, Bill Blacks central message seems to have been lost for years now… he doesn't repeat his central message… 'the crimes must be stopped… there is no alternative… looting criminals MUST be publicly exposed, investigated, indicted, prosecuted, convicted, punished and their loot returned to society… by letting cheaters prosper, organized white-collar crime, perpetrated by the top-most leaders of our public and private institutions, has become an epidemic… the very fabric of civil society is being destroyed… we have no choice… the criminals must be stopped… and the only way to do that is to publicly expose, investigate, indict, prosecute, punish, and take back what is ours'.

    In 2008, when I tuned out of the mainstream media and tuned into the independent media, I thought the messages from Michael Hudson ("they are organized criminals… this is what they're doing…") and Bill Black ("the criminals must be stopped… here's how we stopped the Savings & Loan criminals…) would resonate and become common knowledge. I quickly discovered that it didn't even resonate with close family and friends. Why???

    I will send out this video… Michael Hudson at his best, speaking-wise. I don't expect to get any reaction… why?… very frustrated…

    Ivy November 5, 2016 at 1:35 pm

    Amen. Once you start noticing, it becomes hard to stop. In looking hard for a silver lining to the current election storm clouds, public awareness of the MSM seems to have nudged a few toward slightly more objectivity, although I may just be wishing for that after media fatigue ;)

    [Nov 05, 2016] Economists View Paul Krugman Who Broke Politics

    Notable quotes:
    "... I'll be interested to see how much Hillary tries to "work with Republicans" when it comes to foreign or domestic policy, as she's promising on the campaign trail. ..."
    "... In a recent interview Biden was talking about how his "friends" in the Senate like McCain, Lindsy Graham, etc. - the sane ones who hate Trump - have to come out in support of the Republican plan to block Clinton from nominating a Supreme Court judge, because of if they don't, the Koch brothers will primary them. ..."
    "... While I agree that the Republican party has been interested in whatever argument will win elections and benefit their donor class, doesn't the Democratic Party also have a donor class? Haven't Bill Clinton, Barack Obama, and Hillary Clinton had a close relationship with some business interests? Did anyone go to jail after the asset bubble? Did welfare reform work or simply shift the problem out of view? How complicit are the Democrats in the great risk shift? ..."
    "... I would think the scorched earth politics of the neoliberals required Democrats to shift to the right if they ever hoped to win an election, again. That is what it has looked like to me. The American equivalent of New Labor in Britain. So, we have a more moderate business-interest group of Democrats and a radical business-interest group of Republicans during the past 40 years. I think Kevin Phillips has made this argument. ..."
    "... Our grand experimental shift back to classical theory involved supply side tax cuts, deregulation based on the magic of new finance theory, and monetarist pro-financial monetary policy. All of which gave us the masquerade of a great moderation that ended in the mother of all asset bubbles. While we shredded the safety net. ..."
    "... Now the population is learning the arguments about free trade magically lifting all boats up into the capitalist paradise has blown up. We've shifted the risk onto the working population and they couldn't bear it. ..."
    "... Economists lied to the American people about trade and continue to lie about the issue day in and day out. Brainwashing kids with a silly model called comparative advantage. ..."
    Nov 05, 2016 | economistsview.typepad.com
    Peter K. : November 04, 2016 at 08:51 AM , 2016 at 08:51 AM
    This is all true but Krugman always fails to tell the other side of the story.

    I'll be interested to see how much Hillary tries to "work with Republicans" when it comes to foreign or domestic policy, as she's promising on the campaign trail.

    The centrists always do this to push through centrist, neoliberal "solutions" which anger the left.

    In a recent interview Biden was talking about how his "friends" in the Senate like McCain, Lindsy Graham, etc. - the sane ones who hate Trump - have to come out in support of the Republican plan to block Clinton from nominating a Supreme Court judge, because of if they don't, the Koch brothers will primary them.

    Let's hope Hillary does something about campaign finance reform and Citizen United and takes a harder line against obstructionist Republicans.

    Eric : November 04, 2016 at 09:28 AM

    While I agree that the Republican party has been interested in whatever argument will win elections and benefit their donor class, doesn't the Democratic Party also have a donor class? Haven't Bill Clinton, Barack Obama, and Hillary Clinton had a close relationship with some business interests? Did anyone go to jail after the asset bubble? Did welfare reform work or simply shift the problem out of view? How complicit are the Democrats in the great risk shift?

    I would think the scorched earth politics of the neoliberals required Democrats to shift to the right if they ever hoped to win an election, again. That is what it has looked like to me. The American equivalent of New Labor in Britain. So, we have a more moderate business-interest group of Democrats and a radical business-interest group of Republicans during the past 40 years. I think Kevin Phillips has made this argument.

    Our grand experimental shift back to classical theory involved supply side tax cuts, deregulation based on the magic of new finance theory, and monetarist pro-financial monetary policy. All of which gave us the masquerade of a great moderation that ended in the mother of all asset bubbles. While we shredded the safety net.

    Now the population is learning the arguments about free trade magically lifting all boats up into the capitalist paradise has blown up. We've shifted the risk onto the working population and they couldn't bear it.

    Perhaps the less partisan take-way would be - is it possible for any political candidate to get elected in this environment without bowing to the proper interests? How close did Bernie get? And, how do we fix it without first admitting that the policies of both political parties have not really addressed the social adjustments necessary to capture the benefits of globalization? We need an evolution of both political parties - not just the Republicans. If we don't get it, we can expect the Trump argument to take even deeper root.

    America was rich when it had tariff walls - now it's becoming poor - Thanks economists! : November 04, 2016 at 09:43 PM
    Economists lied to the American people about trade and continue to lie about the issue day in and day out. Brainwashing kids with a silly model called comparative advantage. East Asian economists including Ha Joon Chang among others debunked comparative advantage and Ricardianism long ago.

    Manufacturing is everything. It is all that matters. We needed tariffs yesterday. Without them the country is lost.

    [Oct 30, 2016] Soft neoliberals are using anti-racism to discredit economic populism and its motivations, using the new politics of the right as a foil

    Oct 30, 2016 | crookedtimber.org

    bruce wilder 10.30.16 at 9:34 pm 34

    The success of [civil rights and anti-apartheid] movements did not end racism, but drove it underground, allowing neoliberals to exploit racist and tribalist political support while pursuing the interests of wealth and capital, at the expense of the (disproportionately non-white) poor.

    That coalition has now been replaced by one in which the tribalists and racists are dominant. For the moment at least, [hard] neoliberals continue to support the parties they formerly controlled, with the result that the balance of political forces between the right and the opposing coalition of soft neoliberals and the left has not changed significantly.

    There's an ambiguity in this narrative and in the three-party analysis.

    Do we acknowledge that the soft neoliberals in control of the coalition that includes the inchoate left also "exploit racist and tribalist political support while pursuing the interests of wealth and capital, at the expense of the (disproportionately non-white) poor."? They do it with a different style and maybe with some concession to economic melioration, as well as supporting anti-racist and feminist policy to keep the inchoate left on board, but . . .

    The new politics of the right has lost faith in the hard neoliberalism that formerly furnished its policy agenda of tax cuts for the rich, war in the Middle East and so on, leaving the impure resentment ungoverned and unfocused, as you say.

    The soft neoliberals, it seems to me, are using anti-racism to discredit economic populism and its motivations, using the new politics of the right as a foil.

    The problem of how to oppose racism and tribalism effectively is now entangled with soft neoliberal control of the remaining party coalition, which is to say with the credibility of the left party as a vehicle for economic populism and the credibility of economic populism as an antidote for racism or sexism. (cf js. @ 1,2)

    The form of tribalism used to mobilize the left entails denying that an agenda of economic populism is relevant to the problems of sexism and racism, because the deplorables must be deplored to get out the vote. And, because the (soft) neoliberals in charge must keep economic populism under control to deliver the goods to their donor base.

    [Oct 30, 2016] The term racist no longer carries any of the stigma it once held in part because the term is deployed so cynically and freely as to render it practically meaningless

    Notable quotes:
    "... Grenville regards understanding the opposition to globalization by the Trump constituency as essential. If we are discussing America, we do not need to look to illegal immigration, or undocumented workers to find hostility to out-group immigrants along religious and ethnic lines. ..."
    "... These tendencies are thrown into sharper relief when this hostility is directed towards successfully assimilated immigrants of a different color who threaten the current occupants of a space – witness the open racism and hostility displayed towards Japanese immigrants on the west coast 1900-1924, or so. A similar level of hostility is sometimes/often displayed towards Koreans. The out-grouping in Japan is tiered and extends to ethnicity and language of groups within the larger Japanese community, as it does in the UK, although not as commonly along religious lines as it does elsewhere. ..."
    "... European workers have done much better in the new global economy.(The problems in Europe center around mass migration of people who resist assimilation and adoption of a Humanistic world view.) The answer is simple and horrifying. ..."
    "... A large percentage of American workers consistently vote against their own interest which has allowed the republican party in service to a powerful elite billionaire class ..."
    "... The combination of these reliable cadre of deplorables , controlled by faux news and hate radio , and the lack of political engagement by the low income Americans , has essentially turned power over to the billionaire class. ..."
    Oct 30, 2016 | crookedtimber.org

    kidneystones 10.30.16 at 9:15 am

    I read an interesting piece in the Nikkei, hardly an left-leaning publication citing Arlie Hochschild's "Strangers in Their Own Land: Anger and Mourning on the American Right."

    Doubtless some here would like to see more misery heaped upon those who do not look to the Democratic party as saviors, but Hochschild is rarely regarded as a defender of the American right.

    Few dispute that a significant subset of any given population is going to regard in-group/out-group distinctions along the highly imprecise lines of 'race' and ethnicity, or religion. The question, for some, is what percentage?

    The Nikkei article by Stephen Grenville concludes: Over the longer term, the constituency for globalization has to be rebuilt, the methodology for multilateral trade agreements has to be revived…"

    Grenville regards understanding the opposition to globalization by the Trump constituency as essential. If we are discussing America, we do not need to look to illegal immigration, or undocumented workers to find hostility to out-group immigrants along religious and ethnic lines.

    These tendencies are thrown into sharper relief when this hostility is directed towards successfully assimilated immigrants of a different color who threaten the current occupants of a space – witness the open racism and hostility displayed towards Japanese immigrants on the west coast 1900-1924, or so. A similar level of hostility is sometimes/often displayed towards Koreans. The out-grouping in Japan is tiered and extends to ethnicity and language of groups within the larger Japanese community, as it does in the UK, although not as commonly along religious lines as it does elsewhere.

    Generally, I think John is right. The term 'racist' no longer carries any of the stigma it once held in part because the term is deployed so cynically and freely as to render it practically meaningless. HRC and Bill and their supporters (including me, at one time) are racists for as long as its convenient and politically expedient to call them racists. Once that moment has passed, the term 'racist' is withdrawn and replaced with something like Secretary of State, or some other such title.

    I've no clear 'solution' other than to support a more exact and thoughtful discussion of the causes of fear and anxiety that compels people to bind together into in-groups and out-groups, and to encourage the fearful to take a few risks now and again.

    Here's the link: http://asia.nikkei.com/magazine/20161020-An-era-ends-in-Thailand/Viewpoints/Stephen-Grenville-The-US-election-is-putting-the-TPP-trade-agreement-in-doubt?page=2

    Bob Zannelli 10.30.16 at 11:44 am
    I've no clear 'solution' other than to support a more exact and thoughtful discussion of the causes of fear and anxiety that compels people to bind together into in-groups and out-groups, and to encourage the fearful to take a few risks now and again.

    Here's my take on this. The question to ask is why has this happened? European workers have done much better in the new global economy.(The problems in Europe center around mass migration of people who resist assimilation and adoption of a Humanistic world view.) The answer is simple and horrifying.

    A large percentage of American workers consistently vote against their own interest which has allowed the republican party in service to a powerful elite billionaire class form a reliable cadre of highly visible and highly vocal deplorables which even though slightly less than half the population of those who bother to vote have virtually shut down democratic safeguards which could have mitigated what has happened due to globalization. The combination of these reliable cadre of deplorables , controlled by faux news and hate radio , and the lack of political engagement by the low income Americans , has essentially turned power over to the billionaire class.

    ... ... ...

    Alesis 10.30.16 at 12:13 pm

    A strategy that doesn't work inside the tent is DOA outside it. As it stands many liberals (largely white and this is an important distinction) share with the right a deep discomfort with acknowledging the centrality of racism to American politics.

    Race is the foundational organizing principle of American life and it represents a considerable strain to keep it in focus. Donald Trump will win the majority of white voters as the racial resentment coalition has since the 1930s. An effective strategy for the long term is focused on breaking that near century long hold.

    I'd suggest the direct approach. Call racism what it is and ask white voters directly what good it has done for them lately. Did railing against Mexican rapists brings any jobs back?

    [Oct 29, 2016] Accusations of racism as a method to squash social resistance to neoliberalism

    Oct 29, 2016 | www.nakedcapitalism.com
    Carolinian October 28, 2016 at 3:14 pm

    Or the racism of the middle class. People are tribal and arguably it is baked into our DNA. That doesn't excuse the mental laziness of trafficking in stereotypes but one could make a case that racism is as much a matter of ignorance as of evil character.

    Obama with his "bitter clingers" and HIllary with her "deplorables" are talking about people about whom they probably know almost nothing.

    One of the long ago arguments for school integration was that propinquity fosters mutual understanding. This met with a lot of resistance. And for people like our Pres and would be Pres a broader view of the electorate would be inconvenient.

    They might have to turn into actual liberals.

    [Oct 29, 2016] The economist was using the myth of the western migration and the great get rich quick schemes of 1849 and later (gold rush) as examples

    www.nakedcapitalism.com

    Lyle October 26, 2016 at 7:05 pm

    Actually until recently (the oil price crash) the question in the US was why not pack up and move to Willison, ND, or South of San Antonio (Eagle Ford) or the Permian Basin where during those times a truck driver could make 100k a year.

    But if you go back you find that there were 2 different mind sets of folks who came to the US one group moved nearly every generation (In my family they started in Boston in 1620, moved to Ct, got kicked out and moved to NJ in the late 1600, moved to Oh in 1816, Ia in 1846 to a different town in Ia in 1885 or so and to In in 1916. Other ancestors came to an area and stayed in their community for generations.

    So the economist was using the myth of the western migration and the great get rich quick schemes of 1849 and later (gold rush) as examples.

    It would be interesting to try a poll to ask folks if it were 1849 and you had to wagon train to Ca from the east would you do it. (One could include traveling by ship as that was no piece of cake to go around Cape Horn)

    It was interesting the number of folks forced out of New Orleans who had never been out of La for example.

    However it is the great American myth that folks picked up an moved in the 1800s easily (particularly when back then it meant loosing contact with loved ones for good. Many may have had been capable of one such journey across the Atlantic but that was all they could take.) Of course today moving away does not mean a loss of contact with free long distance on cell phones, emails. etc,

    [Oct 29, 2016] Those economists who deny that unemployment can drive people into crime are idiot jerks.

    Notable quotes:
    "... In Huntsville Alabama, I was part of a group that visited prisoners in the county jail. I visited the women prisoners every Sat. There was a recession in Reagan's term, and Reagan didn't think the government should help the unemployed. Before the recession, there were usually only one or two women prisoners at a time. The most they had at one time was four. ..."
    "... During the recession, the number of prisoners grew greatly. The number of women ballooned to at least a dozen. Because of the increase in the number of male prisoners, the women were all crowded into a single cell, with mattresses on the floor. Most of the women were in jail had children, and were in jail for passing bad checks. ..."
    Oct 29, 2016 | economistsview.typepad.com

    Patricia Shannon : October 29, 2016 at 12:47 PM

    Those economists who deny that unemployment can drive people into crime are idiot jerks.

    http://voxeu.org/article/relationship-between-job-displacement-and-crime

    In Huntsville Alabama, I was part of a group that visited prisoners in the county jail. I visited the women prisoners every Sat. There was a recession in Reagan's term, and Reagan didn't think the government should help the unemployed. Before the recession, there were usually only one or two women prisoners at a time. The most they had at one time was four.

    During the recession, the number of prisoners grew greatly. The number of women ballooned to at least a dozen. Because of the increase in the number of male prisoners, the women were all crowded into a single cell, with mattresses on the floor. Most of the women were in jail had children, and were in jail for passing bad checks.

    When they were able to get jobs, they did not pass bad checks.
    There was a national increase in crime at this time, and Reagan claimed that the high rate and long duration of unemployment did not cause an increase in crime.

    If you have ever been out of work so long that you were losing weight because you couldn't afford enough food, and were in danger of having to live in your car, you would know how wrong Reagan was. It would have to be much worse for parents. I guess if you are unemployed, you are expected to allow yourself and your children to starve to death, so as not to inconvenience those more fortunate.

    This is one of the reasons that if I believed in such things, I would consider Reagan to be a manifestation of the anti-Christ.

    [Oct 29, 2016] Output gap is is subject to two big measurement problems

    Oct 29, 2016 | economistsview.typepad.com

    Peter K. : October 29, 2016 at 07:11 AM

    David Beckworth on the "knowledge problem."

    "...That is, even central banks that follow some kind of Taylor rule in a flexible inflation-targeting regime are susceptible to the knowledge problem...

    The biggest information challenge comes from attempting to measure the output gap in real time. The output gap is the difference between the economy's actual and potential level of output and is subject to two big measurement problems.

    1. First, real-time output data generally get revised and often on the same order of magnitude as the estimated output gap itself.
    2. Second, potential output estimates are based on trends that rely on ever-changing endpoints.

    Orphanides finds the latter problem to be the biggest contributor to real-time misperceptions of the output gap. This means that even if real-time data improved such that there were fewer revisions, there would still be a sizable problem measuring the real-time output gap."

    Conservative ideologues tell us government/central planners are inefficient because of the "knowledge problem." Well so are private sector central planners. See the big banks and the housing bubble/financial crisis. Or Samsung and its exploding Note 7. Or Volkswagon and its cheating on benchmark tests.

    RGC -> Peter K.... , October 29, 2016 at 08:23 AM

    This "output gap" is another rightwing diversion. It is useful to them precisely because it is impossible to measure and therefore people can argue about it ad infinitum.

    Meanwhile we have a lot of people who can't get a decent job at a living wage. That can be easily measured and it could be easily remedied. And it is what average people actually care about. So they want to make sure that isn't discussed. They want to discuss something with no clear answer instead.

    Peter K. -> RGC... , October 29, 2016 at 09:31 AM
    There is a clear answer. Inflation is low and there's an output gap. Yes maybe it's hard to get a precise number but we have a general idea.

    I suppose you want us on the Gold Standard, another rightwing diversion, because according to you monetary policy doesn't work at all.

    Peter K. -> RGC... , October 29, 2016 at 09:45 AM
    I find it much more telling:

    "Former Fed Vice Chairman Alan Blinder said he's skeptical that fiscal policy will be loosened a great deal if Clinton wins the election, as seems likely based on recent voter surveys.

    "She is promising not to make budget deficits bigger by her programs," said Blinder, who is now a professor at Princeton University. "Whatever fiscal stimulus there is ought to be small enough for the Fed practically to ignore it.""

    http://www.bloomberg.com/news/articles/2016-10-25/fed-inclined-to-raise-rates-if-next-president-pumps-up-budget

    Blinder is skeptical that Clinton will do enough to force the Fed to modulate their plans, even though PGL and Sanjait tell us otherwise.

    Clinton's infrastructure plans should be "substantially" larger as Krugman and Summers write. This would help close the output gap. This would help with the job market and increasing incomes and lowering personal debt loads.

    But PGL can't admit this because he's a petulant child who thinks Germany still uses the Deutsche Mark.

    Peter K. -> Peter K.... , October 29, 2016 at 09:46 AM
    As Bernie Sanders wrote last December:

    "The recent decision by the Fed to raise interest rates is the latest example of the rigged economic system. Big bankers and their supporters in Congress have been telling us for years that runaway inflation is just around the corner. They have been dead wrong each time. Raising interest rates now is a disaster for small business owners who need loans to hire more workers and Americans who need more jobs and higher wages. As a rule, the Fed should not raise interest rates until unemployment is lower than 4 percent. Raising rates must be done only as a last resort - not to fight phantom inflation."

    http://www.nytimes.com/2015/12/23/opinion/bernie-sanders-to-rein-in-wall-street-fix-the-fed.html

    [Oct 28, 2016] An Identity-Politicized Election and World Series Lakefront Liberals Can Love

    Oct 28, 2016 | www.counterpunch.org

    Identity politics provides cover for, and diversion from, class rule and from the deeper structures of class, race, gender, empire, and eco-cide that haunt American and global life today – structures that place children of liberal white North Side Chicago professionals in posh 40 th -story apartments overlooking scenic Lake Michigan while consigning children of felony-branded Black custodians and fast food workers to cramped apartments in crime-ridden South Side neighborhoods where nearly half the kids are growing up at less than half the federal government's notoriously inadequate poverty level. Most of the Black kids in deeply impoverished and hyper-segregated neighborhoods like Woodlawn and Englewood (South Side) or North Lawndale and Garfield Park (West Side) can forget not only about going to a World Series game but even about watching one on television. Their parents don't have cable and the Fox Sports 1 channel. There's few if any local restaurants and taverns with big-screen televisions in safe walking distance from their homes. Major League Baseball ticket prices being what they are, few of the South Side kids have even seen the White Sox – Chicago's South Side American League team, whose ballpark lacks the affluent white and gentrified surroundings of Wrigley Field. (Thanks in no small part to the urban social geography of race and class in Chicago, the White Sox winning the World Series in 2005 – thei

    ... ... ...

    There is, yes, I know, the problem of Democrats in the White House functioning to stifle social movements and especially peace activism (the antiwar movement has still yet to recover from the Obama experience). But there's more good news here about a Hillary presidency. Not all Democratic presidents are equally good at shutting progressive activism down. As the likely Green Party presidential candidate Jill Stein (for whom I took five minutes to early vote in a "contested state" three weeks ago) noted in an interview with me last April (when the White Sox still held first place in their division), Hillary Clinton will have considerably less capacity to deceive and bamboozle progressive and young workers and citizens than Barack Obama enjoyed in 2007-08 . "Obama," Stein noted, was fairly new on the scene. Hillary," by contrast, "has been a warmonger who never found a war she didn't love forever!" Hillary's corporatist track record – ably documented in Doug Henwood's book My Turn: Hillary Clinton Targets the Presidency (her imperial track record receives equally impressive treatment in Diana Johnstone's volume Queen of Chaos: The Misadventures of Hillary Clinton ) – is also long and transparently bad. All that and Mrs. Clinton's remarkable lacks of charisma and trustworthiness could be useful for left activism and politics in coming years.

    For what it's worth, the first and most urgent place to restore such activism and politics is in the area where Barack Obama has been most deadening: foreign policy, also known (when conducted by the U.S.) as imperialism. When it comes to prospects for World War III, it is by no means clear that the saber-rattling, regime-changing, NATO-expanding, and Russia-baiting Hillary Clinton is the "lesser evil" compared to the preposterous Trump. That's no small matter. During a friend's birthday party the night the Cubs clinched the National League pennant, I asked fellow celebrants and inebriates if they were prepared for the fundamental realignment of the space-time continuum that was coming when the North Siders won the league championship. That was a joke, of course, but there's nothing funny about the heightened chances of a real downward existential adjustment resulting from war between nuclear superpowers when the "lying neoliberal warmonger" Hillary Clinton gets into office and insists on recklessly imposing a so-called no-fly zone over Russia-allied Syria.

    ... ... ...

    Paul Street's latest book is They Rule: The 1% v. Democracy (Paradigm, 2014)

    [Oct 28, 2016] The Moral Blindness of Identity Politics The American Conservative

    Notable quotes:
    "... In two party politics, generally political parties are mediating institutions, which moderate the claims of the interest groups composing them. However, when it switches to immutable characteristics, political parties become the vehicles of extremism, as each party tries to the "outbid" the other party in claims for dominance for its members. Further, each victory by the rival party spurs fears and polarization by the losers. Generally, you see de-stablization and violence in its wake. Its a good way to destroy a democracy. ..."
    Oct 25, 2016 | www.theamericanconservative.com
    Slate's Jamelle Bouie analyzes the excellent "Black Jeopardy" skit in which Tom Hanks played "Doug," a Trump supporter who, along with his two black opponents, discovers that they have a lot in common. Bouie:

    Then comes the final punchline, "Lives That Matter." Obviously, the answer to the question is "black." But Doug has "a lot to say about this." Which suggests that he doesn't think the answer is that simple. Perhaps he thinks "all lives matter," or that "blue lives matter," the phrasing used by those who defend the status quo of policing and criminal justice. Either way, this puts him in direct conflict with the black people he's befriended. As viewers, we know that "Black Lives Matter" is a movement against police violence, for the essential safety and security of black Americans. It's a demand for fair and equal treatment as citizens, as opposed to a pervasive assumption of criminality.

    Thompson, Zamata, and Jones might see a lot to like in Doug, but if he can't sign on to the fact that black Americans face unique challenges and dangers, then that's the end of the game. Tucked into this six-minute sketch is a subtle and sophisticated analysis of American politics. It's not that working blacks and working whites are unable to see the things they have in common; it's that the material interests of the former-freedom from unfair scrutiny, unfair detention, and unjust killings-are in direct tension with the identity politics of the latter (as represented in the sketch by the Trump hat). And in fact, if Hanks' character is a Trump supporter, then all the personal goodwill in the world doesn't change the fact that his political preferences are a direct threat to the lives and livelihoods of his new friends, a fact they recognize.

    What Bouie doesn't seem to get is that black identity politics and the preferences of those who espouse them are a direct threat to the livelihoods and interests of many whites - and even, at times, their lives ( hello, Brian Ogle! ).

    Consider this insanity from Michigan State University, pointed out by a reader this morning. It's the Facebook page of Which Side Are You On? , radical student organization whose stated purpose is:

    Michigan State University has chosen to remain silent on the issue of racial injustice and police brutality. We demand that the administration release a statement in support of the Movement for Black Lives; and, in doing so, affirms the value of the lives of its students, alumni, and future Spartans of color while recognizing the alienation and oppression that they face on campus. In the absence of open support, MSU is taking the side of the oppressor.

    Got that? Either 100 percent agree with them, or you are a racist oppressor. It's fanatical, and it's an example of bullying. But as we have seen over the past year, year and a half, Black Lives Matter and related identity politics movements (Which Side Are You On? says it is not affiliated with BLM) are by no means only about police brutality. If they were, this wouldn't be a hard call. No decent person of any race supports police brutality. To use Bouie's terms, the material interests of non-progressive white people are often in direct tension with the identity politics of many blacks and their progressive non-black allies. This is true beyond racial identity politics. It's true of LGBT identity politics also. But progressives can't see that, because to them, what they do is not identity politics; it's just politics.

    You cannot practice and extol identity politics for groups favored by progressives without implicitly legitimizing identity politics for groups disfavored by progressives.

    Good luck getting anyone on the left to recognize the fallacy of special pleading when it's right in front of their eyes. Posted in Politics , Pop Culture , Race . Tagged Black Jeopardy , Black Lives Matter , identity politics , Jamelle Bouie , progressives .

    KD , says: October 26, 2016 at 6:55 am
    To paraphrase FiveString:

    Some of my best friends are supporters of police brutality.

    In all seriousness, if one's identity preference is for dominance by your group, then obviously, a member of your group dominating the other group isn't going to bother you. Nor, on the other side, will you be troubled if your group shoots perceived agents of the other side. But note, the justification for racial primacy or racial supremacy is always rhetorically made by asserting claims or the threat of racial primacy or racial supremacy by the Other. Further, racial tensions are always caused by the behavior of the Other, and your groups actions are always "self defense". Of course, your actions are always portrayed as "aggression" by the Other, and lead to ratcheting up of anti-social behavior, but hey.

    I sort of assume that is not how most whites feel, but the reality is whether it is or not, if you turn the political question from legal equality for blacks to legal primacy or dominance, then you will push whites into taking the adversary position.

    In two party politics, generally political parties are mediating institutions, which moderate the claims of the interest groups composing them. However, when it switches to immutable characteristics, political parties become the vehicles of extremism, as each party tries to the "outbid" the other party in claims for dominance for its members. Further, each victory by the rival party spurs fears and polarization by the losers. Generally, you see de-stablization and violence in its wake. Its a good way to destroy a democracy.

    I love "Black Lives Matter" as a slogan, because it is ambiguous enough to be either a claim for dominance or primacy. Obviously, whether a BLM will support the assertion "All Lives Matter" is a litmus test for whether they are asserting racial supremacy or racial primacy. But plausible deniability is baked in.

    a commenter , says: October 26, 2016 at 8:18 am
    I don't mind identity politics, by which I assume you mean people appealing to voters to vote for their pet interest because it will help people with a particular set of characteristics or "identity". This is just people looking out for and lobbying the voting public on their interests, which is what democracy is all about.

    What I don't like is the stunning illogic and flawed reasoning behind some of the appeals, such as the "you're either with BLM or against black people" arguments, the policing of miniscule variations in speech (eg pronouns) as signs of haaaaaaaate, and the labeling of all white people as "white supremacists" unless they self-flagellate and take personal blame for all the police shootings. And, I think these people know that the reasoning is flawed. It's just that they also know that if you repeat it long and loud enough and have enough leaders behind you willing to fire or otherwise silence anyone who points out the flaws in your arguments, then you can convince everyone that it all makes sense.

    I think what is being lost is really the underlying logic of morality itself. Kids are being taught that it doesn't matter what your intention is, it doesn't matter what your reasoning is, it doesn't even matter whether an outcome is predictable from your action. What matters is how the people in identity groups feel about your action. It's consequentialism run amok.

    It's as if someone took Catholic reasoning on morality (grave matter, full knowledge, deliberate consent, don't do wrong things in order to achieve good ends, principle of double effect), reversed it, and then decided that this upside-down reasoning will be our new publicly mandated morality.

    It's fascinating to watch but I feel a bit frightened for my children, because they will have to deal with this new and deeply flawed public morality.

    M. F. Bonner , says: October 26, 2016 at 9:29 am
    "Let me explain something to you. Are you sitting down? Because this is going to come as a shock. Ready? We have been steadily moving away from white identity politics. A lot of people fought and died to end white supremacy. Replacing it with a form of politics that treats blacks as some sort of chosen people because of the color of their skin is regress, and puts that progress towards equal justice for all, regardless of their skin color, in jeopardy."

    For the most part, probably a fair observation. And it only took a couple of hundred years (or more, depending on where you chose to say "white identity politics" started and when (or if) you chose to say it ended).

    Low long have black identity politics had any influence?

    How long does it take, and at what "price" to atone for the past? Haven't we been grappling with that since Lincoln's second inaugural address?

    Will black identity politics be around longer than that? And when will white identity politics end? Not to mention all of the other identity politics in society. But, identity politics always takes at least two sides. You can never have identity politics without "the other." Black identity politics wouldn't last without white identity politics, and vice versa. So too for feminism identity politics, religious identity politics…and…so…on… Each has its counterpart on the other side.

    In a perfect world, identity politics would not exist, but in the real world, they have existed for as long as politics.

    Not that I don't see some hope. By and large, the younger generation gives me every hope that, some day, we might get over this, but probably not until a few score more generational replacements happen. But that too, might be a source of reassurance. A few score generations isn't really that long a time, after all.

    JWJ , says: October 26, 2016 at 9:50 am
    Jesse wrote "62% of white people have either a "great deal" or a "quite a lot" of confidence in the police – ( http://www.gallup.com/poll/192701/confidence-police-recovers-last-year-low.aspx ) – I'm not saying all 62% of those people are OK with police brutality, but they seem not to be that bothered by it."

    How in the blue blazes do you possibly do you go from folks having confidence in the police to them ALSO NOT being bothered by police brutality? How are those two things linked in your mind? Can you not possibly fathom that another human being could have confidence in an institution (or a group) while ALSO condemning the bad actors in that institution (or group)? Or in your mind do a few bad actors condemn an entire group?

    Here is your "logic" re-written in another way. Does it help you see my point?
    61% of non-white people have either "very little" or a "no" of confidence in the police. I'm not saying all 61% of those people are OK with attacking or murdering the police, but they seem not to be that bothered by it.

    Now possibly I am the only who finds your thought process disturbing and wonders how many other folks make the same leap of absurdity.

    DennisR , says: October 26, 2016 at 9:57 am
    In reply the religious liberty comments, I think almost everyone who supports BLM would say that it is about giving African Americans basic human rights in the United States. You might not agree with that, but that's how things stand from their point of view. To many liberals, religious liberty seems like special pleading, even though to you it seems like the advancement of a universal principal.
    GSW , says: October 26, 2016 at 11:03 am
    "All politics is identity politics!" @Ferny

    "Political power, properly so called, is merely the organized power of one class for oppressing another." Karl Marx

    "All that is not race in this world is trash… All historical events… are only the expression of the race's instinct of self-preservation." Adolf Hitler

    "Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies." Groucho Marx

    The Wet One , says: October 26, 2016 at 11:54 am
    M_Young,

    So we basically agree that people are the same all over. Which is to say terrible, awful, nasty beasts. Good.

    For the second time (possibly the third, I know we agreed it was Miller time once upon a time) we agree.

    I guess that's progress.

    🙂

    KD , says: October 26, 2016 at 12:40 pm
    I do not think that all politics is "identity" politics.

    The Populists going after the gold standard, or the New Dealers attempting to deal with the problems of labor and capital, where not primarily about identity politics.

    Certainly, there was lots of identity politics on the state level, whether in the South, or in states like NY, in the battle between upstate WASPs and ethnic political machines in NYC.

    Today we are increasingly nationalizing identity politics. Moreover, we are mainstreaming a slogan based on racial primacy /supremacy, e.g. "Black Lives Matter". You are seeing increasing attacks on traditional American symbols and calls for their replacement with "diverse" symbols. This is not just identity politics, it is ethnopolitics.

    The reality is that the political symbol is in the heart of the people a promise that they'll be treated preferentially. I think that is part of the racial tension post-Obama. We elected an African-American, who appointed a lot of African-Americans, but on the street, he hasn't done $#!+ to help Blacks.

    Now, if I thought that whites would just lay down and not resist racial subjugation and discrimination, I wouldn't be concerned. But I doubt whites are seriously going to go gracefully into that good night as the bottom rung of a racial caste system.

    "Virtue signaling" is very different from "virtue"–you can't tell a white nationalist from a white liberal based on their housing or dating preferences.

    If whites collectively grow to FEAR other groups politically, say due to demographic displacement and claims by minorities for primacy/supremacy, they will change teams overnight. All this anti-racism rhetoric presupposes white noblese oblige and security.

    Any serious movement from equality to some claim of primacy or supremacy is likely to trigger a counter-movement toward a claim of primacy or supremacy by the other group. Moreover, once you polarize racially, the political process encourages extremism, not moderation.

    One reason not to worship the U.S. Constitution is the limited understanding of factionalism by Madison, who accounted for interest group factions (which can break up or wax and wane) but failed to consider identity group factions based on immutable characteristics. It is these identity-based factions which frequently destroy attempts to create liberal democracy the world over.

    The reality is that representative democracy is only an effective system in ethnically homogeneous societies with a strong ethic of individualism (rooted in Protestant ancestors). While Korea and Japan get along politically, their political systems are "different" from a Western perspective, mostly due to lower levels of individualism.

    China is probably a better model for most countries than liberal democracy, because multiethnic societies generally degenerate into authoritarianism anyway.

    This is why, given multiculturalism and secularism, the likelihood of a serious institutional transformation in America seems increasingly a certain bet.

    Rick , says: October 26, 2016 at 1:56 pm
    Here's the brutal truth. We created Black Lives Matter.

    We did it with 400 years of brutal policies, physical violence, economic apartheid and ill conceived do gooder nonsense that could not even begin to counter the former impacts.

    In the 1950's and 1960's you had one branch of the Federal Government - the Federal Housing Authority– both building low income housing in the decaying neighborhoods that were the result of FHA red-lining polices that were was causing the decay - total madness. The black community has yet to recover from that by the way - trillions in lost equity in today's dollars.

    We are incredibly lucky to JUST have Black Lives Matter. It's a miracle that the black community hasn't amassed in force and burned large swaths of this country to the ground peppering us with automatic weapons fire along the way for good measure.

    It's a testament to their fortitude, generosity and patience as a people. That they have formed this group is inevitable.

    To lump BLM in with the white coddled SJW ignores their unique history and context. BLM has no obligation whatsoever to be rational, or contrite, or forgiving, or magnanimous.

    What has that ever gotten them in this country? Here's a hint, f%$k all. That's what it's gotten them.

    [NFR: Well, BLM can behave however it wants to, but don't be surprised if being irrational and bullying gets you nowhere, except on campus run by noodle-spined administrators. - RD]

    KD , says: October 26, 2016 at 2:18 pm
    On the other hand, the notion of color-blind standards is a joke.

    If you belong to a group that has an average IQ of 100 in economic competition with a group that has an average IQ of 85, and you believe that hiring/firing be based on merit, you are promoting a standard that benefits your group over the other guys.

    Likewise, if you are from the second group, you are arguing for proportional representation in the work force (and especially the elite), and you are promoting a standard that benefits your group over the other guys.

    If you look at Anglo-Saxons v. Blacks, Anglo-Saxons always want meritocracy.

    However, if you look at elite admissions in the early 20th Century, when Anglo-Saxons were competing against Jews, they implemented a quota system that benefited Anglo-Saxons. They also generated a lot of Anti-Semitic conspiracy theories blaming their failures on Jewish nepotism, rather than say Jews just being smarter.

    The problem for America is someone will decide on a standard, and that decision will privilege one group over another. Always.

    The more groups, the more divisive and polarizing each decision becomes, until democracy stops being capable of functioning, e.g. making decisions, even bad ones.

    You can have "racial equality", but not "racial equality" in accordance with a definition that all groups will ever agree upon. Further, many persons in all groups will secretly desire supremacy no matter the rhetoric, so will work to undermine and limit nominal "equality" every political chance they get.

    Mary , says: October 26, 2016 at 2:54 pm
    " A lot of people fought and died to end white supremacy"

    And what has it done? American social capital has been destroyed, our society is slowly turning into an atomized hell, and our politics will increasingly resemble tribal warfare. The fiction that we could make race irrelevant needs to die, group differences are real and ethnic tribalism is hardwired into humans by our DNA. Our founders chose to limit citizenship to whites of good character for a reason, just as Japan seeks to remain Japanese for a reason. Diversity + close proximity = war

    VikingLs , says: October 26, 2016 at 3:09 pm
    All politics is not identity politics. America has a rich tradition in positions of relative privilege taking on the political cause of disenfranchised groups.

    Given how many well off white people, including men, are Democrats, I really don't see why progressives would even make that argument.

    Pepi , says: October 26, 2016 at 4:07 pm
    This article showed me how many people in the US live a completely different life than I do. Not only did it change my understanding of race relations and prompt a great deal more study but it made me more aware, generally, of how little I know of how the other 99.9% live.

    https://www.washingtonpost.com/news/the-watch/wp/2014/09/03/how-st-louis-county-missouri-profits-from-poverty/?utm_term=.80f628c84134

    Jeff R. , says: October 26, 2016 at 4:49 pm
    Lots of hypocrites in this comment thread commenting that "identity politics is just politics, period." Okay, white nationalism it is, then! Time to bring David Duke back out from whatever rock he's been under and put him at the top of the ticket. Maybe Louis Farrakhan can run for something, too. After all, why would anti-semitism ever go out of fashion, anyway! Isnt' that just identity politics which is just regular politics, like marginal tax cuts and subsidies for electric cars?

    Twits.

    Liberty&Virtue , says: October 26, 2016 at 4:51 pm
    A few comments:

    -I don't think it's that difficult to understand the anger, stridency, and even vitriol coming from SJW/BLM supporters. With BLM, it's a mostly righteous indignation over a long history of abusive police tactics and laws, exploded by multiple recent captured instances of police abuse.

    As for LGBTQ-issues, I think many advocates–especially those in the vanguard–view themselves as participants in the Second Civil Rights Movement–that the laws and cultural attitudes they are fighting against are analogous to Jim Crow and racism. There is some degree of truth to this.

    The danger comes with the disturbingly common–or at least effective–practice of refusing to grant their opponents *any* goodwill. Like racists, opponents of full legal and cultural inclusion–if not acceptance–are deemed to be totally devoid of any redeeming features, and thus ought to be opposed relentlessly and by any means necessary. The same goes for those who aren't indulgent or repentant enough. We can partly thank the poisonous legacy of Marcuse's "tolerance" for this. We can also thank old-fashioned lust for power–especially to take down "the elite" or to take revenge–and the intoxicating feeling of being on the cutting edge of righteousness.

    How do you deal with this? As KD suggested above, if one group sees itself as against others and acts accordingly, then those others will fall into the "tribal struggle" mindset as well. If extremist social justice advocates (SJAs) define themselves in opposition to other attitudes, values, etc–and more importantly, if they refuse to engage in respectful dialogue and are not willing to compromise–then those who endorse those attitudes, values, etc will inevitably see themselves as being defined through opposition to SJAs. Thus the poison of identity politics–it exacerbates, rather than seeks to contain Us vs Them antagonism.

    The only ways I see out of it are direct, full-throated defenses of SJA's targets–such as last year's "Coddling of the American Mind" and U Chicago's defense of free expression and respectful challenging debate. Ignoring it–as many seem wont to do by dismissals of "oh, they're just stupid college kids, they'll grow out of it"–isn't viable because though many will, some will pursue positions of power and influence. Besides, the less challenged, the more the extreme views will be seen as respectable if not correct.

    -The debate over which groups are or are not practicing identity politics: In (academic) political theory, "identity politics" narrowly refers to a style of politics based on the self-organization of *oppressed* groups and pursuit of policy changes to their advantage. Identity comes to the forefront of members of oppressed groups' consciousness because it is that defining characteristic that puts them in an inferior position.

    The way some have described it here suggests it's more like practicing politics in a way meant to provide benefits for oneself–but that's just self-interest. A better broad view of identity politics would focus on the deliberate and open advocacy of benefits for a particular group one is a member of, when that group is defined by a specific and fundamental trait relevant to one's sense of self. In other words, if the phrase "As a (adjective) (personal-characteristic noun), I believe/support/oppose X" is central to your approach to politics, you're practicing identity politics.

    Axxr , says: October 26, 2016 at 5:28 pm
    JWJ, you are missing the entire point of identity politics.

    The morality inheres in the identity, not in the behavior.

    If brutality occurs, it is not a behavior, it is an identity ("Police"). If you are confident in "Police" you are thus confident in "brutality" because the behavior is not separable from the identity. And for similar reasons, your confidence in brutes means that you, too are a brute (of course this goes double if you are white, since all whites are brutes, for similar reasons).

    Identity politics is the refusal to separate identity from acts. Whiteness *is* slaveowning, blackness *is* victimhood, and so on, regardless of whether one has ever owned or been a slave; these things are irrelevant; they inhere in the identity.

    Loudon is a Fool , says: October 26, 2016 at 6:08 pm
    @ M F Bonner

    How long does it take, and at what "price" to atone for the past? Haven't we been grappling with that since Lincoln's second inaugural address?

    But here's the problem. It's not like the whites who are supporting Trump got fat, rich and happy during their period of "white identity." Whatever privilege attaches to whiteness it hasn't exactly trickled down (even in a Trumped-up fashion) to Trump voters. No doubt Mr. Bonner is either upper middle class or high status (academic, journalist or government employee). But low status whites see the world a bit differently. This is the real tragedy (or, if you're a fat cat, the beauty) of the situation. The lower classes will always fight among themselves for scraps, the high status (but often low pay) elites would scold the various parties for their various thoughtcrimes and the fat cats will high five and do the truffle shuffle, bouncing their greased bellies against each other. Thanks for doing your part.

    M_Young , says: October 26, 2016 at 8:23 pm
    "Now, you can try to make an argument that they are wrong, that they *are* getting equal treatment from law enforcement and that this is all in their heads. You can try, but in all fairness, the anecdotal and empirical evidence seem not to be on your side."

    No, when correcting for crime rates, there is no racial discrepancy in police killings. In fact, blacks are underrepresented and whites overrepresent, given the underlying proportion of criminality in the communities.

    "Replacing it with a form of politics that treats blacks as some sort of chosen people because of the color of their skin is regress,

    Who, exactly, is making this argument? Not BLM and not the mainstream liberal political establishment. "

    Uh, Hilary "whites must listen" Clinton. And lots more.

    M_Young , says: October 26, 2016 at 8:28 pm
    "However, if you look at elite admissions in the early 20th Century, when Anglo-Saxons were competing against Jews, they implemented a quota system that benefited Anglo-Saxons. "

    Why shouldn't the people who, you know, built the universities remain in charge of them? No one asks Brandeis to become a WASP bastion.

    M_Young , says: October 26, 2016 at 8:30 pm
    "In the 1950's and 1960's you had one branch of the Federal Government - the Federal Housing Authority– both building low income housing in the decaying neighborhoods that were the result of FHA red-lining polices that were was causing the decay - total madness. The black community has yet to recover from that by the way - trillions in lost equity in today's dollars"

    LOL, someone's been drinking the TNC Kool-aid (purple, I imagine). It causes people to reverse causality.

    The neighborhoods were redlined because they were poor risk. They were poor risk because of their demographic composition.

    M_Young , says: October 26, 2016 at 8:32 pm
    "It's a miracle that the black community hasn't amassed in force and burned large swaths of this country to the ground peppering us with automatic weapons fire along the way for good measure."

    Uh, they have. See Detroit.

    VikingLS , says: October 26, 2016 at 8:39 pm
    There's not one word in the BLM guiding principles page about the police. Not one word. If you go to their home pager and click on "what we believe" this is what you get.

    http://blacklivesmatter.com/guiding-principles/

    Black Lives Matter may be talking about police brutality right now, but by their own words, it's not their primary cause.

    Caroline walker , says: October 26, 2016 at 11:25 pm
    Criminality matters.
    Esti , says: October 27, 2016 at 7:17 am
    If we would look into how much blacks have been killed by the police last year, the figure will be about few hundred at maximum. If we would look into the same category for whites, the result will be few thouthands, minimum. If we look into the statistics abut the main cause of death for the same period, it will be black on black homicide for blacks and car accident for whites. Also, blacks are about 13% of the American population or so, but make at least as much homicides as whites do. And most homicides are comitted within offenders race group.

    If anything, whites become targets of poluce brutality much more often. And yet, BLM are out there preching, as if police is hunting them for no reason. That's everything you need to know about BLM and their so called care about black lives.

    That's the main problems with such groups. They don't really want to improve the lot of the groups they are supposedly fighting for. They are just exaggerating the problem and imitating fighting for something important, because they'll get money and recognition for it. Without real risk to boot.

    John Smith , says: October 27, 2016 at 8:57 am
    The BLM radical movement is built on a lie. Blacks are 12% of the population yet commit 53% of murders and 70% of gun crime. In this era of cell phones, know the number of black people who have dubious interactions with police, thanks to the scandalous behavior of the news media. We can be sure police brutality is not an epidemic because the examples offered as evidence are,at best , dubious. Each example given, eg Ferguson Missouri or Trayvon Martin, are at best arguably due to the bad behavior by the black person. The real epidemic is black crime, black fatherlessness, and too many people indulging this "I'm a victim" culture. Shame on you Mr. Dreher for delineation this into a black and white cipher in this article. The entire country suffers from this epidemic of black crime and the false narrative that black people are mistreated by society. This is just another example of the madness on the political left the radical extreme hateful positions that are exposed on that side it seems solely.
    Jesse , says: October 25, 2016 at 3:53 pm
    "What Bouie doesn't seem to get is that black identity politics and the preferences of those who espouse them are a direct threat to the livelihoods and interests of many whites - and even, at times, their lives (hello, Brian Ogle!)."

    OK, livelihoods and interests I can understand even if there's the fact that if you're an average white dude, an international student, a student with a soccer scholarship, an out of state student, or a a legacy admission is just as likely to knock you out of your preferred school as a non-white student is.

    However, can you point me to the radio host, politician, TV commentator, or even popular Twitter celebrity who says the people who killed Brian Ogle should go free?

    Because on the other hand, there's plenty of politicians, TV commentators, writers, radio hosts, etc. who think the police are doing a great job and that police brutality is just a liberal myth.

    62% of white people have either a "great deal" or a "quite a lot" of confidence in the police – ( http://www.gallup.com/poll/192701/confidence-police-recovers-last-year-low.aspx ) – I'm not saying all 62% of those people are OK with police brutality, but they seem not to be that bothered by it.

    But in general, the whole paragraph is why for the most part, black Americans will never trust white conservatives – you seem to imply that black Americans want carte blanche to kill white people while in reality, black people just want to be treated as well as a confirmed mass murderer was treated by police – to be fed some Burger King like Dylan Roof perhaps.

    Selvar , says: October 25, 2016 at 3:53 pm
    A moderate, peaceful, and democratic form of white identity politics that was widely representative of the white population would be acceptable as far as I am concerned. The problem is that white nationalists can't go two seconds without demonizing Jews, denying the holocaust, trying to justify the Confederacy, attacking the basic assumptions of liberal democracy, and admiring various obscure mid-20th century fascist/pseudo-fascist far right intellectuals. In that sense, white nationalists are the equivalent of the New Black Panther Party and the Nation of Islam, as opposed to the NAACP or BLM. That does not mean that BLM and the NAACP are not harmful to the interests of whites, but they do not advocate a separate black ethnostate, antisemitism, or ethnic cleansing of whites.
    Andrew C , says: October 25, 2016 at 3:55 pm
    Just watched the SNL skit. Best thing they have done all election season. It's important we understand the motivations behind Trump's rise instead of pushing them under the surface where they fester.
    DennisR , says: October 25, 2016 at 3:57 pm
    I hate the term "identity politics." Identity politics are politics. Straight white people, even liberals (hello Bernie bros), often try to exclude themselves from the definition by casting their own thoughts as neutral while casting everyone with a marked "identity" as practicing identity politics. People are always speaking from a point of view, and in politics they are usually advocating to change things that negatively impact a group they are associated with.

    How is the fight for "religious liberty" different from BLM? How is it not a form of identity politics?

    I agree that certain groups, especially at the university level, take into a totalitarian direction, but casting some activism as "identity politics" while excluding other forms of special pleading makes no sense to me.

    Nathan , says: October 25, 2016 at 4:02 pm
    I agree that *all* identity politics are a moral poison, white, black, Christian, Muslim, or anything else. It is a sad fact of human nature that we are tribal and care more for people like ourselves.

    This reminds me of the parable of the Good Samaritan. If we are to follow the parable, then we are to treat others of different religions and different countries exactly as if they our neighbors, meaning as if they are in our tribe. This is quite the opposite of identity politics.

    The Wet One , says: October 25, 2016 at 4:03 pm
    Rod wrote that:

    "freedom from unfair scrutiny, unfair detention, and unjust killings" for blacks…. are a direct threat to the livelihoods and interests of many whites.

    I've moved things around a bit but in essence this is correct.

    If I've got this wrong Rod, kindly let me know how.

    Huh.

    I didn't realize that oppressing blacks was such a huge industry for white people.

    What exactly is going on in the U.S. exactly?

    Also, just for the record, this is a thing that happened: http://www.cbsnews.com/news/wiggins-mississippi-high-school-noose-incident-town-state-image/

    It seems somehow relevant in the context of this discussion.

    I'm amazed. Truly and utterly amazed. The demand of blacks to be treated like citizens deserving the respect and protection of the law and agents of the law like everyone else is "a direct threat to the livelihoods and interests of many whites."

    I mean, I know that white supremacy is a thing in the U.S., but is it really that ingrained and tenacious? Really?

    Perhaps you misspoke.

    Siarlys Jenkins , says: October 25, 2016 at 4:24 pm
    form of white identity politics that was widely representative of the white population

    That's an oxymoron. No form of "white identity" politics would be or could be "widely representative of the white population."

    A lot of the black rhetoric we're getting lately is belated recognition that "black people" don't really have enduring common interests that bind them all, and the defensive necessity to provide safety for each other in the face of vicious and pervasive persecution just isn't really strong enough to maintain a tenuous identity or unity much longer. As Jesse B. Semple remarked when his "white boss" asked "What does The Negro want now?" … there are fifty eleven different kinds of Negroes in the USA. That's even more true of "whites," always has been, and the hue an cry that a bit of affirmative action is tantamount to creating a massive common race interest is just nonsense.

    How is the fight for "religious liberty" different from BLM? How is it not a form of identity politics?

    Because religion is a search for truth, and religious liberty affirms that there are lots of different searches going on, which are neither binding upon nonbelievers, nor to be suppressed by the skeptical or powerful?

    collin , says: October 25, 2016 at 4:39 pm
    It is nice to see America can laugh about things this year!

    While we can be complain about SJWs and BLMs, doesn't the conservative movement need the same exact lecture here? What was the speech that made Trump popular with Republicans? It was "Mexicans are rapist" speech that originally made 35 – 40% of the party support him the summer of 2015. (And Donald's speeches to African-Americans is not the way to win their votes either!)

    I almost think the best thing for the Republican Party this year is for Trump to lose Texas so the Party learns to better respect Hispanic-Americans. (Unlikely to happen though and Texas is not turning blue long term.)

    Jennifer , says: October 25, 2016 at 4:45 pm
    Jesse: "However, can you point me to the radio host, politician, TV commentator, or even popular Twitter celebrity who says the people who killed Brian Ogle should go free?

    Because on the other hand, there's plenty of politicians, TV commentators, writers, radio hosts, etc. who think the police are doing a great job and that police brutality is just a liberal myth….

    But in general, the whole paragraph is why for the most part, black Americans will never trust white conservatives – you seem to imply that black Americans want carte blanche to kill white people while in reality, black people just want to be treated as well as a confirmed mass murderer was treated by police – to be fed some Burger King like Dylan Roof perhaps."

    +1,000.

    I'd add that there are commentators, politicians, writers, etc. who seem to think that police brutality is justified because of crime rates, as though the Constitution, not to mention just basic fairness and protection against needless violence, applies only to the law-abiding.

    M_Young , says: October 25, 2016 at 4:50 pm
    "That does not mean that BLM and the NAACP are not harmful to the interests of whites, but they do not advocate a separate black ethnostate, "

    If they did, they'd be working for the interests of whites.

    [NFR: You longtime readers know that I reject M_Young's white identity politics. I want to take this opportunity to remind you all that when you cheer on left-wing, racial and sexual identity politics, you implicitly cheer on his. - RD]

    KD , says: October 25, 2016 at 4:53 pm
    There is a literature on the collective behavior of groups in cooperation/competition models. Groups (even artificial ones created by randomly assigning college undergraduates) will compete to maximize their relative power against other groups, even if it leads to collectively a lower standard of living (in other words, they would rather be relatively richer in a poorer world than than relatively poorer in a richer world).

    In interest group politics, say labor v. capital, you have groups which, while fighting each other for power, are permeable. People move from one group or the other, and even if they don't, it is possible to move.

    Identity groups are based on putatively immutable characteristics. In identity politics, identity groups struggle against each other for dominance. Claims can be of three varieties: equality ("All Lives Matter"), primacy ("Black Lives Matter"), and dominance ("Only Black Lives Matter").

    When political parties are defined on identity grounds, elections become censuses rather than "free" elections. You vote for the party that represents your group, because you are afraid of dominance by the other group. Further, you justify claims for primacy or dominance based on fears about the relative power of the other group.

    Political systems that polarize on identity end up in a census election where the winning coalition of groups dominates the other groups, and the group in the electoral minority has no possibility of exercising power. Because elections are censuses, and you don't have the numbers. What typically happens is that minorities turn to violence, and often racial unrest results in military rule.

    It is pretty clear that multiculturalism is precipitating the resurgence of identity politics, and if we believe the polls, that trend is about to accelerate. Further, ethnic polarization of one political party always triggers ethnic polarization in other parties, even over elite objections, as it becomes necessary to appeal to voters.

    This is why some version the Alt-Right represents the future of Conservative politics, even if the Conservative Establishment doesn't like the Alt-Right. It is structural, and you see the same type of political dynamic in Nigeria, Sri Lanka, post-Independence India, as well as places like the Ottoman Empire or Germany.

    What is fueling the Alt-Right is the policies around immigration and non-assimilation/multiculturalism, combined with demands for racial primacy and racial dominance by minorities (e.g. safe spaces where others are forcibly excluded).

    It could be halted today, but instead we are doubling down on the root causes of ethnic anxieties. Further, I don't know what would be "Left-Wing" about pushing whites into a white ethnic voting block intended to subordinate opponents, given their majority status for a few decades, and even as a plurality, they would have the largest plurality.

    Much as many people desire "racial equality", when one group argues for "primacy", politically, you are never going to get "equality" unless a rival group claims primacy for itself. This is basic bargaining theory. Hence, the inevitability of white with egalitarian preferences going over toward white nationalism. Unfortunately, the most probable result will be greater polarization, not compromise.

    P.S. Yes, I understand "racial primacy" for certain racial groups means "racial equality", just as "war is peace".

    Jennifer , says: October 25, 2016 at 4:56 pm
    Dennis R:

    "I hate the term "identity politics." Identity politics are politics. Straight white people, even liberals (hello Bernie bros), often try to exclude themselves from the definition by casting their own thoughts as neutral while casting everyone with a marked "identity" as practicing identity politics. People are always speaking from a point of view, and in politics they are usually advocating to change things that negatively impact a group they are associated with.

    How is the fight for "religious liberty" different from BLM? How is it not a form of identity politics?"

    Exactly.

    The phrase "identity politics" is meant to render illegitimate the concerns of the person who is accused of practicing them. Thus, people don't have to grapple with the actual issue and see whether or not there's a legitimate problem that needs to be addressed. Rod spends a lot of time here complaining about the failings of Black Lives Matter, and very little acknowledging that they have a very legitimate issue that they are pushing to solve.

    KD , says: October 25, 2016 at 5:04 pm
    Religious liberty is not strictly identity politics, because religious affiliations in American society are voluntary. However, religious preferences are pretty inelastic, so you have approximate features of identity politics.

    However, LGBT ideology claims "sexual orientation" is an immutable characteristic. So LGBT is identity politics.

    In some Islamic societies, apostacy is punished by death, so Islam is pretty immutable. So in a strict Muslim society seeking to crack down on alcohol sales, the crack down would be an exercise in identity politics, even if alcohol vendors weren't an identity group.

    Giuseppe Scalas , says: October 25, 2016 at 5:15 pm
    DennisR

    How is the fight for "religious liberty" different from BLM? How is it not a form of identity politics?

    Religious liberty is a universal freedom and it applies to all, including atheists and agnostics. (and, contrary to the narrative, being itself a civic right, it doesn't impinge on other "civil rights")
    Identity politics, on the other hand, is the fostering of tribalism. It's a degrading thing: it considers humans as dogs that have to bite at each other to get a greater share of the kibble bowl.

    KD , says: October 25, 2016 at 5:16 pm
    If you look at politics post-independence in Trinidad and Guyana, or Sri Lanka, you see the emergence of ethnic identity politics converting Communist and Socialist parties, and their leaders, from universalist political programs to ethnic-based programs, depending on what ethnic groups they derived more political support from.

    Although, I suppose some people think that because America is majority white, the same kind of political trends won't play out here. I think human nature is human nature, and identity politics is identity politics, and the result is never good for someone.

    FiveString , says: October 25, 2016 at 5:19 pm
    "No decent person of any race supports police brutality"

    I've known FAR too many "decent" middle and upper-middle class burb-dwellers who are perfectly comfortable with police brutality. They believe that citizens get the policing they deserve. Rodney King? "If you saw the entire tape, not just the excerpt on the evening news, you'd understand why the officers acted that way". Black Lives Matter? "All they have to do is follow the law and not disrespect the police". Unarmed, non-threatening, law-abiding minority killed by police? "There must be more to the story".

    loolaa , says: October 25, 2016 at 5:29 pm
    Lifting from (mooching off of) DennisR's comment, I am also interested in RD's response to this question:

    "How is the fight for "religious liberty" different from BLM? How is it not a form of identity politics?"

    Joe the Plutocrat , says: October 25, 2016 at 5:39 pm
    moral blindness? all politics is identity politics. the fact that white, Christian, property-owning, heterosexual, males looked out for their interests for the first 200+ years of the plutocracy was identity politics in spades. the push-back from BLM, NOW, the LGBT community, and even Trump supporters are as well. I had a very good History professor in the 80's. he taught politics is merely a group or individual looking out for its vested, economic interests. the Karl Marx vs. Adam Smith stuff (ideology) is merely a demographic extension of this. what you call identity politics is more about the relationship between wealth and power, than left or right.
    EliteCommInc , says: October 25, 2016 at 5:39 pm
    It is certainly a peculiar advance that in a country founded on identity color politics those who have benefited and manipulated color politics to their advantage in every way --

    are finding logical flaws in the very system they have created for themselves.

    On its face - should raise serious doubts about the veracity of the complaint.

    Andy Toft , says: October 25, 2016 at 5:56 pm
    "No decent person of any race supports police brutality." Explain what you mean by "decent" person. This is a term similar to the term "elites" be bandied about in this election without anyone saying who they include in that group. All I get in response to my inquiries are quotations from dictionaries. So, please explain what is meant by "decent person."

    [NFR: If you believe it's okay for the police to brutalize people because of their race, or to brutalize anyone, you are not a decent person, in my view. - RD]

    MJR , says: October 25, 2016 at 6:08 pm
    This bit is much better than everything else SNL has commented on the 2016 election. I still think SNL caters way too much to African American chauvinism though.
    Todd carpenter , says: October 25, 2016 at 6:21 pm
    How much traction would BLM have if it were not funded by George Soros?, or any other identity group if they had not been funded by billionaires with an interest in destabilizing the American polity??
    KD , says: October 25, 2016 at 6:22 pm
    BTW, although it is not necessarily identity politics, the political principle that groups maximize their relative power over say the welfare of the totality also explains the problem of elites. All elites want to maximize their relative power over other groups, and so it is really competition (e.g. fear of revolution or being conquered) that keeps them "honest", otherwise they will grind the common man down to subsidence if they have the chance.
    KD , says: October 25, 2016 at 6:23 pm
    should read "subsistence"
    Ferny , says: October 25, 2016 at 6:41 pm
    All of American history includes the strong presence of white identity politics.

    Stop pretending otherwise. What else explains racialized chattel slavery and Jim crow and redlining and so forth?

    [NFR: Let me explain something to you. Are you sitting down? Because this is going to come as a shock. Ready? We have been steadily moving away from white identity politics. A lot of people fought and died to end white supremacy. Replacing it with a form of politics that treats blacks as some sort of chosen people because of the color of their skin is regress, and puts that progress towards equal justice for all, regardless of their skin color, in jeopardy. - RD]

    Sands , says: October 25, 2016 at 6:47 pm
    …to be fed some Burger King like Dylan Roof perhaps.

    You're either ignorant of the context of that situation, or you're deliberately taking it out of context. Roof was arrested by a tiny police department and held until the FBI showed up. He was arrested after 10pm and had not eaten for a while. The police department didn't even have the facilities to prepare a meal. Instead of automatically being suspicious, maybe you should consider that the police were making sure to not do something that could harm the prosecution in such an important case.

    But that's how it's done, huh? Exaggerate things to the extreme, and then wonder why white people don't understand.

    Dain , says: October 25, 2016 at 6:59 pm
    "Black Lives Matter and related identity politics movements (Which Side Are You On? says it is not affiliated with BLM) are by no means only about police brutality."

    Yep. It's also about Israeli "genocide" of Palestinians, if you haven't heard: http://bit.ly/2eJeXDZ

    I remember libertarians complaining in the aughts that it was almost impossible to partake in antiwar demonstrations with the left because it was never about MERELY war. Environmental degradation, environmental racism (yes, that's a thing), and all manner of other unrelated items were seen as a mandatory part of what naive libertarians thought was the goal of simply extracting the US military from the Middle East.

    Ideology is a helluva thing. It's an all-encompassing worldview that looks bizarre to people who aren't already steeped in one.

    Dain , says: October 25, 2016 at 7:01 pm
    "I hate the term 'identity politics'…"

    Then take it up with the campus left, because they're the ones who coined it to distinguish it from regular ol' politics.

    Ferny , says: October 25, 2016 at 7:36 pm
    [NFR: Let me explain something to you. Are you sitting down? Because this is going to come as a shock. Ready? We have been steadily moving away from white identity politics. A lot of people fought and died to end white supremacy. Replacing it with a form of politics that treats blacks as some sort of chosen people because of the color of their skin is regress, and puts that progress towards equal justice for all, regardless of their skin color, in jeopardy. - RD]

    Let me explain something to you too! I'd ask you to sit down, but you're probably already in your fainting couch!

    We have, sort of, in some parts of the country, in some ways moved away from white identity politics! Just because white identity politics doesn't look like lynching doesn't mean it doesn't exist.

    All politics is identity politics! Why wouldn't it be? We create visions of the good and we view it through our prism of identity. The fact that in our nation the axis about race doesn't change that it does exist.

    And no one is asking for 'blacks' to be treated as some chosen people – at even the most exaggerated, most 'blacks' are asking for some acknowledgement that racial damage was done and it's going to take racially conscious solutions (and some people like reparations!).

    But also, here's the reality – the damage to large groups of people in this country was explicitly because of who they were. Why would the solutions necessarily be universal?

    If we both could have had 5, but then I was allowed to unfairly steal 4 from you, it wouldn't then be fair if my solution to the problem was to give both of us 5 again.

    K. W. Jeter , says: October 25, 2016 at 7:37 pm
    Per Selvar:

    The problem is that white nationalists can't go two seconds without demonizing Jews

    The much-reviled John Derbyshire seems to be able to go for quite a stretch without "demonizing" Jews:

    http://www.johnderbyshire.com/Opinions/Religion/jewsandi.html

    Quote: Taken all in all, though, I am proud to call myself a philosemite, and even at low points like the Spectator affair still, at the very least, an anti-antisemite. I recall the numberless kindnesses I have received at the hands of Jews, friendships I treasure and lessons I have learnt. I cherish those recollections.

    Patrick Spens , says: October 25, 2016 at 7:42 pm
    @Sandy

    The point isn't that police did anything wrong with Dylan Roof.

    Adamant , says: October 25, 2016 at 8:03 pm
    "We have been steadily moving away from white identity politics."

    The word 'steadily' is doing quite a lot of heavy lifting here. It seems the distance from full on Jim Crow to 'young bucks eating T bone steaks' is vanishingly small in historical time. If we could quantify and graph the prevalence of white identity politics, would that graph be pointing up or down?

    The comment made above is entirely correct: identity politics is just ordinary politics. Anyone who tells you differently is selling something.

    Sam M , says: October 25, 2016 at 8:57 pm
    "Thompson, Zamata, and Jones might see a lot to like in Doug, but if he can't sign on to the fact that black Americans face unique challenges and dangers,"

    There's the BS right there. Doug might well admit that and accept it and still think that BLM is full of crap. That's my position. Bouie doesn't get to own the conversation like that and neither does BLM.

    Just like the NRA doesn't get to claim that anyone who fails to bow to its agenda and policies hates safety.

    Just because I disagree with the Sierra Clubs position on zero-cut goals on public land do they get to say I hate the earth?

    I'm not really asking for his permission.

    Sam M , says: October 25, 2016 at 9:00 pm
    JeremyK:

    "So the desire to be treated fairly is framed as identity politics?"

    So black people want to be killed more often by police?

    There's at least one famous study famously made famous in the NYT, by a really great black economist from Harvard, indicating that black people are killed LESS often in interactions with cops.

    Yep. That data is limited and incomplete. But so is the data you prefer.

    GSW , says: October 25, 2016 at 9:04 pm
    "We have been steadily moving away from white identity politics. A lot of people fought and died to end white supremacy… RD"

    In fact, the idea of a biologically-based white supremacy never held the political or social field to itself during the last two centuries in either Europe or America.

    This was because it was contested by important currents of both Christian and liberal thought on human equality. These ideas of Christian and liberal equality were powerful enough to sustain the successful 60 year international campaign of the world's leading 19th century Empire. the British, to abolish slavery and were as well a significant factor behind the U.S. civil war.

    Any serious reading of the history of the late 19th and early 20th century reveals how ethnic and "racial" conflicts were created and manipulated by unscrupulous politicians of that time and how these "identities" contributed to the radical destabilization and destruction of domestic and international peace.

    The 20th century Nazis represented the apogee of "white" supremacy and their European and American opponents in World War II repudiated with extreme force their odious race "science."

    Contemporary identity politics seeks to reassert and re-legitimize a supposed biological basis for political conflict. The historical evidence is clear that this is not a story that can in any way end well.

    Anna Duarte , says: October 25, 2016 at 9:34 pm
    Replacing it with a form of politics that treats blacks as some sort of chosen people..

    Chosen people that are still more likely to be the victims of police brutality. I'm pretty sure they'd rather pass on being chosen and get on with being treated like everyone else.

    Joseph , says: October 25, 2016 at 9:40 pm
    You act as if "identity politics" only happens on the left. Small-o "orthodox Christians" are a tribe who practice "identity politics." All politics is local, Tip O'Neill taught us. A corollary of that is "all politics are tribal."

    I (and other liberals) get dismissed as being nonsensical for wanting to be respected on the basis of our identity, but the minute a Christian baker has to do business equally with a gay person, it's tyranny.

    What is the Benedict Option, if not Christian identity politics put into maximum effect?

    The thing that infuriates me (and people like me) is the assumption that we are the "other" and the view expressed here is the "default." As I see it, it's our tribe against yours. Your right to lead is no more evident than mine. We fight for the right to lead. Someone wins, and someone loses.

    I realize this a conservative blog, but try approaching the other side as moral equals, instead of with an a priori assumption that the left is tribal, and the right has the voice of G-d Himself as their trumpeter of all that is good and true.

    Rich , says: October 25, 2016 at 10:00 pm
    In any given society, the dominant majority defines the norm – in every area of life and culture – by using themselves as the yardstick. They are normal, everybody different (and their different stuff) is abnormal.

    This is all perfectly natural. It's why there's pretty much no such thing as "white music" or "white food" in America – whatever was traditional to whites was just called music and food. If it comes from white culture, it doesn't get a special name, and it doesn't get widely recognized as something specific to white people. It's just the norm.

    This is why white identity politics isn't usually called white identity politics, yet any politics arising out of a nonwhite experience is defined as abnormal and gets a special name.

    Seen from any perspective other than the traditionally dominant one, it's rather clear that the driving force on the American right has long been white identity politics. The Republican Party didn't get over 90% white by accident. Some people may have the privilege of calling their own politics the norm and assigning a name to the rest, but it's all identity politics whether they want to see it or not.

    Siarlys Jenkins , says: October 25, 2016 at 10:22 pm
    Then comes the final punchline, "Lives That Matter." Obviously, the answer to the question is "black." But Doug has "a lot to say about this."

    The beautiful thing about the skit is that it left all this hanging… it didn't try to write the final outcome, but left a range of variables and a variety of possible outcomes to the viewer's imagination.

    The problem with over-analysis is that it erases this well done ending, by trying to pin down exactly what the outcome is or was or would have been or should have been. Of course, each analysis erases many possibilities, which is a form of vandalism.

    In a small way, this reminds me of when I heard a woman state during Bible study that she likes the New International Version because it makes everything clear. This cemented my late in life preference for the King James Version, because by trying to make "everything clear," many nuances and layers of meaning are erased. The KJV is sufficiently poetic, and sufficiently archaic, that sometimes there may be five or ten or twenty layers of meaning there, and perhaps that is exactly what God intended.

    (Dain, the term "identity politics" was "coined" as much by Nigel Farage, who openly espouses it, as it was by "the campus left.")

    Environmental degradation, environmental racism (yes, that's a thing), and all manner of other unrelated items were seen as a mandatory part…

    This is a mislocation coined by the campus left… more precisely, by 1970s would-be Marxists, who latched onto the fuzzy notion that Marxism explains everything and that culture is all a "superstructure" resting on an economic "base." They then promulgated, spontaneously, not with much thought, that whatever your pet issue is, Marxism will deliver the desired result. And the Maoist slogan "unite the many to defeat the few" was best served by including everyone's favorite issue in one big happy family of agendas. There was even a short-lived "Lavender and Red League." It doesn't work, Marx and Mao may both be turning in their graves over such petty horse manure, Lenin would certainly call it an infantile disorder, but nobody every accused the post-1970 would-be leftists of professionalism, or profound strategic thinking, or even ability to articulate a coherent working class demand.

    Perichoresis , says: October 25, 2016 at 10:28 pm
    Joe the Plutocrat: "moral blindness? all politics is identity politics."

    No, it can and should be a contest of universal principles and ideas. The Marxian idea that such is just "false consciousness" is bunk and commits the genetic fallacy.

    VikingLS , says: October 25, 2016 at 10:41 pm
    If you haven't been to the Black Lives Matter webpage and read their Guiding Principals, you should not be expressing an opinion about them.

    http://blacklivesmatter.com/guiding-principles/

    This isn't just about the very real issue of police brutality, it's a trojan horse.

    [NFR: That's right. - RD]

    kgasmart , says: October 25, 2016 at 11:26 pm
    I want to take this opportunity to remind you all that when you cheer on left-wing, racial and sexual identity politics, you implicitly cheer on his.

    Yeppers. Because if "people of color" can have their "safe spaces," off limits to white people, then white people are utterly and completely justified in seeking "white spaces," off limits to people of color.

    The assertion is that since people of color have historically been oppressed, they now have additional rights to request accommodations that would never be granted to their historic oppressors.

    Nope. Don't work that way. What's good for the goose is indeed good for the gander – no matter how many "microagressions' the geese detect.

    razib khan , says: October 25, 2016 at 11:41 pm
    why does this post seem racist to me? 😉
    Console , says: October 26, 2016 at 1:03 am
    "We have been steadily moving away from white identity politics."

    Right… because both political parties in America are just so diverse. Oh wait, one's the white people party and one is everyone else. In short, the everyone else party isn't the divisive one…

    [NFR: It is in the nature of progressive protest movements that they portray all things as having gotten no better, because if things *have* improved, it's harder for them to hold on to power and raise money. That's what's happening here. Anybody who doesn't think white supremacy and the identity politics that supported it is vastly weaker today than it was in 1960 is either a fool, or willfully blind. - RD]

    Nelson , says: October 26, 2016 at 1:21 am
    The original sin of conservatism is not giving "the other" equal rights and privileges. Whether it is blacks getting shot by police, the war on drugs (that disproportionately affects the poor), jim crow like immigration laws, not letting gays marry, not giving equal funding to poor school districts or any of the other many inequalities conservatives want to perpetuate.

    Nobody is "the chosen people" just because they gain some kind of right or privilege white middle class straight people already have.

    M_Young , says: October 26, 2016 at 3:07 am
    @WetOne

    We can trade racial aggressions - you'll run out long before I do.

    http://nypost.com/2016/10/25/crazed-teens-viciously-attack-college-kids-for-no-apparent-reason/

    M_Young , says: October 26, 2016 at 3:10 am
    "All of American history includes the strong presence of white identity politics."

    That's a feature, not a bug. Cf. Brazil.

    M_Young , says: October 26, 2016 at 3:24 am
    @Sands

    Thanks for the clarification. I had just assumed that the Narrative - the cops being buddy buddy with Roof and getting him some BK in the middle of the day on the way back to Charleston - was correct. I should have known better.

    As an interesting comparison, look at the treatment of one Trenton Trenton (I kid you not) Lovell, killer of LA Sheriff Deputy Steve Owen. Shot himself, he was patched up by paramedics, sent to the hospital where he was treated at taxpayer expense, and when fit enough for trial, arraigned.

    No complaints about that.

    Jay , says: October 26, 2016 at 5:17 am
    Good luck getting anyone on the left to recognize the fallacy of special pleading when it's right in front of their eyes.

    This special pleading, I do not think it means what you think it does. BLM is not asking to that African Americans be treated in a different fashion than anyone else. Rather, their argument is that they are disproportionately burdened by the manner in which police interact with them and that they are asking that they be just be treated the same as the majority of the country. A basic argument for fairness and equality, in other words.

    Now, you can try to make an argument that they are wrong, that they *are* getting equal treatment from law enforcement and that this is all in their heads. You can try, but in all fairness, the anecdotal and empirical evidence seem not to be on your side.

    Replacing it with a form of politics that treats blacks as some sort of chosen people because of the color of their skin is regress,

    Who, exactly, is making this argument? Not BLM and not the mainstream liberal political establishment. I'm sorry, but I appear to have missed the mainstreaming of black nationalism.

    [Oct 28, 2016] Stately mating of dinosaurs:

    Oct 28, 2016 | www.nakedcapitalism.com

    Jim Haygood October 27, 2016 at 3:29 pm

    Stately mating of dinosaurs:

    CenturyLink Inc. is in advanced talks to merge with Level 3 Communications Inc., a deal that would give the telecommunications companies greater heft in a brutally competitive industry.

    Terms of the deal couldn't be learned. As of Thursday afternoon before the Journal's report of the talks, Level 3, based in Broomfield, Colo., had a market value of $16.8 billion. CenturyLink, based in Monroe, La., was worth $15.2 billion.

    http://www.marketwatch.com/story/centurylink-in-advanced-merger-talks-with-level-3-communications-2016-10-27

    CenturyLink is a former rural telephone exchange operator which bought former Baby Bell, Qwest (U S West) in 2011.

    CenturyLink is a miserable, crappy telco - so spectacularly bad it makes the cable company look like a paragon of customer friendliness by comparison. CTL's share price has declined by about a third since its acquisition of Qwest, reflecting CTL's braindead managerial incompetence.

    If this merger goes through, we'll have a Big Three of dinosaur telcos: AT&T, Verizon, and CenturyLink.

    Arizona Slim October 27, 2016 at 5:00 pm

    CenturyLink is the landline carrier/ISP wannabe for my part of AZ. Around here, they make Cox Communications look like an excellent cable/ISP company.

    EnonZ October 27, 2016 at 5:52 pm

    My experience has been just the opposite. I have had excellent, reliable DSL service from CenturyLink and good technical support. Perhaps it's because I live somewhere there is still some competition – a duopoly with Comcast. I do have to call them every 6 or 12 months and talk to a retention service rep to keep the charges down.

    CenturyLink does seem slow in getting fiber to the end of the block everywhere in my city. I know lots of people who have been stuck for years down at 5Mbps, which is not enough these days. The routers they provide for customers (which most people call modems even though they're not) are crap. I tried getting a router from CenturyLink that supports 802.11n so I could use 5GHz (2.4GHz is very crowded in my neighborhood) – that's when I found out that 5GHz support is OPTIONAL under the 802.11n standard. Of course CenturyLink went with the cheaper model. Returning the router was no problem and the refund appeared promptly and correctly on my bill.

    The return of monopolization is traced by Barry C. Lynn in his 2010 book, Cornered: The New Monopoly Capitalism and the Economics of Destruction . It goes back to the decision of the Reagan administration to reinterpret antitrust regulation to emphasize efficiency over competition. No previous 20th century administration would have allowed the A&P chain to become a behemoth like Walmart.

    [Oct 28, 2016] Jump in Inventories Leads to Stronger than Expected GDP Growth

    Oct 28, 2016 | economistsview.typepad.com

    anne : October 28, 2016 at 07:10 AM , 2016 at 07:10 AM

    http://cepr.net/blogs/cepr-blog/jump-in-inventories-leads-to-stronger-than-expected-gdp-growth

    October 28, 2016

    Jump in Inventories Leads to Stronger than Expected GDP Growth
    By Dean Baker

    The economy grew at a 2.9 percent annual rate, the strongest growth rate since the third quarter of 2014. Most forecasts had put growth for the quarter at just over 2.0 percent. While this number is better than expected, a big factor was an increase in inventory accumulation, which added 0.61 percentage points to growth. Accumulation was actually negative in the second quarter, so the rate of accumulation is likely to be even higher in the fourth quarter.

    Most categories of final demand were relatively weak. Consumption grew at a modest 2.1 percent annual rate. Residential investment fell at a 6.2 percent annual rate, its second consecutive decline. Non-residential fixed investment grew at a 1.2 percent rate, roughly the same pace as in the second quarter. This follows two quarters of decline. The collapse of energy prices and the increase in the trade deficit in manufacturing are the major factors behind the weakness in this component.

    Government expenditures increased at a 0.5 percent annual rate, with a 2.5 percent increase in federal spending offsetting a 0.7 percent decline at the state and local level. This is the second consecutive quarter of decline at the state and local level.

    Exports were a source of strength in the quarter, rising at a 10.0 percent annual rate, the strongest performance since the fourth quarter of 2013. As a result of this increase, net exports added 0.83 percentage points to growth for the quarter.

    One striking figure in this report is the slower pace of inflation shown in the core personal consumption expenditure deflator (PCE). This rose at just a 1.7 percent annual rate in the third quarter. The rate of inflation shown in the core PCE has been trailing off throughout the year, rising at a 2.1 percent annual pace in the first quarter and a 1.8 percent rate in the second quarter. While there are enough erratic movements in the quarterly data to avoid treating this as evidence of deceleration, it is certainly hard to make a case for acceleration with these data.

    [Oct 28, 2016] Banks sell public money as their product and they extract interest for doing so. They thus act as a transfer agent of wealth from the real economy to rentiers.

    Oct 28, 2016 | economistsview.typepad.com

    RGC : , October 28, 2016 at 05:42 AM

    Your Money

    You know that money that your bank lent you to buy your new house? Well, I want to let you in on a little secret: That wasn't the bank's money they lent you. And it wasn't some billionaire's money either. It was some of your own money, along with a little bit of mine and Tom's and Susie's and everybody else in this country. Can you imagine that?

    It's a fact. It's why Henry Ford supposedly said that "if people understood our banking and monetary system, I believe there would be a revolution before tomorrow morning".(1)

    When the bank lent you that money it took your promise to pay them back (a promissory note and title to the house as collateral) and in exchange it punched some numbers into a computer, creating your deposit account and thereby creating the money it lent to you.(2)

    But how can that be, you say. How can the bank just invent money like that? Well they do "just invent money" and they can do it because our government agrees with them that they can do it.

    But don't they have to pay for that money, you say. No, they don't. But they do have to be a depository institution ( a place you can keep your money on deposit) and there is some expense for them to that.

    But they are charging me interest on that money, you say. Yes indeed, they are charging you interest on your own money, and mine, and Tom's, and Susie's, etc.

    But that bank is a private business, and banks make a lot of profit, why should we pay them to loan us our own money, you say. Good question.

    (1)
    http://www.brainyquote.com/quotes/authors/h/henry_ford_3.html
    (2) http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

    pgl -> RGC... , October 28, 2016 at 05:58 AM
    "But don't they have to pay for that money, you say. No, they don't. But they do have to be a depository institution ( a place you can keep your money on deposit) and there is some expense for them to that."

    Again? Take a look at the income statement of any bank. There is interest expense for them on those deposits. OK, it is low but then there are those subsidized services which is why noninterest expenses exceed noninterest income. Again - no exactly a total expense of 5% but mortgage rates today are not exactly 6% either.

    RGC -> pgl... , October 28, 2016 at 06:23 AM
    I said they incur some expenses.
    pgl -> RGC... , October 28, 2016 at 07:18 AM
    We all do. But I see you waste no time doing actual financial economics. If you did, you might realize how to capture monopoly profits. Look at the average return to equity compared to what you'd predict from a CAPM model. When I do this for health insurance companies, their average return is 3 times what they would be from a competitive market. When I do this for major banks, the average return to equity = the CAPM prediction. Estimated monopoly profits = 0.

    Of course you have no idea what any of this means as all you know is word salad.

    RGC -> pgl... , October 28, 2016 at 07:29 AM
    Should health insurance companies exist?

    Banks sell public money as their product and they extract interest for doing so. They thus act as a transfer agent of wealth from the real economy to rentiers.

    pgl -> RGC... , October 28, 2016 at 05:59 AM
    "banks make a lot of profit".

    The return to equity for banks is about what one would expect from a risk-adjusted return perspective. Oh yes - the Capital Asset Pricing Model properly applied would show what utter nonsense this is.

    RGC -> pgl... , October 28, 2016 at 06:27 AM
    Jamie Dimon makes a bundle in comp, which reduces profit. Bankers are highly compensated for lending us our own money.

    You defending banks now?

    RGC -> RGC... , October 28, 2016 at 06:32 AM
    Plus banks' access to public money means they get to blow up the economy periodically.
    pgl -> RGC... , October 28, 2016 at 06:47 AM
    Banks will always exist. Of course proper regulation of financial institutions can address this problem. But your word salad has nothing to do with the real issues.
    pgl -> RGC... , October 28, 2016 at 06:46 AM
    He does but what is the percentage of JPM's total assets? Do you even know? You might need a microscope to see it. And no - I am not defending banks. But your word salad is not getting at the real issues. And yet you persist.
    RGC -> pgl... , October 28, 2016 at 06:50 AM
    And you are not refuting anything I said. What are the real issues?
    pgl -> RGC... , October 28, 2016 at 07:19 AM
    Yea I have. Which is pretty amazing since you have said nothing of substance.

    What are the real issues? Do you even read the various posts our host puts up? Or do you just babble BS 24/7?

    RGC -> pgl... , October 28, 2016 at 07:41 AM
    What did you refute, specifically?
    RGC -> pgl... , October 28, 2016 at 06:47 AM
    But the product they are selling is your own money, and mine. They are basically legalized counterfeiters.
    pgl -> RGC... , October 28, 2016 at 06:47 AM
    You must love word salads.
    anne -> pgl... , October 28, 2016 at 06:47 AM
    https://en.wikipedia.org/wiki/Capital_asset_pricing_model

    In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to a well-diversified portfolio.

    pgl -> anne... , October 28, 2016 at 07:23 AM
    Let's do this for a bank. Expected return to assets = risk-free rate (1%) plus a 1% premium for bearing operational risk. But then the equity to asset ratio for banks is only 10% so the expected return to equity includes a 10% premium for bearing both operational risk and leverage risk. As such, the expected return to equity = 11% for these highly levered firms. And on average that is their actual return to equity.

    For a great application of these thoughts - see that paper by Sarin and Summers. You may not remember when I put it up weeks ago but my internet stalker put up a link to it just yesterday. Of course this was PeterK's childish way of attacking someone who actually contributes to this blog. I said he should read it. So should RGC. They might learn something.

    JohnH -> pgl... , October 28, 2016 at 07:56 AM
    LOL! pgl assumes that banks' investors have a god-given right to a risk premium of 10%.

    Of course, risk premiums are more in the range 4-5%, far below pgl's banker-coddling assumption.

    "Some economists argue that, although certain markets in certain time periods may display a considerable equity risk premium, it is not in fact a generalizable concept. They argue that too much focus on specific cases – e.g. the U.S. stock market in the last century – has made a statistical peculiarity seem like an economic law."
    http://www.investopedia.com/terms/e/equityriskpremium.asp#ixzz4OOLOzdqg

    As for the economic concept of the time value of money, whereby savers get rewarded for setting money aside...the longer the time, the greater the reward, well, central banks have pretty well destroyed that with negative interest rates.

    Time value of money: RIP. Nonetheless investors are still supposed to reap their extravagant risk premiums!!!

    Fred C. Dobbs -> RGC... , October 28, 2016 at 06:30 AM
    It's a Wonderful Life movie clip:
    Bailey vs Potter - Democrat vs Republi... https://youtu.be/n2G0n3035Ns via @YouTube

    (from about 1:30)

    It's A Wonderful Life Bank Run https://youtu.be/iPkJH6BT7dM via @YouTube

    (from about 1:00)

    See also: the Mae sisters, Fannie & Ginnie

    https://en.wikipedia.org/wiki/Fannie_Mae

    https://en.wikipedia.org/wiki/Government_National_Mortgage_Association


    EMichael -> Fred C. Dobbs... , October 28, 2016 at 07:44 AM
    Fred,


    the "wonderful Life" thing is a perfect example for this topic.

    kudos

    EMichael -> RGC... , October 28, 2016 at 06:42 AM
    The stupidity never stops.

    Fantasy land bs.

    Damn.

    pgl -> EMichael... , October 28, 2016 at 06:48 AM
    Notice when I tried to introduce some real economics to the discussion - he changed the subject.
    EMichael -> pgl... , October 28, 2016 at 07:16 AM
    He can't figure out this aggregator thing. He cannot figure out the investor thing. He certainly has no knowledge of the secondary market.

    He takes tiny little pieces of things, ignores the rest and then comes to a conclusion. Of course the conclusion is that MMT makes sense. Everyone knows it doesn't make sense and cannot work world.

    Which is why he stays in his own world.

    EMichael -> EMichael... , October 28, 2016 at 07:16 AM
    oops

    "cannot work in the real world"

    pgl -> EMichael... , October 28, 2016 at 07:24 AM
    He ignores basic finance. But then so does PeterK as actual thinking just gets him all angry. Which means you and I are tagged "liar". This is the intellectual garbage that is ruining this place.
    RGC -> EMichael... , -1
    "Money creation in practice differs from some popular misconceptions - banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they 'multiply up' central bank money to create new loans and deposits."

    http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

    [Oct 28, 2016] Inequality As Policy: Selective Trade Protectionism Favors Higher Earners

    Oct 28, 2016 | economistsview.typepad.com

    anne : October 28, 2016 at 08:44 AM , 2016 at 08:44 AM

    http://cepr.net/publications/op-eds-columns/inequality-as-policy-selective-trade-protectionism-favors-higher-earners

    October 27, 2016

    Inequality As Policy: Selective Trade Protectionism Favors Higher Earners
    By Dean Baker

    Globalization and technology are routinely cited as drivers of inequality over the last four decades. While the relative importance of these causes is disputed, both are often viewed as natural and inevitable products of the working of the economy, rather than as the outcomes of deliberate policy. In fact, both the course of globalization and the distribution of rewards from technological innovation are very much the result of policy. Insofar as they have led to greater inequality, this has been the result of conscious policy choices.

    Starting with globalization, there was nothing pre-determined about a pattern of trade liberalization that put U.S. manufacturing workers in direct competition with their much lower paid counterparts in the developing world. Instead, that competition was the result of trade pacts written to make it as easy as possible for U.S. corporations to invest in the developing world to take advantage of lower labor costs, and then ship their products back to the United States. The predicted and actual result of this pattern of trade has been to lower wages for manufacturing workers and non-college educated workers more generally, as displaced manufacturing workers crowd into other sectors of the economy.

    Instead of only putting manufacturing workers into competition with lower-paid workers in other countries, our trade deals could have been crafted to subject doctors, dentists, lawyers and other highly-paid professionals to international competition. As it stands, almost nothing has been done to remove the protectionist barriers that allow highly-educated professionals in the United States to earn far more than their counterparts in other wealthy countries.

    This is clearest in the case of doctors. For the most part, it is impossible for foreign-trained physicians to practice in the United States unless they have completed a residency program in the United States. The number of residency slots, in turn, is strictly limited, as is the number of slots open for foreign medical students. While this is a quite blatantly protectionist restriction, it has persisted largely unquestioned through a long process of trade liberalization that has radically reduced or eliminated most of the barriers on trade in goods. The result is that doctors in the United States earn an average of more than $250,000 a year, more than twice as much as their counterparts in other wealthy countries. This costs the country roughly $100 billion a year in higher medical bills compared to a situation in which U.S. doctors received the same pay as doctors elsewhere. Economists, including trade economists, have largely chosen to ignore the barriers that sustain high professional pay at enormous economic cost.

    In addition to the items subject to trade, the overall trade balance is also very much the result of policy choices. The textbook theory has capital flowing from rich countries to poor countries, which means that rich countries run trade surpluses with poor countries. While this accurately described the pattern of trade in the 1990s up until the East Asian financial crisis (a period in which the countries of the region enjoyed very rapid growth), in the last two decades developing countries taken as a whole have been running large trade surpluses with wealthy countries.

    This implies large trade deficits in rich countries, especially the United States, which in turn has meant a further loss of manufacturing jobs with the resulting negative impact on wage inequality. However, there was nothing inevitable about the policy shifts associated with the bailout from the East Asian financial crisis that led the developing world to become a net exporter of capital.

    The pattern of gains from technology has been even more directly determined by policy than is the case with gains from trade. There has been a considerable strengthening and lengthening of patent and copyright and related protections over the last four decades. The laws have been changed to extend patents to new areas such as life forms, business methods, and software. Copyright duration has been extended from 55 years to 95 years. Perhaps even more important, the laws have become much more friendly to holders of these property claims to tilt legal proceedings in their favor, with courts becoming more patent-friendly and penalties for violations becoming harsher. And, the United States has placed stronger intellectual property (IP) rules at center of every trade agreement negotiated in the last quarter century.

    In this context, it would hardly be surprising if the development of "technology" was causing an upward redistribution of income. The people in a position to profit from stronger IP rules are almost exclusively the highly educated and those at the top end of the income distribution. It is almost definitional that stronger IP rules will result in an upward redistribution of income.

    This upward redistribution could be justified if stronger IP rules led to more rapid productivity growth, thereby benefitting the economy as a whole. However, there is very little evidence to support that claim. Michele Boldrin and David Levine have done considerable research on this topic and generally found the opposite. My own work, using cross-country regressions with standard measures of patent strength, generally found a negative and often significant relationship between patent strength and productivity growth.

    There is also a substantial amount of money at stake. In the case of prescription drugs alone, the United States is on path to spend more than $430 billion in 2016 for drugs that would likely cost one-tenth of this amount in the absence of patent and related protections. While we do need mechanisms for financing innovation and creative work, it is almost certainly the case that patent and copyright monopolies as currently structured are not the most efficient route...

    JohnH -> anne... -1
    Dean Baker has been on a roll!

    Money quote: "The structuring of trade and rules on IP are two important ways in which policy has been designed to redistribute income upward over the last four decades. There are many other ways in which the market has been structured to disadvantage those at the middle and bottom of the income distribution, perhaps most notably macroeconomic policies that result in high unemployment. While tax and transfer policies that reduce poverty and inequality may be desirable, we should also be aware of the ways in which policy has been designed to increase inequality. It is much easier to have an economic system that produces more equality rather than one that needlessly generates inequality, which we then try to address with redistributive policies."
    http://www.nakedcapitalism.com/2016/10/inequality-as-policy-selective-trade-protectionism-favors-higher-earners.html

    Now if we could get economists to recognize that a monetary policy that prioritizes the 'wealth effect' for a decade is really trickle down, then perhaps we could get them to develop policies to mitigate trickle down aspects and direct monetary policy more towards the broader economy.

    [Oct 27, 2016] In late 2007, before the recession started, the prime-age employment-to-population ratio in the U.S. was about the same as in other Group of Seven developed nations (which also include Canada, France, Germany, Italy, Japan and the U.K.). The U.S., however, experienced a much larger decline during the recession, and remains much farther from undoing the damage.

    Oct 27, 2016 | economistsview.typepad.com

    Peter K. : October 26, 2016 at 08:07 AM , In late 2007, before the recession started, the prime-age employment-to-population ratio in the U.S. was about the same as in other Group of Seven developed nations (which also include Canada, France, Germany, Italy, Japan and the U.K.). The U.S., however, experienced a much larger decline during the recession, and remains much farther from undoing the damage.

    https://www.bloomberg.com/view/articles/2016-10-25/the-u-s-job-recovery-is-a-global-laggard

    Kocherlakota on U.S. macro policy fail:

    "In late 2007, before the recession started, the prime-age employment-to-population ratio in the U.S. was about the same as in other Group of Seven developed nations (which also include Canada, France, Germany, Italy, Japan and the U.K.). The U.S., however, experienced a much larger decline during the recession, and remains much farther from undoing the damage. As of June, the G-7 as a whole had recovered almost completely, while the U.S. was only 60 percent back from its lowest point:"

    [Oct 27, 2016] Being Honest about Ideological Influence in Economics

    Notable quotes:
    "... An important essay indeed in that ideological influence is pervasive in writing by economists, which should be no problem as such, but economists should be aware of ideological influence in the work that they do. The problem is being unaware that work is ideological, so that the work is presented as simple truth allowing for no alternative presentation and argument. ..."
    "... RBC economists are very well compensated for saying that no government intervention is needed in the economy, as are those saying that minimum wages harm employment. ..."
    "... Actually a lot of academics are not exactly paid that well. This crowd does this sort as a religion. The problem is that those of us who never accepted perfect markets and instant market clearing were closed out of publications for 30 years. Now if RBC explained the real world - fine. But it had zero explanation for the last 9 years. ..."
    "... Mankiw is paid well. ..."
    "... Krugman is paid well. ..."
    "... Speaking as an academic, in the university system with the lowest paid faculty in the nation, I am well aware of that. It is not the academic salaries, but the research grants and consulting contracts that matter here. ..."
    "... Upton Sinclair is always right. ..."
    "... "I suspect there is a reluctance among the majority of economists to admit that some among them may not be following the scientific method but may instead be making choices on ideological grounds." ..."
    "... The RBC crowd is arrogant enough to argue that Keynes was practicing junk science. They knew his writings and just ignored it. ..."
    "... That US economists are completely clueless is obvious to anyone who travels around the world. That free trade economies such as the US are complete basket cases is obvious to anyone who visits mercantilist economies such as Singapore, Japan, Israel etc. US trained economists only have prestige because the masses don't know how backward and poverty-stricken the US has become under the policies they relentlessly justify and apologize for. ..."
    Oct 27, 2016 | economistsview.typepad.com
    Simon Wren-Lewis:
    Being honest about ideological influence in economics : Noah Smith has an article that talks about Paul Romer's recent critique of macroeconomics. ... He says the fundamental problem with macroeconomics is lack of data, which is why disputes seem to take so long to resolve. That is not in my view the whole story.

    If we look at the rise of Real Business Cycle (RBC) research a few decades ago, that was only made possible because economists chose to ignore evidence about the nature of unemployment in recessions. There is overwhelming evidence that in a recession employment declines because workers are fired rather than choosing not to work, and that the resulting increase in unemployment is involuntary (those fired would have rather retained their job at their previous wage). Both facts are incompatible with the RBC model.

    In the RBC model there is no problem with recessions, and no role for policy to attempt to prevent them or bring them to an end. The business cycle fluctuations in employment they generate are entirely voluntary. RBC researchers wanted to build models of business cycles that had nothing to do with sticky prices. Yet here again the evidence was quite clear...

    Why would researchers try to build models of business cycles where these cycles required no policy intervention, and ignore key evidence in doing so? The obvious explanation is ideological. I cannot prove it was ideological, but it is difficult to understand why - in an area which as Noah says suffers from a lack of data - you would choose to develop theories that ignore some of the evidence you have. The fact that, as I argue here , this bias may have expressed itself in the insistence on following a particular methodology at the expense of others does not negate the importance of that bias. ...

    I suspect there is a reluctance among the majority of economists to admit that some among them may not be following the scientific method but may instead be making choices on ideological grounds. This is the essence of Romer's critique, first in his own area of growth economics and then for business cycle analysis. Denying or marginalizing the problem simply invites critics to apply to the whole profession a criticism that only applies to a minority.

    anne : October 26, 2016 at 10:52 AM
    An important essay indeed in that ideological influence is pervasive in writing by economists, which should be no problem as such, but economists should be aware of ideological influence in the work that they do. The problem is being unaware that work is ideological, so that the work is presented as simple truth allowing for no alternative presentation and argument.
    anne -> anne... , October 26, 2016 at 11:03 AM
    From the influence of The Economist:

    http://www.bradford-delong.com/2016/04/must-read-i-do-not-understand-china-but-it-now-looks-more-likely-than-not-to-me-that-xi-jinpings-rule-will-lose-china.html

    April 5, 2016

    I do not understand China. But it now looks more likely than not to me that Xi Jinping's rule will lose China a decade, if not half a century... *

    * http://www.economist.com/news/china/21695923-his-exercise-power-home-xi-jinping-often-ruthless-there-are-limits-his

    -- Brad DeLong

    anne -> anne... , October 26, 2016 at 11:04 AM
    Again, on the influence of The Economist:

    https://twitter.com/barryeisler/status/789620951663063040

    Barry Eisler ‏@barryeisler

    This could be a poster for a horror movie. But it's just the sane, sober, centrist @TheEconomist, doing what they do best

    https://pbs.twimg.com/media/CvVLw8PVYAAaLQX.jpg

    5:14 PM - 21 Oct 2016

    anne -> kthomas... , October 26, 2016 at 11:32 AM
    The point of Sophocles Oedipus cycle for Sophocles and for Freud was found in the Oracle at Delphi with which the cycle begins. The inscription at Delphi read "Know Thyself."

    Know your ideological bent or leaning. The tragedy of Oedipus was in not knowing himself.

    kthomas -> anne... , October 26, 2016 at 11:59 AM
    The original "know thyself" was for warriors. For if you do not know yourself (or your limitations), how can you possibly defeat an enemy?

    The later Greek philosophers took it to heart, I suppose.

    anne -> kthomas... , October 26, 2016 at 05:23 PM
    Interesting, but Freud surely took "know thyself" to heart.
    anne -> anne... , October 26, 2016 at 02:09 PM
    http://www.bradford-delong.com/2016/08/fidel-castros-85th-birthday.html

    August 14, 2016

    It's Fidel Castro's 90th Birthday!

    Under Fidel Castro's rule Cuba bucked the historical trend--moving not toward but far away from political democracy.

    Under Fidel Castro it looks as though Cuba lost two generations of economic growth -- generations that other neighboring economies like Mexico, Costa Rica, and Puerto Rico made very good use of. The only good thing you can say about Castro is that Cuba continued to have the social indicators of a middle-income country even as it became a poor one.

    It was always incomprehensible that an anti-Democratic dictator who managed to turn a middle-income country into a poor one would have fans. Yet there are still people in the class not of stooges looking for their Stalin, but fools who have found their Fidel.

    -- Brad DeLong

    [ Importantly, the economics here happen to be wildly wrong but is there any concern about how Cuba actually fared in real per capita growth relative to Mexico, Costa Rica or Puerto Rico since 1971 when record keeping begins?

    The concern seem to be entirely ideological. ]

    anne -> anne... , October 26, 2016 at 02:11 PM
    https://fred.stlouisfed.org/graph/?g=6Ea6

    August 4, 2014

    Real per capita Gross Domestic Product for Brazil, Mexico and Cuba, 1971-2013

    (Percent change)


    https://research.stlouisfed.org/fred2/graph/?g=2P3h

    August 4, 2014

    Real per capita Gross Domestic Product for Mexico and Cuba, 1971-2013

    (Indexed to 1971)

    anne -> anne... , October 26, 2016 at 03:05 PM
    Since 1971, real per capita GDP in Cuba has grown faster than real per capita GDP in Mexico, Guatemala, El Salvador, Nicaragua, Costa Rica and Panama, faster than in Puerto Rico, Jamaica, Trinidad and Bermuda, faster than in Colombia, Venezuela, Brazil and Argentina, faster than in Ecuador, Bolivia, Uruguay and Paraguay, faster than in Spain and Portugal.

    Real per capita growth in the Dominican Republic and Chile alone among Spanish or Portuguese language countries has been faster than in Cuba.

    anne -> anne... , October 26, 2016 at 03:13 PM
    Being forgetful:

    Since 1971, real per capita GDP in Cuba has also grown faster than real per capita GDP in Honduras...

    Data for Haiti begin in 1999, but sadly Haiti has been continually beset since then.

    anne -> anne... , October 26, 2016 at 03:36 PM
    Being forgetful again:

    Since 1971, real per capita GDP in Cuba has also grown faster than real per capita GDP in Peru...

    Correcting:

    Since 1971, real per capita GDP in Cuba has grown slightly slower than real per capita GDP in Paraguay...

    Completing:

    Since 1971, real per capita GDP in Cuba has grown faster than real per capita GDP in Mexico, Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama, faster than in Puerto Rico, Jamaica, Trinidad and Bermuda, faster than in Colombia, Venezuela, Peru, Brazil and Argentina, faster than in Ecuador, Bolivia and Uruguay, faster than in Spain and Portugal.

    Real per capita growth in the Dominican Republic, Chile and Paraguay alone among Spanish or Portuguese language countries has been faster than in Cuba.

    DrDick : , October 26, 2016 at 11:08 AM
    RBC economists are very well compensated for saying that no government intervention is needed in the economy, as are those saying that minimum wages harm employment.
    pgl -> DrDick... , October 26, 2016 at 12:33 PM
    Actually a lot of academics are not exactly paid that well. This crowd does this sort as a religion. The problem is that those of us who never accepted perfect markets and instant market clearing were closed out of publications for 30 years. Now if RBC explained the real world - fine. But it had zero explanation for the last 9 years.
    Peter K. -> pgl... , October 26, 2016 at 12:58 PM
    "RBC economists are very well compensated for saying that no government intervention is needed in the economy"

    "Actually a lot of academics are not exactly paid that well."

    Mankiw is paid well.

    pgl -> Peter K.... , October 26, 2016 at 02:49 PM
    I write "a lot" and you read "all". More evidence that my internet stalker flunked pre-K. BTW - Mankiw is not part of the RBC crowd but PeterK is too stupid to know that. Geesh.
    JohnH -> pgl... , October 26, 2016 at 01:17 PM
    Krugman is paid well. At least his ideological basis is clear...'liberal.'
    http://nypost.com/2014/04/17/cuny-to-pay-economist-paul-krugman-225000/
    pgl -> JohnH... , October 26, 2016 at 01:51 PM
    Lord - what a stupid comment. Krugman does make his believes against evidence. I see this is another post you did not bother to read before posting one of your patented pointless rants.
    JohnH -> pgl... , October 26, 2016 at 02:27 PM
    Love it: "Krugman does make his believes against evidence."

    pgl doesn't even bother to read his own rants before he sends them...

    pgl -> JohnH... , October 26, 2016 at 02:49 PM
    Make - mark. Wow - you actually read something finally.
    DrDick -> pgl... , October 26, 2016 at 04:57 PM
    Speaking as an academic, in the university system with the lowest paid faculty in the nation, I am well aware of that. It is not the academic salaries, but the research grants and consulting contracts that matter here.
    anne -> DrDick... , October 26, 2016 at 05:25 PM
    Speaking as an academic, in the university system with the lowest paid faculty in the nation, I am well aware of that. It is not the academic salaries, but the research grants and consulting contracts that matter here.

    [ Understood and important. ]

    anne -> pgl... , October 26, 2016 at 05:24 PM
    The problem is that those of us who never accepted perfect markets and instant market clearing were closed out of publications for 30 years....

    [ Interesting and important. ]

    anne -> DrDick... , October 26, 2016 at 05:21 PM
    RBC economists are very well compensated for saying that no government intervention is needed in the economy, as are those saying that minimum wages harm employment.

    [ Important. ]

    DrDick -> anne... , October 27, 2016 at 07:27 AM
    Upton Sinclair is always right.
    anne : , October 26, 2016 at 11:11 AM
    https://en.wikipedia.org/wiki/Real_business-cycle_theory

    Real business-cycle theory (RBC theory) are a class of New Classical macroeconomics models in which business-cycle fluctuations to a large extent can be accounted for by real (in contrast to nominal) shocks. Unlike other leading theories of the business cycle, RBC theory sees business cycle fluctuations as the efficient response to exogenous changes in the real economic environment. That is, the level of national output necessarily maximizes expected utility, and governments should therefore concentrate on long-run structural policy changes and not intervene through discretionary fiscal or monetary policy designed to actively smooth out economic short-term fluctuations.

    According to RBC theory, business cycles are therefore "real" in that they do not represent a failure of markets to clear but rather reflect the most efficient possible operation of the economy, given the structure of the economy.

    Sandwichman : , October 26, 2016 at 11:40 AM
    "I suspect there is a reluctance among the majority of economists to admit that some among them may not be following the scientific method but may instead be making choices on ideological grounds."

    Cogito ergo [I suspect] sum.

    Julio -> Sandwichman ... , October 26, 2016 at 12:42 PM
    Wait, wait, it's not "sum". What is the Latin for "publish"?
    Paul Mathis : , October 26, 2016 at 11:49 AM
    How is the ridiculous RBC theory different from saying, as many prominent economists do, that presidents do not significantly influence economic growth and job creation?

    Thus, I have heard repeatedly that FDR, Reagan, Clinton and Obama should not get credit for the economic recoveries and job creation that occurred during their presidencies. Likewise, Hoover, Carter and the Bushes should not be blamed for the economic debacles that occurred during their presidencies. Apparently, these were all just real business cycles that no president has responsibility for.

    Of course voters do not agree at all, re-electing all of the "lucky" presidents while throwing out all of the "unlucky" ones. For example, Carter, who is now regarded as a good president, was buried in a massive landslide: 489-49 by a second rate actor who was regarded as a fool by many. (Trump will outperform Carter!)

    Either RBC is correct or presidents and their policies do matter a lot. Economists have to decide where they stand.

    pgl -> Paul Mathis... , October 26, 2016 at 12:31 PM
    The RBC crowd never really got that much into politics. Of course assuming markets always clear and are perfect in every other way is a silly way to model a real world economy.
    pgl : , October 26, 2016 at 12:29 PM
    Trump bragged today that he built this Washington DC hotel under budget. It seems he did by hiring undocumented workers at less than minimum wages:

    https://www.washingtonpost.com/news/post-politics/wp/2016/10/26/clinton-slams-trump-for-using-undocumented-labor-to-build-d-c-hotel/

    Maybe Greg Mankiw now likes TrumpEconomics.

    pgl : , October 26, 2016 at 12:37 PM
    "you would choose to develop theories that ignore some of the evidence you have". It first this New Classical/RBC crowd put forth all sorts of fancy new econometrics thinking if you looked at the data the right way, their model would be confirmed. Only problem is their model says aggregate demand can have only very transitional effects but the data show persistent effects. Shocks in other words have sustained real effects.

    So when their model was shown to be faulty by the evidence, they gave up on econometrics and turned to calibration which is just fancy math designed to hide the failure of their models.

    pgl : , October 26, 2016 at 12:41 PM
    SWL continues noting David Card's research on the effects of increases in minimum wages:

    'As Card points out in the interview his research involved no advocacy, but was simply about examining empirical evidence. So the friends that he lost objected not to the policy position he was taking, but to him uncovering and publishing evidence. Suppressing or distorting evidence because it does not give the answer you want is almost a definition of an illegitimate science.'

    Greg Mankiw searches high and low for anything that goes along with his view that higher wage floors lead to less employment demand. Of course this kind of bias favors people like Donald Trump who built that DC hotel under budget by ignoring the minimum wage laws.

    Longtooth : , October 26, 2016 at 01:05 PM
    Much of the economic models debates hinge on "sticky wages" which are irrefutable from all empirics. What I haven't seen yet though is a sound testable hypothesis that supports the empirical observation. In other words, we know by empirics it's true, but we really don't yet know why its true or true in most, but certainly not all cases -- e.g. Greece recently for example. Many suppositions have been described but none have to my knowledge been put into the form of testable hypothesis to suppot the suppositions with "scientific" methods..

    How does the relate to RBC models and ideology embedded in models?

    RBC ignores the empirics for what can be said to be ideological reasons. But models which include those observations have no hypothesis proven to support the observations either, so then those models are equally using unscientific methods in their construction, which just so happens to support a different ideological position.

    I don't disagree at all that models must use observations in their construction but it doesn't put those models at any greater scientific method advantage.

    Paul Mathis -> Longtooth... , October 26, 2016 at 01:39 PM
    Keynes Explains Sticky Wages (and Inflation)

    "It appears, therefore, that we have a sort of asymmetry on the two sides of the critical level above which true inflation sets in. For a contraction of effective demand below the critical level will reduce its amount measured in cost-units; whereas an expansion of effective demand beyond this level will not, in general, have the effect of increasing its amount in terms of cost-units.

    "This result follows from the assumption that the factors of production, and in particular the workers, are disposed to resist a reduction in their money-rewards, and that there is no corresponding motive to resist an increase. This assumption is, however, obviously well founded in the facts, due to the circumstance that a change, which is not an all-round change, is beneficial to the special factors affected when it is upward and harmful when it is downward.

    "If, on the contrary, money-wages were to fall without limit whenever there was a tendency for less than full employment, the asymmetry would, indeed, disappear. But in that case there would be no resting-place below full employment until either the rate of interest was incapable of falling further or wages were zero.

    "In fact we must have some factor, the value of which in terms of money is, if not fixed, at least sticky, to give us any stability of values in a monetary system.

    "The view that any increase in the quantity of money is inflationary (unless we mean by inflationary merely that prices are rising) is bound up with the underlying assumption of the classical theory that we are always in a condition where a reduction in the real rewards of the factors of production will lead to a curtailment in their supply." The General Theory, pp. 303-304.

    pgl -> Paul Mathis... , October 26, 2016 at 01:53 PM
    The RBC crowd is arrogant enough to argue that Keynes was practicing junk science. They knew his writings and just ignored it.
    Longtooth -> Paul Mathis... , October 27, 2016 at 01:35 AM
    yes, Keynes supposition, among other was precisely what I was referring to by knowing the observation is true but not why it is.

    Everybody knows it is true by observation that the sun rises in the east and settles in the west 1x in roughly 24 hours give or take a winter/summer trend change. But it took an awfully long time before Copernicus figured out why that was the case... and from his theory testable hypothesis were developed to show that the hypothesis were confirmed.

    With sticky wages we don't know why. E.G.

    Wages will not go below [this level] because [insert testable hypothesis]. A testable hypothesis takes the form

    Lower Bound of Wage = [insert independent measurable variables and their relationships here]

    As I said, lower bounds to wages are empirically observed. Now show why in repeatable results with the equations using the independent variables that apply under the conditions imposed by he hypothesis.

    Until that is the observation is used in models because it suits ones interest to do so... i.e. they like the results of the models better. It isn't a scientifically founded model... the assumption is no better than rational expectations.

    Paul Mathis -> Longtooth... , October 27, 2016 at 06:30 AM
    Keynes' Testable Hypothesis:

    "If, on the contrary, money-wages were to fall without limit whenever there was a tendency for less than full employment, . . . there would be no resting-place below full employment until either the rate of interest was incapable of falling further or wages were zero."

    Absent sticky wages, at ZLB interest, wages would fall to zero whenever there was a tendency for less than full employment and nobody works for zero wages.

    Keynes says this proposition is true.

    pgl -> Longtooth... , October 26, 2016 at 01:52 PM
    RBC also ignores anything that would explain why we have recessions at all. Its assumption that markets instantly clear is key to their model but we know that markets are not so perfect.
    rdy : , October 26, 2016 at 02:11 PM
    This same problem (the near religious belief that markets are always perfect) occurs with anti-trust enforcement and regulatory issues.
    pgl -> rdy... , October 26, 2016 at 02:53 PM
    A few years ago I would have suggested otherwise. But recent research notes you are right. Obama's CEA is noting this but he will not be President for long. Our next President needs to take this head on. Trump won't. Will Clinton? We will see.
    pgl : , October 26, 2016 at 03:07 PM
    Now this is honest. LeBron and Nike tell us to "come out of nowhere". You are not supposed to be here. What an awesome statement:

    http://thespun.com/nba/lebron-james-nike-commercial-new-here-i-am

    djb : , October 26, 2016 at 03:38 PM
    "There is overwhelming evidence that in a recession employment declines because workers are fired rather than choosing not to work, and that the resulting increase in unemployment is involuntary"

    see Keynes called it involuntary unemployment NOT cyclical unemployment

    as all the politicians are saying now a days, words mean something

    David Condon : , October 26, 2016 at 03:51 PM
    Simon-Wren Lewis is making a common mistake as I see it. The limitations and assumptions of a model should not be conflated with evidence against the model. Not considering certain types of data is a limitation of a model; not evidence against that model. If an RBC model does not include certain types of data, then the best approach is to try and understand that data and attempt to show how it fits into the existing model. Another model should be considered only when certain limitations appear intractable. Because there are almost always lots of ways to model the same problem, at least in the social sciences, if you create a new model every time you come across a limitation, you'll end up running around in circles.
    ScentOfViolets -> David Condon... , October 26, 2016 at 04:14 PM
    This makes no sense to me. So how about explaining what you meant with real world examples? I choose the examples of involuntary unemployment and wage stickiness, and the effects of raising the minimum wage.
    RW -> David Condon... , October 26, 2016 at 04:21 PM
    "The limitations and assumptions of a model should not be conflated with evidence against the model."

    I don't think this is what SWL is saying and am fairly certain it is not what Romer is saying: The problem is not limitation or contradiction, it is central variables assumed to confer verisimilitude that cannot and assumptions considered true that are not.

    David Condon -> RW... , October 27, 2016 at 10:27 AM
    Or to put your argument another way:

    The assumptions of the model are false and therefore should be construed as evidence against using the model. I'm saying that's faulty reasoning.

    The "my model is better than your model" argument is not a good way to approach problems at a theoretical level. It's sometimes okay at an applied level. One thing that's hard to wrap one's head around is that a model can still be useful even when its assumptions are false. When data is sparse, all useful theories will have to rely on false or incomplete assumptions. Usually a better approach is to extend rather than start over to keep people from running in too many different directions.

    Longtooth -> David Condon... , October 27, 2016 at 01:52 AM
    Then what value the model?

    Re: Your supposition / assertion:

    "Not considering certain types of data is a limitation of a model; not evidence against that model. If an RBC model does not include certain types of data, then the best approach is to try and understand that data and attempt to show how it fits into the existing model"

    Henry Carey - a real American economist, sadly forgotten to history : , -1
    That US economists are completely clueless is obvious to anyone who travels around the world. That free trade economies such as the US are complete basket cases is obvious to anyone who visits mercantilist economies such as Singapore, Japan, Israel etc. US trained economists only have prestige because the masses don't know how backward and poverty-stricken the US has become under the policies they relentlessly justify and apologize for.

    [Oct 26, 2016] There are some countervailing forces in action and the Triumphal march of neoliberalism with the USA as the hegemon of the new neoliberal order is either over, or soon will be over

    Notable quotes:
    "... Any analysis that starts with the assumption reactionaries still has a great deal to its agenda to achieve, such as promoting regressive taxation; privatization of Social Security; limiting Medicare; privatization of education; expansion of the police state; using the military to support the dollar, banking, world markets, etc., rather than Corey Robin's belief that "the Right" has won is in my view an improvement on the OP. ..."
    "... In the end, Putin will be done in by his oligarchs, despite the care he has taken to give them their share if they just refrain from wrecking everything with their excesses. Again, no need for NGOs. ..."
    Oct 26, 2016 | crookedtimber.org
    stevenjohnson

    @58

    This is a very good analyses. But I am less pessimistic: the blowback against neoliberal globalization is real and it is difficult to swipe it under the carpet.

    There are some signs of the "revolutionary situation" in the USA in a sense that the neoliberal elite lost control and their propaganda loss effectiveness, despite dusting off the "Red scare" trick with "Reds in each computer" instead of "Reds under each bed". With Putin as a very convenient bogeyman.

    As somebody here said Trump might be a reaction of secular stagnation, kind of trump card put into play by some part of the elite, because with continued secular stagnation, the social stability in the USA is under real threat.

    But it looks like newly formed shadow "Committee for Saving [neo]Liberal Order" (with participation of three latter agencies, just read the recent "Red scare" memorandum ( https://www.dni.gov/index.php/newsroom/press-releases/215-press-releases-2016/1423-joint-dhs-odni-election-security-statement ) want Hillary to be the POTUS.

    But the problem is that Hillary with her failing health is our of her prime and with a bunch of neocons in key positions in her administration, she really represents a huge threat to world peace. She might not last long as the level of stress inherent in POTUS job make it a killing ground for anybody with advanced stage of Parkinson or similar degenerative neurological disease. But that might make her more impulsive and more aggressive (and she always tried to outdo male politicians in jingoism, real John McCain is the red pantsuit).

    All-in-all it looks like she in not a solution for neoliberal elite problems, she is a part of the problem

    Adventurism of the US neoliberal elite, and especially possible aggressive moves in Syria by Hillary regime ("no fly zone"), makes military alliance of Russia and China very likely (with Pakistan, Iran and India as possible future members). So Hillary might really work like a powerful China lobbyist, because the alliance with Russia will be on China terms.

    Regime change via color revolution in either country requires at dense network of subservient to the Western interests and financed via shadow channels MSM (including TV channels), strong network of NGO and ability to distribute cash to selected members of the fifth column of neoliberal globalization. All those condition were made more difficult in Russia and impossible in mainland China. In Russia the US adventurism in Ukraine and the regime change of February 2014 (creation of neo-fascist regime nicknamed by some "Kaganat of Nuland" (Asia Times http://www.atimes.com/atimes/Central_Asia/CEN-01-100315.html )) essentially killed the neoliberal fifth column in Russia and IMHO it no longer represent a viable political force.

    Also Russians probably learned well lesson of unsuccessful attempt of regime change by interfering into Russian Presidential election process attempted by Hillary and Obama in 2011-2012. I would like to see the US MSM reaction if Russian ambassador invited Sanders and Trump into the embassy and promised full and unconditional support for their effort to remove criminal Obama regime, mired in corruption and subservient to Wall Street interests, the regime that produced misery for so many American workers, lower middle class and older Americans ;-)

    Ambassador McFaul soon left the country, NED was banned and screws were tightened enough to make next attempt exceedingly difficult. Although everything can happen I would discount the possibility of the next "White Revolution" in Russia. So called "Putin regime" survived the period of low oil prices and with oil prices over $60 in 2017 Russian economy might be able to grow several percent a year. At the same time the US "post-Obama" regime might well face the winds of returning higher oil prices and their negative influence of economy growth and unemployment.

    In China recent troubles in Hong Cong were also a perfect training ground for "anti color revolution" measures and the next attempt would much more difficult, unless China experience economic destabilization due to some bubble burst.

    That means that excessive military adventurism inherent in the future Hillary regime might speed up loss by the USA military dominance and re-alignment of some states beyond Philippines. Angela Merkel regime also might not survive the next election and that event might change "pro-Atlantic" balance in Europe.

    Although the list in definitely not complete, we can see that there are distinct setbacks for attempts of further neoliberalization beyond Brexit and TPP troubles.

    So there are some countervailing forces in action and my impression that the Triumphal march of neoliberalism with the USA as the hegemon of the new neoliberal order is either over, or soon will be over. In certain regions of the globe the USA foreign policy is in trouble (Syria, Ukraine) and while you can do anything using bayonets, you can't sit on them.

    So while still there is no viable alternative to neoliberalism as a social system, the ideology itself is discredited and like communism after 1945 lost its hold of hearts and minds of the USA population. I would say that in the USA neoliberalism entered Zombie stage.

    My hope is that reasonable voices in foreign policy prevail, and the disgust of unions members toward DemoRats (Neoliberal Democrats) could play the decisive role in coming elections. As bad as Trump is for domestic policy, it represent some hope as for foreign policy unless co-opted by Republican establishment.

    Val 10.26.16 at 3:54 am 72

    #70
    But the problem is that Hillary with her failing health is our of her prime and with a bunch of neocons in key positions in her administration, she really represents a huge threat to world peace. She might not last long as the level of stress inherent in POTUS job make it a killing ground for anybody with advanced stage of Parkinson or similar degenerative neurological disease. But that might kale her more impulsive and more aggressive (and she always tried to outdo her male politicians in jingoism, real John McCain is the red pantsuit).

    Does the new CT moderation regime have any expectations about the veracity of claims made by commenters? Because I think it would be useful in cases like this.

    Howard Frant 10.26.16 at 6:19 am ( 73 )

    Stephen @58

    Yes, it was late and I was tired, or I wouldn't have said something so foolish. Still, the point is that after centuries of constant war, Europe went 70 years without territorial conquest. That strikes me as a significant achievement, and one whose breach should not be taken lightly.

    phenomenal cat @64

    So democratic structures have to be robust and transparent before we care about them? I'd give a pretty high value to an independent press and contested elections. Those have been slowly crushed in Russia. The results for transparency have not been great. Personally, I don't believe that Ukraine is governed by fascists, or that Ukraine shot down that jetliner, but I'm sure a lot of Russians do.

    Russian leaders have always complained about "encirclement," but we don't have to believe them. Do you really believe Russia's afraid of an attack from Estonia? Clearly what Putin wants is to restore as much of the old Soviet empire as possible. Do you think the independence of the Baltic states would be more secure or less secure if they weren't members of NATO? (Hint: compare to Ukraine, Georgia, Moldova.)

    Layman 10.26.16 at 11:33 am ( 79 )

    ' .makes military alliance of Russia and China very likely '

    Any analysis which arrives at this conclusion is profoundly ignorant.

    Meta-comment: Is it permitted to say that a moderation scheme which objects to engels as a troll, while permitting this tripe from likbez has taken a wrong turn somewhere. Seriously, some explanation called for.

    likbez 10.26.16 at 3:54 pm 80

    @72

    Does the new CT moderation regime have any expectations about the veracity of claims made by commenters? Because I think it would be useful in cases like this.

    I would like to apologize about the number of typos, but I stand by statements made. Your implicit assumption that I am lying was not specific, so let's concentrate on three claims made:

    1. "Hillary has serious neurological disease for at least four years",
    2. "Obama and Hillary tried to stage color revolution in Russia in 2011-2012 interfering in Russian Presidential elections"
    3. "Hillary Clinton is a neocon, a warmonger similar to John McCain"

    1. Hillary Health : Whether she suffers from Parkinson disease or not in unclear, but signs of some serious neurological disease are observable since 2012 (for four years). Parkinson is just the most plausible hypothesis based on symptoms observed. Those symptoms suggests that she is at Stage 2 of the disease due to an excellent treatment she gets:

    http://www.viartis.net/parkinsons.disease/news/100312.htm
    The average time taken to progress from Stage 1 (mild) to Stage 2 (mild but various symptoms) was 1 year 8 months. The average time taken to progress from Stage 2 to Stage 3 (typical) was 7 years and 3 months. From Stage 3 to Stage 4 (severe) took 2 years. From Stage 4 to Stage 5 (incapacitated) took 2 years and 2 months. So the stage with typical symptoms lasts the longest. Those factors associated with faster progression were older age at diagnosis, and longer disease duration. Gender and ethnicity were not associated with the rate of Parkinson's Disease progression.

    These figures are only averages. Progression is not inevitable. Some people with Parkinson's Disease have either : stayed the same for decades, reduced their symptoms, rid their symptoms, or worsened at a rapid rate. For more current news go to Parkinson's Disease News.

    Concern about Hillary health were voiced in many publications and signs of her neurological disease are undisputable:

    2. Hillary and Obama attempt to stage the color revolution in Russia in 2011-2012 are also undisputable, but not widely known:

    3. The opinion that Hillary as a neocon is supported by facts from all her career , but especially during her tenure as the Secretary of State. She voted for Iraq war and was instrumental in unleashing Libya war and Syria war. The amount of evidence can't be ignored:

    If you have more specific concerns please voice them and I will try to support my statements with references and known facts.


    stevenjohnson 10.26.16 at 1:50 pm

    likbez @70 Any analysis that starts with the assumption reactionaries still has a great deal to its agenda to achieve, such as promoting regressive taxation; privatization of Social Security; limiting Medicare; privatization of education; expansion of the police state; using the military to support the dollar, banking, world markets, etc., rather than Corey Robin's belief that "the Right" has won is in my view an improvement on the OP. But whether mine is actually a deep analysis seems doubtful even to me.

    But the OP is really limiting itself solely to domestic politics, and in that context the resistance to "neoliberal globalization," (Why not use the term "imperialism?") is more or less irrelevant. The OP seems to have some essentialist notion of the "Right" as openly aimed at restoring the past, ignoring the content of policies. Reaction would be something blatant like restoring censorship of TV and movies, instead of IP laws that favor giant telecommunications companies, or abolition of divorce, instead of discriminatory enforcement of child protection laws that break up poor families. This cultural/psychological/moralizing/spiritual approach seems to me to be fundamentally a diversion from a useful understanding.

    There may be some sort of confused notions about popular morals and tastes clearly evolving in a more leftish direction. Free love was never a conservative principle for instance, yet many of its tenets are now those of the majority of the population. Personally I can only observe that there's nothing quite like the usefulness of laws and law enforcement, supplemented by the occasional illicit violence, to change social attitudes. The great model of course is the de facto extermination of the Left by "McCarthyism." No doubt the disappearance of the left targeted by "McCarthyism" is perceived to be a purification of the real left. It is customary for the acceptable "left" to agree with the McCarthys that communism lost its appeal to the people, rather than being driven out by mass repression. As to populism, such reactionary goals as the abolition of public education are notoriously sold as service to the people against the hifalutin' snobs, starting of course with lazy ass teachers. It seems to me entirely mistaken to see the populist reactionaries as out of ammunition because the old forms of race-baiting aren't working so well.

    By the way, there already is a Chinese bourgeoisie, in Taiwan, Singapore, the Philippines, Malaysia, Indonesia, Hong Kong, as well as elements in SEZs in China proper and select circles in various financial capitals. Restoration of capitalism in China has run into the difficulty that capitalism isn't holding up its end. President Xi Jinping is finding it difficult for capitalism to keep the mainland economy growing at a sufficiently rapid rate to keep the working class pacific, much less generate the so-called middle class whose stock market portfolios will bind them to the new ruling class forever. These are the sources for a revolution in China, not NGOs or a color revolution. In the end, Putin will be done in by his oligarchs, despite the care he has taken to give them their share if they just refrain from wrecking everything with their excesses. Again, no need for NGOs.

    Val @72 I remember that there were only rare, vague hints about Reagan, not factual evidence. So unless you are committed to the proposition his Alzheimer's disease only set in January 21, 1992, demanding factual evidence about the mental and physical health of our elective divinities seems unduly restrictive I think.

    Layman @79 The Shanghai Cooperation Organization alone makes an analysis that a military alliance between Russia and China reasonable enough. Even if incorrect in the end, it is not "profoundly ignorant."

    Meta-comment: Engels post was perceived as mocking, which was its offense. As for "trolling," that's an internet thing...

    [Oct 25, 2016] Dean Baker: Rigged – How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer

    Notable quotes:
    "... Geithner's comments about his sacrifices in public service did not elicit any outcry from the media at the time because his perspective was widely shared. The implicit assumption is that the sort of person who is working at a high level government job could easily be earning a paycheck that is many times higher if they were employed elsewhere. In fact, this is often true. When he left his job as Treasury Secretary, Geithner took a position with a private equity company where his salary is likely several million dollars a year. ..."
    "... The CEOs who are paid tens of millions a year would like the public to think that the market is simply compensating them for their extraordinary skills. A more realistic story is that a broken corporate governance process gives corporate boards of directors - the people who largely determine CEO pay -little incentive to hold down pay. Directors are more closely tied to top management than to the shareholders they are supposed to represent, and their positions are lucrative, usually paying six figures for very part-time work. Directors are almost never voted out by shareholders for their lack of attention to the job or for incompetence. ..."
    "... We also have done little to foster medical travel. This could lead to enormous benefits to patients and the economy, since many high cost medical procedures can be performed at a fifth or even one-tenth the U.S. price in top quality medical facilities elsewhere in the world. In this context, it is not surprising that the median pay of physicians is over $250,000 a year and some areas of specialization earn close to twice this amount. In the case of physicians alone, if pay were reduced to West European-levels the savings would be close to $100 billion a year (@ 0.6 percent of GDP). ..."
    "... As a technical matter, the Federal Reserve Bank of New York is a private bank. It is owned by the banks that are members of the Federal Reserve System in the New York District. ..."
    Oct 25, 2016 | www.nakedcapitalism.com

    Yves here. We are delighted to feature an excerpt from Dean Baker's new book Rigged , which you can find at http://deanbaker.net/books/rigged.htm via either a free download or in hard copy for the cost of printing and shipping. The book argues that policy in five areas, macroeconomics, the financial sector, intellectual property, corporate governance, and protection for highly paid professionals, have all led to the upward distribution of income. The implication is that the yawning gap between the 0.1% and the 1% versus everyone else is not the result of virtue ("meritocracy") but preferential treatment, and inequality would be substantially reduced if these policies were reversed.

    I urge you to read his book in full and encourage your friends, colleagues, and family to do so as well.

    By Dean Baker, Co-Director, Center for Economic and Policy Research

    Chapter 1: Introduction: Trading in myths

    In winter 2016, near the peak of Bernie Sanders' bid for the Democratic presidential nomination, a new line became popular among the nation's policy elite: Bernie Sanders is the enemy of the world's poor. Their argument was that Sanders, by pushing trade policies to help U.S. workers, specifically manufacturing workers, risked undermining the well-being of the world's poor because exporting manufactured goods to the United States and other wealthy countries is their path out of poverty. The role model was China, which by exporting has largely eliminated extreme poverty and drastically reduced poverty among its population. Sanders and his supporters would block the rest of the developing world from following the same course.

    This line, in its Sanders-bashing permutation, appeared early on in Vox, the millennial-oriented media upstart, and was quickly picked up elsewhere (Beauchamp 2016). [1] After all, it was pretty irresistible. The ally of the downtrodden and enemy of the rich was pushing policies that would condemn much of the world to poverty.

    The story made a nice contribution to preserving the status quo, but it was less valuable if you respect honesty in public debate.

    The problem in the logic of this argument should be apparent to anyone who has taken an introductory economics course. It assumes that the basic problem of manufacturing workers in the developing world is the need for someone who will buy their stuff. If people in the United States don't buy it, then the workers will be out on the street and growth in the developing world will grind to a halt.

    In this story, the problem is that we don't have enough people in the world to buy stuff. In other words, there is a shortage of demand. But is it really true that no one else in the world would buy the stuff produced by manufacturing workers in the developing world if they couldn't sell it to consumers in the United States? Suppose people in the developing world bought the stuff they produced raising their living standards by raising their own consumption.

    That is how the economics is supposed to work. In the standard theory, general shortages of demand are not a problem. [2] Economists have traditionally assumed that economies tended toward full employment. The basic economic constraint was a lack of supply. The problem was that we couldn't produce enough goods and services, not that we were producing too much and couldn't find anyone to buy them. In fact, this is why all the standard models used to analyze trade agreements like the Trans-Pacific Partnership assume trade doesn't affect total employment. [3] Economies adjust so that shortages of demand are not a problem.

    In this standard story (and the Sanders critics are people who care about textbook economics), capital flows from slow-growing rich countries, where it is relatively plentiful and so gets a low rate of return, to fast-growing poor countries, where it is scarce and gets a high rate of return (Figure 1-1).

    So the United States, Japan, and the European Union should be running large trade surpluses, which is what an outflow of capital means. Rich countries like ours should be lending money to developing countries, providing them with the means to build up their capital stock and infrastructure while they use their own resources to meet their people's basic needs.

    This wasn't just theory. That story accurately described much of the developing world, especially Asia, through the 1990s. Countries like Indonesia and Malaysia were experiencing rapid annual growth of 7.8 percent and 9.6 percent, respectively, even as they ran large trade deficits, just over 2 percent of GDP each year in Indonesia and almost 5 percent in Malaysia.

    These trade deficits probably were excessive, and a crisis of confidence hit East Asia and much of the developing world in the summer of 1997. The inflow of capital from rich countries slowed or reversed, making it impossible for the developing countries to sustain the fixed exchange rates most had at the time. One after another, they were forced to abandon their fixed exchange rates and turn to the International Monetary Fund (IMF) for help.

    Rather than promulgating policies that would allow developing countries to continue the textbook development path of growth driven by importing capital and running trade deficits, the IMF made debt repayment a top priority. The bailout, under the direction of the Clinton administration Treasury Department, required developing countries to switch to large trade surpluses (Radelet and Sachs 2000, O'Neil 1999).

    The countries of East Asia would be far richer today had they been allowed to continue on the growth path of the early and mid-1990s, when they had large trade deficits (Figure 1-2). Four of the five would be more than twice as rich, and the fifth, Vietnam, would be almost 50 percent richer. South Korea and Malaysia would have higher per capita incomes today than the United States.

    In the wake of the East Asia bailout, countries throughout the developing world decided they had to build up reserves of foreign exchange, primarily dollars, in order to avoid ever facing the same harsh bailout terms as the countries of East Asia. Building up reserves meant running large trade surpluses, and it is no coincidence that the U.S. trade deficit has exploded, rising from just over 1 percent of GDP in 1996 to almost 6 percent in 2005. The rise has coincided with the loss of more than 3 million manufacturing jobs, roughly 20 percent of employment in the sector.

    There was no reason the textbook growth pattern of the 1990s could not have continued. It wasn't the laws of economics that forced developing countries to take a different path, it was the failed bailout and the international financial system. It would seem that the enemy of the world's poor is not Bernie Sanders but rather the engineers of our current globalization policies.

    There is a further point in this story that is generally missed: it is not only the volume of trade flows that is determined by policy, but also the content. A major push in recent trade deals has been to require stronger and longer patent and copyright protection. Paying the fees imposed by these terms, especially for prescription drugs, is a huge burden on the developing world. Bill Clinton would have much less need to fly around the world for the Clinton Foundation had he not inserted the TRIPS (Trade Related Aspects of Intellectual Property Rights ) provisions in the World Trade Organization (WTO) that require developing countries to adopt U.S.-style patent protections. Generic drugs are almost always cheap -patent protection makes drugs expensive. The cancer and hepatitis drugs that sell for tens or hundreds of thousands of dollars a year would sell for a few hundred dollars in a free market. Cheap drugs would be more widely available had the developed world not forced TRIPS on the developing world.

    Of course, we have to pay for the research to develop new drugs or any innovation. We also have to compensate creative workers who produce music, movies, and books. But there are efficient alternatives to patents and copyrights, and the efforts by the elites in the United States and other wealthy countries to impose these relics on the developing world is just a mechanism for redistributing income from the world's poor to Pfizer, Microsoft, and Disney. Stronger and longer patent and copyright protection is not a necessary feature of a 21 st century economy.

    In textbook trade theory, if a country has a larger trade surplus on payments for royalties and patent licensing fees, it will have a larger trade deficit in manufactured goods and other areas. The reason is that, in theory, the trade balance is fixed by national savings and investment, not by the ability of a country to export in a particular area. If the trade deficit is effectively fixed by these macroeconomic factors, then more exports in one area mean fewer exports in other areas. Put another way, income gains for Pfizer and Disney translate into lost jobs for workers in the steel and auto industries.

    The conventional story is that we lose manufacturing jobs to developing countries because they have hundreds of millions of people willing to do factory work at a fraction of the pay of manufacturing workers in the United States. This is true, but developing countries also have tens of millions of smart and ambitious people willing to work as doctors and lawyers in the United States at a fraction of the pay of the ones we have now.

    Gains from trade work the same with doctors and lawyers as they do with textiles and steel. Our consumers would save hundreds of billions a year if we could hire professionals from developing countries and pay them salaries that are substantially less than what we pay our professionals now. The reason we import manufactured goods and not doctors is that we have designed the rules of trade that way. We deliberately write trade pacts to make it as easy as possible for U.S. companies to set up manufacturing operations abroad and ship the products back to the United States, but we have done little or nothing to remove the obstacles that professionals from other countries face in trying to work in the United States. The reason is simple: doctors and lawyers have more political power than autoworkers. [4]

    In short, there is no truth to the story that the job loss and wage stagnation faced by manufacturing workers in the United States and other wealthy countries was a necessary price for reducing poverty in the developing world. [5] This is a fiction that is used to justify the upward redistribution of income in rich countries. After all, it is pretty selfish for rich country autoworkers and textile workers to begrudge hungry people in Africa and Asia and the means to secure food, clothing, and shelter.

    The other aspect of this story that deserves mention is the nature of the jobs to which our supposedly selfish workers feel entitled. The manufacturing jobs that are being lost to the developing world pay in the range of $15 to $30 an hour, with the vast majority closer to the bottom figure than the top. The average hourly wage for production and nonsupervisory workers in manufacturing in 2015 was just under $20 an hour, or about $40,000 a year. While a person earning $40,000 is doing much better than a subsistence farmer in Sub-Saharan Africa, it is difficult to see this worker as especially privileged.

    By contrast, many of the people remarking on the narrow-mindedness and sense of entitlement of manufacturing workers earn comfortable six-figure salaries. Senior writers and editors at network news shows or at the New York Times and Washington Post feel entitled to their pay because they feel they have the education and skills to be successful in a rapidly changing global economy.

    These are the sort of people who consider it a sacrifice to work at a high-level government job for $150,000 to $200,000 a year. For example, Timothy Geithner, President Obama's first treasury secretary, often boasts about his choice to work for various government agencies rather than earn big bucks in the private sector. His sacrifice included a stint as president of the Federal Reserve Bank of New York that paid $415,000 a year. [6] This level of pay put Geithner well into the top 1 percent of wage earners.

    Geithner's comments about his sacrifices in public service did not elicit any outcry from the media at the time because his perspective was widely shared. The implicit assumption is that the sort of person who is working at a high level government job could easily be earning a paycheck that is many times higher if they were employed elsewhere. In fact, this is often true. When he left his job as Treasury Secretary, Geithner took a position with a private equity company where his salary is likely several million dollars a year.

    Not everyone who was complaining about entitled manufacturing workers was earning as much as Timothy Geithner, but it is a safe bet that the average critic was earning far more than the average manufacturing worker - and certainly far more than the average displaced manufacturing worker.

    Turning the Debate Right-Side Up: Markets Are Structured

    The perverse nature of the debate over a trade policy that would have the audacity to benefit workers in rich countries is a great example of how we accept as givens not just markets themselves but also the policies that structure markets. If we accept it as a fact of nature that poor countries cannot borrow from rich countries to finance their development, and that they can only export manufactured goods, then their growth will depend on displacing manufacturing workers in the United States and other rich countries.

    It is absurd to narrow the policy choices in this way, yet the centrists and conservatives who support the upward redistribution of the last four decades have been extremely successful in doing just that, and progressives have largely let them set the terms of the debate.

    Markets are never just given. Neither God nor nature hands us a worked-out set of rules determining the way property relations are defined, contracts are enforced, or macroeconomic policy is implemented. These matters are determined by policy choices. The elites have written these rules to redistribute income upward. Needless to say, they are not eager to have the rules rewritten which means they have no interest in even having them discussed.

    But for progressive change to succeed, these rules must be addressed. While modest tweaks to tax and transfer policies can ameliorate the harm done by a regressive market structure, their effect will be limited. The complaint of conservatives - that tampering with market outcomes leads to inefficiencies and unintended outcomes - is largely correct, even if they may exaggerate the size of the distortions from policy interventions. Rather than tinker with badly designed rules, it is far more important to rewrite the rules so that markets lead to progressive and productive outcomes in which the benefits of economic growth and improving technology are broadly shared

    This book examines five broad areas where the rules now in place tend to redistribute income upward and where alternative rules can lead to more equitable outcomes and a more efficient market:

      Macroeconomic policies determining levels of employment and output. Financial regulation and the structure of financial markets. Patent and copyright monopolies and alternative mechanisms for financing innovation and creative work. Pay of chief executive officers (CEOs) and corporate governance structures. Protections for highly paid professionals, such as doctors and lawyers.

    In each of these areas, it is possible to identify policy choices that have engineered the upward redistribution of the last four decades.

    In the case of macroeconomic policy, the United States and other wealthy countries have explicitly adopted policies that focus on maintaining low rates of inflation. Central banks are quick to raise interest rates at the first sign of rising inflation and sometimes even before. Higher interest rates slow inflation by reducing demand, thereby reducing job growth, and reduced job growth weakens workers' bargaining power and puts downward pressure on wages. In other words, the commitment to an anti-inflation policy is a commitment by the government, acting through central banks, to keep wages down. It should not be surprising that this policy has the effect of redistributing income upward.

    The changing structure of financial regulation and financial markets has also been an important factor in redistributing income upward. This is a case where an industry has undergone very rapid change as a result of technological innovation. Information technology has hugely reduced the cost of financial transactions and allowed for the development of an array of derivative instruments that would have been unimaginable four decades ago. Rather than modernizing regulation to ensure that these technologies allow the financial sector to better serve the productive economy, the United States and other countries have largely structured regulations to allow a tiny group of bankers and hedge fund and private equity fund managers to become incredibly rich.

    This changed structure of regulation over the last four decades was not "deregulation," as is often claimed. Almost no proponent of deregulation argued against the bailouts that saved Wall Street in the financial crisis or against the elimination of government deposit insurance that is an essential part of a stable banking system. Rather, they advocated a system in which the rules restricting their ability to profit were eliminated, while the insurance provided by the Federal Reserve Board, the Federal Deposit Insurance Corporation, and other arms of the government were left in place. The position of "deregulators" effectively amounted to arguing that they should not have to pay for the insurance they were receiving.

    The third area in which the rules have been written to ensure an upward redistribution is patent and copyright protection. Over the last four decades these protections have been made stronger and longer. In the case of both patent and copyright, the duration of the monopoly period has been extended. In addition, these monopolies have been applied to new areas. Patents can now be applied to life forms, business methods, and software. Copyrights have been extended to cover digitally produced material as well as the internet. Penalties for infringement have been increased and the United States has vigorously pursued their application in other countries through trade agreements and diplomatic pressure.

    Government-granted monopolies are not facts of nature, and there are alternative mechanisms for financing innovation and creative work. Direct government funding, as opposed to government granted monopolies, is one obvious alternative. For example, the government spends more than $30 billion a year on biomedical research through the National Institutes of Health - money that all parties agree is very well spent. There are also other possible mechanisms. It is likely that these alternatives are more efficient than the current patent and copyright system, in large part because they would be more market-oriented. And, they would likely lead to less upward redistribution than the current system.

    The CEOs who are paid tens of millions a year would like the public to think that the market is simply compensating them for their extraordinary skills. A more realistic story is that a broken corporate governance process gives corporate boards of directors - the people who largely determine CEO pay -little incentive to hold down pay. Directors are more closely tied to top management than to the shareholders they are supposed to represent, and their positions are lucrative, usually paying six figures for very part-time work. Directors are almost never voted out by shareholders for their lack of attention to the job or for incompetence.

    The market discipline that holds down the pay of ordinary workers does not apply to CEOs, since their friends determine their pay. And a director has little incentive to pick a fight with fellow directors or top management by asking a simple question like, "Can we get a CEO just as good for half the pay?" This privilege matters not just for CEOs; it has the spillover effect of raising the pay of other top managers in the corporate sector and putting upward pressure on the salaries of top management in universities, hospitals, private charities, and other nonprofits.

    Reformed corporate governance structures could empower shareholders to contain the pay of their top-level employees. Suppose directors could count on boosts in their own pay if they cut the pay of top management without hurting profitability, With this sort of policy change, CEOs and top management might start to experience some of the downward wage pressure that existing policies have made routine for typical workers.

    This is very much not a story of the natural workings of the market. Corporations are a legal entity created by the government, which also sets the rules of corporate governance. Current law includes a lengthy set of restrictions on corporate governance practices. It is easy to envision rules which would make it less likely that CEOs earn such outlandish paychecks by making it easier for shareholders to curb excessive pay.

    Finally, government policies strongly promote the upward redistribution of income for highly paid professionals by protecting them from competition. To protect physicians and specialists, we restrict the ability of nurse practitioners or physician assistants to perform tasks for which they are entirely competent. We require lawyers for work that paralegals are capable of completing. While trade agreements go far to remove any obstacle that might protect an autoworker in the United States from competition with a low-paid factory worker in Mexico or China, they do little or nothing to reduce the barriers that protect doctors, dentists, and lawyers from the same sort of competition. To practice medicine in the United States, it is still necessary to complete a residency program here, as though there were no other way for a person to become a competent doctor.

    We also have done little to foster medical travel. This could lead to enormous benefits to patients and the economy, since many high cost medical procedures can be performed at a fifth or even one-tenth the U.S. price in top quality medical facilities elsewhere in the world. In this context, it is not surprising that the median pay of physicians is over $250,000 a year and some areas of specialization earn close to twice this amount. In the case of physicians alone, if pay were reduced to West European-levels the savings would be close to $100 billion a year (@ 0.6 percent of GDP).

    Changing the rules in these five areas could reduce much and possibly all of the upward redistribution of the last four decades. But changing the rules does not mean using government intervention to curb the market. It means restructuring the market to produce different outcomes. The purpose of this book is to show how.

    [1] See also Weissman (2016), Iacono (2016), Worstall (2016), Lane (2016), and Zakaria (2016).

    [2] As explained in the next chapter, this view is not exactly correct, but it's what you're supposed to believe if you adhere to the mainstream economic view.

    [3] There can be modest changes in employment through a supply-side effect. If the trade deal increases the efficiency of the economy, then the marginal product of labor should rise, leading to a higher real wage, which in turn should induce some people to choose work over leisure. So the trade deal results in more people choosing to work, not an increased demand for labor.

    [4] For those worried about brain drain from developing countries, there is an easy fix. Economists like to talk about taxing the winners, in this case developing country professionals and rich country consumers, to compensate the losers, which would be the home countries of the migrating professionals. We could tax a portion of the professionals' pay to allow their home countries to train two or three professionals for every one that came to the United States. This is a classic win-win from trade.

    [5] The loss of manufacturing jobs also reduced the wages of less-educated workers (those without college degrees) more generally. The displaced manufacturing workers crowded into retail and other service sectors, putting downward pressure on wages there.

    [6] As a technical matter, the Federal Reserve Bank of New York is a private bank. It is owned by the banks that are members of the Federal Reserve System in the New York District.

    fresno dan October 25, 2016 at 7:24 am

    "Markets are never just given. Neither God nor nature hands us a worked-out set of rules determining the way property relations are defined, contracts are enforced, or macroeconomic policy is implemented. These matters are determined by policy choices. The elites have written these rules to redistribute income upward. Needless to say, they are not eager to have the rules rewritten which means they have no interest in even having them discussed."

    ======================================================
    It is one of those remarkable hypocrisies that free "unregulated" trade requires deals of thousands of pages .
    but if these deals weren't so carefully structured to help the 1%, support would melt like snowmen in Fresno on a July day

    Kokuanani October 25, 2016 at 8:05 am

    Any other way to buy a paperback copy than via Amazon [which is where the link takes me]?

    I refuse to use them/it.

    JeffC October 25, 2016 at 9:15 am

    It's also at BarnesandNoble.com .

    Katharine October 25, 2016 at 11:15 am

    Or check your local indy, or one of those that take orders (I refrain from naming my favorite co-op in Chicago, and anyway I admit there are others). Nice to support those when you can.

    RickM October 25, 2016 at 10:55 am

    I downloaded the complete pdf directly from the link time to make a donation to the CEPR, I reckon.

    Vatch October 25, 2016 at 2:47 pm

    There's also this, which can help to find an independent bookseller in your area:

    http://www.indiebound.org/book/9780692793367

    Carolinian October 25, 2016 at 9:05 am

    Almost no proponent of deregulation argued against the bailouts that saved Wall Street in the financial crisis or against the elimination of government deposit insurance that is an essential part of a stable banking system.

    Actually I believe there were some Republicans who denounced the Wall Street bailout as a violation of capitalist principles. My state's Mark Sanford comes to mind. It was the Dems at the urging of Pelosi who saved the bailout. On the other hand many of my local politicians are big on "public/private" partnerships which would be a violation of laissez-faire that they approve. Perhaps it was simply that there are no giant banks headquartered in SC.

    The truth is there is no coherent intellectual basis to how the US economy is currently run. It's all about power and what you can do with it. Which is to say it is our politics, above all, that is broken.

    Sound of the Suburbs October 25, 2016 at 9:34 am

    "That is how the economics is supposed to work. In the standard theory, general shortages of demand are not a problem.[2] Economists have traditionally assumed that economies tended toward full employment. The basic economic constraint was a lack of supply. The problem was that we couldn't produce enough goods and services, not that we were producing too much and couldn't find anyone to buy them. In fact, this is why all the standard models used to analyze trade agreements like the Trans-Pacific Partnership assume trade doesn't affect total employment.[3] Economies adjust so that shortages of demand are not a problem."

    Unbelievable.

    By the 1920s they realised the system produced so much stuff that extensive advertising was needed to shift it all.

    One hundred year's later, we might take this on board.

    What is the global advertising budget?

    The amount necessary to shift all the crap the system produces today.

    Sound of the Suburbs October 25, 2016 at 9:45 am

    Demand has to be manufactured through advertising due to chronic over-supply.

    Sound of the Suburbs October 25, 2016 at 9:40 am

    We need to move on from Milton Freidman's ideas and discover what trade in a globalized world is really about.

    We are still under the influence of Milton Freidman's ideas of a globalised free trade world.

    These ideas came from Milton Freidman's imagination where he saw the ideal as small state, raw capitalism and thought the public sector should be sold off and entitlement programs whittled down until everything must be purchased through the private sector.

    "You are free to spend your money as you choose"

    Not mentioning its other meaning:

    "No money, no freedom"

    After Milton Freedman's "shock therapy" in Russia, people were left with so little money they couldn't afford to eat and starved to death. In Greece people cannot afford even bread today.

    But this is economic liberalism, the economy comes first.

    Milton Freidman used his imagination to work out what small state, raw capitalism looked like whereas he could have looked at it in reality through history books of the 18th and 19th centuries where it had already existed.

    The Classical Economists studied it and were able to see its problems first hand and noted the detrimental effects of the rentier class on the economy. They were constantly looking to get "unearned" income from doing nothing; sucking purchasing power out of the economy and bleeding it dry.

    Adam Smith observed:

    "The Labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money. But every savage has the full fruits of his own labours; there are no landlords, no usurers and no tax gatherers."

    Adam Smith saw landlords, usurers (bankers) and Government taxes as equally parasitic, all raising the cost of doing business.

    He sees the lazy people at the top living off "unearned" income from their land and capital.

    He sees the trickle up of Capitalism:
    1) Those with excess capital collect rent and interest.
    2) Those with insufficient capital pay rent and interest.

    He differentiates between "earned" and "unearned" income.

    Today we encourage a new rentier class of BTL landlords who look to extract the "earned" income of generation rent for "unearned" income. If you have a large BTL portfolio you can become a true rentier, do nothing productive at all and live off "unearned" income extracted from generation rent, the true capitalist parasite. (UK)

    The Classical Economists realised capitalism has two sides, the productive side where "earned" income is generated and the unproductive, parasitic, rentier side where "unearned" income is generated.

    You should tax "unearned" income to discourage the parasitic side of capitalism.
    You shouldn't tax "earned" income to encourage the productive side of capitalism.

    You should provide low cost housing, education and services to create a low cost of living, giving a low minimum wage making you globally competitive. This is to be funded by taxes on "unearned" income.

    The US has probably been the most successful in making its labour force internationally uncompetitive with soaring costs of housing, healthcare and student loan repayments.

    These all have to be covered by wages and US businesses are now squealing about the high minimum wage.

    That's Milton Freidman's imagined small state, raw capitalism.

    What he imagined bears little resemblance to the reality the Classical Economists saw firsthand.

    We need to move on from Milton Freidman fantasy land.

    Sound of the Suburbs October 25, 2016 at 9:42 am

    Milton Freidman fantasy land:

    Businesses should maximise profit.

    Small state, raw capitalism as observed by Adam Smith:

    "But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin."

    When rates of profit are high, capitalism is cannibalising itself by:
    1) Not engaging in long term investment for the future
    2) Paying insufficient wages to maintain demand for its products and services

    In the 18th Century they would have understood today's problems with growth and demand.

    Luckily Jeff Bezos didn't inhabit Milton Freidman fantasy land.

    He re-invested almost everything to turn Amazon onto the global behemoth it is today.

    Jim Haygood October 25, 2016 at 9:47 am

    ' The commitment to an anti-inflation policy is a commitment by the government, acting through central banks, to keep wages down. '

    This is strikingly silly. Insert the word 'nominal' before wages, and it's not a howler anymore.

    Anti-inflation policy in fact has little influence on real wages (the variable of concern, not nominal wages). But it has a lot to do with preventing the social chaos of constantly rising prices, strikes for higher wages, inability of first-time home buyers to borrow at affordable rates, and so on.

    Inflationism is greasy kid stuff not to mention a brazen fraud on the public.

    Anonymous2 October 25, 2016 at 10:18 am

    As one who walked the corridors of power in a very modest capacity in my country in the early to mid 1990s, can I just say that people with power or influence then were aware that globalisation would create winners and losers. I recall the consensus of those I knew then was that steps would need to be taken to compensate the losers. The tragedy is that these steps were never taken, or, if they were, only to a wholly inadequate degree.

    Alejandro October 25, 2016 at 12:22 pm

    The always elusive referents for cost, price and value the flip-side of social chaos would seem the entropic degradation of wasted lives, excluded from participating {either-OR} abandoned as irredeemable

    Katharine October 25, 2016 at 1:01 pm

    Higher interest rates slow inflation by reducing demand, thereby reducing job growth, and reduced job growth weakens workers' bargaining power and puts downward pressure on wages.

    Your assertion that anti-inflation policy has little influence on real wages does not address Baker's statement about the mechanism by which he says it does. Given an argument between two people, one of whom cites a mechanism he is probably prepared to document with numbers and one of whom merely declares his belief, which are people more likely to trust? Granted always, they should go look for the numbers before they fully accept the statement, his credibility is currently higher than yours on this subject.

    Jim Haygood October 25, 2016 at 1:24 pm

    Real wages roughly doubled from 1947 (when BLS data begins) through the late 1970s:

    https://en.wikipedia.org/wiki/Real_wages#/media/File:US_productivity_and_real_wages.jpg

    Over this same period, the nominal yield on 10-year Treasury notes rose from 2.5% to over 10%:

    https://staticseekingalpha.a.ssl.fastly.net/uploads/2010/3/29/saupload_10_yr_treasury_yields_25_.jpg

    By contrast, since the 1970s real wages stalled, while interest rates round-tripped back to 2 percent.

    Over nearly seven decades, the correlation is quite the opposite from that made up claimed by Dean Bonkers. Namely, real wages soared under a regime of steadily rising nominal interest rates.

    Numbers - they can be crunchy sometimes.

    Katharine October 25, 2016 at 2:22 pm

    Since my original reply has disappeared in limbo, I will merely note that numbers are probably even crunchier when you don't generalize across a span of decades: first there was A, then there was B, nothing else happened. It's a sure way to obscure patterns.

    And Jim, please quit the ad hominem stuff! It's ugly and needless. If you really have an argument you don't need it, and if you don't you don't gain by it. You know perfectly well he's not making things up and he's not bonkers. When you say stuff like that, the obvious presumption is that you just don't want to consider his arguments because they lead somewhere you don't want to go.

    Paul Art October 25, 2016 at 4:56 pm

    Don't feed the troll

    Smell of Sulfur October 25, 2016 at 5:32 pm

    Perhaps I am missing the point being made, but if you are suggesting that increases in real wages in the 1945-1975 period caused inflation, why not provide the data on inflation which would in fact show that inflation was essentially tame for 20 years in this period (1952-1972, with a slight hiccup in 1969-1971), thereby contradicting your point? And if you are suggesting that Fed increases in interest rate have not resulted in suppression of wages you will have to demonstrate that using analysis that takes into account the lag in time between increase in rate and transmission to wages, and in that case would you not also use the Fed Funds Rate itself as a variable?

    sgt_doom October 25, 2016 at 5:31 pm

    Bulltwacky, they have been globalizing wages downwards while globalizing housing prices upwards!

    Every time some stupid and moronic newsy floozy on one of the CorporateNonMedia outlets claims housing purchases may be going down because consumer confidence is plummeting, they CHOOSE to ignore the foreign buyers of said houses!

    It's all connected - it's all rigged . . . .

    Minnie Mouse October 25, 2016 at 1:32 pm

    Did I get this right? Full employment is an assumed boundary condition and so is fixed balance of trade? If the model is to work as advertised then the boundary conditions must be hard wired to be true, right?

    sgt_doom October 25, 2016 at 5:28 pm

    Dean hits it out of the park once again!

    Sounds like a great book on every level.

    If the top 25 hedge fund managers saved around $5 billion per year in being taxed on their income at capital gains rate (carried interest ruling in tax code - utterly corrupt), then think of the amount that is being robbed from the tax base when one considers ALL the hedge fund people, and ALL the private equity types (who also do this), a conservative amount of tax revenues remitted should be around $100 billion per year!

    Now that would go far . . .

    [Oct 25, 2016] Krugman - a Vichy Left coward?

    Jan 27, 2016 | larspsyll.wordpress.com

    Paul Krugman's recent posts have been most peculiar. Several have looked uncomfortably like special pleading for political figures he likes, notably Hillary Clinton. He has, in my judgement, stooped rather far down in attacking people well below him in the public relations food chain

    Perhaps the most egregious and clearest cut case is his refusal to address the substance of a completely legitimate, well-documented article by David Dayen outing Krugman, and to a lesser degree, his fellow traveler Mike Konczal, in abjectly misrepresenting Sanders' financial reform proposals

    The Krugman that was early to stand up to the Iraq War, who was incisive before and during the crisis has been very much in absence since Obama took office. It's hard to understand the loss of intellectual independence. That may not make Krugman any worse than other Democratic party apparatchiks, but he continues to believe he is other than that, and the lashing out at Dayen looks like a wounded denial of his current role. Krugman and Konczal need to be seen as what they are: part of the Vichy Left brand cover for the Democratic party messaging apparatus. Krugman, sadly, has chosen to diminish himself for a not very worthy cause.

    Yves Smith/Naked Capitalism

    [Oct 25, 2016] Chris Wallace, Supply, Demand, and the Government Budget Deficit

    Oct 20, 2016 | cepr.net

    FastEddie 5 days ago

    "The Austerity Tax " was instituted by the GOP as soon as the Brown Guy became president. 8 years earlier, the same GOP pushed a huge Tax cut as Greenspan worried that the surplus was too big. The GOP can always be counted on to put party before country. Good riddance.
    Paul 5 days ago
    50 Million More Jobs
    • By 2015, federal spending was 454% higher and the national debt was 20 times greater than when Pres. Reagan took office in 1981. The result: Real GDP gained 153% and jobs increased by more than 50 million from 1981.
    • In total, our debt is now 875 times greater than in 1933 at the bottom of the Great Depression. Were we better off then?
    • And no, we are not like Greece because we print our money and all our debt is in U.S. dollars. As former Fed chairman Alan Greenspan said: "The U.S. can pay any debt it has because we can always print money to do that. So there is zero probability of default."
    • The real limit on printing money and increasing the debt/budget deficit is high inflation which is well controlled by increasing interest rates as the Fed did in 1980 when it cut inflation from 14.6% to 1.6% in 6 years. Interest on the debt is now 1.2% of GDP (national income) and has never exceeded 2% during this century.
    pieceofcake Paul 4 days ago
    AND - right - right - the US isn't Greece! -

    If Greece is in danger to go under - there are all these other nice Europeans - who save the Country...

    BUT if the almighty US of A is threatening to go under -(like in 2008) - the whole world is in danger to go under with it too... so we desperately need this Greenspan dude - with his wonderful printing machine - and if the American people don't trust him -(because the printing machine seemed to have been not very effective in 2008) - let's tell the people there is always TRUMP - who will put his name in Gold ON IT -

    That should do it - Right?

    pieceofcake Paul 4 days ago
    Oh ja! -

    Oh ja!! - let's get the Greenspan dude out of retirement to print US... some!!

    And especially for the people - who really need the dough - like all these depressed workers -
    Let's call up Greenspan and tell him to print RIGHT AWAY - and not waisting any time anymore - or America will be called 'TRUMP' forever!!

    skeptonomist Paul 4 days ago
    The Fed and other central banks have been demonstrating that they do not have the ability to print money. Massive QE and record low interest rates have not resulted in the lending by commercial banks which actually expands the money supply. In practice inflation and expansion of the money supply have been brought about in the US and other advanced countries in most cases (excluding the commodity shocks of the 70's) by government spending, especially in wars (or after them as in Germany in 1922). And when the government spends it obviously increases debt.

    It's past time to be relying on the supposed ability of central banks to "print money". The assumptions involved in the monetary "theory" about this are just wrong.

    Paul skeptonomist 3 days ago
    The M2 money stock is up 70% over the past 8 years.
    https://fred.stlouisfed.org/se...

    Meanwhile inflation is at a 50 year low and has been falling for the past 5 years.
    https://fred.stlouisfed.org/gr...

    So you are just dead wrong on the facts. But hey, thanks for your BS theory of economics.

    skeptonomist Paul 4 days ago
    If the Fed can control inflation, why did it let inflation increase to 14.6% in the first place? It raised rates continuously from 1977 to 1980 to historic record levels as inflation increased to its peak. As Dean has pointed out before, inflation began to fall rapidly in early 1980 when oil price stabilized, not when the Fed raised rates. The squabbling about the true value of NAIRU is pointless since the Fed has never demonstrated an ability to control inflation.
    Francisco Flores skeptonomist 4 days ago
    Inflation increased due to an external shock - the quadrupling of oil and thus food prices. Once they stopped rising, once prices had permeated through the economy, price rises would have tapered off without the horrid recession the Fed imposed on the American people.
    pieceofcake Francisco Flores 4 days ago
    'the horrid recession the Fed imposed on the American people.'

    You mean the 'US FED'?
    Now how was the US FED able to impose some horrid recession on the American people?

    By not raising the Interest Rate?

    Francisco Flores pieceofcake 4 days ago
    ?? By raising interest rates to 21%?
    pieceofcake Francisco Flores 4 days ago
    '21%?'
    Good Lord - can you imagine how much money we would make just with a savings account?

    We wouldn't have to go gambling at all anymore?

    pieceofcake pieceofcake 4 days ago
    and seriously - let's raise interest rates 21 percent for everybody who invests her or his money in speculative assets -(like stocks or downtown SF apartments) - and in exchange let's lower the interest rates for every credit card holder down to -1 percent.

    How does that sound?
    -(should be a piece of cake for Dame Yellen!)

    Francisco Flores pieceofcake 4 days ago
    I'm not following you Piece. But that's OK.
    pieceofcake Francisco Flores 4 days ago
    'I'm not following you Piece.'

    As long as you understand - that it would be really a great idea if the low interest rates would really help 'the people' -(Credit Card holders) - and some high interest rates would help 'the people' too -(all these retirees who would love to get 21 percent from their savings accounts) - that's OK.

    skeptonomist Paul 4 days ago
    It is nonsense to claim that shrinking national debt is harmful or that the economy only does well when it is growing. The US debt shrank from its WWII peak in 1947 of 120% of GDP down to 31% in 1975 while the economy was doing very well. There was plenty of spending on things like infrastructure and housing as well as the military. The British debt shrank from over 250% of GDP at the end of the Napoleonic wars down to 30% at the start of WWI - this was the period of British world economic domination.

    The shrinkage of debt/GDP was not brought about by running surpluses, it was because of nominal GDP growth. And that growth was not just inflation - inflation in Britain (and the US) during the 19th century was generally low. Obviously tax rates were highly progressive during and after WW II in the US (and in Britain also, whose debt also shrank).

    The lesson is that debts can be controlled with appropriate tax rates (if it is important to do so) and that such rates do not impair growth. There is an enormous amount of foolish economic discourse which deliberately ignores the basic facts about taxes, debt and economic growth.

    Paul skeptonomist 4 days ago
    "It is nonsense to claim that shrinking national debt is harmful."

    During the 1920s, we had a budget surplus every year and 4 separate recessions during that decade with the last one causing the worst depression in a century.
    We had our highest debt-to-GDP ratio after WW II then increased the federal debt 82% and spending 725% over the next quarter century from 1948, producing our greatest prosperity ever: a 168% gain in Real GDP and a 70% increase in jobs.

    It is nonsense to ignore the facts that are undeniable.

    skeptonomist Paul 4 days ago
    When I refer to "national debt" I mean debt/GDP. There is no need to run surpluses to shrink this, but there is no reason to think that small surpluses are harmful. Spending can be high, as it was in the post-WWII period, without running large deficits, provided tax rates are adequate.

    Surpluses occur - or used to - when the economy is booming and revenues increase and also expenditures for unemployment relief, etc. are low. It is a fact that booms tend to be followed by recessions - they don't go on forever. So the correlation you refer to is an inevitable result of the cyclical nature of economies.

    Paul skeptonomist 3 days ago
    So You Are Smarter than Keynes?

    The recessions of 1957, 1960, 1970 and 2001 were all immediately preceded by budget surpluses. The Great Depression was preceded by a decade of record budget surpluses and the "Roosevelt Recession" of 1937-38 was caused by FDR's virtual balancing of the federal budget (a deficit of 0.1% of GDP in fiscal year 1938) while the economy was still very weak. whitehouse.gov/omb/budget/hist...

    Keynes analyzed this situation and his conclusion was unequivocal: "a change-over from a policy of Government borrowing to the opposite policy of providing sinking funds (for paying off the principal of a debt) is capable of causing a severe contraction of effective demand." The General Theory of Employment, Interes, and Money p. 95.

    [Oct 25, 2016] The Problem with unemployed men in the USA

    Oct 25, 2016 | economistsview.typepad.com

    anne : October 25, 2016 at 05:09 AM

    http://cepr.net/blogs/beat-the-press/the-problem-with-the-problem-with-men

    October 24, 2016

    The Problem with the Problem with Men

    We continue to see a steady drumbeat of news stories and opinion pieces about the problem of men, and especially less-educated men, in the modern economy. The pieces always start with the fact that large numbers of prime-age men (ages 25–54) have dropped out of the labor force. The latest entry is a New York Times column * by Susan Chira that highlighted recent research showing that a large percentage of men who are not in the labor force are in poor health and frequent users of pain medication.

    ... ... ...

    Undoubtedly many are, although the extent to which these problems are the result of their unemployment or a cause will often not be clear. Nonetheless, steps that can improve public health will be a good thing, but the better place to look to solve the problem of unemployment is Washington.

    * http://www.nytimes.com/2016/10/23/opinion/campaign-stops/men-need-help-is-hillary-clinton-the-answer.html

    ** http://jaredbernsteinblog.com/more-on-the-non-mystery-of-non-work-germany-v-us/

    *** http://cepr.net/blogs/beat-the-press/men-who-don-t-work-when-did-economists-stop-being-wrong-about-the-economy

    -- Dean Baker

    Reply Tuesday, anne -> anne... , October 25, 2016 at 05:10 AM
    http://cepr.net/blogs/beat-the-press/men-who-don-t-work-when-did-economists-stop-being-wrong-about-the-economy

    September 14, 2016

    Men Who Don't Work: When Did Economists Stop Being Wrong About the Economy?
    By Cherrie Bucknor and Dean Baker

    ... ... ...

    Since there is a drop in prime-age EPOPs for all groups, this would seem to suggest that the main problem is a lack of demand and not some new difficulty that some relatively narrow group of workers has in dealing with the labor market. Before going through these trends, it is worth making an additional point; this decline in EPOPs was not expected before it happened.

    For example, the Congressional Budget Office (CBO) in 2001 projected that EPOPs would continue to rise from their 2000 peaks. It projected that the potential labor force would grow at an average annual rate of 1.1 percent over the next decade, implying that it would be 11.6 percent larger in 2010 than in 2000. This growth was driven in part by population growth, but also by the expectation that the trend of rising EPOPs for women would continue.

    In fact, the labor force in 2010 was just 7.9 percent larger than in 2000. This 3.7 percentage point difference corresponds to a labor force that was 5 million smaller in 2010 than CBO had projected for that year in 2001. (It is worth noting that the CBO projections were not an outlier. CBO tries to ensure that its projections lie close to the middle of the pack for economic forecasters.)

    If the argument that structural factors have led to a permanent lowering of prime-age EPOPs is right, as opposed to just weakness in demand reducing employment, then the 2001 projections for the growth of the potential labor force were clearly wrong. Of course official projections have often proven wrong, but this should give us caution about our ability to accurately assess the structural determinants of employment rates. After all, it's not obvious that our knowledge of the economy is very much better in 2016 than it was in 2001.

    The figure below shows the employment to population ratios for prime-age workers by gender and education levels.

    [Figure]

    The ratios for 2000 are set at 100 to allow for a clear view of the drop off from this peak. As noted, all groups see some drop from this peak, with the smallest drop for college-educated women, followed by college-educated men. The drop for prime-age workers with some college is considerably sharper, with the drop for women being somewhat larger than the drop for men. The drop for workers with a high school degree or less is even greater, but here also the drop is larger for women than for men. The decline in EPOPs for prime-age men with a high school degree or less is 7.8 percent, while the drop for women is 14.0 percent. Given the much sharper drop in EPOPs for less-educated women, it is difficult to understand why the policy debate has focused on men leaving the labor force.

    The more fundamental issue is that it is difficult to explain a drop in EPOPS for all workers, regardless of education levels, as being a problem of workers lacking skills or a desire to work. This looks pretty clearly like a story of weak demand. In other words, the problem is not them; it is us, where "us" is the people who make economic policy.

    * https://www.bloomberg.com/view/articles/2016-09-12/debating-government-s-role-in-boosting-growth

    ________________________________

    [1] This discussion focuses on EPOPs rather than labor force participation rates (LFPR) because the latter has likely been affected by the tightening of rules for getting unemployment insurance. It is widely recognized that many unemployed workers drop out of the labor force when they are no longer eligible for unemployment benefits. With many states having instituted stricter rules on benefits over this period, we would have expected a decline in LFPR even with no changes in the workforce or the economy.

    JohnH -> anne... , -1
    Economist should also be looking at labor participation rates in other industrial growth which are experiencing the same economic stagnation as the US. In the UK and Japan EPOPs are near record highs, while US rates are near 40 year lows. Why such a disparity?

    My hunch is that economists are trying to find ways to explain away the low EPOP rates in the US, because the crux of the problem goes back to investor friendly/worker hostile policies that they have advocated for years--trade policy and trickle down monetary policy.

    [Oct 25, 2016] Mergers Raise Prices, Not Efficiency

    Oct 25, 2016 | economistsview.typepad.com

    RC AKA Darryl, Ron : October 25, 2016 at 04:56 AM RE: Mergers Raise Prices, Not Efficiency

    https://www.bloomberg.com/view/articles/2016-10-24/mergers-raise-prices-not-efficiency

    [IMO, Noah muddles the message, but it is a important topic that gets muddled by everyone else too. Economists with a financial bent had no problem apparently with the bank mergers that started in the seventies and everyone loved the auto maker mergers of the first half of the 2oth century.

    Efficiency itself is an amorphous term. Mergers can be an efficient use of capital since they deliver lower competition and higher profits. JP Morgan did not want to be in a industry that he could not dominate. Efficiency is different for a fish than a capital owner. Mergers are good for regulatory capture and ineffishient for fish. Mergers are inefficient for workers that want higher wages or the unemployed that want jobs. Market power and regulatory capture can be efficient vehicles for taking advantage of trade agreements to offshore production and increase returns to capital all while lowering both prices and quality as well as reducing domestic wages. Efficiency is in the eyeballs of the beholder especially if they make good soup.] Reply Tuesday, reason -> RC AKA Darryl, Ron... , October 25, 2016 at 06:58 AM

    But Keynes was saying something quite different - he wasn't actually talking about policy but about economics (the task of economists). He was saying that understanding short term fluctuations was as important as predicting the long term. Still relevant in this age of irrelevant general equilibrium models.
    RC AKA Darryl, Ron -> reason ... , October 25, 2016 at 09:56 AM
    Sorry, I thought that the whole purpose of the study of macroeconomics was to guide policy decisions. I stand corrected.
    RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , October 25, 2016 at 10:02 AM
    I always looked at Keynes as a fellow traveler, one who wrote obtusely at times for the express purpose of couching his meaning in sweetened platitudes that at a second glance were drenched in cynicism and sarcasm, at least when it came to his opinions of economists and politicians and the capital owning class that they both served.
    RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , October 25, 2016 at 10:39 AM
    OK, "obtusely" was a poor choice of words, at least with regards to Keynes. Keynes realized WWI was a big mistake, the Treaty at Versailles was an abomination with regards to German restitution, and he was accused of anti-Semitism just for being honest about Jewish elites in the Weimar Republic. It was not that Keynes was insensitive, unpatriotic, or anti-Semitic, but that Keynes was just correct on all counts.
    JohnH -> RC AKA Darryl, Ron... , -1
    This is a good example of economists working in lock step with investors: "Economists with a financial bent had no problem apparently with the bank mergers that started in the seventies and everyone loved the auto maker mergers of the first half of the 2oth century."

    I think it has been questioned for decades whether increased efficiency in banking actually materialized in the wake of industry consolidation. Local market oligopolies may well have generated higher profits and the appearance of more efficiency. And concentration certainly facilitated collusion as we have seen in many markets, including LIBOR.

    What concentration indisputably caused was a dramatic increase in the political power of the Wall Street banking cartel, which owns not only the Federal Reserve but also a lot of powerful politicians...a subject on which 'liberal' economists are generally agnostic, since politics is outside their silo.

    point -> RC AKA Darryl, Ron... , October 25, 2016 at 10:26 AM
    The article ignored the effect of mergers on supplier relationships, often one of near monopsony (oligopsony?). DOJ seems to be focused on unit pricing to consumers(though perhaps not with cable) to the point that most managements understand that they have free rein to squeeze suppliers. And so they merge to do so.

    It may be that more contribution to increasing margins is from purchase prices than selling prices.

    RC AKA Darryl, Ron -> point... , October 25, 2016 at 10:41 AM
    Doubly so with global supply chaining.

    [Oct 25, 2016] Trump supporters no longer believe or trust the Republican elite who they see as corrupt which is partly true

    Notable quotes:
    "... My impression is that Trump_vs_deep_state is more about dissatisfaction of the Republican base with the Republican brass (which fully endorsed neoliberal globalization), the phenomenon somewhat similar to Sanders. ..."
    "... Working class and lower middle class essentially abandoned DemoRats (Clinton democrats) after so many years of betrayal and "they have nowhere to go" attitude. ..."
    "... Now they try to forge the alliance of highly paid professionals who benefitted from globalization("creative class"), financial speculators and minorities. Which does not look like a stable coalition to me. ..."
    "... In other words both Parties are now split and have two mini-parties inside. I am not sure that Sanders part of Democratic party would support Hillary. The wounds caused by DNC betrayal and double dealing are still too fresh. ..."
    "... We have something like what Marxists call "revolutionary situation" when the elite loses control of "peons". And existence of Internet made MSM propaganda far less effective that it would be otherwise. That's why they resort to war propaganda tricks. ..."
    economistsview.typepad.com

    Peter K. -> Sanjait... , October 24, 2016 at 11:48 AM

    "That's not untrue, but it seems to me to be getting worse."

    Because of economic stagnation and anxiety among lower class Republicans. Trump blames immigration and trade unlike traditional elite Republicans. These are economic issues.

    Trump supporters no longer believe or trust the Republican elite who they see as corrupt which is partly true. They've been backing Nixon, Reagan, Bush etc and things are just getting worse. They've been played.

    Granted it's complicated and partly they see their side as losing and so are doubling down on the conservatism, racism, sexism etc. But Trump *brags* that he was against the Iraq war. That's not an elite Republican opinion.

    likbez -> DrDick... , -1
    My impression is that Trump_vs_deep_state is more about dissatisfaction of the Republican base with the Republican brass (which fully endorsed neoliberal globalization), the phenomenon somewhat similar to Sanders.

    Working class and lower middle class essentially abandoned DemoRats (Clinton democrats) after so many years of betrayal and "they have nowhere to go" attitude.

    Looks like they have found were to go this election cycle and this loss of the base is probably was the biggest surprise for neoliberal Democrats.

    Now they try to forge the alliance of highly paid professionals who benefitted from globalization("creative class"), financial speculators and minorities. Which does not look like a stable coalition to me.

    Some data suggest that among unions which endorsed Hillary 3 out of 4 members will vote against her. And that are data from union brass. Lower middle class might also demonstrate the same pattern this election cycle.

    In other words both Parties are now split and have two mini-parties inside. I am not sure that Sanders part of Democratic party would support Hillary. The wounds caused by DNC betrayal and double dealing are still too fresh.

    We have something like what Marxists call "revolutionary situation" when the elite loses control of "peons". And existence of Internet made MSM propaganda far less effective that it would be otherwise. That's why they resort to war propaganda tricks.

    likbez : , October 24, 2016 at 12:00 PM
    My impression is that that key issue is as following: a vote for Hillary is a vote for the War Party and is incompatible with democratic principles.

    She is way too militant, and is not that different in this respect from Senator McCain. That creates a real danger of unleashing the war with Russia.

    Trump with all his warts gives us a chance to get some kind of détente with Russia.

    In other words no real Democrat can vote for Hillary.

    [Oct 24, 2016] Chris Wallace, Supply, Demand, and the Government Budget Deficit

    Notable quotes:
    "... Second, it is important to note that the size of the projected shortfall in the Medicare Part A program (the portion funded by its own tax) has fallen sharply in the Obama years. The shortfall for the 75-year planning horizon was projected at 3.53 percentage points of payroll in 2009, the first year of the Obama presidency. It has now fallen by 80 percent to just 0.73 percent of payroll. This reduction is due to a sharp slowdown in the projected growth of health care costs. Some of this predates the Affordable Care Act (ACA), but some of the slowdown is undoubtedly attributable to the impact of the ACA. ..."
    "... On Chris Wallace's question, we know now from Hillary Clinton's Wall Street speeches that her plan on debt and entitlements is to support the elitist Bowles-Simpson project, the centerpiece of which was raising the age for Medicare and Social Security. Who do you think Hillary is lying to about benefits - everyday Americans like you (who she deplores) or her Wall Street backers? ..."
    "... Japan has been doing this deficit spending thing for 20+ years and borrowed an enormous amount of money. It has not solved anything. Growth continues to be elusive. Progressive economists keep whistling by the graveyard. And the conservatives just want to cut taxes. Both groups look like medieval doctors who prescribe bloodletting no matter what the illness is. Oh, the dismal science! ..."
    "... She proudly proclaimed that her programs would not add to the national debt implying no increase in deficit spending. She ridiculed Trump because his tax plan would add significantly to the deficit and national debt. Clearly she wants to portray an image of fiscal responsibility and Wallace's question allowed her to go down that path. ..."
    Oct 24, 2016 | cepr.net
    At the debate last night, moderator Chris Wallace challenged both candidates on the question of cutting Social Security and Medicare. The implication is that the country is threatened by the prospect of out of control government deficits. The question was misguided on several grounds.

    First, as a matter of law the Social Security program can only spend money that is in the trust fund. This means that, unless Congress changes the law, the program can never be a cause of runaway deficits.

    Second, it is important to note that the size of the projected shortfall in the Medicare Part A program (the portion funded by its own tax) has fallen sharply in the Obama years. The shortfall for the 75-year planning horizon was projected at 3.53 percentage points of payroll in 2009, the first year of the Obama presidency. It has now fallen by 80 percent to just 0.73 percent of payroll. This reduction is due to a sharp slowdown in the projected growth of health care costs. Some of this predates the Affordable Care Act (ACA), but some of the slowdown is undoubtedly attributable to the impact of the ACA.

    Anyhow, the implication of Wallace's question, that these programs are somehow out of control and require some near term fix, is not supported by the data. We will have to make changes to maintain full funding for Social Security, but there is no urgency to this issue.

    On the more general point of deficits, the country's problem since the crash in 2008 has been deficits that are too small, not too large. The main factor holding back the economy has been a lack of demand, not a lack of supply. Deficits create more demand, either directly through government spending or indirectly through increased consumption. If we had larger deficits in recent years we would have seen more GDP, more jobs, and, due to a tighter labor market, higher wages.

    The problem of too small deficits is not just a short-term issue. A smaller economy means less investment in new plant and equipment and research. This reduces the economy's capacity in the future. In the same vein, high rates of unemployment cause people to permanently drop out of the labor force, reducing our future labor supply if these people become unemployable. (Having unemployed parents is also very bad news for the kids who will have worse life prospects.)

    The Congressional Budget Office now puts potential GDP at about 10 percent lower for 2016 than its projection from 2008, before the recession. Much of this drop is due the decision to run smaller deficits and prevent the economy from reaching its potential level of output. We can think of this loss of potential output as a "austerity tax." It currently is at close to $2 trillion a year or more than $6,000 for every person in the country.

    It is unfortunate that Wallace chose to devote valuable debate time to a non-problem while ignoring the huge problem of needless unemployment and lost output due to government deficits that are too small.

    WDG • 4 days ago
    On Chris Wallace's question, we know now from Hillary Clinton's Wall Street speeches that her plan on debt and entitlements is to support the elitist Bowles-Simpson project, the centerpiece of which was raising the age for Medicare and Social Security. Who do you think Hillary is lying to about benefits - everyday Americans like you (who she deplores) or her Wall Street backers?

    pieceofcake 4 days ago

    and the nerve of this Wallace dude and the nerve of all these other... so called journalist on this show?

    Wallace even didn't notice - the whole time!! - that it was Alec Baldwin -(and not Trump) - who answered his silly questions - and then the nerve of the so called 'media' to praise Wallace - that he didn't notice that Alec Baldwin answered his questions.

    ... ... ...

    NN 4 days ago
    I am perfectly fine with running deficits to get out of a recession and compensate for temporary shortfall in private demand. Isn't this the original idea behind deficit spending? But we are 7 years out of a recession.

    Japan has been doing this deficit spending thing for 20+ years and borrowed an enormous amount of money. It has not solved anything. Growth continues to be elusive. Progressive economists keep whistling by the graveyard. And the conservatives just want to cut taxes. Both groups look like medieval doctors who prescribe bloodletting no matter what the illness is. Oh, the dismal science!

    Paul NN 4 days ago
    The Japanese yen is severely overvalued and therefore Japan's exports no longer can sustain GDP growth as they did in the past. Combined with Japan's anemic consumer demand, there is nothing but government spending to spur growth. If Japan now cut its deficit spending, its economy would collapse.
    michael garneau carolindenver 2 days ago
    My point is that American health care is profit driven. The private health insurer companies drive up the costs in all sectors of health care - whether that be for a simple phlebotomy test or a urinary catheter or...., or for a visit to a cardiologist after initial treatment for angina in an emergency dep't.

    Health care should be considered a basic human right in any country and not one that is affected by the amount a person can pay - or the quality of private insurance a person can afford. I worked in the field for 33 years before retiring and what I saw was, in many cases, very sad and unfortunate. Those who had money went on with their lives and those who did not often simply died. That is no way to manage any society.

    carolindenver michael garneau a day ago
    Dear Michael,I am in TOTALl agreement with you but, as a very satisfied Kaiser Permanente member, I am a little defensive about maligning the term "HMO" which, I believe, is a beacon of hope for "Best Practices" in our current profit driven health delivery mess. I am a retired RN who watched first hand as the system became ruled by consolidation and greed. I remember in the 1980s being told that consolidation would bring cost down. What a joke that was. So I am working for single payer, Medicare for all. Carol
    stewarjt 4 days ago
    "It is unfortunate that Wallace chose to devote valuable debate time to a
    non-problem while ignoring the huge problem of needless unemployment
    and lost output due to government deficits that are too small." -D. Baker

    That's Wallace's job and he does it expertly.

    JaaaaaCeeeee stewarjt 4 days ago
    Well, not so much expertly as doggedly, with enthusiasm, and without letting anything like arithmetic or reality interfere.
    Francisco Flores 4 days ago
    We should have a Full Employment Fiscal Policy coupled with a Federal Job Guaranty would put an end to this discussion. Funding the entitlements are not an issue - although the law may need to be revised - as the government can issue its currency without a problem - inflation being the constraint. (The increase in demand for apartments, cable subscriptions, and shuffleboards are unlikely to trigger uncontrolled inflation.)
    AlanInAZ • 4 days ago
    Dean thinks the debt is not a problem but the majority of voters Clinton was trying to reach probably do think it is a problem. She proudly proclaimed that her programs would not add to the national debt implying no increase in deficit spending. She ridiculed Trump because his tax plan would add significantly to the deficit and national debt. Clearly she wants to portray an image of fiscal responsibility and Wallace's question allowed her to go down that path.
    AlanInAZ NP 4 days ago
    I did not say that she did not propose to increase spending - just that she would not increase the debt because everything is "paid for". If everything is paid for by tax increases then there is no near term stimulus to the overall economy. There may be long term benefits if the projects are worthwhile but that will take years to surface. She also declined to defend the benefits of fiscal stimulus after the financial crisis. People hear what they want to hear from these debates.
    NP AlanInAZ 4 days ago
    I think you are wrong about the near term benefits of taxing wealthy people and then using that money for public spending. The propensity of the wealthy for spending is low and therefore if you take some of their money and spend it it will be stimulative.
    AlanInAZ NP 3 days ago
    I am aware of this ptc argument but find it weak. I know plenty of "wealthy" couples who save very little. Anyhow, even if there is some merit to the argument why not borrow now at almost zero cost and ensure the maximum stimulus.

    Another factor - public spending may not find its way into the lowest income levels of our society. Infrastructure projects, for example, will enrich contractors and materials industries as much or more than the individual workers. Also, they take a long time to get started as there really is no such thing as shovel ready. Couple the protracted startup with higher taxes and you get very little near term benefit.

    Francisco Flores AlanInAZ 3 days ago
    This whole discussion is of course mute since running deficits does not crowd out investing. And increasing the debt has no negative implication other then the political effects. The government can print money and spend money. If it runs deficits it can keep interest rates low by buying securities.
    jumpinjezebel 4 days ago
    We need to stimulate DEMAND Now to get the economy revved up and the money flowing. Best way is the change Social Security such that it doesn't kick in until the earner has made $10,000 (i.e.) and account for that by lifting the cap accordingly such that 90% of all earned income is taxed: just as it used to be when Reagan/?? fixed it. Just think what all that money would do in the economy. It would not be used to by back stock or inflate golden parachutes. It would be immediately spent. It would be DEMAND.

    [Oct 24, 2016] The Peter Peterson-Washington Post deficit hawk gang keep trying to scare us into cutting Social Security and Medicare

    Oct 24, 2016 | economistsview.typepad.com

    anne : October 23, 2016 at 02:04 PM , 2016 at 02:04 PM

    http://cepr.net/blogs/beat-the-press/the-173-trillion-austerity-tax-in-the-infinite-horizon

    October 23, 2016

    The $173 Trillion Austerity Tax in the Infinite Horizon
    By Lara Merling and Dean Baker

    The Peter Peterson-Washington Post deficit hawk gang keep trying * to scare us into cutting Social Security and Medicare. If we don't cut these programs now, then at some point in the future we might have to cut these program or RAISE TAXES.

    There are many good reasons not to take the advice of the deficit hawks, but the most immediate one is that our economy is suffering from a deficit that is too small, not too large. The point is straightforward, the economy needs more demand, which we could get from larger budget deficits. More demand would lead to more output and employment. It would also cause firms to invest more, which would make us richer in the future.

    The flip side in this story is that because we have not been investing as much as we would in a fully employed economy, our potential level of output is lower today than if we had remained near full employment since the downturn in 2008. The Congressional Budget Office estimates that potential GDP in 2016 is down by 10.5 percent (almost $2.0 trillion) from the level it had projected for 2016 back in 2008, before the downturn.

    This is real money, over $6,200 per person. But if we want to have a little fun, we can use a tactic developed by the deficit hawks. We can calculate the cost of austerity over the infinite horizon. This is a simple story. We just assume that we will never get back the potential GDP lost as a result of the weak growth of the last eight years. Carrying this the lost 10.5 percent of GDP out to the infinite future and using a 2.9 percent real discount rate gives us $172.94 trillion in lost output. This is the size of the austerity tax for all future time. It comes to more than $500,000 for every person in the country.

    By comparison, we can look at the projected Social Security shortfall for the infinite horizon. According to the most recent Social Security Trustees Report, ** this comes to $32.1 trillion. (Almost two thirds of this occurs after the 75-year projection period.) Undoubtedly many deficit hawks hope that people would be scared by this number. But compared to the austerity tax imposed by the deficit hawks, it doesn't look like a big deal.

    * http://www.nytimes.com/2016/10/22/opinion/ignoring-the-debt-problem.html

    ** https://www.ssa.gov/OACT/TR/2016/VI_F_infinite.html#1000194

    [Oct 23, 2016] Clintonism is wedge politics directed against any class or populist upheaval that might threaten neoliberalism

    That's explains vicious campaign by neoliberal MSM against Trump and swiping under the carpet all criminal deeds of Clinton family. They feel the threat...
    Notable quotes:
    "... It should be remembered that fascism does not succeed in the real world as a crusade by race-obsessed lumpen. It succeeds when fascists are co-opted by capitalists, as was unambiguously the case in Nazi Germany and Italy. And big business supported fascism because it feared the alternatives: socialism and communism. ..."
    "... That's because there is no more effective counter to class consciousness than race consciousness. That's one reason why, in my opinion, socialism hasn't done a better job of catching on in the United States. The contradictions between black and white labor formed a ready-made wedge. ..."
    Oct 23, 2016 | www.nakedcapitalism.com

    An excellent article

    It should be remembered that fascism does not succeed in the real world as a crusade by race-obsessed lumpen. It succeeds when fascists are co-opted by capitalists, as was unambiguously the case in Nazi Germany and Italy. And big business supported fascism because it feared the alternatives: socialism and communism.

    That's because there is no more effective counter to class consciousness than race consciousness. That's one reason why, in my opinion, socialism hasn't done a better job of catching on in the United States. The contradictions between black and white labor formed a ready-made wedge. The North's abhorrence at the spread of slavery into the American West before the Civil War had more to do a desire to preserve these new realms for "free" labor-"free" in one context, from the competition of slave labor-than egalitarian principle.[…]

    There is more to Clintonism, I think, than simply playing the "identity politics" card to screw Bernie Sanders or discombobulate the Trump campaign. "Identity politics" is near the core of the Clintonian agenda as a bulwark against any class/populist upheaval that might threaten her brand of billionaire-friendly liberalism.

    In other words it's all part of a grand plan when the Clintonoids aren't busy debating the finer points of her marketing and "mark"–a term normally applied to the graphic logo on a commercial product.

    http://www.unz.com/plee/trump-we-wish-the-problem-was-fascism/

    [Oct 23, 2016] Hillary Clinton and Identity Politics

    Notable quotes:
    "... Hillary Clinton's nomination and the euphoria in the press (one NPR female reporter said she has seen women weeping over the possibility of Hillary becoming president) eclipses any discussion about the real issues facing the country. ..."
    "... Notice how the term "women's issues" is used by the media and certain politicians to suggest that there is only one acceptable position for females on any given topic. To the left, women's issues appear to mean abortion rights, same-sex marriage, higher taxes, bigger government and electing more women who favor such things. ..."
    "... As the husband of a successful woman with a master's degree and accomplished daughters and granddaughters, that's how we feel about Hillary Clinton. We're all for a female president, just not this one. ..."
    www.newsbusters.org
    Have you heard that Hillary Clinton is the "first woman" ever to be nominated for president by a major political party? Of course you have. The media have repeated the line so often it is broken news.

    Hillary Clinton's nomination and the euphoria in the press (one NPR female reporter said she has seen women weeping over the possibility of Hillary becoming president) eclipses any discussion about the real issues facing the country.

    To quote Clinton in another context, "what difference does it make" that she is a woman? A liberal is a liberal, regardless of gender, race or ethnicity.

    Must we go through an entire list of "firsts" before we get to someone who can solve our collective problems, instead of making them worse? Many of those cheering this supposed progress in American culture, which follows the historic election of the "first African-American president," are insincere, if not disingenuous. Otherwise, they would have applauded the advancement of African-Americans like Gen. Colin Powell, Justice Clarence Thomas, former one-term Rep. Allen West (R-FL), Sen. Tim Scott (R-SC) and conservative women like Sarah Palin, Rep. Marsha Blackburn (R-TN), former presidential candidate Carly Fiorina, Rep. Mia Love (R-UT) and many others.

    Immigrants who entered the country legally and became citizens are virtually ignored by the media. They champion instead illegal immigrants and the liberals who support them.

    The reason for this disparity in attitude and coverage is that conservative blacks, women and Hispanics hold positions anathema to the left. Conservative African-Americans have been called all kinds of derogatory names in an effort to get them to convert to liberal orthodoxy, and they're ostracized if they don't convert. If conservative, a female is likely to be labeled a traitor to her gender, or worse.

    Notice how the term "women's issues" is used by the media and certain politicians to suggest that there is only one acceptable position for females on any given topic. To the left, women's issues appear to mean abortion rights, same-sex marriage, higher taxes, bigger government and electing more women who favor such things.

    When it comes to accomplished conservative female leaders, one of the greatest and smartest of our time was the late Jeane Kirkpatrick, Ronald Reagan's consequential U.S. ambassador to the United Nations. As Jay Nordlinger wrote in his review of Peter Collier's book "Political Woman" for National Review, "In a saner world, Jeane Kirkpatrick would have been lionized by feminists. She had risen from the oil patch to the commanding heights of U.S. foreign policy. But her views were 'wrong.'"

    Collier writes that Kirkpatrick, who was a Democrat most of her life, recalled feminist icon Gloria Steinem once referring to her as "a female impersonator." Author Naomi Wolf called her "a woman without a uterus" and claimed that she had been "unaffected by the experiences of the female body." Kirkpatrick responded, "I have three kids, while she, when she made this comment had none."

    The left gets away with these kinds of smears because they largely control the media and the message. No Republican could escape shunning, or worse, if such language were employed against a female Democrat.

    Conservative columnist Michelle Malkin, born in Philadelphia to Philippine citizens, has written about some of the printable things she's been called -- "race traitor," "white man's puppet," "Tokyo Rose," "Aunt Tomasina."

    As the cliche goes, if liberals didn't have a double standard, they would have no standards at all.

    There's an old joke about a woman with five children who was asked if she had it to do over again would she have five kids. "Yes," she replied, "just not these five."

    As the husband of a successful woman with a master's degree and accomplished daughters and granddaughters, that's how we feel about Hillary Clinton. We're all for a female president, just not this one.

    [Oct 23, 2016] Why money should not be considered to be a fuel for economics

    Notable quotes:
    "... I'm increasingly interested in the metaphors around banking, which seem to still come out of early 19th c invention of engines, all of which used ' fuel ' as a central tenet: 'the money supply fuels the economy'. Economics seems drenched in outdated, antiquated metaphors where ' fuel ' is always and everywhere a good thing, with no polluting externalities, and no downside costs. ..."
    "... Fuels don't lie, cheat, or steal - continuing to use fuel as a central metaphor enables banks, economists, and central bankers to put their fingers in their ears and howl "La! La! La! Using metaphors shaped by sail-powered whaling ships hunting for blubber is working just great for us!!" After all, calculus had been invented by the 1820s - so math + moneyAsEngineSpeak = economics. ..."
    "... If money were more widely regarded as a social tool: recognized as a tool that requires communication, social networks, and flourishes within civil society, then Haldane's observations would be met with "Doh, you betcha!" ..."
    "... Then, also, Bill Black's observations that crime actually does exist, and often looks exceptionally respectable, would be impossible to ignore. ..."
    "... I interpreted Brexit as a 'tea leaf' that the banks could no longer be made fine-proof without triggering social unrest. ..."
    "... The way that I read this, contemporary economics and finance leads to utter, unmanageable disaster from which there is absolutely no way out. The engine 'melts down', so to speak. I feel as if I have spent the past 8 years watching systems nearly implode, be saved by extraordinary (lunatic) measures, and in the end the systems of thinking that created these problems are precisely the mental pathways that keep people stuck in a labyrinth of dysfunction. ..."
    "... It's hard to work out how "1. Implode, not too violently" could give rise to anything other than lethal shortages, especially in urban environments, and how this could lead to anything but "2. blow up, social unrest" anyway. ..."
    "... Money is social relations, power relations, if Gold is law then the powerful will grab the gold. If not, they'll grab the money creating buttons in various spreadsheets, unless opposed by all. ..."
    "... Maybe there is a way to make the vulnerability that the central banks and banksters and CorpoStates like GE and Cigna and Goldman Sux nd the rest impose on the vast rest of us into a mutual exposure? ..."
    "... There is nothing wrong with interest, as long as the rate is reasonable. It is a service charge for someone handing you money now to buy what you want now instead of waiting to save up the money. Interest does not make an economic system unstable. It's the same as a massage or other service you buy. You just need enough income to cover it, and the principal payment of course. ..."
    "... "As noted in the article [money is] a concept created by human beings and should be considered a very malleable tool that we can use to do pretty much whatever we as a society decide we want to with it. If we truly wanted to create a more equitable society there is nothing stopping us from doing so except the greed of the few." ..."
    "... The Big Lie that the federal government needs tax revenue in order to operate, so we "can't afford" the social benefits that help the non-rich, must be constantly debunked and rejected. ..."
    "... The terminology of finance is designed to hide predatory and extractive activities behind a curtain of beneficial-sounding words. These terms are deeply embedded, and serve both to put some friendly makeup on the business, and allow the "consumers" to feel better about their capitulation. The process is akin to the way politicians wrap themselves in the flag while they sell out the citizenry. We know deep down that they are lying, but we prefer the false patriotism because it serves the lies we prefer to tell ourselves. We bitch and moan, but we play our part, because not doing so leads to trouble. It is the way most of us live our lives. ..."
    "... Most people go along the big lie because of hope. ..."
    "... Money is nutrition, not a snack. It's food and fertilizer. It makes things grow. You have to share it with other life like bacteria and worms: without these organisms in your gut ecology, you get sick (autism, diabetes, obesity, M.S.). Idiots try to convince us these organisms are parasites instead of symbionts just like Monsanto thinks bees are disposable or Donald Trump likes to think of pregnant women as drags on business profits. ..."
    "... If you think altruism is for suckers, your Ayn Rand economy collapses because you confuse parasites with symbionts and symbionts with parasites. You can't distinguish between compensation for earned and unearned income. What's a tax and what's theft? Try living without bacteria making butyrate in your gut. Wells Fargo can no more survive without little people like airport janitors to scrub out the TB and Ebola stains than our cells can breathe without mitochondria. Yet who gets their pay driven down in corporate America? ..."
    Oct 22, 2016 | www.nakedcapitalism.com
    ... ... ...

    ReaderOfTeaLeaves made an important observation yesterday on a post by Bill Black , i n reply to a comment by another NC regular and sometimes guest blogger, Clive . It describes a set of seductively inaccurate metaphors used to depict banking, money, and finance. Needless to say, some of the recent coinages, like "sharing economy" are downright Orwellian yet taking hold, but the older ones, by being well worn tropes, are so routine that the implicit messaging gets nary a thought.

    By ReaderOfTeaLeaves

    Clive, FWIW, I'm increasingly interested in the metaphors around banking, which seem to still come out of early 19th c invention of engines, all of which used ' fuel ' as a central tenet: 'the money supply fuels the economy'. Economics seems drenched in outdated, antiquated metaphors where ' fuel ' is always and everywhere a good thing, with no polluting externalities, and no downside costs.

    Hence, what matters is 'efficiency': it's moneyAsEngineSpeak, so to speak.

    Lordy, it's all petrochemical: from a time when chemical and mechanical engineering (and physics) were in their relative infancies and whaling schooners were sailing out of Nantucket.

    Fuels don't lie, cheat, or steal - continuing to use fuel as a central metaphor enables banks, economists, and central bankers to put their fingers in their ears and howl "La! La! La! Using metaphors shaped by sail-powered whaling ships hunting for blubber is working just great for us!!" After all, calculus had been invented by the 1820s - so math + moneyAsEngineSpeak = economics.

    Egads.

    In that paradigm, Bill Black is a mere scold, an oddball, a scruffy prophet in the wastelands, so to speak.

    If money were more widely regarded as a social tool: recognized as a tool that requires communication, social networks, and flourishes within civil society, then Haldane's observations would be met with "Doh, you betcha!"

    Then, also, Bill Black's observations that crime actually does exist, and often looks exceptionally respectable, would be impossible to ignore.

    Timmy Geithner is probably not a fan of: (a) Bill Black or (b) the idea of money as inherently social. Fuel is an emotionally sterile construct to work within; it enables one to avoid moral qualms, or any sense of personal responsibility when ' engines blow up', or when they 'run out of fuel '.

    The fact that Haldane's observations and analysis are not more widely embraced suggests that somehow the business schools, economics departments, and bankers all still use thought processes shaped in the era of whalers seeking blubber for lanterns and lamps. Also, they probably still receive endowments from the Kochs, Exxon, and other fuel obsessed interests.
    Egads.

    Until the metaphors move to biology, with a concomitant recognition that some kinds of ' fuel ' (aka Coke, Fritos, Doritos, donuts) work for short-term energy bursts, but carry extremely negative longer term costs, I doubt that even the best attempts to muddle through will get us out of this mess. Without amendment, this system is going to do one of two things: (1) implode (not too violently) or else (2) blow up (social unrest).

    I have no idea what the banker equivalent of 'chard, lettuce, and celery' would be, but some bright mind ought to be thinking about it. (You distinguish yourself as such a mind; I hope that my metaphor is not too offensive…)

    I interpreted Brexit as a 'tea leaf' that the banks could no longer be made fine-proof without triggering social unrest. Then I read your comment, esp:

    the U.K. government is stuck with its vast holding in RBS. The only way it could ever be rid of the RBS albatross is for RBS to have some vague hope of (eventually) earning its way back to being something other than a complete basket case.

    Apart from, ironically, the central banks' own ZIRP policy, the biggest threat to this is endless redress for wrongdoing.

    The way that I read this, contemporary economics and finance leads to utter, unmanageable disaster from which there is absolutely no way out. The engine 'melts down', so to speak. I feel as if I have spent the past 8 years watching systems nearly implode, be saved by extraordinary (lunatic) measures, and in the end the systems of thinking that created these problems are precisely the mental pathways that keep people stuck in a labyrinth of dysfunction.

    Banking needs to be completely rethought, using the social sciences, which include the realities of criminal conduct corroding the system to such a degree that it is threatening to implode. I'm moving toward being agnostic as to whether this is a good thing, or not. Either way, the present systems as I've read you describe them do not seem even remotely sustainable.

    John Merryman October 22, 2016 at 7:21 am

    The metaphor I think applies is that we use money as both medium of exchange and store of value. While the first is inherently dynamic, the second is static, so a good analogy is that in the body, the medium is blood, while the store is fat. The trick has been how to store extreme amounts of notional wealth and that is largely by having the government borrow it back out and spend in ways which support the private sector, but don't compete with it in the hunt for profits. So are all those pallets of money going to fund our wars really about war, or is it about keeping that money flowing in one end and out the other? Consider all those super secure US savings bonds are mostly just being poured down various rat holes, rather then building a sustainable society.

    This probably goes back to Roosevelt, who borrowed a lot of unemployed capital to put a lot of unemployed workers back to work.

    Money is not a commodity to be mined or manufactured, whether gold or bitcoin, but a contract. Every asset is the other side of an obligation. It allows a large economy to function, but it also reduces community reciprocity, creating atomized societies.

    Like blood, the economy needs very regulated amounts of money, as it functions as a voucher system and storing lots of excess vouchers eventually causes the system to collapse, when everyone tries to dump them at once. If government threatened to tax excess out, people would have to find other ways to store value, like in stronger communities and healthier environments, aka the commons. Most people save for the same general reasons, housing, healthcare, retirement, etc, which are ultimately community functions anyway.

    Finance as a public utility doesn't have to be subservient to government. Much as government is analogous to the central nervous system, finance is to the circulatory system and the head and heart are separate organs.

    Government started out as a private business, institutionalized as monarchy, before becoming a public utility. Now is the time to do the same with finance.

    Never let a good crisis go to waste.

    Edward Morbius October 22, 2016 at 8:54 pm

    I'm leaning strongly to the idea that money is information . More specifically, it's information about general claims on national commerce. That gold coin in your hand is a bidding right . The obligation isn't to any one person, but your possession of it means that there's one less gold coin's bidding power throughout the rest of the economy.

    I'm still sorting out my thoughts on this, but Frederick Soddy, the Technocrats (a short-lived 1920s – 1930s US movement), and the ecological economists (Georgescu-Roegen, Daly, Boulding, etc.) seem to make more sense to me.

    The more I read of traditional / classical / neoclassical / post-Keynesian monetary theory the more I suspect nobody has much of a clue.

    PuzzleMonkey October 22, 2016 at 7:30 am

    Excellent and original points that make a tremendous amount of sense. Thank you.

    One tiny quibble. It's hard to work out how "1. Implode, not too violently" could give rise to anything other than lethal shortages, especially in urban environments, and how this could lead to anything but "2. blow up, social unrest" anyway.

    scott 2 October 22, 2016 at 8:13 am

    US Grant rode in a horse-drawn carriage from his inauguration to a White House lit with coal-gas, while oil or candles. Medicine, sanitation, and agriculture was hardly different than it was in Roman times. The railroad and the telegraph represented technological progress.

    A little more than 30 years later McKinley rode in an automobile to a White House lit with electric lamps, that had running water and sewage. Steel framed buildings could rise more the 3-4 stories off the ground. The causes of many diseases were known and somewhat preventable. The first radio transmission was months away, and the first powered flight was 3 years away. The standard of living of an average American doubled during that period. And it was all done under the gold standard.

    DGP per capita of the US peaked in 1973, the same time Bretton Woods formally ended. A dollar today buys what 3 cents could buy when the Fed was formed. Do these FACTS escape the Krugmans of the world or are they merely inconvenient and in conflict with what seems to be the true nature of academic economics, to provide pseudo-science cover to political policy?

    BecauseTradition October 22, 2016 at 9:14 am

    By all means let's go back to worshipping a dumb, shiny metal rather than, for instance, removing all priviledges for the banks. And let's replace theft by inflation and deflation with theft by deflation alone.

    And let's confuse correlation with cause since the massive gold and silver strikes during that period greatly increased the money supply and indeed, in some places, caused huge price inflation. And let's forget that it is the government's authority to tax that gives value to fiat and give gold owners a huge bonanza by making fiat needlessly expensive.

    Tinky October 22, 2016 at 9:28 am

    Setting aside your implied straw man, that it's a binary choice between unconstrained credit creation, and "worshipping" gold, would you argue that today's society is better or worse than that of 1970, just before the final (golden) constraint was broken?

    Pespi October 22, 2016 at 10:36 am

    Does the answer to this question answer the question? Money is social relations, power relations, if Gold is law then the powerful will grab the gold. If not, they'll grab the money creating buttons in various spreadsheets, unless opposed by all.

    craazyboy October 22, 2016 at 1:54 pm

    Or both. Hitler thought Chartalism (grandfather to MMT) was a great idea, then invaded France and stole France's sizeable gold horde too! These greedy people want it all!

    BecauseTradition October 22, 2016 at 11:48 am

    just before the final (golden) constraint was broken? Tinky

    The central bank should not be allowed to create fiat for the private sector (e.g. Open Market Purchases) AT ALL so no constraint is needed there other than absolute prohibition.

    As for the monetary sovereign, price inflation is a restraint wrt fiat creation since the voters hate it.

    Also, please note that the demand for fiat is greatly reduced via other privileges for the banks. Eliminate those and the demand for fiat shall greatly increase – greatly increasing the amount of new fiat that can created without significant price inflation. This will be especially the case when government provided deposit insurance is properly abolished since a huge amount of new fiat should be required*.

    *For the xfer of at least some currently insured deposits to inherently risk-free accounts at a Postal Checking Service or equivalent.

    Tinky October 22, 2016 at 12:38 pm

    Sounds good in theory, but how do you imagine that we might get to the point at which central banks are prohibited from creating credit for the private sector?

    JTMcPhee October 22, 2016 at 12:55 pm

    How much of that fiat creation gets done via electronic means? Maybe there is a way to make the vulnerability that the central banks and banksters and CorpoStates like GE and Cigna and Goldman Sux nd the rest impose on the vast rest of us into a mutual exposure?

    I mean, "they" can leverage and disappear and derivatize "capital" and ZIRP and NIRP with impunity, and steal people's homes and garnish and change contract terms on personal accounts unilaterally.

    Is there a turnabout, or are "we" so terrified of "instability" (where no "stability" really exists, "disruption " and all that, not to act? As well demonstrated in many posts in this very blog, it's not like the Fortress of FIRE's walls are any stronger than the foundations it is "coded" on…

    John Zelnicker October 22, 2016 at 9:49 am

    @scott 2 – "A dollar today buys what 3 cents could buy when the Fed was formed."

    That something is true does not make it relevant; it can also be misleading. The real (domestic) purchasing power of a dollar is determined by the amount of labor it takes to earn that dollar. With the gains in labor productivity since 1913, it takes much less labor to earn today's dollar than it took to earn that 3 cents 103 years ago. Comparing the nominal cost of a loaf of bread in 1913 with its nominal cost today tells us nothing useful.

    BecauseTradition October 22, 2016 at 10:08 am

    Adding that deflation rewards risk-free money hoarding – a self-defeating strategy since progress requires taking risks.

    OpenThePodBayDoorsHAL October 22, 2016 at 6:52 pm

    Yes isn't it awful when the prices of goods and services go down, I hate it when I have to spend less money to eat and obtain shelter and all of the other necessaries of life.

    https://mises.org/library/deflating-deflation-myth

    Agricultural productivity rises so food costs less; industrial productivity rises so goods cost less; and these are what is known as "progress". Increasing productivity is what raises our standard of living.

    But ah, there's a fly in the ointment, we have a debt-based money creation system. Problem

    1.): Banks can print the principal but they can't print the interest. This leads to Problem

    2.): people borrow either because they think they can grow money faster than the debt service, or because they are desperate and have no other choice.

    Problem 2 (a) is that debt pulls demand from the future to the present, and when enough demand is pulled forward people will no longer feel they should borrow for future growth because there is none in sight. This leaves only desperate people borrowing to service existing outstanding debt and that prophecy fulfills itself.

    We are told this is somehow a "steady state" system but that is mathematically and obviously incorrect. Even with unnatural acts like interest rates below zero (how can time preference be below zero, and what does that say for the prospects for growth?) the system winds down and needs to be completely reset.

    The percentage of times that debt-based currency systems have failed in the past and gone to zero = 100…leave it to alchemists economists to insist they can pull it off though.

    OpenThePodBayDoorsHAL October 22, 2016 at 7:09 pm

    Like the Soviet Union we now live in an era of centrally-planned price fixing for the most important price of all in the economy: the price of money.
    It's true that in eras where the price of money fluctuated wildly there were also wild fluctutaions in the economy, booms and busts.

    But someone made the statement: "The Fed makes the economy more stable. But I do not think that word means what you think it does".

    So no more busts…and no more booms, either. So put the periods of fastest economic growth and fastest rises in the standard of living out of your mind, those are history. And given the mathematics of "unlimited" debt creation, we'll get the bust anyway.

    craazyboy October 22, 2016 at 7:19 pm

    There is nothing wrong with interest, as long as the rate is reasonable. It is a service charge for someone handing you money now to buy what you want now instead of waiting to save up the money. Interest does not make an economic system unstable. It's the same as a massage or other service you buy. You just need enough income to cover it, and the principal payment of course.

    Some people seem to have this idea that x amount of money was created to buy a car, but none was made to pay the interest. This causes the world to end. Not so. Money circulates and we know that around a trillion or so in circulation seems to be enough to support our $18 T in annual GDP. What is does mean is to pay off the 5 year car loan, you spent 4 years paying off the car and another year paying the interest.

    A benefit of interest is it may allow people to live past retirement age – but there there is little economic focus on this phenomena.

    Vatch October 22, 2016 at 8:15 pm

    There is nothing wrong with interest, as long as the rate is reasonable.

    In principle this is true, but it leads to a paradox in an economy in which money is based on debt. You start your second paragraph with an acknowledgement of this, but then you back down. In such an economy, money is created when it is loaned - this money is the principal of the loan. When the money is paid back, the money disappears.

    But wait - the debtor must also pay back more than the principal of the loan; he or she must also pay back the interest. How is the interest created? The same way as the principal, but it is created by someone else's loan. So in a debt based economy, the amount of money in existence is less than the total amount of people's debts.

    If everyone is thrifty, and pays back their loans promptly, some people will never be able to get the money to pay their interest. It's a game of musical chairs.

    craazyboy October 22, 2016 at 8:51 pm

    Pretty close, but consider this. The loan got paid back, the "money" disappeared, but the bank gained it as new loan capacity. The bank makes a new loan. So far I think I'm repeating what you stated. One minor problem is you say money is less than debt – it will be – debt is the contract for the entire amount. But not everyone pays it all off at once – we just need the liquidity to be there so the payor's personal bank account, or the one of their employer, doesn't run dry.

    So at this point it's a matter of the banking system and the Fed managing liquidity. But the size of the Fed balance sheet and reserves steadily increases over the years to account for growth and any other liquidity needs the banks may have. It's either done directly with banks – buying treasury bond assets or loans to banks, or they buy Treasuries in the market, the money goes somewhere, then there is interbank lending to make it go where it's needed. (all in theory, of course. But the theory seems sound, when uncorrupted.)

    OpenThePodBayDoorsHAL October 22, 2016 at 10:06 pm

    You make it sound like a steady state system, but it's not, debt is *always* issued in excess of people's capacity to pay whether for political, psychological, or other reasons. The Fed knows this. So they desperately want to reduce the total indebtedness by inflating it away, and this puts everyone on a giant rat race treadmill, working two jobs trying to outrun the rise in prices. Given the rise in productivity we're all supposed to be living like the Jetsons by now but Oh No gatta keep running to stay in one place.
    The Fed has forgotten that there is another way to reduce serial overindebtedness and that is B-A-N-K-R-U-P-T-C-Y. It has the added advantage of being an actual capitalistic endeavor, and not the inverted hyper-socialism we have today.The Fed keeps putting out brush fires so the dead wood keeps building up, eventually there is an unholy crowning conflagration that takes the whole forest with it.

    craazyboy October 22, 2016 at 10:24 pm

    Firstly, I said there is nothing wrong with interest . If you want to shift to "could something go wrong with principal_plus_interest in a fractional reserve central banking system", then, why yes! Plenty!

    No, the system is by no means steady state – the economy has ups and downs and there are those occasional "credit crunch" periods where banks get spooked over some such thing and stop lending completely and then it seems like all the money disappeared. But that's why we have the Fed and everyone furiously managing liquidity.

    Sluggeaux October 22, 2016 at 2:12 pm

    Since we're on a terminology thread (and my grandfather was a whaler), the whaling vessels out of Nantucket tended to be square-rigged - barques, brigs, etc. Schooners were coastal vessels used by fishermen more often than by whalers, who travelled long distances to launch their hunts.

    Great post - I want to puke every time I hear Wall Street referred to as an "economic engine." More like "social engineering" - of fraud schemes.

    uncle tungsten October 22, 2016 at 10:07 pm

    Ah! a new term is coined (pun intended):- fraudgineering always included in any sentence where the words "Wall Street" or a named bank is used.

    Moneta October 22, 2016 at 8:32 am

    A couple of generations ago most people lived on farms. Many would trade grain to pay the miller. In essence, hard cash was needed for goods at the general store.

    Debt was used to finance big projects that were based on hard assets, land, commodities.

    Fast forward to today…. banks still favour collateral based on hard assets yet services are a much bigger part of our economy. I would venture to say that banks lend on soft collateral when it is fed by sectors that have hard asset collateral or with a government guarantee.

    IMO, get government out of everything and watch the economy drop to an economy of sustenance based on hard asset collateral which will get increasingly constrained with world population going from 7 to 9B. Exactly what rentiers LOVE!

    Moneta October 22, 2016 at 8:38 am

    Services are a bigger measured part of our economy. Family members on farms would do all kinds of work or services but these were not recorded.

    scott 2 October 22, 2016 at 8:57 am

    Debt was used to finance increases in productivity. Unless you have a sweat shop in your basement, a house is not a productive asset. It's a slowly appreciating consumer of capital, real and financial (utilities, maintainance, and taxes). In distorted markets like California, it can make a lucky few a lot of money while turning the area into a feudal system of land owners and serfs.

    A side effect of financialization has been to turn the US economy into one that lives, temporarily, on housing speculation. When people realize that spending $2 million on a bungalow that should only cost $40K is the TRUE mis-allocation of capital, let's hope they don't realize that all at once.

    lyman alpha blob October 22, 2016 at 10:06 am

    A couple generations ago land in many places was still relatively cheap. Asked my father once how our family of dairy farmers managed to have as much land as we do and was told that my grandfather often received land as payment. He'd give someone an animal or a side of beef and they'd give him an acre they owned abutting his property that they weren't using for anything anyway. I've seen some of the old ledgers found in his attic and as you noted, cash was not just in essence but in fact used for goods at the general store. The barn itself was built with the help of the community although I'm not sure how that was paid for but I'd wager that any financing was minimal.

    The economy was a few steps above just sustenance but the population was a lot less and there weren't nearly as many rich people from the city coming in looking for second (or 3rd or 4th) homes in the country driving up the cost of real estate. Two generations later land is much more dear to the point where our family likely wouldn't be able to afford to purchase property if they needed extra acreage.

    There are far too many economists who seem to think that money actually does grow on trees in the sense that it's a naturally occurring resource that human beings can't control – it's all determined by markets. In that sense I'd describe money not so much as a fuel but as a weapon. I believe Jon Perkins had a similar description in his Confessions of an Economic Hitman. Weaponized war is no longer the first option among advanced economies – first they'll try to bleed other countries dry with economics. It's only when the victims won't cave that the bombs start dropping now.

    But money does not occur naturally and it should not be considered a fuel or a weapon. As noted in the article it's a concept created by human beings and should be considered a very malleable tool that we can use to do pretty much whatever we as a society decide we want to with it. If we truly wanted to create a more equitable society there is nothing stopping us from doing so except the greed of the few.

    John Zelnicker October 22, 2016 at 12:22 pm

    @lyman alpha bob – "As noted in the article [money is] a concept created by human beings and should be considered a very malleable tool that we can use to do pretty much whatever we as a society decide we want to with it. If we truly wanted to create a more equitable society there is nothing stopping us from doing so except the greed of the few."

    Adding: The Big Lie that the federal government needs tax revenue in order to operate, so we "can't afford" the social benefits that help the non-rich, must be constantly debunked and rejected.

    TheCatSaid October 22, 2016 at 2:05 pm

    Weaponizing money. That's a valuable concept. It reminds me of the end of David E. Martin's (true-story-called-fiction-to-avoid-lawsuits) book "The Apostles of Power". And this was the reason he wrote the book, actually–to fend off a major play to steal all the electronically-stored reserves of the Fed into their own accounts, and destroy the evidence of their actions by triggering a nuclear explosion of the precise nuclear power station that provided the power to the NYC/NJ computers that stored the data. By telling enough about the plan in process (only the minor, human-created fake "earthquake" at the Santa Ana reactor occurred, as the charges had been set before the book was published; the book predicts the "earthquake"), a nuclear disaster and major financial theft were averted.

    Martin spoke about this, and the other real events described in the book, in a number of radio interviews he gave in 2012, the year the book was published.

    Steve H. October 22, 2016 at 8:37 am

    Not sure if this is meta or not:

    "Here's the [Machine] trick: Design the machine that will produce the result your analysis indicates occurs routinely in the situation you have studied. Make sure you have included all the parts – all the social gears, cranks, belts, buttons, and other widgets – and all the specifications of materials and their qualities necessary to get the desired result."

    Howard S. Becker

    JTMcPhee October 22, 2016 at 8:58 am

    Well, great! That part of the great discourse has been decoded and unpacked and all that, I feel much better for the personal increase in awareness of how fokked things are.

    Now, how are "we" going to get billions of other humans to the same state of awareness, to stop talking about "fuel" when talking (using a gazillion other "terms of art" and memes and tropes that are similarly opaque and whitewash and FUD-laden) about "the economy" and "economics" and while generating ever more momentum for those same deadly (but profitable for the few) terms, tropes, memes and shorthands? "Profitable" being one of them, "profit" being part of the disease process, because after all, for the individual or the firm s/he belongs to, "profit" (ignoring externalities, of course) is the summum bonum that lets you buy stuff and experiences galore?

    Other Juggernaut words, just a very few: "bonus", "healthcare", "entitlement", "MArket", "free trade," and a personal favorite, "donor" meaning very simply "BRIBER/corrupter" but hey, those very few squillionaires who own everything including the "political process" are described millions of times a DAY on the intertubes as "donors," "donors" to political candidates and PACs and "think tanks" (??another fave). Giving a kidney to a person with terminal kidney failure, "donating" one's corneas and body parts or those of deeply loved ones suddenly deceased, those are ""donations." Not Koch or Adelman or Soros or Gates etc. billions to "Foundations" or operas or art museums.

    "We," who are Aware, perceive some of this, often argue and debate and cavil over nitty bits of those perceptions. That is so very effective, isn't it, the few hundreds or thousands of "us" who participate in or observe the Flow in NCspace, in bringing about any kind of regression to a mean that is hardly defined or maybe undefinable, a mean that might actually be "kind" and "decent" and "fair" and "just" (whatever those terms are taken to mean)?

    What is to be done about it? "We" ain't either powerful or certain enough to do something like a "global search and replace" across the entire internet, with a burning of all the books and papers, and a quarantine of all the GeithnerDimonGreenspanKrugmans and their myriad of citers and followers and extenders, that carry the infection forward into the label minds of future "policy makers" who like most humans who (I am assured by others) are wired to seek dominance and pleasure and reproductive success? And who obviously are the dominant, successful vector and segment of the "political economy?"

    The plagues that Pandora was tricked into loosing on "humanity" have been out there probably too long to be re-packaged. Nice effort for those who try, try and try again, but that effort seems to me mostly pissing into the wind…

    griffen October 22, 2016 at 9:27 am

    TINA. Sadly it's true, we appear somewhat stuck in this mode of what's working. I personally appreciate the credit union / co-op model of accomplishing financial intermediation but that is also a continuation of what we have.

    Biggest problem in the US, no one competing with the FED.

    Dave October 22, 2016 at 11:40 am

    "some of the recent coinages, like "sharing economy" are downright Orwellian". Yes, but that phrase can be and is easily replaced in casual conversation with "the sharecropper economy". (Be prepared to deliver a short explanation what a sharecropper is to the youg 'uns.)

    Another valid word out of the past is "the man," as in the giver of overpriced credit to the sharecropper who often ended up with zero profits and thus was kept in perpetual debt. Central bankers?

    "The company store" is another one. Applepay?

    "Papal indulgences" another. Hillary?

    Word substitution is a fun game.

    Dave October 22, 2016 at 11:48 am

    Speaking of Big Brother, how can we forget "Thought leader"

    diptherio October 22, 2016 at 12:24 pm

    Everybody talks about "thought leaders" but no one ever talks about "thought followers," much less actually claims to be one. But without "thought followers" how can you have "thought leaders"? I'm suspicious….

    And anyway, wouldn't "thought leader" be applicable to anybody whose thinking ends up being followed by others, for good or ill? Wouldn't Charles Manson be a "thought leader"? He certainly was for the Manson Family….just a thought…

    Jeremy Grimm October 22, 2016 at 5:33 pm

    I always thought the exhortation to be thought leaders was a ruse for encouraging people to speak up and try to act as thought leaders. That way those who worked us could identify the taller daisies and thereby identify which flowers to top.

    Steven October 22, 2016 at 12:28 pm

    Seems like some combination of Frederick Soddy and Michael Hudson is called for here. Soddy is apparently a tough slog even for otherwise intelligent people. So at the risk of over-simplification here is my attempt to convey his ideas about money and wealth:

    Money is not wealth. It is a claim on wealth, i.e. debt.

    Wealth. Soddy provides both a practical and a more abstract definition of (the ingredients of) wealth:

    "But economics, in a national sense, is concerned with wealth as what is produced by human beings to maintain their lives.

    Discovery, Natural Energy and Diligence, the Three Ingredients of Wealth

    For Discovery, think research and development (R&D) and of course education so R&D is even possible. For Natural Energy, think, for most of the Industrial Revolution (IR), fossil fuels. (Pretty obviously we need to do something different if we want to keep the machine the IR built functioning, sustainably producing the wealth which sustains our civilization.)

    One of my favorite passages from Soddy's "Wealth, Virtual Wealth and Debt" is:

    "As Ruskin said, a logical definition of wealth is absolutely needed for the basis of economics if it is to be a science."

    But without a science-based definition of wealth, i.e. continuing to use profit and money as a measure of 'productivity', just 'printing' more money (even Hudson's MMT) will solve nothing. Put these observations together and you get an idea what should 'back' money – wealth not gold or as Hudson puts it "Debts that can't be repaid (and) won't be."

    Hudson's 'clean slate' provides the other part of the solution. As Hudson notes, the 'miracle of compound interest' is not sustainable – particularly when the West's 'financial engineers' are busy cranking out money (as debt) at rates well in excess of going interest rates. Just continuing to use profit and money as a measure of 'productivity', 'printing' more money (even Hudson's MMT) will solve nothing. Probably by the middle of the 20th century, the West had 'enough' wealth its people could begin to find other purposes in life than creating ever more of it (to make ever more money, i.e. acquire ever more debt to be paid by someone – the unborn?). Again from Soddy / Ruskin – real "Wealth rots." That's what's happening to the West's 'culture' as its ruling classes mindlessly attempt to acquire ever more money.

    It isn't just the 1% who are going to have to take their lumps, to stop playing games with the world's future so they can, as candidate Trump put it, 'run up a bigger score' with money for which they have no immediate need. It is those of us in the 99% who do not possess the skills and aptitudes required for the genuine creation of wealth, wealth the world needs and can sustainably afford. Those numbers are going to grow as the Industrial Revolution succeeds, with human labor and rote intelligence replaced more and more by machines powered by "natural energy". But, even if we can't find our niche, I take it as a given that we are all born with a right to life.

    Moneta October 22, 2016 at 1:27 pm

    Wealth is hard to define because what we view as wealth might be a money pit that guarantees our decline…

    For example, instead of injecting money directly in the faculty of medicine, a university might have decided to fund a football team to attract the capital and end up building a stadium… Instead of just funding the faculty.

    All these activities related to the sports team contribute to GDP. The bankers might have been productive and efficient in raising capital, the coach might be productive and make a winning team, the builders of the stadium might have been very productive building a fine structure but all these activities sucked up resources and energy that could have been used by other sectors to better serve the future of the country. Maybe these activities are totally unsustainable. They might appear as wealth currently but will lead to poverty over time.

    Since ou basic needs have been met, we have been investing in a forever greater number of non-essential resource intensive activities which show how disconnected we have become from the earth supporting us.

    redleg October 22, 2016 at 12:50 pm

    All the analogues to fuel and engines, yet nobody takes the next step to Power. Power is the key to both engines and finance.

    Hudson, Black, Keen and other non-mainstream people are exceptions, but is anyone listening to them besides this choir?

    Edward Morbius October 22, 2016 at 8:51 pm

    "Wealth, as Mr Hobbes says, is power." Adam Smith, Wealth of Nations . It's only the second discussion (after definition) of the term in the book.

    Smith doesn't get everything right, but he's considerably more savvy and left-wing, bleeding-heart liberal than he's commonly given credit for.

    Les Swift October 22, 2016 at 1:13 pm

    The terminology of finance is designed to hide predatory and extractive activities behind a curtain of beneficial-sounding words. These terms are deeply embedded, and serve both to put some friendly makeup on the business, and allow the "consumers" to feel better about their capitulation. The process is akin to the way politicians wrap themselves in the flag while they sell out the citizenry. We know deep down that they are lying, but we prefer the false patriotism because it serves the lies we prefer to tell ourselves. We bitch and moan, but we play our part, because not doing so leads to trouble. It is the way most of us live our lives.

    One of the biggest problems people face in discussing matters financial, is that the very terminology of the system undercuts the critiques. Just as criticizing the wars invokes in some the specter of failing to support the troops and the specter of criticizing America, criticizing Wall Street's predatory aspects invokes in many the specter of criticizing institutions we have been led to believe represent the essence of American freedom. Doing so makes you at least a malcontent or troublemaker, and maybe even some sort of subversive pinko. Either way, you're rocking a boat many do not want rocked.

    Using analogies and metaphors to discuss such matters can outflank the loaded-terminology question to a significant degree. You can cut through a lot of the fog of jargon by describing the activities in other terms. (E.g., Dave's "sharecropping" for "sharing economy.")

    We are in an era in which the financial world is being downsized and consolidated, the giant speculative bubble which dominated most of our lives is being deflated and wound down before our eyes. There is still speculative activity, to be sure, but there is also a rise in the use of rentier income. This downsizing process involves shifting losses wherever possible down the food chain, including to institutions which previously were integral parts of the system. Insiders are finding themselves outsiders, jettisoned by other insiders.

    This reminds me of the situation of a pack of wolves, grown large in an era of plentiful food, but now finding that food supply dwindling. The pack must shrink to survive, the excess members culled in often brutal ways. The strongest eat the most, the rest are left with the scraps, or nothing at all. The financial system is similar, a pack in which the herd is being culled. Individual institutions, even important ones like Barings or Lehman, are ephemeral. They come and they go, just like individual wolves in the pack. But the pack lives on, and so does the financial system. To the wolves, the pecking order, who lives and who dies, is very important. But for the creatures the pack eats, such concerns are irrelevant.

    tongorad October 22, 2016 at 2:40 pm

    Either way, you're rocking a boat many do not want rocked.

    Perhaps. Or perhaps the alternatives to our ruling narratives and power mechanisms have been ruthlessly dismantled and extinguished. For example, I would love to join a union. But I live in a right-to-work state.

    I would love to have representation at my workplace and have some degree of bargaining power. I guess there's always the complaint box. Or the "freedom" to hit the bricks.

    Luckily, I went to school when it was affordable, so I don't have student loan debt. I rent, and although rents continue to rise every year, I don't have a mortgage hanging over my head.

    My younger colleagues are saddled with outrageous student loan debt that they will never likely repay. Unfortunately many/most of them bought into the housing market. How likely are they to even entertain the idea of speaking truth to power?

    I'm past 50, and you know what that means to my prospects of finding another job. Young and old, we just keep our mouths shut and do what we're told.

    moneta October 22, 2016 at 2:44 pm

    The US represents 5% of world population but consumes a much larger share of world energy and resources. The 99% are concerned about fairness but if they truly cared, they'd understand that the global economy needs to shrink their share of resources to 5%. And the leveling is getting stronger by the day. Most people go along the big lie because of hope.

    Jeremy Grimm October 22, 2016 at 5:51 pm

    Question about your numbers - I think our share of resources needs to shrink but I'm not sure 5% is the right number. Are some of the resources in that 5% dedicated to our Industry? Is our industry productive? and who gets the stuff? It may be we need to shrink our use of resources to 4%. And what about the who uses how much of what resources? How do you count the resources used to support our car, bus, and truck industries while deliberately stifling mass transit. I only make these quibbles to avoid your logic of proportions. Clearly we must take/steal less from the rest of the world and share what we have. I believe there is enough to go around - once a few (quite a few) problems here and there are taken care of.

    I'm not sure how much hope continues to hold up the big lie. I think the supports for the big lie need a lot of maintenance to keep it from falling. Maybe we can simply stop using that road.

    moneta October 22, 2016 at 6:13 pm

    I don't know what the number is but from my vantage point , it looks like the western work is heading for a world of pain. Americans want America to be great again but it's based on materialism.

    To be great again would mean a different kind of greatness where the economy is based on a reduction of it share of resources.

    But the population is still very far away from the fact that its way of life depends on an unfair distribution of world resources which will probably lead to a big world struggle meaning a focus on the military.

    This is not what I want by what I see in the horizon.

    There's a reason money and fuel are in the same sentence. It's because the a nation's power depends on energy.

    Vatch October 22, 2016 at 8:25 pm

    It might seem trite, but if an American is patriotic, he or she will try to reduce the nation's energy use by using energy efficiently. Whether it's transportation, home heating, home cooling, or nighttime illumination, one should use the energy efficiently. Aside from the immorality of using so much more than many other people in the world, it's a way to reduce pollution and to avoid sending money to the Wahhabi nut jobs in Saudi Arabia. Plus, energy efficiency saves money!

    Jeremy Grimm October 22, 2016 at 8:39 pm

    I think you and I are on the same page.

    Our country has the capacity to help the world get through the crises of Global Warming and the end of oil. Our country has responsibility as one of the guilty parties - one of the most most guilty in taking more than our share and sharing less than we are able or should share. The meaning of riches is best enjoyed through the sharing of those riches. In ancient times - at least in some places - that was the privilege and obligation of the rich.

    I would feel deep shame for our country if it is to be remembered in the future for what it has done so far.

    Orn October 22, 2016 at 1:17 pm

    An alternate metaphor could be the slime mold .

    knowbuddhau October 22, 2016 at 2:48 pm

    Great comment, ROTL! Accords very well with my understanding of the power of metaphors, to bring into being the world stage on which we strut our stuff.

    Many here at NC often comment on the quasi-religious nature of economics. I'm always struck by the conflation of the organic/natural world with mechanics. Wrongly conceiving of market forces as natural forces and so on. I think you've struck a blow against this wrong-headed mythos at its weakest point. If the metaphors that bring into being this world of pain we're living in themselves are discredited, the whole edifice could come crashing down in no time.

    If anyone's interested in a little exercise, trying paying attention to the metaphors one uses for organic systems, and society at large. Even though I'm aware of their inappropriateness, it's hard not to think in mechanistic terms. And not just mechanistic, but weaponized, at that. You can't even listen to a baseball game without hearing metaphors of war all the damn time. Then there are "Twitter wars" and "Facebook wars" ad nauseaum.

    I like lyman alpha blob's mention of financial warfare, too. In 2010, forensic economists found confirmation of the "economic hit man hypothesis" by studying the effectiveness of the CIA's overseas efforts wrt US exports.
    http://www.slate.com/articles/business/the_dismal_science/2010/05/industrial_espionage.html

    If we agree that we need a most fundamental and profound change to our ways of being in the world, our use of metaphors is a great place to start.

    Wade Riddick October 22, 2016 at 6:46 pm

    Money is nutrition, not a snack. It's food and fertilizer. It makes things grow. You have to share it with other life like bacteria and worms: without these organisms in your gut ecology, you get sick (autism, diabetes, obesity, M.S.). Idiots try to convince us these organisms are parasites instead of symbionts just like Monsanto thinks bees are disposable or Donald Trump likes to think of pregnant women as drags on business profits.

    Where does he propose business find future workers if not in wombs? From where will his future customers come?

    Perhaps in sharing economy of future America, companies will have to share their dwindling customers and make do with less?

    If you think altruism is for suckers, your Ayn Rand economy collapses because you confuse parasites with symbionts and symbionts with parasites. You can't distinguish between compensation for earned and unearned income. What's a tax and what's theft? Try living without bacteria making butyrate in your gut. Wells Fargo can no more survive without little people like airport janitors to scrub out the TB and Ebola stains than our cells can breathe without mitochondria. Yet who gets their pay driven down in corporate America?

    Money weaves a supporting web of trust, a mutual network of obligations and payments – and what happens biologically when that web inside us is broken and friends become enemies and we treat enemies as friends? Is fraud any different than autoimmunity or cancer?

    readerOfTeaLeaves October 22, 2016 at 7:16 pm

    Well, I was gobsmacked to see this show up when I finally logged on to the Internet today. Many heartfelt thanks to all who commented so thoughtfully and insightfully; and also to the remarkable NC crew (Yves, Lambert, Jerri-Lynn, the IT folks), as well of course to Clive.

    I think that we are all rooting for the time when Haldane's insights are met with 'Doh', and when we celebrate Bill Black as a Nobel in Economics ;-)

    [Oct 23, 2016] How 401(k) Plans Stack the Deck to Get Chump Investors to Sign Up for Doggy Sponsor Funds

    Notable quotes:
    "... When I signed up for a 401k at my previous job, I wanted to invest in the S&P index fund, as it was the lowest cost option. Given that Putnam used their own fund, it charged 0.35% at a time when Vanguard was at 0.07% and Fidelity at 0.10%. ..."
    "... Rule of 72 says that at 7% return for ten years would be $20,000 not $136K. ..."
    "... Washington has proven itself incapable of managing its money (our taxes) prudently and efficiently because of our corrupt representatives putting their electoral and personal interests first. The 401K experiment has failed. Very few individuals will be able to rely on them for retirement security, and of those most hail from the higher income brackets. They do virtually nothing for retirement security for the vast, vast majority of the country. ..."
    "... Social Security is a proven, cost effective, and reliable deliverer of retirement income for our entire population. 401K's will never come close, and in fact aren't worth shit to most people. But that is not what matters in Washington. ..."
    "... The Plan administrator has a fiduciary obligation to manage the options. The administrator can put pressure to make non-Sponsor funds available. With a total company 401k of only about $5mm, I was able to pressure our 401K plan Sponsor to provide access to lower cost equivalent portfolios for investment options such as S&P 500, Russell 2000 and a long-term bond yield (via Vanguard and Fidelity). ..."
    "... Difficult to reconcile this with the Department of Labor's new fiduciary rule, which reportedly requires financial advisers to place the interests of clients with retirement-saving accounts ahead of their own. I have read that it will be implemented sometime next year, assuming there are no additional delays. (hat tip Barry Ritholtz) ..."
    Oct 23, 2016 | www.nakedcapitalism.com
    Cocomaan October 21, 2016 at 6:56 am

    Thanks for this analysis. I have a 403b through my institution of higher Ed, specifically Tiaa. Their funds are kind of lousy (compared, say, to a vanguard index) and there's little choice in which funds seem to be available from one institution to another.

    The idea that workers will somehow sit down and process the numbers surrounding badly performing funds, and then redistribute, is a fantasy. Who has the financial literacy to do that? Like healthcare,it's another area of personal finance where people are expected to take on time consuming and complex administrative duties.

    Mandatory 401s sounds just great. Can't wait. "You give me your money, you tell me where to put it among crappy options, wait forty years, and you may or may not ever see it again, based on the quality of your choices. Pleasure doing business with you."

    Larry October 21, 2016 at 7:18 am

    I love the last line, because it applies to almost everything in our society today: far more scrutiny and oversight. Thanks to Naked Capitalism for turning up the scrutiny.

    Mark John October 21, 2016 at 7:59 am

    We are going to have a fight on our hands if and when HRC gets elected. The fact that our politicians have gotten away with weakening New Deal programs that actually worked well is all the evidence I need to believe they are not finished with their attack.

    Scott October 21, 2016 at 9:06 am

    When I signed up for a 401k at my previous job, I wanted to invest in the S&P index fund, as it was the lowest cost option. Given that Putnam used their own fund, it charged 0.35% at a time when Vanguard was at 0.07% and Fidelity at 0.10%.

    James October 21, 2016 at 10:29 am

    If you put $10k into the fund at 35 bps, you'd have $136k at the end of 10 years (assuming 7% gross return). if you got it at 7 bps, you'd have $137k. Now, if you'd bought a loaded A share American Fund with a 5.75% sales load and a 65 bps expense ratio, you'd have $126k.

    The principle of low fees is important, but you're effectively there with the 35 bps fund.

    Rule of 72 October 22, 2016 at 1:12 pm

    Rule of 72 says that at 7% return for ten years would be $20,000 not $136K.

    griffen October 22, 2016 at 6:49 pm

    that is 10k per annum as contribution. mathing on saturday can be hardi know

    JW October 21, 2016 at 4:47 pm

    exactly. then, what's the 401k management fee on top of that?

    KYrocky October 21, 2016 at 10:03 am

    "…investors might be vigilant enough to recognize that their interests are not being well served…"

    Come on. Really. I would wager that the percentage of people knowledgeable and sophisticated enough to do so at well under 0.1% of the population. The entire system of 401 retirement plans has been constructed for the purpose of fleecing undisclosed fees from us suckers forced into these plans.

    Washington has proven itself incapable of managing its money (our taxes) prudently and efficiently because of our corrupt representatives putting their electoral and personal interests first. The 401K experiment has failed. Very few individuals will be able to rely on them for retirement security, and of those most hail from the higher income brackets. They do virtually nothing for retirement security for the vast, vast majority of the country.

    Social Security is a proven, cost effective, and reliable deliverer of retirement income for our entire population. 401K's will never come close, and in fact aren't worth shit to most people. But that is not what matters in Washington.

    cdub October 21, 2016 at 10:56 am

    I see this as akin to a Board of Driectors governance issue.

    The Plan administrator has a fiduciary obligation to manage the options. The administrator can put pressure to make non-Sponsor funds available. With a total company 401k of only about $5mm, I was able to pressure our 401K plan Sponsor to provide access to lower cost equivalent portfolios for investment options such as S&P 500, Russell 2000 and a long-term bond yield (via Vanguard and Fidelity).

    All it required was performing the minimums of being a 401k plan administrator. Quarterly monitoring of fund performance versus peers via a service like Morningstar (took 4 hours to prebuild screens that displayed QonQ, YonY and 3Yon3Y), pressing the Sponsor for alternatives and then refusing the steak dinner to discuss with the Sponsor. I mean for crying out loud this is really simple. And of course if your plan administrator isn't doing this minimum I'm sure they have fiduciary insurance so there are alternatives.

    Of course many people aren't willing to ask/press these questions of their employer/HR. I've seen plans administered exceptionally well (utility with a union for about 1/3 of employees and small family energy firm) and poorly (some larger energy companies). Why somebody doesn't provides this administrator function as an outsource is beyond me. The real liability can be quite high and pushing off to a 3rd party who does just that would seem worth the $.

    P Fitzsimon October 21, 2016 at 10:58 am

    My 401K was administered by Fidelity and I believe there were no restrictions whatsoever. I could invest in any Fidelity fund or actually any fund through a brokerage account. If you didn't use a Fidelity brokerage account offered by the plan as an option your choices were restricted.

    enzica October 21, 2016 at 12:12 pm

    I think you meant 'dodgy', not 'doggy'.

    Vatch October 21, 2016 at 2:12 pm

    Yes, thank you. I was going to comment on that, but you're way ahead of me.

    Doggy funds belong in the Antidote du jour.

    Yves Smith Post author October 21, 2016 at 5:52 pm

    No, I mean "doggy" as in the performance is bad. "That fund is a dog".

    "Dodgy" means the ethics are questionable.

    Mattie October 22, 2016 at 7:42 am

    They are often dodgy too. Great-west/Empower does a real bait and switch on the options offered for certain 401A funds were there is deeply buried disclosure about proprietary versions charging much higher fees, than the term sheet prominently displayed as "this is what you're buying if you select this fund". This is a real racket

    Arizona Slim October 21, 2016 at 5:01 pm

    I'm of the mind that people should be investors because they *want* to, not because they *have* to. Even then, investing is not easy.

    Can't help agreeing with Joe Nocera, who said that investing is a talent that most people will never have.

    oceaniris October 22, 2016 at 1:15 pm

    Yves, article and analysis insightful, thanks again. "Doggy" in title makes sense, but "dodgy" may apply as well to Fidelity specifically, read on. Stumbled on to Reuters write up by Tim McLaughlin about Fidelity this month and began a search for a new money management firm with a "fiduciary" bone in it's body: http://www.reuters.com/article/us-usa-fidelity-family-specialreport-idUSKCN1251BG .
    Though the article indicates Fidelity's behavior is not "illegal nor unethical" – Yale University law professor John Morley said Fidelity runs the risk of losing investors by competing with the funds that serve them.

    "What they're doing is not illegal, not even unethical," Morley said. "But it's entirely appropriate for mutual fund investors to take their money elsewhere because Fidelity has made a decision to take away some of their potential returns."

    Many of us are trapped in the DC funds our employers establish for us. As cdub referenced, pressuring plan administrators is one way to change options or broaden offerings – but one needs to understand what pressure to apply.

    Morely said it best and I will move on…..
    .

    Chauncey Gardiner October 22, 2016 at 6:35 pm

    Difficult to reconcile this with the Department of Labor's new fiduciary rule, which reportedly requires financial advisers to place the interests of clients with retirement-saving accounts ahead of their own. I have read that it will be implemented sometime next year, assuming there are no additional delays. (hat tip Barry Ritholtz)

    [Oct 23, 2016] Trump Unloads in Pennsylvania Speech Hillary Clinton Should Be in Prison - Breitbart

    Oct 23, 2016 | www.breitbart.com
    In a lengthy speech on Saturday night in Manheim, Pennsylvania, Republican nominee for president Donald J. Trump lambasted his opponent Democratic nominee Hillary Rodham Clinton for a secret tape recording of her bashing supporters of Sen. Bernie Sanders of Vermont-and even called for Clinton to be placed in prison and questioned as to whether she has been loyal to her husband former President Bill Clinton.

    Trump said in the speech on Saturday night:

    A new audio tape that has surfaced just yesterday from another one of Hillary's high roller fundraisers shows her demeaning and mocking Bernie Sanders and all of his supporters. You know, and I'll tell you something we have a much bigger movement that Bernie Sanders ever had. We have much bigger crowds than Sanders ever had. And we have a more important movement than Bernie Sanders ever had because we're going to save our country, okay? We're going to save our country. But I can tell you Bernie Sanders would have left a great, great legacy had he not made the deal with the devil. He would have really left a great legacy. Now he shows up and 120 people come in to hear him talk. Bernie Sanders would have left a great legacy had he not made the deal, had he held his head high and walked away. Now he's on the other side perhaps from us and we want to get along with everybody and we will-we're going to unite the country-but what Bernie Sanders did to his supporters was very, very unfair. And they're really not his supporters any longer and they're not going to support Hillary Clinton. I really believe a lot of those people are coming over and largely because of trade, college education, lots of other things-but largely because of trade, they're coming over to our side-you watch, you watch. Especially after Hillary mocks him and mocks all of those people by attacking him and his supporters as 'living in their parents' basements,' and trapped in dead-end careers. That's not what they are.

    Also in his speech on Saturday night, Trump summed up exactly what came out in the latest Hillary Clinton tapes in which she mocks Sanders supporters:

    She describes many of them as ignorant, and [that] they want the United States to be more like Scandinavia but that 'half the people don't know what that means' in a really sarcastic tone because she's a sarcastic woman. To sum up, and I'll tell you the other thing-she's an incompetent woman. She's an incompetent woman. I've seen it. Just take a look at what she touches. It never works out, and you watch: her run for the presidency will never ever work out because we can't let it work out. To sum up, Hillary Clinton thinks Bernie supporters are hopeless and ignorant basement dwellers. Then, of course, she thinks people who vote for and follow us are deplorable and irredeemable. I don't think so. I don't think so. We have the smartest people, we have the sharpest people, we have the most amazing people, and you know in all of the years of this country they say, even the pundits-most of them aren't worth the ground they're standing on, some of that ground could be fairly wealthy but ground, but most of these people say they have never seen a phenomenon like is going on. We have crowds like this wherever we go.

    WATCH THE FULL SPEECH:

    Later in the speech, Trump came back to the tape again and hammered her once more for it.

    "Hillary Clinton all but said that most of the country is racist, including the men and women of law enforcement," Trump said. "She said that the other night. Did anybody like Lester Holt? Did anybody question her when she said that? No, she said it the other night. [If] you're not a die hard Clinton fan-you're not a supporter-from Day One, Hillary Clinton thinks you are a defective person. That's what she's going around saying."

    In the speech, Trump questioned whether Clinton has the moral authority to lead when she considers the majority of Americans-Trump supporters and Sanders supporters-to be "defective" people. And he went so far as saying that Clinton "should be in prison." He went on:

    How on earth can Hillary Clinton try to lead this country when she has nothing but contempt for the people who live in this country? She's got contempt. First of all, she's got so many scandals and she's been caught cheating so much. One of the worst things I've ever witnessed as a citizen of the United States was last week when the FBI director was trying so hard to explain how she away with what she got away with, because she should be in prison. Let me tell you. She should be in prison. She's being totally protected by the New York Times and the Washington Post and all of the media and CNN-Clinton News Network-which nobody is watching anyway so what difference does it make? Don't even watch it. But she's being protected by many of these groups. It's not like do you think she's guilty? They've actually admitted she's guilty. And then she lies and lies, 33,000 emails deleted, bleached, acid-washed! And then they take their phones and they hammer the hell out of them. How many people have acid washed or bleached a Tweet? How many?

    He returned to the secret Clinton tape a little while later:

    Hillary Clinton slanders and attacks anyone who wants to put America First, whether they are Trump Voters or Bernie Voters. What she said about Bernie voters amazing. Like the European Union, she wants to erase our borders and she wants to do it for her donors and she wants people to pour into country without knowing who they are.

    Trump later bashed the media as "dishonest as hell" when calling on the reporters at his event to "turn your cameras" to show the crowd that came to see him.

    "If they showed the kind of crowds we have-which people can hear, you know it's interesting: you can hear the crowd when you hear the television but if they showed the crowd it would be better television, but they don't know much about that. But it would actually be better television," Trump said.

    Trump also questioned whether Hillary Clinton has been loyal to her husband, former President Bill Clinton. Bill Clinton has been known to cheat on Hillary Clinton with a variety of mistresses and has been accused of rape and sexual assault by some women.

    "Hillary Clinton's only loyalty is to her financial contributors and to herself," Trump said. "I don't even think she's loyal to Bill, if you want to know the truth. And really, folks, really: Why should she be, right? Why should she be?"

    Throughout the speech, Trump weaved together references to his new campaign theme about Clinton-"Follow The Money"-with details about the Trans Pacific Partnership (TPP) trade deal. He said:

    We're going to take on the corrupt media, the powerful lobbyists and the special interests that have stolen your jobs, your factories, and your future-that's exactly what's happened. We're going to stop Hillary Clinton from continuing to raid the industry from your state for her profit. Hillary Clinton has collected millions of dollars from the same global corporations shipping your jobs and your dreams to other countries. You know it and everybody else knows it. That's why Clinton, if she ever got the chance, would 100 percent approve Trans Pacific Partnership-a total disastrous trade deal. She called the deal the 'gold standard.' The TPP will bring economic devastation to Pennsylvania and our campaign is the only chance to stop that and other bad things that are happening to our country. She lied about the Gold Standard the other night at the debate. She said she didn't say it-she said it. We want to stop the Trans Pacific Partnership and if we don't-remember this, if we don't stop it, billions and billions [of dollars] in jobs and wealth will be vacuumed right out of Pennsylvania and sent to these other countries. Just like NAFTA was a disaster, this will be a disaster. Frankly I don't think it'll be as bad as NAFTA. It can't get any worse than that-signed by Bill Clinton. All of us here in this massive room here tonight can prevent this from happening. Together we can stop TPP and we can end the theft of American jobs and prosperity.

    Trump praised Sanders for being strongly opposed to the TPP:

    I knew one man-I'm not a big fan-but one man who knew the dangers of the TPP was Bernie Sanders. Crazy Bernie. He was right about one thing, only one thing, and that was trade. He was right about it because he knew we were getting ripped off, but he wouldn't be able to do anything about it . We're going to do a lot about it. We're going to have those highways running the opposite direction. We're going to have a lot of trade, but it's going to come into our country. We are going to start benefitting our country because right now it's one way road to trouble. Our jobs leave us, our money leaves us. With Mexico, we get the drugs-they get the cash-it's that simple.

    Hillary Clinton, Trump noted, is "controlled by global special interests."

    "She's on the opposite side of Bernie on the trade issue," Trump said. "She's totally on the opposite side of Bernie."

    He circled back to trade a bit later in the more-than-hour-long speech, hammering TPP and Clinton cash connections. Trump continued:

    Three TPP member countries gave between $6 and $15 million to Clinton. At least four lobbyists who are actively lobbying for TPP passage have raised more than $800,000 for her campaign. I'm just telling you Pennsylvania, we're going to make it. We're going to make it. We're going to make it if we have Pennsylvania for sure. It'll be easy. But you cannot let this pass. NAFTA passed. It's been the worst trade deal probably ever passed, not in this country but anywhere in the world. It cleaned out New England. It cleaned out big portions of Pennsylvania. It cleaned out big portions of Ohio and North Carolina and South Carolina-you can't let it happen.

    Trump even called the politicians like Clinton "bloodsuckers" who have let America be drained out of millions upon millions of jobs.

    "These bloodsuckers want it to happen," Trump said. "They're politicians that are getting taken care of by people that want it to happen. Other countries want it to happen because it's good for them, but it's not good for us. So hopefully you're not going to let it happen. Whatever Hillary's donors want, they get. They own her. On Nov. 8, we're going to end Clinton corruption. Hillary Clinton, dishonest person, is an insider fighting for herself and for her friends. I'm an outsider fighting for you. And by the way, just in case you're not aware, I used to be an insider but I thought this was the right thing to do. This is the right thing to do, believe me."

    [Oct 22, 2016] Race-specific programs are a wedge issues and belong to identity politics as they will create great resentment

    Notable quotes:
    "... I think race-specific programs are a dead end as they will create great resentment, but universal programs and ESPECIALLY a job guarantee would be tremendously helpful in improving the U.S. racial situation. ..."
    "... And it prevents the constant attacks on recipients of benefits as being unworthy, criminal, drug-taking, undeserving folk who should be drug-tested, monitored, controlled, suspected. ..."
    "... Privileges like the selection of judges or the creation of special loopholes in the tax law, or other privileges only a political donation of the right amount might purchase. And it should be plain that some of the privileges described are not privileges at all but basic rights of human kind borne within any notion of the just. ..."
    "... I think race-specific programs are a dead end as they will create great resentment, but universal programs and ESPECIALLY a job guarantee would be tremendously helpful in improving the U.S. racial situation. ..."
    "... When the BLM (I think) asked Bernie about reparations, he said he didn't think it was a good idea, that free college etc would help everyone. ..."
    Oct 21, 2016 | www.nakedcapitalism.com
    SpringTexasn October 21, 2016 at 10:45 am

    PlutoniumKun is 100% on-target. Moreover, non-universal benefits have tremendous overhead cost in terms of paperwork, qualifications, etc., while a universal benefit can be minimally bureaucratic.

    I think race-specific programs are a dead end as they will create great resentment, but universal programs and ESPECIALLY a job guarantee would be tremendously helpful in improving the U.S. racial situation.

    On the baby bonds, it's foolish to have a "$50 endowment for a child of Bill Gates". Instead it would be better to just provide $50,000 to ALL babies including Bill Gates' child, and tax Bill Gates more.

    As the saying goes, "programs for the poor are poor programs." Bill Gates' child should be allowed to use the same public libraries, go to the same (free) public universities, etc. etc. I doubt Bill Gates' child will need to take up the guaranteed job, but if he needs or wants to (perhaps because of a quarrel with his parent) he should be able to.

    And it prevents the constant attacks on recipients of benefits as being unworthy, criminal, drug-taking, undeserving folk who should be drug-tested, monitored, controlled, suspected.

    Jeremy Grimm October 22, 2016 at 1:06 am

    Universality removes many of the privileges the rich enjoy - $50K for all babies including Bill Gates child - and as privileges are dismantled in this way the remaining privileges of the rich will stand all the more glaring for their unfairness - to all. Privileges like the selection of judges or the creation of special loopholes in the tax law, or other privileges only a political donation of the right amount might purchase. And it should be plain that some of the privileges described are not privileges at all but basic rights of human kind borne within any notion of the just.

    HotFlash October 22, 2016 at 6:38 am

    I think race-specific programs are a dead end as they will create great resentment, but universal programs and ESPECIALLY a job guarantee would be tremendously helpful in improving the U.S. racial situation.

    I've been thinking about this bit a lot. When the BLM (I think) asked Bernie about reparations, he said he didn't think it was a good idea, that free college etc would help everyone.

    I don't recall any elaboration on his part, but I wondered at the time, how would they be allocated? Full black, one-half black, one quarter, quadroon, octoroon, mulatto, 'yaller'? That's wholly back to Jim Crow, or worse. I refer, of course to the artificial division of Huttus and Tutsis which, you may recall, did not work out so well . Barack Obama, would he qualify? None of his ancestors were slaves.

    I am looking forward to the book by Darity and Muller, but they would have to do a lot of persuading to get me to get comfy with reparations.

    Oh, and re Yves' remark about the baby box, that would be Finland, there's a BBC article here , and one from the Atlantic, "Finland's 'Baby Box': Gift from Santa Claus or Socialist Hell?" America, jeesh!

    Stratos October 21, 2016 at 10:58 am

    The country that gives every expecting mother a new baby package is Finland. They started the practice in the 1930's when their infant mortality rate was at ten percent. Now they have one of the lowest infant mortality rates in the world.

    [Oct 22, 2016] Why Trade Deals Lost Legitimacy

    Oct 22, 2016 | economistsview.typepad.com

    Dani Rodrik:

    The Walloon mouse : ...Instead of decrying people's stupidity and ignorance in rejecting trade deals, we should try to understand why such deals lost legitimacy in the first place. I'd put a large part of the blame on mainstream elites and trade technocrats who pooh-poohed ordinary people's concerns with earlier trade agreements.

    The elites minimized distributional concerns, though they turned out to be significant for the most directly affected communities. They oversold aggregate gains from trade deals, though they have been smallish since at least NAFTA. They said sovereignty would not be diminished though it clearly was in some instances. They claimed democratic principles would not be undermined, though they are in places. They said there'd be no social dumping though there clearly is at times. They advertised trade deals (and continue to do so) as "free trade" agreements, even though Adam Smith and David Ricardo would turn over in their graves if they read, say, any of the TPP chapters.

    And because they failed to provide those distinctions and caveats now trade gets tarred with all kinds of ills even when it's not deserved. If the demagogues and nativists making nonsensical claims about trade are getting a hearing, it is trade's cheerleaders that deserve some of the blame.

    One more thing. The opposition to trade deals is no longer solely about income losses. The standard remedy of compensation won't be enough -- even if carried out. It's about fairness, loss of control, and elites' loss of credibility. It hurts the cause of trade to pretend otherwise.

    El Chapo Guapo -> DrDick... October 22, 2016 at 11:22 AM , 2016 at 11:22 AM

    ... ... ..
    Trump would propose and/or enact, he listed the following six:

    "A Constitutional Amendment to impose term limits on all members of Congress."
    "A hiring freeze on all federal employees."
    "A requirement that for every new federal regulation, 2 existing regulations must be eliminated."
    "A 5-year ban on White House and Congressional officials becoming lobbyists after they leave government."
    "A lifetime ban on White House officials lobbying on behalf of a foreign government."
    "A complete ban on foreign lobbyists raising money for American elections."
    "
    ~~WWW~

    Lot of reform is needed but may be

    The forgotten spirit of American protectionism : , -1
    The free traders have human economic history precisely inverted. Countries that practice protectionism almost uniformly become wealthy and technologically advanced. Countries that don't become or remain terribly sad, poverty-stricken producers of worthless raw materials and desperate labor migrants. This has been true at least going back to Byzantium and its economic conquest by Genoa and Venice.

    That the US thrived pre-1970 free trade is no coincidence. There is no alternative to protectionism. Free trade = no industry = no money = no future.

    [Oct 22, 2016] Liberals Compete for the Soul of Economics

    I think he is trying to talk about soft neoliberalism vs rejection of neoliberalism as discredited economics dogma and ideology. I think like Marxism neoliberalism has religious elements in it (as in "secular religion") so will not go away completely much like obscure religious cults does not dissapper they on a given date second coming of Christ did not happen.
    Notable quotes:
    "... new research showing that policies like public housing , welfare and public education spending are more beneficial than conservatives have recognized in decades past. ..."
    "... But there are not one, but two big trends in liberal economic thinking. One wants to modify the economic thinking of the past few decades, and the other wants to rip it up. I expect to see a lot of the economic debate in the coming years play out not between the left and right, but between these two strains of thought. ..."
    "... The New Center-Left Consensus is attractive to academics and policy wonks. It draws on an eclectic mix of mainstream economic theory, empirical studies and historical experience. It refuses to assume, as many conservatives and libertarians do, that free markets are always the best unless there is a glaring case for government intervention. ..."
    Oct 22, 2016 | www.bloomberg.com
    In 2015, Forbes writer Adam Ozimek suggested that a "new liberal consensus" is forming in the economic-policy world. The data back him up. Many economics professors now tend to favor government intervention in the economy more than the general public. And the profession's biggest public stars, from Paul Krugman to Thomas Piketty to Joseph Stiglitz, are now more likely to lean to the left than to the right. Meanwhile, I've tried to document the flood of new research showing that policies like public housing , welfare and public education spending are more beneficial than conservatives have recognized in decades past.

    But there are not one, but two big trends in liberal economic thinking. One wants to modify the economic thinking of the past few decades, and the other wants to rip it up. I expect to see a lot of the economic debate in the coming years play out not between the left and right, but between these two strains of thought.

    The research and people I've been writing about fit into what we might call the New Center-Left Consensus. This strain of thought is based on data and empiricism. Support for higher minimum wages, for example, has grown among economists because a large amount of careful empirical analysis has shown that minimum wage hikes don't usually cause sizable immediate disruptions in local labor markets. These economists aren't ignorant of the basic theory of labor supply and demand -- the kind that every undergrad econ student is forced to learn. They just realize that it might not be the right theory in this case.

    The New Center-Left Consensus is attractive to academics and policy wonks. It draws on an eclectic mix of mainstream economic theory, empirical studies and historical experience. It refuses to assume, as many conservatives and libertarians do, that free markets are always the best unless there is a glaring case for government intervention. It's more willing to entertain all kinds of ways that government can improve the economy, from welfare to infrastructure spending to regulation, but it also recognizes that these won't always work. It embraces a philosophy of careful experimentation. Sometimes the new center-left is even in favor of deregulation -- for example, loosening zoning restrictions and reducing occupational licensing . It's not ideologically opposed to the free market.

    The best evangelist of the New Center-Left Consensus might be President Barack Obama. In an amazingly well-informed editorial in the Economist, he recently laid out a comprehensive picture of the economy and policy. I have little doubt that Obama's understanding was heavily informed by his chief economic adviser, Jason Furman , who has become a titan of center-left policy advocacy. Obama mixes a healthy respect for capitalism with a desire to use government to temper the market's excesses.

    But there's a second strain of progressive economic thinking that is gaining attention and strength. This alternative could be called the New Heterodox Explosion. It's basically a movement to purge mainstream economics from progressive policy-making and thought.

    The New Heterodox Explosion rose in large part out of strongly left-leaning intellectual circles, particularly sociology, the humanities and other disciplines outside economics. It has also found a home in some economics departments in other countries (most notably the U.K.). Recently, it has started to permeate blogs and the media.

    The new website Evonomics , for example, is heavily devoted to strongly worded critiques of the entire edifice of modern [neoliberal] economics and it's where the work of many of the most outspoken champions of the New Heterodox Explosion appears. These include evolutionary biologist David Sloan Wilson, activist and venture capitalist Nick Hanauer, speechwriter Eric Liu and Eric Beinhocker of the Institute for New Economic Thinking. In a spate of recent blog posts and editorials, these thinkers have advocated replacing mainstream economic theory with thinking based on evolution, and/or on complexity theory.

    Though it's difficult to boil down these critiques to a few sentences, one basic theme of Wilson, Hanauer, et al.'s thinking is that modern economics is based on selfishness. Mainstream theories model human beings as atomistic individuals pursuing their own wants. But, say these Evonomics writers, people are social beings who care a lot about their fellow humans, and are also deeply embedded in larger social structures and organizations like communities, nations and cultures.

    I'm sympathetic to this point of view. I'm not at all sure that economies can be completely understood by looking at individual decisions, any more than I'm certain the growth of a tree can be understood simply by looking at the motions of the particles in the leaves and roots. And I do wish that economists dedicated a lot more thought and attention to the phenomena they call " externalities " and " social preferences ."

    But I'm also very wary of applying the Evonomics ideas to policy-making without a lot more work. First, the connection to evolution and complexity theory often seems less than solid. Nobody really knows if economies evolve the way organisms do. And efforts to connect complexity theory to economics, led by the Santa Fe Institute , have been going on for quite some time without any dramatic breakthroughs.

    So while the New Center-Left Consensus is fully formed and ready for application in the real world, the New Heterodox Explosion is still in its infancy. Center-left ideas have tons of very careful academic empirical work behind them, while those wishing to tear up economics and start over are still working mostly with broad analogies. I hope that the New Heterodox Explosion -- which of course extends far beyond the few writers and ideas I've cited in this post -- becomes a rich source of new and innovative economic ideas. But it still has a long way to go to match the intellectual heft of the center-left.

    This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

    [Oct 22, 2016] Capitalism and any other form of social organization based on profit seeking, in principle, is unsustainable within a closed system, such as planet Earth, without periodic destruction of its material wealth and human population

    Notable quotes:
    "... Social mobility is the kind of equality professional and managerial elites support. ..."
    "... High rates of social mobility are not inconsistent with systems of stratification that concentrate power and privilege in a ruling elite. Certainly the circulation of elites strengthens the idea of hierarchy furnishing it with fresh talent and legitimating their ascendancy as a function of merit rather than birth. ..."
    "... Look at the root of the problem: capitalism is a profit seeking competition based social organization. This is not meant as a judgement, but it can be demonstrated that capitalism and any other form of social organization based on profit seeking, in principle, is unsustainable within a closed system, such as planet Earth, without periodic destruction of its material wealth and human population. ..."
    Oct 22, 2016 | www.nakedcapitalism.com
    Jim October 21, 2016 at 2:13 pm

    Social mobility is the kind of equality professional and managerial elites support. Our present society seems quite mobile and highly stratified.

    Historically social mobility became an interpretation of opportunity only after more hopeful interpretations of opportunity (yeoman idea– your own plot of land– rather than Horatio Alger) began to fade out of the American experience (sometime after 1890 when social stratification could no longer be ignored).

    High rates of social mobility are not inconsistent with systems of stratification that concentrate power and privilege in a ruling elite. Certainly the circulation of elites strengthens the idea of hierarchy furnishing it with fresh talent and legitimating their ascendancy as a function of merit rather than birth.

    Social policy that would support a wider distribution of land would give a significant support to a parents' ability to bequeth property to their children–as seen, for example, in the Homstead Act.

    Think tradition of Jefferson, Lincoln and Orestes Brownson.

    PhilU October 21, 2016 at 3:34 pm

    I just listened to this podcast yesterday. It's Glenn Loury not William Darity, Jr. unless they had practically the same life. But there are at least a dozen lines that are verbatim from the podcast. http://loveandradio.org/2016/10/the-enemy-within/

    Nekto October 21, 2016 at 6:45 pm

    Look at the root of the problem: capitalism is a profit seeking competition based social organization. This is not meant as a judgement, but it can be demonstrated that capitalism and any other form of social organization based on profit seeking, in principle, is unsustainable within a closed system, such as planet Earth, without periodic destruction of its material wealth and human population. And this destruction becomes increasingly severe and threatening to the existence of the entire system as this social organization, such as capitalism, evolves.

    As far as the fundamental premise 'that everyone can prosper in the individual race for wealth given equal starting opportunities are provided' is not questioned all these studies calling for creation of "truly equal opportunities" will only exacerbate the problem, which is being practically done (explicitly or implicitly, knowingly or unknowingly) by many famous liberal economists, including Joseph Stiglitz, Robert Reich, Bill Black, Michael Hudson, etc., who are trying to find the ways to fix and improve capitalism without touching the fundamentals.

    This is not to say that social economic reforms that practically improve the lives of millions poor people are wrong or useless. Fighting cancer can be helpful, but only until and unless it kills the host. So, all these studies, policies, proposals, etc. can be helpful and productive only if clear awareness of the nature of the disease (capitalism) they are trying to treat exists.

    [Oct 21, 2016] Neoliberals take demands for economic fairness and try to give us identity politics instead

    Notable quotes:
    "... Clinton says publically she believes that. Meanwhile supposedly smart economists like Tyler Cowen say they don't. Boston Fed President Rosengren says there are too many jobs. We need more unemployed. I'm Fed Up with regional Fed Presidents like him. ..."
    "... Class issues are now a tough nut to crack, partly I think because the Democrats and some liberals take demands for economic fairness and try to give us identity politics instead, ..."
    "... The meritocratic class who Krugman speaks for and centrist politicians like Clinton will slow-walk class issues like how Tim Geithner slow-walked financial reform. It's part of their job description and milieu. ..."
    "... It's funny when neo-liberals/libertarians hate an activity engaged in by workers in what is clearly the product of a free market -- exercising the right of free association and organizing to do collective bargaining -- while think it is perfectly OK -- indeed, so "natural" that any question wouldn't even occur to them -- for owners of capital to organize themselves under the special protections of the state-created corporation. ..."
    "... It's understandable, though, that they would consider the corporation to be ordained by natural law: the Founding Fathers, after all, were dedicated to the proposition that all men and corporations are endowed with certain unalienable rights by their Creator. (Never mind that the creator of the corporations is the state.) ..."
    economistsview.typepad.com
    Peter K: October 21, 2016 at 10:14 AM
    I liked how Hillary said in the third debate that she was for raising the minimum wage because people who work full time shouldn't live in poverty. And "Donald" is against it. That's why people are voting for her.

    That's an ethical or moral notion, combined with "morally neutral" economics. People who work hard full time, play by the rules and pay their dues shouldn't live in poverty.

    Clinton says publically she believes that. Meanwhile supposedly smart economists like Tyler Cowen say they don't. Boston Fed President Rosengren says there are too many jobs. We need more unemployed. I'm Fed Up with regional Fed Presidents like him.

    Think about the debate between the centrists and progressives over Trump supporters. The centrists argue Trump supporters (nor anyone else besides a few) aren't suffering from economic anxiety - that it's racism all of the way down. Matt Yglesias. Dylan Matthews. Krugman. Meyerson. Etc.

    The progressives admit there's racism, but there's a wider context. The Nazis were racists, but there was also the Treaty of Versailles and the Great Depression. And Germany got better in the decades after the war just as the American South is better than it once was. Steve Randy Waldman and James Kwak discussed in blog post how the wider context should be taken into consideration.

    On some "non-economic issues" there has been progress even though the recent decades haven't been as booming as the post-WWII decades were with rising living standards for all.

    A black President. Legalized gay marriage. Legalized pot. I wouldn't have thought these things as likely to happen when I was a teenager because of the bigoted authoritarian nature of many voters and elites. During the Progressive era and when the New Deal was enacted, racism and sexism and bigotry and anti-science thinking was virulent. Yet economic progress was made on the class front.

    Class issues are now a tough nut to crack, partly I think because the Democrats and some liberals take demands for economic fairness and try to give us identity politics instead, not that the latter isn't worthwhile. Partly b/c of what Mike Konczal discussed in his recent Medium piece.

    If we can just apply the morality and politics of electing a black President and legalizing gay marriage and pot, to class issues. The meritocratic class who Krugman speaks for and centrist politicians like Clinton will slow-walk class issues like how Tim Geithner slow-walked financial reform. It's part of their job description and milieu.

    But Clinton did talk to it during the third debate when she said she'd raise the minimum wage because people who work full time shouldn't live in poverty. That is a morale issue as the new Pope has been talking about.

    Hillary should have joked last night about what God's Catholic representative here on Earth had to say about Trump.

    urban legend said...
    It's funny when neo-liberals/libertarians hate an activity engaged in by workers in what is clearly the product of a free market -- exercising the right of free association and organizing to do collective bargaining -- while think it is perfectly OK -- indeed, so "natural" that any question wouldn't even occur to them -- for owners of capital to organize themselves under the special protections of the state-created corporation.

    It's understandable, though, that they would consider the corporation to be ordained by natural law: the Founding Fathers, after all, were dedicated to the proposition that all men and corporations are endowed with certain unalienable rights by their Creator. (Never mind that the creator of the corporations is the state.)

    [Oct 21, 2016] Clinton Promises to Increase Social Security Tax

    www.strategic-culture.org

    So: Hillary Clinton has already said that she will raise Social Security taxes on people who make less than $118,500 per year, but Donald Trump has not indicated whether he will impose Social Security taxes on income above $118,500 per year.

    Other proposals that have been pushed in order to "replenish the Social Security Trust Fund" - or to achieve the long-term stability of the Social Security system - mainly focus on three approaches:

    One is privatizing Social Security, as Wall Street wants, and which proposal is based on private gambles that the assets that are purchased by the Wall Street firm for the individual investor will continually increase in value, never plunge, and never be reduced by annual charges to pay Wall Street's fees for management and for transactions, throughout the worker's career until retirement.

    Another approach is gradually reducing the inflation-adjuster for benefits, the inflation-adjusted value of the benefits that Social Security recipients will be receiving. President Obama had been trying to get congressional Republicans to agree with him to do that (which some call "the boiling-frog approach" because it's applied so gradually), but they continued to hold out for privatizing Social Security, and thus nothing was done.

    And the third option is to increase the retirement-age, as Obama also wanted to do (and which is really just another form of "boiling-frog approach"), but also couldn't get congressional Republicans to accept that. (Trump's comment to "Not increase the age and to leave it as it is" is a clear repudiation by him of this approach. And his promise to not increase taxes would, if taken seriously, also prohibit him from endorsing Hillary Clinton's approach.)

    Investigative historian Eric Zuesse is the author, most recently, of They're Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST'S VENTRILOQUISTS: The Event that Created Christianity.

    [Oct 20, 2016] For-Profit Colleges Stay Quietly on Offense

    Oct 20, 2016 | www.truth-out.org
    For-profit colleges may be playing defense in the public perception, but they have not given up their offensive game, if their recent contributions to Congress are any indication.

    For-profit education colleges and trade groups donated more than $1.4 million to federal candidates, parties and elected officials during the first eight months of 2016, according to the most recent tally by the Center for Responsive Politics. Lobbyists for the sector spent an additional $2.6 million. (Nonprofit colleges are not permitted to donate to candidates.)

    The top recipients in Congress are, or were, running for election, and all but one of the incumbents have a leadership position on or are members of one of the powerful committees that help determine the flow of federal money to for-profit colleges. The top three recipients can count for-profit sector groups among their top campaign contributors.

    2016 1020chart1

    For-profit colleges and advocates gave $657,531 to 139 incumbents and candidates running for the House of Representatives. Click HERE for list of House members and candidates (by amount of contribution). There were 54 Senators and candidates for the Senate who received contributions, for a total of $378,758 between January and August of this year. Click HERE for list of Senators and candidates (by amount of contribution.)

    More than a third of the money donated to sitting Senators has gone to members of the Armed Services committee and most of that went to its powerful chairman, John McCain (R-AZ). Last year the Pentagon banned the biggest for-profit college, the University of Phoenix, from recruiting on military bases and receiving federal tuition, citing deceptive practices. But McCain lobbied loud and hard and succeeded in reversing the ban in January.

    Republicans running for Congress scooped up 72 percent of contributions from the for-profit education sector during the first eight months of this year. That's a change from 2010, when they only received 39 percent of contributions. The Presidential race this year, however, has favored the Democrat, Hillary Clinton.

    2016 1020chart2

    Some of the biggest donors so far this year are for-profit institutions that have drawn scrutiny from federal agencies for high student debt levels and low graduation rates. Bridgepoint, at the top of the list, is under investigation by the Justice Department; it also must pay millions of dollars in fines to resolve the Consumer Financial Protection Bureau's accusation that its private student loan advertisements misled students. Corinthian Colleges filed for bankruptcy last year and this year was forced to pay massive fines for defrauding students.

    2016 1020chart3

    Meredith Kolodner is a staff writer at The Hechinger Report. She previously covered schools for the New York Daily News and was an editor at InsideSchools.org and for The Investigative Fund at the Nation Institute. She's also covered housing, schools, and local government for the Press of Atlantic City and The Chief-Leader newspaper and her work has appeared in the New York Times and the American Prospect. Kolodner is a graduate of Brown University and Columbia University's Graduate School of Journalism and an active New York City public school parent. She is grateful to her 11th grade English teacher who persistently gave her Cs on essays until she finally stopped burying the lead.

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    [Oct 20, 2016] The Ruling Elite Has Lost the Consent of the Governed

    Notable quotes:
    "... As I have tirelessly explained, the U.S. economy is not just neoliberal (the code word for maximizing private gain by any means available, including theft, fraud, embezzlement, political fixing, price-fixing, and so on)--it is neofeudal , meaning that it is structurally an updated version of Medieval feudalism in which a top layer of financial-political nobility owns the engines of wealth and governs the marginalized debt-serfs who toil to pay student loans, auto loans, credit cards, mortgages and taxes--all of which benefit the financiers and political grifters. ..."
    "... The media is in a self-referential frenzy to convince us the decision of the century is between unrivaled political grifter Hillary Clinton and financier-cowboy Donald Trump. Both belong to the privileged ruling Elite: both have access to cheap credit, insider information ( information asymmetry ) and political influence. ..."
    "... If you exit the Pentagon, CIA, NSA, etc. at a cushy managerial rank with a fat pension and lifetime benefits and are hired at a fat salary the next day by a private "defense" contractor--the famous revolving door between a bloated state and a bloated defense industry--the system works great. ..."
    Oct 20, 2016 | www.informationclearinghouse.info

    Information Clearing House - ICH

    Brimming with hubris and self-importance, the ruling Elite and mainstream media cannot believe they have lost the consent of the governed.

    Every ruling Elite needs the consent of the governed: even autocracies, dictatorships and corporatocracies ultimately rule with the consent, however grudging, of the governed.

    The American ruling Elite has lost the consent of the governed. This reality is being masked by the mainstream media, mouthpiece of the ruling class, which is ceaselessly promoting two false narratives:

    1. The "great divide" in American politics is between left and right, Democrat/Republican
    2. The ruling Elite has delivered "prosperity" not just to the privileged few but to the unprivileged many they govern.

    Both of these assertions are false. The Great Divide in America is between the ruling Elite and the governed that the Elite has stripmined. The ruling Elite is privileged and protected, the governed are unprivileged and unprotected. That's the divide that counts and the divide that is finally becoming visible to the marginalized, unprivileged class of debt-serfs.

    The "prosperity" of the 21st century has flowed solely to the ruling Elite and its army of technocrat toadies, factotums, flunkies, apparatchiks and apologists. The Elite's army of technocrats and its media apologists have engineered and promoted an endless spew of ginned-up phony statistics (the super-low unemployment rate, etc.) to create the illusion of "growth" and "prosperity" that benefit everyone rather than just the top 5%. The media is 100% committed to promoting these two false narratives because the jig is up once the bottom 95% wake up to the reality that the ruling Elite has been stripmining them for decades.

    As I have tirelessly explained, the U.S. economy is not just neoliberal (the code word for maximizing private gain by any means available, including theft, fraud, embezzlement, political fixing, price-fixing, and so on)--it is neofeudal , meaning that it is structurally an updated version of Medieval feudalism in which a top layer of financial-political nobility owns the engines of wealth and governs the marginalized debt-serfs who toil to pay student loans, auto loans, credit cards, mortgages and taxes--all of which benefit the financiers and political grifters.

    The media is in a self-referential frenzy to convince us the decision of the century is between unrivaled political grifter Hillary Clinton and financier-cowboy Donald Trump. Both belong to the privileged ruling Elite: both have access to cheap credit, insider information ( information asymmetry ) and political influence.

    The cold truth is the ruling Elite has shredded the social contract by skimming the income/wealth of the unprivileged. The fake-"progressive" pandering apologists of the ruling Elite--Robert Reich, Paul Krugman and the rest of the Keynesian Cargo Cultists--turn a blind eye to the suppression of dissent and the looting the bottom 95% because they have cushy, protected positions as tenured faculty (or equivalent). They cheerlead for more state-funded bread and circuses for the marginalized rather than demand an end to exploitive privileges of the sort they themselves enjoy.

    Consider just three of the unsustainably costly broken systems that enrich the privileged Elite by stripmining the unprivileged:

    • healthcare (a.k.a. sickcare because sickness is profitable, prevention is unprofitable),
    • higher education
    • Imperial over-reach (the National Security State and its partner the privately owned Military-Industrial Complex).

    While the unprivileged and unprotected watch their healthcare premiums and co-pays soar year after year, the CEOs of various sickcare cartels skim off tens of millions of dollars annually in pay and stock options. The system works great if you get a $20 million paycheck. If you get a 30% increase in monthly premiums for fewer actual healthcare services--the system is broken.

    If you're skimming $250,000 as under-assistant dean to the provost for student services (or equivalent) plus gold-plated benefits, higher education is working great. If you're a student burdened with tens of thousands of dollars in student loan debt who is receiving a low-quality, essentially worthless "education" from poorly paid graduate students ("adjuncts") and a handful of online courses that you could get for free or for a low cost outside the university cartel--the system is broken.

    If you exit the Pentagon, CIA, NSA, etc. at a cushy managerial rank with a fat pension and lifetime benefits and are hired at a fat salary the next day by a private "defense" contractor--the famous revolving door between a bloated state and a bloated defense industry--the system works great.

    If you joined the Armed Forces to escape rural poverty and served at the point of the spear somewhere in the Imperial Project--your perspective may well be considerably different.

    Unfortunately for the ruling Elite and their army of engorged enablers and apologists, they have already lost the consent of the governed.

    They have bamboozled, conned and misled the bottom 95% for decades, but their phony facade of political legitimacy and "the rising tide raises all boats" has cracked wide open, and the machinery of oppression, looting and propaganda is now visible to everyone who isn't being paid to cover their eyes. Brimming with hubris and self-importance, the ruling Elite and mainstream media cannot believe they have lost the consent of the governed. The disillusioned governed have not fully absorbed this epochal shift of the tides yet, either. They are aware of their own disillusionment and their own declining financial security, but they have yet to grasp that they have, beneath the surface of everyday life, already withdrawn their consent from a self-serving, predatory, parasitic, greedy and ultimately self-destructive ruling Elite.

    Charles Hugh Smith, new book is #8 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book's website . http://charleshughsmith.blogspot.mx

    [Oct 20, 2016] Guest-post-essential-rules-tyranny

    Notable quotes:
    "... At bottom, the success of despotic governments and Big Brother societies hinges upon a certain number of political, financial, and cultural developments. The first of which is an unwillingness in the general populace to secure and defend their own freedoms, making them completely reliant on corrupt establishment leadership. For totalitarianism to take hold, the masses must not only neglect the plight of their country, and the plight of others, but also be completely uninformed of the inherent indirect threats to their personal safety. ..."
    "... The prevalence of apathy and ignorance sets the stage for the slow and highly deliberate process of centralization. ..."
    "... People who are easily frightened are easily dominated. This is not just a law of political will, but a law of nature. Many wrongly assume that a tyrant's power comes purely from the application of force. In fact, despotic regimes that rely solely on extreme violence are often very unsuccessful, and easily overthrown. ..."
    "... They instill apprehension in the public; a fear of the unknown, or a fear of the possible consequences for standing against the state. They let our imaginations run wild until we see death around every corner, whether it's actually there or not. When the masses are so blinded by the fear of reprisal that they forget their fear of slavery, and take no action whatsoever to undo it, then they have been sufficiently culled. ..."
    "... The bread and circus lifestyle of the average westerner alone is enough to distract us from connecting with each other in any meaningful fashion, but people still sometimes find ways to seek out organized forms of activism. ..."
    "... In more advanced forms of despotism, even fake organizations are disbanded. Curfews are enforced. Normal communications are diminished or monitored. Compulsory paperwork is required. Checkpoints are instituted. Free speech is punished. Existing groups are influenced to distrust each other or to disintegrate entirely out of dread of being discovered. All of these measures are taken by tyrants primarily to prevent ANY citizens from gathering and finding mutual support. People who work together and organize of their own volition are unpredictable, and therefore, a potential risk to the state. ..."
    "... Destitution leads not just to hunger, but also to crime (private and government). Crime leads to anger, hatred, and fear. Fear leads to desperation. Desperation leads to the acceptance of anything resembling a solution, even despotism. ..."
    "... Autocracies pretend to cut through the dilemmas of economic dysfunction (usually while demanding liberties be relinquished), however, behind the scenes they actually seek to maintain a proscribed level of indigence and deprivation. The constant peril of homelessness and starvation keeps the masses thoroughly distracted from such things as protest or dissent, while simultaneously chaining them to the idea that their only chance is to cling to the very government out to end them. ..."
    "... When law enforcement officials are no longer servants of the people, but agents of a government concerned only with its own supremacy, serious crises emerge. Checks and balances are removed. The guidelines that once reigned in police disappear, and suddenly, a philosophy of superiority emerges; an arrogant exclusivity that breeds separation between law enforcement and the rest of the public. Finally, police no longer see themselves as protectors of citizens, but prison guards out to keep us subdued and docile. ..."
    "... Tyrants are generally men who have squelched their own consciences. They have no reservations in using any means at their disposal to wipe out opposition. But, in the early stages of their ascent to power, they must give the populace a reason for their ruthlessness, or risk being exposed, and instigating even more dissent. The propaganda machine thus goes into overdrive, and any person or group that dares to question the authority or the validity of the state is demonized in the minds of the masses. ..."
    "... Tyrannical power structures cannot function without scapegoats. There must always be an elusive boogie man under the bed of every citizen, otherwise, those citizens may turn their attention, and their anger, towards the real culprit behind their troubles. By scapegoating stewards of the truth, such governments are able to kill two birds with one stone. ..."
    "... Citizen spying is almost always branded as a civic duty; an act of heroism and bravery. Citizen spies are offered accolades and awards, and showered with praise from the upper echelons of their communities. ..."
    "... Tyrannies are less concerned with dominating how we live, so much as dominating how we think ..."
    "... Lies become "necessary" in protecting the safety of the state. War becomes a tool for "peace". Torture becomes an ugly but "useful" method for gleaning important information. Police brutality is sold as a "natural reaction" to increased crime. Rendition becomes normal, but only for those labeled as "terrorists". Assassination is justified as a means for "saving lives". Genocide is done discretely, but most everyone knows it is taking place. They simply don't discuss it. ..."
    www.zerohedge.com
    Submitted by Brandon Smith of Alt Market

    The Essential Rules Of Tyranny

    As we look back on the horrors of the dictatorships and autocracies of the past, one particular question consistently arises; how was it possible for the common men of these eras to NOT notice what was happening around them? How could they have stood as statues unaware or uncaring as their cultures were overrun by fascism, communism, collectivism, and elitism? Of course, we have the advantage of hindsight, and are able to research and examine the misdeeds of the past at our leisure. Unfortunately, such hindsight does not necessarily shield us from the long cast shadow of tyranny in our own day. For that, the increasingly uncommon gift of foresight is required…

    At bottom, the success of despotic governments and Big Brother societies hinges upon a certain number of political, financial, and cultural developments. The first of which is an unwillingness in the general populace to secure and defend their own freedoms, making them completely reliant on corrupt establishment leadership. For totalitarianism to take hold, the masses must not only neglect the plight of their country, and the plight of others, but also be completely uninformed of the inherent indirect threats to their personal safety. They must abandon all responsibility for their destinies, and lose all respect for their own humanity. They must, indeed, become domesticated and mindless herd animals without regard for anything except their fleeting momentary desires for entertainment and short term survival. For a lumbering bloodthirsty behemoth to actually sneak up on you, you have to be pretty damnably oblivious.

    The prevalence of apathy and ignorance sets the stage for the slow and highly deliberate process of centralization. Once dishonest governments accomplish an atmosphere of inaction and condition a sense of frailty within the citizenry, the sky is truly the limit. However, a murderous power-monger's day is never quite done. In my recent article 'The Essential Rules of Liberty' we explored the fundamentally unassailable actions and mental preparations required to ensure the continuance of a free society. In this article, let's examine the frequently wielded tools of tyrants in their invariably insane quests for total control…

    Rule #1: Keep Them Afraid

    People who are easily frightened are easily dominated. This is not just a law of political will, but a law of nature. Many wrongly assume that a tyrant's power comes purely from the application of force. In fact, despotic regimes that rely solely on extreme violence are often very unsuccessful, and easily overthrown. Brute strength is calculable. It can be analyzed, and thus, eventually confronted and defeated.

    Thriving tyrants instead utilize not just harm, but the imminent THREAT of harm. They instill apprehension in the public; a fear of the unknown, or a fear of the possible consequences for standing against the state. They let our imaginations run wild until we see death around every corner, whether it's actually there or not. When the masses are so blinded by the fear of reprisal that they forget their fear of slavery, and take no action whatsoever to undo it, then they have been sufficiently culled.

    In other cases, our fear is evoked and directed towards engineered enemies. Another race, another religion, another political ideology, a "hidden" and ominous villain created out of thin air. Autocrats assert that we "need them" in order to remain safe and secure from these illusory monsters bent on our destruction. As always, this development is followed by the claim that all steps taken, even those that dissolve our freedoms, are "for the greater good". Frightened people tend to shirk their sense of independence and run towards the comfort of the collective, even if that collective is built on immoral and unconscionable foundations. Once a society takes on a hive-mind mentality almost any evil can be rationalized, and any injustice against the individual is simply overlooked for the sake of the group.

    Rule #2: Keep Them Isolated

    In the past, elitist governments would often legislate and enforce severe penalties for public gatherings, because defusing the ability of the citizenry to organize or to communicate was paramount to control. In our technological era, such isolation is still used, but in far more advanced forms. The bread and circus lifestyle of the average westerner alone is enough to distract us from connecting with each other in any meaningful fashion, but people still sometimes find ways to seek out organized forms of activism.

    Through co-option, modern day tyrant's can direct and manipulate opposition movements. By creating and administrating groups which oppose each other, elites can then micromanage all aspects of a nation on the verge of revolution. These "false paradigms" give us the illusion of proactive organization, and the false hope of changing the system, while at the same time preventing us from seeking understanding in one another. All our energies are then muted and dispersed into meaningless battles over "left and right", or "Democrat versus Republican", for example. Only movements that cast aside such empty labels and concern themselves with the ultimate truth of their country, regardless of what that truth might reveal, are able to enact real solutions to the disasters wrought by tyranny.

    In more advanced forms of despotism, even fake organizations are disbanded. Curfews are enforced. Normal communications are diminished or monitored. Compulsory paperwork is required. Checkpoints are instituted. Free speech is punished. Existing groups are influenced to distrust each other or to disintegrate entirely out of dread of being discovered. All of these measures are taken by tyrants primarily to prevent ANY citizens from gathering and finding mutual support. People who work together and organize of their own volition are unpredictable, and therefore, a potential risk to the state.

    Rule #3: Keep Them Desperate

    You'll find in nearly every instance of cultural descent into autocracy, the offending government gained favor after the onset of economic collapse. Make the necessities of root survival an uncertainty, and people without knowledge of self sustainability and without solid core principles will gladly hand over their freedom, even for mere scraps from the tables of the same men who unleashed famine upon them. Financial calamities are not dangerous because of the poverty they leave in their wake; they are dangerous because of the doors to malevolence that they leave open.

    Destitution leads not just to hunger, but also to crime (private and government). Crime leads to anger, hatred, and fear. Fear leads to desperation. Desperation leads to the acceptance of anything resembling a solution, even despotism.

    Autocracies pretend to cut through the dilemmas of economic dysfunction (usually while demanding liberties be relinquished), however, behind the scenes they actually seek to maintain a proscribed level of indigence and deprivation. The constant peril of homelessness and starvation keeps the masses thoroughly distracted from such things as protest or dissent, while simultaneously chaining them to the idea that their only chance is to cling to the very government out to end them.

    Rule #4: Send Out The Jackboots

    This is the main symptom often associated with totalitarianism. So much so that our preconceived notions of what a fascist government looks like prevent us from seeing other forms of tyranny right under our noses. Some Americans believe that if the jackbooted thugs are not knocking on every door, then we MUST still live in a free country. Obviously, this is a rather naïve position. Admittedly, though, goon squads and secret police do eventually become prominent in every failed nation, usually while the public is mesmerized by visions of war, depression, hyperinflation, terrorism, etc.

    When law enforcement officials are no longer servants of the people, but agents of a government concerned only with its own supremacy, serious crises emerge. Checks and balances are removed. The guidelines that once reigned in police disappear, and suddenly, a philosophy of superiority emerges; an arrogant exclusivity that breeds separation between law enforcement and the rest of the public. Finally, police no longer see themselves as protectors of citizens, but prison guards out to keep us subdued and docile.

    As tyranny grows, this behavior is encouraged. Good men are filtered out of the system, and small (minded and hearted) men are promoted.

    At its pinnacle, a police state will hide the identities of most of its agents and officers, behind masks or behind red tape, because their crimes in the name of the state become so numerous and so sadistic that personal vengeance on the part of their victims will become a daily concern.

    Rule #5: Blame Everything On The Truth Seekers

    Tyrants are generally men who have squelched their own consciences. They have no reservations in using any means at their disposal to wipe out opposition. But, in the early stages of their ascent to power, they must give the populace a reason for their ruthlessness, or risk being exposed, and instigating even more dissent. The propaganda machine thus goes into overdrive, and any person or group that dares to question the authority or the validity of the state is demonized in the minds of the masses.

    All disasters, all violent crimes, all the ills of the world, are hoisted upon the shoulders of activist groups and political rivals. They are falsely associated with fringe elements already disliked by society (racists, terrorists, etc). A bogus consensus is created through puppet media in an attempt to make the public believe that "everyone else" must have the same exact views, and those who express contrary positions must be "crazy", or "extremist". Events are even engineered by the corrupt system and pinned on those demanding transparency and liberty. The goal is to drive anti-totalitarian organizations into self censorship. That is to say, instead of silencing them directly, the state causes activists to silence themselves.

    Tyrannical power structures cannot function without scapegoats. There must always be an elusive boogie man under the bed of every citizen, otherwise, those citizens may turn their attention, and their anger, towards the real culprit behind their troubles. By scapegoating stewards of the truth, such governments are able to kill two birds with one stone.

    Rule #6: Encourage Citizen Spies

    Ultimately, the life of a totalitarian government is not prolonged by the government itself, but by the very people it subjugates. Citizen spies are the glue of any police state, and our propensity for sticking our noses into other peoples business is highly valued by Big Brother bureaucracies around the globe.

    There are a number of reasons why people participate in this repulsive activity. Some are addicted to the feeling of being a part of the collective, and "service" to this collective, sadly, is the only way they are able to give their pathetic lives meaning. Some are vindictive, cold, and soulless, and actually get enjoyment from ruining others. And still, like elites, some long for power, even petty power, and are willing to do anything to fulfill their vile need to dictate the destinies of perfect strangers.

    Citizen spying is almost always branded as a civic duty; an act of heroism and bravery. Citizen spies are offered accolades and awards, and showered with praise from the upper echelons of their communities. People who lean towards citizen spying are often outwardly and inwardly unimpressive; physically and mentally inept. For the average moral and emotional weakling with persistent feelings of inadequacy, the allure of finally being given fifteen minutes of fame and a hero's status (even if that status is based on a lie) is simply too much to resist. They begin to see "extremists" and "terrorists" everywhere. Soon, people afraid of open ears everywhere start to watch what they say at the supermarket, in their own backyards, or even to family members. Free speech is effectively neutralized.

    Rule #7: Make Them Accept The Unacceptable

    In the end, it is not enough for a government fueled by the putrid sludge of iniquity to lord over us. At some point, it must also influence us to forsake our most valued principles. Tyrannies are less concerned with dominating how we live, so much as dominating how we think. If they can mold our very morality, they can exist unopposed indefinitely. Of course, the elements of conscience are inborn, and not subject to environmental duress as long as a man is self aware. However, conscience can be manipulated if a person has no sense of identity, and has never put in the effort to explore his own strengths and failings. There are many people like this in America today.

    Lies become "necessary" in protecting the safety of the state. War becomes a tool for "peace". Torture becomes an ugly but "useful" method for gleaning important information. Police brutality is sold as a "natural reaction" to increased crime. Rendition becomes normal, but only for those labeled as "terrorists". Assassination is justified as a means for "saving lives". Genocide is done discretely, but most everyone knows it is taking place. They simply don't discuss it.

    All tyrannical systems depend on the apathy and moral relativism of the inhabitants within their borders. Without the cooperation of the public, these systems cannot function. The real question is, how many of the above steps will be taken before we finally refuse to conform? At what point will each man and woman decide to break free from the dark path blazed before us and take measures to ensure their independence? Who will have the courage to develop their own communities, their own alternative economies, their own organizations for mutual defense outside of establishment constructs, and who will break under the pressure to bow like cowards? How many will hold the line, and how many will flee?

    For every American, for every human being across the planet who chooses to stand immovable in the face of the very worst in mankind, we come that much closer to breathing life once again into the very best in us all.

    [Oct 20, 2016] The real driver of inequality, then, is not an individuals level of education and productivity, but the resources that parents and grandparents are able to transmit.

    Notable quotes:
    "... In ['William Darity, Jr.'s] his view, the capacity of parents and grandparents to invest in their children is contingent on their wealth position" [ iNet ]. ..."
    "... "What drives white-collar criminals? Often, these are successful people who possess great wealth, have impeccable education, and hold much influence within their respective industries, yet they risk it all by breaking the law" [ ProMarket ]. "Incentives specifically play a big role in fostering white-collar crime, according to Soltes, especially when financial managers are pressured to succeed and have to make rapid decisions one after the other, their potential victims far from view. 'I was doing exactly what I was incentivized to do. We wouldn't have gone through all this trouble if we just wanted to cheat,' says Enron CFO Andrew Fastow in the book.'" ..."
    Oct 20, 2016 | www.nakedcapitalism.com

    "In ['William Darity, Jr.'s] his view, the capacity of parents and grandparents to invest in their children is contingent on their wealth position" [ iNet ].

    "The real driver of inequality, then, is not an individual's level of education and productivity, but the resources that parents and grandparents are able to transmit." Hence: "[S]tratification economics." Might go down easier than "class warfare," I dunno.

    "What drives white-collar criminals? Often, these are successful people who possess great wealth, have impeccable education, and hold much influence within their respective industries, yet they risk it all by breaking the law" [ ProMarket ]. "Incentives specifically play a big role in fostering white-collar crime, according to Soltes, especially when financial managers are pressured to succeed and have to make rapid decisions one after the other, their potential victims far from view. 'I was doing exactly what I was incentivized to do. We wouldn't have gone through all this trouble if we just wanted to cheat,' says Enron CFO Andrew Fastow in the book.'"

    "Mike Konczal has an interesting piece on how the progressives are unlikely to win over Trump's base of white, male, working class voters – even if they take their concerns to heart and propose policies that will help them… Konczal might well be right, but I want to entertain the possibility that he is wrong" [ Dani Rodrik ]. I will say that Konczal knows how to generate buzz. More:

    "Konczal might well be right, but I want to entertain the possibility that he is wrong…. If left-liberals take for granted that the white middle class is essentially racist, hate the federal government, oppose progressive taxation, don't think big banks and dark money are a problem … and so on, then indeed many of the remedies that progressives have to offer will fail to resonate and there is little that can be done. But why should we assume that these are the givens of political life?

    A large literature in social psychology and political economy suggests that identities are malleable as are voters' perceptions of how the world works and therefore which policies serve their interests. A large part of the right's success derives from their having convinced lower and middle class voters that the government is corrupt and inept. Can't progressives alter that perception?

    Note that Rodrik has exactly the same conflation of "progressive," "left," and "liberal" that Konczal does. Je repete : Liberals (and conservatives) want to divide the working class, and they use their distinctive flavors of identity politics to do so. The left wishes to unite them. And both liberals and conservatives will deny that identity is malleable (Clinton's "irredeemables") not only because to admit that would smash any number of rice bowls, but because it would smash their social functions as factions. What should give the left hope in Rodrik's rejoinder - hope that Konczal is, quite naturally, attempting to strangle in its cradle - is the notion that identity is malleable; Occupy, with the 99% concept, proved that. Thomas Frank, with his 10%, takes the same approach. Of course, 99 and 10 don't add to 100, so there's some analytical work to be done, but the way forward beyond identity politics is clear.

    [Oct 20, 2016] For-Profit Colleges Stay Quietly on Offense

    Oct 20, 2016 | www.truth-out.org
    For-profit colleges may be playing defense in the public perception, but they have not given up their offensive game, if their recent contributions to Congress are any indication.

    For-profit education colleges and trade groups donated more than $1.4 million to federal candidates, parties and elected officials during the first eight months of 2016, according to the most recent tally by the Center for Responsive Politics. Lobbyists for the sector spent an additional $2.6 million. (Nonprofit colleges are not permitted to donate to candidates.)

    The top recipients in Congress are, or were, running for election, and all but one of the incumbents have a leadership position on or are members of one of the powerful committees that help determine the flow of federal money to for-profit colleges. The top three recipients can count for-profit sector groups among their top campaign contributors.

    2016 1020chart1

    For-profit colleges and advocates gave $657,531 to 139 incumbents and candidates running for the House of Representatives. Click HERE for list of House members and candidates (by amount of contribution). There were 54 Senators and candidates for the Senate who received contributions, for a total of $378,758 between January and August of this year. Click HERE for list of Senators and candidates (by amount of contribution.)

    More than a third of the money donated to sitting Senators has gone to members of the Armed Services committee and most of that went to its powerful chairman, John McCain (R-AZ). Last year the Pentagon banned the biggest for-profit college, the University of Phoenix, from recruiting on military bases and receiving federal tuition, citing deceptive practices. But McCain lobbied loud and hard and succeeded in reversing the ban in January.

    Republicans running for Congress scooped up 72 percent of contributions from the for-profit education sector during the first eight months of this year. That's a change from 2010, when they only received 39 percent of contributions. The Presidential race this year, however, has favored the Democrat, Hillary Clinton.

    2016 1020chart2

    Some of the biggest donors so far this year are for-profit institutions that have drawn scrutiny from federal agencies for high student debt levels and low graduation rates. Bridgepoint, at the top of the list, is under investigation by the Justice Department; it also must pay millions of dollars in fines to resolve the Consumer Financial Protection Bureau's accusation that its private student loan advertisements misled students. Corinthian Colleges filed for bankruptcy last year and this year was forced to pay massive fines for defrauding students.

    2016 1020chart3

    Meredith Kolodner is a staff writer at The Hechinger Report. She previously covered schools for the New York Daily News and was an editor at InsideSchools.org and for The Investigative Fund at the Nation Institute. She's also covered housing, schools, and local government for the Press of Atlantic City and The Chief-Leader newspaper and her work has appeared in the New York Times and the American Prospect. Kolodner is a graduate of Brown University and Columbia University's Graduate School of Journalism and an active New York City public school parent. She is grateful to her 11th grade English teacher who persistently gave her Cs on essays until she finally stopped burying the lead.

    Related Stories

    [Oct 20, 2016] Blackstone Groups Tony James, likely to be Clintons Sec of Treasury, advocates a hedgfund enriching scheme involving MANDATORY government savings plan on all Amercans

    Notable quotes:
    "... Mr. James recommended a proposal by Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at The New School in New York, to create a retirement savings plan for everyone based on 3% annual salary contributions shared equally among employees and employers. The federal government would guarantee a 2% return, through a modest insurance premium on such accounts . "With corporate profits at an all-time high, this should be a manageable burden," he said, adding that the approach "is going to require us to look beyond the next election cycle." ..."
    www.zerohedge.com

    Cheapie -> css1971 Oct 19, 2016 9:20 AM

    Blackstone Group's Tony James, likely to be Clinton's Sec of Treasury, advocates a hedgfund enriching scheme involving MANDATORY government savings plan on all Amercans.

    Tony James head of the crooked Blackstone Group, a giant hedge fund connected to many state pension funds, is likely to be Clinton's Treasury Sec. Hedge funds have donated 125 million to Crooked Hillary, 20k to Trump. This is thievery on the grand, epic biblical scale with the usual bs about "helping" people.

    "We absolutely have to start now," Mr. James said at a Center for American Progress conference in Washington on Wednesday. " It has to be mandated . Nothing short of a mandate will provide future generations a secure retirement."

    Mr. James recommended a proposal by Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at The New School in New York, to create a retirement savings plan for everyone based on 3% annual salary contributions shared equally among employees and employers. The federal government would guarantee a 2% return, through a modest insurance premium on such accounts . "With corporate profits at an all-time high, this should be a manageable burden," he said, adding that the approach "is going to require us to look beyond the next election cycle."

    Mr. James also called for redirecting $120 billion in annual retirement tax deductions to give every worker a $600 annual tax credit to save for retirement.

    small search brings up deluge of corruption, payoffs etc.

  • http://www.reuters.com/article/us-blackstone-lawsuit-idUSBRE97S0NA20130829
  • http://blogs.wsj.com/corruption-currents/tag/blackstone-group/
  • http://www.businessinsider.com/sec-probes-banks-buyout-shops-over-dealings-with-sovereign-funds-2011-1
  • http://www.ibtimes.com/political-capital/hillary-clinton-denounces-corporate-crime-while-accepting-cash-blackstone-firm
  • http://www.economicpopulist.org/content/one-thousand-names-fraud
  • https://www.ft.com/content/0cee0c66-1e3e-11e4-bb68-00144feabdc0
  • http://nypost.com/2014/08/14/seaworld-shares-dive-but-blackstone-on-a-perfect-wave/
  • https://libertyblitzkrieg.com/2014/05/05/leaked-documents-show-how-blackstone-fleeces-taxpayers-via-public-pension-funds/
  • https://pando.com/2014/05/05/leaked-docs-obtained-by-pando-show-how-a-wall-street-giant-is-guaranteed-huge-fees-from-taxpayers-on-risky-pension-investments/
  • [Oct 20, 2016] This is the smoking gun behind the corruption of the Fed during the 2008 crisis

    Oct 20, 2016 | www.moonofalabama.org

    psychohistorian | Oct 19, 2016 8:29:29 PM | 99

    I just read this posting at ZH and believe that this information when fully grokked will take the market down.

    http://www.zerohedge.com/news/2016-10-19/never-seen-secret-memo-aig-bailout-feds-tarullo-obama-revealed-podesta-emails

    This is the smoking gun behind the corruption of the Fed during the 2008 crisis. I want to see how they tell the world that this was all legal.

    END PRIVATE FINANCE! The folks that own private finance also own the US and many other governments.....with or without vote rigging as one of their tools.

    [Oct 19, 2016] Toxic Politics Versus Better Economics by Mohamed A. El-Erian

    This guy is die hard neoliberal. That's why he is fond of Washington consensus. He does not understand that the time is over for Washington consensus in 2008. this is just a delayed reaction :-)
    Notable quotes:
    "... after years of unusually sluggish and strikingly non-inclusive growth, the consensus is breaking down. Advanced-country citizens are frustrated with an "establishment" – including economic "experts," mainstream political leaders, and dominant multinational companies – which they increasingly blame for their economic travails. ..."
    "... Anti-establishment movements and figures have been quick to seize on this frustration, using inflammatory and even combative rhetoric to win support. They do not even have to win elections to disrupt the transmission mechanism between economics and politics. ..."
    "... They also included attacks on "international elites" and criticism of Bank of England policies that were instrumental in stabilizing the British economy in the referendum's immediate aftermath – thus giving May's new government time to formulate a coherent Brexit strategy. ..."
    "... The risk is that, as bad politics crowds out good economics, popular anger and frustration will rise, making politics even more toxic. ..."
    "... At one time, the people's government served as a check on the excesses of economic interests -- now, it is simply owned by them. ..."
    "... The defects of the maximalist-globalist view were known for years before the "consensus began to break down". ..."
    "... In at least some of these cases, the "transmission" of the consensus involved more than a little coercion and undermining local interests, sovereignty, and democracy. This is an central feature of the "consensus", and it is hard to see how it can by anything but irredeemable. ..."
    "... However it is not bad politics crowding out out good economics, for the simple reason that the economic "consensus" itself, in embracing destructive and destabilizing economic policy crowded out the ostensibly centrist politics... ..."
    "... The Inclusive Growth has remained only a Slogan and Politicians never ventured into the theme. In the changed version of the World.] essential equal opportunity and World of Social media, perspective and social Political scene is changed. Its more like reverting to mean. ..."
    Oct 19, 2016 | www.project-syndicate.org

    In the 1990s and 2000s, for example, the so-called Washington Consensus dominated policymaking in much of the world...

    ... ... ...

    But after years of unusually sluggish and strikingly non-inclusive growth, the consensus is breaking down. Advanced-country citizens are frustrated with an "establishment" – including economic "experts," mainstream political leaders, and dominant multinational companies – which they increasingly blame for their economic travails.

    Anti-establishment movements and figures have been quick to seize on this frustration, using inflammatory and even combative rhetoric to win support. They do not even have to win elections to disrupt the transmission mechanism between economics and politics. The United Kingdom proved that in June, with its Brexit vote – a decision that directly defied the broad economic consensus that remaining within the European Union was in Britain's best interest.

    ... ... ...

    ... speeches by Prime Minister Theresa May and members of her cabinet revealed an intention to pursue a "hard Brexit," thereby dismantling trading arrangements that have served the economy well. They also included attacks on "international elites" and criticism of Bank of England policies that were instrumental in stabilizing the British economy in the referendum's immediate aftermath – thus giving May's new government time to formulate a coherent Brexit strategy.

    Several other advanced economies are experiencing analogous political developments. In Germany, a surprisingly strong showing by the far-right Alternative für Deutschland in recent state elections already appears to be affecting the government's behavior.

    In the US, even if Donald Trump's presidential campaign fails to put a Republican back in the White House (as appears increasingly likely, given that, in the latest twist of this highly unusual campaign, many Republican leaders have now renounced their party's nominee), his candidacy will likely leave a lasting impact on American politics. If not managed well, Italy's constitutional referendum in December – a risky bid by Prime Minister Matteo Renzi to consolidate support – could backfire, just like Cameron's referendum did, causing political disruption and undermining effective action to address the country's economic challenges.

    ... ... ...

    The risk is that, as bad politics crowds out good economics, popular anger and frustration will rise, making politics even more toxic. ...

    john zac OCT 17, 2016

    Mr El-Erian, I know you are a good man, but it seems as though everyone believes we can synthetically engineer a way out of this never ending hole that financial engineering dug us into in the first place.

    Instead why don't we let this game collapse, you are a good man and you will play a role in the rebuilding of better system, one that nurtures and guides instead of manipulate and lie.

    The moral suasion you mention can only appear by allowing for the self annihilation of this financial system. This way we can learn from the autopsies and leave speculative theories to third rate economists

    Curtis Carpenter OCT 15, 2016

    It is sadly true that "the relationship between politics and economics is changing," at least in the U.S.. At one time, the people's government served as a check on the excesses of economic interests -- now, it is simply owned by them.

    It seems to me that the best we can hope for now is some sort of modest correction in the relationship after 2020 -- and that the TBTF banks won't deliver another economic disaster in the meantime.

    Petey Bee OCT 15, 2016
    1. The defects of the maximalist-globalist view were known for years before the "consensus began to break down".

    2. In at least some of these cases, the "transmission" of the consensus involved more than a little coercion and undermining local interests, sovereignty, and democracy. This is an central feature of the "consensus", and it is hard to see how it can by anything but irredeemable.

    In the concluding paragraph, the author states that the reaction is going to be slow. That's absolutely correct, the evidence has been pushed higher and higher above the icy water line since 2008.

    However it is not bad politics crowding out out good economics, for the simple reason that the economic "consensus" itself, in embracing destructive and destabilizing economic policy crowded out the ostensibly centrist politics...

    Paul Daley OCT 15, 2016
    The Washington consensus collapsed during the Great Recession but the latest "consensus" among economists regarding "good economics" deserves respect.
    atul baride OCT 15, 2016
    The Inclusive Growth has remained only a Slogan and Politicians never ventured into the theme. In the changed version of the World.] essential equal opportunity and World of Social media, perspective and social Political scene is changed. Its more like reverting to mean.

    [Oct 19, 2016] October 19, 2016 at 12:17 PM

    Oct 19, 2016 | economistsview.typepad.com

    Anon : , 2016 at 12:17 PM

    so when people criticize the big deflation in computer/electronics hardware using baseless measures like "if the computer has a processor twice as fast then it has fallen by half in price" they are wackos. but now the real growth that is artificially generated by this way (quality improvements) to keep inflation down is being criticized by Fox. Of course it is completely made up growth. the absurdity of the economists deal with price inflation. now years later, everyone realizes we have all taken a big fall in living standards no matter how many gigahertz my stupid computer is.
    Ben Groves -> Anon... , October 19, 2016 at 01:10 PM
    Oh please, when RFK was talking about the massive poverty in eastern kentucky in 1968, where was the huge increase in living standards?

    Government data is flawed right now, to a extent in needs a total reworking. There is no artificial growth. Just lost growth by outdated models.

    pgl -> Ben Groves... , October 19, 2016 at 02:19 PM
    Do you have some weird need to spew nonsense completely unrelated to the post every time you comment? Geesh.
    DrDick : , October 19, 2016 at 12:20 PM
    Color me shocked by this revelation./s
    anne : , October 19, 2016 at 12:28 PM
    https://fred.stlouisfed.org/graph/?g=7yCj

    January 15, 2016

    Manufacturing Production Index, 1992-2016

    (Indexed to 1992)


    https://fred.stlouisfed.org/graph/?g=7OvR

    January 15, 2016

    Manufacturing Production and Manufacturing Durable Computer and Electronic Indexes, 1992-2016

    (Indexed to 1992)

    anne -> anne... , October 19, 2016 at 02:03 PM
    Using separate axes for clarity:

    https://fred.stlouisfed.org/graph/?g=7OBH

    January 15, 2016

    Manufacturing Production and Manufacturing Durable Computer and Electronic Indexes, 1992-2016

    (Indexed to 1992)

    anne -> anne... , October 19, 2016 at 02:40 PM
    What is the share of manufacturing production of durable computer and electronic manufacturing? I do not know how to graph this.
    anne -> anne... , October 19, 2016 at 03:32 PM
    Getting closer:

    https://fred.stlouisfed.org/graph/?g=7OFU

    January 15, 2016

    Relative Importance Weight (Contribution to the total industrial production index): Durable manufacturing: Computer and electronic product, 1992-2016

    (Indexed to 1992)

    anne -> anne... , October 19, 2016 at 03:37 PM
    https://fred.stlouisfed.org/graph/?g=7OG5

    January 15, 2016

    Relative Importance Weight (Contribution to the total industrial production index): Durable manufacturing: Computer and electronic product, 1992-2016

    8.8% in 1992
    to 11.4% in 1999
    to 5.2% in 2014
    to 6.1% in 2016.

    Ben Groves : , October 19, 2016 at 01:08 PM
    Manufacturing hasn't boomed since the 60's. The FRED graphs are garbage and useless in general. They are improperly calculated and they have out right admitted they may have "problems".

    Manufacturing is dying out and becoming automated over the decades. There is no such thing as artificial growth either. Demand based on consumption is just as valid as industrial production shipped to other countries.

    pgl -> Ben Groves... , October 19, 2016 at 02:21 PM
    "The FRED graphs are garbage and useless in general."

    No - your comments are garbage and useless. Actually READ the post. He did not get his graphs or data from FRED. Seriously - you need professional help.

    Ben Groves -> pgl... , October 19, 2016 at 02:48 PM
    poppycock. the garbage on their industrial production chart in the 90's and 00's was stupid bad. The US hasn't had a industrial boom since the 60's when our consumption was surging while we still made most of our products. No wonder inflation surged by the late 60's. The war against communism was having a painful bad side effects to rentiers and bankers, which spread to capital by the late 60's.
    pgl -> Ben Groves... , October 19, 2016 at 04:07 PM
    "the garbage on their industrial production chart in the 90's and 00's was stupid bad."

    Can we focus on the single word "their". You think he used FRED. No jackass, he made his own charts from the source data - BLS. But noooooooo - you are too stupid to get even this simple point. So the rest of your ramblings is nothing more than your usual intellectual garbage.

    likbez : , October 19, 2016 at 02:02 PM
    Quality adjustments = number racket
    jonny bakho : , October 19, 2016 at 03:28 PM
    Auto mfg dropped by half post 2008.
    It is now back but has nowhere to grow.
    Urbanization makes cars less necessary and less desirable
    There is not enough room to park them all now.
    People who earn MinWage cannot afford them
    sanjait : , October 19, 2016 at 03:53 PM
    Interesting point but many will overinterpret this. Leave in the expansion of computer and electronics manufacturing value add, and we have manufacturing output slightly expanding. Take it out entirely and we have manufacturing output basically steady.

    The difference isn't telling an important macro story.

    The important macro story is the major decline in manufacturing employment, and that has two big and one smaller causes.

    The two big factors are the increased productivity of manufacturing globally and the declining share of manufactured products as a % of GDP globally. The smaller factor is the US's declining share of global manufacturing output, which itself is only fractionally attributable to trade policy.

    This one graph tells most of the story:

    http://1.bp.blogspot.com/-JEZXR9XK7vc/Tbr46ReInRI/AAAAAAAAPQ0/HlLXeVin_g0/s1600/worldmfg.jpg

    I don't know anyone who says US manufacturing is "booming." It certainly isn't. It's treading water. It's growing slowly as the economy grows, but we can predict with high confidence that it will continue to contract as a share of total output over time, because that has been the secular trend for decades and there's no reason to expect that to change.

    The only big question is how we adapt to the world as it actually is.

    anne -> sanjait... , October 19, 2016 at 04:23 PM
    Nicely done.

    Also, I did not realize I was being presented with an argument about Chinese growth and sustainability. I foolishly stopped reading and I am entirely sorry. I have set down data and begun to answer the argument below on Links:

    http://economistsview.typepad.com/economistsview/2016/10/links-for-10-19-16.html#comment-6a00d83451b33869e201bb09479d0e970d

    October 19, 2016

    anne -> sanjait... , October 19, 2016 at 04:26 PM
    What is significant though is how China insists on holding to growth targets that are very likely not sustainable. Stability is a worthy aim but when growth is achieved through pushing bad private sector loans, that is ultimately the enemy of stability.

    [ For these 39 past years China has been holding to and achieving growth targets that were repeatedly considered unsustainable so I prefer to figure out why Chinese growth targets have been and from my perspective are now sustainable. ]

    the forgotten spirit of American protectionism : , -1
    YES! Of course US manufacturing isn't booming - how could it? We have horrible economic policies that are focused almost entirely on destroying our industrial base. High overvalued currency, combined with 0% tariffs and we have no VAT, so foreign imports from countries with a VAT receive export subsidies but are not taxed on the US side. That we have even one factory left is amazing and testament to the quality of American workers. Under Clinton, we'll lose what's left. Trump is our only hope. If we don't get Trump's protectionism we will quickly become a country as poor as Armenia or Moldova - stripped of industry and wealth, dependent on remittances from our migrant workers in Asia and Europe.

    [Oct 19, 2016] No, U.S. Manufacturing Isnt Really Booming

    Notable quotes:
    "... Of course it is completely made up growth. the absurdity of the economists deal with price inflation. now years later, everyone realizes we have all taken a big fall in living standards no matter how many gigahertz my stupid computer is. ..."
    "... The important macro story is the major decline in manufacturing employment, and that has two big and one smaller causes. ..."
    "... I don't know anyone who says US manufacturing is "booming." It certainly isn't. It's treading water. It's growing slowly as the economy grows, but we can predict with high confidence that it will continue to contract as a share of total output over time, because that has been the secular trend for decades and there's no reason to expect that to change. ..."
    Oct 19, 2016 | economistsview.typepad.com
    Justin Fox:

    No, U.S. Manufacturing Isn't Really Booming :...[Is]American manufacturing .. in decline? An answer frequently offered by wonky economics journalists is that, no, U.S. manufacturing output has actually kept growing. ...

    There's a catch, though. As economist Susan N. Houseman of the W.E. Upjohn Institute for Employment Research ... points out , about half of the growth in U.S. manufacturing output since 1997 has been in just one sector: computer and electronics manufacturing.

    If it weren't for computers and electronics (which includes semiconductors), manufacturing output would still be well below its 2008 peak and only 21 percent higher than in 1997...

    The ... way those computers-and-electronics numbers are arrived at is worthy of a closer look. ... Without adjusting for deflation, value added in computer and electronics manufacturing is up 45 percent since 1997. With the adjustments, it's up 699 percent! What's happening here is that the Bureau of Economic Analysis has been trying to account for vast improvements in ... quality... Writes Houseman:

    Such quality adjustment ... can make the numbers difficult to interpret..., figures that exclude this industry ... arguably provide a clearer picture of trends in manufacturing output.

    As it stands now, those trends don't look impressive. U.S. manufacturing output has held up a lot better than manufacturing employment. But it definitely isn't booming.

    Anon : October 19, 2016 at 12:17 PM

    so when people criticize the big deflation in computer/electronics hardware using baseless measures like "if the computer has a processor twice as fast then it has fallen by half in price" they are wackos. but now the real growth that is artificially generated by this way (quality improvements) to keep inflation down is being criticized by Fox.

    Of course it is completely made up growth. the absurdity of the economists deal with price inflation. now years later, everyone realizes we have all taken a big fall in living standards no matter how many gigahertz my stupid computer is.

    anne -> anne... , October 19, 2016 at 03:37 PM
    https://fred.stlouisfed.org/graph/?g=7OG5

    January 15, 2016

    Relative Importance Weight (Contribution to the total industrial production index): Durable manufacturing: Computer and electronic product, 1992-2016

    8.8% in 1992
    to 11.4% in 1999
    to 5.2% in 2014
    to 6.1% in 2016.

    likbez : , October 19, 2016 at 02:02 PM
    Quality adjustments = number racket
    jonny bakho : , October 19, 2016 at 03:28 PM
    Auto mfg dropped by half post 2008. It is now back but has nowhere to grow. Urbanization makes cars less necessary and less desirable
    There is not enough room to park them all now. People who earn MinWage cannot afford them
    sanjait : , October 19, 2016 at 03:53 PM
    Interesting point but many will overinterpret this. Leave in the expansion of computer and electronics manufacturing value add, and we have manufacturing output slightly expanding. Take it out entirely and we have manufacturing output basically steady.

    The difference isn't telling an important macro story.

    The important macro story is the major decline in manufacturing employment, and that has two big and one smaller causes.

    The two big factors are the increased productivity of manufacturing globally and the declining share of manufactured products as a % of GDP globally. The smaller factor is the US's declining share of global manufacturing output, which itself is only fractionally attributable to trade policy.

    This one graph tells most of the story:

    http://1.bp.blogspot.com/-JEZXR9XK7vc/Tbr46ReInRI/AAAAAAAAPQ0/HlLXeVin_g0/s1600/worldmfg.jpg

    I don't know anyone who says US manufacturing is "booming." It certainly isn't. It's treading water. It's growing slowly as the economy grows, but we can predict with high confidence that it will continue to contract as a share of total output over time, because that has been the secular trend for decades and there's no reason to expect that to change.

    The only big question is how we adapt to the world as it actually is.

    anne -> sanjait... , October 19, 2016 at 04:23 PM
    Nicely done.

    Also, I did not realize I was being presented with an argument about Chinese growth and sustainability. I foolishly stopped reading and I am entirely sorry. I have set down data and begun to answer the argument below on Links:

    http://economistsview.typepad.com/economistsview/2016/10/links-for-10-19-16.html#comment-6a00d83451b33869e201bb09479d0e970d

    October 19, 2016

    anne -> sanjait... , October 19, 2016 at 04:26 PM
    What is significant though is how China insists on holding to growth targets that are very likely not sustainable. Stability is a worthy aim but when growth is achieved through pushing bad private sector loans, that is ultimately the enemy of stability.

    [ For these 39 past years China has been holding to and achieving growth targets that were repeatedly considered unsustainable so I prefer to figure out why Chinese growth targets have been and from my perspective are now sustainable. ]

    the forgotten spirit of American protectionism : , -1
    YES! Of course US manufacturing isn't booming - how could it? We have horrible economic policies that are focused almost entirely on destroying our industrial base. High overvalued currency, combined with 0% tariffs and we have no VAT, so foreign imports from countries with a VAT receive export subsidies but are not taxed on the US side. That we have even one factory left is amazing and testament to the quality of American workers. Under Clinton, we'll lose what's left. Trump is our only hope. If we don't get Trump's protectionism we will quickly become a country as poor as Armenia or Moldova - stripped of industry and wealth, dependent on remittances from our migrant workers in Asia and Europe.

    [Oct 19, 2016] Why distrust data

    Notable quotes:
    "... **Opinions here are mine and should not to be attributed to anyone with whom I work.** ..."
    Oct 19, 2016 | claudiasahm.postagon.com
    48% of Trump supporters "completely distrust the economic data reported by the federal government" including unemployment, spending, jobs. https://t.co/5l9GhucBFI
    - Justin Wolfers (@JustinWolfers) October 15, 2016

    That tweet and the linked article got my attention (no trust of data by 25% of adults!) ... Still why reflect on this? ... so much else to get stuck on these days. First, I use official statistics in my work A LOT; second, I am always on the look out for new survey insights; and finally, I am a bit obsessed lately with models in which people are not acting on the same information. This level of distrust is troubling ... even though I doubt it's new or entirely about the data ... I want us to think about WHY.

    I study consumer behavior as an economist, which in 2016 still means reading lots of research with dynamic optimization and Euler equations. This is a typical early morning ritual for me, that quiet time before my kids wake up when I can still imagine a world in which we know everything about everything, including ourselves, and we choose calmly and appropriately. BUT I balance out my openness to such models with a determination to also understand what people ACTUALLY do and think.

    Nevertheless, I am picky about the survey insights that I absorb, pass on, and try to understand. My cognate in grad school was survey methodology and I still write survey questions in my research ... thus I understand how much responses can be manipulated, or even carelessly biased by poor methods and human nature. Also I want to know what people think, not what someone writing up the survey results wants me as a reader to think. (I'm not a fan of the tweet, by the way.) So I googled and found the survey's homepage , a Marketplace-Edison Research poll designed to measure economic anxiety. And, I found a description of the methods AND the full survey too (see page 30 for this question). It's not the micro data online, so I can't replicate the statistic in the tweet, but I could see that the "data trust" question was asked before voting intentions or political affiliation. I have learned from pollsters that asking about politics conjures up an identity that can be hard to shake in the rest of the survey. The main roadblock I see in interpreting the data distrust is this survey's short time series; it only began last fall as a quarterly survey. My hunch is that distrust of economic data is nothing new but I can't prove that here. Plus changes in attitudes are often more informative than a snapshot, since subjective questions are tricky to interpret. What does it mean to "trust data" anyway? Do you trust data?

    To be clear, I am not justifying anyone's views, but I am also trying not to be judgmental. A key principle of surveying is not to make people feel bad or shameful about their views. Because, guess what, if you do, they are less likely to tell you what they think or did ... then you are fighting blind and may miss the chance to learn why we sometimes see the world differently. I am not in the 25% of adults who have "no trust at all" in economic statistics from the government. In fact, I am in a rare set of adults who spends more time on the Bureau of Economic Analysis ' website sorting through spending data than on Amazon adding to it. So what's up with all this distrust? I have a few hypotheses to take to the data.

    Hypothesis 1: government economic data don't match people's life

    Sometimes I think the Representative Agent is a frenemy of economists. (Oh, not the Twitter persona , he's great, but the concept.) How can a simplifying assumption ... a focus on the typical or aggregate household ... be an enemy in disguise? Well, sometimes it gives theoretical models the focus they need and other times, especially in empirical work, it glosses over important details. Details, also known as people . So maybe distrust of economic data comes from not seeing your life experience in the numbers that roll across the screen. National aggregates get a lot of attention, so maybe it is minorities that end of distrusting data more, data that doesn't tell their story as loudly.

    Not so, at least in terms of data about the economy, minorities are more trusting than whites. Only 15 percent of African-American have no trust at all in economic data almost half the fraction of whites. And among Hispanics, only12 percent have complete distrust of data. With whites comprising over 70 percent of all adults, they are well represented in both aggregate statistics and the distrust of them. Of course, this is just one cut of the data and not seeing your life experience in the data may raise other issues (more below). Government agencies have made a push to improve regional statistics and even make neighborhood data more readily accessible and help improve local decision making. And of course, lots of household level surveys exist too. Another reason to take distrust (or even disinterest) in government economic data seriously is that the quality of the data we have depends on people's participation in our surveys. Response rates on numerous surveys have been falling and research suggests that non response could impact official statistics, making them a less accurate reflection of life experiences.

    Hypothesis 2: distrust stems from people being "hurt" by data

    One the first Friday of the every month, my Twitter feed is overflowing with chatter about the latest employment report from the Bureau of Labor Statistics . That makes me weird. I firmly believe that few people absorb the government statistics in the way that I and my fellow econos do. Why should they? People confront economic data when it affects them. One example I can think of is the cost-of-living adjustment, such as for Social Security benefits. That came to mind when I looked at data distrust by age.

    no cost-of-living adjustment to benefits had led some seniors to "distrust" government data, like the CPI-W? Again, this hypothesis would be a lot better to test with a time series of data, comparing years with benefit increases and without. But feeling shortchanged by the data may be understandable given wide variation relative price changes , few of us exactly consume the representative basket. Alternatively, as risk aversion appears to rise with age, maybe so too does distrust? I wrote earlier that age is more than just a number , the impact of demographic change deserves more study.

    Hypothesis 3: it's not the data, it is the way we use them ... the spin

    I don't trust data, I trust people. And even then, trust but verify, right? Perfectly measured data (dream, dream), can be still be suspect. In fact, data can codify a lot of the biases and mistakes we have made together in the past. Maybe we should also be concerned for the people who "completely trust" government economic data? (Do read Cathy O'Neil's book on Big Data and algorithms.) Yet, I suspect the distrust in the survey is not about data construction (I've never seen a protest at the ever-interesting BEA advisory committee meetings ) ... or even about the government employees who construct the statistics in excruciating detail, and in line with international standards . I bet the distrust is more about how the numbers are interpreted and how they are used in policy making. Drawing conclusions from data is hard and reasonable disagreement is to be expected. As just one example, the seasonally-adjusted unemployment rate for African Americans was 8.3 in September , which is below its average of 10.8 percent over the past 20 years but is almost double the 4.4 percent unemployment rate of whites. Should we call that 8.3 (or 4.4, for that matter) victory or 'full employment'? And is the unemployment rate even the right statistic to assess? Relative to the past it may well be but the past can be an imperfect guide for the future. Every data point has its shortcoming, especially where there is no clear counterfactual or agreed upon target. My "moderate" growth could easily be your "weaker-than-expected" growth. And, of course, on top of honest disagreements about data, plenty of motivated reasoning is done with numbers. BUT when we start with the same data, there are at least some bounds on the disagreement. In contrast, when government data are wholesale rejected one quarter of adults, it's no surprise that we aren't living in the same world. And we stop trying to understand each other. I would be lost (and bored out of my mind) in my work on consumer behavior without data. You don't want me extrapolating from my tiny circle of experience ... and frankly no one should make decisions with that little information. We can learn a lot from the data, including these attitudinal surveys. And data adds accountability, including in how its collected. Even so, no one likes to feel manipulated or, worse, written off, especially with numbers.

    Data can't solve problems but maybe it holds clues to a path forward ... to rebuild trust.

    **Opinions here are mine and should not to be attributed to anyone with whom I work.**

    Is it just not done to ask people why they distrust Government figures ?
    2016-10-17, Stuart Gibson The same thing happened here in Italy with Silvio Berlusconi. He got a lot of reforms but a lot of people ignored facts.
    2016-10-17, pietro No one 'trusts' data. We all have confidence intervals.
    This combined with your point number 3 is the main issue I suspect.
    Point number 1 is also in play, I think point 2 is essentially irrelevant, it might be true for some data, but not for data.
    As far as economics goes, people intuitively understand that economics attempts to push the envelope and use data to draw conclusions that are not really addressable with the data. Economists don't even have agreement on how data is used - thinking mostly of macro. I see no reason to puzzle on this until you can get economists to all agree. I don't mean this as a challenge, just a description of the situation.
    2016-10-17, Dan The headline unemployment number is obviously false, and this affects confidence in the other numbers.
    There is no particular mystery about what is going on.
    2016-10-17, Dave Chapman Because your aggregated statistics does not reflect the experience of the individuals:
    "But several underlying factors also appear to have contributed to the closeness of the race. For starters, many Americans are economically worse off than they were a quarter-century ago. The median income of full-time male employees is lower than it was 42 years ago, and it is increasingly difficult for those with limited education to get a full-time job that pays decent wages.
    Indeed, real (inflation-adjusted) wages at the bottom of the income distribution are roughly where they were 60 years ago. So it is no surprise that Trump finds a large, receptive audience when he says the state of the economy is rotten. But Trump is wrong both about the diagnosis and the prescription. The US economy as a whole has done well for the last six decades: GDP has increased nearly six-fold. But the fruits of that growth have gone to a relatively few at the top – people like Trump, owing partly to massive tax cuts that he would extend and deepen. "
    https://www.project-syndicate.org/commentary/trump-candidacy-message-to-political-leaders-by-joseph-e--stiglitz-2016-10
    2016-10-17, PSteele

    [Oct 18, 2016] For starters, many Americans are economically worse off* than they were a quarter-century ago. The median income of full-time male employees is lower than it was 42 years ago, and it is increasingly difficult for those with limited education to get a full-time job that pays decent wages

    Notable quotes:
    "... If you insist on focusing on individuals, you may miss the connection, because the worst off within communities - actual chronic discouraged workers, addicts - are likely to express no opinion to the degree they can be polled at all. Trump primary voters are white Republicans who vote, automatically a more affluent baseline* than the white voters generally. ..."
    Oct 18, 2016 | economistsview.typepad.com

    Peter K. : October 17, 2016 at 10:13 AM

    EMichael quotes Steve Randy Waldman and Dylan Matthews in today's links:

    ""Trump voters, FiveThirtyEight's Nate Silver found, had a median household income of $72,000, a fair bit higher than the $62,000 median household income for non-Hispanic whites in America."

    ...

    ""But it is also obvious that, within the Republican Party, Trump's support comes disproportionately from troubled communities, from places that have been left behind economically, that struggle with unusual rates of opiate addiction, low educational achievement, and other social vices."

    I followed the link and failed to find any numbers on the "troubled communities" thing. It seems strange to me that the two comments above are in conflict with each other."

    It seems like you are missing the point of Waldman's blog post (and Stiglitz and Shiller)

    You didn't quote this part:

    "... If you insist on focusing on individuals, you may miss the connection, because the worst off within communities - actual chronic discouraged workers, addicts - are likely to express no opinion to the degree they can be polled at all. Trump primary voters are white Republicans who vote, automatically a more affluent baseline* than the white voters generally.

    * [ http://election.princeton.edu/2016/05/07/among-republican-voters-trump-supporters-have-the-lowest-income/

    "Among Republicans, Trump supporters have slightly lower incomes. But what really differentiates them?"]

    "At the community level**, patterns are clear. (See this*** too.) Of course, it could still all be racism, because within white communities, measures of social and economic dysfunction are likely correlated with measures you could associate with racism."

    [** http://www.nytimes.com/2016/03/13/upshot/the-geography-of-Trump_vs_deep_state.html?_r=1

    "The Geography of Trump_vs_deep_state"

    *** http://www.cracked.com/blog/6-reasons-trumps-rise-that-no-one-talks-about/

    "How Half Of America Lost Its F**king Mind"]

    Of course, it could still all be racism, because within white communities, measures of social and economic dysfunction are likely correlated with measures you could associate with racism. Social affairs are complicated and the real world does not hand us unique well-identified models. We always have to choose our explanations,**** and we should think carefully about how and why we do so. Explanations have consequences, not just for the people we are imposing them upon, but for our polity as a whole. I don't get involved in these arguments to express some high-minded empathy for Trump voters, but because I think that monocausally attributing a broad political movement to racism when it has other plausible antecedents does real harm....

    **** http://www.interfluidity.com/v2/6602.html

    [Oct 16, 2016] The Cathedral -- The self-organizing ideological consensus represented by the universities, the media, and the civil service by Rod Dreher

    Notable quotes:
    "... The corridor between Manhattan and Washington is a well trodden highway for the personalities we have all gotten to know in the period since the massive deregulation of Wall Street: Robert Rubin, Lawrence Summers, Henry Paulson, Timothy Geithner and many others. ..."
    "... General Petraeus' expertise in these areas is unclear. His ability to peddle influence, however, is a known and valued commodity. ..."
    "... Petraeus also obtained a sinecure as a non-resident senior fellow at the Belfer Center for Science and International Affairs at Harvard. The Ivy League is, of course, the preferred bleaching tub and charm school of the American oligarchy. ..."
    "... The Cathedral has no central administrator, but represents a consensus acting as a coherent group that condemns other ideologies as evil. ..."
    "... "you believe that morality has been essentially solved, and all that's left is to work out the details." ..."
    "... Cultural assimilation is partly a matter of what psychologist Irving L. Janis called "groupthink," the chameleon-like ability of people to adopt the views of their superiors and peers. This syndrome is endemic to Washington: The town is characterized by sudden fads, be it negotiating biennial budgeting, making grand bargains or invading countries. Then, after a while, all the town's cool kids drop those ideas as if they were radioactive. As in the military, everybody has to get on board with the mission, and questioning it is not a career-enhancing move. The universe of people who will critically examine the goings-on at the institutions they work for is always going to be a small one. As Upton Sinclair said, "It is difficult to get a man to understand something when his salary depends upon his not understanding it. ..."
    "... A more elusive aspect of cultural assimilation is the sheer dead weight of the ordinariness of it all once you have planted yourself in your office chair for the 10,000th time. ..."
    "... No wonder so few people are whistle-blowers, quite apart from the vicious retaliation whistle-blowing often provokes: Unless one is blessed with imagination and a fine sense of irony, growing immune to the curiousness of one's surroundings is easy. To paraphrase the inimitable Donald Rumsfeld, I didn't know all that I knew, at least until I had had a couple of years away from the government to reflect upon it. ..."
    "... It's probably not a coincidence that the American media elite live, work, and socialize in New York and Washington, ..."
    "... It's a kind of corporatism. ..."
    "... They pretend to be merrily neutral servants of the state, giving the best advice possible on national security or financial matters. But they hold a very deep ideology of the Washington consensus at home, which is deregulation, outsourcing, de-industrialization and financialization. ..."
    "... And they believe in American exceptionalism abroad, which is boots on the ground everywhere, it's our right to meddle everywhere in the world. And the result of that is perpetual war. ..."
    Feb 28, 2014 | The American Conservative

    From: The Deep State By Rod Dreher

    The corridor between Manhattan and Washington is a well trodden highway for the personalities we have all gotten to know in the period since the massive deregulation of Wall Street: Robert Rubin, Lawrence Summers, Henry Paulson, Timothy Geithner and many others.

    Not all the traffic involves persons connected with the purely financial operations of the government: In 2013, General David Petraeus joined KKR (formerly Kohlberg Kravis Roberts) of 9 West 57th Street, New York, a private equity firm with $62.3 billion in assets. KKR specializes in management buyouts and leveraged finance. General Petraeus' expertise in these areas is unclear. His ability to peddle influence, however, is a known and valued commodity. Unlike Cincinnatus, the military commanders of the Deep State do not take up the plow once they lay down the sword. Petraeus also obtained a sinecure as a non-resident senior fellow at the Belfer Center for Science and International Affairs at Harvard. The Ivy League is, of course, the preferred bleaching tub and charm school of the American oligarchy.

    Lofgren goes on to say that Silicon Valley is a node of the Deep State too, and that despite the protestations of its chieftains against NSA spying, it's a vital part of the Deep State's apparatus. More:

    The Deep State is the big story of our time. It is the red thread that runs through the war on terrorism, the financialization and deindustrialization of the American economy, the rise of a plutocratic social structure and political dysfunction. Washington is the headquarters of the Deep State, and its time in the sun as a rival to Rome, Constantinople or London may be term-limited by its overweening sense of self-importance and its habit, as Winwood Reade said of Rome, to "live upon its principal till ruin stared it in the face."

    Read the whole thing.

    Steve Sailer says that the Shallow State is a complement to the Deep State. The Shallow State is, I think, another name for what the Neoreactionaries call "The Cathedral," defined thus:

    The Cathedral - The self-organizing consensus of Progressives and Progressive ideology represented by the universities, the media, and the civil service. A term coined by blogger Mencius Moldbug. The Cathedral has no central administrator, but represents a consensus acting as a coherent group that condemns other ideologies as evil. Community writers have enumerated the platform of Progressivism as women's suffrage, prohibition, abolition, federal income tax, democratic election of senators, labor laws, desegregation, popularization of drugs, destruction of traditional sexual norms, ethnic studies courses in colleges, decolonization, and gay marriage. A defining feature of Progressivism is that "you believe that morality has been essentially solved, and all that's left is to work out the details." Reactionaries see Republicans as Progressives, just lagging 10-20 years behind Democrats in their adoption of Progressive norms.

    You don't have to agree with the Neoreactionaries on what they condemn - women's suffrage? desegregation? labor laws? really?? - to acknowledge that they're onto something about the sacred consensus that all Right-Thinking People share. I would love to see a study comparing the press coverage from 9/11 leading up to the Iraq War with press coverage of the gay marriage issue from about 2006 till today. Specifically, I'd be curious to know about how thoroughly the media covered the cases against the policies that the Deep State and the Shallow State decided should prevail. I'm not suggesting a conspiracy here, not at all. I'm only thinking back to how it seemed so obvious to me in 2002 that we should go to war with Iraq, so perfectly clear that the only people who opposed it were fools or villains. The same consensus has emerged around same-sex marriage. I know how overwhelmingly the news media have believed this for some time, such that many American journalists simply cannot conceive that anyone against same-sex marriage is anything other than a fool or a villain. Again, this isn't a conspiracy; it's in the nature of the thing. Lofgren:

    Cultural assimilation is partly a matter of what psychologist Irving L. Janis called "groupthink," the chameleon-like ability of people to adopt the views of their superiors and peers. This syndrome is endemic to Washington: The town is characterized by sudden fads, be it negotiating biennial budgeting, making grand bargains or invading countries. Then, after a while, all the town's cool kids drop those ideas as if they were radioactive. As in the military, everybody has to get on board with the mission, and questioning it is not a career-enhancing move. The universe of people who will critically examine the goings-on at the institutions they work for is always going to be a small one. As Upton Sinclair said, "It is difficult to get a man to understand something when his salary depends upon his not understanding it."

    A more elusive aspect of cultural assimilation is the sheer dead weight of the ordinariness of it all once you have planted yourself in your office chair for the 10,000th time. Government life is typically not some vignette from an Allen Drury novel about intrigue under the Capitol dome. Sitting and staring at the clock on the off-white office wall when it's 11:00 in the evening and you are vowing never, ever to eat another piece of takeout pizza in your life is not an experience that summons the higher literary instincts of a would-be memoirist.

    After a while, a functionary of the state begins to hear things that, in another context, would be quite remarkable, or at least noteworthy, and yet that simply bounce off one's consciousness like pebbles off steel plate: "You mean the number of terrorist groups we are fighting is classified?" No wonder so few people are whistle-blowers, quite apart from the vicious retaliation whistle-blowing often provokes: Unless one is blessed with imagination and a fine sense of irony, growing immune to the curiousness of one's surroundings is easy. To paraphrase the inimitable Donald Rumsfeld, I didn't know all that I knew, at least until I had had a couple of years away from the government to reflect upon it.

    When all you know is the people who surround you in your professional class bubble and your social circles, you can think the whole world agrees with you, or should. It's probably not a coincidence that the American media elite live, work, and socialize in New York and Washington, the two cities that were attacked on 9/11, and whose elites - political, military, financial - were so genuinely traumatized by the events.

    Anyway, that's just a small part of it, about how the elite media manufacture consent. Here's a final quote, one from the Moyers interview with Lofgren:

    BILL MOYERS: If, as you write, the ideology of the Deep State is not democrat or republican, not left or right, what is it?

    MIKE LOFGREN: It's an ideology. I just don't think we've named it. It's a kind of corporatism. Now, the actors in this drama tend to steer clear of social issues. They pretend to be merrily neutral servants of the state, giving the best advice possible on national security or financial matters. But they hold a very deep ideology of the Washington consensus at home, which is deregulation, outsourcing, de-industrialization and financialization.

    And they believe in American exceptionalism abroad, which is boots on the ground everywhere, it's our right to meddle everywhere in the world. And the result of that is perpetual war.

    This can't last. We'd better hope it can't last. And we'd better hope it unwinds peacefully.

    I, for one, remain glad that so many of us Americans are armed. When the Deep State collapses - and it will one day - it's not going to be a happy time.

    Questions to the room: Is a Gorbachev for the Deep State conceivable? That is, could you foresee a political leader emerging who could unwind the ideology and apparatus of the Deep State, and not only survive, but succeed? Or is it impossible for the Deep State to allow such a figure to thrive? Or is the Deep State, like the Soviet system Gorbachev failed to reform, too entrenched and too far gone to reform itself? If so, what then?

    [Oct 14, 2016] The well deserved hatred for Hillary and the globalists is so great, that at least 40% of the males in this country would back anyone who went up against the Clintons.

    Oct 14, 2016 | www.zerohedge.com
    dsty balolalo Oct 14, 2016 11:53 AM Thank You Vladimir Putin

    The Hillary Clinton campaign says the hackers behind the leaked email evidence of their collusion with the major media are from Russia and linked to the Russian regime. If so, I want to publicly thank those Russian hackers and their leader, Russian President Vladimir Putin, for opening a window into the modern workings of the United States government-corporate-media establishment.

    We always knew that the major media were extensions of the Democratic Party. But the email evidence of how figures like Maggie Haberman of The New York Times, Juliet Eilperin of The Washington Post, and John Harwood of CNBC worked hand-in-glove with the Democrats is important. The Daily Caller and Breitbart have led the way in digging through the emails and exposing the nature of this evidence. It is shocking even to those of us at Accuracy in Media who always knew about, and had documented, such collusion through analysis and observation.

    The Clinton campaign and various intelligence officials insist that the purpose of the Russian hacking is to weaken the confidence of the American people in their system of government, and to suggest that the American system is just as corrupt as the Russian system is alleged to be. Perhaps our confidence in our system should be shaken. The American people can see that our media are not independent of the government or the political system and, in fact, function as an arm of the political party in control of the White House that wants to maintain that control after November 8.

    In conjunction with other evidence, including the ability to conduct vote fraud that benefits the Democrats, the results on Election Day will be in question and will form the basis for Donald J. Trump to continue to claim that the system is "rigged" against outsiders like him.

    The idea of an American system of free and fair elections that includes an honest press has been terribly undermined by the evidence that has come to light. We are not yet to the point of the Russian system, where opposition outlets are run out of business and dissidents killed in the streets. That means that the Russians have not completely succeeded in destroying confidence in our system. But we do know that federal agencies like the Federal Election Commission (FEC) and Federal Communications Commission (FCC) are poised to strike blows against free and independent media. Earlier this year the three Democrats on the FEC voted to punish filmmaker Joel Gilbert for distributing a film critical of President Barack Obama during the 2012 campaign.

    The New York Times is reporting that Clinton campaign chairman John Podesta has been contacted by the FBI about the alleged Russian hackers behind the leaks of his emails. This is what Podesta and many in the media want to talk about.

    But the Russians, if they are responsible, have performed a public service. And until there is a thorough house-cleaning of those in the major media who have made a mockery of professional journalism, the American people will continue to lack confidence in their system. The media have been caught in the act of sabotaging the public's right to know by taking sides in the presidential contest. They have become a propaganda arm of the Democratic Party, coordinating with the Hillary Clinton for president campaign, which apparently was being run out of Georgetown University, where John Podesta was based. Many emails carry the web address of [email protected] , a reference to the Georgetown University position held by the chairman of the 2016 Hillary Clinton presidential campaign. Podesta is a Visiting Professor at Georgetown University Law Center. His other affiliations include the George Soros-funded Center for American Progress and the United Nations High Level Panel on the Post-2015 Development Agenda.

    Podesta and the other members of this U.N. panel had proposed " A New Global Partnership for the World ," which advocated for a "profound economic transformation" of the world's economic order that would result in a new globalist system. Shouldn't the American people be informed about what Podesta and his Democratic allies have planned for the United States should they win on November 8?

    That Podesta would serve the purposes of the U.N. is not a surprise. But it is somewhat surprising that he would use his base at Georgetown University to run the Hillary campaign. On the other hand, Georgetown, the nation's oldest Catholic and Jesuit university, describes itself as preparing "the next generation of global citizens to lead and make a difference in the world."

    In a previous column, "The Sad Demise of a Once-Catholic University," we noted that the university launched a " Hillary Rodham Clinton Fellowship Program ," and that Mrs. Clinton is the Honorary Founding Chair of the Georgetown Institute for Women, Peace and Security . Georgetown is even giving awards named after the former Secretary of State, designated the " Hillary Rodham Clinton Awards for Advancing Women in Peace and Security ."

    When a Catholic university serves as the base for the election of a Democratic Party politician committed to taxpayer-funded abortion on demand and transgender rights, you know America's political system and academia are rotten to the core. The disclosure from WikiLeaks that Podesta used his Georgetown email to engage in party politics only confirms what we already knew.

    If the Russians are ultimately responsible for the release of these emails, some of which show an anti-Catholic animus on the part of Clinton campaign officials, we are grateful to them. The answer has to be to clean out the American political system of those who corrupt it and demonstrate to the world that we can achieve higher standards of integrity and transparency.

    For its part, Georgetown University should be stripped of its Catholic affiliation and designated as an official arm of the Democratic Party.

  • Read more: " Thank You Vladimir Putin http://americasurvival.org/2016/10/thank-you-vladimir-putin.html#ixzz4N4iiqCrc

    Paul Kersey balolalo Oct 14, 2016 12:02 PM The well deserved hatred for Hillary and the globalists is so great, that at least 40% of the males in this country would back anyone who went up against the Clintons. That's just not the same thing as "BUYING TRUMPS BULLSHIT HOOK, LINE, AND SINKER".

    Trump is exposing the corruption and the hypocrisy of the Clintons in a way that no one has ever had the guts to do in the past. He's doing it on national TV with a large national audience. With Trump we may get anarchy, but with the Clintons, Deep State is guaranteed. It is Deep State that is working overtime to finish building the expressway to neofeudalism.

    [Oct 14, 2016] Hillary Clinton asks for landslide victory to rebuke Trumps bigotry and bullying

    Killary only can beg that voters hold their noses and vote for her. Guardian neoliberal presstitutes still don't want to understand that Hillary is more dangerous then trump, Sge with her attempt that she is more militant then male neocons can really provoke a confrontation with Russia or China.
    Notable quotes:
    "... War at home versus another foreign war, nothing will get through Congress, and either will get impeached...so third party all the way for me. ..."
    "... Keep in mind, the election is not over and that drip, drip, drip of Hillary emails may push more people towards Trump. ..."
    "... Shameless. Absolutely shameless, Guardian. This is not-even-disguised Clinton sycophancy... ..."
    "... Clinton has everything going for her. The media, the banks, big business, the UN, foreign leaders, special interest lobbyists, silicon valley, establishment Republicans. How can she not win in an landslide?! ..."
    "... We came, we saw, and he grabbed some pussy. ..."
    "... It seems nobody wants to talk about what is really going on here - instead we are fed this bilge from both sides about 'sexual misconduct' and other fluff ..."
    "... The stagnation of middle-class incomes in the West may last another five decades or more. ..."
    "... This calls into question either the sustainability of democracy under such conditions or the sustainability of globalization. ..."
    "... These classes of "globalization losers," particularly in the United States, have had little political voice or influence, and perhaps this is why the backlash against globalization has been so muted. They have had little voice because the rich have come to control the political process. The rich, as can be seen by looking at the income gains of the global top 5 percent in Figure 1, have benefited immensely from globalization and they have keen interest in its continuation. ..."
    "... But while their use of political power has enabled the continuation of globalization, it has also hollowed out national democracies and moved many countries closer to becoming plutocracies. Thus, the choice would seem either plutocracy and globalization – or populism and a halt to globalization. ..."
    Oct 14, 2016 | www.theguardian.com

    Julian Kelley , 14 Oct 2016 02:47

    The vast majority of her support comes from people that will be holding their noses as they vote for her. Seems to me that convincing those same people that you have it in the bag will just cause them to think voting isn't worth their time since they don't want to anyway.

    I know Trump's supporters, the real ones, and the anyone-but-Hillary club will show up as well. Funny if this backfires and he wins.

    I won't be voting for either one and couldn't care less which one wins. War at home versus another foreign war, nothing will get through Congress, and either will get impeached...so third party all the way for me.

    Apache287 -> Julian Kelley , 14 Oct 2016 02:57

    War at home versus another foreign war

    Yes because War in the US will be so great.

    ... ... ...

    AQuietNight -> playloro , 14 Oct 2016 02:56
    "Trump has to be the limit, and there has to be a re-alignment"

    Trump has shown one must fight fire with fire. The days of the meek and mild GOP are over. Twice they tried with nice guys and failed. Trump has clearly shown come out with both fists swinging and you attract needed media and you make the conversation about you. Trump's mistake was not seeking that bit of polish that leaves your opponent on the floor.

    Keep in mind, the election is not over and that drip, drip, drip of Hillary emails may push more people towards Trump.

    taxhaven , 14 Oct 2016 02:50
    Shameless. Absolutely shameless, Guardian. This is not-even-disguised Clinton sycophancy...
    tugend49

    For every woman that's been sexually harassed, bullied, raped, assaulted, catcalled, groped, objectified, and treated lesser than, a landslide victory for Clinton would be an especially sweet "Fuck You" to the Trumps of this world.

    DJROM -> tugend49 , 14 Oct 2016 03:17

    Tell that to Juanita Brodrick, Katherine Willie, or Paula Jones
    SwingState , 14 Oct 2016 02:53

    Clinton has everything going for her. The media, the banks, big business, the UN, foreign leaders, special interest lobbyists, silicon valley, establishment Republicans. How can she not win in an landslide?!

    It might be a reaction against Trump, but it's also a depressing example of the power of the establishment, and their desire for control in democracy. Just look at how they squealed at Brexit.

    chuckledog -> SwingState , 14 Oct 2016 03:06
    Rather low opinion of people's ability to decide for themselves.
    AlvaroBo -> chuckledog , 14 Oct 2016 03:13
    That low opinion is justified. See also: Asch experiment.
    Kieran Brown -> SwingState , 14 Oct 2016 03:52
    "squealed at Brexit" hahaha...hasnt happened yet and your currency is in the toilet. the squealing from england gonna be deafening...
    Boojay , 14 Oct 2016 02:54
    It takes a horrible man to make Clinton look good. We came, we saw, and he grabbed some pussy.
    SeenItAlready , 14 Oct 2016 02:55
    It seems nobody wants to talk about what is really going on here - instead we are fed this bilge from both sides about 'sexual misconduct' and other fluff

    There is a report from two years ago, July 2014, before the candidates had even been selected, by the economist Branko Milanovic for Yale 'Global' about the impact of Globalisation on the Lower Middle Classes in the West and how this was basically going to turn into exactly the choice the American electorate is facing now

    http://yaleglobal.yale.edu/content/tale-two-middle-classes

    Why won't the media discuss these issues instead of pushing this pointless circus?

    These are the penultimate paragraphs of the article on the report (there is a similar one for the Harvard Business Review here ):

    The populists warn disgruntled voters that economic trends observed during the past three decades are just the first wave of cheap labor from Asia pitted in direct competition with workers in the rich world, and more waves are on the way from poorer lands in Asia and Africa. The stagnation of middle-class incomes in the West may last another five decades or more.

    This calls into question either the sustainability of democracy under such conditions or the sustainability of globalization.

    If globalization is derailed, the middle classes of the West may be relieved from the immediate pressure of cheaper Asian competition. But the longer-term costs to themselves and their countries, let alone to the poor in Asia and Africa, will be high. Thus, the interests and the political power of the middle classes in the rich world put them in a direct conflict with the interests of the worldwide poor.

    These classes of "globalization losers," particularly in the United States, have had little political voice or influence, and perhaps this is why the backlash against globalization has been so muted. They have had little voice because the rich have come to control the political process. The rich, as can be seen by looking at the income gains of the global top 5 percent in Figure 1, have benefited immensely from globalization and they have keen interest in its continuation.

    But while their use of political power has enabled the continuation of globalization, it has also hollowed out national democracies and moved many countries closer to becoming plutocracies. Thus, the choice would seem either plutocracy and globalization – or populism and a halt to globalization.

    Martin51 -> SeenItAlready , 14 Oct 2016 09:19
    Globalisation will continue to happen. It has pulled a large part of the world population out of poverty and grown the global economy.

    Sure on the downside it has also hugely benefitted the 1%, while the western middle classes have done relatively less well and blue collar workers have suffered as they seek to turn to other types (less well paid) of work.

    The issue is the speed of change, how to manage globalisation and spread the wealth more equitably. Maybe it will require slowing but it cannot and should not be stopped.

    ozbornzadick , 14 Oct 2016 02:56
    Ah, the lesser of two evils.

    [Oct 13, 2016] CUNY, All Too CUNY Or, what happens when higher-ed hoodlums arent brought to heel

    Notable quotes:
    "... New York Times ..."
    Oct 13, 2016 | crookedtimber.org

    Crooked Timber

    on October 10, 2016 In August, I blogged about a New York Times story on a corruption investigation of City College President Lisa Coico. On Friday, the Times reported that Coico abruptly resigned. Today, the Times has a long piece on the corruption and potential criminality that led to Coico's resignation (upon threat of firing).

    On the one hand, the piece paints a portrait of a college president so fantastically corrupt, it's almost comical.

    Ms. Coico, who had an annual salary of $400,000 at that point [2011], was using the college's main fund-raising vehicle, the 21st Century Foundation, to pay tens of thousands of dollars for housekeeping, furniture, seasonal fruits and organic maple-glazed nuts, among other items .By August 2011, according to an email between two school officials, the college had begun to itemize more than $155,000 of her spending in three categories - "college," "personal" and "iffy."
    On the other hand, it's just one blood-boiling outrage after another, where the criminality flows, like lava, from the mountain of largesse that Coico was legally allowed in the first place.
    The Times also questioned whether Ms. Coico had repaid a $20,000 security deposit for a rental home , or kept the money for herself .Ms. Coico had a housing allowance of $5,000 per month when she was hired, which was increased to $7,500 per month in July 2010. We have adjuncts at CUNY who can't pay their rent. Mostly because the pay is so low, but sometimes, as occurred at Brooklyn College last month, because CUNY can't be bothered to get its act together so that people are paid on time. Yet a college president, who's already earning a $400,000 salary (and remember that was in 2011; God knows what she was raking in upon her resignation) plus a housing allowance of $7500, gets additional help to put down a $20,000 security deposit on a rental home in Westchester?

    On top of it all, the article makes plain that CUNY officials have been nervous about and watchful of Coico's spending since her first year at the college:

    Behind the scenes, there were also questions about her personal spending going back to the middle of 2011, roughly a year after her appointment .Anxious about the amount she was spending, especially given the fact that many of City College's students come from low-income families and struggle to pay even its modest tuition, some began "questioning its appropriateness, since the president had a substantial housing allowance meant for such things," said one longtime official who spoke on the condition of anonymity to avoid being entangled in the investigation.


    She was later ordered by Frederick P. Schaffer, CUNY 's general counsel, to repay the college $51,000, or roughly one-third of the expenses in question, because she had not received prior approval for moving and other expenses. She fulfilled that obligation by January 2016.


    Ms. Coico was also informed that any furniture bought with foundation funds - including $50,000 worth for a rental home in Larchmont, N.Y. - belonged to City College. Moreover, she was asked to return a $20,000 security deposit at the end of her lease in Larchmont.


    Ms. Coico and her husband bought another home in Westchester County in April 2013, property records show. When asked if she repaid the $20,000 deposit, the college declined to comment.



    But this summer, The Times took a closer look at her expenses, and reported that CUNY 's Research Foundation , which manages research funds for the entire system, had ultimately covered Ms. Coico's personal expenses from her early years as president. Using Research Foundation funds that way raised concerns because they could include money from federal grants, which are typically earmarked for research-related expenses, such as staff and equipment, and have strict guidelines about how they are used.


    Two weeks after the Times report was published, a subpoena was issued by the office of Robert L. Capers, the United States attorney for the Eastern District of New York.



    The memo in question is just one paragraph long and is bureaucratic in nature.


    Addressed to an employee at the provost's office named Luisa Hassan, and dated Sept. 15, 2011, it begins, "As we have discussed," and is attributed to Ron Woodford, a manager at the college's 21st Century Foundation. It goes on to say that some of Ms. Coico's expenses "were inadvertently paid" by that foundation, when they should have been paid by CUNY 's Research Foundation. The memo then asks Ms. Hassan to process an invoice for $155,176 to "rectify the funding source," for what it calls "start-up expenses associated with the appointment of the new president."



    Were the memo proved to be backdated or manufactured, the responsible parties could be open to charges such as obstruction of justice, legal experts said.



    Given all of this, why has it taken CUNY so long-to the point of a federal investigation being launched -to demand Coico's resignation?


    The whole story, in my experience, is CUNY , all too CUNY . Not just the opéra bouffe of corruption but also the creaking machinery of self-correction.


    Here you have a garden-variety miscreant, thieving one piece of the pie after another from an institution that has so little to begin with. Even the things Coico did that weren't criminal should have been enough to get her fired. On ethical grounds alone.


    But what did CUNY do? Lots of whispering emails, lots of back and forth between cowed and ineffective administrators, culminating each time, it seems, with a polite-and sometimes unheeded-request to Coico that she correct the problem. As if it were all a simple misunderstanding or oversight.


    Indeed, in the one instance when CUNY seemed more determined to take action, an extensive internal investigation of just one of Coico's questionable moves led to her being exonerated by the institution. Whether she was in that instance correct in her actions, surely her track record might have raised enough red flags to lead to a much wider investigation rather than a declaration, with much fanfare, of her innocence.


    Not once, it seems, until the very last minute-the Times reported on Friday that it was a smoking-gun email from the newspaper that led to the abrupt resignation of Coico, leaving City College with no replacement, save the acting provost, who was herself replacing someone else; all suggesting that Coico's being pushed out was unplanned, unrehearsed, and unprepared for-did CUNY execute a plan to get rid of Coico. From what I can tell (and in my experience, as I said, this is how CUNY often operates), the institution allowed this higher-ed hoodlum to happily continue in her position, secure in the knowledge that if she ever did anything too egregious or got caught, that she'd get a mild entreaty to fix the error.


    If there is one potential bit of good news in this story, it's this:


    And over the weekend, speculation intensified among staff and faculty members as to whether people close to the president would also be implicated, and whether the federal investigation would spread to other parts of CUNY , the largest public urban university in the country.



    One can only hope that that speculation turns out to be true.

    Dr. Hilarius 10.10.16 at 9:05 pm

    A good example of the failure of university president as CEO model of governance. Model comes complete with ineffectual trustees and administrators.
    Brett 10.10.16 at 9:34 pm
    Aren't there people above her who are supposed to be watch-dogs on this as well? Did they just not care that she was stealing from the college, because they'd rather not go through the hassle of hiring another college president? Was it okay as long as she was compliant and enthusiastic in making budget cuts?
    Tabasco 10.10.16 at 10:54 pm
    It seems to be a failure on so many levels: a hiring failure (CEOs who lie, cheat and steal almost always did so in previous jobs); a failure of auditing and accountability systems; a failure of governance; and most of all, a failure of culture. Unless these are fixed, it will happen again.
    PJW 10.11.16 at 1:24 am
    Horrible.

    Iowa State's president has been under fire:
    http://www.iowastatedaily.com/news/politics_and_administration/campus/article_09652364-8b0a-11e6-ac12-5741764bf660.html

    William Timberman 10.11.16 at 3:05 am
    From the other coast: Robert Huttenback. Thirty years ago, this was, but having witnessed the whole mess from far too close up for comfort, I suppose I'm not all that surprised at the detailed similarities with the Coico case you're reporting on here. The Wikipedia entry gives only the gist, but the details in all their sleaziness are still available elsewhere on the Web for anyone who has the stomach to wade through them. To quote from our swine of the hour, If you're a star, they let you do it. The depressing thing is that we don't seem to have any institutions left where this casual breach of trust isn't routine.
    kidneystones 10.11.16 at 3:39 am
    "That's what is done by tin-pot dictators spanning the globe from North Korea to Zimbabwe."

    Excellent post, Corey. Yes, I'm aware that the quote is from Beauchamp, but I think it fits just as well, if not better here.

    I'm an adjunct with bona fides and a publication history to receive research funding from universities, just not quite often enough. I reference the tin-pot dictators for two reasons.

    Tabasco and Brett get to the nub. Ms. Coico and her husband are earning far more than almost all faculty and certainly far more than I. There's an enormous gulf separating Ms.Coico and the adjuncts who can't actually rely on being paid their pennies on time. Suffice to say that Ms. Coico is likely blissfully aware of that gulf and our problems, and much more painfully aware on the enormous gulf separating her and her husband from the world-class grifters she aspires to join, which I suggest is her principal preoccupation.

    As the CEO, a large part of her job is groveling for cash before the truly rich. This has to wear on her. And as we've learned, only partisan imbeciles believe that candidate X is the only wealthy person paying well to ensure he/she pays the absolute minimum in taxes, and who (occasionally) moves into the 'grey' areas of compliance. See senior civil servants at both the state and national level.

    There are, like it or not, two sets of rules in America, whether that makes America a tin-pot dictatorship or no. If one happens to be poor and a minority one can expect to face the full brunt of the law for even the smallest infraction. And that's if you're not beaten, or shot by 'accident' along the way. If you're wealthy and white, you can do whatever you like until and after, in many cases, you get caught.

    The reason, I suggest, that those charged with supervising Ms. Coico did not act earlier is that they did not wish to attract any unwanted legal scrutiny into their own practices, those of their peers, and especially of the donor class who fork over part of the class.

    It's their world, we just live in it.

    kidneystones 10.11.16 at 3:42 am
    Part of class? Yes, why not that too.

    William Timberman puts his finger right into the wound.

    Sebastian H 10.11.16 at 5:01 am
    The whole thing is crazy, but I can't get past the $20,000 security deposit for a rental home.

    What kind of a house is that?

    Louis Proyect 10.11.16 at 11:19 am
    Interesting that she was hired to boost the science department based on her own scientific background. Remind you of another college president out in Illinois?
    Alex SL 10.11.16 at 5:35 pm
    As a non-native speaker of English, I am wondering not for the first time about how the term corrupt is used in the English world. Is it not correct that corruption means taking money (or some other form of payment) in exchange for doing somebody an undeserved favour, e.g. a professor accepting money to pass a student who should really have been failed? I would have thought that what is described here was embezzlement instead?

    Sorry if this is not the most productive contribution, but I am wondering.

    steve 10.11.16 at 7:12 pm
    Corruption is a general term for premeditated unethical actions. Embezzlement would be a specific criminal change.
    J-D 10.11.16 at 8:58 pm
    I think it's common for 'corruption' to be used to refer to the misuse of official authority for private benefit; so if somebody has official authority to expend funds for stipulated purposes, and misuses that authority to expend some of those funds for a private benefit unconnected with those stipulated purposes, that could be described as corrupt conduct.
    CCNY Drudge 10.12.16 at 12:50 am
    What you don't mention but is how despicable it is that a high level administrator tried to set up two low level employees with no decision authority with a faked document. Yes, CUNY administrators should be held accountable for their non-action and sticking their heads in the sand, but don't exonerate the CCNY faculty who closed their eyes for the ethical problems and remained silent, just because of their comfortable teaching hours under this president or other perks, or just because they didn't want to rock the boat, just grumble at the water cooler. They had the academic freedom and union protection, and the majority of them did nothing. They were like the Republican Party facing Trump.
    Karl Kolchack 10.12.16 at 1:01 am
    A professional colleague of mine was prosecuted and fired for falsifying a relocation voucher for a grand total of around $2200. Of course, this was way back in 1991, when such garbage was far less tolerated that it seems to be these days.
    Alex SL 10.12.16 at 8:48 am
    Thanks.
    LaRoi Lawton 10.12.16 at 2:12 pm
    This demonstrates on so many levels how administrators within CUNY are so poorly managed to the point where they create their own "Game of Thrones." It is no wonder why the current Governor of New York has a negative opinion of CUNY and wants a deeper look at our administrative levels across CUNY. You can bet your last dollar that what the former CCNY President has done, has also infected many of the departments within CCNY and across CUNY. This was no anomaly. The seeds were planted ions ago and watered by the City and State at the expense of our students CUNY was meant to help.
    Library Love 10.12.16 at 4:37 pm
    This sickens me to no end. I'm a librarian at CCNY and I have taken money out of my own pocket for office supplies etc. for my office and for students. This is just disgusting. I knew she was up to something but I had no idea it was this bad.

    [Oct 13, 2016] "The Skills Delusion"

    Oct 13, 2016 | www.project-syndicate.org

    [Adair Turner, Project Syndicate ].

    "Everybody agrees that better education and improved skills, for as many people as possible, is crucial to increasing productivity and living standards and to tackling rising inequality. But what if everybody is wrong?… As for inequality, we may need to offset it through overt redistribution, with higher minimum wages or income support unrelated to people's price in the job market, and through generous provision of high-quality public goods." Of course, Clinton has already foreclosed this possibility; after all, some of the redistribution would go to "irredeemables."

    [Oct 13, 2016] Lambert Strether Stats Watch For October 13, 2016

    Oct 13, 2016 | www.nakedcapitalism.com

    Jobless Claims, week of October 8, 2016: "Unemployment claims remain at or near historic lows, indicating a lack of layoffs and quick turnaround for those who do lose their jobs" [ Econoday ]. Or that claims are harder to get. And: "Initial jobless claims continued to surprise to the downside, plumbing depths not seen in a very long time" [Amherst Pierpont, Across the Curve ]. "Not that we should be shocked. When the labor market gets very tight, firms do not want to lay off anyone that they suspect they might want to re-hire at some point because chances are, they will not be available when the firm tries to call them back…. here may be 3 or 4 doves on the FOMC who still believe that there is substantial slack in the labor market, but the more compelling argument in my view is that we are moving/have moved into clearly tight territory, which is why wage hikes are (finally) accelerating to a pace in excess of what productivity growth and cost-of-living adjustments would dictate." Time to screw the workers? I mean, a better time than usual?

    Import and Export Prices, September 2016: "Progress is the theme in September's import & export price report where emerging pressures may be appearing. Import prices rose 0.1 percent in the month with export prices up 0.3 percent. And year-on-year rates are finally coming up for air, at only minus 1.1 percent for import prices which is the best showing since August 2014. The year-on-year rate for export prices is minus 1.5 percent for their best showing since October 2014" [ Econoday ]. And: "The month-over-month figures given in the headlines only confuse. At the current rate of moderation of deflation (trend line) – both imports and export prices should start inflating by the end of the year" [ Econintersect ].

    Bloomberg Consumer Comfort Index, week of October 9, 2016: "[A] tough month for the consumer comfort index which drifted in the 41 range, well down from the prior trend at 44" [ Econoday ].

    Real Estate: "The U.S. industrial property market is on track for another record year in 2016, and the market could expand well into 2018 despite the possibility of higher interest rates that would increase the costs of carrying inventory, according to a leading industrial real estate and logistics firm" [ DC Velocity ]. "Richard H. Thompson, JLL's international director, supply chain and logistics solutions, said demand will be powered by the dramatic growth of e-commerce and the fulfillment networks developed and expanded to support it." Can't we just turn the malls into warehouses?

    Supply Chain: "The collapse of Hanjin Shipping has brought into sharp relief the vulnerability of intercontinental supply chains, the spectre of further bankruptcies among ocean shipping lines, and the likelihood of an acceleration of nearshoring trends" [ Lloyd's List ].

    Shipping: "Bankrupt Hanjin Shipping has redelivered the majority of its chartered-in vessels with more to follow, which is swelling the global fleet of idled containerships, according to research by Alphaliner" [ Splash 247 ]. "These redeliveries [of 67 vessels] have caused the fleet of idle containerships of over 500 teu to surge to 371 vessels (1.33m teu total), as of October 3, Alphaliner said in its latest weekly report."

    Shipping: "For the fourth time in as many months, U.S. aviation safety regulators have proposed a fine on Amazon.com Inc." [ Wall Street Journal , "Safety Regulators Fine Amazon Again Over Hazardous Air Shipments"]. "According to the Federal Aviation Administration, in August 2015 FedEx Corp. workers at a sorting facility in Cary, Ill., discovered a leaking package that held two 14-ounce bottles of a flammable, ethanol-based hair tonic. The shipment, which was flown from Ruskin, Fla., to Algonquin, Ill., wasn't packaged or marked properly to show it contained hazardous material, the FAA alleges, and shipping papers didn't provide required details, including emergency response information." Amazon's response is priceless: "[Amazon] has developed sophisticated technologies to detect potential shipping hazards and use any defects as an opportunity for continuous improvement." I guess when a plane falls out of the sky that will come under the heading of "continuous improvement" too?

    Shipping: "Amazon.com Inc. plans to hire 20% more seasonal workers for its U.S. warehouses this holiday season as some competitors have kept hiring steady." [ Wall Street Journal , "Amazon to Add 120,000 Workers for Holidays"]. "The company said 14,000 seasonal employees were hired full time last year, and the company plans to bring on more full-time workers this year."

    Rail: "It does appear that the downward slide in the one year rolling averages will pause shortly as the rate of increase in the rate of decline is continuing to be smaller. But this movement is like watching snails race. Based on the current trends – rail year-over-year rate of contraction should start improving by year end" [ Econintersect ]. "Still I am grappling with what this contraction actually means as the USA economy is not being pulled into a recession."

    Rail: "[Railroad] tie production plunged 12.9 percent in July to 2.21 million units, while purchases dropped 11.8 percent to 2.2 million units from June levels, according to [the Railway Tie Association]. Compared with July 2015 data, production fell 7.6 percent, while purchases slipped 8.4 percent" [ Progressive Railroading ].

    Commodities: "One of the more eye-catching trends for tanker markets this quarter is the slowing fuel demand in China, as indicated by multiple indicators and analysts" [ Lloyd's List ].

    Political Risk: "Economists in The Wall Street Journal's latest monthly survey of economists put the odds of the next downturn happening within the next four years at nearly 60%" [ Wall Street Journal , "Economists Believe a Recession Is Likely Within Next Four Years"]. Obama decreasing the deficit should leave Clinton II holding the bag, exactly as Clinton I reducing the deficit left Bush holding the bag.

    Political Risk: "Hard Brexit could turn EU to Ukraine for wheat, rather than UK" [ Agrimoney ]. "For both wheat, of which the EU buyers accounted for 80% of UK exports last season, and barley, for which the bloc took 63% of UK sales, the [import levies] would represent more than half the value of supplies, at 2015 prices, and would probably render such shipments 'uneconomic'."

    Today's Fear & Greed Index: 32, Fear (previous close: 45, Neutral) [ CNN ]. One week ago: 53 (Neutral). (0 is Extreme Fear; 100 is Extreme Greed). Last updated Oct 13 at 11:43am. Mr. Market finally decides he doesn't like Clinton all that much after all? War is bad for business, after all.

    [Oct 13, 2016] Big oil companies are no longer able to replace all their production through conventional exploration, the energy consulting company said in a report published Tuesday

    Oct 13, 2016 | mishtalk.com

    Thomas Malthus said:

    October 11, 2016 8:51:21 at 8:51 PM Irrelevant. This is all that matters:

    Big oil companies are no longer able to replace all their production through conventional exploration, the energy consulting company said in a report published Tuesday.

    More http://www.bloomberg.com/news/articles/2016-09-20/oil-majors-must-count-on-m-a-to-replenish-reserves-woodmac-says

    Why energy prices are ultimately headed lower

    We have been hearing a great deal about IMF concerns recently, after the release of its October 2016 World Economic Outlook and its Annual Meeting October 7-9. The concerns mentioned include the following:

    Too much growth in debt, with China particularly mentioned as a problem

    World economic growth seems to have slowed on a long-term basis

    Central bank intervention required to produce artificially low interest rates, to produce even this low growth

    Global international trade is no longer growing rapidly

    Economic stagnation could lead to protectionist calls

    These issues are very much related to issues that I have been writing about:

    It takes energy to make goods and services.

    It takes an increasing amount of energy consumption to create a growing amount of goods and services–in other words, growing GDP.

    This energy must be inexpensive, if it is to operate in the historical way: the economy produces good productivity growth; this productivity growth translates to wage growth; and debt levels can stay within reasonable bounds as growth occurs.

    We can't keep producing cheap energy because what "runs out" is cheap-to-extract energy. We extract this cheap-to-extract energy first, forcing us to move on to expensive-to-extract energy.

    Eventually, we run into the problem of energy prices falling below the cost of production because of affordability issues. The wages of non-elite workers don't keep up with the rising cost of extraction.

    Governments can try to cover up the problem with more debt at ever-lower interest rates, but eventually this doesn't work either.

    Instead of producing higher commodity prices, the system tends to produce asset bubbles.

    Eventually, the system must collapse due to growing inefficiencies of the system. The result is likely to look much like a "Minsky Moment," with a collapse in asset prices.

    The collapse in assets prices will lead to debt defaults, bank failures, and a lack of new loans. With fewer new loans, there will be a further decrease in demand. As a result, energy and other commodity prices can be expected to fall to new lows.

    Let me explain a few of these issues:

    https://ourfiniteworld.com/2016/10/11/why-energy-prices-are-ultimately-headed-lower-what-the-imf-missed/comment-page-1/#comment-102654

    Like Liked by 1 person

    Reply

    [Oct 13, 2016] No Banker Left Behind

    Oct 13, 2016 | www.nakedcapitalism.com
    Bunk McNulty October 12, 2016 at 3:06 pm

    It's a fine afternoon for singing.

    No Banker Left Behind (Ry Cooder)

    "Well the bankers called a meeting to the White House they went one day
    They was going to call on the President in a quiet and a sociable way
    And the afternoon was sunny and the weather it was fine
    They counted out our money and no banker was left behind"

    [Oct 13, 2016] Lambert Strether Stats Watch 10-12-2016

    www.nakedcapitalism.com

    JOLTS, August 2016: "In downbeat indications on the labor market, job openings fell a sharp 7.3 percent in August to 5.443 million at the same time that hiring, instead of rising, slowed by 0.9 percent to 5.210 million" [Econoday]. "Though readings in this report remain healthy, the drop in openings and the lack of hiring are consistent with slowing jobs growth, as seen in both the August and September employment reports." And: "The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year growth rate of unadjusted private non-farm job openings were insignificantly changed from last month. In addition, the growth rate trends declined using the 3 month averages" [Econintersect]. But: " Even with the decline in Job Openings, this is another solid report" [Calculated Risk]. And: "There was a significant decline in openings in the manufacturing and construction sectors, while openings were little changed in the retail sector. There was an increase in the leisure sector, while openings in government declined. More positively, there was an increase in hires in the manufacturing and construction sectors: [Economic Calendar]. "The number of hires for the month still exceeded separations by over 250,000, which still indicates very solid employment growth for the month, and no underlying deterioration.:"

    MBA Mortgage Applications, week of October 7, 2016: "Mortgage activity slowed in in the October 7 week, with seasonally adjusted purchase applications for home mortgages falling" [Econoday]. "Versus the comparable week a year ago, however, unadjusted purchase applications were 27 percent higher, a sharp reversal of the 14 percent year-on-year decline seen in the prior week." But: " Don't read too much into the year-over-year increase – remember last year there was a sharp increase in applications the week prior to the TILA-RESPA regulatory change, and the following week applications plunged 28%. Since this is a comparison to the week following the regulatory change, applications are up year-over-year. This will smooth out soon" [Calculated Risk].

    Fodder for the Bulls: "Eurozone Industrial Production Rebounds 1.6% In August" [Economic Calendar]. "There will certainly be caution over the data for August given the risks of faulty seasonal adjustments as August is a peak holiday season. Any renewed downturn for September would trigger fresh concerns, although the data overall should boost confidence in the outlook slightly."

    Shipping: " Hanjin Shipping Co. is stepping in to help resolve the logistics mess created by the carrier's thousands of empty containers" [Wall Street Journal]. "The confusion over boxes is part of the supply-chain mess that's followed the South Korean carrier's declaration of bankruptcy in August. Questions over shipping payments and fees remain, however, and those may take longer to resolve than it will take to clear away Hanjin's empty containers."

    Shipping: "General Average is a legal principle of Maritime Law under which, all parties who are involved in that voyage, shall be asked to proportionally share the losses resulting from such sacrifice" [Shipping and Freight Resource]. "Say for example the ship is a container ship and there are 100 containers on board with 100 customers.. One of the containers caught fire on board which spread to 9 other containers and all 10 containers had to be thrown overboard in order to save the balance 90 containers, the ship and the crew. Since the ship, the cargo and the crew were saved due to this action, the whole burden of the loss will be shared among the 100 customers and not just the 10 customers whose cargo was thrown overboard." Interestingly, the principle of "general average" was used to justify fraud in the case of the ship Zong, whose captain and crew threw its slaves (cargo) overboard to collect on the insurance money.

    [Oct 12, 2016] Interesting read on the history of the Nobel Prize in Economics and its ideological tendency

    Notable quotes:
    "... In the West, the priority accorded to the individualist self-regarding norms underlying the Washington Consensus created a nurturing environment for growth in corruption, inequality, and mistrust in governing elites – the unintended consequences of rational-choice, me-first premises. With the emergence in advanced economies of disorders previously associated with developing countries, Swedish political scientist Bo Rothstein has petitioned the Academy of Sciences (of which he is a member) to suspend the Nobel Prize in economics until such consequences are investigated." ..."
    Oct 11, 2016 | economistsview.typepad.com

    JohnH : October 11, 2016 at 06:58 AM

    Interesting read on the history of the Nobel Prize in Economics and its ideological tendency:

    Avner Offer: "a group of center-right economists captured the process of selecting prizewinners...The prize kingmaker was Stockholm University economist Assar Lindbeck, who had turned away from social democracy. During the 1970s and 1980s, Lindbeck intervened in Swedish elections, invoked microeconomic theory against social democracy, and warned that high taxation and full employment led to disaster. His interventions diverted attention from the grave policy error being made at the time: deregulation of credit, which led to a deep financial crisis in the 1990s and anticipated the global crisis that erupted in 2008.

    Lindbeck's concerns were similar to those of the International Monetary Fund, the World Bank, and the US Treasury. These actors' insistence on privatization, deregulation, and liberalization of capital markets and trade – the so-called Washington Consensus – enriched business and financial elites, led to acute crises, and undermined emerging economies' growth.

    In the West, the priority accorded to the individualist self-regarding norms underlying the Washington Consensus created a nurturing environment for growth in corruption, inequality, and mistrust in governing elites – the unintended consequences of rational-choice, me-first premises. With the emergence in advanced economies of disorders previously associated with developing countries, Swedish political scientist Bo Rothstein has petitioned the Academy of Sciences (of which he is a member) to suspend the Nobel Prize in economics until such consequences are investigated."

    https://www.project-syndicate.org/commentary/economics-nobel-versus-social-democracy-by-avner-offer-2016-10

    [Oct 11, 2016] On the ongoing demise of globalisation

    Notable quotes:
    "... But if the third globalisation wave is mostly about taking advantage of cheap labour not commodities - whilst simultaneously reducing industrial capacity at home - today's global imbalances could result in a very different type of correction (something which may or may not be happening now). ..."
    "... The immediate consequence may be the developed world's desire to engage in significant industrial on-shoring. ..."
    "... I'm not convinced the end of globalization and the retrenchment of banking industry are the same thing. There are some things that can't be exp/imported. Maybe we just got to the point where it didn't make sense to order moules marinieres from Brussels!? ..."
    "... You forget the third leg - reducing the price of labour for services via immigration of labour from poorer countries. On top of the supply-and-demand effects, it reduces social solidarity (see Robert Putnam) - of which trades union membership and activity is one indicator. It's a win-win for capital. ..."
    Oct 11, 2016 | ftalphaville.ft.com
    10 comments
    According to strategists Bhanu Baweja, Manik Narain and Maximillian Lin the elasticity of trade to GDP - a measure of wealth creating globalisation - rose to as high as 2.2. in the so-called third wave of globalisation which began in the 1980s. This compared to an average of 1.5 since the 1950s. In the post-crisis era, however, the elasticity of trade has fallen to 1.1, not far from the weak average of the 1970s and early 1980s but well below the second and third waves of globalisation.

    ... ... ...

    The anti-globalist position has always been simple. Global trade isn't a net positive for anyone if the terms of trade relationships aren't reciprocal or if the trade exists solely for the purpose of taking advantage of undervalued local resources like labour or commodities whilst channeling rents/profits to a single central beneficiary. That, they have always argued, makes it more akin to an imperialistic relationship than a reciprocal one.

    If the latest wave of "globalisation" is mostly an expression of American imperialism, then it does seem logical it too will fade as countries wake-up to the one-sided nature of the current global value chains in place.

    Back in the first wave of globalisation, of course, much of the trade growth was driven by colonial empires taking advantage of cheap commodity resources abroad in a bid to add value to them domestically. When these supply chains unravelled, that left Europe short of commodities but long industrial capacity - a destabilising imbalance which coincided with two world wars.

    Simplistically speaking, resource rich countries at this point were faced with only two options: industrialising on their own autonomous terms or be subjugated by even more oppressive imperialist forces, which had even grander superiority agendas than their old colonial foes. That left those empires boasting domestic industrial capacity but lacking natural resources of their own, with the option of fighting to defend the rights of their former colonies in the hope that the promise of independence and friendly future knowledge exchanges (alongside military protection) would be enough to secure resource access from then on. But if the third globalisation wave is mostly about taking advantage of cheap labour not commodities - whilst simultaneously reducing industrial capacity at home - today's global imbalances could result in a very different type of correction (something which may or may not be happening now).

    The immediate consequence may be the developed world's desire to engage in significant industrial on-shoring.

    But while reversing the off-shoring trend may boost productivity in nations like the US or even in Europe, it's also likely to reduce demand for mobile international capital as a whole. As UBS notes, global cross border capital flows are already decelerating significantly as a share of GDP post-crisis, and the peak-to-trough swing in capital inflows to GDP over the past ten years has been much more dramatic in developed markets than in emerging ones:

    Related likes:
    How do you solve a problem like de-globalisation? – FT Alphaville
    As goes correspondent banking, so goes globalisation – FT Alphaville
    There is a war for capital coming, says UBS – FT Alphaville
    Prepare for the Post Pax-Americana era, says Citi – FT Alphaville

    Refractious

    To note, in China trade as a % of GDP fell from 65% in 2006 to 42% in 2014. The relationship between trade and GDP is in reality more variable than is usually claimed.

    Knockmacool

    I'm not convinced the end of globalization and the retrenchment of banking industry are the same thing. There are some things that can't be exp/imported. Maybe we just got to the point where it didn't make sense to order moules marinieres from Brussels!?

    labantall

    "if the third globalisation wave is mostly about taking advantage of cheap labour not commodities - whilst simultaneously reducing industrial capacity at home"

    You forget the third leg - reducing the price of labour for services via immigration of labour from poorer countries. On top of the supply-and-demand effects, it reduces social solidarity (see Robert Putnam) - of which trades union membership and activity is one indicator. It's a win-win for capital.

    Terra_Desolata 5pts Featured
    11 hours ago

    The simple problem with globalization is that it was based off economic views which looked at things in aggregate - but people are individuals, not aggregates. "On average, GDP per person has gone up" doesn't do anything for the person whose income has gone down. "Just think about all the people in China who are so much better off than they used to be" isn't going to do much for an American or European whose standard of living has slipped from middle class to working class to government assistance.

    "Redistribution" is routinely advertised as the solution to all of this. I leave it as an exercise to the reader to figure out how to redistribute wealth from the areas that have prospered the most (Asia, particularly China) to the individuals (primarily in the West) who have lost the most. In the absence of any viable redistribution scheme, though, I suspect the most likely outcome will be a pulling back on globalization.

    Meh... 5pts Featured
    11 hours ago

    @ Terra_Desolata The aggregates also do apply to countries - i.e. the US on aggregate has benefited from globalisation, but median wages have been stagnant in real terms, meaning that the benefits of globalisation have not been well distributed across the country (indeed, companies like Apple have benefited hugely from reducing the costs of production, while you could make the case that much of the benefits of lower production costs have been absorbed into profit margins).

    That suggests that redistribution can occur at the country level, rather than requiring a cross-border dimension.

    Terra_Desolata 5pts Featured
    8 hours ago
    @ Meh... @ Terra_Desolata Yes, there has been uneven distribution of income within countries as well as between them - but as the Panama Papers revealed, in a world of free movement of capital, incomes can also move freely between borders. (See: Apple.) While the U.S. has lower tolerance than Europe and Asia for such games, any attempts at redistribution would necessarily include an effort to keep incomes from slipping across national borders, which would have the same effect: a net reduction in globalization.

    [Oct 09, 2016] Economic Recovery Feels Weak Because the Great Recession Hasnt Really Ended

    Notable quotes:
    "... The banking and corporate elites certainly have a problem. The agenda for many decades has been to steal and rape enough from the 99% to maintain positive balance sheets and earnings per share. ..."
    "... Fewer and fewer of the 99% can now afford to pay for the promoted goods and services. It has reached a tipping point. Name one major bank that could afford to mark-to-mark its balance sheet assets. Name one S&P corporation that has shown solid earnings growth absent stock buybacks. And from here on, it only gets worse. ..."
    Oct 09, 2016 | www.nakedcapitalism.com
    cnchal October 9, 2016 at 9:11 am

    Global debt has now reached about a hundred and fifty-two trillion dollars . This includes government debt, household debt, non-financial firms' debt. What does all this debt mean for the global financial system and for everyday people here, Michael?

    That works out to only USD $20,540 for every man, woman and child on the planet. I'm sure the debt serfs can take double or triple that.

    a different chris October 9, 2016 at 10:03 am

    Yup, barely over 2 million dollars per 1 percenter. You can barely buy a passable vacation mansion for that, let alone staff it with peons. C'mon, guys, work harder for (and borrow more from) your betters!

    apber October 9, 2016 at 9:50 am

    The banking and corporate elites certainly have a problem. The agenda for many decades has been to steal and rape enough from the 99% to maintain positive balance sheets and earnings per share.

    It has worked too well, but pure math has a way of biting the 1% in the ass.

    Fewer and fewer of the 99% can now afford to pay for the promoted goods and services. It has reached a tipping point. Name one major bank that could afford to mark-to-mark its balance sheet assets. Name one S&P corporation that has shown solid earnings growth absent stock buybacks. And from here on, it only gets worse.

    [Oct 09, 2016] Meanwhile, simmering on the back burner id Deutsche Bank

    Oct 09, 2016 | www.nakedcapitalism.com

    Jim Haygood October 9, 2016 at 9:31 am

    Meanwhile, simmering on the back burner:

    Deutsche Bank AG Chief Executive Officer John Cryan failed to reach an agreement with the U.S. Justice Department to resolve a years-long investigation into its mortgage bond dealings during a meeting in Washington Friday, Germany's Bild newspaper reported.

    Concerns about Deutsche Bank's ability to pay the $14 billion opening settlement bid from the Justice Department sent the lender's stock to a record low last month. The bank, which set aside 5.5 billion euros ($6.2 billion) for litigation at the end of June, may face additional penalties to wrap up other outstanding investigations.

    Cryan, a Briton who speaks fluent German, has sought for the last three weeks to reassure investors that Deutsche Bank can weather the formidable obstacles to its financial health.

    http://www.bloomberg.com/news/articles/2016-10-08/deutsche-bank-s-cryan-doesn-t-reach-accord-with-u-s-bild-says

    A bankster is haunting Europe.

    timbers October 9, 2016 at 9:36 am

    Germany's Schaeuble says too much talk on Deutsche Bank – Reuters

    The key word is "talk" . If you take this literally it makes perfect sense and Hillary would know what to do as this quote of her in the latest Wikileaks trove over at MoonofAlabama makes clear:

    *CLINTON SAYS YOU NEED TO HAVE A PRIVATE AND PUBLIC POSITION ON POLICY*
    Clinton: "But if everybody's watching, you know, all of the back room discussions and the deals, you know, then people get a little nervous, to say the least. So, you need both a public and a private position."

    Can't have the little people becoming nervous. Then they might start asking questions and want to know what their government is doing and start paying attention. Then they won't do their national duty and go shopping. Clinton will know how to continue the ponzi scheme of higher debt Michael Hudson talks about in the earlier link by saying one thing in public while doing another in private.

    Uahsenaa October 9, 2016 at 11:23 am

    German sources have him using the word Gerede , which is more like "chitchat" or "tittle tattle," meaning not just talk but idle talk. The headline of this Frankfurter Rundschau article also characterizes his comments a little differently: Idle Talk About Deutsche Bank Worries [literally "nerves"] Schäuble.

    The Reuters article is paraphrasing him correctly, mind you, but the use of Gerede / gereden casts the talk in a very particular light.

    timbers October 9, 2016 at 11:25 am

    Sorry, noticed later that this quote is prominent on NC

    [Oct 09, 2016] Trump angst looms over economic elite at IMF meetings

    Notable quotes:
    "... "In my lifetime I cannot remember anything like the scepticism about these values that we see today," said Suma Chakrabarti, president of the European Bank for Reconstruction and Development. ..."
    "... There was much discussion this week about the underlying causes of that scepticism - low growth, stagnant wages and other scars of the 2008 global financial crisis - together with calls for governments to do more to ensure the benefits of globalisation are distributed more widely. ..."
    "... Lou Jiwei, China's finance minister, told reporters on Friday, the current "political risks" would in the immediate future lead only to "superficial changes" for the global economy. But underlying them was a deeper trend of "deglobalisation". ..."
    Oct 09, 2016 | www.ft.com
    The world's economic elite spent this week invoking fears of protectionism and the existential crisis facing globalisation

    .... ... ...

    Mr Trump has raised the possibility of trying to renegotiate the terms of the US sovereign debt much as he did repeatedly with his own business debts as a property developer. He also has proposed imposing punitive tariffs on imports from China and Mexico and ripping up existing US trade pacts.

    ... ... ...

    "Once a tariff has been imposed on a country's exports, it is in that country's best interest to retaliate, and when it does, both countries end up worse off," IMF economists wrote.

    It is not just angst over Mr Trump. There are similar concerns over Brexit and the rise of populist parties elsewhere in Europe. All present their own threats to the advance of the US-led path of economic liberalisation pursued since Keynes and his peers gathered at Bretton Woods in 1944.

    "In my lifetime I cannot remember anything like the scepticism about these values that we see today," said Suma Chakrabarti, president of the European Bank for Reconstruction and Development.

    There was much discussion this week about the underlying causes of that scepticism - low growth, stagnant wages and other scars of the 2008 global financial crisis - together with calls for governments to do more to ensure the benefits of globalisation are distributed more widely.

    Lou Jiwei, China's finance minister, told reporters on Friday, the current "political risks" would in the immediate future lead only to "superficial changes" for the global economy. But underlying them was a deeper trend of "deglobalisation".

    ... ... ...

    [Oct 09, 2016] The Week Globalists Started to Panic

    Notable quotes:
    "... Weak global trade, fears that the U.K. is marching towards a hard Brexit , and polls indicating that the U.S. election remains a tighter call than markets are pricing in have led a bevy of analysts to redouble their warnings that a backlash over globalization is poised to roil global financial markets-with profound consequences for the real economy and investment strategies. ..."
    "... From the economists and politicians at the annual IMF meeting in Washington to strategists on Wall Street trying to advise clients, everyone seems to be pondering a future in which cooperation and global trade may look much different than they do now. ..."
    "... "The main risk with potentially tough negotiating tactics is that trade partners could panic, especially if global coordination evaporates." ..."
    Oct 09, 2016 | www.bloomberg.com
    Weak global trade, fears that the U.K. is marching towards a hard Brexit , and polls indicating that the U.S. election remains a tighter call than markets are pricing in have led a bevy of analysts to redouble their warnings that a backlash over globalization is poised to roil global financial markets-with profound consequences for the real economy and investment strategies.

    From the economists and politicians at the annual IMF meeting in Washington to strategists on Wall Street trying to advise clients, everyone seems to be pondering a future in which cooperation and global trade may look much different than they do now.

    Brexit

    Suggestions that the U.K. will prioritize control over its migration policy at the expense of open access to Europe's single market in negotiations to leave the European Union-a strategy that's being dubbed a "hard Brexit"-loomed large over global markets. The U.K. government is "strongly supportive of open markets, free markets, open economies, free trade," said Chancellor of the Exchequer Philip Hammond during a Bloomberg Television interview in New York on Thursday. "But we have a problem-and it's not just a British problem, it's a developed-world problem-in keeping our populations engaged and supportive of our market capitalism, our economic model."

    Trade

    Citing the rising anti-trade sentiment, analysts from Bank of America Merrill Lynch warned that "events show nations are becoming less willing to cooperate, more willing to contest," and a backlash against inequality is likely to trigger more activist fiscal policies. Looser government spending in developed countries-combined with trade protectionism and wealth redistribution-could reshape global investment strategies, unleashing a wave of inflation, the bank argued, amid a looming war against inequality.

    U.S. Treasury Secretary Jack Lew did his part to push for more openness. During an interview in Washington on Thursday, he said that efforts to boost trade, combined with a more equitable distribution of the fruits of economic growth, are key to ensuring U.S. prosperity. Rolling back on globalization would be counterproductive to any attempt to boost median incomes, he added.

    Trump

    Without mentioning him by name, Lew's comments appeared to nod to Donald Trump, who some believe could take the U.S. down a more isolationist trading path should he be elected president in November. "The emergence of Donald Trump as a political force reflects a mood of growing discontent about immigration, globalization and the distribution of wealth," write analysts at Fathom Consulting, a London-based research firm. Their central scenario is that a Trump administration might be benign for the U.S. economy. "However, in our downside scenario, Donald Dark, global trade falls sharply and a global recession looms. In this world, isolationism wins, not just in the U.S., but globally," they caution.

    Analysts at Standard Chartered Plc agree that the tail risks of a Trump presidency could be significant. "The main risk with potentially tough negotiating tactics is that trade partners could panic, especially if global coordination evaporates." They add that business confidence could take a big hit in this context. "The global trade system could descend into a spiral of trade tariffs, reminiscent of what happened after the Smoot-Hawley tariff of 1930 , and ultimately a trade war, possibly accompanied by foreign-exchange devaluations; this would be a 'lose-lose' deal for all."

    Market participants are also concerned that populism could take root under a Hillary Clinton administration. "We believe the liberal base's demands on a Clinton Administration could lead to an overly expansive federal government with aggressive regulators," write analysts at Barclays Plc. "If the GOP does not unify, Clinton may expand President Obama's use of executive authority to accomplish her goals."

    [Oct 09, 2016] One percent of total US electricity usage goes to indoor cannabis cultivation, nearly 10 pct of California household electricity. Pretty amazing.

    Oct 09, 2016 | www.nakedcapitalism.com
    Dogstar October 7, 2016 at 5:05 pm

    One percent of total US electricity usage goes to indoor cannabis cultivation, nearly 10 pct of California household electricity. Pretty amazing.

    hunkerdown October 7, 2016 at 9:05 pm

    According to The Oregonian, Colorado's numbers are more like 2% of existing statewide demand and 45% of new statewide demand. Calilfornia's numbers could be as high as they are due to secrecy and concealment requirements (dummy loads, HVAC, etc).

    [Oct 08, 2016] Bond king Jeffrey Gundlach's recession indicator was triggered this morning

    Notable quotes:
    "... During a panel discussion at the New York Historical Society back in May, the Doubleline Capital CEO revealed that one of his top three recession indicators is when the unemployment rate breaches its 12-month moving average. ..."
    "... High-quality bonds perform better in recessions than in expansions. Treasuries love recessions. The 10-year T-note returned an eye-popping 17.7% in the crisis year of 2008, when Treasuries were the last safe harbor on planet Earth. ..."
    Oct 07, 2016 | www.nakedcapitalism.com

    Bond king Jeffrey Gundlach's recession indicator was triggered this morning:

    During a panel discussion at the New York Historical Society back in May, the Doubleline Capital CEO revealed that one of his top three recession indicators is when the unemployment rate breaches its 12-month moving average.

    September's non-farm payrolls report showed that the unemployment rate in the U.S. ticked up to 5 percent, while the 12-month moving average held steady at 4.9 percent.

    "This indicator is a necessary, but not sufficient, sign of a coming recession," wrote Gundlach in an email to Bloomberg. "It is worth factoring into economic analysis but not a reason for sudden alarm."

    http://www.bloomberg.com/news/articles/2016-10-07/one-of-jeff-gundlach-s-favorite-recession-indicators-just-got-triggered

    This indicator briefly gave false positives in 1976, 1985, 1986, 1995, 1996, and 1998. So as Gundlach says, it's not definitive. No single indicator is.

    Nevertheless, if the unemployment rate carries on rising above 5.0 percent this autumn, it would get my attention.

    High-quality bonds perform better in recessions than in expansions. Treasuries love recessions. The 10-year T-note returned an eye-popping 17.7% in the crisis year of 2008, when Treasuries were the last safe harbor on planet Earth.

    MyLessThanPrimeBeef October 7, 2016 at 3:36 pm

    My personal economy has been slow this year. That I know for sure.

    [Oct 08, 2016] Mankiw should be the lead negotiator for the administration, explaining to the dining hall workers why they're paid what they're worth, and no more.

    Oct 08, 2016 | www.nakedcapitalism.com
    allan October 7, 2016 at 3:17 pm

    "Harvard, In Theory and Practice"

    Mankiw should be the lead negotiator for the administration, explaining to the dining hall workers why they're paid what they're worth, and no more.
    Maybe he could throw in e-access codes to his textbook as a sweetener.

    cnchal October 7, 2016 at 6:20 pm

    When the great crime of this millennium happened and Jabba the Hut was in charge of Harvaaaaard, Jabba was getting paid millions to lose billions. Too bad he wasn't paid tens of millions to increase productivty and lose tens of billions, wiping the fountainhead of corruption out.

    NY Union Guy October 7, 2016 at 4:16 pm

    RE: Harvard, In Theory and Practice

    This is absolutely deplorable! These folks had to strike for 35K/yr at rich-ass Harvard? Unreal.

    Why is it that White Collar types have such contempt for Blue Collar people?

    I'm sick and tired of being looked down upon, made fun of, and laughed at because I'm not an office drone. I can't stand how these jokers refer to themselves as "professionals" all the damned time too, as if the rest of us are a bunch of amateurs, blathering all the goddamned time about free market this, free market that, this goodthink cause, that goodthink cause, union bad, gov't bad, private sector good, yada yada.

    jypsi October 7, 2016 at 4:49 pm

    > Why is it that White Collar types have such contempt for Blue Collar people?

    It's an inferiority complex. At some level, every office drone knows that they are completely useless.

    Katniss Everdeen October 7, 2016 at 6:04 pm

    Absolutely–an inferiority complex. It's why so many white collar types drive pick-up trucks. Makes them look like they know how to do something useful.

    polecat October 7, 2016 at 6:30 pm

    …the tell is there's nary a scratch on the bed liner !

    Kurt Sperry October 7, 2016 at 7:27 pm

    Yes, the perfectly unscratched pick-up truck more than a year old. It's such an epic fail because it's "girly" and they were going instead for "manly". Either is, no doubt, a fine thing, but not when epically fail.

    cnchal October 7, 2016 at 6:58 pm

    Lots of times it's because they have motorized entertainment that only a truck can haul.

    polecat October 7, 2016 at 8:56 pm

    well ..it's 'entertainment' until they break something …. like their body !!

    MUST GO FASTER ……

    cnchal October 7, 2016 at 9:51 pm

    Soon the elite will have the race track option for their supercars, an AV version of track lapping where they strap themselves into the driver's seat and let the car scare the crap out of them.

    [Oct 08, 2016] Krugman is an abhorrent neoliberal hack and Hillary stooge

    Notable quotes:
    "... Krugman is such a deplorable hack. I know we are supposed to accept bribe-taking politicians and the economy run by looting robber barons. But can't we even have a goddamn fourth estate? ..."
    "... The way Krugman murders journalism ethics by outright campaigning for one of the most corrupt politicians in American history is outrageous. Barfing up her disgusting campaign memes verbatim as if he's coordinating his columns with her war room. ..."
    "... If you're a scientist you would know that economics does not remotely resemble a science. One familiar with the history of math and science will notice that their development (based on discovered facts) forms a tree-like structure. One discovery branches out to more discoveries. The growth is therefore exponential. ..."
    Oct 08, 2016 | economistsview.typepad.com
    JohnH -> pgl... , Friday, October 07, 2016 at 06:44 PM
    Sure...Krugman will occasionally pay lip service to green energy.

    The problem is that 'liberal' economists tend to keep separate silos for green energy and infrastructure.

    Question is, why do they refuse to connect the dots between climate change mitigation, green energy, fiscal stimulus, and lots of jobs? And why do they prioritize more road and bridges, which will only make climate change worse?

    Sure sounds like the usual hypocrisy to me...

    nikbez -> JohnH... , Saturday, October 08, 2016 at 03:45 PM
    Krugman is an abhorrent neoliberal hack (as well as Hillary stooge).

    Who actually understand very little about climate change clearly being non-specialist without any training of physics and geophysics. He is a second rate neoclassical economist with penchant for mathiness (and a very talented writer).

    The key question here is Clinton warmongering and the threat of nuclear war with Russia. Washington neocon chichenhawks became recently realty crazy. Obama looks completely important and does not control anything.

    I think this is more immediate threat then climate change.

    Oil depletion (which already started and will be in full force in a couple of decades) might take care about climate change as period of "cheap oil" (aka "oil age") probably will last less then 100 years and as such is just a blip in Earth history.

    End of cheap oil also might lead to natural shrinking of human population -- another factor in the global climate change and a threat to natural ecosystems.

    supersaurus : , Friday, October 07, 2016 at 09:56 AM
    @Sandwichman: it isn't illegal to be an idiot in this country (USA), hence "almost".
    Sandwichman -> supersaurus... , Friday, October 07, 2016 at 10:00 AM
    It is, however, often illegal to not be an idiot.
    Ron Waller -> pgl... , Friday, October 07, 2016 at 12:29 PM
    Hillary is the fracking Queen. Claiming she's a champion of the environment is as ridiculous portraying Donald Trump a feminist.

    Obomba is another pretender on the environment. The Paris Agreement commits to absolutely nothing but more talk at a future time. China signed on and is still keeping its commitment to do absolutely nothing to reduce emissions until 2030. (By the time the West has exported the lion share of its emissions to the country in a pointless GHG emissions shell game; emission per capita have skyrocketed since 2002! a 25% increase!)

    Krugman is such a deplorable hack. I know we are supposed to accept bribe-taking politicians and the economy run by looting robber barons. But can't we even have a goddamn fourth estate?

    The way Krugman murders journalism ethics by outright campaigning for one of the most corrupt politicians in American history is outrageous. Barfing up her disgusting campaign memes verbatim as if he's coordinating his columns with her war room.

    So to all the pretend liberals out there who offer the people nothing more than more corruption, lies, war-profiteering and public trust liquidation: you deserve Trump. And I pray that you get him. (After him, a New Deal; and the 'me generation,' the Void.)

    pgl -> DrDick... , Friday, October 07, 2016 at 12:44 PM
    I think he consumed too much of the byproduct from fracking. Dirty dangerous business.
    Ron Waller -> pgl... , Friday, October 07, 2016 at 01:24 PM
    You two must be economists. Never anything intelligent to say.
    DrDick -> Ron Waller ... , Friday, October 07, 2016 at 01:39 PM
    Actually, I am a cultural anthropologist. I must say that there are no signs of intelligent life on you planet.
    Ron Waller -> DrDick... , Friday, October 07, 2016 at 02:40 PM
    If you're a scientist you would know that economics does not remotely resemble a science. One familiar with the history of math and science will notice that their development (based on discovered facts) forms a tree-like structure. One discovery branches out to more discoveries. The growth is therefore exponential.

    Economic history does not follow this pattern.

    With science there are paradigm shifts that occur with groundbreaking discoveries like the theories of relativity and quantum mechanics. The Friedmanian paradigm shift was founded on jettisoning all the enormously successful work Keynes accomplished and digging up failed 19th century ideology, repeating disastrous history.

    Even psychology follows the pattern. Although it began with a lot of unsubstantiated Aristotelian philosophizing, it was a starting point from which a significant body of definite knowledge and medical treatments developed. A real social science. (Not perfect. It was recently discovered that about 50% of published psychological experiments were not reproducible.)

    As an anthropologist you should know about cliques and group-think. Have an inkling of how corruption could gradually develop and spread among upper-echelon cliques to the point where the government, the economy, the courts and the news media become captured by the upper class. Understand how cowards would rather look the other way than take a stand and deal with it: "see no evil, hear no evil, speak no evil."

    DrDick -> Ron Waller ... , Friday, October 07, 2016 at 04:28 PM
    As an anthropologist, I can assert with confidence that you are babbling about things you do not really understand at all. I have issues with a lot of economics, but you are completely incoherent.
    Ron Waller -> DrDick... , Friday, October 07, 2016 at 05:21 PM
    Completely incoherent? Then it should be easy enough for you to tear apart what I wrote. It was certainly easy enough for me to tear into Krugman's crass political pandering. But all you got is lame generalizations. Stock insults that could be said about anything.

    What issues do you have with "a lot of economics?" I bet you can't come up with anything. Come on. Out with it! Say something intelligent about anything, if you are at all capable, Mr. Dick. I have yet to read anything from you that indicates you have any knowledge about anything.

    DrDick -> Ron Waller ... , Saturday, October 08, 2016 at 06:36 AM
    It is Dr. Dick, since I have a Ph.D. If you ever read the comments on this blog, you would know full well what those issues are, since I have raised them here many times. For a start the assumption of "rational actors" (only partially true), the assumption of economic maximization (people maximize many different things which affect their economic choices), and the assumption of "rational markets" (this ignores pervasive information assymetry and active deceit).
    nikbez -> DrDick... , Saturday, October 08, 2016 at 03:48 PM
    "I must say that there are no signs of intelligent life on you planet."

    That's good :-) Thank you --

    [Oct 07, 2016] Facing up to income inequality by Jeffrey D. Sachs

    Notable quotes:
    "... yes rates were higher - but the deductions were huge - if you were wealthy - you could easily buy tax shelters that would offset your income. ..."
    "... Pardon me, but this good citizen, Nossir, is shoveling a load of typical BS. We must suffer inequality in good cheer, he or she posits, and tens of millions of us must struggle to put food on our children's tables, or else the all powerful "Investors" will be angry with us and stop being so kind to us. ..."
    "... The "Investors" who rule over us, are parasites who are sucking the blood out of our nation, but to their way of thinking, they are kind and magnanimous as they deign to exploit us. ..."
    "... look it up nossir. Capital gains tax are not north of 50% even in Denmark Most gains there are taxed at 27%. It's earned income taxes combined with VAT that add up to around 55% in Denmark. ..."
    "... For those tax rates they get free and/or subsidized education through university, free health care for all, an infrastructure that puts ours to shame, a vastly superior mass transit system throughout the nation, guaranteed maternity/paternity leave of up to 2 years with income provided by government; hugely subsidized childcare for those too young for kindergarten, etc. etc. ..."
    "... Median household income is no indicator of prosperity. If adult children can't make enough money to live apart from their parents, even if they take a minimum wage job the median household income goes up. Per capita income is a much more truthful indicator of a country's prosperity. Obama's (and Clinton's) economic policies hurt the middle class; why do you think "income inequality" has gotten worse in the past eight years - and why Hillary won't release the texts of her Wall Street speeches? ..."
    Oct 02, 2016 | The Boston Globe

    The Census BurEAU recently announced a heartening 5 percent gain in the median household income between 2014 and 2015, the largest one-year gain on record. Yet a look at the longer-term trends offers a sobering perspective. The jump in household income merely helps to make up for lost ground; the median earnings in 2015 were actually lower than back in 1999 - 16 years ago.

    While household median incomes have stagnated since the late 1990s, the inflation-adjusted earnings of poorer households have stagnated for even longer, roughly 40 years. Meanwhile, households at or near the top of the income distribution have enjoyed sizeable increases of living standards. The result is a stark widening of the gap between rich and poor households.

    There is perhaps no issue in America more contentious than income inequality. Everybody has a theory as to why the gap between rich and poor has widened and what should be done - if anything - to close it. A full explanation should help us understand why the United States stands out for having an especially high and rising inequality of income.

    There are three main factors at play: technology, trade, and politics. Technological innovations have raised the demand for highly trained workers, thereby pushing up the incomes of college-educated workers relative to high-school-educated workers. Global trade has exposed the wages of industrial workers to tough international competition from workers at much lower pay scales. And our federal politics has tended, during the past 35 years, to weaken the political role of the working class, diminish union bargaining power, and cap or cut the government benefits received by working-class families.

    Consider technology. Throughout modern history, ingenious machines have been invented to replace heavy physical labor. This has been hugely beneficial: Most (though not all) American workers have been lucky to escape the hard toil, drudgery, dangers, and diseases of heavy farm work, mining, and heavy industry. Farm jobs have been lost, but with some exceptions, their backbreaking drudgery has been transformed into office jobs. Farm workers and miners combined now account for less than 1 percent of the labor force.

    Yet the office jobs required more skills than the farm jobs that disappeared. The new office jobs needed a high school education, and, more recently, a college degree. So who benefited? Middle-class and upper-class kids fortunate enough to receive the education and skills for the new office jobs. And who lost? Mostly poorer kids who couldn't afford the education to meet the rising demands for skilled work.

    Now the race between education and technology has again heated up. The machines are getting smarter and better faster than ever before - indeed, faster than countless households can help their kids to stay in the job market. Sure, there are still good jobs available, as long as you've graduated with a degree in computer science from MIT, or at least a nod in that direction.

    Globalization is closely related to technology and, indeed, is made possible by it. It has a similar effect, of squeezing incomes of lower-skilled workers. Not only are the assembly-line robots competing for American jobs; so too are the lower-waged workers half a world away from the United States. American workers in so-called "traded-goods" sectors, meaning the sectors in direct competition with imports, have therefore faced an additional whammy of intense downward pressure on wages.

    For a long time, economists resisted the public's concern about trade depressing wages of lower-skilled workers. Twenty-two years ago I coauthored a paper arguing that rising trade with China and other low-wage countries was squeezing the earnings of America's lower-skilled workers. The paper was met with skepticism. A generation later, the economics profession has mostly come around to recognize that globalization is a culprit in the rise of income inequality. This doesn't mean that global trade should be ended, since trade does indeed expand the overall economy. It does, however, suggest that open trade should be accompanied by policies to improve the lot of lower-wage, lower-skilled workers, especially those directly hit by global trade but also those indirectly affected.

    MANY ANALYSES OF rising income inequality stop at this point, emphasizing the twin roles of technology and trade, and perhaps debating their relative importance. Yet the third part of the story - the role of politics - is perhaps the most vital of all. Politics shows up in two ways. First, politics helps to determine the bargaining power of workers versus corporations: how the overall pie is divided between capital and labor. Second, politics determines whether the federal budget is used to spread the benefits of a rising economy to the workers and households left behind.

    Unfortunately, US politics has tended to put the government's muscle on behalf of big business and against the working class. Remember the Reagan revolution: tax cuts for the rich and the companies, and union-busting for the workers? Remember the Clinton program to "end welfare as we know it," a program that pushed poor and working-class moms into long-distance commuting for desperately low wages, while their kids were often left back in dangerous and squalid conditions? Remember the case of the federal minimum wage, which has been kept so low for so long by Congress that its inflation-adjusted value peaked in 1968?

    There is no deep mystery as to why federal politics has turned its back on the poor and working class. The political system has become "pay to play," with federal election cycles now costing up to $10 billion, largely financed by the well-heeled class in the Hamptons and the C-suites of Wall Street and Big Oil, certainly not the little guy on unemployment benefits. As the insightful political scientist Martin Gilens has persuasively shown, when it comes to federal public policy, only the views of the rich actually have sway in Washington.

    So in the end, the inequality of income in the United States is high and rising while in other countries facing the same technological and trade forces, the inequality remains lower, and the rise in inequality has tended to be less stark. What explains the difference in outcomes? In the other countries, democratic politics offers voice and representation to average voters rather than to the rich. Votes and voters matter more than dollars.

    To delve more deeply into the comparison between the United States and other countries, it is useful to measure the inequality of income in each country in two different ways. The first way measures the inequality of "market incomes" of households, that is, the income of households measured before taxes and government benefits are taken into account. The second measures the inequality of "disposable income," taking into account the taxes paid and transfers received by the household.

    The difference between the two measures shows the extent of income redistribution achieved through government taxation and spending. In all of the high-income countries, the inequality of market income is greater than the inequality of disposable income. The taxes paid by the relatively rich and the transfers made to the relatively poor help to offset some of the inequality of the marketplace.

    THE ACCOMPANYING CHART offers just this comparison for the high-income countries. For each country, two measures of inequality based on the "Gini coefficient" are calculated. The Gini coefficient is a measure of income inequality that varies between 0 (full-income equality across households) and 1 (full-income inequality, in which one household has all of the income). Countries as a whole tend to have a Gini coefficient of disposable income somewhere between 0.25 (low inequality) and 0.60 (very high inequality).

    In the figure, we see the two values of the Gini coefficient for each country: a higher value (more inequality) based on market income and a lower value (less inequality) based on disposable income (that is, after taxes and transfers). We can see that in every country, the tax-and-transfer system shifts at least some income from the rich to the poor, thereby pushing down the Gini coefficient. Yet the amount of net redistribution is very different in different countries, and is especially low in the United States.

    Compare, for example, the United States and Denmark. In the United States, the Gini coefficient on market income is a very high 0.51, and on disposable income, 0.40, still quite high. In Denmark, by comparison, the Gini coefficient on market income is a bit lower than the United States, at 0.43. Yet Denmark's Gini coefficient on disposable income is far lower, only 0.25. America's tax-and-transfer system reduces the Gini coefficient by only 0.11. Denmark's tax-and-transfer system reduces the Gini coefficient by 0.18, half-again as high as in the United States.

    How does Denmark end up with so much lower inequality of disposable income from its budget policies? Denmark taxes more heavily than the United States and uses the greater tax revenue to provide free health care, child care, sick leave, maternity and paternity leave, guaranteed vacations, free university tuition, early childhood programs, and much more. Denmark taxes a hefty 51 percent of national income and provides a robust range of high-quality public services. The United States taxes a far lower 31 percent and offers a rickety social safety net. In the United States, people are left to sink or swim. Many sink.

    So, many Americans would suspect, Denmark is miserable and being crushed by taxes, right? Well, not so right. Denmark actually comes out number 1 in the world happiness rankings, while the United States comes in 13th. Denmark's life expectancy is also higher, its poverty lower, and its citizens' trust in government and in each other vastly higher than the equivalent trust in the United States.

    SO HEREIN LIES a key lesson for the United States. America's inequality of disposable income is the highest among the rich countries. America is paying a heavy price in lost well-being for its high and rising inequality of income, and for its failure to shift more benefits to the poor and working class.

    We have become a country of huge distrust of government and of each other; we have become a country with a huge underclass of people who can't afford their prescription drugs, tuition payments, or rents or mortgage payments. Despite a roughly threefold increase in national income per person over the past 50 years, Americans report to survey takers no higher level of happiness than they did back in 1960. The fraying of America's social ties, the increased loneliness and distrust, eats away at the American dream and the American spirit. It's even contributing to a rise in the death rates among middle-aged, white, non-Hispanic Americans, a shocking recent reversal of very long-term trends of rising longevity.

    The current trends will tend to get even worse unless and until American politics changes direction. As I will describe in a later column, the coming generation of yet smarter machines and robots will claim additional jobs among the lower-skilled workers and those performing rote activities. Wages will be pushed lower except for those with higher training and skills. Capital owners (who will own the robots and the software systems to operate them) will reap large profits while many young people will be unable to find gainful employment. The advance in technology could thereby contribute to a further downward spiral in social cohesion.

    That is, unless we decide to do things differently. Twenty-eight countries in the Organization for Economic Cooperation and Development have lower inequality of disposable income than the United States, even though these countries share the same technologies and compete in the same global marketplace as the United States. These income comparisons underscore that America's high inequality is a choice, not an irreversible law of the modern world economy.

    Jeffrey D. Sachs is University Professor and Director of the Center for Sustainable Development at Columbia University, and author of "The Age of Sustainable Development."

    RZwarich 10/03/16 07:08 AM

    The "Gini coefficient" is one of the worst, one of the least understandable, measures of inequality I've ever seen. I'm sure that it is a useful and scientifically accurate tool to economists who are trained in math and statistics, but to average people, these numbers are just so much 'mumbo jumbo'.

    It's rather like the exponentially based Richter scale for measuring earthquakes, (or the decibel scale for sound, or any exponentially based scale). Very few people understand that a Richter 6.1 earthquake is TWICE as strong as a Richter 6.0 quake, and that a Richter 7 quake is ten times as strong as a 6.0 quake.

    I would advise Dr. Sachs, and/or other economists trying to illustrate a measure of inequality in popular mass media, to find or devise some other 'measuring stick'.

    As for our good citizen Harry's relevance, try to consider that he is a grown man, (with grandchildren), who thinks that the old I.P Freeley joke is hilarious. (Harry Arm Pitts. Get it?)

    RZwarich 10/03/16 07:21 AM
    This good citizen posits the most basic precept of true democracy. True Democracy requires a moral agreement among citizens. "I will respect you, and your interests, if you will respect mine". Thus, following from this basic moral agreement, we each have an equal 'voice', and an equal vote, in support of our own interests.

    We are thus all connected, each to all, and all to each, in an agreement of mutually intertwined interests.

    The system we have now is an "every person for himself or herself" system. It is not based upon that moral agreement.

    Thus in our system, one person is not required, or even expected, to respect the interests of others. One person is allowed to have so much, that many do not have even enough to sustain a minimally dignified life.

    In the US today, 22 people, 22 individual citizens, (not even enough to fill the first 6 rows of a city bus), have as much wealth, combined between them, as 160 MILLION of their fellow citizens.

    It is surely no surprise that among those 160 MILLION are many millions (about 50-60) who suffer in the constant indignity of poverty, with tens of millions of children living in daily 'food insecurity'. (That means that though they may not be actually starving, they never know where their next meal is coming from, or when).

    Nossir 10/02/16 08:10 PM

    The fallacy of composition states that what works on a small scale - say in a country like Denmark - will not work everywhere, or more specifically, in a 17 trillion dollar economy like the United States. Investors will not invest the capital needed to maintain an economy of this size with tax rates north of 50%.

    megmuck 10/03/16 06:25 AM

    But they did for until the 1980's and the Reagan tax cuts. What happened to make Americans so much greedier 30 years ago?

    tsynchronous 10/03/16 07:18 AM

    I lived the economy of the late 1970's early 1980's - let's see - interest rates of 22% - being 1 of 25 individuals applying for a dishwasher job - running out of gasoline - sure - let's bring those days back.

    and yes rates were higher - but the deductions were huge - if you were wealthy - you could easily buy tax shelters that would offset your income.

    RZwarich 10/03/16 07:29 AM

    Pardon me, but this good citizen, Nossir, is shoveling a load of typical BS. We must suffer inequality in good cheer, he or she posits, and tens of millions of us must struggle to put food on our children's tables, or else the all powerful "Investors" will be angry with us and stop being so kind to us.

    This is the same line of "reasoning" that holds that when 'Investors" exploit the population of an underdeveloped country, paying slave level wages to people living in squalid poverty, they are being superbly magnanimous for "providing jobs".

    The "Investors" who rule over us, are parasites who are sucking the blood out of our nation, but to their way of thinking, they are kind and magnanimous as they deign to exploit us.

    Such is the sick psychology of the Ruling Classes. Such has it ever been, (and likely will ever be).

    Global Initiative 10/03/16 07:43 AM

    RZ.

    if only you were in charge, right? You'd make sure it was fair for everyone (including, of course, yourself?)

    bigfoot 201510/03/16 04:22 PM

    one of the greatest periods of growth in the United States was the 1950's. Top marginal tax rate was 90 percent.

    rwc2 10/03/16 07:46 PM

    look it up nossir. Capital gains tax are not north of 50% even in Denmark Most gains there are taxed at 27%. It's earned income taxes combined with VAT that add up to around 55% in Denmark.

    For those tax rates they get free and/or subsidized education through university, free health care for all, an infrastructure that puts ours to shame, a vastly superior mass transit system throughout the nation, guaranteed maternity/paternity leave of up to 2 years with income provided by government; hugely subsidized childcare for those too young for kindergarten, etc. etc.

    Considering my approximate 30% total tax rate, I'm pretty sure I spend/spent more than another 20% of my income on all the services provided by the Danish government (and by most of the rest of Europe, Canada, Australia, New Zealand). As a not an all insubstantial side benefit, there would be the joy of living in a society not beset by poverty, alienation and hatred. In fact, that additional tax rate seems a small price to pay I belief.

    And what's more, I don't even think the tax rate has to be that high here to provide those services if we stopped spending way, way too much on the military and our attempt to be world policeman.

    RZwarich10/03/16 07:33 AM

    This good citizen's heart seems to be in the right place, (generally speaking), but she or he is very confused.

    Per capita income does not measure income distribution.

    If 10 people have a per capita income of $1 million, we do not know if they each make $100k, or one makes $990,000, and the other nine split the other $10k.

    Suares23 10/02/16 08:46 PM

    Median household income is no indicator of prosperity. If adult children can't make enough money to live apart from their parents, even if they take a minimum wage job the median household income goes up. Per capita income is a much more truthful indicator of a country's prosperity. Obama's (and Clinton's) economic policies hurt the middle class; why do you think "income inequality" has gotten worse in the past eight years - and why Hillary won't release the texts of her Wall Street speeches?

    Suares2310/04/16 08:17 AM

    RZ, please note that my comment specified a country's prosperity, not individual prosperity. Plus, your example defines "average" prosperity, not "median" prosperity. As you note, "averages" explain very little; "median" incomes are a much more accurate indicator of individuals' prosperity.

    RZwarich 10/03/16 07:41 AM
    This is the 'religious' dogma of the Elite. Let's produce 'economic growth' and the benefits will trickle down to all. This dogma has been thoroughly proven top be a 'fairy tale' that never comes true.

    When 'economic growth occurs, the newly created wealth is distributed the same as the old amount of wealth. Most goes to the top. It does NOT "trickle down".

    Since the blood sucking pirates raped our nation, culminating in the economic collapse of 2008, the taxpayers 'bailed them out'. That's you and me, folks. We EACH paid to make these guys 'whole'.

    Ever since, we've had a decent amount of 'economic growth', but almost all of it has gone to those SAME blood sucking pirates.

    The good citizen is 100% correct that "Inequality of incomes is a necessary condition of a free market economy", but she or he is 100% wrong that in a free market economy "growing the economy raises more people up".

    Growing an economy only "raises more people up" if the "free market is regulated to produce an equitable (fair, NOT equal), distribution of wealth.

    [Oct 07, 2016] Noahpinion The new heavyweight macro critics

    Notable quotes:
    "... I got tired of lambasting macroeconomics a while ago, and the "macro wars" mostly died down in the blogosphere around when the recovery from the Great Recession kicked in. But recently, there have been a number of respected macroeconomists posting big, comprehensive criticisms of the way academic macro gets done. Some of these criticisms are more forceful than anything we bloggers blogged about back in the day! ..."
    "... First, there's Paul Romer's latest, " The Trouble With Macroeconomics ". The title is an analogy to Lee Smolin's book " The Trouble With Physics ". Romer basically says that macro (meaning business-cycle theory) has become like the critics' harshest depictions of string theory - a community of believers, dogmatically following the ideas of revered elders and ignoring the data. The elders he singles out are Bob Lucas, Ed Prescott, and Tom Sargent. ..."
    "... In response to the observation that the shocks [in DSGE models] are imaginary, a standard defense invokes Milton Friedman's (1953) methodological assertion from unnamed authority that "the more significant the theory, the more unrealistic the assumptions (p.14)." More recently, "all models are false" seems to have become the universal hand-wave for dismissing any fact that does not conform to the model that is the current favorite. ..."
    "... We [macroeconomists] tend to view research as being the process of posing a question and delivering a pretty precise answer to that question...The research agenda that I believe we need is very different. It's hugely messy work. We need...to build a more evidence-based modeling of financial institutions. We need...to learn more about how people actually form expectations. We need [to use] firm-based information about residual demand functions to learn more about product market structure. At the same time, we need to be a lot more flexible in our thinking about models and theory, so that they can be firmly grounded in this improved empirical understanding. ..."
    "... This is a somewhat misleading way of putting it, but it allows me to illustrate some important points about 'unrealistic' assumptions. In real world modelling in Physics 'unrealistic' assumptions are ubiquitous. What matters is not literal realism of assumptions but robustness.of conclusions. ..."
    "... Simplifying assumptions are context specific, ie ad hoc, and never axiomatic.The ad hoc nature of simplifying assumptions is a feature, not a bug as the above example illustrates. ..."
    "... Robustness is critical. As we move from our simplifying assumptions towards greater realism/precision, the conclusion should not change in any material way, and we use the simplifications because the gain in accuracy of the conclusions is not worth the added complexity and consequent loss of tractability in the model. ..."
    "... This is indeed excellent. The three criteria for evaluating assumptions/simplifications, the precise definition of ad hoc, and the crystal-clear example of point mass for orbits vs rotation. ..."
    "... So, we are witnessing a battle between a declining DSGE scam and ascending "Realistic assumptions" scam. ..."
    "... Both approaches are worthless, but I guess it will give an excuse to macroeconomists why they are useless: we just used the wrong paradigm, now we are switching to the new one. Just many more years of research is needed and we will be ready. Science!, as they say. ..."
    "... Science, IEHO, has three touchstones. Coherence - your model and its assumptions should not contradict each other or lead to contradictory conclusions. Consilience - a good theory has a broad reach for explaining reality. Consensus - a theory which is coherent and consilient should lead to a consensus among practicioners. It is only within a strong consensus that people can talk to each other and extend the field. ..."
    "... It appears that macro misses out on a number of these. ..."
    "... "Romer basically says that macro (meaning business-cycle theory)" ..."
    "... In either case, I think this is another big problem with macro, its obsession with business cycles as opposed to long-term thriving and prosperity. eg, Gerald Friedman got tied in knots by this; he was trying to use "stimulus" thinking and arguments to talk about about multi-decadal possibilities. ..."
    "... I'm fond of observing that in addition to "cargo cult science", macroeconomics has often been likened to a religion. What religions do when the mainstream becomes intolerable for one reason or another is schism. Then after a number of years what used to be the mainstream dies out and the former schismatics become the mainstream. ..."
    "... Psychology went through this kind of crisis some years ago when the scientists split off from the clinicians, and created the Association for Psychological Science to contrast with the clinically-oriented American Psychological Association (the APA is the one that publishes the unscientific but influential Diagnostic and Statistical Manual). ..."
    "... In order to be scientific, the standard method is to actually try predicting. Prediction is messy and provably fails to converge to any possible theory, but there are other authentic sciences that have this same theoretical limitation, like meteorology. This doesn't prevent meteorologists from constructing theories which make predictions that demonstrably get better and better year after year. ..."
    "... For twenty years Romer has been implying (and recently saying) that economists who don't accept endogenous growth theory have abandoned the canons of science and are either blind or indifferent to the truth. Over the same twenty years he seems to have produced very little theoretical work, while his targets have remained working economists. (Why, after all, should anyone continue to do theory, since Romer has discovered the truth?) ..."
    Oct 02, 2016 | noahpinionblog.blogspot.com
    I got tired of lambasting macroeconomics a while ago, and the "macro wars" mostly died down in the blogosphere around when the recovery from the Great Recession kicked in. But recently, there have been a number of respected macroeconomists posting big, comprehensive criticisms of the way academic macro gets done. Some of these criticisms are more forceful than anything we bloggers blogged about back in the day! Anyway, I thought I'd link to a couple here.

    First, there's Paul Romer's latest, " The Trouble With Macroeconomics ". The title is an analogy to Lee Smolin's book " The Trouble With Physics ". Romer basically says that macro (meaning business-cycle theory) has become like the critics' harshest depictions of string theory - a community of believers, dogmatically following the ideas of revered elders and ignoring the data. The elders he singles out are Bob Lucas, Ed Prescott, and Tom Sargent.

    Romer says that it's obvious that monetary policy affects the real economy, because of the Volcker recessions in the early 80s, but that macro theorists have largely ignored this fact and continued to make models in which monetary policy is ineffectual. He says that modern DSGE models are no better than old pre-Lucas Critique simultaneous-equation models, because they still take lots of assumptions to identify the models, only now the assumptions are hidden instead of explicit. Romer points to distributional assumptions, calibration, and tight Bayesian priors as ways of hiding assumptions in modern DSGE models. He cites an interesting 2009 paper by Canova and Sala that tries to take DSGE model estimation seriously and finds (unsurprisingly) that identification is pretty difficult.

    As a solution, Romer suggests chucking formal modeling entirely and going with more general, vague but flexible ideas about policy and the macroeconomy, supported by simple natural experiments and economic history.

    Romer's harshest zinger (and we all love harsh zingers) is this:

    In response to the observation that the shocks [in DSGE models] are imaginary, a standard defense invokes Milton Friedman's (1953) methodological assertion from unnamed authority that "the more significant the theory, the more unrealistic the assumptions (p.14)." More recently, "all models are false" seems to have become the universal hand-wave for dismissing any fact that does not conform to the model that is the current favorite.
    The noncommittal relationship with the truth revealed by these methodological evasions...goes so far beyond post-modern irony that it deserves its own label. I suggest "post-real."
    Ouch. He also calls various typical DSGE model elements names like "phlogiston", "aether", and "caloric". Fun stuff . (Though I do think he's too harsh on string theory, which often is just a kind of math that physicists do to keep themselves busy, and has no danger of hurting anyone, unlike macro theory.)

    Meanwhile, a few weeks earlier, Narayana Kocherlakota wrote a post called " On the Puzzling Prevalence of Puzzles ". The basic point was that since macro data is fairly sparse, macroeconomists should have lots of competing models that all do an equally good job of matching the data. But instead, macroeconomists pick a single model they like, and if data fails to fit the model they call it a "puzzle". He writes:

    To an outsider or newcomer, macroeconomics would seem like a field that is haunted by its lack of data...In the absence of that data, it would seem like we would be hard put to distinguish among a host of theories...[I]t would seem like macroeconomists should be plagued by underidentification...
    But, in fact, expert macroeconomists know that the field is actually plagued by failures to fit the data – that is, by overidentification.
    Why is the novice so wrong? The answer is the role of a priori restrictions in macroeconomic theory...
    The mistake that the novice made is to think that the macroeconomist would rely on data alone to build up his/her theory or model. The expert knows how to build up theory from a priori restrictions that are accepted by a large number of scholars...[I]t's a little disturbing how little empirical work underlies some of those agreed-upon theory-driven restrictions – see p. 711 of Lucas (JMCB, 1980) for a highly influential example of what I mean.
    In fact, Kocherlakota and Romer are complaining about much the same thing: the overuse of unrealistic assumptions. Basically, they say that macroeconomists, as a group, have gotten into the habit of assuming stuff that just isn't true. In fact, this is what the Canova and Sala paper says too, in a much more technical and polite way:
    Observational equivalence, partial and weak identification problems are widespread and typically produced by an ill-behaved mapping between the structural parameters and the coefficients of the solution.
    That just means that the model elements aren't actually real things.
    (This critique resonates with me. From day 1, the thing that always annoyed me about macro was how people made excuses for assumptions that were either unverifiable or just flatly contradictory to micro data. The usual excuse was the " pool player analogy " - the idea that the pieces of a model don't have to match micro data as long as the resulting model matches macro data. I'm not sure that's how Milton Friedman wanted his metaphor to be used, but that seems to be the way it does get used. And when the models didn't match macro data either, the excuse was "all models are wrong," which really just seems to be a way of saying "the modeler gets to choose which macro facts are used to validate his theory". It seemed that to a large extent, macro modelers were just allowed to do whatever they wanted, as long as their papers won some kind of behind-the-scenes popularity contest. But I digress.)
    So what seems to unite the new heavyweight macro critics is an emphasis on realism . Basically, these people are challenging the idea, very common in econ theory, that models shouldn't worry about being realistic. (Paul Pfleiderer is another economist who has recently made a similar complaint , though not in the context of macro.) They're not saying that economists need 100% perfect realism - that's the kind of thing you only get in physics, if anywhere. As Paul Krugman and Dani Rodrik have emphasized, even the people advocating for more realism acknowledge that there's some ideal middle ground. But if Romer, Kocherlakota, etc. are to be believed, macroeconomists aren't currently close to that optimal interior solution.


    Updates

    Olivier Blanchard is a bet less forceful, but he's definitely also one of the new heavyweight critics . Among his problems with DSGE models, at least as they're currently done, are 1. "unappealing" assumptions that are "at odds with what we know about consumers and firms", and 2. "unconvincing" estimation methods, including calibration and tight Bayesian priors. Sounds pretty similar to Romer.

    Meanwhile, Kocherlakota responds to Romer . He agrees with Romer's criticism of unrealistic macro assumptions, but he dismisses the idea that Lucas, Prescott, and Sargent are personally responsible for the problems. Instead, he says it's about the incentives in the research community. He writes:

    We [macroeconomists] tend to view research as being the process of posing a question and delivering a pretty precise answer to that question...The research agenda that I believe we need is very different. It's hugely messy work. We need...to build a more evidence-based modeling of financial institutions. We need...to learn more about how people actually form expectations. We need [to use] firm-based information about residual demand functions to learn more about product market structure. At the same time, we need to be a lot more flexible in our thinking about models and theory, so that they can be firmly grounded in this improved empirical understanding.
    Kocherlakota says that this isn't a "sociological" issue, but I think most people would call it that. Since journals and top researchers get to decide what constitutes "good" research, it seems to me that to get the changes in focus Kocherlakota wants, a sociological change is exactly what would be required.

    Kocherlakota now has another post describing how he thinks macro ought to be done . Basically, he thinks researchers - as a whole, not just on their own! - should start with toy models to facilitate thinking, then gather data based on what the toy models say is important, then build formal "serious" models from the ground up to match that data. He contrasts this with the current approach of tweaking existing models.

    My question is: Who is going to enforce this change? If a few established researchers start doing things the way Kocherlakota wants, they'll certainly still get published (because they're famous old people), but will the young folks follow? How likely is it that established researchers en masse are going to switch to doing things this way, and demanding that young researchers do the same, and using their leverage as reviewers, editors, and PhD advisers to make that happen? This doesn't seem like the kind of change that can be brought about by a few young smart rebels forcing everyone else to recognize the value of their approach - the existing approach, which Kocherlakota dislikes, already succeeds in getting publication and prestige, so the rebels would simply coexist alongside the old approach, rather than overthrowing it. How could this cultural change be put into effect?

    Also: Romer now has a follow-up to his original post, defending his original post against the critics. This part stood out to me as particularly persuasive:

    The whine I hear regularly from the post-real crowd is that "it is really, really hard to do research on macro so you shouldn't criticize any of our models unless you can produce one that is better."
    This is just post-real Calvinball used as a shield from criticism. Imagine someone saying to a mathematician who finds an error in a theorem that is false, "you can't criticize the proof until you come up with valid proof." Or try this one on and see how it feels: "You can't criticize the claim that vaccines cause autism unless you can come up with a better explanation for autism."
    Sounds right to me. The old like that "it takes a theory to kill a theory" just seems wrong to me. Sometimes all it takes is evidence.

    Herman 7:21 PM

    I've already commented at lenght on Romer at Mark Thoma's. So I'll just use something you wrote on physics to make a tangential comment on unrealistic assumptions.

    "They're not saying that economists need 100% perfect realism - that's the kind of thing you only get in physics, if anywhere"

    This is a somewhat misleading way of putting it, but it allows me to illustrate some important points about 'unrealistic' assumptions. In real world modelling in Physics 'unrealistic' assumptions are ubiquitous. What matters is not literal realism of assumptions but robustness.of conclusions.

    Consider a point-mass. There is no such thing. Yet it is a perfectly legitimate simplifying assumption about a planet if you are interested in studying its orbit around its sun. It is not a legitimate assumption if you are interested in studying a planet's rotation about its axis

    The most important points underlying such simplifying assumptions are:

    1. Simplifying assumptions are context specific, ie ad hoc, and never axiomatic.The ad hoc nature of simplifying assumptions is a feature, not a bug as the above example illustrates.

    2. Robustness is critical. As we move from our simplifying assumptions towards greater realism/precision, the conclusion should not change in any material way, and we use the simplifications because the gain in accuracy of the conclusions is not worth the added complexity and consequent loss of tractability in the model.

    3. Out of sample performance of the model.

    * Richard Feynman:

    "...in order to understand physical laws you must understand that they are all some kind of approximation.

    The trick is the idealizations. To an excellent approximation of perhaps one part in 10^10, the number of atoms in the chair does not change in a minute, and if we are not too precise we may idealize the chair as a definite thing; in the same way we shall learn about the characteristics of force, in an ideal fashion, if we are not too precise. One may be dissatisfied with the approximate view of nature that physics tries to obtain (the attempt is always to increase the accuracy of the approximation), and may prefer a mathematical definition; but mathematical definitions can never work in the real world. A mathematical definition will be good for mathematics, in which all the logic can be followed out completely, but the physical world is complex, as we have indicated in a number of examples, such as those of the ocean waves and a glass of wine. When we try to isolate pieces of it, to talk about one mass, the wine and the glass, how can we know which is which, when one dissolves in the other? The forces on a single thing already involve approximation, and if we have a system of discourse about the real world, then that system, at least for the present day, must involve approximations of some kind.

    This system is quite unlike the case of mathematics, in which everything can be defined, and then we do not know what we are talking about. In fact, the glory of mathematics is that we do not have to say what we are talking about. The glory is that the laws, the arguments, and the logic are independent of what "it" is.

    [ Feynman Lectures Vol.I Ch.12 ]

    JW Mason 9:39 AM

    These are good observations. The way "ad hoc" has become a decisive argument against a model, at least in macro, is a symptom of the problem.

    Herman 4:10 PM

    Indeed. That was part of the reason for redundantly using the phrase :) . The other reason was that the usage is strictly accurate. ad hoc = for this particular purpose (Shorter OED)

    It is difficult to see how simplifying assumptions underlying real world models can be anything but ad hoc (context-specific)

    For a mathematician to object to ad hoc statements would be understandable, but for someone concerned with real world modelling to do so is mind-boggling.

    It is worth pointing out that the economists who do so object have never in their life built a model that works, for any definition of 'works' acceptable anywhere outside economics.

    Steve Roth 10:23 AM

    This is indeed excellent. The three criteria for evaluating assumptions/simplifications, the precise definition of ad hoc, and the crystal-clear example of point mass for orbits vs rotation.

    I'd like to bring in my pet bailiwick, accounting. Our (national) accounting systems are rife with assumptions and simplifications - they are economic models. (Or in Feynman's excellent term, "idealizations.") And those assumptions are effectively invisible to almost everyone. If I had a nickel for every time I've heard "it's an accounting identity" as if that was somehow synonymous with "truth"...

    Just one example, relating to a rather important economic measure - income:

    http://unstats.un.org/unsd/nationalaccount/rissue.asp?rID=3

    The national-accounting sages know that the appropriateness of this basic conceptual construct is a very open question. But that fact is invisible to almost everyone. National accounts could be depicted quite differently (yes, with everything still balancing).

    Economists' thinking is completely owned by the conceptual constructs, the idealizations, embodied in our national-accounting structures. And they frequently display zero understanding of the constructs that they are (we are) using to think with.

    reason 4:05 AM

    Herman,

    I've been critical of you in the past, but that is a really good comment, 100% on the ball. But I will add that the simplifying assumption you used to illustrate your point, may not be true, but it is nearly true (without the scales being considered). And many simplifying assumptions used in economics are not nearly true.

    Herman 4:42 PM

    Informally we might - and sometimes do - say that the assumption (point-mass) is 'nearly true', but it is not quite correct. It is an idealization that satisfies criterion (2): robustness, and the resulting model satisfies criterion (3); out-of-sample performance.

    Of course this is very different from the sort of assumptions common in economics which are often patently false - and this is the critical point - making them more realistic materially changes the conclusions ie the assumptions in the models fail to satisfy the robustness criterion. And, at least in DSGE/RBC macro to talk of in-sample fit or out-of-sample performance of the resulting model would imply a libelous misuse of the terms.

    Herman 4:53 PM

    ... cont

    Actually, as Romer notes, the situation in economics is often even worse.with assumptions being not merely false ( with non-robust conclusions) but entirely meaningless in terms of real world observables. Assumptions of the sort that are deservedly derisively dismissed as not even wrong in every scientific or engineering discipline.

    Anonymous 6:26 AM

    It's not just an argument about having models with realistic assumptions. It is also an argument about the extent to which mathematics and models can usefully provide the answers we need to know. Basically we are going back to Keynes's (1937) arguments about the limitations of "pretty and polite techniques". Edgeworth was also very much aware of the limitations of mathematics in economics. And so have many others, for a long time.

    I have been critical of Romer in the past. His growth theory for me does not answer the critical questions that I think are the most important into understanding why certain countries get on to a growth curve and others do not. But I now really have to admire his honesty.

    I wish him all the best at the World Bank.

    NK.

    Anonymous 6:47 AM

    It is not true that we do not have a lot of macro data. The National Accounts contain scores of (largely stock-flow consistent) data. The point is: one of the big failures of DSGE economists is their failureto establish a measurement system which produces data consistent with the DSGE models. Keynes, who even established his own government statistical office, the present day ONS, and, in a more indirect sense, Smith, Marshall as well and Veblen did establish systems of measurement to measure data consistent with their models and ideas. Read Mitra Kahn http://openaccess.city.ac.uk/1276/ or my efforts

    https://www.researchgate.net/publication/304988655_Models_and_measurement_in_economics_2_A_short_overview_of_conceptual_differences_between_neoclassical_macro_models_and_the_national_accounts

    DSGE economists never bothered to do this. Weird (well, not that weird - taking account of real life data would have meant taking unemployment and the government serious... Or the fact that the National Accounts identities only hold for nominal variables, not for deflated real variables). Anyway - as there is no system of DSGE consistent measurement of the macro-economy it can't be called a valid science.There are however systems consistent with the ideas of Keynes and Veblen...

    Merijn Knibbe

    Krzys 3:35 PM

    So, we are witnessing a battle between a declining DSGE scam and ascending "Realistic assumptions" scam.

    Both approaches are worthless, but I guess it will give an excuse to macroeconomists why they are useless: we just used the wrong paradigm, now we are switching to the new one. Just many more years of research is needed and we will be ready. Science!, as they say.

    I'm curious how many economists are simply too blind to understand that this will lead nowhere and how many are simply cynical beyond belief.

    I just don't understand the mentality. Wouldn't you like to do something productive? Like produce actual knowledge? Can you guys be satisfied with infinite curve fitting?

    EliRabett 7:53 PM

    Science, IEHO, has three touchstones. Coherence - your model and its assumptions should not contradict each other or lead to contradictory conclusions. Consilience - a good theory has a broad reach for explaining reality. Consensus - a theory which is coherent and consilient should lead to a consensus among practicioners. It is only within a strong consensus that people can talk to each other and extend the field.

    It appears that macro misses out on a number of these.

    Steve Roth 10:26 AM

    "Romer basically says that macro (meaning business-cycle theory)"

    Are you equating macro with business-cycle theory, or are you saying that Romer does?

    In either case, I think this is another big problem with macro, its obsession with business cycles as opposed to long-term thriving and prosperity. eg, Gerald Friedman got tied in knots by this; he was trying to use "stimulus" thinking and arguments to talk about about multi-decadal possibilities.

    Todd Kreider 12:57 PM

    " (Though I do think he's too harsh on string theory, which often is just a kind of math that physicists do to keep themselves busy, and has no danger of hurting anyone, unlike macro theory.)"

    I find it hard to believe Noah understands string theory well enough to justify such a strong opinion of it only existing to keep theorists employed. As much as I like "The Trouble With Physics" those reading should keep in mind that Lee Smolin acknowledges that maybe there is something to string theory.

    And again, the focus of string theory in theoretical physics is harmful to the expansion of knowledge and economic growth if too many brains not only barked up the wrong tree - nothing wrong with that - but *continued* to bark up the wrong tree for years, ignoring other paths of understanding physics, which is Smolin's main point.

    G3 McK 10:24 PM

    I'm fond of observing that in addition to "cargo cult science", macroeconomics has often been likened to a religion. What religions do when the mainstream becomes intolerable for one reason or another is schism. Then after a number of years what used to be the mainstream dies out and the former schismatics become the mainstream.

    Psychology went through this kind of crisis some years ago when the scientists split off from the clinicians, and created the Association for Psychological Science to contrast with the clinically-oriented American Psychological Association (the APA is the one that publishes the unscientific but influential Diagnostic and Statistical Manual).

    All that heterodox economists need to do is gain some self-confidence and stop calling themselves derogatory names. That won't make them scientific, but it'll be a step in the right direction.

    In order to be scientific, the standard method is to actually try predicting. Prediction is messy and provably fails to converge to any possible theory, but there are other authentic sciences that have this same theoretical limitation, like meteorology. This doesn't prevent meteorologists from constructing theories which make predictions that demonstrably get better and better year after year.

    Why don't all these macro critics stop publishing in "unscientific" mainstream journals and setup their own J.Econ.Sci. that has rigorous scientific standards? Many of them have tenure or non-academic jobs (e.g. Roemer) and don't need to kowtow to committees who care only about established impact factors. It's been done elsewhere. It wasn't so long ago that one of the most prestigious biology journals Cell, was just an upstart new face on the block. All it takes is a strong editor and a pool of like-minded peer reviewers.

    Tom Barson 9:33 AM

    I think Paul Romer's self-serving ad hominem attacks should be identified as just that. One would hardly blame the older generation of Nobel laureates of conspiring to deny economic pre-eminence to Romer - look at how he behaves! - but I think they probably have better things to do.

    I admit I haven't completely digested Romer's latest thunderbolt - I'm basing my comments more on Romer's "mathiness" series of a year ago. In that case, I went back and read the "mathy" papers that Romer was attacking. Mathy they were, but the Lucas and Moll paper at least was very clear about why it didn't see increasing returns-to-scale in growth models convincing: the intellectual property-driven economic sector just isn't, in their view, big enough. (BTW, that's almost exactly the same argument made by William Nordhaus against the AI "singularity" folks: it could happen, but none of today's macroeconomic data suggest that it is happening.)

    To come back to the current discussion, I have no particular sympathy with the Lucas-Prescott-Sargent rational expectations / microfoundations / real business cycle approach - but the needed discussion of the defects of RBC has been underway for some time. And note that Romer's opening distillation of RBC makes its problems all about a supposed "exogenous" component, for which the subtext is that RBC's authors don't accept Romer's "endogenous" growth theory.

    For twenty years Romer has been implying (and recently saying) that economists who don't accept endogenous growth theory have abandoned the canons of science and are either blind or indifferent to the truth. Over the same twenty years he seems to have produced very little theoretical work, while his targets have remained working economists. (Why, after all, should anyone continue to do theory, since Romer has discovered the truth?)

    I wish Romer well at the World Bank. There is no doubt that his ideas around urbanization, for example, will bring an important and updated perspective to a development bank. But the very move suggest to me that the World Bank has not failed to note Romer's ability to propagandize an economic agenda - and that it values his political skills as much as his reputation as an economic theorist.

    Anonymous 7:11 PM

    It's easy to poke holes in existing methodology, but it's much more difficult to come up with viable alternatives and solutions. Do those who knock DSGE models really think we should go back to 1970's macro and reuse old-school Keynesian models? The empirical evidence against Keynesian multipliers is overwhelming (See Ramey for an overview). Methodologically, Keynesian models make just as many implausible, ad hoc assumptions as DSGE models, if not more. Their forecast accuracy is no better; private forecasters are mostly selling stories and scenarios, not forecasts that in any way will prove ex post to be accurate.

    Tom Barson 8:44 AM

    I think you are repeating - and it is a good reminder - the classic Mark Blaug argument that economists should not abandon the "best available" theory (even if its deficiencies are manifest) if there is no better replacement. I have no problem with that.

    However, I think the discussion right now is about those manifest defects. And there are stirrings about what comes next. Noah has blogged several times on the new "empirical turn". And the Keynesians, who have never gone away, may yet stand up a rehabilitated theory. For a usable business cycle theory, there are really three tests to satisfy:
    1) Normal forecasting capability (as you mention);
    2) Convincing comparative statics on the effects of monetary or fiscal intervention. (RBC omitted this almost by definition.)
    3) Some ability to detect pressures that are building toward a major shock. (I call this 'the Cassandra feature', since the predictions are unlikely to be believed or heeded.) Whether any model could really offer this is open to question, but it's a real question. The Fed always talks about "risks to the economy", but is the perception of those risks coming from the model? How did Warren Buffet know that the pile of financial derivatives would collapse, but bankers and regulators and economists not know it? One answer, at least for economists, is that rational expectations theory forces prediction of any kind of discontinuity completely out of the model. That part of Paul Romer's complaint seems to me to be valid.

    [Oct 07, 2016] Heterodox macro - a reply to some replies

    Notable quotes:
    "... There is indeed a wing of heterodox economics that is anti-mathematical. Known as "Critical Realism" and centred on the work of Tony Lawson at Cambridge UK, it attributes the failings of economics to the use of mathematics itself... ..."
    "... Steve also offers some useful criticism of Milton Friedman's ideas about how to evaluate a model's empirical success ( I agree ). ..."
    "... The problem with 'heterodox economics' is that it is self-definition in terms of the other. It says 'we are not them' - but says nothing about what we are. This is because it includes everything outside of the mainstream, from reasonably well-defined and coherent schools of thought such as Post Keynesians, Marxists and Austrians, to much more nebulous and ill-defined discontents of all hues. To put it bluntly, a broad definition of 'people who disagree with mainstream economics' is going to include a lot of cranks. People will place the boundary between serious non-mainstream economists and cranks differently, depending on their perspective. ..."
    "... Aside from rejecting standard neoclassical economics, the Marxists and the Austrians don't have a great deal in common. ..."
    "... Noah seems to define heterodox economics as 'non-mathematical' economics. This is inaccurate. There is much formal modelling outside of the mainstream. ..."
    "... Noah's post unfortunately seems to have elicited some rather defensive responses from the heterodox community, along the lines of " But we DO like mathematics! " or even, " Actually our mathematics is better than yours ". But this is to buy into Noah's core proposition. The heterodox economics community should - and, to be fair, in most cases does - reject it outright. Economics is not, and cannot be , exclusively mathematical...There is no need for the heterodox economic community to be defensive about vagueness. ..."
    Aug 20, 2016 | noahpinionblog.blogspot.com

    The other day I wrote a Bloomberg View post arguing that heterodox macroeconomics is not in any better shape than mainstream macroeconomics. As you might expect, this drew some lively responses.

    One or two of the responses seemed to be arguing against the title of my post, rather than the contents. That's understandable, since titles are important. In this case, though, it probably detracted from the debate a great deal. The Bloomberg title people are good, and they usually get things right, but once in a while the title they choose doesn't quite capture the point I'm trying to make. This was one of those cases. The title they gave my post was "Economics Without Math Is Trendy, But It Doesn't Add Up." But actually, this wasn't what I was arguing. My point about non-mathy models wasn't that these are bad, useless, or inferior. It was that they're different from mathy models, and so comparing non-mathy models with mathy ones is an apples-to-oranges comparison. Both types of models have their uses, but you can't really compare one to the other. I make that pretty clear in the text of my post , but most of the people who responded tended to focus more on the title. Oh well. These things happen.

    Anyway, on to some of the responses. The numbering here is arbitrary, corresponding to the order in which the tabs were open on my browser. (Note: The ordering has changed; see #4.)

    Response 1: Steve Keen

    First, we have a response by Steve Keen . Steve, unlike others, did get the point I was making about mathy vs. non-mathy models (Thanks, Steve!), and had some good commentary on the subject:

    There is indeed a wing of heterodox economics that is anti-mathematical. Known as "Critical Realism" and centred on the work of Tony Lawson at Cambridge UK, it attributes the failings of economics to the use of mathematics itself...
    What Noah might not know is that many heterodox economists are critical of this approach as well. In response to a paper by Lawson that effectively defined "Neoclassical" economics as any economics that made use of mathematics (which would define me as a Neoclassical!), Jamie Morgan edited a book of replies to Lawson entitled What is Neoclassical Economics? (including a chapter by me). While the authors agreed with Lawson's primary point that economics has suffered from favouring apparent mathematical elegance above realism, several of us asserted that mathematical analysis is needed in economics, if only for the reason that Noah gave in his article[.]
    Steve also offers some useful criticism of Milton Friedman's ideas about how to evaluate a model's empirical success ( I agree ).

    Steve also makes the useful point that linearization critically hampers many mainstream models ( I agree ).

    Steve points out that non-mathy models can make qualitative forecasts. That's true. However, my point was that these are often a lot less actionable than quantitative forecasts. A non-mathy model might tell you that private-sector debt is dangerous, but it might not tell you how much of it is dangerous, or how dangerous. For that, you'd need some kind of mathy model. Steve definitely seems to get this point too, though, so I'm not disagreeing.

    Steve then discusses overfitting of data, and points out that many mainstream models do this too. That's certainly true, although I think DSGE models tend to be a lot more parsimonious than SFC models or stuff like FRB/US. Actually, overfitting is one of the big criticisms of the most popular DSGE models in use at central banks.

    Steve then addresses the idea that heterodox models are similar to mainstream ones. I never said they were, although I said there are some similarities between the FRB/US model and Wynne Godley-type SFC models. In fact, there are some similarities, though there are also differences. But in general, most heterodox models are very different from most mainstream models.

    Steve also discusses my (admittedly too brief) mention of agent-based models, and has some good comments:

    Largely speaking, this is true - if you want to use these models for macroeconomic forecasting. But they are useful for illustrating an issue that the mainstream avoids: "emergent properties". A population, even of very similar entities, can generate results that can't be extrapolated from the properties of any one entity taken in isolation...Neoclassical economists unintentionally proved this about isolated consumers as well, in what is known as the Sonnenschein-Mantel-Debreu theorem. But they have sidestepped its results ever since...Multi-agent modelling may not lead to a new policy-oriented theory of macroeconomics. But it acquaints those who do it with the phenomenon of emergent properties - that an aggregate does not function as a scaled-up version of the entities that comprise it. That's a lesson that Neoclassical economists still haven't absorbed.
    I think this is right. Agent-based models have so far served as a demonstration of the fragility of representative agent models. In the future, they might be much more than that.

    So anyway, I'd say I pretty much agree with Steve's response. Good stuff. (Though this person on Reddit had some problems with it.)


    Response 2: Ari Andricopolous

    Ari has a response as well . His response comes in the form of a list of things that he thinks macro models should not include. The list is:

    1. Microfoundations
    2. Neoliberal_rationality/
    3. Loanable funds
    4. Interest rate effects
    5. The financial sector

    It's pretty clear that the last item on this list is misplaced, since Ari thinks one should include the financial sector in models.

    Whether macro models should be microfounded is a big open question, but I'd like to note that by saying they shouldn't be, Ari is saying that agent-based models are bad. Agent-based models are as microfounded as they come.

    As for rationality, I kind of disagree...humans observe and learn and adapt (OK, some more than others, I'll grant). Even though perfect rationality is probably pretty unrealistic, to insist that models totally ignore human observation, learning, and adaptation seems very dangerous for the realism of any model.

    As for the loanable funds thing...yeah, OK, sure.


    Response 3: Jo Michell

    Jo Michell's response might have been the first to go up, but it's later on this list because...the numbering is arbitrary!

    Jo, which I believe is short for "Jörmungandr", has a helpful diagram of the "schools" of macroeconomic thought. He also pushes back on the notion that "heterodox" is a useful classification at all:

    The problem with 'heterodox economics' is that it is self-definition in terms of the other. It says 'we are not them' - but says nothing about what we are. This is because it includes everything outside of the mainstream, from reasonably well-defined and coherent schools of thought such as Post Keynesians, Marxists and Austrians, to much more nebulous and ill-defined discontents of all hues. To put it bluntly, a broad definition of 'people who disagree with mainstream economics' is going to include a lot of cranks. People will place the boundary between serious non-mainstream economists and cranks differently, depending on their perspective.
    Another problem is that these schools of thought have fundamental differences. Aside from rejecting standard neoclassical economics, the Marxists and the Austrians don't have a great deal in common.
    This is a good and useful point. My Bloomberg post really did bite off more than it could chew. My point was that there wasn't something better and more successful out there that by rights ought to already have displaced the (unsuccessful) mainstream approach. But in making that point, I touched on a number of different types of alternatives that aren't really closely connected. And I left out others (for example, Steve Keen's own work, and the Austrians).

    Jo, unfortunately, appears to have gotten tripped up by the title:

    Noah seems to define heterodox economics as 'non-mathematical' economics. This is inaccurate. There is much formal modelling outside of the mainstream.
    Well, no, I don't define it that way, otherwise I wouldn't have discussed SFC models and agent-based models in my post.

    Jo goes on to make some good points about mainstream models, and some of the problems they encounter.

    Response 4: Frances Coppola

    Frances Coppola, whom I cited in my Bloomberg post, also has a response . I responded to this post earlier, but Frances changed it, so I moved my response down to #4.

    Frances still seems to misunderstand my post somewhat, and to have been tripped up by the title:

    Noah's core proposition is that economics has no validity unless it is expressed in mathematical terms. He says that economics without mathematics doesn't add up.
    Actually, I didn't make such a claim. Nor do I believe it. What I wrote was:
    Broad idea-sketching is certainly a valuable activity. If theorists get lost in the specifics of their models, they can blind themselves to truly new hypotheses and mechanisms that would let them make big, radical changes. I do think this has happened to some degree in mainstream macro...But that doesn't mean that broad idea-sketching is a replacement for formal models. It's not an apples-to-apples comparison.
    My point is that although non-mathematical econ is often valuable, it's not comparable to mathematical econ. Both have their place. But to say that a non-quantitative theory was successful at predicting the Great Recession, while a quantitative theory failed, is to hold the two theories to very different standards, since "predict" means different things for quantitative theories than it does for non-quantitative theories.

    Frances goes on to discuss some of the limitations of purely quantitative models. She's broadly right. She then criticizes some heterodox theorists who, in her opinion, focus too much on math:

    Noah's post unfortunately seems to have elicited some rather defensive responses from the heterodox community, along the lines of " But we DO like mathematics! " or even, " Actually our mathematics is better than yours ". But this is to buy into Noah's core proposition. The heterodox economics community should - and, to be fair, in most cases does - reject it outright. Economics is not, and cannot be , exclusively mathematical...There is no need for the heterodox economic community to be defensive about vagueness.
    Again, Frances demonstrates a deep misunderstanding of my thesis. I never said that econ theory should be exclusively mathematical, nor do I believe it. This confusion is partly the result of the title, and partly the result of me just not explaining my thesis well enough.

    Anyway, those are the responses I've seen. Thanks to everyone who took the time to respond!

    [Oct 06, 2016] Policies that raise the costs of reallocating profits maybe be effective suppressing the use of tax havens

    Notable quotes:
    "... Multinational firms may invest in tax havens to avoid taxation in non-haven countries, but other motives, such as business opportunities in these countries, may also drive such investment. ..."
    "... Policies that raise the costs of reallocating profits maybe be effective in attenuating firms' use of tax havens ..."
    Oct 06, 2016 | economistsview.typepad.com

    pgl : Thursday, October 06, 2016 at 01:34 AM

    "Multinational firms may invest in tax havens to avoid taxation in non-haven countries, but other motives, such as business opportunities in these countries, may also drive such investment. This column uses data on German firms to investigate the motives for tax haven investment. Tax avoidance does appear to be a motive, particularly for manufacturing firms.

    Policies that raise the costs of reallocating profits maybe be effective in attenuating firms' use of tax havens."

    VoxEU also notes that not every multinational uses tax havens to massively evade taxes. Rudy G. would have their shareholders sue over this. Of course Rudy G. is an idiot. Of course multinationals source production in regions with low costs as in "always low wages".

    But I have a question - how many factories are located in the Cayman Islands?

    [Oct 06, 2016] Monetary policy is not a panacea

    Notable quotes:
    "... Some combination of improved public infrastructure, better education, more encouragement for private investment, and more-effective regulation is likely to promote faster growth, which would increase the natural rate of interest and, thus, reduce the probability that we may find ourselves again struggling to avoid Keynes's infamous liquidity trap. If the natural rate can be lifted by appropriate policies, the economic near-stagnation that many countries have experienced in recent years may well turn out not to be that secular after all. ..."
    "... A truly orthodox monetarist believes that monetary policy IS a panacea, that counter-cyclical fiscal policy is inflationary and debt expanding such that it should never be used. ..."
    Oct 06, 2016 | economistsview.typepad.com

    RC AKA Darryl, Ron : Thursday, October 06, 2016 at 04:04 AM

    [If Vice Chairman Stanley Fischer is not a strictly orthodox monetarist then I cannot see any reason for anyone else to be one. ]

    ...But, second, the virtues of sound monetary policy notwithstanding, we must not forget, as former Fed Chairman Ben Bernanke reminded us on numerous occasions, that "monetary policy is not a panacea."17

    For instance, as I mentioned recently elsewhere, policies to boost productivity growth and the longer-run potential of the economy are more likely to be found in effective fiscal and regulatory measures than in central bank actions.18

    Some combination of improved public infrastructure, better education, more encouragement for private investment, and more-effective regulation is likely to promote faster growth, which would increase the natural rate of interest and, thus, reduce the probability that we may find ourselves again struggling to avoid Keynes's infamous liquidity trap. If the natural rate can be lifted by appropriate policies, the economic near-stagnation that many countries have experienced in recent years may well turn out not to be that secular after all.

    [A truly orthodox monetarist believes that monetary policy IS a panacea, that counter-cyclical fiscal policy is inflationary and debt expanding such that it should never be used.]

    RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , Thursday, October 06, 2016 at 04:06 AM
    [Oops!]

    RE: Low Interest Rates

    http://www.federalreserve.gov/newsevents/speech/fischer20161005a.htm

    JF -> RC AKA Darryl, Ron... , Thursday, October 06, 2016 at 05:01 AM
    Notice that Fishers remedies do not include policy actions to support increased consumption/demand apparently believing that Investment is done for what purpose? Could he not have said that people might increase Investment in productive purposes if they felt they could sell their produced offerings profitably. Then I would like him to say that the creation of credit is not productive as it comes almost costlessly (a corporate bond, even a mortgage contract cost little to produce), the same with a govt bond or govt currency, or the electronic registration of a stock, or the creation of derived financial instruments defined by ink on paper.

    Inputs like labor, equipment and supplies of materials produce offerings, but financial assets need almost none of these inputs. We need much more flow going to getting real offerings marketed. But why does investing-wherewithal take such risks in hoping to organize all these inputs and marketing efforts when the huge volumes of high trading frequency lead to returns of added wherewithal coming to comfortable offices anywhere, to be churned again in the trading of non-production based financial things.

    Have central banks (and others in the financial asset trading club) become so distanced from the production economics of Wicksall and Keynes that they can no longer even talk about basic demand for goods and services as a reason to Invest?

    How about a set of remarks focused on aggregate demand for real offerings.

    How about a set of remarks focused on how to redirect the economic wherewithal churning about in the financial asset trading marketplaces and convert more and more of this wherewithal into taking risks on real production and marketing businesses (more than ample supply of wherewithal now). The central bank leaders could talk more about how they can serve in making this conversion happen well, in coordination with other public policies such as those that help support more basic demand and happier more dynamic animal spirits in society, so to speak.

    Can we replace Fisher with a deputy who sees everything first via the lens of demand side thinking followed by labor market considerations, long before they see solutions coming from "encouraging private investment" in financial assets?

    RC AKA Darryl, Ron -> JF... , Thursday, October 06, 2016 at 05:37 AM
    Vice Chairman Stanley Fischer is a very conventional orthodox establishment economist, just not a strictly orthodox monetarist. I was in no way lauding Fischer other than by just spelling his last name correctly. However he can serve as a benchmark that distinguishes orthodox establishment economics from the even more narrow and rigid orthodox monetarism.
    JF -> RC AKA Darryl, Ron... , Thursday, October 06, 2016 at 06:12 AM
    My misspelling was not intended as a passive aggressive disrespect. But of course I called for his replacement, and I did this to bring attention to matters important to me, not just as an ad hominem attack on Mr. Fischer.

    I do not want more policies to encourage capital formation and husbandry, nor do I want managers of capital to use public means or subsidues so they can get better educated workforces and eak more out of them so their capital is further favored (of course there are public good reasons for public effirts here, but its purposes are not just to encourage more investment because it is further subsidized), and the same with public efforts to build better infrastructure if the idea of 'better' is because it subsidizes investors (not perhaps because it makes society safer to have a more reilient and efficient energy delivery system that also helps with climate change concerns too), or better regulation of the financial system so its risks are spread better and investors are encouraged to trade even more in them. So here I've taken each of Fischers recommendations and addressed them, pointing out how these statements can be seen as supporting the investing class nit the real economy of demand side considerations about economics.

    Perhaps the Deputy Director didn't intend for these remarks to be read that way. After all he talked about Wicksell, and I'm pretty sure his views were tied to the world of real production, anf Fischer even talked about production. So maybe I'm too willing to read with suspicion, or he is not cautious enough in his writing, or he needs to be replaced (because I read this the way he meant it).

    IMHO.

    JF -> JF... , Thursday, October 06, 2016 at 06:15 AM
    Typepad disease.
    Peter K. -> RC AKA Darryl, Ron... , Thursday, October 06, 2016 at 06:13 AM
    Conventional orthodox establishment economists worry about inflation even after they deliver 1.6 percent growth for 2016.

    And they insist monetary policy doesn't work well which is somewhat of a contradiction as they're worrying about inflation and monetary policy working too well.

    If you read the Sept. 2008 minutes of the FOMC they are worrying about inflation 48 hours after Lehman failed and the implosion of the financial system. Just 8 years ago and they don't seem to have learned.

    marcus nunes -> Peter K.... , -1
    Fischer has gone ga ga!
    http://ngdp-advisers.com/fischer-fed-pursuing-sound-monetary-policy-good-70s-now-really/

    [Oct 06, 2016] Most of the profession does believe in the power of monetary policy.

    Oct 06, 2016 | economistsview.typepad.com

    JohnH -> RC AKA Darryl, Ron... , Thursday, October 06, 2016 at 07:51 AM

    Noah Smith from yesterday: "Most of the profession does believe in the power of monetary policy. The dominant form of macroeconomic model for at least a decade has been so-called New Keynesian models, which say that interest rates play a very large role in stabilizing the economy. These are also the dominant form of modern macro model in use at central banks...

    Now, the big question is whether faith in monetary policy might have been misplaced. The seemingly small effects of quantitative easing, and the difficulty of dealing with very low interest rates, are causing some macroeconomists to cast about for alternatives to the New Keynesian paradigm.

    This illustrates the real fundamental problem with macroeconomics -- the lack of good evidence."
    https://www.bloomberg.com/view/articles/2016-10-04/breaking-the-spell-that-grips-economics

    It sure seems like the economics profession is confused, very confused. Sadly, that will not keep them from demagoguing their favorite policy and insulting those who dare to point out the obvious problems and mistakes.

    [Oct 06, 2016] https://www.theguardian.com/world/2016/oct/06/could-italys-renzi-be-next-victim-of-an-unwanted-referendum

    Notable quotes:
    "... the issue of the elite against the people. ..."
    Oct 06, 2016 | www.theguardian.com

    The other European referendum, soon to be known as the Italian Job. Interesting the way the article touches on the issue of the elite against the people.

    [Oct 05, 2016] Stupefied after graduation

    Notable quotes:
    "... Smart young things joining the workforce soon discover that, although they have been selected for their intelligence, they are not expected to use it. They will be assigned routine tasks that they will consider stupid. If they happen to make the mistake of actually using their intelligence, they will be met with pained groans from colleagues and polite warnings from their bosses. After a few years of experience, they will find that the people who get ahead are the stellar practitioners of corporate mindlessness. ..."
    "... The Stupidity Paradox ..."
    "... they quickly found themselves working long hours on 'boring' and 'pointless' routine work. After a few years of dull tasks, they hoped that they'd move on to more interesting things. But this did not happen. As they rose through the ranks, these ambitious young consultants realised that what was most important was not coming up with a well-thought-through solution. It was keeping clients happy with impressive PowerPoint shows. Those who did insist on carefully thinking through their client's problems often found their ideas unwelcome. If they persisted in using their brains, they were often politely told that the office might not be the place for them. ..."
    Oct 02, 2016 | aeon.co
    Aeon (RS). " How organisations enshrine collective stupidity and employees are rewarded for checking their brains at the office door."

    You don't have to be stupid to work here, but it helps Aeon Essays

    Each summer, thousands of the best and brightest graduates join the workforce. Their well-above-average raw intelligence will have been carefully crafted through years at the world's best universities. After emerging from their selective undergraduate programmes and competitive graduate schools, these new recruits hope that their jobs will give them ample opportunity to put their intellectual gifts to work. But they are in for an unpleasant surprise.

    Smart young things joining the workforce soon discover that, although they have been selected for their intelligence, they are not expected to use it. They will be assigned routine tasks that they will consider stupid. If they happen to make the mistake of actually using their intelligence, they will be met with pained groans from colleagues and polite warnings from their bosses. After a few years of experience, they will find that the people who get ahead are the stellar practitioners of corporate mindlessness.

    One well-known firm that Mats Alvesson and I studied for our book The Stupidity Paradox (2016) said it employed only the best and the brightest. When these smart new recruits arrived in the office, they expected great intellectual challenges. However, they quickly found themselves working long hours on 'boring' and 'pointless' routine work. After a few years of dull tasks, they hoped that they'd move on to more interesting things. But this did not happen. As they rose through the ranks, these ambitious young consultants realised that what was most important was not coming up with a well-thought-through solution. It was keeping clients happy with impressive PowerPoint shows. Those who did insist on carefully thinking through their client's problems often found their ideas unwelcome. If they persisted in using their brains, they were often politely told that the office might not be the place for them.

    ... ... ...

    Organisations hire smart people, but then positively encourage them not to use their intelligence. Asking difficult questions or thinking in greater depth is seen as a dangerous waste. Talented employees quickly learn to use their significant intellectual gifts only in the most narrow and myopic ways.

    Those who learn how to switch off their brains are rewarded. By avoiding thinking too much, they are able to focus on getting things done. Escaping the kind of uncomfortable questions that thinking brings to light also allows employees to side-step conflict with co-workers. By toeing the corporate line, thoughtless employees get seen as 'leadership material' and promoted. Smart people quickly learn that getting ahead means switching off their brains as soon as they step into the office. ... ... ...

    We found many ways that all kinds of organisations positively encouraged intelligent people not to fully use their intelligence. There were rules and routines that prompted them to focus energies on complying with bureaucracy instead of doing their jobs. There were doctors who spent more time 'playing the tick-box game' than actually caring for patients; teachers who spent more time negotiating new bureaucratic procedures than teaching children. We met Hans, a manager in a local government agency: after a visit from a regulator, his office received a list of 25 issues in need of improvement. So Hans's agency developed 25 new policies and procedures. The result: the regulator was happy, but there was no change in actual practice. Such stories showed us how mindless compliance with rules and regulations can detract people from actually doing their jobs. The doctors, teachers and government officials all knew that the rules and regulations they spent their days complying with were pointless diversions. However, they chose not to think about this too much. Instead, they just got on with ticking the boxes.

    Another significant source of stupidity in firms we came across was a deep faith in leadership. In most organisations today, senior executives are not content with just being managers. They want to be leaders. They see their role as not just running their business but also transforming their followers. They talk about 'vision', 'belief' and 'authenticity' with great verve. All this sounds like our office buildings are brimming with would-be Nelson Mandelas. However, when you take a closer look at what these self-declared leaders spend their days doing, the story is quite different.

    ... ... ...

    As Jan Wallander, the ex-chairman of Sweden's Handelsbanken, said: 'Business leaders are just as fashion-conscious as teenage girls choosing jeans.' Many companies adopt the latest management fads, no matter how unsuitable they are. If Google is doing it, then it's good enough reason to introduce nearly any practice, from mindfulness to big-data analytics.

    ,,, ,,, ,,,

    One last source of corporate stupidity we came across was company culture. Often, these cultures imprison employees in narrow ways of viewing the world, such as the common obsession with constant change.

    ... ... ...

    What's more, people in corporations have short attention spans. Perpetrators of blunders will likely have moved onwards (often upwards) before their mistakes becomes obvious. 'Always try to outrun your mistakes' was one middle-manager's key career advice.

    ... ... ...

    In a world where stupidity dominates, looking good is more important than being right. Advanced practitioners of corporate stupidity often spend less time on the content of their work and more on its presentation. They know that a decision-maker sees only the PowerPoint show and reads just the executive summary (if they're lucky). They also realise that most stupid ideas are routinely accepted when they're presented well. Decision-makers will likely forget much of the content by the time they walk out the door. And when things go wrong, they can say: 'They didn't read the fine-print.'

    Negotiating corporate stupidity also requires assuming that the boss knows best. This means doing what your boss wants, no matter how idiotic. What is even more important is that you should do what your boss's boss wants. You will look like you are loyal and it will save time arguing for your position. When things go wrong, you can blame your boss.

    Working in a stupefied firm often means blinding others with bullshit. A very effective way to get out of doing anything real is to rely on a flurry of management jargon. Develop strategies, generate business models, engage in thought leadership. This will get you off the hook of doing any actual work. It will also make you seem like you are at the cutting edge. When things go wrong, you can blame the fashionable management idea.

    [Oct 05, 2016] the reason wealth concentration becomes inherently unstable is because of the exponential growth of capital, which is essentially rent the bottom 80% must pay to the top 20% net investment holders in one form or another

    Oct 05, 2016 | economistsview.typepad.com

    Ron Waller -> anne... October 04, 2016 at 06:39 PM

    I think the reason wealth concentration becomes inherently unstable is because of the exponential growth of capital, which is essentially rent the bottom 80% must pay to the top 20% net investment holders in one form or another.

    Exponential growth of capital and no growth of incomes and wealth for the bottom 80% means that the glut of growing capital aggressively seeking returns will eventually leech so much wealth out of the real world economy it will cause it to collapse in a deflationary death spiral when people stop borrowing.

    In short, the neoclassical Friedmanian era is coming to a close one way or another. One way is that some European nations reject capitalism for fascism. If that happens, Masters of the Universe can try shorting civilization. But they won't be taking it with them.

    [Oct 05, 2016] Does the One Percent Deserve What it Gets

    Oct 05, 2016 | economistsview.typepad.com

    Economist's View

    Ron Waller -> Sandwichman ... , Tuesday, October 04, 2016 at 05:26 PM

    Donald J. Deadbeat got rich working the system. I.e. legally. The Clintons, on the other hand, got all their riches from betraying the people, liquidating the public trust and selling off American government to oligarchs domestic and foreign. They made over $100-million in speaking fees alone cashing in on promissory bribes.

    For every criticism against Trump there exists one worse against Hillary.

    Whichever bottom-feeder ends up president it will be bad news for the party they captured. Better for progressives if Trump blows up the Republican party than the Goldwater Girl destroying the Democratic party (saddling it with a 12-year Great Recession by 2020.)

    The former will produce a New Deal revolution led by someone like Elizabeth Warren in 2020, which will usher in a new era for civilization.

    The latter will kick the New Deal can down the road to 2024 with something like a Ted Cruz presidency in 2020. Given the state of the global economy, which is teetering on the verge of collapse into fascist revolutions and world war, that will probably mean just kicking the can.

    ilsm -> Ron Waller ... , -1
    Willie Horton may be worse than no convictions Clintons.

    Trump has no blood on his hands like both Clintons.

    [Oct 05, 2016] The computers and the internet sped outsourcing to countries like China

    Notable quotes:
    "... Average US wages rose 350% in the 40 years between 1932 and 1972, but only 22% over the next 40 years. The pattern holds similar across the developed world. In other words, for all their hype, the computer and the internet have done less to lift economic growth than the flush toilet. ..."
    "... ahem… the computer and the internet sped outsourcing to countries like China. Ask China or India how their economic growth has been since 1972. The author is mixing up several things at once. ..."
    "... When so many of our jobs, technology and investment is offshored to China (and elsewhere), the future for innovation is certainly not bright, and this should be obvious to everyone, including the author. ..."
    Oct 05, 2016 | www.nakedcapitalism.com

    flora October 4, 2016 at 5:18 pm

    " Average US wages rose 350% in the 40 years between 1932 and 1972, but only 22% over the next 40 years. The pattern holds similar across the developed world. In other words, for all their hype, the computer and the internet have done less to lift economic growth than the flush toilet."

    ahem… the computer and the internet sped outsourcing to countries like China. Ask China or India how their economic growth has been since 1972. The author is mixing up several things at once.

    sgt_doom October 4, 2016 at 6:32 pm

    Great comments, and please allow me to piggyback off them:

    When so many of our jobs, technology and investment is offshored to China (and elsewhere), the future for innovation is certainly not bright, and this should be obvious to everyone, including the author.

    When so many have contributed so much, only to see their jobs and livelihoods offshored again and again and again, that great jump the others have will then zero out OUR innovation!

    [Oct 04, 2016] Vertical mobility can not be completely suppressed without system losing the social stability and thats was true for classic aristocracy as well as modern neoliberal elite

    Notable quotes:
    "... At the same time traditional aristocracy is not fixed either and always provided some "meritocratic" mechanisms for entering its ranks. Look, for example, at British system where prominent scientists always were awarded lordship. Similar mechanism was used in many countries where low rank military officers, who displayed bravery and talent in battles were promoted to nobility and allowed to hold top military positions. Napoleonic France probably is one good example here. ..."
    "... Neoliberal elite like traditional aristocracy also enjoys the privilege of being above the law. And like in case of traditional aristocracy the democratic governance is limited to members of this particular strata. Only they can be viewed as political actors. ..."
    "... The USSR nomenklatura is yet another example of the same. It was so close in spirit to neoliberal elite, that the transition in 1991 was almost seamless. ..."
    "... vertical mobility can't be completely suppressed without system losing the social stability and that's was true for classic aristocracy as well as modern neoliberal elite ..."
    Oct 04, 2016 | crookedtimber.org

    likbez 10.04.16 at 10:22 pm 415

    Re: Rich Puchalsky 10.03.16 at 7:52 pm.371

    A side note: there was some conversation above about the interests of an aristocracy, which of course prompted the idea that the aristocracy is long gone. But meritocracy is a kind of aristocracy.

    This is an interesting observation. BTW other aspect of the same is related to the "Iron law of oligarchy". Also both aristocracy and meritocracy are just variants of oligarchy. The actual literal translation from the Greek is the "rule of the few".

    At the same time traditional aristocracy is not fixed either and always provided some "meritocratic" mechanisms for entering its ranks. Look, for example, at British system where prominent scientists always were awarded lordship. Similar mechanism was used in many countries where low rank military officers, who displayed bravery and talent in battles were promoted to nobility and allowed to hold top military positions. Napoleonic France probably is one good example here.

    Neoliberal elite like traditional aristocracy also enjoys the privilege of being above the law. And like in case of traditional aristocracy the democratic governance is limited to members of this particular strata. Only they can be viewed as political actors.

    The USSR nomenklatura is yet another example of the same. It was so close in spirit to neoliberal elite, that the transition in 1991 was almost seamless.

    In other words, vertical mobility can't be completely suppressed without system losing the social stability and that's was true for classic aristocracy as well as modern neoliberal elite (actually vertical mobility is somewhat higher in European countries then in the USA; IMHO it is even higher in former Eastern block).

    [Oct 04, 2016] Trumponomics

    Notable quotes:
    "... Trump isn't attempting to appeal to neocons or neoliberals. (New Classical or New Keynesian.) That's Hillary's job. So losing this guy (neocon Bush economist) means nothing. ..."
    "... Accusations of corruption against Hillary are ridiculous! Have you ever listened to Hillary's voice? Her speeches are like music to the ears! The only reason why corporations across various industrial complexes - financial, healthcare, private prison, military, Big Oil, etc. - pay Hillary $250k a speech is because they can afford to. The rest of society - the moochers - can only dream of being wealthy enough to enjoy a Hillary speech! ..."
    "... I'm so tired of people hating on the rich and disparaging the Clintons' 'democratic innovation' techniques. They are clearly nothing more than envious ingrates and ignoramuses! ..."
    "... All of the neoclassical tax cutting over the past 35 years has only provided a net benefit to the upper class. Only 30% of the US economy is related to international trade. So very little of the debt created with tax cuts has trickled down into trade deficits. ..."
    "... But trade-liberalization/outsourcing policies, on the other hand, explain how a trade deficit has an accompanying budget deficit (according to the Twin Deficits hypothesis.) If a country is spending more on imports than it is earning in exports it will have to borrow the money to pay for them. ..."
    "... Trump's absurd tax cuts would only benefit the top 20%. They would not increase demand for imports or increase the trade deficit. All of this money would be in the form of whopping budget deficits and growing government debt. It would be a spectacular failure. A better one than what Hillary would bring: because the Republicans would be on the hook for it. (If Hillary wins, the Democrats are on the hook for a 12 year Great Recession by 2020. That kicks the New Deal can down the road to 2024.) ..."
    "... Sanders supporters dislike Republicans more than Hillary supporters do according to polls. They're not going to go for trickle-down economics. Sanders's message was that the problem with the economy and political system are people like Trump. That's why he proposed a significant financial transaction tax. Sanders supporters agree with Sanders, Dean Baker and Jared Bernstein that corporate trade deals could be made more fair. ..."
    "... "Corporate" trade deals aren't the issue. It is capital markets. Republicans wants a total abolition of regulations on capital markets. Not only will Trumps deficits need more foreign finance, he will gut the economy to bring that foreign finance in or gut the economy if it doesn't come in if he trade saber rattles. The only other option is much such large government spending cuts, that creates a recession as well creating capital flight. ..."
    "... Mankiw reveals like Krugman he's never been to East Asia, nor is he the least bit curious about why the US developed in the first place. If he had studied economic development or East Asia he would know that blistering high interest rates (+50%) were common in the East Asian countries during their periods of stunning growth. Rising interest rates from the reduced flow of capital would also be associated with - for the first time in 40 years -- positive incentives to invest in US tradable goods production. ..."
    "... Watch Charles Ferguson's Inside Job for information on how morally and financially compromised US economists are. ..."
    "... And Mankiw does this specifically in the context of offering support to idiotic Republican policies, to pander to the Republican mandarins who hire him every 4 years as economic adviser to their Presidential candidate (and to sell more textbooks at Red-state schools). ..."
    "... Why does Mankiw think he deserves to sell his own ass like a two-bit prison whore, while Navarro and Ross can't? ..."
    Sep 29, 2016 | economistsview.typepad.com

    Ron Waller -> DrDick...

    Trump isn't attempting to appeal to neocons or neoliberals. (New Classical or New Keynesian.) That's Hillary's job. So losing this guy (neocon Bush economist) means nothing.

    This argument against Trump's economic plan would appear to be nonsensical. Interest rates are not marked to international markets. They are set by the central bank to manage demand and inflation. (According to 'orthodox' economics, protectionism would negatively affect GDP and put a downward pressure on demand, inflation and interest rates. So this argument is doubly senseless.)

    I can't imagine that many economists understand international trade or they wouldn't be in favor of the highly mercantlist global economy that free-trade globalization has produced.

    The 35 years of trade deficits the US has run with undeveloped mercantilist countries is a triple whammy: 1) jobs, production and investment flow out of the country reducing GDP, real incomes and demand; 2) the trade deficit has an accompanying budget deficit (according to the Twin Deficits hypothesis); this creates rising government debt; spending cuts further depress demand; 3) for every dollar that flows out of the country from imported goods, a dollar must flow back into the country in the form of foreign investment (i.e. debt owed to foreign countries.)

    This process is certainly no Carnot engine. Simply a linear process of wealth being transferred from one source to another (much of it in debt.) A process that is quickly running out of steam.

    My impression is that only a return to the progressive Keynesian New Deal era (that began with FDR and ended with Reagan) can prevent the global economy from collapsing into fascist revolutions and world war. (Repeating the history of the 1930s; Trump would make a better Herbert Hoover than Hillary, that's for sure.)

    Ron Waller -> sanjait... , -1
    Accusations of corruption against Hillary are ridiculous! Have you ever listened to Hillary's voice? Her speeches are like music to the ears! The only reason why corporations across various industrial complexes - financial, healthcare, private prison, military, Big Oil, etc. - pay Hillary $250k a speech is because they can afford to. The rest of society - the moochers - can only dream of being wealthy enough to enjoy a Hillary speech!

    I'm so tired of people hating on the rich and disparaging the Clintons' 'democratic innovation' techniques. They are clearly nothing more than envious ingrates and ignoramuses!

    Ron Waller -> spencer... , -1
    This is putting the cart before the horse.

    All of the neoclassical tax cutting over the past 35 years has only provided a net benefit to the upper class. Only 30% of the US economy is related to international trade. So very little of the debt created with tax cuts has trickled down into trade deficits.

    But trade-liberalization/outsourcing policies, on the other hand, explain how a trade deficit has an accompanying budget deficit (according to the Twin Deficits hypothesis.) If a country is spending more on imports than it is earning in exports it will have to borrow the money to pay for them.

    Clearly any form of non-regulated stimulus (tax cuts or income redistribution) that primes anemic demand by putting more money in the hands of the bottom 80% will produce a bigger trade deficit. The only way to eliminate a trade deficit with a mercantilist country is with tariffs.

    If Trump's plan is to raise GDP by eliminating the trade deficit with some form of regulatory measures, then clearly this could not raise the trade deficit.

    Trump's absurd tax cuts would only benefit the top 20%. They would not increase demand for imports or increase the trade deficit. All of this money would be in the form of whopping budget deficits and growing government debt. It would be a spectacular failure. A better one than what Hillary would bring: because the Republicans would be on the hook for it. (If Hillary wins, the Democrats are on the hook for a 12 year Great Recession by 2020. That kicks the New Deal can down the road to 2024.)

    Peter K. -> pgl... , Thursday, September 29, 2016 at 01:27 PM
    Sanders supporters dislike Republicans more than Hillary supporters do according to polls. They're not going to go for trickle-down economics. Sanders's message was that the problem with the economy and political system are people like Trump. That's why he proposed a significant financial transaction tax. Sanders supporters agree with Sanders, Dean Baker and Jared Bernstein that corporate trade deals could be made more fair.
    Ben Groves -> Peter K.... , -1
    "Corporate" trade deals aren't the issue. It is capital markets. Republicans wants a total abolition of regulations on capital markets. Not only will Trumps deficits need more foreign finance, he will gut the economy to bring that foreign finance in or gut the economy if it doesn't come in if he trade saber rattles. The only other option is much such large government spending cuts, that creates a recession as well creating capital flight.

    Sanders doesn't support deregulated capital markets, he can swagger about 'trade'.

    Saigo Takamori : , -1
    Mankiw reveals like Krugman he's never been to East Asia, nor is he the least bit curious about why the US developed in the first place. If he had studied economic development or East Asia he would know that blistering high interest rates (+50%) were common in the East Asian countries during their periods of stunning growth. Rising interest rates from the reduced flow of capital would also be associated with - for the first time in 40 years -- positive incentives to invest in US tradable goods production.

    US economists are paid to confuse people and be confused. Watch Charles Ferguson's Inside Job for information on how morally and financially compromised US economists are.

    No wonder the US is an economic basket case on the cusp of becoming a third world country. Thanks economists! You guys have the best advice! Free trade and comparative advantage are real winners! Just ask Haiti, the second most open economy in the Americas after the US.

    vic twente : , -1
    This is rich coming from Mankiw.

    I've watched Mankiw, on video, on several occasions, make patently false claims about economic policy based on first-year macro that's completely and utterly disproven at even a third-year level.

    And Mankiw does this specifically in the context of offering support to idiotic Republican policies, to pander to the Republican mandarins who hire him every 4 years as economic adviser to their Presidential candidate (and to sell more textbooks at Red-state schools).

    Why does Mankiw think he deserves to sell his own ass like a two-bit prison whore, while Navarro and Ross can't?

    [Oct 04, 2016] Meritocracy is a kind of aristocracy.

    Notable quotes:
    "... ...First of all, for all extents and purposes they *are* the governing class, and they aren't simply failing to be subversive, they are defending their class interest. I know that this will cue any number of remarks about how someone is a college professor and isn't governing anything - as if someone in corporate upper management somewhere is really governing anything either - but what holds the neoliberal order in place is that it serves the interests of the managerial class, which includes professionals and other symbolic-manipulation people as its lower tier. ..."
    "... A side note: there was some conversation above about the interests of an aristocracy, which of course prompted the idea that the aristocracy is long gone. But meritocracy is a kind of aristocracy. ..."
    "... I'll quote wiki: "One study […] found that of nine developed countries, the United States and United Kingdom had the lowest intergenerational vertical social mobility with about half of the advantages of having a parent with a high income passed on to the next generation." That's not perfect, but it's getting better. ..."
    "... to the extent that the people parroting this line are professional-class hangers-on of the global financial elite and neoliberalism serves their class interests ( at least until academic/media sinecures are next in line for outsourcing ), their aversion to subversive radical politics makes perfect sense as a simple matter of vested interest. ..."
    Oct 04, 2016 | crookedtimber.org

    bruce wilder 10.03.16 at 6:12 pm 369

    If you need an eloquent summary of how the dysfunction of the American political system has become manifest in a foreign policy of perpetual and costly failure .
    Rich Puchalsky 10.03.16 at 7:31 pm 370

    ...First of all, for all extents and purposes they *are* the governing class, and they aren't simply failing to be subversive, they are defending their class interest. I know that this will cue any number of remarks about how someone is a college professor and isn't governing anything - as if someone in corporate upper management somewhere is really governing anything either - but what holds the neoliberal order in place is that it serves the interests of the managerial class, which includes professionals and other symbolic-manipulation people as its lower tier.

    Second, I'm not sure about the merits of the whole Manufacturing Consent line of critique, but defending elite opinion as the only respectable opinion sort of is accomplishing something. Sure, individual votes are meaningless, and any one person's contribution negligible. But there is a recurring trope of people wondering whether someone is a paid troll because people are actually paid - whether by David Brooks or by Putin - to do exactly this kind of thing. And they are paid to do it because it works, or at any rate people think that it works. Even better if people do it on a volunteer basis.

    Rich Puchalsky 10.03.16 at 7:52 pm 371
    A side note: there was some conversation above about the interests of an aristocracy, which of course prompted the idea that the aristocracy is long gone. But meritocracy is a kind of aristocracy.

    Look at how much effort people put into ensuring that their children are high-status, degreed, good job holders just like themselves, and how successful that generally is.

    I'll quote wiki: "One study […] found that of nine developed countries, the United States and United Kingdom had the lowest intergenerational vertical social mobility with about half of the advantages of having a parent with a high income passed on to the next generation." That's not perfect, but it's getting better.

    Will G-R 10.03.16 at 9:33 pm
    You're right, Rich: to the extent that the people parroting this line are professional-class hangers-on of the global financial elite and neoliberalism serves their class interests ( at least until academic/media sinecures are next in line for outsourcing ), their aversion to subversive radical politics makes perfect sense as a simple matter of vested interest.

    But I like to think of my point as less Chomskian and more Žižekian, in that while Chomsky's manufactured consent is presented as a simple way to cover other people's interests with ideological mystification, Žižek's fetishism (like Marx's before him) is presented as a way for people to cover their own interests by imagining their mystification as itself a demystification. It's not that professional-class liberals don't realize the truth that they should be fighting against oppression - they do realize this, but it's false realization concealing from them the deeper truth that they're actually fighting for oppression.

    [Oct 02, 2016] The absurdly high levels of executive pay under neoliberalism are disconnected with performance and encourage short-termism

    Oct 02, 2016 | www.ft.com

    Tommy Breen, the low profile boss of support services group DCC who earned a relatively modest €737,000 in the year to March 2016, offered the best value for money, according to rankings by consultants Mercer Kepler.

    Alison Cooper, chief executive of consumer goods group Imperial Brands, who was paid £3.58m in 2015, and George Weston, boss of international food group ABF, who earned £3.05m in 2015, were in second and third place.

    The total pay of all three is below the average pay of £5.5m for a FTSE 100 chief executive in 2015, according to the High Pay Centre.

    In contrast, only two of the top 10 best paid FTSE 100 CEOs in 2015 made the top 30 in the value for money rankings. This was Shire chief executive Flemming Ornskov, who earned £14.6m last year, and RELX boss Erik Engstrom, who was awarded £10.9m.

    None of the other top 10 best paid bosses last year, which included Sir Martin Sorrell, who earned £70.4m at WPP , Rakesh Kapoor, awarded £23.2m at Reckitt Benckiser , Jeremy Darroch, on £16.9m at Sky, or Bob Dudley, on £13.3m at BP , made the top 30 value for money list. The index only lists the top 30.

    Full details of Mrs May's plans will not be laid out until later in the autumn when BIS, the business department, launches a consultation. Some of the policies are already known: disclosure of pay ratios, annual binding shareholder votes on pay and having worker and consumer representatives on boards.

    Other investors and business groups have been critical of the planned government reforms, warning that they may force up pay levels. An annual binding vote, they warn, could create uncertainty, which in turn might prompt demands for extra compensation.

    The Mercer survey looks at the relationship between value created and money earned by a chief executive. The value is calculated by taking the company's total shareholder return relative to the FTSE and its sector.

    Money earned is the chief executive's three-year average realised pay figure, which is adjusted for the size of the company. Chief executive pay correlates strongly with company size as well as performance.

    Gordon Clark, partner at Mercer Kepler, said: "Our research puts all companies on a level playing field when comparing whether their executives offer value for money. It does this by controlling for differences in sector, size and complexity.

    "Executives who create the most value for shareholders relative to their peers, and relative to their pay, offer the best value for money."

    [Oct 01, 2016] Four Modifications To Feds Current Posture - Larry Summers

    Notable quotes:
    "... ...Second, it should acknowledge at least to itself that it has damaged its credibility by repeatedly holding out the prospects of much more tightening than the market anticipated, being ignored by the market, and then having the market turn out to be right. It should recognize output and inflation and unemployment would all be closer to their target levels today and in their forecasts if rates had not been increased last December... ..."
    Oct 01, 2016 | economistsview.typepad.com

    RC AKA Darryl, Ron : October 01, 2016 at 06:13 AM

    RE: Four Modifications To Fed's Current Posture - Larry Summers

    [It is wonderful to see Larry Summers has redeeming social value. As far as monetary policy goes then Larry has nailed it here.]


    ...First, it should acknowledge that the neutral rate is now close to zero and it may well remain under 2 percent for the foreseeable future...


    ...Second, it should acknowledge at least to itself that it has damaged its credibility by repeatedly holding out the prospects of much more tightening than the market anticipated, being ignored by the market, and then having the market turn out to be right. It should recognize output and inflation and unemployment would all be closer to their target levels today and in their forecasts if rates had not been increased last December...


    ...Third, the Fed should make real the idea that its inflation target is symmetric by being clear that in the late stage of prolonged expansion with low unemployment it is comfortable with inflation rising a little bit above 2 percent with the confidence that it will decline when the next recession comes...


    ... Fourth, the Fed should make clear that it sees risk as asymmetric right now...


    [I can agree with all that without changing my view of last December's 25 basis point FFR hike. That hike did very little to change the economic conditions compared to how much it did to change the conversation. How could the hawks be capitulating to the doves now had they not gotten their chance to be proven wrong? That goes double for the neo-Fisherites.]

    [Oct 01, 2016] The conventional [neoliberal] view serves to protect us from the painful job of thinking

    Oct 01, 2016 | economistsview.typepad.com

    RC AKA Darryl, Ron : September 30, 2016 at 07:16 AM

    RE: Stop pretending that an economy can be controlled

    [Wow, this is interesting. I wonder what reason, Sandwichman, and cm think of this?]

    http://oecdinsights.org/2016/09/29/stop-pretending-that-an-economy-can-be-controlled/

    Angel Gurría, OECD Secretary-General

    The crisis exposed some serious flaws in our economic thinking. It has highlighted the need to look at economic policy with more critical, fresh approaches. It has also revealed the limitations of existing tools for structural analysis in factoring in key linkages, feedbacks and trade-offs – for example between growth, inequality and the environment.

    We should seize the opportunity to develop a new understanding of the economy as a highly complex system that, like any complex system, is constantly reconfiguring itself in response to multiple inputs and influences, often with unforeseen or undesirable consequences. This has many implications. It suggests policymakers should be constantly vigilant and more humble about their policy prescriptions, act more like navigators than mechanics, and be open to systemic risks, spillovers, strengths, weaknesses, and human sensitivities. This demands a change in our mind-sets, and in our textbooks. As John Kenneth Galbraith once said, "the conventional view serves to protect us from the painful job of thinking."

    This is why at the OECD we launched an initiative called New Approaches to Economic Challenges (NAEC). With this initiative we want to understand better how the economy works, in all its complexity, and design policies that reflect this understanding. Our aim is to consider and address the unintended consequences of policies, while developing new approaches that foster more sustainable and inclusive growth.

    Complexity is a common feature of a growing number of policy issues in an increasingly globalised world employing sophisticated technologies and running against resource constraints.

    The report of the OECD Global Science Forum (2009) on Applications of Complexity Science for Public Policy reminds us of the distinction between complicated and complex systems. Traditional science (and technology) excels at the complicated, but is still at an early stage in its understanding of complex phenomena like the climate.

    For example, the complicated car can be well understood using normal engineering analyses. An ensemble of cars travelling down a highway, by contrast, is a complex system. Drivers interact and mutually adjust their behaviours based on diverse factors such as perceptions, expectations, habits, even emotions. To understand traffic, and to build better highways, set speed limits, install automatic radar systems, etc., it is helpful to have tools that can accommodate non-linear and collective patterns of behaviour, and varieties of driver types or rules that might be imposed. The tools of complexity science are needed in this case. And we need better rules of the road in a number of areas.

    This is not an academic debate. The importance of complexity is not limited to the realm of academia. It has some powerful advocates in the world of policy. Andy Haldane at the Bank of England has thought of the global financial system as a complex system and focused on applying the lessons from other network disciplines – such as ecology, epidemiology, and engineering – to the financial sphere. More generally, it is clear that the language of complexity theory – tipping points, feedback, discontinuities, fat tails – has entered the financial and regulatory lexicon. Haldane has shown the value of adopting a complexity lens, providing insights on structural vulnerabilities that built up in the financial system. This has led to policy suggestions for improving the robustness of the financial system.

    Closer to home, Bill White, Chairman of our Economic and Development Review Committee (EDRC) has been an ardent advocate of thinking about the economy as a complex system. He has spoken in numerous OECD meetings – in part as an explanation and in part as a warning – that systems build up as a result of cumulative processes, can have highly unpredictable dynamics and can demonstrate significant non-linearity. As a result Bill has urged policymakers to accept more uncertainty and be more prudent. He also urged economists to learn some exceedingly simple but important lessons from those that have studied or work with complex systems such as biologists, botanists, anthropologists, traffic controllers, and military strategists.

    Perhaps the most important insight of complexity is that policymakers should stop pretending that an economy can be controlled. Systems are prone to surprising, large-scale, seemingly uncontrollable, behaviours. Rather, a greater emphasis should be placed on building resilience, strengthening policy buffers and promoting adaptability by fostering a culture of policy experimentation.

    At the OECD, we are starting to embrace complexity. For several years we have been mapping the trade "genome" with our Trade in Value Added (TiVA) database to explain the commercial interconnections between countries.

    We have examined the possibilities for coupling economic and other systems models, for example environmental (climate) and societal (inequalities). Our work on the Costs of Inaction and Resource Constraints: Implications for Long-term Growth (CIRCLE) is a key example of linking bio-physical models and economic models to gauge the impact of environmental degradation and climate change on the economy.

    We are also looking at governing complex systems in areas as diverse as education and international trade policy. And we are looking at the potential for tapping big data – an indispensable element of complexity modelling approaches. But there remains much to do to fully enrich our work with the perspectives of complexity.

    The OECD is delighted to work with strong partners – the Institute for New Economic Thinking (INET) Oxford, and the European Commission to help policy-makers advance the use of complex systems thinking to address some of the most difficult challenges.

    An important question remains. How can the insights and methods of complexity science be applied to assist policymakers as they tackle difficult problems in areas such as environmental protection, financial regulation, sustainability or urban development?

    At the Workshop on Complexity and Policy on 29-30 September at the OECD, we will help find the answer – stimulate new thinking, new policy approaches and ultimately better policies for better lives.


    [Sometimes when it seems like you are just howling at the moon there really is a new day coming.]

    Reply Friday, September 30, 2016 at 07:16 AM reason -> RC AKA Darryl, Ron... , Friday, September 30, 2016 at 07:39 AM
    I think it is both correct, and entirely wrong-headed.

    Firstly, we have not believed that the economy can be controlled (we were just trying to steer it) - the guiding principle was that it didn't need to be controlled which is something completely different. It also falls into the trap of talking about "the economy" as though the economy was an organism that had its own purposes, rather than as a set of institutions that ultimately exist to serve human beings (a job which it achieves with quite varying degrees of success). I won't say this approach is necessarily bound to fail, I just doubt that it will be alone sufficient.

    RC AKA Darryl, Ron said in reply to reason ... , Friday, September 30, 2016 at 08:01 AM
    The OECD is one of those institutions. Yep, they have plenty of their own assumptions. Complexity has been mentioned here before.

    Exactly what they mean is indeterminable from the general principles mentioned, but examples are worthwhile. You might read them to mean be cautious about leaps of faith such as financial deregulation because bad stuff CAN happen.

    RC AKA Darryl, Ron said in reply to RC AKA Darryl, Ron... , Friday, September 30, 2016 at 08:58 AM
    "...Perhaps the most important insight of complexity is that policymakers should stop pretending that an economy can be controlled. Systems are prone to surprising, large-scale, seemingly uncontrollable, behaviours. Rather, a greater emphasis should be placed on building resilience, strengthening policy buffers and promoting adaptability by fostering a culture of policy experimentation..."

    [In context I took this more to mean that economic models are probabilistic at best rather than deterministic rather than that it said policy makers in the OECD were performing central planning of the economy, which everyone knows is not true.]

    anne -> reason ... , -1
    Firstly, we have not believed that the economy can be controlled (we were just trying to steer it) - the guiding principle was that it didn't need to be controlled which is something completely different. It also falls into the trap of talking about "the economy" as though the economy was an organism that had its own purposes, rather than as a set of institutions that ultimately exist to serve human beings (a job which it achieves with quite varying degrees of success)....

    [ Nice. ]

    RGC : , Friday, September 30, 2016 at 08:09 AM
    Re: Stop pretending that an economy can be controlled - OECD Insights

    "The crisis exposed some serious flaws in our economic thinking. It has highlighted the need to look at economic policy with more critical, fresh approaches. It has also revealed the limitations of existing tools for structural analysis in factoring in key linkages, feedbacks and trade-offs – for example between growth, inequality and the environment.

    We should seize the opportunity to develop a new understanding of the economy as a highly complex system that, like any complex system, is constantly reconfiguring itself in response to multiple inputs and influences, often with unforeseen or undesirable consequences. This has many implications. It suggests policymakers should be constantly vigilant and more humble about their policy prescriptions, act more like navigators than mechanics, and be open to systemic risks, spillovers, strengths, weaknesses, and human sensitivities. This demands a change in our mind-sets, and in our textbooks. As John Kenneth Galbraith once said, "the conventional view serves to protect us from the painful job of thinking."
    ..................................
    Complex systems such as chemical processes are managed by feedback control systems that specify a desired output and then measure deviation from that control point (the error signal) to adjust the inputs and thus return to the desired setpoint.

    I have promoted the use of control theory concepts in economics before. From a previous post:

    Auto-control:

    Did you ever think about how you keep the temperature in your house at a comfortable level even though the weather is unpredictable and can change a lot?
    Well, maybe the level of the economy could be controlled on similar principles. Maybe economists could borrow from the control theory that is employed in air conditioning thermostats.
    For example, if we wanted to maintain full employment we could adjust inputs in a similar manner to the way heat and cooling is adjusted in your house. Just as heat is added when the temperature gets too low, government jobs could be added when private employment falls short. When the temperature starts to get too high ( full employment is achieved), heat could be sucked out ( no more jobs would be added and/or higher taxes could be imposed) to cool things off.
    This is an appealing analogy because, like the weather, the economy is inherently unpredictable and, like the air conditioning in your house, you could keep things comfortable without the need of forecasting the unknowable.
    So maybe economists should forsake their DSGE models and instead study control theory.
    ...................
    In my view such approaches are not promoted because they require central control by the state and our elite establishment quashes such threats to their dominance. That is why Keynes' conclusions were subverted:

    "The context is as follows: in an interview with the leftist British journalist Kingsley Martin (1897–1969) in the New Statesman of January 1939, Keynes – commenting on the need for a new interventionist economic system and at the same time the need to avoid the authoritarianism of the Fascist and communist states – said this:

    "The question is whether we are prepared to move out of the nineteenth-century laissez faire state into an era of liberal socialism, by which I mean a system where we can act as an organized community for common purposes and to promote social and economic justice, whilst respecting and protecting the individual-his freedom of choice, his faith, his mind and its expression, his enterprise and his property." (Moggridge 1982: 500 = Keynes and Martin 1939: 123).
    ............
    Many people now accept that we have traveled the wrong path since the 1950's. I would submit that economists would do well to go back to the ideas of Keynes, Kalecki, Lerner and perfect those concepts within a framework of automatic stabilization. This would be greatly facilitated if some prominent economists would have the guts to say again what Keynes was saying in the 30's.


    anne -> RGC... , Friday, September 30, 2016 at 08:23 AM
    What would a recommended reading of or about Abba Lerner be? Though Lerner is frequently mentioned, I still have no idea where to begin reading. Would this do?

    http://www.levyinstitute.org/pubs/wp272.pdf

    July, 1999

    Functional Finance and Full Employment: Lessons from Lerner for Today?
    By Mathew Forstater

    pgl -> anne... , Friday, September 30, 2016 at 08:41 AM
    Lerner wrote a lot. But his comment reminded me of the Functional Finance piece so I think you got the right one.
    pgl -> anne... , Friday, September 30, 2016 at 08:44 AM
    Lerner's Symmetry Theorem was noted the other day:

    http://www2.econ.iastate.edu/classes/econ355/choi/lerner.htm

    Of course this related to Navarro's nonsense on VAT and trade so I doubt this was the paper relevant here.

    anne -> pgl... , Friday, September 30, 2016 at 08:52 AM
    https://en.wikipedia.org/wiki/Lerner_symmetry_theorem

    The Lerner symmetry theorem is a result used in international trade theory, which states that, based on an assumption of a zero balance of trade (that is, the value of exported goods equals the value of imported goods for a given country), an ad valorem import tariff (a percentage of value or an amount per unit) will have the same effects as an export tax. The theorem is based on the observation that the effect on relative prices is the same regardless of which policy (ad valorem tariffs or export taxes) is applied.

    The theorem was developed by economist Abba P. Lerner in 1936.

    anne -> RGC... , -1
    http://www.levyinstitute.org/pubs/wp272.pdf

    July, 1999

    Functional Finance and Full Employment: Lessons from Lerner for Today?
    By Mathew Forstater

    The Asian Crisis, with the fallout in Latin America and the transition economies; the Russian default; continuing troubles in Japan; weaknesses in the structure of the new European EMU; volatility on Wall Street; deflationary pressures in the global economy: recent economic developments invite a reconsideration of some of our most deeply held beliefs concerning economic theory and public policy. Even within the hallowed halls of mainstream economics, voices of dissent can be heard. Paul Krugman, Joseph Stiglitz, and Jeffrey Sachs are among those whose recent proclamations indicate that we have entered a period in which orthodox views are being openly questioned, creating an atmosphere characterized by a crisis of confidence.

    Such periods of impending crisis and open expressions of self-doubt, questioning our most deeply held beliefs about the way the world works, creates a climate in which the ideas of the great unorthodox thinkers of the past may be revisited. The work of those who in the past dedicated their lives to formulating solutions to the challenges of modern capitalist economies may contain lessons applicable to the contemporary situation. It is in this spirit that this paper revisits the early works of Abba Lerner, outlining fifteen such lessons regarding macroeconomic theory and policy, as fresh in the context of the current scene as they were some five decades ago when they were first formulated.

    Lesson #1: Full employment, price stability, and a decent standard of living for all are fundamental macroeconomic goals, and it is the responsibility of the state to promote their attainment.

    Lesson #2: Policies should be judged on their ability to achieve the goals for which they are designed and not on any notion of whether they are "sound" or otherwise comply with the dogmas of traditional economics.

    Lesson #3: "Money Is a Creature of the State"

    Lesson #4: Taxing is not a funding operation.

    Lesson #5: Government Borrowing is not a funding operation.

    Lesson #6: The primary purpose of taxation is to influence the behavior of the public.

    Lesson #7: The primary purpose of government bond sales is to regulate the overnight interest rate.

    Lesson #8: Bond sales logically follow from, rather than precede, government spending....

    RGC -> anne... , Friday, September 30, 2016 at 08:53 AM
    This has some history:

    MMP Blog #31: FUNCTIONAL FINANCE: Monetary and Fiscal Policy for Sovereign Currencies
    Posted on January 8, 2012

    By L. Randall Wray

    http://neweconomicperspectives.org/2012/01/mmp-blog-31-functional-finance-monetary.html

    anne -> RGC... , Friday, September 30, 2016 at 09:13 AM
    http://neweconomicperspectives.org/2012/01/mmp-blog-31-functional-finance-monetary.html

    January 8, 2012

    Functional Finance: Monetary and Fiscal Policy for Sovereign Currencies
    By L. Randall Wray

    Today we will lay out Abba Lerner's approach to policy. In the 1940s he came up with what he called the functional finance approach to policy.

    Lerner's Functional Finance Approach. Lerner posed two principles:

    First Principle: if domestic income is too low, government needs to spend more. Unemployment is sufficient evidence of this condition, so if there is unemployment it means government spending is too low.

    Second Principle: if the domestic interest rate is too high, it means government needs to provide more "money", mostly in the form of bank reserves.

    The idea is pretty simple. A government that issues its own currency has the fiscal and monetary policy space to spend enough to get the economy to full employment and to set its interest rate target where it wants. (We will address exchange rate regimes later; a fixed exchange rate system requires a modification to this claim.) For a sovereign nation, "affordability" is not an issue-it spends by crediting bank accounts with its own IOUs, something it can never run out of.If there is unemployed labor, government can always afford to hire it-and by definition, unemployed labor is willing to work for money.

    Lerner realized that this does not mean government should spend as if the "sky is the limit"-runaway spending would be inflationary (and, as discussed many times, it does not presume that government spending won't affect the exchange rate). When Lerner first formulated the functional finance approach (in the early 1940s), inflation was not a major concern-the US had recently lived through deflation in the Great Depression. However, over time, inflation became a serious concern, and Lerner proposed a form of wage and price controls to constrain inflation that he believed would result as the economy nears full employment. Whether or not that would be an effective and desired way of attenuating inflation pressures is not our concern here. The point is that Lerner was only arguing that government should use its spending power with a view to moving the economy toward fullemployment-while recognizing that it might have to adopt measures to fight inflation.

    Lerner rejected the notion of "sound finance"-that is the belief that government ought to run its finances as if it were like a household or a firm. He could see no reason for the government to try to balance its budget annually, over the course of a business cycle, or ever. For Lerner, "sound" finance (budget balancing) was not "functional"-it did not help to achieve the public purpose (including, for example, full employment). If the budget were occasionally balanced, so be it; but if it never balanced, that would be fine too. He also rejected any attempt to keep a budget deficit below any specific ratio to GDP, as well as any arbitrary debt to GDP ratio. The "correct" deficit would be the one that achieves full employment.

    Similarly the "correct" debt ratio would be the one consistent with achieving the desired interest rate target. This follows from his second principle: if government issues too much debt, it has by the same token issued too few bank reserves and cash. The solution is for the treasury and central bank to stop selling bonds,and, indeed, for the central bank to engage in open market purchases (buying treasuries by crediting the selling banks with reserves). That will allow the overnight rate to fall as banks obtain more reserves and the public gets more cash.

    Essentially, the second principle just says that government ought to let the banks,households, and firms achieve the portfolio balance between "money" (reserves and cash) and bonds desired. It follows that government bond sales are not really a "borrowing" operation required to let the government deficit spend. Rather, bond sales are really part of monetary policy, designed to help the central bank to hit its interest rate target. All of that is consistent with the modern money view advanced previously....

    anne -> RGC... , -1
    Properly edited link:

    https://pro.creditwritedowns.com/2012/01/monetary-and-fiscal-policy-for-sovereign-currencies.html

    January 9, 2012

    Functional Finance: Monetary and Fiscal Policy for Sovereign Currencies
    By L. Randall Wray

    [Oct 01, 2016] Oddly, after outsourcing jobs CEO pay never decreases.

    Oct 01, 2016 | www.theguardian.com

    jellybelly21 5h ago 3 4 Why are Trump supporters under the illusion that DT can bring jobs back? Carrier will move production abroad because 'Most of its Indianapolis workers make about $26 an hour. Their Mexican replacements make $3 an hour'. DT products are manufactured overseas for the same reason: low production costs = higher profits. Reply Share Share on Facebook Facebook Share on Facebook Twitter | Pick Report WillKnotTell jellybelly21 3h ago 2 3 Oddly, CEO pay never decreases.

    [Oct 01, 2016] Doing what contemporary American economists suggest: eliminate tariffs, dont worry about huge capital inflows or a ridiculously overvalued dollar, has led the US from being the envy of the world to being a non-developed economy with worse roads than Cuba or Ghana.

    Oct 01, 2016 | economistsview.typepad.com

    Friederich List : September 30, 2016 at 05:29 PM

    Doing what contemporary American economists suggest: eliminate tariffs, don't worry about huge capital inflows or a ridiculously overvalued dollar, has led the US from being the envy of the world to being a non-developed economy with worse roads than Cuba or Ghana.

    That US economists are still treated with any degree of credibility it totally appalling. They are so obviously bought-and-paid for snake oil salesmen that people are finally tuning them out.

    TRUMP 2016: Return America to Protectionism - Screw globalism

    [Oct 01, 2016] Get real! No alumni of the Peterson Institute and IMF is going to go all mushy on the down sides of globalization and wealth distribution.

    Oct 01, 2016 | economistsview.typepad.com

    RC AKA Darryl, Ron : September 30, 2016 at 07:07 AM RE: The State of Advanced Economies and Related Policy Debates: A Fall 2016 Assessment

    https://piie.com/publications/policy-briefs/state-advanced-economies-and-related-policy-debates-fall-2016-assessment

    [There is a pdf at the link. Olivier Blanchard has surprised me again. As establishment economists go he is not so bad. There is plenty that he still glosses over but insofar as status quo establishment macroeconomics goes he is thorough and coherent. One might hope that those that do not understand either the debate for higher inflation targets or the debate for fiscal policy to accomplish what monetary policy cannot might learn from this article by Olivier Blanchard, but I will not hold my breath waiting for that. In any case the article is worth a read for anyone that can.] RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , Friday, September 30, 2016 at 07:07 AM

    Get real! No alumni of the Peterson Institute and IMF is going to go all mushy on the down sides of globalization and wealth distribution.
    anne -> RC AKA Darryl, Ron... , Friday, September 30, 2016 at 07:13 AM
    https://piie.com/system/files/documents/pb16-14.pdf

    September, 2016

    The State of Advanced Economies and Related Policy Debates: A Fall 2016 Assessment
    By Olivier Blanchard

    Perhaps the most striking macroeconomic fact about advanced economies today is how anemic demand remains in the face of zero interest rates.

    In the wake of the global financial crisis, we had a plausible explanation why demand was persistently weak: Legacies of the crisis, from deleveraging by banks, to fiscal austerity by governments, to lasting anxiety by consumers and firms, could all explain why, despite low rates, demand remained depressed.

    This explanation is steadily becoming less convincing. Banks have largely deleveraged, credit supply has loosened, fiscal consolidation has been largely put on hold, and the financial crisis is farther in the rearview mirror. Demand should have steadily strengthened. Yet, demand growth has remained low.

    Why? The likely answer is that, as the legacies of the past have faded, the future has looked steadily bleaker. Forecasts of potential growth have been repeatedly revised down. And consumers and firms-anticipating a gloomier future-are cutting back spending, leading to unusually low demand growth today....

    RC AKA Darryl, Ron -> anne... , -1
    THANKS!

    [Oct 01, 2016] The ruling class has figured out that a happy and productive population with free time on their hands is a mortal danger

    Notable quotes:
    "... Why all the bullshit jobs? And why are the most necessary and useful jobs, almost inevitably the lowest prestige and lowest paid? Capitalism. It's a nasty, nasty, nasty tangle of perverse incentives and evil. ..."
    Oct 01, 2016 | www.nakedcapitalism.com
    Kurt Sperry October 1, 2016 at 11:44 am

    David Graeber I think hits one out of the park today: http://evonomics.com/why-capitalism-creates-pointless-jobs-david-graeber/

    Why all the bullshit jobs? And why are the most necessary and useful jobs, almost inevitably the lowest prestige and lowest paid? Capitalism. It's a nasty, nasty, nasty tangle of perverse incentives and evil.

    BecauseTradition October 1, 2016 at 12:52 pm

    The answer clearly isn't economic: it's moral and political. The ruling class has figured out that a happy and productive population with free time on their hands is a mortal danger (think of what started to happen when this even began to be approximated in the '60s). And, on the other hand, the feeling that work is a moral value in itself, and that anyone not willing to submit themselves to some kind of intense work discipline for most of their waking hours deserves nothing, is extraordinarily convenient for them. David Graeber from http://evonomics.com/why-capitalism-creates-pointless-jobs-david-graeber/

    Also, as several here have noted, one can work without a job if they have such resources as land or a workshop and, dare I say it, an income.

    Nice article!

    Jomo October 1, 2016 at 2:28 pm

    Yes! Just read! Forwarding to friends and family! Love comments community on NC site.

    [Sep 30, 2016] increasing inequality is bad news for managing resource limits and externalities. The demands of the masses can be crammed down, but at a cost to social discipline as well as poverty. The power of the rich to marshal resources to mitigate the effects and externalize and socialise costs will exacerbate the main drivers.

    Notable quotes:
    "... Ridiculing the anachronism of Marxism is a pastime, but what are to do with neoclassical economics? Even if I believed that world leaders ceremonially signing agreements were willing to act in (corrupt) principle, there is still the small matter of technocratic palsy among the economists. I mean, did you read the 5th IPCC summary? Responding will cost growth. ..."
    "... What I do get explicitly from Marxism which is mostly only implicit in neoclassical economics is that increasing inequality is bad news for managing resource limits and externalities. ..."
    "... The demands of the masses can be crammed down, but at a cost to social discipline as well as poverty. The power of the rich to marshal resources to mitigate the effects and externalize and socialise costs will exacerbate the main drivers. ..."
    Sep 30, 2016 | crookedtimber.org

    bruce wilder 09.29.16 at 4:07 pm ( 14 9 )

    Throwing around a Marxist accented capitalism label as all purpose explanator does not seem to me to providing much insight independent of what is projected onto it, and calling for Monty Python revolution proves as much, imho. That said, neoclassical economics is even less helpful.

    Quite apart from the impulses of sociopathic or philanthropic financiers - are they the same or different people? - the official doctrine of economic analysis, in which framework public policy must be drawn, has been remarkably unhelpful in developing a common understanding of what needs to be done, imho.

    Ridiculing the anachronism of Marxism is a pastime, but what are to do with neoclassical economics? Even if I believed that world leaders ceremonially signing agreements were willing to act in (corrupt) principle, there is still the small matter of technocratic palsy among the economists. I mean, did you read the 5th IPCC summary? Responding will cost growth.

    But, not to worry, we will be able to extract carbon at scale real soon and reverse overshoot.

    The optimistic reply seems to reject the need for an overarching framework of ideas to give context and orientation: apparently, solar electricity will keep getting cheaper - here is a price per kWh - problem solved. Which problem? . . .?

    What I do get explicitly from Marxism which is mostly only implicit in neoclassical economics is that increasing inequality is bad news for managing resource limits and externalities.

    The demands of the masses can be crammed down, but at a cost to social discipline as well as poverty. The power of the rich to marshal resources to mitigate the effects and externalize and socialise costs will exacerbate the main drivers.

    [Sep 30, 2016] Myth that neoliberal globalization reduces poverty

    Notable quotes:
    "... "Over the last 25 years, the number of people living in extreme poverty has been cut from nearly 40 percent of humanity to under 10 percent." This is roughly true, according to World Bank data, but the story of how it happened goes against his whole speech - which argues that this progress is a result of the "globalization" that Washington leads and supports wherever it has influence in the developing world. In fact, the majority of the reduction in extreme poverty during this period (more than 1.1 billion people worldwide) took place in China. But during this period China was really the counterexample to the "principles of open markets" with which Obama insists "we must go forward, not backward." ..."
    "... If we go back a bit more and look at 1981–2012, China accounted for even more of the reduction of the world population in extreme poverty, about 70 percent. This would indicate that other parts of the developing world increased their economic and social progress during the 21st century, relative to China, and indeed many developing countries did (as compared to the last two decades of the 20th century). But China played an increasingly large role in reducing poverty in other countries during this period. ..."
    "... It was so successful in its economic growth and development - by far the fastest in world history - that it became the largest economy in the world, and pulled up many developing countries through its imports. Chinese imports went from a negligible 0.1 percent of other developing countries' exports to 3 percent, from 1980–2010. China also provided hundreds of billions of dollars in investment, loans, and aid to low- and middle-income countries in the 21st century. (In the last few years, Chinese growth has slowed, along with that of most countries, and that has contributed - although perhaps not as much as Europe has - to the global slowdown since 2011.) ..."
    "... the "principles of open markets" that Obama refers to is really code for "policies that Washington supports." ..."
    "... In his defense of a world economic order ruled by Washington and its rich country allies, President Obama also asserted that "we have made international institutions like the World Bank and the International Monetary Fund more representative." But that is a gross exaggeration: the most recent reform of IMF voting shares left the US with an unchanged 16.7 percent share, enough to veto many important decisions (that require an 85 percent majority) by itself; and it left Washington and its traditional rich country allies with a solid majority of more than 60 percent of votes. Of course, it is the developing countries, especially poorer ones, that are most subject to IMF decisions. But the IMF is - by a gentleman's agreement among the rich country governments - headed by a European, and the World Bank by an American. It should not be surprising if these institutions do not look out for the interests of the developing world. ..."
    Sep 30, 2016 | economistsview.typepad.com

    anne : September 30, 2016 at 04:55 AM

    http://cepr.net/publications/op-eds-columns/president-obama-inadvertently-gives-high-praise-to-china-in-un-speech

    September 29, 2016

    President Obama Inadvertently Gives High Praise to China in UN Speech
    By Mark Weisbrot

    President Obama's speech at the UN last week was mostly a defense of the world's economic and political status quo, especially that part of it that is led or held in place by the US government and the global institutions that Washington controls or dominates. In doing so, he said some things that were exaggerated or wrong, or somewhat misleading. It is worth looking at some of the things that media reports on this speech missed.

    "Over the last 25 years, the number of people living in extreme poverty has been cut from nearly 40 percent of humanity to under 10 percent." This is roughly true, according to World Bank data, but the story of how it happened goes against his whole speech - which argues that this progress is a result of the "globalization" that Washington leads and supports wherever it has influence in the developing world. In fact, the majority of the reduction in extreme poverty during this period (more than 1.1 billion people worldwide) took place in China. But during this period China was really the counterexample to the "principles of open markets" with which Obama insists "we must go forward, not backward."

    China's historically unprecedented economic growth in the past 25 years (or 35 years, or even more) was accomplished with state-owned enterprises and banks dominating the economy. State control over investment, technology transfer, and foreign exchange was vastly greater than in other developing countries. China rejected the neoliberal policies of an "independent central bank," indiscriminate opening to international trade and investment, and rapid privatization of state companies. Instead, it chose a gradual transition, over 35 years, from an overwhelmingly planned economy to a mixed economy in which the state still plays a leading role. Even today, China expanded the investment of state-owned enterprises by 23.5 percent in the first six months of 2016 (as compared to the same period in 2015), to help boost the economy.

    If we go back a bit more and look at 1981–2012, China accounted for even more of the reduction of the world population in extreme poverty, about 70 percent. This would indicate that other parts of the developing world increased their economic and social progress during the 21st century, relative to China, and indeed many developing countries did (as compared to the last two decades of the 20th century). But China played an increasingly large role in reducing poverty in other countries during this period.

    It was so successful in its economic growth and development - by far the fastest in world history - that it became the largest economy in the world, and pulled up many developing countries through its imports. Chinese imports went from a negligible 0.1 percent of other developing countries' exports to 3 percent, from 1980–2010. China also provided hundreds of billions of dollars in investment, loans, and aid to low- and middle-income countries in the 21st century. (In the last few years, Chinese growth has slowed, along with that of most countries, and that has contributed - although perhaps not as much as Europe has - to the global slowdown since 2011.)

    Of course, the "principles of open markets" that Obama refers to is really code for "policies that Washington supports." Some of them are the exact opposite of "open markets," such as the lengthening and strengthening of patent and copyright protection included in the Trans-Pacific Partnership (TPP) agreement. President Obama also made a plug for the TPP in his speech, asserting that "we've worked to reach trade agreements that raise labor standards and raise environmental standards, as we've done with the Trans-Pacific Partnership, so that the benefits [of globalization] are more broadly shared." But the labor and environmental standards in the TPP, as with those in previous US-led commercial agreements, are not enforceable; whereas if a government approves laws or regulations that infringe on the future profit potential of a multinational corporation - even if such laws or regulations are to protect public health or safety - that government can be hit with billions of dollars in fines. And they must pay these fines, or be subject to trade sanctions.

    In his defense of a world economic order ruled by Washington and its rich country allies, President Obama also asserted that "we have made international institutions like the World Bank and the International Monetary Fund more representative." But that is a gross exaggeration: the most recent reform of IMF voting shares left the US with an unchanged 16.7 percent share, enough to veto many important decisions (that require an 85 percent majority) by itself; and it left Washington and its traditional rich country allies with a solid majority of more than 60 percent of votes. Of course, it is the developing countries, especially poorer ones, that are most subject to IMF decisions. But the IMF is - by a gentleman's agreement among the rich country governments - headed by a European, and the World Bank by an American. It should not be surprising if these institutions do not look out for the interests of the developing world.

    "We can choose to press forward with a better model of cooperation and integration," President Obama told the world at the UN General Assembly. "Or we can retreat into a world sharply divided, and ultimately in conflict, along age-old lines of nation and tribe and race and religion."

    But the rich country governments led by Washington are not offering the rest of the world any better model of cooperation and integration than the failed model they have been offering for the past 35 years. And that is a big part of the problem....

    RGC -> anne... , Friday, September 30, 2016 at 06:57 AM

    Excellent commentary by Mark Weisbrot.
    anne -> RGC... , Friday, September 30, 2016 at 07:09 AM
    Excellent commentary by Mark Weisbrot.

    [ Really so. ]

    anne -> anne... , Friday, September 30, 2016 at 09:23 AM
    http://cepr.net/publications/op-eds-columns/president-obama-inadvertently-gives-high-praise-to-china-in-un-speech

    September 29, 2016

    China's historically unprecedented economic growth in the past 25 years (or 35 years, or even more) was accomplished with state-owned enterprises and banks dominating the economy. State control over investment, technology transfer, and foreign exchange was vastly greater than in other developing countries. China rejected the neoliberal policies of an "independent central bank," indiscriminate opening to international trade and investment, and rapid privatization of state companies. Instead, it chose a gradual transition, over 35 years, from an overwhelmingly planned economy to a mixed economy in which the state still plays a leading role. Even today, China expanded the investment of state-owned enterprises by 23.5 percent in the first six months of 2016 (as compared to the same period in 2015), to help boost the economy....

    -- Mark Weisbrot

    anne -> anne... , Friday, September 30, 2016 at 10:04 AM
    http://cepr.net/publications/op-eds-columns/president-obama-inadvertently-gives-high-praise-to-china-in-un-speech

    September 29, 2016

    Even today, China expanded the investment of state-owned enterprises by 23.5 percent in the first six months of 2016 (as compared to the same period in 2015), to help boost the economy....

    -- Mark Weisbrot


    http://blogs.wsj.com/economics/2011/10/14/yale-professors-offer-economic-prescriptions/

    October 14, 2011

    Yale Professors Offer Economic Prescriptions
    By Brenda Cronin - Wall Street Journal

    Richard C. Levin, president of Yale - and also a professor of economics - moderated the conversation among Professors Judith Chevalier, John Geanakoplos, William D. Nordhaus, Robert J. Shiller and Aleh Tsyvinski....

    An early mistake during the recession, Mr. Levin said, was not targeting more stimulus funds to job creation. He contrasted America's meager pace of growth in gross domestic product in the past few years with China's often double-digit pace, noting that after the crisis hit, Washington allocated roughly 2% of GDP to job creation while Beijing directed 15% of GDP to that goal....

    anne -> anne... , Friday, September 30, 2016 at 10:13 AM
    Repeatedly there are warnings from Western economists that the Chinese economy is near collapse, nonetheless economic growth through the first 2 quarters this year is running at 6.7% and the third quarter looks about the same. The point is to ask and describe how after these last 39 remarkable years:

    https://fred.stlouisfed.org/graph/?g=7uKv

    August 4, 2014

    Real per capita Gross Domestic Product for China, 1976-2015

    (Percent change)

    https://fred.stlouisfed.org/graph/?g=7uKu

    August 4, 2014

    Real per capita Gross Domestic Product for China, 1976-2015

    (Indexed to 1976)

    anne -> anne... , Friday, September 30, 2016 at 10:16 AM
    https://fred.stlouisfed.org/graph/?g=7uKF

    November 1, 2014

    Total Factor Productivity at Constant National Prices for China, 1976-2014

    https://fred.stlouisfed.org/graph/?g=7uKE

    November 1, 2014

    Total Factor Productivity at Constant National Prices for China, 1976-2014

    (Indexed to 1976)

    jonny bakho : , -1
    Before the crash, complacent Democrats, ... tended to agree with them that the economy was largely self-correcting.

    Who is a complacent Democrat? Obama ran as a fiscal conservative and appointed a GOP as his SecTreas. Geithner was a "banks need to be bailed out" and the economy self corrects. Geithner was not in favor of cram down or mortgage programs that would have bailed out the injured little folks.

    Democrats like Romer and Summers were in favor a fiscal stimulus, but not enough of it. I expect to see the Clinton economic team include a lot more women and especially focus on economic policies that help working women and families.

    I have always thought that a big reason for the Bush jobless recovery was his lack of true fiscal stimulus. Bush had tax cuts for the wealthy, but the latest from Summers shows why trickle down does not work.

    Full employment may have been missing from the 1992 platform, but full employment was pursued aggressively by Bill Clinton. He got AG to agree to allow unemployment to drop to 4% in exchange for raising taxes and dropping the middle class tax cuts. Bill Clinton used fiscal policy to tax the economy and as a break so monetary policy could be accommodating.

    He should include raising the MinWage. Maybe that has not changed but it is a lynchpin for putting money in the pockets of the working poor.

    [Sep 30, 2016] Will the media ever stop the ridiculous charade of pretending that the path of globalization that we are on is somehow and natural and that it is the outcome of a "free" market?

    Notable quotes:
    "... Will the media ever stop the ridiculous charade of pretending that the path of globalization that we are on is somehow and natural and that it is the outcome of a "free" market? Are longer and stronger patent and copyright monopolies the results of a free market? ..."
    "... The NYT should up its game in this respect. It had a good piece on the devastation to millions of working class people and their communities from the flood of imports of manufactured goods in the last decade, but then it turns to hand-wringing nonsense about how it was all a necessary part of globalization. Actually, none of it was a necessary part of a free trade. ..."
    "... First, the huge trade deficits were the direct result of the decision of China and other developing countries to buy massive amounts of U.S. dollars to hold as reserves in this period. This raised the value of the dollar and made our goods and services less competitive internationally. This problem of a seriously over-valued dollar stems from the bungling of the East Asian bailout by the Clinton Treasury Department and the I.M.F. ..."
    "... The second point is political leaders are constantly working to make patents and copyrights stronger and longer. This raises the price that ordinary workers have to pay for everything from drugs to computer games. The result is lower real wages for ordinary workers and higher incomes for the beneficiaries of these rents. It also slows economic growth since markets are not smart enough to distinguish between a 10,000 percent price increase due to a tariff and a 10,000 percent price increase due to a patent monopoly. (In other words, all the bad things that "free trade" economists say about tariffs also apply to patents and copyrights, except the impact is far larger in the later case.) ..."
    Sep 30, 2016 | economistsview.typepad.com

    Mr. Bill -> Mr. Bill... September 30, 2016 at 05:30 PM

    Dean Baker:

    Why are none of the "free trade" members of Congress pushing to change the regulations that require doctors go through a U.S. residency program to be able to practice medicine in the United States? Obviously they are all protectionist Neanderthals.

    Will the media ever stop the ridiculous charade of pretending that the path of globalization that we are on is somehow and natural and that it is the outcome of a "free" market? Are longer and stronger patent and copyright monopolies the results of a free market?

    The NYT should up its game in this respect. It had a good piece on the devastation to millions of working class people and their communities from the flood of imports of manufactured goods in the last decade, but then it turns to hand-wringing nonsense about how it was all a necessary part of globalization. Actually, none of it was a necessary part of a free trade.

    First, the huge trade deficits were the direct result of the decision of China and other developing countries to buy massive amounts of U.S. dollars to hold as reserves in this period. This raised the value of the dollar and made our goods and services less competitive internationally. This problem of a seriously over-valued dollar stems from the bungling of the East Asian bailout by the Clinton Treasury Department and the I.M.F.

    If we had a more competent team in place, that didn't botch the workings of the international financial system, then we would have expected the dollar to drop as more imports entered the U.S. market. This would have moved the U.S. trade deficit toward balance and prevented the massive loss of manufacturing jobs we saw in the last decade.

    The second point is political leaders are constantly working to make patents and copyrights stronger and longer. This raises the price that ordinary workers have to pay for everything from drugs to computer games. The result is lower real wages for ordinary workers and higher incomes for the beneficiaries of these rents. It also slows economic growth since markets are not smart enough to distinguish between a 10,000 percent price increase due to a tariff and a 10,000 percent price increase due to a patent monopoly. (In other words, all the bad things that "free trade" economists say about tariffs also apply to patents and copyrights, except the impact is far larger in the later case.)

    Finally, the fact that trade has exposed manufacturing workers to international competition, but not doctors and lawyers, was a policy choice, not a natural development. There are enormous potential gains from allowing smart and ambitious young people in the developing world to come to the United States to work in the highly paid professions. We have not opened these doors because doctors and lawyers are far more powerful than autoworkers and textile workers. And, we rarely even hear the idea mentioned because doctors and lawyers have brothers and sisters who are reporters and economists.

    Addendum:

    Since some folks asked about the botched bailout from the East Asian financial crisis, the point is actually quite simple. Prior to 1997 developing countries were largely following the textbook model, borrowing capital from the West to finance development. This meant running large trade deficits. This reversed following the crisis as the conventional view in the developing world was that you needed massive amounts of reserves to avoid being in the situation of the East Asian countries and being forced to beg for help from the I.M.F. This led to the situation where developing countries, especially those in the region, began running very large trade surpluses, exporting capital to the United States. (I am quite sure China noticed how its fellow East Asian countries were being treated in 1997.)

    [Sep 29, 2016] The academic precariat in the UK

    Sep 29, 2016 | www.nakedcapitalism.com

    paul September 29, 2016 at 7:24 am

    The precariat article is good, reflecting the depressing industrialisation of education in the UK. Think only low–paid workers get the Sports Direct treatment? You're wrong Guardian. The academic precariat in the UK.
    The guardian is all for this in its own workplace,however

    Reply
    Clive September 29, 2016 at 7:43 am

    The Guardian is, increasingly (if you'll pardon the phrase) getting on my tits at the moment. Is there anything worse in the mainstream media than a Progressive In Name Only newspaper?

    Reply
    paul September 29, 2016 at 7:52 am

    The BBC's fair and balanced news and current affairs departments ( driven by its sinister business unit ) are perhaps worse because of its greater reach, but it's a tight race.

    Reply
    DJG September 29, 2016 at 9:22 am

    Clive, intemperate: The agony of the Guardian is indeed interesting. A while back, I read that its site was the most used among English-language newspapers, particularly by U.S. readers looking for some balance.

    With regard to the U.S. political coverage, and their rah-rah Clintonism, as evinced by the resurrection of the likes of Jill Abramson, I tend to cut them some slack. I find that many English (in particular, the English) are somewhat tone-deaf about U.S. culture and folkways. I imagine some Guardian Uxonian editors, who once spent a week in NYC with a side trip to LA, and who have actually eaten corn on the cob, thinking that they understand the U.S. Constitution and U.S. politics. But they still don't know how to pronounce Illinois and Arkansas.

    The anti-Corbyn hysteria shows detachment from their roots. The Guardian editors should get in a car and head out for a field trip to Manchester (do they recall Manchester?) to find out more about Brexit and Corbyn. A trip to the English nether-regions would do them some good.

    And yet I can't complain too much: How often do they present Douthat, Bruni, and Brooks as sages?

    [Sep 29, 2016] The Coming of the Post Neoliberal Era

    Notable quotes:
    "... The current US presidential election shows, perhaps better than anything else, just how far that decadence has gone. Hillary Clinton's campaign is floundering in the face of Trump's challenge because so few Americans still believe that the [neo]liberal shibboleths in her campaign rhetoric mean anything at all. ..."
    "... Even among her supporters, enthusiasm is hard to find, and her campaign rallies have had embarrassingly sparse attendance. Increasingly frantic claims that only racists, fascists, and other deplorables support Trump convince no one but true believers, and make the concealment of interests behind shopworn values increasingly transparent. Clinton may still win the election by one means or another, but the broader currents in American political life have clearly changed course. ..."
    "... Or one could take the idea that "Health" or "College" reform is merely funneling ever more resources to insurance companies and College administrations with precious little if any improvement in the real cost or quality to the users of the service. ..."
    Sep 29, 2016 | www.nakedcapitalism.com

    fresno dan September 29, 2016 at 8:48 am

    The Coming of the Post[neo]liberal Era The Archdruid Report

    Ironies of this sort are anything but unusual in political history. It's astonishingly common for a movement that starts off trying to overturn the status quo in the name of some idealistic abstraction or other to check its ideals at the door once it becomes the status quo. If anything, American liberalism held onto its ideals longer than most and accomplished a great deal more than many, and I think that most of us-even those who, like me, are moderate Burkean conservatives-are grateful to the liberal movement of the past for ending such obvious abuses as chattel slavery and the denial of civil rights to women, and for championing the idea that values as well as interests deserve a voice in the public sphere. It deserves the modern equivalent of a raised hat and a moment of silence, if no more, as it finally sinks into the decadence that is the ultimate fate of every successful political movement.

    The current US presidential election shows, perhaps better than anything else, just how far that decadence has gone. Hillary Clinton's campaign is floundering in the face of Trump's challenge because so few Americans still believe that the [neo]liberal shibboleths in her campaign rhetoric mean anything at all.

    Even among her supporters, enthusiasm is hard to find, and her campaign rallies have had embarrassingly sparse attendance. Increasingly frantic claims that only racists, fascists, and other deplorables support Trump convince no one but true believers, and make the concealment of interests behind shopworn values increasingly transparent. Clinton may still win the election by one means or another, but the broader currents in American political life have clearly changed course.

    =====================================

    Great article IMHO – I certainly agree about the portion concerning immigration.

    And for an example of a contradiction – Police unions and big cities. Unions do much more than raise wages and pensions – many of the protections of police by hamstringing complaint investigations against the police are exposing a fissure that has reached the point of earthquake.

    Or one could take the idea that "Health" or "College" reform is merely funneling ever more resources to insurance companies and College administrations with precious little if any improvement in the real cost or quality to the users of the service.

    [Sep 29, 2016] The academic precariat in the UK

    Sep 29, 2016 | www.nakedcapitalism.com

    paul September 29, 2016 at 7:24 am

    The precariat article is good, reflecting the depressing industrialisation of education in the UK. Think only low–paid workers get the Sports Direct treatment? You're wrong Guardian. The academic precariat in the UK.
    The guardian is all for this in its own workplace,however

    Reply
    Clive September 29, 2016 at 7:43 am

    The Guardian is, increasingly (if you'll pardon the phrase) getting on my tits at the moment. Is there anything worse in the mainstream media than a Progressive In Name Only newspaper?

    Reply
    paul September 29, 2016 at 7:52 am

    The BBC's fair and balanced news and current affairs departments ( driven by its sinister business unit ) are perhaps worse because of its greater reach, but it's a tight race.

    Reply
    DJG September 29, 2016 at 9:22 am

    Clive, intemperate: The agony of the Guardian is indeed interesting. A while back, I read that its site was the most used among English-language newspapers, particularly by U.S. readers looking for some balance.

    With regard to the U.S. political coverage, and their rah-rah Clintonism, as evinced by the resurrection of the likes of Jill Abramson, I tend to cut them some slack. I find that many English (in particular, the English) are somewhat tone-deaf about U.S. culture and folkways. I imagine some Guardian Uxonian editors, who once spent a week in NYC with a side trip to LA, and who have actually eaten corn on the cob, thinking that they understand the U.S. Constitution and U.S. politics. But they still don't know how to pronounce Illinois and Arkansas.

    The anti-Corbyn hysteria shows detachment from their roots. The Guardian editors should get in a car and head out for a field trip to Manchester (do they recall Manchester?) to find out more about Brexit and Corbyn. A trip to the English nether-regions would do them some good.

    And yet I can't complain too much: How often do they present Douthat, Bruni, and Brooks as sages?

    [Sep 29, 2016] Georgia Tech's master degree in computer science costs less than one-eighth as much as its most expensive rival - if you learn online.

    Sep 29, 2016 | www.nakedcapitalism.com

    Portia September 29, 2016 at 8:05 am

    http://www.burlingtonfreepress.com/story/news/2016/09/28/st-michaels-facing-15m-deficit/91212534/
    I thought the reasoning was interesting:

    To keep a little more of that tuition money, the college is considering slightly ratcheting down financial aid. They are also going to offer buyouts to a number of employees later this fall.

    "When you have a reduction in your enrollment, you're going to need a proportionate reduction in faculty and staff," Robinson said. "We definitely need to get smaller."

    Adding to the problem, there were fewer unrestricted donations - donations that are free to use for whatever the college might need - than expected last year, but more donations overall. Gifts that were received were earmarked for specific programs and buildings on campus, not necessarily for the general fund. (can't put your name on a general fund)

    By next year the college won't be able to break even, but by 2018 Robinson and his team expects to present a balanced budget to the Board of Trustees.

    Despite the budget issues, the college is still on strong footing and is looking ahead, said Alex Bertoni, spokesperson for the college.

    "The college is doing well, and the students here are thriving," he said. "We're going to continue to invest in the long-term. " (that long-term does not look good for a lot of students, to me)

    bolding and comments in () mine. I am an eye-roller for sure, and they got a workout here.

    Reply
    Jim Haygood September 29, 2016 at 8:14 am

    The ghastly horror of competition roils the cozy academic cartel:

    Georgia Tech's master's [sic] in computer science costs less than one-eighth as much as its most expensive rival - if you learn online.

    With one of the top 10 computer science departments in the nation, according to U.S. News & World Report, Georgia Tech had a reputation to uphold. So it made the online program as much like the residential program as possible.

    Tuition for a 30-credit master's in computer science from the University of Southern California runs $57,000. Syracuse, Johns Hopkins and Carnegie Mellon charge over $43,000 for the same degree.

    Most prestigious colleges are currently sticking with the model that lets them offer degrees for $57,000 instead of the roughly $7,000 that it costs at Georgia Tech.

    http://www.nytimes.com/2016/09/29/upshot/an-online-education-breakthrough-a-masters-degree-for-a-mere-7000.html

    Creative destruction, comrades: Who is Joe Schumpeter?

    Reply
    Portia September 29, 2016 at 8:24 am

    To be fair, IMO computer science is an ideal online course, coding being something most people do alone. And only the self-disciplined will endure.

    [Sep 29, 2016] How Short-Termism Saps the Economy

    Sep 29, 2016 | economistsview.typepad.com
    RC AKA Darryl, Ron : , Thursday, September 29, 2016 at 04:00 AM
    http://www.wsj.com/articles/how-short-termism-saps-the-economy-1475018087

    How Short-Termism Saps the Economy

    Paying CEOs so much in stocks puts their focus on the share price instead of building for the long run.

    By
    Joe Biden
    Sept. 27, 2016 7:14 p.m. ET

    135 COMMENTS

    Short-termism-the notion that companies forgo long-run investment to boost near-term stock price-is one of the greatest threats to America's enduring prosperity. Over the past eight years, the U.S. economy has emerged from crisis and maintained an unprecedented recovery. We are now on the cusp of a remarkable resurgence. But the country can't unlock its true potential without encouraging businesses to build for the long-run.

    Private investment-from new factories, to research, to worker training-is perhaps the greatest driver of economic growth, paving the way for future prosperity for businesses, their supply chains and the economy as a whole. Without it robust growth is nearly impossible. Yet all too often, executives face pressure to prioritize today's share price over adding long-term value.

    The origins of short-termism are rooted in policies and practices that have eroded the incentive to create value: the dramatic growth in executive compensation tied to short-term share price; inadequate regulations that allow share buybacks without limit; tax laws that designate an investment as "long-term" after only one year; a subset of activist investors determined to steer companies away from further investment; and a financial culture focused on quarterly earnings and short-run metrics.


    Consider the evolution in the structure of CEO compensation. In the 1980s, roughly three-fourths of executive pay at S&P 500 companies was in the form of cash salary and bonuses, and the rest in investment options and stock, according to an article in the Annual Review of Financial Economics. The Omnibus Budget Reconciliation Act of 1993 included a provision to link executive pay to the performance of the company. But it didn't work as intended. By the time I became vice president, only 40% of executive pay was in cash, with the bulk being tied to investment options and stock. Now more than ever, there is a direct link between share price and CEO pay.

    Performance-based pay encourages executives to think in the short-term. Ever since the Securities and Exchange Commission changed the buyback rules in 1982, there has been a proliferation in share repurchases. Today buybacks are the norm. According to economist William Lazonick , from 2003-12, companies on the S&P 500 spent 37% of their earnings on dividends and a full 54% on buybacks-leaving less than 10% for reinvestment.

    This emphasis on returning profits to shareholders has led to a significant decline in business investment. Total investment as a share of the economy has fallen to about 11% today, down from a high of about 15% in the early 1980s, according to the Bureau of Economic Analysis. With interest rates at historically low levels, and business confidence in the U.S. far ahead of its economic competitors, there should be more investment, not less.

    I am not blaming CEOs. The business leaders I've met over the course of my career want to build their firms and contribute to the economy, not simply send checks to investors or buy back their own stock. Sometimes they succeed. Other times the pressures to lift the short-run share price are simply too great.

    As these short-term pressures mount, most of the harm is borne by workers. As any economist will tell you, productivity is typically the most important driver of increasing wages. But productivity will never flourish without businesses investing in endeavors like on-the-job training, new equipment, and research and development. In short, business investment boosts productivity, which lifts wages.

    A continued economic resurgence requires solving the short-termism puzzle. The federal government can help foster private enterprise by providing worker training, building world-class infrastructure, and supporting research and innovation. But government should also take a look at regulations that promote share buybacks, tax laws that discourage long-term investment and corporate reporting standards that fail to account for long-run growth. The future of the economy depends on it.

    [You go, Joe! He even references William Lazonick.

    Lazonick wrote about the new economy business model (NEBM) versus the old, but never really pinned down what changed in the taxation on returns to capital that caused it. Also, Lazonick seemed to believe that the rapid capital formation used in the NEBM justified the low taxation on capital gains. That was a big mistake. Scarce capital has never been a obstacle in the US since early in the 20th century except when a financial shock locked up capital allocation.

    Dividends payouts are sometimes seen as short term payouts to shareholders, but if not for the capital gains tax preference that would not be true. Paying dividends reduces a firms capital, but increases the desirability of its shares both as a source of income and as a performer which boost share price more than the underlying reduction of equity due to capital payout. So, dividends versus capital gains is not an either or in the short term. Over the longer term accumulated dividends from a firm that invests in itself are a better incentive for reinvestment than a capital gains windfall at some point in that longer term. The capital gains preference makes selling shares more desirable than holding shares and M&A more desirable than internal investment.

    In 1954 the dividends tax credit was rescinded in that year's tax act. It had been in effect since 1913 except for 1936-1939. I know that I should provide references, but since I started writing about this five years ago most of the evidence has been taking off the WWW.

    The dividends tax credit returned to the individual taxpayer the amount of their tax liability on their dividends income that had been paid in corporate taxes by the issuing firms. This served as an incentive to shareholders to prefer higher corporate tax rates with fewer loopholes. Higher effective corporate tax rates encourage firms to increase their expenses in wages and exempt reinvestments that lowers their taxable profits.

    If we wanted even less short termism then we should have higher capital gains tax rates with reductions per year of holding term along with the dividends tax credit. Rescinding the dividends tax credit might be considered desirable because it was a tax increase on the wealthy, but in 1954 both Congress and POTUS were Republican which is worth considering. Democrats had done it before in 1936, but reversed it in 1939. Joe Biden's article on short termism is probably a lot more significant than it will ever been given credit for which goes a long ways to explain how corporatism and globalization have had such devastating effects on jobs and wages. We not only do not know what we are doing, but we don't know what we have done either.]

    RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , Thursday, September 29, 2016 at 04:27 AM
    Sure huge executive stock options have a perverse effect on corporate financial decisions, but "higher capital gains tax rates with reductions per year of holding term along with the dividends tax credit" would go a long ways to changing the incentives created by stock options as well. By higher capital gains tax rates I mean much higher, at least before holding term exclusions. Also, an inflation adjustment to the basis for capital gains calculation for each year of holding term equal to each year's SSA COLA would eliminate the pressure against SSA COLA that is exerted by agents of the wealthy against the interest of retired wage class seniors.
    RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , Thursday, September 29, 2016 at 04:29 AM
    It would be a much different world if rich people supported higher effective corporate tax rates and SSA COLA.
    Tom aka Rusty -> RC AKA Darryl, Ron... , Thursday, September 29, 2016 at 05:06 AM
    https://www.washingtonpost.com/news/wonk/wp/2012/08/16/bill-clinton-tried-to-limit-executive-pay-heres-why-it-didnt-work/
    jonny bakho -> Tom aka Rusty... , Thursday, September 29, 2016 at 05:27 AM
    The only way to limit executive pay is to tax it at very high levels. Reagan blew up the top tax rate and set the stage for executive pay to skyrocket.
    pgl -> jonny bakho ... , Thursday, September 29, 2016 at 05:46 AM
    From that WaPo story: "According to a new paper from Temple University's Steven Balsam published by the Economic Policy Institute, the big flaw in 162(m) was its broad exemption of "performance-based" pay. The $1 million cap only applied to traditional salaries, bonuses and grants of company stock."

    Sort of a silly way of measuring compensation it seems. I agree that a higher tax rate on income would help but be careful to define income as total compensation.

    Of course the other thing one might consider is to have a Board of Directors that answers to shareholders and not upper management.

    RC AKA Darryl, Ron -> Tom aka Rusty... , Thursday, September 29, 2016 at 05:53 AM
    The tax incentives on dividends relative to capital gains work for executive pay, monopoly, investment, and wage worker channels. Dividends can be used for just taking profits but they produce more over the longer term from investment returns. Capital gains are never more than a one time windfall although stable share price is useful for equities as collateral.
    RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , -1
    Since CEOs are usually the shareholders with the most power then affecting their incentives as shareholders can be very effective. Getting CEOs to not raise their own pay is futile. Changing the game for everyone to favor internal investment over M&A as a use for retained earnings is necessary. The downside of my recommendation is that IPOs will no longer make angel investors insanely rich over night. Boohoo!

    [Sep 29, 2016] A recession initiated by a financial crisis cause consumers to reduce their own borrowing, so erroneous analogies between governments and households resonate

    Sep 29, 2016 | economistsview.typepad.com

    pgl : , A recession initiated by a financial crisis cause consumers to reduce their own borrowing, so erroneous analogies between governments and households resonate

    Simon Wren Lewis (Mainly Macro) highlights his new paper on why some supported austerity even if it was a disaster. Krugman's latest adds more.
    Dan Kervick -> pgl... , Thursday, September 29, 2016 at 05:21 AM
    It seems to me this line from Wren-Lewis is the biggie as far as the Great Recession/Longer Depression is concerned:

    "A recession initiated by a financial crisis is also likely to see consumers reducing their own borrowing, and so (erroneous) analogies between governments and households resonate."

    In 2008/9 the public was (rightly) convinced that the collapse was due to deflation of a financial bubble blown up by many years of excessive private borrowing and debt-fueled over-consumption: too much credit card debt; too much borrowing against (inflated) home values; two much speculative gambling with, and ponzi profiting from, cutesy and overvalued financial instruments. That correct, instinctive evaluation of the situation was backed up by numbers showing that the total private debt to GDP ratio had reached a level unseen since 1928, and by the sudden discovery of the many analyses of many experienced, sober, but neglected financial observers who had been predicting some kind of collapse for years.

    Since the public was thus primed to believe that, going forward, the private economy had to reduce its overall debt load, it was very easy to convince them that governments, being just another part of the overall economy, had to do the same thing.

    But what Wren-Lewis doesn't seem to mention is that the public had already been primed by decades of Norquistian, Petersonian and Rubinite deficit-hectors, debt-despairers and entitlement-exterminators to believe that our deficits were a very bad thing, that government was too big, and that we were headed for a "fiscal train wreck" because of our undisciplined budgets and government spending. They were thus easily convinced that the financial crisis also had something to to with the problems alleged by this bipartisan team of budget Casandras all finally coming a-cropper.

    We had endless cadres of Republican politicians promoting hysteria over the public debt and also decrying the very size of government, whether deficit-financed or not.

    We had Bill Clinton running around bragging about his "reinvention" (shrinking) of government and his dot-com boom-assisted surprise surplus.

    We had Joe Biden telling everyone that the financial collapse was caused by "putting two wars on a credit card".

    We had the Concord Coalition and the Peterson Institute gearing up their zombies for the Fix the Debt onslaught that eventually saddled us with an economic discourse driven by a stupid budget-reduction commission in the middle a deep recession!

    Hatred of governments and their spending habits had already given us years of gradually building stagnation due to declining public investment and a consequent secular shift from capital formation to consumption. But the voters saw only that all of the Serious People in both parties were strongly in favor of this "disciplined" decimation of government. So why in the world wouldn't they end up supporting its continuation?

    ken melvin -> Dan Kervick... , -1
    Very good.

    [Sep 29, 2016] Economists Keep Getting It Wrong Because the Media Coverup Their Mistakes

    Notable quotes:
    "... Most workers suffer serious consequences when they mess up on their jobs. Custodians get fired if the toilet is not clean. Dishwashers lose their job when they break too many dishes, but not all workers are held accountable for the quality of their work. ..."
    "... At the top of the list of people who need not be competent to keep their job are economists. Unlike workers in most occupations, when large groups of economists mess up they can count on the media covering up their mistakes and insisting it was just impossible to understand what was going on. ..."
    Sep 29, 2016 | economistsview.typepad.com

    anne : September 29, 2016 at 05:18 AM , September 29, 2016 at 05:18 AM

    http://cepr.net/blogs/beat-the-press/economists-keep-getting-it-wrong-because-the-media-coverup-their-mistakes

    September 29, 2016

    Economists Keep Getting It Wrong Because the Media Coverup Their Mistakes

    Most workers suffer serious consequences when they mess up on their jobs. Custodians get fired if the toilet is not clean. Dishwashers lose their job when they break too many dishes, but not all workers are held accountable for the quality of their work.

    At the top of the list of people who need not be competent to keep their job are economists. Unlike workers in most occupations, when large groups of economists mess up they can count on the media covering up their mistakes and insisting it was just impossible to understand what was going on.

    This is first and foremost the story of the housing bubble. While it was easy * to recognize that the United States and many other countries were seeing massive bubbles that were driving their economies, which meant that their collapse would lead to major recessions, the vast majority of economists insisted there was nothing to worry about.

    The bubbles did burst, leading to a financial crisis, double-digit unemployment in many countries, and costing the world tens of trillions of dollars of lost output. The media excused this extraordinary failure by insisting that no one saw the bubble and that it was impossible to prevent this sort of economic and human disaster. Almost no economists suffered any consequences to their career as a result of this failure. The "experts" who determined policy in the years after the crash were the same people who completely missed seeing the crash coming.

    We are now seeing the same story with trade. The New York Times has a major magazine article ** on the impact of trade on the living standards of workers in the United States and other wealthy countries. The subhead tells readers:

    "Trade is under attack in much of the world, because economists failed to anticipate the accompanying joblessness, and governments failed to help."

    Of course many economists did not anticipate the negative impact of trade, but of course many of us did. The negative impact was entirely predictable and predicted. (Here are a few from Center for Economic and Policy Research, *** **** ***** there are many more books and papers from my friends at the Economic Policy Institute.) The argument is straightforward: trade policy has been designed to put manufacturing workers in direct competition with low paid workers in the developing world. This costs jobs and puts downward pressure on the wages of these workers. It also puts downward pressure on the wages of less-educated workers more generally, as displaced manufacturing workers seek jobs in retail and other sectors. Stagnating wages and increasing inequality are the predicted result of this pattern of trade, not a surprising outcome.

    If economists were like custodians and dishwashers, the failure to recognize this obvious outcome of trade policy would have put them out on the street. Instead, we get major news outlets like the New York Times, telling us this is all a remarkable surprise. No one could have seen that trade would have bad outcomes for large segments of the workforce. Rather than lose their jobs, economists can still draw comfortable six figure salaries as they tell reporters how it was impossible for them to understand the economy.

    Economic theory tells us that if economists don't face consequences for completely messing up on the job then they have no incentive to get things right. If the custodian never pays any price for not cleaning the toilet, then they won't clean the toilet. In the same way, if the media and the country always grant a "who could have known" amnesty to large chunks of the economics profession when it gets things completely wrong, then there is no reason to expect that economists will ever get things right. All they have to do is say the same things as other elite economists say, and if it turns out to be wrong, the NYT will just run major news articles explaining that no one could have known better.

    There is one other important point that needs emphasis here. There was nothing inherent to trade that required growing inequality, it was the structure of trade policy that gave us this result. There are millions of very bright ambitious people in the developing world who would be very happy to study to meet U.S. standards and work as doctors, dentists, lawyers and other professionals in the United States. We could have designed trade agreements to facilitate this process.

    The result would be massive economic gains in the form of lower cost health care, dental care, legal services and other professionals services. In the case of physicians alone, if the increased supply brought the pay of our doctors down to the levels of Western Europe and Canada, we would save close to $100 billion a year. This comes to roughly $700 a year in savings for every family in the United States. And, this would lead to a reduction in inequality.

    Our elite economists have chosen not to discuss this sort of trade opening. (They also rarely discuss reducing rather than increasing protectionist barriers like patents and copyrights.) These issues are discussed in more depth in my forthcoming book, "Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer" (coming to a website near year in October). But the key point here is that economists should know better, and if they were doing their job, they did.

    * http://cepr.net/documents/publications/housing_2002_08.pdf

    ** http://www.nytimes.com/2016/09/29/business/economy/more-wealth-more-jobs-but-not-for-everyone-what-fuels-the-backlash-on-trade.html

    *** http://cepr.net/documents/publications/trade_2008_01.pdf

    **** http://cepr.net/documents/publications/faf_2006_11.pdf

    ***** http://cepr.net/documents/publications/trade_2001_10_03.pdf

    -- Dean Baker

    Paine -> anne... , Thursday, September 29, 2016 at 06:47 AM
    Dean is a dream

    I'll leave it at that --

    Peter K. -> Paine... , Thursday, September 29, 2016 at 06:56 AM
    the job class happy warrior
    Peter K. -> anne... , Thursday, September 29, 2016 at 06:56 AM
    "The argument is straightforward: trade policy has been designed to put manufacturing workers in direct competition with low paid workers in the developing world. This costs jobs and puts downward pressure on the wages of these workers. It also puts downward pressure on the wages of less-educated workers more generally, as displaced manufacturing workers seek jobs in retail and other sectors. Stagnating wages and increasing inequality are the predicted result of this pattern of trade, not a surprising outcome."

    This is surprising to PGL and Krugman who argue the Fed will just adjust to keep full employment or at least that's what the models tell them.

    pgl -> Peter K.... , Thursday, September 29, 2016 at 07:07 AM
    Dean is talking about protectionism for drug companies, doctors etc. and free trade for the rest of us. On this score he is exactly right and I have said so many times. This is a very different issue from the macroeconomic ones. I would accuse you of once again misrepresenting what I have said. But to be fair - you are too stupid to get these distinctions so maybe you are not lying. I do wish I had a smarter internet stalker.
    Tom aka Rusty -> anne... , -1
    Baker get the diagnosis correct.

    Baker's standard solutions do very little for blue collar workers. Having a cheaper doctor and lawyer don't help much for the unemployed and underemployed.

    [Sep 29, 2016] A General Theory Of Austerity

    Sep 29, 2016 | economistsview.typepad.com

    anne : September 29, 2016 at 04:45 AM , September 29, 2016 at 04:45 AM

    http://krugman.blogs.nytimes.com/2016/09/29/a-general-theory-of-austerity/

    September 29, 2016

    A General Theory Of Austerity?
    By Paul Krugman

    Simon Wren-Lewis has an excellent new paper * trying to explain the widespread resort to austerity in the face of a liquidity trap, which is exactly the moment when such policies do the most harm. His bottom line is that

    "austerity was the result of right-wing opportunism, exploiting instinctive popular concern about rising government debt in order to reduce the size of the state."

    I think this is right; but I would emphasize more than he does the extent to which both the general public and Very Serious People always assume that reducing deficits is the responsible thing to do. We have some polling from the 1930s, showing a strong balanced-budget bias even then:

    [Chart]

    I think Simon would say that this is consistent with his view that large deficits grease the rails for deficit phobia, since Franklin Roosevelt's administration did run up deficits and debt that were unprecedented for peacetime. But has there ever been a time when the public favored bigger deficits?

    Meanwhile, as someone who was in the trenches during the US austerity fights, I was struck by how readily mainstream figures who weren't especially right-wing in general got sucked into the notion that debt reduction was THE central issue. Ezra Klein documented this phenomenon ** with respect to Bowles-Simpson: ***

    "For reasons I've never quite understood, the rules of reportorial neutrality don't apply when it comes to the deficit. On this one issue, reporters are permitted to openly cheer a particular set of highly controversial policy solutions. At Tuesday's Playbook breakfast, for instance, Mike Allen, as a straightforward and fair a reporter as you'll find, asked Simpson and Bowles whether they believed Obama would do 'the right thing' on entitlements - with 'the right thing' clearly meaning 'cut entitlements.' "

    Meanwhile, as Brad Setser points out, the International Monetary Fund - whose research department has done heroic work puncturing austerity theories and supporting a broadly Keynesian view of macroeconomics - is, in practice, pushing for fiscal contraction **** almost everywhere.

    Again, this doesn't exactly contradict Simon's argument, but maybe suggests that there is a bit more to it.

    * http://www.bsg.ox.ac.uk/sites/www.bsg.ox.ac.uk/files/documents/BSG-WP-2016-014.pdf

    ** https://www.washingtonpost.com/news/wonk/wp/2013/02/20/the-problem-with-alan-simpson/

    *** https://en.wikipedia.org/wiki/National_Commission_on_Fiscal_Responsibility_and_Reform

    *** http://blogs.cfr.org/setser/2016/08/22/imf-cannot-quit-fiscal-consolidation-in-asian-surplus-countries/

    anne -> anne... , Thursday, September 29, 2016 at 04:50 AM
    http://www.bsg.ox.ac.uk/sites/www.bsg.ox.ac.uk/files/documents/BSG-WP-2016-014.pdf

    May, 2016

    A General Theory of Austerity
    By Simon Wren-Lewis

    Abstract

    Austerity is defined as a fiscal contraction that causes a significant increase in aggregate unemployment. For the global economy, or an economy with a flexible exchange rate, or a monetary union as a whole, an increase in unemployment following a fiscal consolidation can and should be avoided because monetary policy can normally offset the demand impact of the consolidation. The tragedy of global austerity after 2010 was that fiscal consolidation was not delayed until monetary policy was able to do this.

    An individual member of a currency union that requires a greater fiscal contraction than the union as a whole cannot use its own monetary policy to offset the impact of fiscal consolidation. Even in this case, however, a sharp and deep fiscal contraction is unlikely to be optimal. Providing this economy is in a union where the central bank acts as a sovereign lender of last resort, a more gradual fiscal adjustment is likely to minimise the unemployment cost.

    As the theory behind these propositions is simple and widely accepted, the interesting question is why global austerity happened. Was austerity an unfortunate accident, or is there a more general political economy explanation for why it occurred? Answering this question is vital to avoid the next global recession being followed by yet more austerity.

    jonny bakho -> anne... , Thursday, September 29, 2016 at 05:43 AM
    The answer is that politicians and pundits have a flawed understanding of inflation and its relationship to hyperinflation.
    Some economists promoted a seriously flawed interpretation of the 1970s stagflation that solidified myths about inflation.

    As Max Planck said, "Science advances one funeral at a time." We need the current generation of economists and their failed models to be replaced by a new generation that does not suffer from the same mythology.

    Peter K. -> anne... , -1
    If one just read Krugman or Kevin Drum you wouldn't understand how Bill Clinton declared "the era of Big Government is over" or how after he was first elected he listened to his top two economic advisers Robert Rubin and Alan Greenspan and dropped his middle class spending campaign promise in favor of deficit reduction.

    Greenspan promised Clinton lower rates in exchange for reducing government. Clinton ended "welfare as we knew it."

    But Greenspan didn't regulate this increase in private investment. It led to the tech-stock bubble and a shadow banking system which was susceptible to a banking panic.

    According to Hillary, Bush's tax cuts caused the housing bubble and Great Recession. It's a little more complicated. But this cuts against Krugman and Drum's narrative that the Clinton years were nothing but awesome.

    Summers told Brooksley Born that derivatives shouldn't be regulated b/c the market is magic.

    Obama reinforced the narrative that government should tighten its belt during hard times like households do. This is exactly wrong.

    Maybe it's understandable for politicians to pander for short-term political expediency but it's hurts the long-term ideological conflict.

    There's the right and there's the left and Obama and Clinton tried to straddle the two ideologies which just waters down the left's appeal and pull.

    That's why the millennials and more progressive workers aren't as excited for Hillary's candidacy. That's why Sanders energized them.

    Now I agree with Sanders that a Trump Presidency would be a disaster, but this doesn't preclude me from correcting Krugman's outlook as some center-leftists would insist in their binary thinking.

    pgl : , Thursday, September 29, 2016 at 01:41 AM
    Simon Wren Lewis (Mainly Macro) highlights his new paper on why some supported austerity even if it was a disaster. Krugman's latest adds more. mainly macro Why was austerity once so popular
    Dan Kervick -> pgl... , Thursday, September 29, 2016 at 05:21 AM
    It seems to me this line from Wren-Lewis is the biggie as far as the Great Recession/Longer Depression is concerned:

    "A recession initiated by a financial crisis is also likely to see consumers reducing their own borrowing, and so (erroneous) analogies between governments and households resonate."

    In 2008/9 the public was (rightly) convinced that the collapse was due to deflation of a financial bubble blown up by many years of excessive private borrowing and debt-fueled over-consumption: too much credit card debt; too much borrowing against (inflated) home values; two much speculative gambling with, and ponzi profiting from, cutesy and overvalued financial instruments. That correct, instinctive evaluation of the situation was backed up by numbers showing that the total private debt to GDP ratio had reached a level unseen since 1928, and by the sudden discovery of the many analyses of many experienced, sober, but neglected financial observers who had been predicting some kind of collapse for years.

    Since the public was thus primed to believe that, going forward, the private economy had to reduce its overall debt load, it was very easy to convince them that governments, being just another part of the overall economy, had to do the same thing.

    But what Wren-Lewis doesn't seem to mention is that the public had already been primed by decades of Norquistian, Petersonian and Rubinite deficit-hectors, debt-despairers and entitlement-exterminators to believe that our deficits were a very bad thing, that government was too big, and that we were headed for a "fiscal train wreck" because of our undisciplined budgets and government spending. They were thus easily convinced that the financial crisis also had something to to with the problems alleged by this bipartisan team of budget Casandras all finally coming a-cropper.

    We had endless cadres of Republican politicians promoting hysteria over the public debt and also decrying the very size of government, whether deficit-financed or not.

    We had Bill Clinton running around bragging about his "reinvention" (shrinking) of government and his dot-com boom-assisted surprise surplus.

    We had Joe Biden telling everyone that the financial collapse was caused by "putting two wars on a credit card".

    We had the Concord Coalition and the Peterson Institute gearing up their zombies for the Fix the Debt onslaught that eventually saddled us with an economic discourse driven by a stupid budget-reduction commission in the middle a deep recession!

    Hatred of governments and their spending habits had already given us years of gradually building stagnation due to declining public investment and a consequent secular shift from capital formation to consumption. But the voters saw only that all of the Serious People in both parties were strongly in favor of this "disciplined" decimation of government. So why in the world wouldn't they end up supporting its continuation?

    ken melvin -> Dan Kervick... , Thursday, September 29, 2016 at 06:28 AM
    Very good.
    Benedict@Large -> Dan Kervick... , Thursday, September 29, 2016 at 06:38 AM
    +1

    Exactly. This all having started with the 70s arrival of monetarism, essentially a gold standard with no gold. While no one really paid attention to gold standard (depressionary) budgeting until Clinton I, the rhetoric was being put into place such that, even today, the Democrats still hail Clinton's "balanced budget" disaster as if it were God's gift, when in reality it was the kickoff to consumers cannibalizing the home equity just to keep pace, and the ultimate reason the 2008 crash was so severe on household spending. Hillary Clinton; be forewarned.

    Hobroken -> Dan Kervick... , Thursday, September 29, 2016 at 08:03 AM
    Hatred of governments and their spending habits
    "

    If governmental fat cats and billionaire lobbyists would spend more time at fixing the obvious, they would have less time for looting the public treasure. Do you see how they could have prevented the HD, Hoboken disaster?

    They could have removed the overpowered transformers that oversupplied coulombs to the Catenary wire that supplied current to the Pantograph of the Hoboken train that just now crashed into the station full of passengers. All the transformers at the end of the line should be scaled down to prevent this sort of disaster, plus all the transformers near a curves in the roadbed should be scaled back to prevent excess power from speeding train up enough to jump the track. No!

    You can't always depend on the engineer's judgment to prevent these disasters. Can't always depend on high-tech-safety devices to prevent! Hell! High-tech can be hacked by the North Koreans. You need to change the deep infrastructure of power available.

    Get back to work,

    Governmental
    goof-off-s --

    jonny bakho -> pgl... , Thursday, September 29, 2016 at 05:24 AM
    Most people have a flawed understanding of inflation.
    Sustainable inflation means BOTH wages and prices go up.
    Most people think of inflation only in terms of price increases so we get: Prices go up, wages stay the same: BAD.

    A minimum level of inflation is necessary to allow relative prices and wages to reset smoothly.
    Prices and wages are sticky downward.
    It is unsustainable for a business to deflate prices below fixed costs.
    A price can be reset downward by inflation (if inflation is high enough) erosion and thus is less likely to be below fixed costs.
    Businesses don't cut wages of employees, they layoff employees.
    Businesses don't only cut prices, they cut production.
    Workers with leverage and fixed payments cannot afford to work for less.
    Inflation allows relative wages to deflate without causing issues with fixed payments.
    Everyone agrees that deflation is bad because it is associated with lower output and higher unemployment.
    Inflation and deflation are a continuum. Inflation that is too low is only marginally better than deflation.
    Inflation must be high enough to absorb relative price resets demanded by the majority of economic shocks or the process of resetting wages and prices will be extended and be a continued drag on an economy.
    The evidence clearly suggests that US inflation in the 21st Century has been much too low. A higher inflation target is clearly necessary.

    People misunderstand hyperinflation.
    Hyperinflation is associated with an increased money supply.
    The increased money supply is an effect of hyperinflation not its cause.
    Under hyperinflation, an economy needs increasingly larger amounts of currency for transactions, so governments print more money to meet demand.

    Hyperinflation is caused by loss of confidence in a currency.
    Under hyperinflation, the risk of complete loss of buying power of a currency factors into the price that vendors are willing to accept for goods and services.
    Example: In the 1865 US, Confederate currency hyper inflated, not because too much was printed, but because the Confederate government was facing elimination and the currency no longer being honored. 90 percent of the currency could have been eliminated and prices still would have hyperinflated.

    Major Myths:
    Printing money does not cause hyperinflation, loss of confidence does.
    A higher rate of inflation does not make hyperinflation more likely.
    A lower rate of inflation is NOT always better for an economy than a higher rate.
    Politicians and pundits need to unlearn these inflation myths.

    DrDick -> pgl... , -1
    Krugman makes some good points, adding to Wren Lewis's excellent observations. I would point out, however, that neither of them acknowledges that most of our media are economic and policy illiterates and incapable of understanding the issues, while the general public has been sold on the idiocy that national budgets are just like household budgets (mostly by that same illiterate media).

    [Sep 28, 2016] Battling Apple and the Giants naked capitalism

    Notable quotes:
    "... Reuters reports that an investigation conducted by it in 2013 found that around three-fourths of the 50 biggest U.S. technology companies use practices that are similar to Apple's to avoid paying tax. So Verstager has taken on not just one giant, but the worlds corporate elite. She should not lose. But even if she does this time, this is a battle well begun. ..."
    "... Thus the power of the multinationals comes not just from their own size and reach, and from the support that their own governments afford them, but from their ability to divide desperate countries seeking the presence of global giants to make a small difference to their economic conditions ..."
    "... Those who support globalisation support this power disparity. ..."
    Sep 28, 2016 | www.nakedcapitalism.com
    The case of Apple's Irish operations is an extreme example of such tax avoidance accounting. It relates to two Apple subsidiaries Apple Sales International and Apple Operations Europe. Apple Inc US has given the rights to Apple Sales International (ASI) to use its "intellectual property" to sell and manufacture its products outside of North and South America, in return for which Apple Inc of the US receives payments of more than $2 billion per year. The consequence of this arrangement is that any Apple product sold outside the Americas is implicitly first bought by ASI, Ireland from different manufacturers across the globe and sold along with the intellectual property to buyers everywhere except the Americas. So all such sales are by ASI and all profits from those sales are recorded in Ireland. Stage one is complete: incomes earned from sales in different jurisdictions outside the Americas (including India) accrue in Ireland, where tax laws are investor-friendly. What is important here that this was not a straight forward case of exercising the "transfer pricing" weapon. The profits recorded in Ireland were large because the payment made to Apple Inc in the US for the right to use intellectual property was a fraction of the net earnings of ASI.

    Does this imply that Apple would pay taxes on these profits in Ireland, however high or low the rate may be? The Commission found it did not. In two rather curious rulings first made in 1991 and then reiterated in 2007 the Irish tax authority allowed ASI to split it profits into two parts: one accruing to the Irish branch of Apple and another to its "head office". That "head office" existed purely on paper, with no formal location, actual offices, employees or activities. Interestingly, this made-of-nothing head office got a lion's share of the profits that accrued to ASI, with only a small fraction going to the Irish branch office. According to Verstager's Statement: "In 2011, Apple Sales International made profits of 16 billion euros. Less than 50 million euros were allocated to the Irish branch. All the rest was allocated to the 'head office', where they remained untaxed." As a result, across time, Apple paid very little by way of taxes to the Irish government. The effective tax rate on its aggregate profits was short of 1 per cent. The Commissioner saw this as illegal under the European Commission's "state aid rules", and as amounting to aid that harms competition, since it diverts investment away from other members who are unwilling to offer such special deals to companies.

    In the books, however, taxes due on the "head office" profits of Apple are reportedly treated as including a component of deferred taxes. The claim is that these profits will finally have to be repatriated to the US parent, where they would be taxed as per US tax law. But it is well known that US transnationals hold large volumes of surplus funds abroad to avoid US taxation and the evidence is they take very little of it back to the home country. In fact, using the plea that it has "permanent establishment" in Ireland and, therefore, is liable to be taxed there, and benefiting from the special deal the Irish government has offered it, Apple has accumulated large surpluses. A study by two non-profit groups published in 2015 has argued that Apple is holding as much as $181 billion of accumulated profits outside the US, a record among US companies. Moreover, The Washington Post reports that Apple's Chief Executive Tim Cook told its columnist Jena McGregor, "that the company won't bring its international cash stockpile back to the United States to invest here until there's a 'fair rate' for corporate taxation in America."

    This has created a peculiar situation where the US is expressing concern about the EC decision not because it disputes the conclusion about tax avoidance, but because it sees the tax revenues as due to it rather than to Ireland or any other EU country. US Treasury Secretary Jack Lew criticised the ruling saying, "I have been concerned that it reflected an attempt to reach into the U.S. tax base to tax income that ought to be taxed in the United States." In Europe on the other hand, the French Finance Minister and the German Economy Minister, among others, have come out in support of Verstager, recognizing the implication this has for their own tax revenues. Governments other than in Ireland are not with Apple, even if not always for reasons advanced by the EC.

    ... ... ...

    Thus the power of the multinationals comes not just from their own size and reach, and from the support that their own governments afford them, but from their ability to divide desperate countries seeking the presence of global giants to make a small difference to their economic conditions. The costs of garnering that difference are, therefore, often missed. Reuters reports that an investigation conducted by it in 2013 found that around three-fourths of the 50 biggest U.S. technology companies use practices that are similar to Apple's to avoid paying tax. So Verstager has taken on not just one giant, but the worlds corporate elite. She should not lose. But even if she does this time, this is a battle well begun.

    JEHR September 28, 2016 at 10:42 am

    Greed has no boundaries!

    Ranger Rick September 28, 2016 at 10:43 am

    I think the common misconception that multinational corporations exist because "they are big companies that happen to operate in more than one country" is one of the biggest lies ever told.

    From the beginning (e.g. Standard Oil, United Fruit) it was clear that multinational status was an exercise in political arbitrage.

    tegnost September 28, 2016 at 11:23 am

    " Thus the power of the multinationals comes not just from their own size and reach, and from the support that their own governments afford them, but from their ability to divide desperate countries seeking the presence of global giants to make a small difference to their economic conditions "

    Those who support globalisation support this power disparity.

    [Sep 28, 2016] Is Inequality Rising or Falling? by James Kwak

    Sep 28, 2016 | baselinescenario.com

    Last week, Council of Economic Advisers chair Jason Furman took to the Washington Post to announce that President Obama has "narrowed the inequality gap." Furman's argument, bolstered by charts and data from a recent CEA report, has won over some of the more perceptive commentators on the Internet, including Derek Thompson, who concludes that Obama "did more to combat [income inequality] than any president in at least 50 years." In 538, the headline on Ben Casselman's summary reads, "The Income Gap Began to Narrow Under Obama."

    But is it true?

    I already wrote about the key misdirection in Furman's argument: his measures of reduced inequality compare the current world not against the world of eight years ago, but against a parallel universe in which, essentially, the policies of George W. Bush remained in place. (This is not something either Thompson or Casselman fell for; they both realized what Furman was actually arguing.) Today I want to address the larger question of whether inequality is actually getting worse or better.

    First, let's orient ourselves. At a high level, there are two sets of forces that affect income inequality. The first set is underlying economic factors that determine inequality of pre-tax income: skills gap, globalization, bargaining power of labor, and so on. The second set is government policies that affect the distribution of income, often referred to as taxes and transfers; these policies take pre-tax income inequality as an input and produce after-tax income inequality as an output. (This isn't a perfect distinction, since tax and transfer policies also affect the distribution of pre-tax income, but I think it's good enough for explanatory purposes.)

    Furman's argument is that Obama has improved that second set of policies. That's what this chart really shows; remember, it's comparing the effect of taxes and transfers next year against the effect of taxes and transfers under George W. Bush policies.

    skunk | September 27, 2016 at 6:01 pm

    Either way, we still have an economy which is build on a foundation of debt, that in turn leads to price increases, and the separation of the haves, and the have nots.

    [Sep 28, 2016] Wolf Richter Negative Growth of Real Wages is Normal for Much of the Workforce, and Getting Worse – New York Fed naked cap

    Notable quotes:
    "... If you're wondering why a large portion of American consumers are strung out and breathless and have trouble spending more and cranking up the economy, here's the New York Fed with an answer. And it's going to get worse. ..."
    "... That the real median income of men has declined 4% since 1973 is an ugly tidbit that the Census Bureau hammered home in its Income and Poverty report two weeks ago, which I highlighted in this article – That 5.2% Jump in Household Income? Nope, People Aren't Suddenly Getting Big-Fat Paychecks – and it includes the interactive chart below that shows how the real median wage of women rose 36% from 1973 through 2015, while it fell 4% for men... ..."
    "... Nominal wages are sticky downwards but not real wages. That is why the FED, the banks, the corporate sector and the economists support persistent inflation, i.e. it lowers real wages. The "study" correlating wage growth with aging is one of those empirical pieces by economists to obscure the role of inflation in lowering real wages. ..."
    "... Real Wage Growth chart very interesting, crossing negative at about 55 for no college, and 43 for a Bachelor's degree. 43!! Not even halfway through a work-life, and none better since 2003 at best. ..."
    Sep 28, 2016 | www.nakedcapitalism.com
    By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.

    The New York Fed published an eye-opener of an article on its blog, Liberty Street Economics , seemingly about the aging of the US labor force as one of the big economic trends of our times with "implications for the behavior of real wage growth." Then it explained why "negative growth" – the politically correct jargon for "decline" – in real wages is going to be the new normal for an ever larger part of the labor force.

    If you're wondering why a large portion of American consumers are strung out and breathless and have trouble spending more and cranking up the economy, here's the New York Fed with an answer. And it's going to get worse.

    The authors looked at the wages of all employed people aged 16 and older in the Current Population Survey (CPS), both monthly data from 1982 through May 2016 and annual data from 1969 through 1981. They then restricted the sample to employed individuals with wages, which boiled it down to 7.6 million statistical observations.

    Then they adjusted the wages via the Consumer Price Index to 2014 dollars and divide the sample into 140 different "demographic cohorts" by decade of birth, sex, race, and education. As an illustration of the principles at work, they picked the cohort of white males born in the decade of the 1950s.

    That the real median income of men has declined 4% since 1973 is an ugly tidbit that the Census Bureau hammered home in its Income and Poverty report two weeks ago, which I highlighted in this article – That 5.2% Jump in Household Income? Nope, People Aren't Suddenly Getting Big-Fat Paychecks – and it includes the interactive chart below that shows how the real median wage of women rose 36% from 1973 through 2015, while it fell 4% for men...

    Sally Snyder September 28, 2016 at 7:22 am

    Here is an interesting article that looks at which Americans have left the workforce in very high numbers:

    http://viableopposition.blogspot.ca/2016/08/exiting-workforce-growing-pastime-for.html

    The current real world employment experience of millions of Americans has shown little improvement since the end of the Great Recession.

    Damian September 28, 2016 at 7:35 am

    The number of public companies have been cut in half in the last 20 years. Just for one metric.

    So for those born in the 50's, reaching middle or senior management by the time they were in their mid 40's (1999) was increasingly harder as the probability of getting squeezed out multiplied. In the last ten years, the birth / death rate of startups / small business has reversed as well.

    There is probably ten other examples of why age is not the mitigating criteria for the decline in wages. It's not skill sets, not ambition, not flexibility. Pure number of chances for advancement and therefore associated higher wages has declined precipitously.

    Anti Trust Enforcement went out the window as Neo-Liberal policies converted to political donations for promoting consolidation.

    Now watch even those in their 20-30 age group will experience the same thing as H-1b unlimited takes hold with the Obama / Clinton TTP burning those at younger demographics. Are you going to say they are "too old" as well to write software?

    Tell me where you want to go, and I will focus on selective facts and subjective interpretation of those selective facts to yield the desired conclusions.

    Barack Peddling Fiction Obama – BS at the B.L.S. – has a multiplicity of these metrics.

    Jim A. September 28, 2016 at 7:37 am

    Hmm…Because wages are "sticky downwards" it would be helpful to see the inflation rate on that first chart.

    Reply
    Ignim Brites September 28, 2016 at 8:35 am

    Nominal wages are sticky downwards but not real wages. That is why the FED, the banks, the corporate sector and the economists support persistent inflation, i.e. it lowers real wages. The "study" correlating wage growth with aging is one of those empirical pieces by economists to obscure the role of inflation in lowering real wages.

    Steve H. September 28, 2016 at 8:05 am

    Real Wage Growth chart very interesting, crossing negative at about 55 for no college, and 43 for a Bachelor's degree. 43!! Not even halfway through a work-life, and none better since 2003 at best.

    [Sep 28, 2016] The Consequences of Long Term Unemployment - NBER

    Sep 28, 2016 | www.nber.org

    [Sep 28, 2016] Globalization, Inequality and Welfare - NBER

    Sep 28, 2016 | www.nber.org

    [Sep 27, 2016] DeLong on helicopter money

    Sep 27, 2016 | economistsview.typepad.com

    Peter K. : September 27, 2016 at 06:45 AM DeLong on helicopter money: "The swelling wave of argument and discussion around "helicopter money" has two origins:

    First, as Harvard's Robert Barro says: there has been no recovery since 2010.

    The unemployment rate here in the U.S. has come down, yes. But the unemployment rate has come down primarily because people who were unemployed have given up and dropped out of the labor force. Shrinkage in the share of people unemployed has been a distinctly secondary factor. Moreover, the small increase in the share of people with jobs has been neutralized, as far as its effects on how prosperous we are, by much slower productivity growth since 2010 than America had previously seen, had good reason to anticipate, and deserves.

    The only bright spot is a relative one: things in other rich countries are even worse.
    ..."

    I thought Krugman and Furman were bragging about Obama's tenure.

    "Now note that back in 1936 [John Maynard Keynes had disagreed][]:

    "The State will have to exercise a guiding influence... partly by fixing the rate of interest, and partly, perhaps, in other ways.... It seems unlikely that the influence of banking policy on the rate of interest will be sufficient by itself.... I conceive, therefore, that a somewhat comprehensive socialisation of investment will prove the only means of securing an approximation to full employment; though this need not exclude all manner of compromises and of devices by which public authority will co-operate with private initiative..."

    By the 1980s, however, for Keynes himself the long run had come, and he was dead. The Great Moderation of the business cycle from 1984-2007 was a rich enough pudding to be proof, for the rough consensus of mainstream economists at least, that Keynes had been wrong and Friedman had been right.

    But in the aftermath of 2007 it became very clear that they-or, rather, we, for I am certainly one of the mainstream economists in the roughly consensus-were very, tragically, dismally and grossly wrong."

    DeLong sounds very much left rather than center-left. His reasons for supporting Hillary over Sanders eludes me.

    Hillary's $275 billion over 5 years is substantially too small as center-leftist Krugman put it.

    Now we face a choice:

    Do we accept economic performance that all of our predecessors would have characterized as grossly subpar-having assigned the Federal Reserve and other independent central banks a mission and then kept from them the policy tools they need to successfully accomplish it?

    Do we return the task of managing the business cycle to the political branches of government-so that they don't just occasionally joggle the elbows of the technocratic professionals but actually take on a co-leading or a leading role?

    Or do we extend the Federal Reserve's toolkit in a structured way to give it the tools it needs?

    Helicopter money is an attempt to choose door number (3). Our intellectual adversaries mostly seek to choose door number (1)-and then to tell us that the "cold douche", as Schumpeter put it, of unemployment will in the long run turn out to be good medicine, for some reason or other. And our intellectual adversaries mostly seek to argue that in reality there is no door number (3)-that attempts to go through it will rob central banks of their independence and wind up with us going through door number (2), which we know ends badly..."

    ------------

    Some commenters believe more fiscal policy via Congress is politically more realistic than helicopter money.

    I don't know, maybe they're right. I do know Hillary's proposals are too small. And her aversion to government debt and deficit is wrong given the economic context and market demand for safe assets.

    Some pundits like Krugman believe helicopter money won't be that effective "because the models tell him." We should try it and find out. Reply Tuesday, September 27, 2016 at 06:45 AM

    reason -> Peter K.... , Tuesday, September 27, 2016 at 08:40 AM

    "Moreover, the small increase in the share of people with jobs has been neutralized, as far as its effects on how prosperous we are, by much slower productivity growth since 2010 than America had previously seen, had good reason to anticipate, and deserves."

    ?????? The rate of (measured) productivity growth is not all that important. What has happened to real median income.

    And why are quoting from Robert Barro who is basically a freshwater economist. Couldn't you find somebody sensible?

    pgl -> reason ... , Tuesday, September 27, 2016 at 09:08 AM
    Barro wants us to believe we have been at full employment all along. Of course that would mean any increase in aggregate demand would only cause inflation. Of course many of us think Barro lost it years ago.

    These little distinctions are alas lost on PeterK.

    Peter K. -> pgl... , Tuesday, September 27, 2016 at 01:05 PM
    run a long stupid troll.

    Go read some hack Republican analyses.

    Peter K. -> reason ... , Tuesday, September 27, 2016 at 01:06 PM
    DeLong is quoting Barro.
    Paine -> Peter K.... , Tuesday, September 27, 2016 at 09:57 AM
    Really it's Delong on the context that has produced a return to HM fantasies

    I'm sure u agree

    He doesn't endorse HM in this post does he ?

    Peter K. -> Paine ... , Tuesday, September 27, 2016 at 01:09 PM
    Sounds to me like he does:

    "Now we face a choice:

    [1] Do we accept economic performance that all of our predecessors would have characterized as grossly subpar-having assigned the Federal Reserve and other independent central banks a mission and then kept from them the policy tools they need to successfully accomplish it?

    [2] Do we return the task of managing the business cycle to the political branches of government-so that they don't just occasionally joggle the elbows of the technocratic professionals but actually take on a co-leading or a leading role?

    [3] Or do we extend the Federal Reserve's toolkit in a structured way to give it the tools it needs?

    Helicopter money is an attempt to choose door number (3). Our intellectual adversaries mostly seek to choose door number (1)-and then to tell us that the "cold douche", as Schumpeter put it, of unemployment will in the long run turn out to be good medicine, for some reason or other. And our intellectual adversaries mostly seek to argue that in reality there is no door number (3)-that attempts to go through it will rob central banks of their independence and wind up with us going through door number (2), which we know ends badly...""

    ---------------------
    Conservatives want 1 and 2 ends badly, so 3 is the only choice.

    [Sep 27, 2016] Contrary to What AP Tells You, Social Security Is NOT a Main Driver of the Countrys Long-term Budget Problem

    Sep 27, 2016 | economistsview.typepad.com

    anne : Tuesday, September 27, 2016 at 05:05 AM

    http://cepr.net/blogs/beat-the-press/contrary-to-what-ap-tells-you-social-security-is-not-a-main-driver-of-the-country-s-long-term-budget-problem

    September 27, 2016

    Contrary to What AP Tells You, Social Security Is NOT a Main Driver of the Country's Long-term Budget Problem

    The New York Times ran a short Associated Press piece * on Social Security and "why it matters." The piece wrongly told readers that Social Security is "a main driver of the government's long-term budget problems." This is not true. Under the law, Social Security can only spend money that is in its trust fund. If the trust fund is depleted then full benefits cannot be paid. The law would have to be changed to allow Social Security to spend money other than the funds designated for the program and in that way contribute to the deficit.

    The piece also plays the "really big number" game, telling readers:

    "the program faces huge shortfalls that get bigger and bigger each year.In 2034, the program faces a $500 billion shortfall, according to the Social Security Administration. In just five years, the shortfalls add up to more than $3 trillion.

    "Over the next 75 years, the shortfalls add up to a staggering $139 trillion. But why worry? When that number is adjusted for inflation, it comes to only $40 trillion in 2016 dollars - a little more than twice the national debt."

    Since this is talking about shortfalls projected to be incurred over a long period of time, it would be helpful to express the shortfall relative to the economy over this period of time, not debt at a point in time. This is not hard to do, since there is a table ** right in the Social Security trustees report that reports the projected shortfall as being equal to 0.95 percent of GDP over the 75-year forecasting horizon. By comparison, the costs of the war in Iraq and Afghanistan came to around 1.6 percent of GDP at their peaks in the last decade.

    The piece also gets the reason for the projected shortfall wrong. It tells readers:

    "In short, because Americans aren't having as many babies as they used to. That leaves relatively fewer workers to pay into the system. Immigration has helped Social Security's finances, but not enough to fix the long-term problems.

    "In 1960, there were 5.1 workers for each person getting benefits. Today, there are about 2.8 workers for each beneficiary. That ratio will drop to 2.1 workers by 2040."

    Actually the drop in the birth rate and the declining ratio of workers to beneficiaries had long been predicted. The reason that the program's finances look worse than when the Greenspan commission put in place the last major changes in 1983 is the slowdown in wage growth and the upward redistribution of wage income so that a larger share of wage income now goes untaxed.

    In 1983, only 10 percent of wage income was above the payroll tax cap. Today it is close to 18 percent. This upward redistribution explains more than 40 percent *** of projected shortfall over the next 75 years.

    It is also worth noting that the loss in wage income for most workers to upward redistribution swamps the size of any tax increases that could be needed to maintain full funding for the program. While AP wants to get people very worried over possible tax increases in future years, it would rather they ignore the policies (e.g. trade, Federal Reserve policy, Wall Street policy, patent policy) that have taken money out of the pockets of ordinary workers and put it in the hands of the rich.

    * http://www.nytimes.com/aponline/2016/09/27/business/ap-us-campaign-2016-why-it-matters-social-security.html

    ** https://www.ssa.gov/OACT/TR/2016/VI_G2_OASDHI_GDP.html#200732

    *** http://www.cepr.net/index.php/blogs/cepr-blog/the-impact-of-the-upward-redistribution-of-wage-income-on-social-security-solvency

    -- Dean Baker

    Reply Tuesday, September 27, 2016 at 05:05 AM Foreign Kidnappers said in reply to anne... , Tuesday, September 27, 2016 at 05:21 AM

    fewer workers to pay into the system. Immigration has helped Social Security's finances, but not enough to fix the long-term
    "
    ~~dB~

    Fewer workers who on balance draw smaller pay-check-s within a World of rising prices. Can you see the long trend of inflation? Do you see how the price of a t-bond has risen steady on during the past 35 years? As the bond price rises the yield falls. Do you see how much?

    This is a long term unstoppable inflation that raises the price of all ships. All nursing homes and all ships!

    Holy
    ship --

    Paine -> anne... , Tuesday, September 27, 2016 at 07:23 AM
    Dean in high gear
    Remove the taxable compensation exclusions and caps
    Julio -> anne... , Tuesday, September 27, 2016 at 01:39 PM
    That's 139 Trillion with a capital "T", and that rhymes with "P", and that stands for pool!

    And don't look at guys like me to save Social Security. My unfunded liability for kids shoes alone is over $20,000, and that's assuming they leave home at 18.

    anne : , Tuesday, September 27, 2016 at 05:08 AM
    http://cepr.net/publications/op-eds-columns/time-to-treat-bank-ceos-like-adults

    September 26, 2016

    Time to Treat Bank CEOs Like Adults
    By Dean Baker

    The country's major banks are like trouble-making adolescents. They constantly get involved in some new and unimagined form of mischief. Back in the housing bubble years it was the pushing, packaging and selling of fraudulent mortgages. Just a few years later we had JP Morgan, the country's largest bank, incurring billions in losses from the gambling debts of its "London Whale" subsidiary. And now we have the story of Wells Fargo, which fired 5,300 workers for selling phony accounts to the bank's customers.

    It is important to understand what is involved in this latest incident at Wells Fargo. The bank didn't just discover last month that these employees had been ripping off its customers. These firings date back to 2011. The company has known for years that low-level employees were ripping off customers by assigning them accounts -- and charging for them -- which they did not ask for. And this was not an isolated incident, 5,300 workers is a lot of people even for a huge bank like Wells Fargo.

    When so many workers break the rules, this suggests a problem with the system, not bad behavior by a rogue employee. And, it is not hard to find the problem with the system. The bank gave these low level employees stringent quotas for account sales. In order to make these quotas, bank employees routinely made up phony accounts. This practice went on for five years.

    As it became aware of widespread abuses, it's hard to understand why the bank would not change its quota system for employees. One possibility is that they actually encouraged this behavior, since the new accounts (even phony accounts) would be seen as good news on Wall Street and drive up the bank's stock price.

    Certainly Wells Fargo CEO John Stumpf, as a major share and options holder, stood to gain from propping up the stock price, as pointed out by reporter David Dayan. In keeping with this explanation, Carrie Tolsted, the executive most immediately responsible for overseeing account sales, announced her resignation and took away $125 million in compensation. This is equal to the annual pay of roughly 5,000 starting bank tellers at Wells Fargo. That is not ordinarily the way employees are treated when they seriously mess up on the job.

    Regardless of the exact motives, the real question is what will be the consequences for Stumpf and other top executives. Thus far, he has been forced to stand before a Senate committee and look contrite for four hours. Stumpf stands to make $19 million this year in compensation. That's almost $5 million for each hour of contrition. Millions of trouble-making high school students must be very jealous.

    There is little reason for most of us to worry about Stumpf contrition, or lack thereof. His bank broke the law repeatedly on a large scale. And, he was aware of these violations, yet he nonetheless left in place the incentive structure that caused them. In the adult world this should mean being held accountable.

    This is not a question of being vindictive towards Stumpf, it's a matter of getting the incentives right. If the only price for large-scale law breaking by the top executives of the big banks is a few hours of public shaming, but the rewards are tens of millions or even hundreds of millions in compensation, then we will continue to see bankers disregard the law, as they did at Wells Fargo and they did on a larger scale during the run-up of housing bubble.

    There is another aspect to the Wells Fargo scandal that is worth considering. Insofar as the bank was booking revenue on accounts that didn't exist, it was also ripping off the banks' shareholders. The shareholders' interests are supposed to be protected by the bank's board of directors.

    It doesn't seem the shareholders got much help there....

    anne -> anne... , Tuesday, September 27, 2016 at 06:09 AM
    http://www.nytimes.com/2016/09/27/business/dealbook/wells-fargo-workers-claim-retaliation-for-playing-by-the-rules.html

    September 26, 2016

    Wells Fargo Workers Claim Retaliation for Playing by the Rules
    By STACY COWLEY

    In two lawsuits seeking class-action status, workers say they were fired or demoted for acting ethically and falling short of unrealistic sales goals.

    Paine -> anne... , Tuesday, September 27, 2016 at 07:31 AM
    Really important
    pgl -> anne... , Tuesday, September 27, 2016 at 08:19 AM
    Rehire the staff. Fire the CEO.
    EMichael -> anne... , Tuesday, September 27, 2016 at 09:06 AM
    This isn't going to be popular in here, and I do not even like saying it, but the timing of these lawsuits suggest to me ambulance chasing.

    Unless someone can tell me how it is possible for these employees to accept this treatment for years and years until the CFPB fines Wells Fargo.

    pgl -> EMichael... , Tuesday, September 27, 2016 at 09:18 AM
    Cellino & Barnes? I hope these plaintiffs have been attorneys than that. But yea - having a government agency make your case is a good idea as I'm sure top Wells Fargo management has hired some nasty defense attorneys.
    EMichael -> pgl... , Tuesday, September 27, 2016 at 09:26 AM
    Not my point.

    California has some of the strongest whistle blower protections in the country.

    I find it remarkable that(and I have tried but failed to find any evidence) not one of these mistreated employees filed a lawsuit years ago. The firings started in 2011. Are you telling me these employees sat around for 5 years without a single one of them taking action?

    The other part that bothers me is this bonus level goal. Wells Fargo is not the only company in the world that sets their bonus levels at points that are almost impossible to obtain.

    I do not see why that is an issue at all.


    pgl -> EMichael... , Tuesday, September 27, 2016 at 09:46 AM
    Not talking whistle blower protections. Firms like Cellino and Barnes only take cases where they know they can win. Then again - I am talking about a dirt bag law firm. Why bring a case when the odds are stacked against you? But I think what you are pointing out is they is a new sheriff in town with respect to gathering the facts - which of course is always key in winning any law suit.
    pgl -> EMichael... , Tuesday, September 27, 2016 at 09:47 AM
    "not one of these mistreated employees filed a lawsuit years ago".

    A lot of women who have been raped don't bother to prosecute the creep thinking they can't win anyway. This may have been the thinking of these employees until now.

    EMichael -> pgl... , Tuesday, September 27, 2016 at 10:04 AM
    0 for 5300 is mind boggling.

    I am not saying the law firm is incompetent, I am saying it seems to me they are taking a case where WF might not want to deal with more bad pr and settle.

    The only people, from what I have seen of this case, that have a chance to win on the merits are those who claimed they called the ethics department at Wells and were fired for that action.

    Julio -> EMichael... , Tuesday, September 27, 2016 at 11:19 AM
    Yes, the lawyers are circling like vultures.
    But it just shows that lawyers evaluate cases before taking them on, and that the cases' prospects depend on public opinion.

    In addition, it is much easier for people to feel empowered, talk to lawyers, and fight back if they don't feel isolated and vulnerable to retaliation.

    cm -> anne... , Tuesday, September 27, 2016 at 09:35 AM
    "the executive most immediately responsible for overseeing account sales, announced her resignation and took away $125 million in compensation. ... That is not ordinarily the way employees are treated when they seriously mess up on the job."

    Based on (public) evidence available to me, I have to inform you that this *is* ordinarily the way how the higher executive ranks are treated when the have to leave because of a serious blunder. In many cases, the termination package is written into their contract, with exceptions mostly for criminal malfeasance, breach of contract, and that type of thing, or if the management/board deems it is better for everybody else to "convince" the undesired executive to leave without a big splash, then they will sweeten the deal.

    As I have seen in tech, in many companies the rank-and-file are treated to similar arrangements, only the amounts are several orders of magnitude lower. But it is not very common for somebody to be outright fired without severance. There are commonly provisions like a few weeks of salary continuation per year of service, or offering a small sum to get a quick exit instead of a drawn out and arduous process of managing somebody out and "documenting" everything.

    EMichael -> anne... , Tuesday, September 27, 2016 at 10:52 AM
    Here's the part that bothers me about this.(and once again I will mention that I feel almost dirty defending bank execs).

    " large-scale law breaking by the top executives of the big banks".

    I don't get this at all. It seems that setting huge bonus numbers is somehow large scale law breaking.

    But let's look at the real numbers is some perspective here(which is usually Baker's thing).

    The idea seems to be that Stumpf came up with this idea to open accounts that people did not know they had. Those accounts would both generate revenue and allow him to talk about the growth of accounts in the bank.

    I have seen nothing that shows how many accounts were opened illegally(I would like to see that) and nothing to show how many legal accounts were opened during this time frame. With that info you could put this into perspective how Stumpf and other high level execs gained from this action.

    That being said I know one thing. People who had accounts opened illegally were returned the fees that they paid. That total is $5 million. Not a lot of revenue but it kind of makes sense. You cannot charge people a lot of fees with products they do not even know they have. there is no way in the world that anyone can think there was going to be a lot of money made on accounts that were, to all intents and purposes, dead.

    Meanwhile, in the time period that this case covers, Wells Fargo had profits of almost $100 billion. To think the CEO is going to worry about such an insignificant amount of revenue by "planning" an illegal action is absurd.

    I am all in in the bank CEOs committing fraud during the bubble, there was a huge amount of profit to be made. But to think this thing came from the top, or even five or six levels down, is silly. There is no reason.

    This was the case of front line people committing fraud to make money. It was also the case of their managers to encourage and/or allow that fraud to make money.

    Wells certainly deserves the punishment for allowing this fraud to happen, but thinking it originated in the executive offices makes no sense from an standpoint.

    Paine -> EMichael... , Tuesday, September 27, 2016 at 11:38 AM
    It takes courage to defend top management
    Of a oligop bank
    Peter K. -> Paine ... , Tuesday, September 27, 2016 at 01:01 PM
    EMichael hates lefites. He gets off on baiting them (us).
    paine -> Peter K.... , -1
    Let us enjoy the attention

    [Sep 27, 2016] reason

    Sep 27, 2016 | plus.google.com
    said... https://www.stlouisfed.org/on-the-economy/2016/september/great-moderation-vacation

    I don't like the way this is written. Is low volatility in measured GDP growth and inflation a good thing in and of itself? I would think that this needs justification. I have the feeling this is a clear case of proxy creep. We try to control a proxy for something we care about, and in the end we forget what it is that we actually care about and the proxy becomes useless, misleading even. What if the decline of the middle class that we are so concerned about is the result precisely of the policies we are using to reduce volatility? Reply Tuesday, September 27, 2016 at 01:58 AM Paine said in reply to reason ... Excellent Trade-induced increases in inequality of disposable income erode about 20% of the gains from trade reason said... http://www.nber.org/papers/w22676#fromrss
    Didn't read the paper, but in the conclusions this was important
    "Our quantitative results suggest that both corrections are nonnegligible: trade-induced increases in inequality of disposable income erode about 20% of the gains from trade, while the gains from trade would be about 15% larger if redistribution was carried out via non-distortionary means. " reason said... http://oecdinsights.org/2016/09/26/complexity-theory-and-evolutionary-economics/
    "So where should we go with complexity? I believe that a core component of complexity is and should be evolution. In an evolutionary view, an economy is an "organism" that is constantly developing new industries, technologies, organizations, occupations, and capabilities while at the same time shedding older ones that new technologies and other evolutionary changes make redundant. This rate of evolutionary change differs over time and space, depending on a variety of factors, including technological advancement, entrepreneurial effort, domestic policies, and the international competitive environment. To the extent that neoclassical models consider change, it is seen as growth more than evolution. In other words, market transactions maximize static efficiency and consumer welfare. As Alan Blinder writes, "Can economic activities be rearranged so that some people are made better off, but no one is made worse off? If so we have uncovered an inefficiency. If not, the system is efficient."

    In complexity or evolutionary economics, we should be focusing not on static allocative efficiency, but on adaptive efficiency. Douglass North argues that: "Adaptive efficiency…is concerned with the kinds of rules that shape the way an economy evolves through time. It is also concerned with the willingness of a society to acquire knowledge and learning, to induce innovation, to undertake risk and creative activity of all sorts, as well as to resolve problems and bottlenecks of the society through time." Likewise, Richard Nelson and Sidney G. Winter wrote in their 1982 book An Evolutionary Theory of Economic Change, "The broader connotations of 'evolutionary' include a concern with processes of long-term and progressive change."

    This provides a valuable direction. It means that a key focus for economic policy should be to encourage adaptation, experimentation and risk taking. It means supporting policies to intentionally accelerate economic evolution, especially from technological and institutional innovation. This means not only rejecting neo-Ludditism in favor of techno-optimism, it means the embrace of a proactive innovation policy. And it means enabling new experiments in policy, recognizing that many will fail, but that some will succeed and become "dominant species." Policy and program experimentation will better enable economic policy to support complex adaptive systems.
    "

    Yes, I basically agree with this because it is specifically directed towards policy thinking in the broadest sense. I was suspicious of the article at first because of this:
    "However, despite what Larry Summers has written, economics is not a science that applies for all times and places."
    This seems to me wrong headed. Do we need a new biology every time there is some genetic change or do we need a biology that can cope with genetic change? Reply Tuesday, September 27, 2016 at 02:12 AM RC AKA Darryl, Ron said in reply to reason ... We need a new biology that can rewrite the laws of science whenever we want :<)

    [Sep 27, 2016] Globalization is gone as a main driving force, pan-European unity is gone, and whether the United States will stay united is far from a done deal

    Notable quotes:
    "... Global is gone as a main driving force, pan-European is gone, and whether the United States will stay united is far from a done deal. We are moving towards a mass movement of dozens of separate countries and states and societies looking inward. All of which are in some form of -impending- trouble or another. ..."
    "... And of course it's confusing that the protests against the 'old regimes' and the growth and centralization -first- manifest in the rise of faces and voices who do not reject all of the above offhand. That is to say, the likes of Marine Le Pen, Donald Trump and Nigel Farage may be against more centralization, but none of them has a clue about growth being over. They don't get that part anymore than Hillary or Hollande or Merkel do. ..."
    "... Dems in the US, Labour in the UK, and Hollande's 'Socialists' in France have all become part of the two-headed monster that is the political center, and that is (held) responsible for the deterioration in people's lives. ..."
    Sep 27, 2016 | www.nakedcapitalism.com
    fresno dan September 27, 2016 at 4:46 pm

    Why There is Trump ~Ilargi

    But nobody seems to really know or understand. Which is odd, because it's not that hard. That is, this all happens because growth is over. And if growth is over, so are expansion and centralization in all the myriad of shapes and forms they come in.

    Global is gone as a main driving force, pan-European is gone, and whether the United States will stay united is far from a done deal. We are moving towards a mass movement of dozens of separate countries and states and societies looking inward. All of which are in some form of -impending- trouble or another.

    What makes the entire situation so hard to grasp for everyone is that nobody wants to acknowledge any of this. Even though tales of often bitter poverty emanate from all the exact same places that Trump and Brexit and Le Pen come from too.

    That the politico-econo-media machine churns out positive growth messages 24/7 goes some way towards explaining the lack of acknowledgement and self-reflection, but only some way. The rest is due to who we ourselves are. We think we deserve eternal growth.

    And of course it's confusing that the protests against the 'old regimes' and the growth and centralization -first- manifest in the rise of faces and voices who do not reject all of the above offhand. That is to say, the likes of Marine Le Pen, Donald Trump and Nigel Farage may be against more centralization, but none of them has a clue about growth being over. They don't get that part anymore than Hillary or Hollande or Merkel do.

    So why these people? Look closer and you see that in the US, UK and France, there is nobody left who used to speak for the 'poor and poorer'. While at the same time, the numbers of poor and poorer increase at a rapid clip. They just have nowhere left to turn to. There is literally no left left.

    Dems in the US, Labour in the UK, and Hollande's 'Socialists' in France have all become part of the two-headed monster that is the political center, and that is (held) responsible for the deterioration in people's lives. Moreover, at least for now, the actual left wing may try to stand up in the form of Jeremy Corbyn or Bernie Sanders, but they are both being stangled by the two-headed monster's fake left in their countries and their own parties.
    ================================================
    This is from today's Links, but I didn't have a chance to post this snippet.
    https://fred.stlouisfed.org/series/A191RL1A225NBEA

    Long time since we had 5% – if the whole system is financial scheme is premised on growth, and there is less and less of it ever year, it doesn't look sustainable. How bad http://www.nakedcapitalism.com/2016/09/200pm-water-cooler-9272016.html#comment-2676054does it have to get for how many before the model is chucked???

    In the great depression, even the bankers were having a tough time. If the rich are exempt from suffering, I think history has shown that a small elite can impose suffering on masses for a long time…

    'there is nobody left who used to speak for the 'poor and poorer'.

    Actually, there are plenty who SPEAK for the poor, there just is NONE who ACT.

    Reply
    jrs September 27, 2016 at 5:08 pm

    How would we measure this growth that is supposed to be over? Yes of course there are the conventional measurements like GDP, but it's not zero. Yes of course if inflation is understated it would overstate GDP, and yes GDP measurements may not measure much as many critics have said. But what about other measures?

    Is oil use down, are CO2 emissions down, is resource use in general down? If not it's growth (or groath). This growth is at the cost of the planet but that's why GDP is flawed. And the benefit of this groath goes entirely to the 1%ers, but that's distribution.

    The left failed, I don't know all the reasons (and it's always hard to oppose the powers that be, the field always tilts toward them, it's never a fair fight) but it failed. That's what we see the results of.

    fresno dan September 27, 2016 at 6:13 pm

    I agree

    OpenThePodBayDoorsHAL September 27, 2016 at 5:12 pm

    Someone very smart said "the Fed makes the economy more stable".
    He also quoted The Princess Bride: "You keep using that word, I do not think it means what you think".
    Definition of stable: firm; steady; not wavering or changeable.
    As in: US GDP growth of a paltry 1.22% per year.
    But hey it only took an additional trillion $ in debt per year to stay "stable".

    Softie September 27, 2016 at 5:42 pm

    there are plenty who SPEAK for the poor, there just is NONE who ACT.
    ========
    That's why in 1992 Francis Futurama refirmed the end of history that was predicted by Hegel some 150 years earlier.

    Lee September 27, 2016 at 5:58 pm

    Time to revisit Herman Daly's Steady-State Economy.

    [Sep 26, 2016] The Financialization of Education and the Student Loan Debt Bubble

    Sep 26, 2016 | www.nakedcapitalism.com

    DrBob September 25, 2016 at 11:58 am

    The Financialization of Education and the Student Loan Debt Bubble

    http://www.nybooks.com/articles/2016/10/13/how-the-financing-of-colleges-may-lead-to-disaster/

    [Sep 26, 2016] The Outlaws of Political Economy

    Sep 26, 2016 | econospeak.blogspot.com

    EconoSpeak

    Perusing Palgrave's Dictionary of Political Economy from 1894 alerted me to the odd interaction of a pair of distinctions. The first distinction was between the study of "what is" and "what ought to be." The second distinction was between "economic science" (or "economics") and "political economy." Economic science presumably distinguished itself from political economy by its strict focus on describing "what is" rather than on prescribing "what ought to be."

    Palgrave's
    explains the latter distinction to have been at least partly motivated by the confusion that arose over just what kind of laws -- legal or natural -- so-called "laws of political economy" were. Even after the attempt at rebranding, however:

    "...even well-educated persons still occasionally speak of "laws of political economy" as being "violated" by the practice of statesmen, trades-unions and other individuals and bodies.
    You can't "break" scientific laws. They are simply generalized descriptions of fact. A flying airplane doesn't break the law of gravity. It conforms to a more comprehensive complex of physical laws. The law of gravity isn't the only law.

    Palgrave's Dictionary further noted that the "great complexity and variety of circumstance which surround every economic problem are such as to render the enunciation of general laws, on a large scale, barely possible and if possible barely useful."

    So the whole "positive" economics rigamarole wasn't just about methodological rigor. It was a purification ritual to rid the political economist of the stigma of dogma. Economists who invoke the violation of so-called laws aren't only forfeiting any legitimate claim to economic science. They are contaminating their profession with atavistic hokum.

    Speaking of atavistic hokum, I have been trying to track down ANY accessible published record of a trade unionist or advocate of the reduction of the hours of labor EVER overtly expressing the belief that there is a fixed amount of work to be done or a certain quantity of labor to be performed or whatever synonymous equivalent. There is none.

    There is a reasonable explanation for this absence of evidence. The alleged false belief is expressed in abstract language that was not vernacular to the people accused of harbouring it. It's the wrong answer to a question workers never asked themselves.

    False belief requires two conditions to be fulfilled: 1. the idea is false and 2. it is believed by someone to be true. The matrix below shows the possible states of belief and falsehood. An idea does not have to be true to be "not false" and it doesn't have to be believed to be false to be "not believed to be true." The fallacy claim asserts a simplistic (and false!) polarization in which the beliefs of the "unenlightened" are "the opposite" of economic orthodoxy.

    In an 1861 letter to the Times of London "A Master Builder" alleged that George Potter, secretary of the carpenters' union, and his associates had "absurdly argued that there was only a certain amount of work to be done" during a 1859 strike and lock-out of the London building trades. There is a detailed report on the 1859 strike in an 1860 report on Trades' Societies and Strikes published by the National Association for the Promotion of Social Science. The 23-page account presents several items of correspondence from Potter outlining the union's position with not a hint of a lump in the load. The "certain amount of work to be done" was what Mr. Master Builder thought he heard when he mentally translated Potter's argument into his own capitalistic patois .

    There was something else interesting in the 685-page document -- an overarching controversy about whether or not labor was a commodity just like any other and therefore whether or not unions violated the laws of political economy by trying to regulate wages and hours of work. The employers who maintained this were pretty dogmatic about it. "Rates of wages cannot be settled by mediation, but must be left to the free operation of supply and demand." It's the law!

    This was not simply political economy It was vulgar political economy of the most self-serving and disingenuous kind. One has no difficulty whatsoever finding multiple evocations by employers of the so-called laws of political economy but the elusive lump remains "one of the most tenaciously held and generally least articulated of trade union beliefs."

    Least articulated? Least articulated is an understatement. Try NEVER articulated. There is no there there. The alleged false belief is a pure projection by the laws-of-political-economy crowd onto the unbeliever. The eighth annual report of the New York Bureau of Labor Statistics for the year 1890 contains the responses of over 600 labor union locals to the question of whether and why they support an eight-hour day. Not one claims there is only a certain quantity of work to be done.

    Below is an example of what an overt statement of the theory of the lump of labor looks like. It is not from a trade union manifesto or a pamphlet of the eight-hour day movement. It is from a propaganda tract put out by Nassau Senior's crew of Whig-Benthamites in defense of their New Poor Laws, which abolished outdoor relief and established the workhouse test:

    The fact is, there is a certain quantity of work to be done, and the question is who ought to do it -- those who live by their labour, and their labour only, or those who have thrown themselves on public charity.
    Can anyone find such an unequivocal articulation of the false belief by a trade unionist? Of course not. It's not the way that workers talk about their work. Work is not an abstract, disembodied quantity to those who do it. It is part of a lived experience. "A certain quantity of work to be done" is political economy speak, plain and simple. It's ceteris paribus and "all else being equal."

    Paradoxically, for old school vulgarians there both is and is not a certain quantity of work to be done. There is a certain quantity of work to be done when it comes to disparaging the idea that workers might increase wages their through collective action:

    There is a certain quantity of work to be done, and a certain number of hands to do it; if there be much work and comparatively few hands, wages will rise; if little work and an excess of hands, wages will fall. It is self-evident that combinations and strikes cannot alter this law. They can neither increase capital, nor diminish population; and, therefore, it is utterly impossible, in the very nature of things, that they ever can procure a permanent rise of wages.
    But there isn't a certain amount of work when it comes to explaining why such foolish action isn't even necessary:
    There is, say they, a certain quantity of labour to be performed. This used to be performed by hands, without machines, or with very little help from them... The principle itself is false. There is not a precise limited quantity of labour, beyond which there is no demand. Trade is not hemmed in by great walls, beyond which it cannot go. By bringing our goods cheaper and better to market, we open new markets, we get new customers, we encrease the quantity of labour necessary to supply these, and thus we are encouraged to push on, in hope of still new advantages. A cheap market will always be full of customers.
    Five years ago I compiled a database of over 500 instances of the claim in books and journal articles between 1890 and 2010 ( Excel file ). That's 500 claims without a single overt statement of the false belief from an alleged believer. Six claimants (about one percent) named culprits whose argument "arguably depends upon..." "makes an error equivalent to..." "indicates a belief..." "seems hopelessly involved in..." "is an example of the strange conclusions to which one may be carried by clinging clinging firmly to..." and "are driven by implicit assumptions." Each of those turns out to be a false alarm -- an uncharitable, speculative inference. Five hundred boys crying "wolf" and not a single wolf to be seen?

    This is an astonishing performance. This compulsion to repeat is not "careless" or "dogmatic." It's neurotic.

    The patient cannot remember the whole of what is repressed in him, and what he cannot remember may be precisely the essential part of it.. He is obliged to repeat the repressed material as a contemporary experience instead of remembering it as something in the past.
    The atavistic return of the repressed "laws of political economy" conforms faithfully to a description toward the end of chapter 3 of Beyond the Pleasure Principle where Freud talks about the experiences of "people with whom every human relationship ends in the same way" and gives as a "singularly affecting" final example the events in a romantic epic, in which the hero, Tancred, repeatedly slays his beloved, Clorinda, each time she reappears in a different guise. In this example, as Gavriel Reisner notes,
    Freud reverses the compulsion to repeat, showing how we will sometimes injure others in order to avoid injuring ourselves. Freud concludes that we often project the internal, masochistic drive as the external, sadistic drive, victimizing others to redirect an intent toward self-victimization.
    The utilitarian political economists styled themselves advocates for "the greatest good for the greatest number" and viewed opponents as apologists for narrow special interests. The supposed laws they discovered, which operated through isolated exchanges between individuals in the market, vindicated a system of natural liberty and consequently freedom entailed obedience to those laws. Collective action and collective bargaining violated the laws of individual exchange, resulting in sub-optimal outcomes. Such perversity could only be motivated by false beliefs. The false beliefs of the adversary were presumably the opposite of the true beliefs of the faithful: trade unions operated through tyranny and their bizzaro-world political economy assumed that less output meant more income.

    Reality discredited that polemic of political economy and calmer heads sought to rebrand the enterprise as economics. The ersatz laws were scaled back to tendencies, which operated within the admittedly abstract ceteris paribus pound of the economist's static model. Real life and the evolution of economic relations operated outside the ceteris paribus pound but maybe the static model could shed light on dynamic economic activity.

    It was no longer fashionable to denounce "The Evils of Collective Bargaining in Trades' Unions" (Thomas Cree, 1898) because it was increasingly understood that the so-called laws of supply and demand operated quite differently with regard to the peculiar commodity of labor power (Richard Ely, 1886):

    While those who sell other commodities are able to influence the price by a suitable regulation of production, so as to bring about a satisfactory relation between supply and demand, the purchaser of labor has it in his own power to determine the price of this commodity and the other conditions of sale.
    But even as old-guard political economy was being gradually displaced by rebranded economics in the universities, employers' associations and business journalism emerged to propound and propagate the old-time religion. The break with quasi-scientific, quasi-legalistic, quasi-religious pseudo-laws was ambivalent, the reconciliation surreptitious. Employers' associations told the college teachers what to teach. Textbooks served up a smorgasbord of the obsolescent and the innovative.

    In this twilight of science and superstition, the fallacy claim offered uncertain economists a distinctive advantage. It enabled them to continue to denounce violations of the laws of political economy without actually having to specify which laws were being violated. That left them exempt from any obligation to justify the validity of defunct laws. The burden of proof deftly shifted and the providence of economic science affirmed, albeit by default.

    Economic science thus gets to have its "what is" humility... and eat its "what ought to be" hubris too! Evidence be damned.



    That there was one particular offense singled out for condemnation by the self-appointed economic police is suggested by the example given in Palgrave's Dictionary for the common confusion between the legislative and scientific senses of law: "Thus it is often said that to regulate the hours of labour, or to introduce differential import duties, is to break economic law." The anachronism of such a view should require no explanation. The hours of labor are regulated.

    Any proposal to repeal the Fair Labor Standards Act of 1938 on the grounds that it "breaks economic law" would no doubt be laughed at by Paul Krugman, David Autor, Jonathan Portes or Alan Manning. But, inadvertently, that is precisely the historical grammar of their lump-of-labor fallacy taunt. Although there is no logical imperative that links the law-breaking claim to the fallacy claim, they have been inseparably paired in usage from their inception. To invoke the latter is either to imply the former or it is a non sequitur.

    At long last, economists, have you no scientific self-respect ? On this labor day, 2016, would you still insist that regulating of the hours of work breaks the laws of economics? Posted by Sandwichman at

    [Sep 26, 2016] Equilibrium and Information Literacy

    Sep 23, 2016 | econospeak.blogspot.com
    "Everybody except Joan Robinson agrees about capital theory." -- Robert Solow (as paraphrased by Robinson)
    An essential text in my researches on mercantilism, usury and bills of exchange is Raymond de Roover's Gresham on Foreign Exchange, which just happens to be stored in part of SFU's library that is under construction and thus inaccessible. The immediate unavailability of that book, however, led to a fortuitous discovery.

    I browsed in the call number section of the library's general collection where de Roover's book would have been and Robert Leeson's Ideology and the International Economy caught my eye. I flipped through the book and noticed on page 19 the delicious quote from Joan Robinson that, "the free-trade doctrine is just a more subtle form of mercantilism."

    The quote is from a 1966 lecture, "The New Mercantilism" that is included in a collection of essays, Contributions to Modern Economics, which also contains "Capital Theory Up-to-Date," a 1970 review of C. E. Ferguson's The Neoclassical Theory of Production and Distribution, in which Robinson reprises her parody of neo-Walrasian, neo-neoclassical capital " leets. " Leets is steel spelled backward and makes its debut in "Equilibrium Growth Models," Robinson's 1961 review of James Meade's Neo-Classical Theory of Economic Growth.

    This allegedly ectoplasmic representation of capital is, in a nutshell, the crux of the "Cambridge capital controversy," which Robinson launched with her 1952 challenge, "I leave it to those who draw production functions to say what marginal productivity and the elasticity of substitution mean when labour and capital are the factors of production." Looking back, in 1978, on her 1952 essays and the "long struggle to escape... habitual modes of thought and expression," Robinson stressed that "it was precisely from the concept of equilibrium that Keynes was struggling to escape..." Contrarily, though:

    "...textbook teaching in the department of so-called macro theory was an attempt to push Keynes into short-term equilibrium. ... The grand neoclassical synthesis (now known as bastard Keynesianism) was a more ambitious attempt to reduce the General Theory to a system of equilibrium."
    In responding to Robinson's leets critique, Robert Solow began by acknowledging "much truth" to the objection that "the usual production functions, allowing for more or less substitutability between capital and labor, attribute to 'capital' a degree of malleability which contradicts common observation." He then distinguished between the "econometrically-minded person" who would view the overly malleable capital as a "specification error" and others -- presumably including Robinson -- who judge it to be "a doctrinal error; and its consequence is a kind of Fall from Grace." Seven years later, Robinson had this to say about "doctrinal disputes":
    Many economists, nowadays, who are interested in practical questions are impatient of doctrinal disputes. What does it matter, they are inclined to say, let him have his leets, what harm does it do? But the harm that the neo-neoclassicals have done is, precisely, to block off economic theory from any discussion of practical questions.
    If one is concerned about actual unemployment in an actual economy, Robinson later explained, one "has to discuss it in terms of processes taking place in actual history. The concept of equilibrium is incompatible with history. It is a metaphor based on movements in space applied to processes taking place in time." In other words, it is not just some kind of ethereal affectation to object to the concept of equilibrium -- it is an argument with irrevocable real-world consequences.

    The failure of what Robinson dismissed as "bastard Keynesianism" also had real-world doctrinal consequences. "In the era of stagflation, this notion [that equilibrium growth can be achieved through fiscal and monetary 'fine tuning'] has been discredited and the quantity theory of money is blossoming afresh amongst its ruins." This 'blossoming,' incidentally, was not something Robinson welcomed.

    Well, my interlibrary loan of de Roover's Gresham on Foreign Exchange has arrived, so I'm off up the hill to pick it up. To be continued...

    [Sep 26, 2016] The downside of upward mobility

    Notable quotes:
    "... I think that we are led to a very somber conclusion here. In societies with slow growth, upward mobility is limited by the lack of opportunities and the solid grip that those who are on the top keep over the chances of their children to remain on the top. It is either self-delusion or hypocrisy to believe that societies with such unevenness of chances will come close to resembling "meritocracies". But it is also the case that true upward mobility comes with an enormous price tag of lives lost and wealth destroyed. ..."
    Sep 26, 2016 | economistsview.typepad.com

    http://glineq.blogspot.com/2016/09/the-downside-of-upward-mobility.html

    RGC : , The downside of upward mobility

    The downside of upward mobility

    Saturday, September 17, 2016

    Branko Milanovic
    ...........................
    I think that we are led to a very somber conclusion here. In societies with slow growth, upward mobility is limited by the lack of opportunities and the solid grip that those who are on the top keep over the chances of their children to remain on the top. It is either self-delusion or hypocrisy to believe that societies with such unevenness of chances will come close to resembling "meritocracies". But it is also the case that true upward mobility comes with an enormous price tag of lives lost and wealth destroyed.

    http://glineq.blogspot.com/2016/09/the-downside-of-upward-mobility.html

    anne -> RGC... , Sunday, September 25, 2016 at 09:40 AM
    Really important essay.

    [Sep 26, 2016] Another way of eliminating employees and forcing the customer to do the work

    Notable quotes:
    "... I refuse to use self-checkouts at grocery stores, as well. I see that, and this new Sam's app, as doing nothing more than 'outsourcing' the job onto the customers themselves (but even better, as they have to pay no one), eliminating jobs, while increasing their profits by cutting the overhead for the company we're patronizing. ..."
    "... IMO I think we, as the public, should refuse to use such apps, forcing companies such as these to keep employees rather than allowing them to eliminate jobs to increase their profits. The words 'customer service' are rare enough in businesses these days, already. ..."
    Sep 26, 2016 | www.nakedcapitalism.com

    Walmart's Sam's Club Scan-and-Go App May Make Cash Registers Obsolete

    As of 2014, nearly 30% of the US households no internet access. How do you think that maps onto WalMart customers? Plue get outside the big cities, you see a big drop in smart phone use. Even in wealthy Mountain Brook, Alabama (yes, believe it or not, it looks like the better parts of Westchester County), you see a fraction of the device use in NYC. These analysts need to get out and see more of the heartland.

    KurtisMayfield September 25, 2016 at 7:39 am

    Re: the street article on the Walmart app.

    #1 I am happy that the news industry has found new sources of revenue, because that story read like a Walmart advertisement. Don't they have to disclose if they are getting paid for it?

    #2. They already have these prescan guns in supermarkets. I see a very small percentage of people us them. I doubt that it saves you any time shopping because the register person can probably scan the items faster than an amateur. If you wanted to save time at the store you would have ordered online.

    crittermom September 25, 2016 at 11:13 am

    I certainly agree with you on #1. It did read like a Walmart ad.

    The part that jumped out at me was: "If the item doesn't have a barcode, it could be easily looked up."

    Really? How is the barcode looked up? And by whom? The customer?
    It didn't say how in that 'ad'. (poor reporting)

    It all sounds like another way of eliminating employees and forcing the customer to do the work. Obviously 'checking out' is one job that can't be outsourced, so now they've discovered a way to still eliminate the employees by forcing the customer to do the work instead.

    As Yves mentioned, many of us living rural don't have dumbphones because we don't have service. I've never had a cell phone because there's never been coverage where I've lived out in the country, but even if I did, I'd resent having to 'check myself out' to increase the profits of the company. Oh, hell no!

    I refuse to use self-checkouts at grocery stores, as well. I see that, and this new Sam's app, as doing nothing more than 'outsourcing' the job onto the customers themselves (but even better, as they have to pay no one), eliminating jobs, while increasing their profits by cutting the overhead for the company we're patronizing.

    SS recently required a cell phone to access your account online. They quickly dialed that back when they realized that many of us don't have one. Duh? I agree with Yves that these analysts need to get out into the heartland more.

    And I hope their vehicle breaks down while there, so reality smacks 'em hard. To quote a comedian, "Here's your sign!"

    Regarding #2, I have no experience with those. My nearest Walmart is hours away so what little I do buy from them I order online and have it shipped to me.

    IMO I think we, as the public, should refuse to use such apps, forcing companies such as these to keep employees rather than allowing them to eliminate jobs to increase their profits. The words 'customer service' are rare enough in businesses these days, already.

    [Sep 26, 2016] EconoSpeak All Models are False The Internet-Computer Explanation of Major Recessions

    Notable quotes:
    "... Female labor force participation in the U.S. is well below its pre-crisis level. Maybe video games are now marketed equally toward men and women. ..."
    "... Cowen is an idiot. I think the man needs to get some serious first hand experience on how much "fun" unemployment is. ..."
    Sep 24, 2016 | econospeak.blogspot.com
    Uneasy Money has a wonderful post on the "all models are false dodge". Nothing really to add but I especially enjoyed this:
    Romer's most effective rhetorical strategy is to point out that the RBC core of modern DSGE models posit unobservable taste and technology shocks to account for fluctuations in the economic time series, but that these taste and technology shocks are themselves simply inferred from the fluctuations in the times-series data, so that the entire structure of modern macroeconometrics is little more than an elaborate and sophisticated exercise in question-begging.
    I used to ask the New Classical crowd what the great negative real shock was during the early 1980's. The massive real appreciation of the dollar may have lowered net export demand but that was one of those Keynesian things. One would think the rise in the relative price of domestically supplied goods would have increased employment. Same with the alleged wonders of the Reagan tax cut. Oh but it was paid for by reducing transfer payments – another one of those Keynesian things. If poor people got less government assistance, then they should have gone all Jeb! and worked harder. And of course we were enjoying the start of the computer and technology revolution. But here is where the list gets hysterical – the line was that these new tools were being used to do less work in the office. But before you fall in the floor laughing at this excuse consider a recent excuse ala Tyler Cowen :
    There are a few reasons, but the internet may be the biggest. It is easier to have fun while unemployed. That's a social problem for some people.
    Tyler was debating Noah Smith. Noah had just argued for more infrastructure investment on the Keynesian notion that we were still below full employment. Tyler seems to think the low employment to population ratio is still somehow consistent with full employment. Noah disagreed noting that real wage growth is weak to which Tyler continues:
    Maybe employers just aren't that keen to hire those males who prefer to live at home, watch porn and not get married. Is that more of a personal failure on the part of the worker than a market failure?
    Oh my – boys will be boys! Noah had some good counters including:
    Female labor force participation in the U.S. is well below its pre-crisis level. Maybe video games are now marketed equally toward men and women.
    Thankfully Tyler did not respond by suggesting the ladies in the office were going crazy over hot dudes on Instragram. Posted by ProGrowthLiberal at

    DrDick said... September 25, 2016 at 10:45 AM

    Sweet spreadable Jeebus on a matzoh, Cowen is an idiot. I think the man needs to get some serious first hand experience on how much "fun" unemployment is.
    Anonymous said... September 25, 2016 at 4:38 PM
    I take it you don't put much stock in articles like this in The Post, then?

    https://www.washingtonpost.com/news/wonk/wp/2016/09/23/why-amazing-video-games-could-be-causing-a-big-problem-for-america/

    ProGrowthLiberal September 25, 2016 at 4:46 PM
    The Washington Post article noted this presentation:
    "Leisure Luxuries and the Labor Supply of Young Men"
    Presenter: Mark Bils, University of Rochester
    Coauthors: Mark Aguiar, Kerwin Charles, and Erik Hurst
    Discussant: John Kennan, University of Wisconsin

    https://www.frbatlanta.org/news/conferences/2016/0922-unemployment-wages-productivity/agenda

    did not provide a link so I have not read this "research".

    Until I do - I am not taking stock into this thesis.

    Anonymous said... September 25, 2016 at 5:51 PM
    Fair enough.

    As it happens, Dean Baker was the only person who noted that "the drop in employment rates among less-educated women over the last 15 years has been even sharper. Furthermore there has been a decline in employment rates among all groups of prime age workers (25-54), even those with college degrees."

    This seems to put a pretty big whole in the idea from the get go, doesn't it?

    ProGrowthLiberal September 25, 2016 at 6:42 PM
    Anon- Dean's point was pretty clear. We have seen a broad based drop in the employment to population ratio which is better described by weak aggregate demand than some strange tale that the kids stay home to watch video games. And the weakness in real wage growth is better explained by demand rather than supply factors. The rest is details.

    [Sep 26, 2016] In 2015, the work rate (or employment-to-population ratio) for American males ages 25 to 54 was slightly lower than it had been in 1940, at the tail end of the Great Depression.

    Notable quotes:
    "... "In 2015, the work rate (or employment-to-population ratio) for American males ages 25 to 54 was slightly lower than it had been in 1940, at the tail end of the Great Depression. If we were back at 1965 levels today, nearly 10 million additional men would have paying jobs. The collapse of male work is due almost entirely to a flight out of the labor force-and that flight has on the whole been voluntary. The fact that only 1 in 7 prime-age men are not in the labor force points to a lack of jobs as the reason they are not working." ..."
    "... "these unworking men are floated by other household members (wives, girlfriends, relatives) and by Uncle Sam. Government disability programs figure prominently in the calculus of support for unworking men-ever more prominently over time." ..."
    Sep 26, 2016 | economistsview.typepad.com

    pgl : , In 2015, the work rate (or employment-to-population ratio) for American males ages 25 to 54 was slightly lower than it had been in 1940, at the tail end of the Great Depression.

    A hat tip to PeterK for alerting us to the latest from Nicholas Eberstadt (AEI):

    http://time.com/4504004/men-without-work/

    "In 2015, the work rate (or employment-to-population ratio) for American males ages 25 to 54 was slightly lower than it had been in 1940, at the tail end of the Great Depression. If we were back at 1965 levels today, nearly 10 million additional men would have paying jobs. The collapse of male work is due almost entirely to a flight out of the labor force-and that flight has on the whole been voluntary. The fact that only 1 in 7 prime-age men are not in the labor force points to a lack of jobs as the reason they are not working."

    Uh Nick – thanks for telling us what we already knew – labor force participation is down. But do you realize how you just contradicted yourself. Keynesians like myself would agree that is due to a lack of jobs (aka low aggregate demand). So is this a voluntary thing?

    Let's read on:

    "these unworking men are floated by other household members (wives, girlfriends, relatives) and by Uncle Sam. Government disability programs figure prominently in the calculus of support for unworking men-ever more prominently over time."

    Since government provided benefits have not been scaled up by our policy makers – he must think the hard working ladies are cuddling young men for their good lucks or something. Uh Nick – come to NYC and you will see that the ladies here think this is so stupid. His next excuse is all those dudes in prison. Seriously? Does this AEI clown not realize crime is much lower than it was a generation ago? This piece was dumb even by AEI "standards". But at least he did not dwell on the Tyler Cowen porn thing.And at the risk of repeating myself (and Noah Smith) if their thesis that young men had suddenly decided to loaf, then the inward shift of the labor supply curve would mean higher real wages than we are seeing.

    pgl -> pgl... , Sunday, September 25, 2016 at 10:43 AM
    I decided to put these thoughts in the following Econospeak post which goes a little further debunking the misrepresentations from the AEI hack:

    http://econospeak.blogspot.com/2016/09/the-new-men-without-jobs-conservative.html

    RC AKA Darryl, Ron : , Sunday, September 25, 2016 at 10:10 AM
    [A reply from Paine:

    "paine -> RC AKA Darryl, Ron...


    Joe playing hill
    courtier

    Who knows what he thinks

    Reply Friday, September 23, 2016 at 01:29 PM"

    Reminded me of this entirely by accident or maybe incident:]

    http://unionsong.com/u017.html


    Joe Hill

    A song by Alfred Hayes, Music by Earl Robinson©1938 by Bob Miller, Inc.

    I dreamed I saw Joe Hill last night
    Alive as you or me
    Says I, But Joe, you're ten years dead
    I never died, says he
    I never died, says he

    In Salt Lake, Joe, says I to him
    Him standing by my bed
    They framed you on a murder charge
    Says Joe, But I ain't dead
    Says Joe, But I ain't dead

    The copper bosses killed you, Joe
    They shot you, Joe, says I
    Takes more than guns to kill a man
    Says Joe, I didn't die
    Says Joe, I didn't die

    And standing there as big as life
    And smiling with his eyes
    Joe says, What they forgot to kill
    Went on to organize
    Went on to organize

    Joe Hill ain't dead, he says to me
    Joe Hill ain't never died
    Where working men are out on strike
    Joe Hill is at their side
    Joe Hill is at their side

    From San Diego up to Maine
    In every mine and mill
    Where workers strike and organize
    Says he, You'll find Joe Hill
    Says he, You'll find Joe Hill

    I dreamed I saw Joe Hill last night
    Alive as you or me
    Says I, But Joe, you're ten years dead
    I never died, says he
    I never died, says he


    [More about Joe Hill and Alfred Hayes at the link.]

    RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , Sunday, September 25, 2016 at 10:14 AM
    Fortunately I will have very little spare time for idle or addle minded leisure now until well after the election and even well after the subsequent coronation save those days so rainy that outdoor activity is entirely impractical.
    pgl : , Sunday, September 25, 2016 at 11:55 AM
    I never liked Ross Douhart. The political right thinks he has written something very important:

    http://www.nytimes.com/2016/09/21/opinion/campaign-stops/clintons-samantha-bee-problem.html?_r=0

    "At the same time, outside the liberal tent, the feeling of being suffocated by the left's cultural dominance is turning voting Republican into an act of cultural rebellion - which may be one reason the Obama years, so good for liberalism in the culture, have seen sharp G.O.P. gains at every level of the country's government. This spirit of political-cultural rebellion is obviously crucial to Trump's act."

    Vote for a racist like Trump because liberals are suffocating. Did I say I really do not like Ross Douhart?

    Peter K. -> pgl... , Sunday, September 25, 2016 at 01:38 PM
    Again we agree. (Signs of the apocalypse? I guess Trump is going to win.)

    Douchehat is the worst hypocrite. He wants readers to believe he's an expert in morality and morale rectitude and that's what conservative should be known for when in reality Republicans chose Trump as their candidate, one grand example of immorality and dishonesty.

    And still Douthat turns on the liberals as behaving badly. Suffocating? Howabout the insanity of the Republican convention? That was suffocating.

    He even quotes Internet Troll Steve Sailor!!!

    *rubs eyes*

    "(The alt-right-ish columnist Steve Sailer made the punk rock analogy as well.)"

    It's like Douthat writing about JohnH or BINY. Every one of Sailor's Internet comments would be racist ones about immigration. He's mentally unhinged.

    "But it remains an advantage for the G.O.P., and a liability for the Democratic Party, that the new cultural orthodoxy is sufficiently stifling to leave many Americans looking to the voting booth as a way to register dissent."

    Clueless Douthat. The culture is getting better in certain ways because the TV executives just want to sell advertising and these performers are popular. It's capitalism at work.

    Kudos to John Oliver for winning an Emmy.

    "Among millennials, especially, there's a growing constituency for whom right-wing ideas are so alien or triggering, left-wing orthodoxy so pervasive and unquestioned, that supporting a candidate like Hillary Clinton looks like a needless form of compromise."

    Note the disdain for millennials. "Triggering."

    Conservative like Douthat and Bobo Brooks "trigger" the hate and anger centers of my brain.

    The fact is that Samantha Bee is right and NBC facilitated the rise of Trump with the Apprentice and treating him well on other shows like Jimmy Fallon and SNL.

    Here's the offending video.

    http://www.huffingtonpost.com/entry/samantha-bee-slams-jimmy-fallon-nbc-for-softball-donald-trump-interview_us_57e12dbbe4b0071a6e095c1f

    anne -> Peter K.... , Sunday, September 25, 2016 at 02:44 PM
    --------- is the worst hypocrite....

    [ Do not use sickening language on this blog. Never ever use such language here. ]

    pgl : , Sunday, September 25, 2016 at 12:24 PM
    I have provided this link to some of the papers by Michael Bruno – many co-authored by Jeffrey Sachs – for a couple of reasons:

    http://www.nber.org/authors/michael_bruno

    The minor reason is they have a nice paper on the Dutch Disease – something JohnH thinks he understands but he needs to read up on this topic. But the main reason has to do with a stupid comment from Paine on my Econospeak post, which goes to show how very little Paine actually learned in graduate school.

    I was try to paint a picture of some Real Business Cycle claim that Bruno and Sachs emphasized when I was in graduate school. I never truly bought their story as I was (and still am) a die hard Keynesian. But here is how it went as applied to the early 1980's (the period I was talking about). If a nation enjoys a massive real appreciation and if aggregate demand does not matter (the New Classical view which we Keynesians do not buy) then the real wages of its domestic workers rise. These workers supply more labor driving down wages relative to domestic prices. So domestic firms hire more workers.

    That is their story. I do not buy it as I was clearly mocking it. Alas Paine never learned this. And so he mocks someone who did. Just another day at the EV comment section. Aals.

    [Sep 26, 2016] Neoliberal prostitute Cowen about unemployment

    Sep 26, 2016 | economistsview.typepad.com

    anne -> djb... September 25, 2016 at 07:29 AM https://www.bloomberg.com/view/articles/2016-09-12/debating-government-s-role-in-boosting-growth

    September 12, 2016

    Debating Government's Role in Boosting Growth: Cowen and Smith
    By Tyler Cowen & Noah Smith

    Smith: If that's true -- if we're seeing a greater preference for leisure -- why are we not seeing wages go up as a result? Is that market also broken?

    Cowen: Maybe employers just aren't that keen to hire those males who prefer to live at home, watch porn and not get married. Is that more of a personal failure on the part of the worker than a market failure? Reply Sunday, DrDick -> djb... , Sunday, September 25, 2016 at 07:49 AM

    This is a man who has never visited reality.
    Paine -> DrDick... , Sunday, September 25, 2016 at 12:03 PM
    And he's well compensated for his pipe dreaming

    Why seek truth from facts
    When from scratch
    story telling pays so much better

    DrDick -> Paine ... , -1
    ;-)
    cm -> djb... , -1
    And I thought it was "video games".

    There will always be water carriers "explaining" lack of success by lack of virtue. Likewise, before large scale automation and "globalization", we didn't need PISA studies to highlight the failures of the education systems and alleged lack of student/graduate preparedness.

    Sandwichman had multiple expositions on the early lump of labor fallacy debates where the plight of laborers was ascribed to their carrying their money to the ale house.

    pgl -> djb... , -1
    He lacks basic logic. If his story was valid, real wages would have risen. Inward shift of the supply curve v. movement along a supply curve? Hello? What do they teach the kids at GMU?
    Peter K. -> pgl... , -1
    This month's Time magazine - with Kaepernick on the cover - has a column by an AEI hack, Eberstadt, who pushes the exact same line Cowen is pushing. The lazy/entertained male meme.

    His reasoning is that the decline in the labor force participation rate is consistent through boom times and recessions. (I'm not going to bother linking.)

    "Consider: America's prime-male workforce participation has been declining at a virtually linear rate for half a century - a trajectory unaffected by good times or recessions."

    Again I suspect the conservatives are just lying. The Age of Niallism.

    Excellent Econospeak post by PGL. He can be quite good when not trolling or mud-wrestling with trolls.

    Peter K. -> Peter K.... , Sunday, September 25, 2016 at 06:42 AM
    Dean Baker also takes on the new conservative meme:

    http://cepr.net/blogs/beat-the-press/if-men-don-t-work-because-of-video-games-what-explains-women-not-working

    If Men Don't Work Because of Video Games, What Explains Women Not Working?

    by Dean Baker

    Published: 24 September 2016

    As is widely known the Washington Post never misses an opportunity to blame the victims of policy for bad outcomes, rather than rich and powerful folks who design policy. We are treated to yet another example of this charade with the Post running a major article that claims that video games are a major reason that fewer young men are working today than 15 years ago.

    The basic story is that many young men, particularly those with less education, have dropped out of the labor force in the last 15 years. According to survey data, they appear to be spending much of their time playing video games. They also report to be relatively happy. See, all you people who thought it was a bad economy are mistaken, the problem is the video games are just too much fun.

    Okay, that's a great Trumpian level of analysis, but let's get back to the real world. Less-educated young men are not the only group with declines in employment rates. In fact, the drop in employment rates among less-educated women over the last 15 years has been even sharper. Furthermore there has been a decline in employment rates among all groups of prime age workers (25-54), even those with college degrees.

    This general drop in employment rates might suggest that the real problem is a lack of demand. In other words, young men are not working for the same reason young women are not working, the Washington Post and other advocates of austerity have been successful in reducing demand in the economy by reducing the government budget deficit. So the problem has little to do with video games, the problem is the policy, but hey, if the Post can use video games to distract attention from what its favored policies are doing to people -- why not?

    Peter K. -> Peter K.... , Sunday, September 25, 2016 at 06:43 AM
    Not just Time magazine, but the Washington Post as well. A large problem is MediaMacro or the corporate media.
    cm -> Peter K.... , Sunday, September 25, 2016 at 08:40 AM
    What, is there a presumption that young women don't play video games? (Or indulge in other online/"social media" entertainment formats?)

    Of course lack of employment is not the consequence but the cause of filling one's day with any available entertainment - and due to cheap offshore manufacturing the hardware is overall a minor expenditure, as well as due to the near zero marginal cost of software replication, the games are quite affordable. For online games there are data center expenses but they are distributed over many players which fits the budget of involuntary or semi-voluntary "Hotel Mama" residents.

    Of course puritans cannot have it that the un(der)employeds are not suffering every inconvenience there is, particularly the soul crushing boredom of an absence of any engaging activity. Hence the mindset that the welfare state must provide exactly the measure of life support that keeps the beneficiaries from death but in this particular state of suffering. Being able to play games or having sexual relations (with others or oneself) defeats the whole purpose.

    Peter K. -> cm... , Sunday, September 25, 2016 at 09:16 AM
    Well said.
    JF -> Peter K.... , Sunday, September 25, 2016 at 10:25 AM
    You mean reducing Spending in the economy, and yes via political controls that stop the govt from spending at levels that might fill the gaps.

    But the point is, to me, that private spending is where it is and will not increase to fill the gaps. Only the public acting as society's agent vua its govt can increase spending to fill the gaps - uh, jusy as Keynes and many ithers have said for quite some time.

    I'm pretty sure you agree, but the point is about spending, not about the fiscal math (a deficit is just 2nd grade math, not a policy). The other party does not want to fill gaps and does not want the public to understand its role in governance - political control for infirm reasons, and that is not a word containing a typo.

    Spending to cause gaps to fill. How to get this.

    pgl -> Peter K.... , Sunday, September 25, 2016 at 09:23 AM
    I will have to take a peek at this Eberstadt piece. Maybe he will explain to us how a supposed inward shift of the labor supply curve is consistent with weak real wage growth. Oh wait - he writes for the AEI so maybe not.
    Peter K. -> pgl... , Sunday, September 25, 2016 at 10:15 AM
    That's what I thought. When I saw he was from AEI I knew we were getting lies. Just like with Trump.

    That it was in a column in Time magazine depressed me.

    Reading your blogpost shredding Cowen cheered me up!

    Thanks.

    pgl -> Peter K.... , Sunday, September 25, 2016 at 10:45 AM
    I have a new Econospeak post going after this horrible AEI post. Thanks again for the alert.
    pgl -> Peter K.... , Sunday, September 25, 2016 at 09:39 AM
    Just posted a link to this really awful piece from this AEI goofball. Thanks for the tip. Along with the link, I rip its sheer stupidity. Tyler Cowen was really bad but this AEI guy is incredibly incoherent.
    Paine -> pgl... , Sunday, September 25, 2016 at 11:18 AM
    Try this on for incoherent

    " ...One would think the rise in the relative price of domestically supplied goods would have increased employment. "

    Typo or
    banana peel ?

    pgl -> Paine ... , Sunday, September 25, 2016 at 11:45 AM
    I see standard aka Econ 101 theory - which is what the New Classical crowd pushes - is lost on you. Do try to follow the discussion before your usual babbling. Jesus H. Christ - even JohnH is trying to grasp the economics of the Dutch disease. OK - he is doing his usual terrible job but you do not even try.
    Paine -> pgl... , Sunday, September 25, 2016 at 12:24 PM
    Look carefully my friend

    It's your good fortune no ump stands over your shoulder to rub your face in this goof

    Higher dollar leads to lower domestic employment in trade good industries
    That or lower wage rates

    Or some combo of both

    Paine -> Paine ... , -1
    RBC. Modelers
    Largely Ignore the complications of open systems
    U invoke the forex rate

    Then fumble the ball behind the line of scrimmage

    You are actual more careless and over confident then most here realize

    My adivice avoid actual economists
    Stay in the boon docks
    And at that very gentl hetero fox site econo speak

    Where loons can flock with mavericks
    Lions lie down with skunks

    anne -> pgl... , Sunday, September 25, 2016 at 07:00 AM
    https://en.wikipedia.org/wiki/Real_business-cycle_theory

    Real business-cycle theory (RBC theory) are a class of New classical macroeconomics models in which business-cycle fluctuations to a large extent can be accounted for by real (in contrast to nominal) shocks. Unlike other leading theories of the business cycle, RBC theory sees business cycle fluctuations as the efficient response to exogenous changes in the real economic environment. That is, the level of national output necessarily maximizes expected utility, and governments should therefore concentrate on long-run structural policy changes and not intervene through discretionary fiscal or monetary policy designed to actively smooth out economic short-term fluctuations.

    According to RBC theory, business cycles are therefore "real" in that they do not represent a failure of markets to clear but rather reflect the most efficient possible operation of the economy, given the structure of the economy.

    DrDick -> pgl... , -1
    Conservative economics, like RBC, cannot survive exposure to reality. Your post in the list today quite nicely shreds that kind of nonsense.

    [Sep 26, 2016] Neoliberal corruption is enhanced by 401K investors

    Sep 26, 2016 | economistsview.typepad.com
    Peter K. : September 25, 2016 at 07:01 AM This is a large problem for the left. (and I see the prospect of enacting "maximum wage laws" as pretty slim. Maybe I'm wrong.)

    You read progressive commenters like David and EMichael here pondering the returns on their investments. Not that there's anything fundamentally wrong with it. It's just a problem needed to be solved by public policy so everyone is facing the same rules.

    http://cepr.net/blogs/beat-the-press/you-voted-to-pay-wells-fargo-ceo-john-stumpf-19-5-million

    You Voted to Pay Wells Fargo CEO John Stumpf $19.5 Million
    by Dean Baker

    Published: 24 September 2016


    You don't remember casting that vote? Well, you didn't actually cast it, but if you have a 401(k) someone like Blackrock CEO Larry Fink cast the vote for you.

    Most middle income people have 401(k)s for their retirement and most of this money is in mutual funds. These mutual funds have control over the proxy votes for the shares they hold. This means that funds like Blackrock, which has more than $5 trillion in assets, have enormous say over the distribution of income in this country. And, as Gretchen Morgenson points out in her NYT column this morning, these folks almost always endorse outlandish pay packages for CEOs. As they say in Wall Street circles, what's a few million dollars between friends.

    So, if you're upset about an economy where the rich keep getting richer, just remember, you voted for it, sort of. Reply Sunday, pgl -> Peter K.... , Sunday, September 25, 2016 at 09:43 AM

    $19.5 million and zero accountability. Wells Fargo needs a new CEO now.
    Cray Singularity -> pgl... , Sunday, September 25, 2016 at 10:04 AM

    Folks need to keep their $$$$ out of mutual funds, keep their $$$$ out of 401(k). Plus you will avoid the load. When stocks fall your t-bonds will rise by virtue of their negative beta. Is that why investment bankers are contributing more to Clinton Dynasty Foundation? To Clinton election slush fund? Than to Trump University? Because the strongly suspect that stocks will collapse when the Donald moves into White House?

    Do you know where your assets are? When was the last

    time you saw
    Uranus
    ?

    pgl -> Cray Singularity... , Sunday, September 25, 2016 at 10:47 AM
    Gold may be a negative beta asset but government bonds? Don't think so.
    mrrunangun -> Peter K.... , Sunday, September 25, 2016 at 10:06 AM
    I hate to remark on so obvious a matter. A TBTF bank CEO bonus of $19.5million is a low bonus by industry standards. Back in the 90s and oughties a $2million bonus for a managing director was an insult or an indication that you were on your way out. $10million was a good bonus, $5 million was OK. A $20 million bonus was really good for an MD. CEOs and leaders of successful business units could see 9 figure bonuses, like Mr Blankfein's $130million 2010 bonus, and he was not the highest paid GS exec that year. A bonus below $20million for a current day CEO could be read as bad news and is probably read as such by his friends. He is probably on his way out.

    Bonuses today are not as sumptuous as they were in 2010 when the Obama bailout money was considered income and bonuses were paid out in proportion to the income of the business unit.

    pgl -> mrrunangun... , Sunday, September 25, 2016 at 10:48 AM
    OK, I bet Jamie Dimon makes more but I'd be really dismayed if he refused to take basic accountability for what Wells Fargo did.
    pgl -> mrrunangun... , Sunday, September 25, 2016 at 10:50 AM
    It seems Wells Fargo may have avoided the disasterous decline in stock valuations that BofA and Citigroup experienced but this is not exactly a large increase either:

    https://finance.yahoo.com/quote/WFC?ltr=1

    pgl -> pgl... , Sunday, September 25, 2016 at 10:52 AM
    JPMorgan has seen a 25% increase in stock prices.

    https://finance.yahoo.com/quote/JPM?ltr=1

    Wells Fargo fairly flat and big stock declines for BofA and Citigroup. And yet we here from JohnH some incessant spin about record bank profits.

    So many misconceptions so easily debunked.

    JohnH -> pgl... , -1
    More BS from pgl. Banks were able to take advantage of the Fed's historically low interest rates and post record profits in 2014 and 2015, while median real household income was back where it was a generation ago.
    http://www.bloomberg.com/news/articles/2015-09-02/u-s-banks-posted-record-profits-in-second-quarter-fdic-says

    Sad part, is that now pgl will tell us about the woes of one or two of his favorite banks and try to project that to the industry...or he'll put in a link showing declines in net interest margins...because he's a dissembling sleazebag.

    This dude is so confused that he doesn't even know the difference between net INCOME margin (profit) and net INTEREST margin!

    [Sep 25, 2016] Popular Acceptance of Inequality Due to Brute Luck

    Notable quotes:
    "... By Matthew Weinzierl, Assistant Professor of Business Administration, Harvard Business School. Originally published at VoxEU ..."
    "... The trick or con being played by the elite is to convince enough of us that the game of life is being played fair. And when that fails, the con or lie becomes that its the fault of (insert target minority group). ..."
    "... From two complementary sociological points of view -- conflict theory and symbolic interactionism -- this article is naive -or a red herring- in the ways you suggest. ..."
    "... Indeed, the issue is about people accepting a "definition of the situation" that is in fact detrimental to their material interests (Pierre Bourdieu terms this "misrecognition"). Erving Goffman, who was trained as an interactionist, studied con artists to describe how they successfully created a definition of situation -- which means a version of social reality -- that their marks would internalize as reality itself. A sociologist would not begin a discussion of socioeconomic inequality with tax policy. ..."
    "... Control over arguments regarding political economy in the public sphere have to be wrested from economists, so that we can start to talk about what actually matters. Sanders' popularity, despite his numerous problems, lay in how he took control of the argument and laid bare the absurdities of those who benefit from the status quo. ..."
    "... I say we boycott economists. Sure some of them are not terrible, but in the main the discipline needs to be torn down and rebuilt from the ground up. ..."
    "... Many economists function as members of the courtier class, justifying what the rich and powerful want to occur. Most citizens already boycott economists in that they don't use their services except when required to attend an Econ class at school. ..."
    "... But economists do influence average citizens lives via their justification of tax policy, land use policy, labor policy, trade policy and law implementation. ..."
    "... Economic education has been a failure of the left. Everyone needs to know how money and finance works. Only then can that power be put to various uses. It is not that you don't need economists, you need economists working in your interest. ..."
    "... I could get behind this. And I would have to agree that harping against the evils of capitalism, which are very real, often comes from those who don't really understand how it works. ..."
    "... The post indicates this guy is Assistant Professor of Business Administration - at Harvard Business School - so I'm not sure I would give him even so much regard as I might give an economist. I wonder how he and his will regard the fairness of luck while they wait in line to be serviced at the guillotine they're building - much as Scrooge crafted his chain and weights for his afterlife. ..."
    "... Interesting reference to Scrooge -- the power of art to enlighten the human condition cannot be underestimated. As I get older, it seems to me that the capitalism system debases everything it touches. Anything of real value will be found outside this system. It has become the box that confines us all. ..."
    "... It's also worth noting how his examples are still a function of the neoliberal canard that privilege is simply a boost on the ladder of meritocracy. The game is still implicitly understood to be fair. ..."
    "... Yet, it's not clear to me what Alice Walton, for instance, has done to justify being a multi-billionaire. People who are born not just with spoons but entire silver foundries in their mouths could redistribute 90% of the wealth they acquired by virtue of being someone's baby and still be absurdly rich. ..."
    "... Learning must be for its own sake. Like you, I spent many hours in the library. BUT it was to scratch an itch I have not been able to quell - even in these many years since I was in that library. ..."
    "... "The putative "father of the Euro", economist Robert Mundell is reported to have explained to one of his university of Chicago students, Greg Palast: "the Euro is the easy way in which Congresses and Parliaments can be stripped of all power over monetary and fiscal policy. Bothersome democracy is removed from the economic system" Michael Hudson "Killing the Host" ..."
    "... The neoclassical economists didn't have a clue as the Minsky Moment was approaching. ..."
    Sep 24, 2016 | www.nakedcapitalism.com
    Yves here. This article argues that people don't mind inequality due to "brute luck"…but is one man's brute luck another man's rigged system?

    By Matthew Weinzierl, Assistant Professor of Business Administration, Harvard Business School. Originally published at VoxEU

    Tax policy to correct inequality assumes that nobody is entitled to advantages due to luck alone. But the public largely rejects complete equalisation of 'brute luck' inequality. This column argues that there is near universal public support for an alternative, benefit-based theory of taxation. Treating optimal tax policy as an empirical matter may help us to close the gap between theory and reality.

    ... .... ...

    In this case, the optimal tax policy aggressively offsets inequality. Only the need to retain incentives to work and the desire to reward extra effort justify allowing inequality to persist.

    ... ... ...

    Brute Luck and Economic Inequality

    What explains the gap between scholarly and popular views of the moral status of pre-tax income? A clue might be our attitude to luck.

    The view that individuals have no moral claim to their pre-tax incomes relies on the ethical assumption that nobody is entitled to advantages due to factors outside his or her control. Philosophers such as Cohen (2011) call this 'brute luck'. Given the importance of brute luck (for example, natural ability, childhood home environment, and early schooling) to a person's economic status, this assumption directly leads to a rejection of moral claims to pre-tax income.

    ... ... ...

    The 2016 US presidential campaign's attention to inequality fits these findings. Some candidates complain of a 'rigged system' and rich individuals and corporations who do not pay their 'fair' share. Critically, gains due to a rigged system or tax avoidance are due to unjust actions, not brute luck. They are due to the toss of a loaded coin, not a fair one.

    ... ... ...

    These are early steps in developing a new approach to tax theory that I have called 'positive optimal taxation'. This approach modifies the standard optimal tax analysis by treating the objective for taxation as an empirical matter. It uses a variety of sources – including opinion surveys, political rhetoric, and analysis of robust policy features – to highlight gaps between the standard theory and prevailing reality of tax policy. It also identifies and incorporates into the theory alternative goals – and the philosophical principles behind them – that better describe the public's views on policy.

    .... .... ...

    Robert Hahl September 24, 2016 at 6:13 am

    "I stole it fair and square" is not a form of brute luck, but I saw no recognition of that fact while skimming the article. Sorry if I missed it.

    Adam1 September 24, 2016 at 6:17 am

    One piece of logic missing from the research analysis is accounting for the game itself. If I agree to play a game of chance that is fairly played I am by default also agreeing that I accept the possibility that the outcomes will not be equal, otherwise why would I play. It shouldn't be a surprise that in the end people are willing to maintain that inequality because they originally agreed to it by the fact that they agreed to play.

    As Yves points out, if you change the scenario where one of the players was allowed to collude with the person executing the game and the other player was informed of this you might get a very different answer. You might even get a punishing answer.

    The trick or con being played by the elite is to convince enough of us that the game of life is being played fair. And when that fails, the con or lie becomes that its the fault of (insert target minority group).

    DanB September 24, 2016 at 7:34 am

    From two complementary sociological points of view -- conflict theory and symbolic interactionism -- this article is naive -or a red herring- in the ways you suggest.

    Indeed, the issue is about people accepting a "definition of the situation" that is in fact detrimental to their material interests (Pierre Bourdieu terms this "misrecognition"). Erving Goffman, who was trained as an interactionist, studied con artists to describe how they successfully created a definition of situation -- which means a version of social reality -- that their marks would internalize as reality itself. A sociologist would not begin a discussion of socioeconomic inequality with tax policy.

    Uahsenaa September 24, 2016 at 9:21 am

    A sociologist would not begin a discussion of socioeconomic inequality with tax policy.

    But an economist would, and therein lies the problem. Control over arguments regarding political economy in the public sphere have to be wrested from economists, so that we can start to talk about what actually matters. Sanders' popularity, despite his numerous problems, lay in how he took control of the argument and laid bare the absurdities of those who benefit from the status quo.

    I say we boycott economists. Sure some of them are not terrible, but in the main the discipline needs to be torn down and rebuilt from the ground up.

    John Wright September 24, 2016 at 10:06 am

    Many economists function as members of the courtier class, justifying what the rich and powerful want to occur. Most citizens already boycott economists in that they don't use their services except when required to attend an Econ class at school.

    But economists do influence average citizens lives via their justification of tax policy, land use policy, labor policy, trade policy and law implementation.

    Even if we tore down the profession, it could likely regrow to provide the same functionality.

    The profession provides a valuable service, as it is valued by the class with power and money throughout the world.

    Norb September 24, 2016 at 10:35 am

    Economic education has been a failure of the left. Everyone needs to know how money and finance works. Only then can that power be put to various uses. It is not that you don't need economists, you need economists working in your interest.

    All knowledge and technology works this way. It is the purposeful use of information that matters, not the information itself. The left wastes time, effort, and resources trying to convince people to change their minds. Instead, they need to focus on building things in the real world, using all the economic tools at their disposal.

    Uahsenaa September 24, 2016 at 11:02 am

    I could get behind this. And I would have to agree that harping against the evils of capitalism, which are very real, often comes from those who don't really understand how it works.

    Maybe the solution is more co-ops and less rhetoric.

    Norb September 24, 2016 at 11:50 am

    Using the power of the boycott is another. The powerless need to rediscover what power they truly wield in this system. That was the other failure of the left. Yes, they were actively crushed by corporate power, but the ideas live on. They can only be exterminated through lack of use.

    A new ideology needs to be born of the ashes. If the predictions of climate disruption are anywhere near accurate, a proactive, and positive direction can be undertaken. My experience is that caring, healthy people are driven to help others in times of adversity. Well, those times are coming. We are once again going to have to face the choice between choosing abject fear or rolling up our sleeves and getting back to work making everyones lives better.

    You don't need corporate sponsorship to do that. They need us more than we need them. In the end, I have a feeling that the current system will come down very quickly. Being prepared for that outcome is what should be driving the actions of those not vested in keeping the status quo going.

    Jeremy Grimm September 24, 2016 at 11:42 am

    The post indicates this guy is Assistant Professor of Business Administration - at Harvard Business School - so I'm not sure I would give him even so much regard as I might give an economist. I wonder how he and his will regard the fairness of luck while they wait in line to be serviced at the guillotine they're building - much as Scrooge crafted his chain and weights for his afterlife.

    Norb September 24, 2016 at 12:34 pm

    For a historian, making connections between past and present situations is the root of their insight. As in all walks of life, your efforts can gain value to your fellow citizens or they can be used as a tool for your own self interest- whatever that might be. How interesting are these repeating cycles in the human drama.

    Interesting reference to Scrooge -- the power of art to enlighten the human condition cannot be underestimated. As I get older, it seems to me that the capitalism system debases everything it touches. Anything of real value will be found outside this system. It has become the box that confines us all.

    When your viewpoint of the world and your relationship to it shrink to only seeking profits, the depravity of that situation is hidden from view unless shocked back to awareness.

    As Peter Gabriel would say- Shock the Monkey

    Shock the monkey to life
    Shock the monkey to life

    Cover me when I run
    Cover me through the fire
    Something knocked me out' the trees
    Now I'm on my knees
    Cover me darling please
    Monkey, monkey, monkey
    Don't you know you're going to shock the monkey

    Fox the fox
    Rat on the rat
    You can ape the ape
    I know about that
    There is one thing you must be sure of
    I can't take any more
    Darling, don't you monkey with the monkey
    Monkey, monkey, monkey
    Don't you know you're going to shock the monkey

    Wheels keep turning
    Something's burning
    Don't like it but I guess I'm learning

    Shock! – watch the monkey get hurt, monkey

    Cover me, when I sleep
    Cover me, when I breathe
    You throw your pearls before the swine
    Make the monkey blind
    Cover me, darling please
    Monkey, monkey, monkey
    Don't you know you're going to shock the monkey

    Too much at stake
    Ground beneath me shake
    And the news is breaking

    Shock! – watch the monkey get hurt, monkey

    Shock the monkey
    Shock the monkey
    Shock the monkey to life

    Jeremy Grimm September 24, 2016 at 1:07 pm

    This is tangential to topic of this thread:
    I was particularly struck by your comment about art: "the power of art to enlighten the human condition cannot be underestimated." I recall a similar assertion made in one of Howard Zinn's speeches - sorry I can't recall the exact phrasing of his statement or its context.

    I'm retired and found a strange calling to make art - a calling I never listened to when I had to worry about supporting a household. I find it difficult to make art that isn't political, satirical or in some way didactic. Whether anyone else would regard my works as art I don't know and in a way I don't care. Art has become a way in which I must express something inside me I don't understand but whose direction I must follow. I suppose similar feeling drive many expressions of art. Perhaps that explains something of the power of art you refer to.

    Spencer September 24, 2016 at 7:12 am

    For the erosion in income inequality to be fixed, economic policies need fixed. The disparity between income quintiles will continue to widen. Social unrest will continue to proliferate. This situation will simply never get corrected until the commercial banks are driven out of the savings business (however bizarre one might think that solution is).

    Vladimir Lenin, leader of the 1917 Russian Revolution said: "The best way to destroy the capitalist system is to debauch the currency." Not so. The best way to destroy capitalists is the deregulation of deposit caps for saver-holders' accounts in the commercial banking system. This policy error simply increased the bank's costs with no increase in their income. Bottling up savings, is first observed by the decline in money velocity, then by a decline in AD (secular stagnation), and when the Fed attempts to offset this decline, by an increase in stagflation.

    Moneta September 24, 2016 at 7:43 am

    The beliefs come first, then the system reflects these. Creeping individualism and the belief in the self made man will do the trick.

    Alejandro September 24, 2016 at 10:52 am

    ""[V]elocity" is just a dummy variable to "balance" any given equation – a tautology, not an analytic tool."

    http://michael-hudson.com/2012/05/paul-krugmans-economic-blinders/

    How can the "code" be modified to restrain usurious AND sociopathic behaviour?

    Spencer September 24, 2016 at 9:44 pm

    Vi is contrived. Vt is money actually exchanging counterparties. But since Ed Fry discontinued the G.6 debit and demand deposit turnover release in Sept. 1996, the Fed has no rudder or anchor.

    Required reserves are a surrogate, though the underweight Vt. But RRs are based on payments (money turning over). And 95 percent of all demand drafts clear thru transaction based accounts.

    The "code" you speak of relates to the volume of financial transactions consummated. Financial transactions are not random. Financial speculation is a function of money flows. The volume of bank debits during the housing crisis would have stood out like a sore thumb (as it captured both new and existing real-estate transactions).

    Only price increases generated by demand, irrespective of changes in supply, provide evidence of inflation. There must be an increase in aggregate demand which can come about only as a consequence of an increase in the volume and/or transactions velocity of money. The volume of domestic money flows must expand sufficiently to push prices up, irrespective of the volume of financial transactions, the exchange value of the U.S. dollar, and the flow of goods and services into the market economy.

    The "administered" prices would not be the "asked" prices, were they not "validated" by (M*Vt), i.e., "validated" by the world's Central Banks.

    - Michel de Nostredame

    Alejandro September 24, 2016 at 10:28 pm

    I'm not sure that what you just spewed even makes sense to you, or that you even bothered to read the link provided…but the "code" is about concurrent monetary AND fiscal policy to serve a purpose other than making the rich richer and the poor poorer…

    Moneta September 24, 2016 at 7:40 am

    If someone gets the waterfront property just because he/she was born first so got there first, he better do something positive for the next generation… The next generation will understand the luck factor as not everyone can be standing in the same spot at the same time, but it will not accept the scrooge.

    HotFlash September 24, 2016 at 7:53 am

    Prof Weinzieri says

    If people are entitled, even in part, to their pre-tax incomes, the optimal tax policy would no longer offset inequality as aggressively. Taxes would, instead, be focused on raising funds for government activities in a way that tries to respect those entitlements.

    which seems fair-ish, but also

    Given the importance of brute luck (for example, natural ability, childhood home environment, and early schooling)

    Oh my! Childhood home environment and (gasp!) early schooling are matters of luck? Oh those Haaahvaahd guys! No, professor, winning the lottery is a matter of luck, and can happen to anyone at any point in their life. Being born in poverty, into a class 15% of whose male population is incarcerated or having to go to a crappy school are *systemic* results of deliberate social structures, the elites just prefer to call it "bad luck". Thus we see how the Ivies serve the elites.

    Eclair September 24, 2016 at 9:32 am

    Yes, HotFlash. And these 'deliberate social structures,' the 'red-lining' policies, the wildly unequal sentences for crack versus cocaine, the casual brutality of the prison system (over 200,000 male rapes per year), the laws preventing people who have served their sentence for a felony from voting, public housing, scholarship aid, welfare .. in other words, from living and improving their lives .. are structural violence. And then we are 'surprised' when people who have lived their lives under a regime of these subtle but unrelenting acts of economic, social and spiritual violence, finally hit back.

    Uahsenaa September 24, 2016 at 9:32 am

    It's also worth noting how his examples are still a function of the neoliberal canard that privilege is simply a boost on the ladder of meritocracy. The game is still implicitly understood to be fair.

    Yet, it's not clear to me what Alice Walton, for instance, has done to justify being a multi-billionaire. People who are born not just with spoons but entire silver foundries in their mouths could redistribute 90% of the wealth they acquired by virtue of being someone's baby and still be absurdly rich.

    Banana Breakfast September 24, 2016 at 9:49 am

    The paper seems totally oblivious to the fact that in the scenario presented, all the gains enjoyed by both players are due to luck. Player B is getting a windfall either way, so there's no sense of real unfairness. The perception would be quite different if it was only the difference between A and B that was assigned randomly, while each had to earn some baseline.

    OpenThePodBayDoorsHAL September 24, 2016 at 5:28 pm

    And I think the "popular acceptance" part is given a huge boost when the young, black, nominally-Democrat president keeps insisting everything is awesome and anyone who says otherwise is "peddling fiction".

    Jeremy Grimm September 24, 2016 at 11:45 pm

    I think this paper goes to great lengths to build a question around the ideas of the fairness behind progressive taxation. This post hardly seems to pose a question worthy of study. Our tax systems so much favor Corporations and the wealthy that considerations of "fairness" are at best comical - and I'm not laughing.

    Rodger Malcolm Mitchell September 24, 2016 at 10:20 am

    The most important problem in economics is the widening Gap between the rich and the rest. A solution is: https://mythfighter.com/2014/11/09/a-brief-reference-what-you-need-to-know-when-discussing-economics/

    kgw September 24, 2016 at 10:35 am

    As William Godwin says, if people actually knew who they were, all would be peaceable…

    https://www.amazon.com/Enquiry-Concerning-Political-Justice-Influence-ebook/dp/0140400303/ref=la_B000APJ4OS_1_5?s=books&ie=UTF8&qid=1474727648&sr=1-5

    From Cold Mountain September 24, 2016 at 11:14 am

    Yes, the outcome of self awareness will always be Anarchism. I came be an advocate, not through economics or politics, but thought Buddhism and Daoism. It is a story older than humanity that we are just starting to remember.

    So here I am sitting, watching, waiting for the rest of the world to catch up.

    Jeremy Grimm September 24, 2016 at 11:48 pm

    What kind of self-knowledge did Hitler find in his imprisonment? It didn't lead to anything I would call peaceable. Was there some inner Hitler he didn't reach in his prison contemplations?

    Ivy September 24, 2016 at 10:56 am

    If I had only known it was luck, I would not have spent so many late nights in the library during undergrad and grad schools. However, I enjoyed those nights and was enriched by them. Is that taxable?

    Jeremy Grimm September 24, 2016 at 11:40 pm

    Learning must be for its own sake. Like you, I spent many hours in the library. BUT it was to scratch an itch I have not been able to quell - even in these many years since I was in that library.

    Norb September 24, 2016 at 11:24 am

    Will future generations, if there are any, be able to look back and reflect," what were these people thinking?"

    There is no justification for the levels of inequality and environmental destruction we are experiencing. Period. We can all consider ourselves fools, even for entertaining debating these issues much longer. We need to be discussing concrete actions, not theoretical justifications.

    Everyone must face the randomness of the universe every day. The only certainty know is the one WE create as human beings- one and together. Why is it do you think that the elite never break ranks. They are creating their own certainty in an uncertain world. Heads I win, tails you loose. TBTF. Race to the bottom. The new normal. Political capture using the revolving door techniques.

    Human evolution is racing toward a crisis point. Ending inequality and world conflict are at the focal point of this outcome. Leaders that continue to use the outdated modes of social control will either drive us over the cliff to destruction, or will loose the ability to control outcomes as their numbers dwindle. The day the revelation is made that the elite are full of crap, is the day change becomes possible.

    It seems large social structures will always come crashing down. The weakness in human nature and flaws in our social structures lead to eventual failure. Greed and selfish action is seldom tolerated is smaller structures.

    Jeremy Grimm September 24, 2016 at 11:36 pm

    I think there will always be inequality between people on many many dimensions. I am constantly humbled by how much I don't know that other people know, people less well educated and I suspect less intelligent - whatever that means - than I am. I celebrate this inequality and sincerely hope this larger knowledge shared with mine and the knowledge of many others will suffice to address the great challenges we face in the all too near future.

    HOWEVER - inequality as a matter of power relations - that is different matter. If I were my great great grandson I could never forgive what I have allowed through my cowardice and intent to have a surviving great great grandson - or granddaughter.

    sd September 24, 2016 at 11:32 am

    I am not sure I really understand the intention of this paper. The example used, that 20% of $90,000 income must be paid in taxes, and then taking surveys of how that distribution should work seems to ignore whether or not the respondents actually understand basic math.

    Why do I say this?

    The "easy" answer is that Person A pays $15,000 and person B pays $3,000 which is the equivalent of a flat tax. And yet, that's not how most responded. Only 5% selected the easy answer. Which makes me wonder if the targets of the survey even understand basic math.

    So I guess I am questioning the questioning….

    Vatch September 24, 2016 at 5:43 pm

    Actually the easiest answer is for person A to pay the whole $18,000. He's the one who is getting more money before taxes, and if he pays the $18,000, he's still getting $12,000 more than person B. The "flat tax" is probably the second easiest answer. However, since neither person is doing any tangible work to receive the money, the fairest result is for both to get the same after "taxes". If person A pays $24,000, $18,000 will go to the "state", and $6,000 will go to person B, and both A and B will each get $36,000. Person B can force person A to agree to this, because if they don't agree, then person A only gets $600 and person B gets $300.

    If we want to get complicated, then the result should be such that the difference between person A's portion and person B's portion is $300, whether they agree or not. So if they agree, person A would pay $23,850 ($18,000 to the "state" and $5,850 to person B), and person A would get $36,150. In that case, person B would get $35,850. The difference between person A's income and person B's income is $300, just as it would have been if they had not agreed.

    Vatch September 24, 2016 at 9:52 pm

    The "easy" answer is that Person A pays $15,000 and person B pays $3,000 which is the equivalent of a flat tax.

    Wait a minute. 20% of $60,000 is $12,000, and 20% of $30,000 is $6,000. Not $15,000 and $3,000.

    Anyhow, I still like my solution where person A pays $23,850.

    Jeremy Grimm September 24, 2016 at 11:13 pm

    Why not question the $90K - of income? - instead.

    In terms of the money and wealth of the people who run our government and economy, and control and direct our lives and the lives of millions of others - $90K barely registers.

    Jeremy Grimm September 24, 2016 at 11:19 pm

    I read this post as questioning the basis for progressive taxation - a rationale for taxation we sorely lack.

    knowbuddhau September 24, 2016 at 12:47 pm

    I have little faith in studies like these. My first question is always, "What's a respondent?" Define Person, please.

    Notice how they're treated as entirely substitutable standardized parts. That is, as if people were molecules or atoms. But try as it might, social science ain't physics. You can't just grab the nearest few people, sit them down at a keyboard to play your game (for credit? for fun? on assignment?) and then substitute their behavior for the behavior of all people everywhere.

    Which people, where, under what conditions, and how many? Was the sample representative? Did the author go to prisons, ghettos, farm fields, etc. and ask them? Or was it proximity and ease of access that defined it?

    It's the old "college sophomores in the lab" problem. As an undergrad psych student, I saw time and time again how people gamed the system, yet PhD candidates and professors took the data as gospel. It's only too often more a demonstration of ability to work the method, to play the academic game, than testing hypotheses.

    Or I guess as coders say, GIGO.

    Jeremy Grimm September 24, 2016 at 11:23 pm

    Also you might ask what meaning to attribute to a questionable measure of human opinions about a concept like "what is fair" in an environment completely dominated by promotion of ideas of fairness which to my mind are quite unfair.

    So I agree with you and wonder why you don't pres further.

    Jeremy Grimm September 24, 2016 at 12:53 pm

    This post frames inequality in terms of "fairness" and luck/pluck and treats money as some form of prize in an economic "game". I suppose this way of looking at things works up to a point as long as we look to those below us and congratulate our merit while accepting some greater luck of those above us which help rationalize our merit. But any concepts of fairness or the justice things rapidly fractures if we look past those in our own neighborhood. Riding a bubble through the slums here and elsewhere in the world it becomes very difficult to rationalize justice and merit. Looking in the other direction toward the high rises and gated estates and manifestations of wealth I can't even imagine and the fragments of the fairness or justice of things evaporates completely. The "findings" of this post do not scale - at all.

    Aside from the living standard which money/wealth affords the notions of "fairness" "merit" and "luck" this post contemplates there is no discussion of other aspects of money/wealth conveniently passed over and ignored.

    In our society our money-culture money/wealth is equated with merit. It packages demand for automatic respect and deference. This pecuniary one-size-fits all measure for character, intellect, excellence, creativity, leadership, even physical attractiveness undermines all these values reducing them to commodities of the marketplace.

    But the ability of money/wealth to control and command the lives of others and the collective resources of society is far more pernicious. What concept of "fairness" or "justice" can justify this aspect of inequality?

    Emma September 24, 2016 at 9:47 pm

    JG – Rogge covers this in his book: "World Poverty and Human Rights: Cosmopolitan Responsibilities and Reforms" ( https://en.wikipedia.org/wiki/World_Poverty_and_Human_Rights ) using the perfect example of the acquisition and management of natural resources.

    Jeremy Grimm September 24, 2016 at 10:47 pm

    Your comment to mine leaves me quizzical. Though I value any comments to mine given my wondering how far I am from what is reasonable - global poverty is far beyond the complexity of anything I might address in my comments. I grant global poverty is not a problem beyond solution - but first we need to address the problems of economic philosophy used to justify and enable the gross inequalities of our world.

    I have not read Rogge's book. There are far too many books I have not read and of the books i have read there are far too many I have not really understood. I am also concerned by how little this post seems to have stimulated our commentariat - an entity I have come to greatly respect.

    Please elaborate on what you mean. I am concerned by this post's lack of consideration of the political power money/wealth confers - something beyond and to some degree outside considerations of poverty and the suffering inequality fosters - even celebrates.

    Adar September 24, 2016 at 5:43 pm

    My poor non-economist head reels at this article. OK, it's a mind exercise to determine attitudes toward taxation. But it's completely made up – Fig. 1 Tossing a fair coin, doesn't scan for me, it's like a crap game. At the random flip of a coin, A gets twice as much as B, but where did the $18k penalty come from? Is it arbitrary? Why "could" one have to pay more, and who decides? And where did the $24k figure come from? Seems obvious to me A got twice as much, and so should pay 2 out of 3 parts of the penalty. So, re brute luck and tax policy, if inherited wealth or investment income (i.e. rent) vs. wage income is really what's meant here, please say so.

    Jeremy Grimm September 24, 2016 at 11:06 pm

    I view this post - at least in part - as questioning the basis for a progressive tax rate based on attitudes toward what is "fair" in turn based on a - sorry - hokey experiment to test attitudes about what is fair. To me the problem is a problem of scale. If we're talking about my place opposed to that of the fellow in the house on the hill or the house down the street - I might - on a good day - buy-in to this post's notions about "fairness". Those notions do NOT scale and they don't give any consideration to the powers of control and command which great wealth confers.

    What I can accept in the way of inequality between myself and the guy on the hill does NOT scale when the guy on the hill doesn't live on the hill and only owns the house on the hill as a reminder of his lowly beginnings. He lives in a multi-million dollar 10,000 sq. ft. condominium high in New York City and a similar flat in London, and in Tai Pei and Shanghai and Paris and … and lives in none of them really. And I cannot accept the poverty and oppression found in Camden, New Jersey, Southside Chicago, … in Brazilian favelas or the slums of Seoul.

    Doug September 25, 2016 at 6:46 am

    Perhaps the failure to scale arises from the compounded flaws that, first, this post is all about "I" and speaks not at all to "we"; and, second, as your comments point out, uses money in typical fashion as the lowest common denominator determining utility and fairness when, 'we' demands a focus on the highest not lowest common denominator (and that's not mathematically or logically convenient).
    Further, 'we' must be something more meaningful than a mere agglomeration of "I's". Those are at best 'thin we's' easily seduced into theoretical constructs that, in fact, have nothing to do with the actual experience of 'we' in any meaningful way.

    Real, 'thick' we's comprised of actual people who persistently interact and truly know they share some to a lot of their shared fates respond to questions of brute luck, fairness and inequality together (whether democratically or otherwise or blends of ways). They don't determine their shared fates with an eye on abstract individualism grounded in lowest common denominators of 'utility'. They actually care about 'what makes most sense for us together' and balk at devices, questions - indeed swindles - aimed at tearing apart the fabric of 'we'.

    Sound of the Suburbs September 25, 2016 at 3:47 am

    Milton Freidman, the man that wrecked the world with bad economics.

    Milton Freidman's charm, energy and charisma seduced his students and global elites alike into believing he had come up with an economics that could transform the world. His students loved the idea of transforming the world through economics as it made them feel so important. Global elites loved his economics as it worked so well for them and gave a scientific backing for a world that was one that they had always wanted.

    Unfortunately, there were a lot of problems with his economics that are making themselves felt today.

    His economics was missing:

    1) The work of the Classical Economists
    2) The true nature of money and debt
    3) The work of Irving Fischer in the 1930s

    The Classical Economists were the first economists to look at and analyse the world around them, a world of small state, raw capitalism.

    They noted how the moneyed classes were always rent seeking and looking to maintain themselves in luxury and leisure, through rent and interest. This sucked money out of the productive side of the economy, reducing the purchasing power within the nation.

    They noted how the cost of living must be kept low, to keep the basic minimum wage low, so nations could be competitive in the international arena.

    This knowledge is missing today.

    The UK dream is to live like the idle, rich rentier, with a BTL portfolio extracting "unearned" rental income from the "earned" income of generation rent.

    In the US they removed all the things that kept the cost of living down, not realising these costs would have to be covered by wages. The US now has a very high minimum wage due to soaring costs of housing, healthcare and student loans and US businesses are squealing.

    The true nature of money and debt were understood in the 1930s when the Chicago Plan was put forward after a thorough investigation into the 1929 bust.

    Money and debt are opposite sides of the same coin.
    If there is no debt there is no money.
    Money is created by loans and destroyed by repayments of those loans.

    This knowledge is missing today.

    Today's ubiquitous housing boom is like a printing press creating more and more money as the new mortgage debt comes into existence.

    The money supply expands and pours into the real economy making everything look really good.

    The only thing that is really happening is the inflation of the price of things that exist already, houses. All the debt being created is not productive investment.

    The cost of living goes up and more and more money gets sucked into mortgage and rent payments sucking purchasing power out of the economy. The increasing cost of living, raises the basic minimum wage pricing labour out of international labour markets.

    Irving Fisher also looked into the 1929 bust and developed a theory of economic crises called debt-deflation, which attributed the crises to the bursting of a credit bubble.

    Irving Fisher looked into debt inflated asset bubbles and realised the huge danger they pose to the whole economy. This knowledge is missing today. The ubiquitous housing boom is a debt inflated asset bubble, with huge amounts of debt spread through the whole economy, when it bursts there is hell to pay.

    This was first seen in Japan in 1989, its economy has never recovered.

    It was repeated in the US and leveraged up with derivatives leading to 2008.

    Ireland and Spain have also wrecked their economies with housing bubbles.

    There are housing bubbles around the world, ready to burst and pull that nation into debt deflation.

    Milton Freidman, the man that wrecked the world with bad economics.

    Sound of the Suburbs September 25, 2016 at 5:20 am

    Milton Freidman worked at the Chicago School of Economics and was the global ambassador for his dire economics. This dire economics and the University of Chicago were also behind the design of the Euro, no wonder it doesn't work.

    "The putative "father of the Euro", economist Robert Mundell is reported to have explained to one of his university of Chicago students, Greg Palast: "the Euro is the easy way in which Congresses and Parliaments can be stripped of all power over monetary and fiscal policy. Bothersome democracy is removed from the economic system" Michael Hudson "Killing the Host"

    Their dire economics predicts the Euro-zone economies will converge into a stable equilibrium.

    The reality – the economies are diverging and the poorer nations are going under. It's bad. 2008 – How did that happen?

    The neoclassical economists didn't have a clue as the Minsky Moment was approaching.

    Two people who did see 2008 coming (there aren't many).

    Steve Keen – A whole book "Debunking Economics" on this dire neoclassical economics and the problems of not using realistic assumptions on money and debt.

    Michael Hudson – Calls it "junk" economics and has written a whole book on the problems of forgetting the world of Classical Economics – Killing the Host.

    Naomi Klein "Shock Doctrine" goes into the brutality of the Chicago Boys and Berkeley Mafia in implementing their economic vision. A right wing "Khmer Rouge" that descended on developing nations to wipe away left wing thinking.

    It's bad and Milton Freidman was behind it.

    Skippy September 25, 2016 at 6:20 am

    Goes a bit deeper than just the Chicago boys imo…

    Marginalist economics tends to be characterised primarily by a couple of distinct axioms that operate 'under the surface' to produce its key results. these are simplistically characterise as: the axiom of methodological individualism; the axiom of methodological instrumentalism; and the axiom of methodological equilibration, where models derived from them have ex-ante predictive power.

    This is historically Epicurean philosophy, example, Epicurus wrote,

    "The magnitude of pleasure reaches its limit in the removal of all pain. When such pleasure is present, so long as it is uninterrupted, there is no pain either of body or of mind or of both together."

    Which is a reflection of its materialistic atomism which is basically identical with the marginalist focus on atomistic individuals and makes it an atomistic doctrine. Thorstein Veblen where he wrote in his Why is Economics Not an Evolutionary Science?:

    "The hedonistic conception of man is that of a lightning calculator of pleasure and pains, who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift him about the area, but leave him intact. He has neither antecedent nor consequent. He is an isolated definitive human datum."

    Which in turn is just Epicurean ontology where everything becomes objects and not subjects where Epicurean ethics involves individuals maximising pleasure and minimising pain - or, as the marginalists would put it, maximising utility and minimising disutility - it simply follows from the basic ontological position that is put forward.

    Just to put a more modern perspective on it – see: Note that the patient suffering from schizophrenia tends not to answer the questions directed at him but rather responds with complete non-sequiturs.

    "In his book, King lays out how economists have tried to establish supposedly disaggregated "microfoundations" with which to rest their macroeconomics upon. The idea here is that Keynesian macroeconomics generally deals with large aggregates of individuals – usually entire national economies – and draws conclusions from these while largely ignoring the actions of individual agents. As King shows in the book, however, the idea that a macro-level analysis requires such microfoundations is itself entirely without foundation. Unfortunately though, since mainstream economists are committed to methodological individualism – that is, they try to explain the world with reference to what they think to be the rules of individual behaviour – they tend to pursue this quest across the board and those who proclaim scepticism about the need for microfoundations can rarely articulate this scepticism as they too are generally wedded to the notion that aggregative behaviour can only be explained with reference to supposedly disaggregated behaviour."

    http://www.nakedcapitalism.com/2013/02/philip-pilkington-of-madness-and-microfoundationsm-rational-agents-schizophrenia-and-a-noble-attempt-by-one-noah-smith-to-break-through-the-mirror.html

    You might also like – Le Bon, Gustave. The Crowd: A Study of the Popular Mind, you can get it free online.

    Additionally – The Myth of the Rational Market: Wall Street's Impossible Quest for Predictable Markets – by Justin Fox

    Chronicling the rise and fall of the efficient market theory and the century-long making of the modern financial industry, Justin Fox's "The Myth of the Rational Market" is as much an intellectual whodunit as a cultural history of the perils and possibilities of risk. The book brings to life the people and ideas that forged modern finance and investing, from the formative days of Wall Street through the Great Depression and into the financial calamity of today. It's a tale that features professors who made and lost fortunes, battled fiercely over ideas, beat the house in blackjack, wrote bestselling books, and played major roles on the world stage. It's also a tale of Wall Street's evolution, the power of the market to generate wealth and wreak havoc, and free market capitalism's war with itself.

    The efficient market hypothesis -- long part of academic folklore but codified in the 1960s at the University of Chicago -- has evolved into a powerful myth. It has been the maker and loser of fortunes, the driver of trillions of dollars, the inspiration for index funds and vast new derivatives markets, and the guidepost for thousands of careers. The theory holds that the market is always right, and that the decisions of millions of rational investors, all acting on information to outsmart one another, always provide the best judge of a stock's value. That myth is crumbling.

    Disheveled Marsupial…. Main stream econnomics is an extenuation of much deeper metaphysical and resultant ideological beliefs….

    [Sep 24, 2016] Income Inequality in a Globalising World

    Notable quotes:
    "... By Miguel Niño-Zarazúa, Research Fellow, UNU-WIDE, Laurence Roope, Researcher, Health Economics Research Centre, University of Oxford, and Finn Tarp, Director, UNU-WIDER. Originally published at VoxEU ..."
    "... See original post for references ..."
    "... John Ross argues that the reduction in poverty has been pretty much all China. I'm also not convinced China is actually that much richer than before. A sweatshop worker has a higher income than a traditional farmer, but probably has a lower standard of living, and while the traditional farmer maintains the natural resource base, the industrial worker destroys it. ..."
    "... Globalization is an economic and ecological disaster. We have outsourced wealth creation to China and they do it in the most polluting way possible, turning their country into a toxic waste dump in the process. ..."
    "... The peasants slaving away in the cinder block hellholes of their factories churning out the crapola on Wal-Mart's shelves also get paid squat, while the leaders of the Chinese Criminal Party steal half of their effort for themselves and smuggle the loot out, to get away from the pollution. The other half gets stolen by the likes of Wal-Mart and Apple. ..."
    "... The elites sold globalization as something that would generate such a munificent surplus that those in harms way would be helped. It ends up as a lie, where the elites the world over help themselves to the stolen sweat of the lowest people in society, with nothing left over, except for a polluted planet. ..."
    "... Yes, those who "have seen their incomes stagnating in real terms for over 20 years" are indeed experiencing "considerable discontent." But this anodyne phrasing masks the reality of entire communities seeing their means of livelihood ripped out and shipped across the globe. This rhetoric makes it sound like, Oh those prosperous American workers can't buy as many luxuries now, boo hoo, when the standard practice from NAFTA on of globalization-as-corporate-welfare has meant real impoverishment for hundreds of thousands of individuals, entire cities and large chunks of whole states. As Lambert always says, Whose economy? ..."
    Sep 23, 2016 | www.nakedcapitalism.com
    ...if you look at absolute inequality, as opposed to relative inequality, inequality has increased around the world. This calls into question one of the big arguments made in favor of globalization: that the cost to workers in advanced economies are offset by gains to workers in developing economies, and is thus virtuous by lowering inequality more broadly measured.

    By Miguel Niño-Zarazúa, Research Fellow, UNU-WIDE, Laurence Roope, Researcher, Health Economics Research Centre, University of Oxford, and Finn Tarp, Director, UNU-WIDER. Originally published at VoxEU

    Since the turn of the century, inequality in the distribution of income, together with concerns over the pace and nature of globalisation, have risen to be among the most prominent policy issues of our time. These concerns took centre stage at the recent annual G20 summit in China. From President Obama to President Xi, there was broad agreement that the global economy needs more inclusive and sustainable growth, where the economic pie increases in size and is at the same time divided more fairly. As President Obama emphasised, "[t]he international order is under strain." The consensus is well founded, following as it does the recent Brexit vote, and the rise of populism (especially on the right) in the US and Europe, with its hard stance against free trade agreements, capital flows and migration.

    ... ... ...

    The inclusivity aspect of growth is now more imperative than ever. Globalisation has not been a zero sum game. Overall perhaps more have benefitted, especially in fast-growing economies in the developing world. However, many others, for example among the working middle class in industrialised nations, have seen their incomes stagnating in real terms for over 20 years. It is unsurprising that this has bred considerable discontent, and it is an urgent priority that concrete steps are taken to reduce the underlying sources of this discontent. Those who feel they have not benefitted, and those who have even lost from globalisation, have legitimate reasons for their discontent. Appropriate action will require not only the provision of social protection to the poorest and most vulnerable. It is essential that the very nature of the ongoing processes of globalisation, growth, and economic transformation are scrutinised, and that broad based investments are made in education, skills, and health, particularly among relatively disadvantaged groups. Only in this way will the world experience sustained – and sustainable – economic growth and the convergence of nations in the years to come.

    See original post for references

    tony , September 23, 2016 at 7:20 am

    http://ablog.typepad.com/keytrendsinglobalisation/2013/11/china-world-poverty.html

    John Ross argues that the reduction in poverty has been pretty much all China. I'm also not convinced China is actually that much richer than before. A sweatshop worker has a higher income than a traditional farmer, but probably has a lower standard of living, and while the traditional farmer maintains the natural resource base, the industrial worker destroys it.

    cnchal , September 23, 2016 at 7:32 am

    Only in this way will the world experience sustained – and sustainable – economic growth and the convergence of nations in the years to come.

    Globalization is an economic and ecological disaster. We have outsourced wealth creation to China and they do it in the most polluting way possible, turning their country into a toxic waste dump in the process.

    The peasants slaving away in the cinder block hellholes of their factories churning out the crapola on Wal-Mart's shelves also get paid squat, while the leaders of the Chinese Criminal Party steal half of their effort for themselves and smuggle the loot out, to get away from the pollution. The other half gets stolen by the likes of Wal-Mart and Apple.

    The elites sold globalization as something that would generate such a munificent surplus that those in harms way would be helped. It ends up as a lie, where the elites the world over help themselves to the stolen sweat of the lowest people in society, with nothing left over, except for a polluted planet.

    Sustainable economic growth is an oxymoron.

    Sally Snyder , September 23, 2016 at 7:35 am

    Here is an article that looks at the relationship between wealth and ethnicity/race in the United States:

    http://viableopposition.blogspot.ca/2016/08/the-growing-ethnicracial-wealth-gap.html

    The notable presence of public policies that exacerbate racial and economic inequality and the lack of will by Washington to change the system mean that the ethnic/racial wealth gap is becoming more firmly entrenched in society.

    tegnost , September 23, 2016 at 10:15 am

    Good article but standard policy prescription…

    "broad based investments are made in education, skills, and health, particularly among relatively disadvantaged groups. Only in this way will the world experience sustained – and sustainable – economic growth and the convergence of nations in the years to come."

    …I guess if the skills were sustainable low chemical and diverse farming in 5 acre lots or in co-ops then I might have less complaint, however the skills people apparently are going to need are supervising robots and going to non jobs in autonomous vehicles and being fed on chemical mush shaped like things we used to eat, a grim dystopia.

    Yesterday I had the unpleasant experience of reading the hard copy nyt wherein kristof opined that hey it's not so bad, extreme poverty has eased (the same as in this article, but without this article's Vietnamese example where 1 v. 8 becomes 8 v. 80),ignoring the relative difference while on another lackluster page there was an article saying immigrants don't take jobs from citizens which had to be one of the most thinly veiled press releases of some study made by some important sounding acronym and and, of course a supposed "balance" between pro and anti immigration academics. because in this case, they claim we're relatively better off.

    So there you have it, it's all relative. Bi color bird cage liner, dedicated to the ever shrinking population of affluent/wealthy who are relatively better off as opposed to the ever increasing population of people who are actually worse off…There was also an article on the desert dwelling uighur and their system of canals bringing glacier water to farm their arid land which showed some people who were fine for thousands of years, but now thanks to fracking, industrial pollution and less community involvement (kids used to clean the karatz, keeping it healthy) now these people can be uplifted into the modern world(…so great…) that was reminiscent of the nyt of olde which presented the conundrum but left out the policy prescription which now always seems to be "the richer I get the less extreme poverty there is in the world so stop your whining and borrow a few hundred thousand to buy a PhD "

    http://www.nytimes.com/2016/09/22/world/asia/china-xinjiang-turpan-water.html

    timotheus , September 23, 2016 at 2:26 pm

    Yes, those who "have seen their incomes stagnating in real terms for over 20 years" are indeed experiencing "considerable discontent." But this anodyne phrasing masks the reality of entire communities seeing their means of livelihood ripped out and shipped across the globe. This rhetoric makes it sound like, Oh those prosperous American workers can't buy as many luxuries now, boo hoo, when the standard practice from NAFTA on of globalization-as-corporate-welfare has meant real impoverishment for hundreds of thousands of individuals, entire cities and large chunks of whole states. As Lambert always says, Whose economy?

    sgt_doom , September 23, 2016 at 4:47 pm

    Great comments, timotheus , great comments!

    Three reading recommendations for anyone who doesn't grasp your sentiment, shared by millions: Sold Out , by Michelle Malkin Outsourcing America , by Ron Hira America: Who Stole the Dream? , by Donald L. Barlett Reply

    [Sep 22, 2016] Academic Penury Adjunct Faculty as the New Precariat naked capitalism

    Notable quotes:
    "... the true rate of pay is often around the minimum wage. ..."
    "... i was an adjunct professor of urban studies at new york university for 12 years. the entire academic department was staffed by adjuncts and part-time instructors except for the chairman, who was ironically a tenured professor of labor history. ..."
    "... Having come up through the academic process and seeing the handwriting on the wall deciding to opt out of trying for an academic career, I think I can comment a bit. ..."
    "... First, no one is forcing these folks to be adjuncts. It's their choice. ..."
    "... The real issue is one of information and honesty or at least reality over hopeful expectations. When I was an undergrad my professors encouraged me to go to grad school and were pleased when I decided to pursue a Ph.D. They all implied, if not said, that I would be able to then get an academic job. I think they really believed this, but the reality was far different even at that time. By the time I graduated, unemployment in my field was at an all time high. The reality was that only 20-25% of graduates would get "potentially permanent" positions in either academia or research. So, when I finally graduated I posted a letter for the undergraduates informing them of the future in the field. Needless to say the faculty were taken aback, but when they checked they found that my data was correct. ..."
    "... Yes, their choice. They can abandon the academic pursuit and choose another career. Most people with advanced degrees do just that. ..."
    "... I agree that their are way too many grad students and they become the adjuncts that are desperate for full time jobs. But grad students serve an important purpose as cheap labor, particularly in research universities. ..."
    "... What if the point of a review process was to improve teaching methods and get feedback from students about what works and what doesn't? ..."
    "... We are looking at the decades long pursuit of making higher education "more like business". The mantra of privatization and that attitude that segments of our society which served the public: schools, universities, hospitals, departments of governments at all levels, etc., would all be better if they were run as businesses has been proven false a million times over. ..."
    "... University Boards have, for decades, been stacked with advocates of market based systems which have been imposed on institutions which formerly served their students and the public. Students are no longer viewed as students but as revenue streams. Public funding for higher education has similarly declined as the cult of the marketplace including that institutions serving a public purpose needed to be more self funding. Because forcing them to have more skin in the game would force them to trim the fat and innovate. You know, like Walmart. ..."
    "... This is a false hope–especially in higher education. The University, the large corporation, the particular governmental agency, are now beyond internal reform and we all know this in our bones. ..."
    "... Somehow we must individually and collectively find the courage and creativity to move, maneuver and survive outside of these institutions–trading in the fear and anxiety of trying to succeed in dying institutions for the fear and anxiety which comes with creating new institutions. ..."
    Sep 22, 2016 | www.nakedcapitalism.com

    "The work is there," Wangerin tells me, "they just don't want to pay."

    A one-time adjunct and contract lecturer myself, I decide to look into the matter more deeply. Are Wangerin's contentions particular to her own experience or are they more widely shared across the United States? And if they are, what does this mean for higher education?

    Information, as it turns out, isn't hard to come by. I write one message to a long-time Twitter contact who also happens to be a contingent faculty member and my inbox explodes. As I sort through my e-mails a picture of higher education begins to emerge and, far removed from the conventional image of pipe-smoking professors in book-lined studies, it is largely one of exploitation and control.

    "I am currently teaching one class, and in all honesty, unemployment benefits pay double that," a community college lecturer who wished to remain anonymous told me, "I would be better off not teaching at all."

    An art professor from Ohio writes in to tell me that she's just thrown in the towel after more than a decade of work: "My class was canceled two weeks before classes start and I decided to get my Alternative Educator License and teach at the high school level."

    I hear of a lecturer whose courses were allocated to someone else after he spoke out about a contract clause that demanded access to his DNA; about an adjunct who could not afford to pay property taxes on the family home after 20 years of teaching; and of someone who was fired after a student complaint that he was a "black racist." "Whatever that means," the adjunct reporting the incident grumbles.

    ... ... ...

    "Education claims to ameliorate class stratification, but it actually reinforces it," says Alex Kudera, who has taught college writing and literature off the tenure track for over twenty years.

    It's not hard to see what he means. The average adjunct lecturer receives only $2700 per course taught. While that amount is sometimes portrayed as easy money, in addition to time spent in class lecturers must also prepare course content, create exams and assignments, grade, advise students, and, of course, travel from campus to campus. When academics are employed on a casual basis, such activity is not compensated, meaning that the true rate of pay is often around the minimum wage.

    Jim Haygood , September 21, 2016 at 6:36 am

    'Academics may enjoy more intellectual freedom than many workers, but they also have a duty that does not generally fall on others: to research and to publish the results of that research regardless of how unpopular it may be.'

    Proposal for a joint Econ/Law paper

    Thesis : US academia is a Racketeer Influenced and Corrupt Organization

    Synopsis : using de facto antitrust immunity garnered by its politically connected administrators, academia relentlessly hikes tuitions as well as its intake of governmental funding.

    Via false and deceptive marketing, students are promised nonexistent benefits from earning a degree, then subjected to a loan sharking racket which indebts them for life, at inflated cartelized prices, without informing them of the non-dischargeability of those debts.

    Systemic marketing fraud is further enabled by glossy alumni magazines touting the achievements of tenured faculty, without divulging that a majority of classes are taught by adjuncts.

    Recommendations : RICO the entire industry; consolidate it; convict the managers; reopen it under new leadership (former politicians banned for life), under new legislation prohibiting marketing fraud and loan sharking.

    Norb , September 21, 2016 at 9:02 am

    Seems like the logical solution and the only way to avoid actual collapse of the institutions. This higher education scam can only continue until parental funds are tapped out, which is this current generation of collage age families. New entrants into the workforce, on whole, will not be able to save enough, or have job security to even consider college for their children.

    The social contract that the elite are forging ahead with is the bond and willingness to be scammed. It is amazing to see their disbelieving expressions when any form of resistance is encountered. The rational response would be to ease up on the exploitation, but doesn't seem to be happening. Other forces will have to be brought to bear.

    ProNewerDeal , September 21, 2016 at 6:48 am

    "non-tenure track teaching staff – commonly referred to as adjuncts and contingent faculty – now make up approximately 70% of all teaching staff in American higher education. This means that roughly three out of every four courses a student takes are taught by someone without job security who is working on minimal pay."

    Is this actually true? If say some adjuncts are full-time other job & teach only 1 course, some adjuncts are perma-temp FT & teach ~4 courses, & tenure-track teach ~4 courses; then you could have a situation where say
    1 portion of teachers that are adjuncts. The article mentioned 70% of ANY teachers teaching at least 1 course in a given semester at Universities are adjuncts

    2 portion of courses taught that are taught by adjuncts: A lower number, say 40% of the courses taught at Univs are taught by adjuncts, due to having tenure-track Profs teaching ~4 courses & adjuncts teaching ~1 course each.

    The author seems to make a logic error assuming that metric #2 is the same as #1. It may happen to be, but doesn't necessarily need to be.

    What actually is the metric #2 number?

    I have empathy for the perma-temp FT adjuncts, IMHO it is no different than perma-temp FT workers in other occupations, despite the prestige of Unviersities perhaps somewhat masking its practice.

    diptherio , September 21, 2016 at 11:42 am

    You're right that we don't have enough info to know #2 from the article, but I also don't know that you've got it quite right.

    If full time instructors are half-and-half tenure/tenure-track and adjunct (for instance), that would mean that 30% of profs are tenure and 30% are full time adjuncts. That would leave another 40% of the total that are less-than-full time adjuncts. So you'd have a majority of classes being taught by adjuncts. But, of course, we need more info to figure it out for sure, but it seems more likely to me, based on my experience (~ half my classes were taught by adjuncts during my college days, which were in the late nineties-early aughties) that adjuncts represent a firm majority of both personnel and classroom hours.

    MooCows , September 21, 2016 at 1:18 pm

    I'm not an adjunct but I'm a non-tenure track faculty member in the Electrical and Computer Engineering department at a very large university. I teach 8 technical courses a year (3/3/2) while the tenured faculty teach 3 or 4 (2/1/0). We also have adjuncts who typically teach one course a semester.

    I bring this up because it could be that, from the author's perspective, I still fall into the adjunct category because my contract must be renewed yearly and the administration can choose not to renew without cause. I would say that non-tenure track faculty are responsible for about 50% of the courses in this department but, being in engineering, our department is small relative to something in the College of Liberal Arts.

    upstater , September 21, 2016 at 8:02 am

    This fits in, sort of, to this posting the dean of the B-school, with a $500K salary, a supposed expert on "risk management" at Syracuse University, busted in a prostitution sting:

    SU dean arrested in prostitution bust told students: 'Nothing is worth your integrity'

    I guess he'll have to hire out at Goldman - aren't they the ones with the running tab at a NYC escort service?

    Plenty of adjuncts at Syracuse University, where the tuition is $55K/year.

    PlutoniumKun , September 21, 2016 at 8:03 am

    More of a question here, as I see the author teaches in Ireland. If Dr. Fuller comes below the line I'd be interested to hear her thoughts on whether the same process is infecting Irish and other European universities. I know if at least one college administrator in Itelamd who loudly proclaims the superiority if the US system. One can only wonder why

    Anon , September 21, 2016 at 1:25 pm

    Superior in what way? Science? Technical research? Economic research?

    For the US undergad, adjunct instructors is the norm. (My local community college has 70% adjunct instructors.). My local University has slightly less, but uses more experienced gad students to guide less experienced grad students. In any event, the product/experience has been cheapened.

    tony , September 21, 2016 at 9:52 am

    Nearly half of the nation's undergraduates show almost no gains in learning in their first two years of college, in large part because colleges don't make academics a priority, a new report shows.

    Report: First two years of college show small gains

    Morris Berman has pointed out that US college has become a social rather than a learning experience. I suspect this cultural shift has made academics themselves replaceable. Does it really matter who babysits these four-year party retreats?

    Robert Dannin , September 21, 2016 at 10:10 am

    i was an adjunct professor of urban studies at new york university for 12 years. the entire academic department was staffed by adjuncts and part-time instructors except for the chairman, who was ironically a tenured professor of labor history.

    my classes were always bursting to seams, we studied contemporary issues and were focusing on the sub-prime crisis back in 1995. one class toward the end of my lecture, i wrote the math for my salary on the blackboard. it came down to twenty-five cents per student per class, a tiny fraction of their per semester tuition. a student from the business school remarked that i could probably make more panhandling the same hours outside in washington square park. everyone laughed. by the time i got back to the department less than 20 minutes later, the chair invited me into his office. "don't talk about salary issues with your students. GOT IT!" someone had ratted me out. guess i spoiled their day. easier to discuss poor people in the outer boroughs than someone on your doorstep. in the following years i spent my spare time organizing the first adjunct faculty union. door-to-door, button-holing adjuncts on the sidewalk or in the hallways. the less experience they had, the more reluctant they were to get involved for fear of ruining their chances for a F/T tenure track position. they wouldn't listen, when i explained, once an adjunct, always an adjunct. after five more years, they began to see the light and wanted union. then the uaw swooped in, demanding my lists and fealty. they knew nothing about activism on an urban campus and didn't want to listen. when i tried to participate in meetings, i was accused of disrespecting the regional organizer who commuted to the union hqtrs. from her home in litchfield, ct. at one meeting they told us who our "friends" were on campus. yep, heading the list was my dept chair, the good-old red-diaper baby himself. finally, there was a vote, the union won a shitty package that deliberately excluded any new hires. end of the semester the dept chair sends me an email, you're fired! meet the new boss, same as the old boss.

    SpringTexan , September 21, 2016 at 10:46 am

    Thanks. Wish every adjunct would teach this if this is appropriate to the class. (and mention it in passing if it's not)

    Uahsenaa , September 21, 2016 at 11:07 am

    I do this with my students as well, noting that about 10% of their tuition goes to me, while the rest goes to the University.

    I also like to point out that they pay six six times the tuition compared to what the people running the university did, and that's before you take into consideration that they didn't have to pay an extra 1K in "fees."

    If they simply cut me a check for the percentage of their tuition that goes to the class, I'd make upwards of 300K a year.

    ProNewerDeal , September 21, 2016 at 1:15 pm

    Robert,

    Thanks for sharing your story. I am sorry to hear that you were fired, apparently for exercising you human & Constitutional right to labor-organize.

    The fact that your boss was "a labor history Prof" is worst-tier hypocrisy & irony. Reminds me of Constitutional Law Prof 0bama, who continually defecates on the Constitution with his assasination of US citizens overseas program, NSA bulk spying, etc.

    I hope you found an alternative job that had better working conditions & a fairer boss.

    flora , September 21, 2016 at 10:20 am

    This essay is spot-on in every respect. Thanks for posting.

    NoBrick , September 21, 2016 at 10:26 am

    "Tin soldiers and Nixon coming, We're finally on our own. This summer I hear the drumming, Four dead in Ohio." CSNY

    It seems the "social unrest" stemmed from the collective consciousness permitted by
    unrestrained objectivity. The master-client relationship was overwhelmed by repeated
    gestures that breached the ordained demeandor of prostrate obedience.

    The balance between confusion and illumination (consciousness) must be modified!
    After all, successful marketing/propaganda begins where consciousness ends

    Benedict@Large , September 21, 2016 at 10:32 am

    I was fortunate enough (a long time ago) to attend an Ivy League university, with my brother attending the same two class years ahead of me. I became frustrated at one point, finding my courses to always be a number of degrees more abstract in what they were teaching than I had anticipated, and sought my brother's advice. "Brown," he said, "doesn't make engineers; they make graduate students." As I would later come to say, we were not taught to be mathematicians or chemists or historian; we were taught to think like them. I can't tell you how valuable that approach to education has turn out to be for me, both professionally and personally, as I've made my way through life. These are things you don't unlearn.

    I think about this whenever I read articles (like this one) about the direction of education today, especially but not limited to the college level. These experiences are being lost as we turn our schools into trade schools and our students into mere mechanics; OK at any situation for which they have been specifically trained, but kind of useless for those when that has not been the case. Our elites tell us that this is what the market wants, but I never see any of them actually asking the students, and when I check back at the Ivy, I find that the elites still teach their own the way I was taught. The answer is clear. we are deliberately being divided by education into a world where the children of the elites, whether they have earned it or not, will find no intellectual competition from the classes below them. The Poors really will be stupid, but it will be intentional, and built in to the Nature and Nurture the elites have allowed them to have.

    beans , September 21, 2016 at 1:41 pm

    Excellent comment, Benedict. The art of teaching people how to think instead of what to think – the educator who can do this is invaluable, now more than ever.

    Punxsutawney , September 21, 2016 at 10:33 am

    I might add as well, that many of these adjuncts came out of industry, having lost well paying jobs as operations were moved overseas.

    Now working part-time for less than 1/2 of what they were making, if they are lucky!

    Bitman , September 21, 2016 at 10:59 am

    Few points to add to this excellent article:

    1. The shift needed to understand the modern University is to think of it not as an institution of higher learning, but as a processing plant – it produces "students" and "graduates, and adjuncts are the staff assigned the role of processors. The model is industrial. Elite institutions of all sorts have conspired with the University to require professional credentials for more and more of the occupations they staff, in order to assure large flows of people pass through. This also means that larger populations are drawn into the debt system and thereby depoliticized.

    2. The most important role an adjunct can play is to bring the issues associated with the industrializing of the university into the classroom. Make students aware of the labor situation, and what they're buying. Explain to them that adjuncts, like nurses in hospitals, are expected to overperform, and that their overperformance is what props up a diseased, corrupt institution. It's very, very important for adjuncts not to get caught up in the official institutional morality that guilts them into overperformance (hospitals are probably the leader in this respect). How much overperformance you indulge in is a personal decision, in my view, but it should never be taken on uncritically.

    My own individualized response to this system has been to take on as many classes as I humanly can, so that a) my wages actually compare to those of my tenured colleagues, and b) to demonstrate to students by so doing that the University does not give a shit about their education. No one pays attention to how many courses I teach or how prepared I am to teach them. I've taught hundreds of courses (no exaggeration) and no one ever supervises me or even checks in (It's happened twice in 25 years) .Fact is, I happen to be prepared, but I stress that that is not at all a concern of the University. I've been asked to teach courses in subjects where I have absolutely no expertise, but since I'm teaching undergrads, know how to read, construct a syllabus, and make compelling arguments, I get by, sometimes even comfortably. Many get by this way. But it shouldn't be confused with providing student a good education. And I'm getting too old to maintain the pace, as we all do.

    According to the evaluation numbers I'm somehow still providing students with an above-average experience in their courses, but I do so full in the knowledge that I WILL NOT overperform without making the students aware that that is what unfairly is expected of me, even though I'm given none of the resources tenured faculty are given. I cancel classes sometimes, for the express purpose of the fact I need a break (I don;t get sabbaticals). They almost invariably understand. They also are sometimes infuriated that this state of affairs persists, though like adjuncts they fear making waves.

    3. Tenured faculty are the enemy (unfortunately) or PT faculty. Eevn the labor activists among them have different class interests than PT faculty at most large universities. Full-time faculty are dominated by the administration and feel themselves to be under siege, but one response to this is that they dominate PT faculty as a means of freeing themselves as much as possible from the industrial-style teaching of large University life. As a rule, they are not willing to equitably share the burdens PT faculty face, and there's no getting around that.

    David , September 21, 2016 at 11:51 am

    Having come up through the academic process and seeing the handwriting on the wall deciding to opt out of trying for an academic career, I think I can comment a bit.

    First, no one is forcing these folks to be adjuncts. It's their choice.

    The real issue is one of information and honesty or at least reality over hopeful expectations. When I was an undergrad my professors encouraged me to go to grad school and were pleased when I decided to pursue a Ph.D. They all implied, if not said, that I would be able to then get an academic job. I think they really believed this, but the reality was far different even at that time. By the time I graduated, unemployment in my field was at an all time high. The reality was that only 20-25% of graduates would get "potentially permanent" positions in either academia or research. So, when I finally graduated I posted a letter for the undergraduates informing them of the future in the field. Needless to say the faculty were taken aback, but when they checked they found that my data was correct.

    Do these adjuncts believe that a "potentially permanent" position awaits them if they keep going on their present path? Are they being told that by the universities? If so, then they are being deceived. Or, is this just a case of blind optimism and not wanting to give up their dream? In this case, it goes back to being their choice. Or do they want a career as a serial adjunct, and just want the job to be better? The this is just typical employer/employee bargaining and back to their choice.

    So, they can agitate for more money, security, authority, etc. which is what they appear to be doing, or they can leave the field for one that is more lucrative, which is what the vast majority of us have done.

    http://canonicalthoughts.blogspot.com

    reslez , September 21, 2016 at 2:08 pm

    It's their "choice" to be an adjunct. Really? If there was a true choice wouldn't the vast majority "choose" to be full-time faculty with benefits and equivalent pay? Free marketeers keep using the word "choice", but the choice they offer is usually one where you get to "choose" between homelessness and and marginal survival at $11 an hour. A mighty impressive choice!

    Do they "believe" they're going to get a full-time position, because realistic career expectations wouldn't help universities get cheap grad student labor?

    Or maybe they end up in grad school like a lot of people I know - because the job market was so terrible that the idea of staying in school for another couple of years was their best "choice" at that point in time? Since the media constantly tells us education is always good, and those who don't have it will fall behind, the idea that more education isn't always better comes as a foreign idea to a lot of 22 year olds. An assembly line of cheap grad student labor then gets funneled into adjunct teaching.

    David , September 21, 2016 at 2:44 pm

    Yes, their choice. They can abandon the academic pursuit and choose another career. Most people with advanced degrees do just that.

    I agree that their are way too many grad students and they become the adjuncts that are desperate for full time jobs. But grad students serve an important purpose as cheap labor, particularly in research universities. Why would they want to give that up? Again, this is an issue of information, which is why I posted my letter. If undergrads knew the actual prospects for grad students after they graduate perhaps they would choose a different path. But, grad school and academia are extremely attractive pursuits for many people so they readily put up with all the impediments in the hope of making it as a professor. The reality is that academia has become an avocation, a hobby, rather than a vocation for most people.

    diptherio , September 21, 2016 at 11:59 am

    Here's a thought: maybe if our education system weren't built around fear, we'd be able to present a more united front.

    Consider: instructors are tasked with judging students and, if they grade on the curve, punishing some of them regardless of their skill or effort and often enough this sorting is accomplished through BS methods like high-stakes, time-limited testing. So yeah, sometimes students get resentful of the instructors who get seen as the enemy. And so, they take it out be leaving a bad review.

    The reviews, just like the tests and grading systems, are being used to sort and punish profs. Bad reviews from students can be devastating financially and career-wise, as detailed in the article. So profs get scared and therefore fail to ask much of the students, so as to come off as a "nice guy/gal." The students live in fear and don't learn, and the teachers live in fear and don't teach. But what if we did things differently?

    What if the point of a review process was to improve teaching methods and get feedback from students about what works and what doesn't? What if reviews were done in a way aimed at supporting instructors, rather than censuring them? And what if students were treated the same way. What if, instead of a reprimand and a shaming, students were given support and encouragement (more like Evergreen and Sarah Lawrence)?

    Maybe then we'd stop being afraid of each other and be able to support eachother as we demand an answer to the question of how it is that tuitions keep going up while faculty pay keeps going down. Demand in no uncertain terms that the top Admins take major pay cuts or step down so their secretary can take over for them (with a hefty pay raise, of course, but something reasonable ).

    That's my two sense.

    KYrocky , September 21, 2016 at 1:15 pm

    We are looking at the decades long pursuit of making higher education "more like business". The mantra of privatization and that attitude that segments of our society which served the public: schools, universities, hospitals, departments of governments at all levels, etc., would all be better if they were run as businesses has been proven false a million times over.

    University Boards have, for decades, been stacked with advocates of market based systems which have been imposed on institutions which formerly served their students and the public. Students are no longer viewed as students but as revenue streams. Public funding for higher education has similarly declined as the cult of the marketplace including that institutions serving a public purpose needed to be more self funding. Because forcing them to have more skin in the game would force them to trim the fat and innovate. You know, like Walmart.

    For decades, political contributions bought politicians who in turn mandated that federal student loans had to be administered by banks, thereby siphoning off billions, if not tens of billions, of dollars that could have otherwise gone to students and universities. The politicians also permit these banks to gouge students on interest rates, to pass laws making it harder or impossible to discharge loan debt through bankruptcy, or to refinance their loans. None of these abuses of students served a public interest. All of these abuses exemplify our current model for how to apply business practices to higher education.

    In the business sense, the only concern a University has for its product is its relationship to the revenue stream. A little like the charter school model. Universities have a need for instructors, and in applying the methods of successful business as it is defined today they will seek to fill that labor need at the absolute lowest cost achievable. Those who long for the past are out of luck; universities are never going back. Faculty pay will keep going down as long there are new warm bodies to take the place of those who don't like it, and adjuncts will be squeezed for all that can be wrung from them.

    Adjuncts are nameless, faceless, and entirely forgettable as far the University administration is concerned. The administration will blow as much smoke up adjunct's asses as needed to keep their slots filled. Adjuncts are in an abusive relationship, whether they understand it or not. The abuse is never going to end, as the obstacles are not just the administration and the university Board, but the politicians, the big donors, and the attitudes of our society at large.

    templar555510 , September 21, 2016 at 3:02 pm

    What you have so precisely described is yet another Ponzi scheme. Of course it is because that is what post capitalist Capitalism is .

    Think of it like this : there is approximately 7 billion of us living on planet Earth and between us we can and do produce enough food, clothing and could produce enough housing ( that's another matter ) for all 7 billion.

    So the problem for the capitalist is how do I create the illusion of scarcity upon which Capitalism works. Answer : grab by any and every means possible – legal and illegal , it's all the same thing – the lions share of what already exists ; in other words steal it . That's the 1 % .

    And then con the 99% into believing resources are scarce etc, etc and bending to the will of the 1 %.

    Jim , September 21, 2016 at 3:01 pm

    Most of us continue to hope that we will eventually find a secure/meaningful position somewhere in one of the major institutions that make-up our society.

    This is a false hope–especially in higher education. The University, the large corporation, the particular governmental agency, are now beyond internal reform and we all know this in our bones.

    Somehow we must individually and collectively find the courage and creativity to move, maneuver and survive outside of these institutions–trading in the fear and anxiety of trying to succeed in dying institutions for the fear and anxiety which comes with creating new institutions.

    [Sep 21, 2016] When Capitalism Becomes an Act of War Alternet

    Notable quotes:
    "... traditional ways of life are dissolving as a new class of entrepreneur-warriors are wielding unprecedented power - and changing the global landscape. ..."
    "... It's a huge psychological dent in people's faith in the system. I think what's going to happen in the next few years is huge unemployment in the middle class in America because a lot of their jobs will be outsourced or automated. ..."
    Mar 04, 2015 | AlterNet

    Inside the trauma of globalization.

    Novelist Rana Dasgupta recently turned to nonfiction to explore the explosive social and economic changes in Delhi starting in 1991, when India launched a series of transformative economic reforms. In Capital: The Eruption of Delhi, he describes a city where the epic hopes of globalization have dimmed in the face of a sterner, more elitist world. In Part 1 of an interview with the Institute for New Economic Thinking, Dasgupta traces a turbulent time in which traditional ways of life are dissolving as a new class of entrepreneur-warriors are wielding unprecedented power - and changing the global landscape.

    Lynn Parramore: Why did you decide to move from New York to Delhi in 2000, and then to write a book about the city?

    Rana Dasgupta: I moved to be with my partner who lived in Delhi, and soon realized it was a great place to have landed. I was trying write a novel and there were a lot of people doing creative things. There was a fascinating intellectual climate, all linked to changes in society and the economy. It was 10 years since liberalization and a lot of the impact of that was just being felt and widely sensed.

    There was a sense of opportunity, not any more just on the part of business people, but everyone. People felt that things were really going to change in a deep way - in every part of the political spectrum and every class of society. Products and technology spread, affecting even very poor people. Coke made ads about the rickshaw drivers with their mobile phones -people who had never had access to a landline. A lot of people sensed a new possibility for their own lives.

    Amongst the artists and intellectuals that I found myself with, there were very big hopes for what kind of society Delhi could become and they were very interested in being part of creating that. They were setting up institutions, publications, publishing houses, and businesses. They were thinking new ideas. When I arrived, I felt, this is where stuff is happening. The scale of conversations, the philosophy of change was just amazing.

    LP: You've interviewed many of the young tycoons who emerged during Delhi's transformation. How would you describe this new figure? How do they do business?

    RD: Many of their fathers and grandfathers had run significant provincial businesses. They were frugal in their habits and didn't like to advertise themselves, and anyway their wealth remained local both in its magnitude and its reach. They had business and political associates that they drank with and whose weddings they went to, and so it was a tight-knit kind of wealth.

    But the sons, who would probably be now between 35 and 45, had an entirely different experience. Their adult life happened after globalization. Because their fathers often didn't have the skills or qualifications to tap into the forces of globalization, the sons were sent abroad, probably to do an MBA, so they could walk into a meeting with a management consultancy firm or a bank and give a presentation. When they came back they operated not from the local hubs where their fathers ruled but from Delhi, where they could plug into federal politics and global capital.

    So you have these very powerful combinations of father/son businesses. The sons revere the fathers, these muscular, huge masculine figures who have often done much more risky and difficult work building their businesses and have cultivated relationships across the political spectrum. They are very savvy, charismatic people. They know who to give gifts to, how to do favors.

    The sons often don't have that set of skills, but they have corporate skills. They can talk finance in a kind of international language. Neither skill set is enough on its own by early 2000's: they need each other. And what's interesting about this package is that it's very powerful elsewhere, too. It's kind of a world-beating combination. The son fits into an American style world of business and finance, but the thing about American-style business is that there are lots of things in the world that are closed to it. It's very difficult for an American real estate company or food company to go to the president of an African country and do a deal. They don't have the skills for it. But even if they did, they are legally prevented from all the kinds of practices involved, the bribes and everything.

    This Indian business combination can go into places like Africa and Central Asia and do all the things required. If they need to go to market and raise money, they can do that. But if they need to sit around and drink with some government guys and figure out who are the players that need to be kept happy, they can do that, too. They see a lot of the world open to themselves.

    LP: How do these figures compare to American tycoons during, say, the Gilded Age?

    RD: When American observers see these people they think, well, we had these guys between 1890 and 1920, but then they all kind of went under because there was a massive escalation of state power and state wealth and basically the state declared a kind of protracted war on them.

    Americans think this is a stage of development that will pass. But I think it's not going to pass in our case. The Indian state is never going to have the same power over private interests as the U.S. state because lots of things have to happen. The Depression and the Second World War were very important in creating a U.S. state that was that powerful and a rationale for defeating these private interests. I think those private interests saw much more benefit in consenting to, collaborating in, and producing a stronger U.S. state.

    Over time, American business allied itself with the government, which did a lot to open up other markets for it. In India, I think these private interests will not for many years see a benefit in operating differently, precisely because continents like Africa, with their particular set of attributes, have such a bright future. It's not just about what India's like, but what other places are like, and how there aren't that many people in the world that can do what they can do.

    LP: What has been lost and gained in a place like Delhi under global capitalism?

    RD: Undeniably there has been immense material gain in the city since 1991, including the very poorest people, who are richer and have more access to information. What my book tracks is a kind of spiritual and moral crisis that affects rich and poor alike.

    One kind of malaise is political and economic. Even though the poorest are richer, they have less political influence. In a socialist system, everything is done in the name of the poor, for good or for bad, and the poor occupy center stage in political discourse. But since 1991 the poor have become much less prominent in political and economic ideology. As the proportion of wealth held by the richest few families of India has grown massively larger, the situation is very much like the break-up of the Soviet Union, which leads to a much more hierarchical economy where people closest to power have the best information, contacts, and access to capital. They can just expand massively.

    Suddenly there's a state infrastructure that's been built for 70 years or 60 years which is transferred to the private domain and that is hugely valuable. People gain access to telecommunication systems, mines, land, and forests for almost nothing. So ordinary people say, yes, we are richer, and we have all these products and things, but those making the decisions about our society are not elected and hugely wealthy.

    Imagine the upper-middle-class guy who has been to Harvard, works for a management consultancy firm or for an ad agency, and enjoys a kind of international-style middle-class life. He thinks he deserves to make decisions about how the country is run and how resources are used. He feels himself to be a significant figure in his society. Then he realizes that he's not. There's another, infinitely wealthier class of people who are involved in all kinds of backroom deals that dramatically alter the landscape of his life. New private highways and new private townships are being built all around him. They're sucking the water out of the ground. There's a very rapid and seemingly reckless transformation of the landscape that's being wrought and he has no part in it.

    If he did have a say, he might ask, is this really the way that we want this landscape to look? Isn't there enormous ecological damage? Have we not just kicked 10,000 farmers off their land?

    All these conversations that democracies have are not being had. People think, this exactly what the socialists told us that capitalism was - it's pillage and it creates a very wealthy elite exploiting the poor majority. To some extent, I think that explains a lot of why capitalism is so turbulent in places like India and China. No one ever expected capitalism to be tranquil. They had been told for the better part of a century that capitalism was the imperialist curse. So when it comes, and it's very violent, and everyone thinks, well that's what we expected. One of the reasons that it still has a lot of ideological consensus is that people are prepared for that. They go into it as an act of war, not as an act of peace, and all they know is that the rewards for the people at the top are very high, so you'd better be on the top.

    The other kind of malaise is one of culture. Basically, America and Britain invented capitalism and they also invented the philosophical and cultural furniture to make it acceptable. Places where capitalism is going in anew do not have 200 years of cultural readiness. It's just a huge shock. Of course, Indians are prepared for some aspects of it because many of them are trading communities and they understand money and deals. But a lot of those trading communities are actually incredibly conservative about culture - about what kind of lifestyle their daughters will have, what kinds of careers their sons will have. They don't think that their son goes to Brown to become a professor of literature, but to come back and run the family business.

    LP: What is changing between men and women?

    RD: A lot of the fallout is about families. Will women work? If so, will they still cook and be the kind of wife they're supposed to be? Will they be out on the street with their boyfriends dressed in Western clothes and going to movies and clearly advertising the fact that they are economically independent, sexually independent, socially independent? How will we deal with the backlash of violent crimes that have everything to do with all these changes?

    This capitalist system has produced a new figure, which is the economically successful and independent middle-class woman. She's extremely globalized in the sense of what she should be able to do in her life. It's also created a set of lower-middle-class men who had a much greater sense of stability both in their gender and professional situation 30 years ago, when they could rely on a family member or fellow caste member to keep them employed even if they didn't have any marketable attributes. They had a wife who made sure that the culture of the family was intact - religion, cuisine, that kind of stuff.

    Thirty years later, those guys are not going to get jobs because that whole caste value thing has no place in the very fast-moving market economy. Without a high school diploma, they just have nothing to offer. Those guys in the streets are thinking, I don't have a claim on the economy, or on women anymore because I can't earn anything. Women across the middle classes - and it's not just across India, it's across Asia -are trying to opt out of marriage for as long as they can because they see only a downside. Remaining single allows all kinds of benefits – social, romantic, professional. So those guys are pretty bitter and there's a backlash that can become quite violent. We also have an upswing of Hindu fundamentalism as a way of trying to preserve things. It's very appealing to people who think society is falling apart.

    LP: You've described India's experience of global capitalism as traumatic. How is the trauma distinct in Delhi, and in what ways is it universal?

    RD: Delhi suffers specifically from the trauma of Partition, which has created a distinct society. When India became independent, it was divided into India and Pakistan. Pakistan was essentially a Muslim state, and Hindis and Sikhs left. The border was about 400 kilometers from Delhi, which was a tiny, empty city, a British administrative town. Most of those Hindis and Sikhs settled in Delhi where they were allocated housing as refugees. Muslims went in the other direction to Pakistan, and as we know, something between 1 and 2 million were killed in that event.

    The people who arrived in Delhi arrived traumatized, having lost their businesses, properties, friends, and communities, and having seen their family members murdered, raped and abducted. Like the Jewish Holocaust, everyone can tell the stories and everyone has experienced loss. When they all arrive in Delhi, they have a fairly homogeneous reaction: they're never going to let this happen to them again. They become fiercely concerned with security, physical and financial. They're not interested in having nice neighbors and the lighter things of life. They say, it was our neighbors that killed us, so we're going to trust only our blood and run businesses with our brother and our sons. We're going to build high walls around our houses.

    When the grandchildren of these people grow up, it's a problem because none of this has been exorcised. The families have not talked about it. The state has not dealt with it and wants to remember only that India became independent and that was a glorious moment. So the catastrophe actually becomes focused within families rather than the reverse. A lot of grandchildren are more fearful and hateful of Muslims than the grandparents, who remembered a time before when they actually had very deep friendships with Muslims.

    Parents of my generation grew up with immense silence in their households and they knew that in that silence was Islam - a terrifying thing. When you're one year old, you don't even know yet what Islam is, you just know that it's something which is the greatest horror in the universe.

    The Punjabi businessman is a very distinct species. They have treated business as warfare, and they are still doing it like that 70 years later and they are very good at it. They enter the global economy at a time when it's becoming much less civilized as well. In many cases they succeed not because they have a good idea, but because they know how to seize global assets and resources. Punjabi businessmen are not inventing Facebook. They are about mines and oil and water and food -things that everyone understands and needs.

    In this moment of globalization, the world will have to realize that events like the Partition of India are not local history anymore but global history. Especially in this moment when the West no longer controls the whole system, these traumas explode onto the world and affect all of us, like the Holocaust. They introduce levels of turbulence into businesses and practices that we didn't expect necessarily.

    Then there's the trauma of capitalism itself, and here I think it's important for us to re-remember the West's own history. Capitalism achieved a level of consensus in the second half of the 20th century very accidentally, and by a number of enormous forces, not all of which were intended. There's no guarantee that such consensus will be achieved everywhere in the emerging world. India and China don't have an empire to ship people off to as a safety valve when suffering become immense. They just have to absorb all that stuff.

    For a century or so, people in power in Paris and London and Washington felt that they had to save the capitalist system from socialist revolution, so they gave enormous concessions to their populations. Very quickly, people in the West forgot that there was that level of dissent. They thought that everyone loved capitalism. I think as we come into the next period where the kind of consensus has already been dealt a huge blow in the West, we're going to have to deal with some of those forces again.

    LP: When you say that the consensus on capitalism has been dealt a blow, are you talking about the financial crisis?

    RD: Yes, the sense that the nation-state - I'm talking about the U.S. context - can no longer control global capital, global processes, or, indeed, it's own financial elite.

    It's a huge psychological dent in people's faith in the system. I think what's going to happen in the next few years is huge unemployment in the middle class in America because a lot of their jobs will be outsourced or automated. Then, if you have 30-40 percent unemployment in America, which has always been the ideological leader in capitalism, America will start to re-theorize capitalism very profoundly (and maybe the Institute of New Economic Thinking is part of that). Meanwhile, I think the middle class in India would not have these kinds of problems. It's precisely because American technology and finance are so advanced that they're going to hit a lot of those problems. I think in places like India there's so much work to be done that no one needs to leap to the next stage of making the middle class obsolete. They're still useful.

    Lynn Parramore is contributing editor at AlterNet. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of "Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture." She received her Ph.D. in English and cultural theory from NYU. Follow her on Twitter @LynnParramore.

    [Sep 18, 2016] We Have to Deal With Putin

    Notable quotes:
    "... Moscow did indeed support secessionist pro-Russia rebels in East Ukraine. But did not the U.S. launch a 78-day bombing campaign on tiny Serbia to effect a secession of its cradle province of Kosovo? ..."
    "... Russia is reportedly hacking into our political institutions. If so, it ought to stop. But have not our own CIA, National Endowment for Democracy, and NGOs meddled in Russia's internal affairs for years? ..."
    "... Scores of the world's 190-odd nations are today ruled by autocrats. How does it advance our interests or diplomacy to have congressional leaders yapping "thug" at the ruler of a nation with hundreds of nuclear warheads? ..."
    "... Very good article indeed. Knee-jerk reaction of american politicians and journalists looks extremely strange. As a matter of fact they look like idiots or puppets. ..."
    "... Rubio and Graham are reflexively ready to push US influence everywhere, all the time, with military force always on the agenda, and McCain seems to be in a state of constant agitation ..."
    "... Very sensible article. And as the EU falls further into disarray and possible disintegration, due to migration and other catastrophically mishandled problems, a working partnership with Russia will become even more important. Right now, we treat Russia as an enemy and Saudi Arabia as a friend. That makes no sense at all. ..."
    "... As I've stated many times, Obama the narcissist hates Putin because Putin doesn't play the sycophantic lapdog yapping about how good it is to interact with the "smartest person in the room". ..."
    "... I'm serious. Obama craves sources of narcissistic supply and has visceral contempt for sources of narcissistic injury. I.e., people who may reveal the mediocrity that he actually is. Obama considers Putin a threat in that context. ..."
    "... The downside for the U.S. is that Obama has extended hating Putin to hating Russia. And yes, Washington is flooded with sources of sycophantic narcissistic supply for Obama including the MSM. And they are happy to massage his twisted ego by enthusiastically playing along with the Putin/Russia fear-monger bashing. ..."
    "... P.S. too bad Hillary is saturated with her own psychopathology that portends more Global Cop wreckage. ..."
    "... Anyway, what Buchanan is saying is, "We have to deal with him," not "favor him." The two terms should not be confused. ..."
    "... There are a lot of "allies" of questionable usefulness that the US should stop "favoring," and a lot of competitors (and potential allies in the true sense) out there the US should begin "dealing" with. ..."
    "... Everything the Western elite does is about dollar hegemony and control of energy. ..."
    "... As long as Russia is not a puppet of the globalist banking cartel they will be presented as an "enemy". Standing in the way of energy imperialism was the last straw for the all out hybrid war being launched on Russia now. ..."
    "... If the Western public wasn't so lazy and stupid we would remove the globalists controlling us. Instead people, especially liberals, get in bed with the globalists plans against Russia bc they can't stand Russia is Christian and supports the family. ..."
    "... Every word about Russia allowed in the Western establishment are lies funded and molded by people like Soros and warmongers. This is the reality. Nobody who will speak honestly or positively about Russia is allowed any voice. And scumbag neoliberal globalists like Kasperov are presented as "Russians" while real Russian people are given zero voice. ..."
    "... What the Western elite is doing right now in Ukraine and Syria is reprehensible and its all our fault for letting these people control us. ..."
    Sep 16, 2016 | www.theamericanconservative.com

    ...Arriving on Capitol Hill to repair ties between Trump and party elites, Gov. Mike Pence was taken straight to the woodshed.

    • John McCain told Pence that Putin was a "thug and a butcher," and Trump's embrace of him intolerable.
    • Said Lindsey Graham: "Vladimir Putin is a thug, a dictator … who has his opposition killed in the streets," and Trump's views bring to mind Munich.
    • Putin is an "authoritarian thug," added "Little Marco" Rubio.

    What causes the Republican Party to lose it whenever the name of Vladimir Putin is raised?

    Putin is no Stalin, whom FDR and Harry Truman called "Good old Joe" and "Uncle Joe." Unlike Nikita Khrushchev, he never drowned a Hungarian Revolution in blood. He did crush the Chechen secession. But what did he do there that General Sherman did not do to Atlanta when Georgia seceded from Mr. Lincoln's Union?

    Putin supported the U.S. in Afghanistan, backed our nuclear deal with Iran, and signed on to John Kerry's plan have us ensure a cease fire in Syria and go hunting together for ISIS and al-Qaida terrorists.

    Still, Putin committed "aggression" in Ukraine, we are told. But was that really aggression, or reflexive strategic reaction? We helped dump over a pro-Putin democratically elected regime in Kiev, and Putin acted to secure his Black Sea naval base by re-annexing Crimea, a peninsula that has belonged to Russia from Catherine the Great to Khrushchev. Great powers do such things.

    When the Castros pulled Cuba out of America's orbit, we decided to keep Guantanamo, and dismiss Havana's protests?

    Moscow did indeed support secessionist pro-Russia rebels in East Ukraine. But did not the U.S. launch a 78-day bombing campaign on tiny Serbia to effect a secession of its cradle province of Kosovo?

    ... ... ...

    Russia is reportedly hacking into our political institutions. If so, it ought to stop. But have not our own CIA, National Endowment for Democracy, and NGOs meddled in Russia's internal affairs for years?

    ... ... ...

    Is Putin's Russia more repressive than Xi Jinping's China? Yet, Republicans rarely use "thug" when speaking about Xi. During the Cold War, we partnered with such autocrats as the Shah of Iran and General Pinochet of Chile, Ferdinand Marcos in Manila, and Park Chung-Hee of South Korea. Cold War necessity required it.

    Scores of the world's 190-odd nations are today ruled by autocrats. How does it advance our interests or diplomacy to have congressional leaders yapping "thug" at the ruler of a nation with hundreds of nuclear warheads?

    ... ... ...

    Patrick J. Buchanan is a founding editor of The American Conservative and the author of book The Greatest Comeback: How Richard Nixon Rose From Defeat to Create the New Majority

    Tiktaalik , says: September 16, 2016 at 2:41 am

  • >>During the Cold War, we partnered with such autocrats as the Shah of Iran and General Pinochet of Chile, Ferdinand Marcos in Manila, and Park Chung-Hee of South Korea
  • buttressed could be even more pertinent)
  • Very good article indeed. Knee-jerk reaction of american politicians and journalists looks extremely strange. As a matter of fact they look like idiots or puppets.
  • bacon , says: September 16, 2016 at 5:29 am

    Rubio and Graham are reflexively ready to push US influence everywhere, all the time, with military force always on the agenda, and McCain seems to be in a state of constant agitation whenever US forces are not actively engaged in combat somewhere. They are loud voices, yes, but irrational voices, too.

    Skeptic , says: September 16, 2016 at 9:13 am

    Very sensible article. And as the EU falls further into disarray and possible disintegration, due to migration and other catastrophically mishandled problems, a working partnership with Russia will become even more important. Right now, we treat Russia as an enemy and Saudi Arabia as a friend. That makes no sense at all.

    John Blade Wiederspan , says: September 16, 2016 at 10:18 am

    "Just" states the starvation of the Ukraine is a western lie. The Harvest of Sorrow by Robert Conquest refutes this dangerous falsehood. Perhaps "Just" believes The Great Leap Forward did not lead to starvation of tens of millions in China. After all, this could be another "western lie". So to could be the Armenian genocide in Turkey or slaughter of Communists in Indonesia.

    SteveM , says: September 16, 2016 at 10:23 am

    As I've stated many times, Obama the narcissist hates Putin because Putin doesn't play the sycophantic lapdog yapping about how good it is to interact with the "smartest person in the room".

    I'm serious. Obama craves sources of narcissistic supply and has visceral contempt for sources of narcissistic injury. I.e., people who may reveal the mediocrity that he actually is. Obama considers Putin a threat in that context.

    The downside for the U.S. is that Obama has extended hating Putin to hating Russia. And yes, Washington is flooded with sources of sycophantic narcissistic supply for Obama including the MSM. And they are happy to massage his twisted ego by enthusiastically playing along with the Putin/Russia fear-monger bashing.

    And so the U.S. – Russia relationship is wrecked by the "smartest person in the room".

    P.S. too bad Hillary is saturated with her own psychopathology that portends more Global Cop wreckage.

    blimbax , says: September 16, 2016 at 11:29 am

    John asks, "We also have to deal with our current allies. Whom would Mr. Buchanan like to favor?"

    Well, we could redouble our commitment to our democracy and peace loving friends in Saudi Arabia, we could deepen our ties to those gentle folk in Egypt, and maybe for a change give some meaningful support to Israel. Oh, and our defensive alliances will be becoming so much stronger with Montenegro as a member, we will need to pour more resources into that country.

    Anyway, what Buchanan is saying is, "We have to deal with him," not "favor him." The two terms should not be confused.

    There are a lot of "allies" of questionable usefulness that the US should stop "favoring," and a lot of competitors (and potential allies in the true sense) out there the US should begin "dealing" with.

    Joe the Plutocrat , says: September 16, 2016 at 3:46 pm

    "During the Cold War, we partnered with such autocrats as the Shah of Iran and General Pinochet of Chile, Ferdinand Marcos in Manila, and Park Chung-Hee of South Korea. Cold War necessity required it (funny, you failed to mention Laos, South Vietnam, Nicaragua, Noriega/Panama, and everyone's favorite 9/11 co-conspirator and WMD developer, Saddam Hussein). either way how did these "alliances" work out for the US? really doesn't matter, does it? it is early 21st century, not mid 20th century. there is a school of thought in the worlds of counter-terrorism/intelligence operations, which suggests if you want to be successful, you have to partner with some pretty nasty folks. Trump is being "handled" by an experienced, ruthless (that's a compliment), and focused "operator". unless, of course, Trump is actually the superior operator, in which case, this would be the greatest black op of all time.

    Clint , says: September 16, 2016 at 4:41 pm

    "From Russia With Money - Hillary Clinton, the Russian Reset and Cronyism,"

    "Of the 28 US, European and Russian companies that participated in Skolkovo, 17 of them were Clinton Foundation donors" or sponsored speeches by former President Bill Clinton, Schweizer told The Post.

    http://nypost.com/2016/07/31/report-raises-questions-about-clinton-cash-from-russians-during-reset/

    WakeUp , says: September 16, 2016 at 4:45 pm

    Everything the Western elite does is about dollar hegemony and control of energy. Once you understand that then the (evil)actions of the Western elite make sense. Anyone who stands in the way of those things is an "enemy". This is how they determine an "enemy".

    As long as Russia is not a puppet of the globalist banking cartel they will be presented as an "enemy". Standing in the way of energy imperialism was the last straw for the all out hybrid war being launched on Russia now.

    If the Western public wasn't so lazy and stupid we would remove the globalists controlling us. Instead people, especially liberals, get in bed with the globalists plans against Russia bc they can't stand Russia is Christian and supports the family.

    Every word about Russia allowed in the Western establishment are lies funded and molded by people like Soros and warmongers. This is the reality. Nobody who will speak honestly or positively about Russia is allowed any voice. And scumbag neoliberal globalists like Kasperov are presented as "Russians" while real Russian people are given zero voice.

    What the Western elite is doing right now in Ukraine and Syria is reprehensible and its all our fault for letting these people control us.

    [Sep 18, 2016] Brexit In America: Clinton vs. Trump

    You need to substitute PIC (a.k.a., The Elites or Political Class)) for neoliberal elite for the article to make more sense.
    Notable quotes:
    "... Our nation is in the grip of such poisonous thinking. The DNC with its "Super Delegates" already has a way to control who will be their candidate. In an irony to beat all ironies, the DNC's Super Delegates were able to stop Bernie Sanders... ..."
    "... The reason Trump is still rising (and I believe will win handily) is he clearly represents the original image of America: a self made success story based on capitalism and the free market. ..."
    strata-sphere.com

    This election cycle is so amazing one cannot help but think it has been scripted by some invisible, all-powerful, hand. I mean, how could we have two completely opposite candidates, perfectly reflecting the forces at play in this day and age? It truly is a clash between The Elites and The Masses!

    Main Street vs Wall & K Street.

    The Political Industrial Complex (PIC – a.k.a., The Elites or Political Class) is all up arms over the outsider barging in on their big con. The PIC is beside itself trying to stop Donald Trump from gaining the Presidency, where he will be able to clean out the People's House and the bureaucratic cesspool that has shackled Main Street with political correctness, propaganda, impossibly expensive health care, ridiculous taxes and a national debt that will take generations to pay off.

    The PIC has run amok long enough – illustrated perfectly by the defect ridden democrat candidate: Hillary Clinton. I mean, how could you frame America's choices this cycle any better than this --

    Back in July, Democratic presidential nominee and former Secretary of State Hillary Clinton said, "there is absolutely no connection between anything that I did as secretary of state and the Clinton Foundation."

    On Monday of this week, ABC's Liz Kreutzer reminded people of that statement, as a new batch of emails reveal that there was a connection, and it was cash .

    The Abedin emails reveal that the longtime Clinton aide apparently served as a conduit between Clinton Foundation donors and Hillary Clinton while Clinton served as secretary of state. In more than a dozen email exchanges, Abedin provided expedited, direct access to Clinton for donors who had contributed from $25,000 to $10 million to the Clinton Foundation. In many instances, Clinton Foundation top executive Doug Band, who worked with the Foundation throughout Hillary Clinton's tenure at State, coordinated closely with Abedin. In Abedin's June deposition to Judicial Watch, she conceded that part of her job at the State Department was taking care of " Clinton family matters ."

    This is what has Main Street so fed up with Wall & K street (big business, big government). The Clinton foundation is a cash cow for Clinton, Inc. So while our taxes go up, our debt sky rockets and our health care becomes too expensive to afford, Clan Clinton has made 100's of millions of dollars selling access (and obviously doing favors, because no one spends that kind of money without results).

    The PIC is circling the wagons with its news media arm shrilly screaming anything and everything about Trump as if they could fool Main Street with their worn out propaganda. I seriously doubt it will work. The Internet has broken the information monopoly that allowed the PIC in the not too distant past to control what people knew and thought.

    Now we have cracks in the PIC's media spin, through which we can see the ugly truth about our modern democracy :

    Massachusetts has a long history of using the power of incumbency to cripple political opponents. In fact, it's a leading state for such partisan gamesmanship. Dating back to 1812, when Gov. Elbridge Gerry signed into law a redistricting plan for state Senate districts that favored his Democratic-Republican Party, the era of Massachusetts rule rigging began. It has continued, unabated, ever since.

    Given the insider dealing and venality that epitomized the 2016 presidential primary process, I'd hoped that politicians would think twice before abusing the power of the state for political purposes. Galvin quickly diminished any such prospect of moderation in the sketchy behavior of elected officials. He hid his actions behind the thin veil of fiscal responsibility. He claimed to be troubled by the additional $56,000 he was going to have to spend printing ballots to accommodate Independent voters. He conveniently ignored the fact that thousands of these UIP members have been paying taxes for decades to support a primary process that excludes them.

    In my home state of Kansas, where my 2014 candidacy threatened to take a U.S. Senate seat from the Republicans, they responded predictably. Instead of becoming more responsive to voters, our state's highly partisan secretary of state, Kris Kobach, introduced legislation that would bring back one of the great excesses of machine politics: straight party-line voting – which is designed to discourage voters from considering an Independent candidacy altogether. Kobach's rationale, like Galvin's, was laughable. He described it as a "convenience" for voters.

    The article goes on to note these acts by the PIC are an affront to the large swath of the electorate who really choose who will win elections:

    In a recent Gallup poll, 60 percent of Americans said they do not feel well-represented by the Democrats and Republicans and believe a third major party is needed. Fully 42 percent of Americans now describe themselves as politically independent .

    That means the two main parties are each smaller in size than the independents (68% divided by 2 equals 34%), which is why independents pick which side will win. If the PIC attacks this group – guess what the response will look like?

    I recently had a discussion with someone from Washington State who is pretty much my opposite policy-wise. She is a deep blue democrat voter, whereas I am a deep purple independent who is more small-government Tea Party than conservative-GOP. She was lamenting the fact that her state has caucuses, which is one method to blunt Main Street voters from having a say. It was interesting that we quickly and strongly agreed on one thing above all else: open primaries. We both knew that if the voters had the only say in who are leaders would be, all sides could abide that decision easily. It is when PIC intervenes that things get ugly.

    Open primaries make the political parties accountable to the voters. Open primaries make it harder for the PIC to control who gets into office, and reduces the leverage of big donors. Open primaries reflect the will of the states and the nation – not the vested interests (read bank accounts) of the PIC.

    That is why you when you hear someone oppose open primaries , it is a clear sign they are from the Political Industrial Complex and not from Main Street. For example:

    Without doubt, one of the most troublesome aspects of the current system is its gross inefficiency. Whereas generations ago selecting a nominee took relatively little time and money , today's process has resulted in a near-permanent campaign. Because would-be nominees have to win primaries and open caucuses in several states, they must put together vast campaign apparatuses that spread across the nation, beginning years in advance and raising tens of millions of dollars.

    The length of the campaign alone keeps many potential candidates on the sidelines. In particular, those in positions of leadership at various levels of our government cannot easily put aside their duties and shift into full-time campaign mode for such an extended period.

    It is amazing how this kind of thinking can be considered legitimate. Note how independent voters are evil in the mind of the PIC, and only government leaders need apply. Not surprising, their answer is to control access to the ballot:

    During the week of Lincoln's birthday (February 12), the Republican Party would hold a Republican Nomination Convention that would borrow from the process by which the Constitution was ratified. Delegates to the convention would be selected by rank-and-file Republicans in their local communities , and those chosen delegates would meet, deliberate, and ultimately nominate five people who, if willing, would each be named as one of the party's officially sanctioned finalists for its presidential nomination. Those five would subsequently debate one another a half-dozen times.

    Brexit became a political force because the European Union was not accountable to the voters. The EU members are also selected by members of the European PIC – not citizens of the EU. Without direct accountability to all citizens (a.k.a. – voters) there is no democracy – just a variant of communism:

    During the Russian Civil War (1918–1922), the Bolsheviks nationalized all productive property and imposed a policy named war communism, which put factories and railroads under strict government control, collected and rationed food, and introduced some bourgeois management of industry . After three years of war and the 1921 Kronstadt rebellion, Lenin declared the New Economic Policy (NEP) in 1921, which was to give a "limited place for a limited time to capitalism." The NEP lasted until 1928, when Joseph Stalin achieved party leadership, and the introduction of the Five Year Plans spelled the end of it. Following the Russian Civil War, the Bolsheviks, in 1922, formed the Union of Soviet Socialist Republics (USSR), or Soviet Union, from the former Russian Empire.

    Following Lenin's democratic centralism, the Leninist parties were organized on a hierarchical basis, with active cells of members as the broad base; they were made up only of elite cadres approved by higher members of the party as being reliable and completely subject to party discipline .

    Emphasis mine. Note how communism begins with government control of major industries. The current con job about Global Warming is the cover-excuse for a government grab of the energy sector. Obamacare is an attempt to grab the healthcare sector. And Wall Street already controls the banking sector. See a trend yet?

    This is then followed by imposing a rigid hierarchy of "leaders" at all levels of politics – so no opposing views can gain traction. Party discipline uber alles!

    Our nation is in the grip of such poisonous thinking. The DNC with its "Super Delegates" already has a way to control who will be their candidate. In an irony to beat all ironies, the DNC's Super Delegates were able to stop Bernie Sanders...

    The reason Trump is still rising (and I believe will win handily) is he clearly represents the original image of America: a self made success story based on capitalism and the free market.

    His opponent is the epitome of the Political Industrial Complex – a cancer that has eaten away America's free market foundation and core strength. A person who wants to impose government on the individual.

    How could the choice be any starker, any clearer?

    [Sep 18, 2016] Robert Nisbet's Conservatism

    Notable quotes:
    "... Centralization, egalitarianism, and coercive multiculturalism were not the right answers, Nisbet would reiterate throughout his career. ..."
    "... Localism, kinship, and liberty make a society secure. Leviathan smothers the human spirit through sheer size, regulation, bureaucracy, and fiat. ..."
    Sep 18, 2016 | www.theamericanconservative.com

    The American Conservative

    In one of our first "adult" conversations, when I asked earnestly about equality, Nisbet insisted on making a bright-line distinction between what was possible, equal opportunity and equality before the law, and what was not, a coercive dream of managed, equal outcomes.

    During the McGovern years, contesting equality's self-evident virtues was shocking coming from a senior professor and established social critic. But as I listened to Nisbet's faultless reasoning, that was the moment, I realized a good while later, I became a "conservative" in mind.

    The growth of national government during the 1960s through massive military and administrative expansion, Nisbet feared, prefigured "the centralized state of the masses," empowered by the "crumbling of the pre-democratic strata of values and institutions" that "alone made political freedom possible." Worse, he thought, a growing number of clients might welcome its power and largess at the expense of family and freedom.

    Centralization, egalitarianism, and coercive multiculturalism were not the right answers, Nisbet would reiterate throughout his career. What induced social harmony and individual fulfillment, he observed-long before Robert Putnam wrote Bowling Alone (2000)-were communities of churches and schools, volunteer groups, families, and tribes. Localism, kinship, and liberty make a society secure. Leviathan smothers the human spirit through sheer size, regulation, bureaucracy, and fiat.

    If unobtainable forms of equality become cornerstones of national policy, he argued, the onslaught on institutions to try to achieve the impossible would be unlimited. Intrusive state power promising to cure inequality would let government take on powers formerly reserved to other authorities. Stripped of religion, the public was imbibing liberal elixirs that rendered individuals blameless, turning them into victims of a society that "glistens with corruption," he once said to me. Guilt and wishful thinking quickened the politics of equality.

    ... ... ...

    The success of his 1975 book, Twilight of Authority , was rather a surprise. The writing, as with much of Nisbet, ranges from dense and stilted to lucid and aphoristic. It is not an easy book. But its discursive, prescient, panoramic indictment of shifting authorities found a distinguished audience, and it drew him further into debate over socio-cultural policies.

    ... ... ...

    Nisbet had no patience for sloth. His youthful circumstances had been Depression rough, and he escaped a troubled household. With studied poise, he was unfailingly civil, with measured, formal manners, and considerable sangfroid.

    He thought that boredom was civilization's number-one self-poisoner. Wealth and leisure could undermine the collective good sense of the masses, he felt, stimulating euphoria at a cost. Efforts to offset boredom-through video games, television, sports, pornography, or drugs-could be fatal to community. Facebook's artificial communities and the politics of Twitter, he might say, give the illusion of social cement while causing the real thing to crack.

    Much of what Nisbet foresaw decades ago has come to be. Americans surf big-screen HDTV channels, seeking relief and distraction. Hoping politics will make things right, the nation follows the plot like a serial-some on Fox, others on CNN-accepting politics as a televised reality show.

    Gilbert T. Sewall, director of the American Textbook Council, is co-author of The USA Since 1945: After Hiroshima and editor of The Eighties: A Reader .

    [Sep 18, 2016] The dynamic interaction of neoliberalism and cultural nationalism

    Notable quotes:
    "... cultural nationalism is the only ideology capable of being a legitimising ideology under the prevailing global and national political economy. ..."
    "... Neoliberalism cannot perform this role since its simplicities make it harsh not just towards the lower orders, but give it the potential for damaging politically important interests amongst capitalist classes themselves. ..."
    "... In this form, cultural nationalism provides national ruling classes a sense of their identity and purpose, as well as a form of legitimation among thelower orders. ..."
    "... As Gramsci said, these are the main functions of every ruling ideology. Cultural nationalism masks, and to a degree resolves, the intense competition between capitals over access to the state for support domestically and in the international arena – in various bilateral and multilateral fora – where it bargainsfor the most favoured national capitalist interests within the global and imperial hierarchy. ..."
    Sep 18, 2016 | www.scribd.com

    Neoliberal Hegemony

    This is where cultural nationalism comes in. Only it can serve to mask, and bridge, the divides within the 'cartel of anxiety' in a neoliberal context.

    Cultural nationalism is a nationalism shorn of its civic-egalitarian and developmentalist thrust, one reduced to its cultural core. It is structured around the culture of thee conomically dominant classes in every country, with higher or lower positions accorded to other groups within the nation relative to it. These positions correspond, on the whole, to the groups' economic positions, and as such it organises the dominant classes, and concentric circles of their allies, into a collective national force. It also gives coherence to, and legitimises, the activities of the nation-state on behalf of capital, or sections thereof, in the international sphere.

    Indeed, cultural nationalism is the only ideology capable of being a legitimising ideology under the prevailing global and national political economy.

    Neoliberalism cannot perform this role since its simplicities make it harsh not just towards the lower orders, but give it the potential for damaging politically important interests amongst capitalist classes themselves. The activities of the state on behalf of this or that capitalist interest necessarily exceed the Spartan limits that neoliberalism sets. Such activities can only be legitimised as being 'in the national interest.'

    Second, however, the nationalism that articulates these interests is necessarily different from, but can easily (and given its function as a legitimising ideology, it must be said, performatively) be mis-recognised as, nationalism as widely understood: as being in some real sense in the interests of all members of the nation. In this form, cultural nationalism provides national ruling classes a sense of their identity and purpose, as well as a form of legitimation among thelower orders.

    As Gramsci said, these are the main functions of every ruling ideology. Cultural nationalism masks, and to a degree resolves, the intense competition between capitals over access to the state for support domestically and in the international arena – in various bilateral and multilateral fora – where it bargainsfor the most favoured national capitalist interests within the global and imperial hierarchy.

    Except for a commitment to neoliberal policies, the economic policy content of this nationalism cannot be consistent: within the country, and inter-nationally, the capitalist system is volatile and the positions of the various elements of capital in the national and international hierarchies shift constantly as does the economic policy of cultural nationalist governments. It is this volatility that also increases the need for corruption – since that is how competitive access of individual capitals to the state is today organised.

    Whatever its utility to the capitalist classes, however, cultural nationalism can never have a settled or secure hold on those who are marginalised or sub-ordinated by it. In neoliberal regimes the scope for offering genuine economic gains to the people at large, however measured they might be, is small.

    This is a problem for right politics since even the broadest coalition of the propertied can never be an electoral majority, even a viable plurality. This is only in the nature of capitalist private property. While the left remains in retreat or disarray, elec-toral apathy is a useful political resource but even where, as in most countries, political choices are minimal, the electorate as a whole is volatile. Despite, orperhaps because of, being reduced to a competition between parties of capital, electoral politics in the age of the New Right entails very large electoral costs, theextensive and often vain use of the media in elections and in politics generally, and political compromises which may clash with the high and shrilly ambitiou sdemands of the primary social base in the propertied classes. Instability, uncertainty ...

    [Sep 18, 2016] What is "Globalization" and "Free Trade" really?

    Notable quotes:
    "... What is "Globalization" and "Free Trade" really?… Does it encompass the slave trade, trading in narcotics, deforestation and export of a nation's tropical hardwood forests, environmentally damaging transnational oil pipelines or coal ports, fisheries depletion, laying off millions of workers and replacing them and the products they make with workers and products made in a foreign country, trading with an enemy, investing capital in a foreign country through a subsidiary or supplier that abuses its workers to the point that some commit suicide, no limits on or regulation of financial derivatives and transnational financial intermediaries?… the list is endless. ..."
    "... As always, the questions are "Cui bono?"… "Who benefits"?… How and Why they benefit?… Who selects the short-term "Winners" and "Losers"? And WRT those questions, the final sentence of this post hints at its purpose. ..."
    "... Yeah, how is European colonialism - starting in, what, like the 15th century, or something - not "globalisation"? What about the Roman and Persian and Selucid empires? Wasn't that globalisation? I think we've pretty much always lived in a globalised world, one way or another (if "globalised world" even makes sense). ..."
    "... Bring back the broader, and more meaningful conception of Political Economy and some actual understanding can be gained. The study of economics cannot be separated from the political dimension of society. Politics being defined as who gets what in social interactions. ..."
    "... The neoliberal experiment has run its course. Milton Friedman and his tribe had their alternative plan ready to go and implemented it when they could- to their great success. The best looting system developed-ever. This system only works with the availability of abundant resources and the mental justifications to support that gross exploitation. Both of which are reaching limits. ..."
    "... If only the Milton Friedman tribe had interested itself in sports instead of economics. They could have argued that referees and umpires should be removed from the game for greater efficiency of play, and that sports teams would follow game rules by self-regulation. ..."
    "... Wouldn't the whole thing just work out more efficiently if you leave traffic lights and rules out of it? Just let everyone figure it out at each light, survival of the fittest. ..."
    "... With increasingly free movement of people as tourists whose spending impacts nations GDP, where does it fit in to discussions on globalization and trade? ..."
    www.nakedcapitalism.com
    Chauncey Gardiner

    What is "Globalization" and "Free Trade" really?… Does it encompass the slave trade, trading in narcotics, deforestation and export of a nation's tropical hardwood forests, environmentally damaging transnational oil pipelines or coal ports, fisheries depletion, laying off millions of workers and replacing them and the products they make with workers and products made in a foreign country, trading with an enemy, investing capital in a foreign country through a subsidiary or supplier that abuses its workers to the point that some commit suicide, no limits on or regulation of financial derivatives and transnational financial intermediaries?… the list is endless.

    As always, the questions are "Cui bono?"… "Who benefits"?… How and Why they benefit?… Who selects the short-term "Winners" and "Losers"? And WRT those questions, the final sentence of this post hints at its purpose.

    diptherio

    Yeah, how is European colonialism - starting in, what, like the 15th century, or something - not "globalisation"? What about the Roman and Persian and Selucid empires? Wasn't that globalisation? I think we've pretty much always lived in a globalised world, one way or another (if "globalised world" even makes sense).

    Norb

    Bring back the broader, and more meaningful conception of Political Economy and some actual understanding can be gained. The study of economics cannot be separated from the political dimension of society. Politics being defined as who gets what in social interactions.

    What folly. All this complexity and strident study of minutia to bring about what end? Human history on this planet has been about how societies form, develop, then recede form prominence. This flow being determined by how well the society provided for its members or could support their worldview. Talk about not seeing the forest for the trees.

    The neoliberal experiment has run its course. Milton Friedman and his tribe had their alternative plan ready to go and implemented it when they could- to their great success. The best looting system developed-ever. This system only works with the availability of abundant resources and the mental justifications to support that gross exploitation. Both of which are reaching limits.

    Only by thinking, and communicating in the broader terms of political economy can we hope to understand our current conditions. Until then, change will be difficult to enact. Hard landings for all indeed.

    flora

    If only the Milton Friedman tribe had interested itself in sports instead of economics. They could have argued that referees and umpires should be removed from the game for greater efficiency of play, and that sports teams would follow game rules by self-regulation.

    LA Mike September 17, 2016 at 8:15 pm

    While in traffic, I was thinking about that today. For some time now, I've viewed the traffic intersection as being a good example of the social contract. We all agree on its benefits. But today, I thought about it in terms of the Friedman Neoliberals.

    Why should they have to stop at red lights. Wouldn't the whole thing just work out more efficiently if you leave traffic lights and rules out of it? Just let everyone figure it out at each light, survival of the fittest.

    sd

    Something I have wondered for some time, how does tourism fit into trade? With increasingly free movement of people as tourists whose spending impacts nations GDP, where does it fit in to discussions on globalization and trade?

    I Have Strange Dreams

    Other things to consider:
    – negative effects of immigration (skilled workers leave developing countries where they are most needed)
    – environmental pollution
    – destruction of cultures/habitats
    – importation of western diet leading to decreased health
    – spread of disease (black death, hiv, ebola, bird flu)
    – resource wars
    – drugs
    – happiness
    How are these "externalities" calculated?

    [Sep 16, 2016] ITT Tech Is Officially Closing

    Sep 16, 2016 | news.slashdot.org
    (gizmodo.com) 419 Posted by manishs on Tuesday September 06, 2016 @12:40PM from the goodbye dept. Reader Joe_Dragon shares a Gizmodo report: ITT Technical Institute is officially closing all of its campuses following federal sanctions imposed against the company. The for-profit college announced the changes in a statement: "It is with profound regret that we must report that ITT Educational Services, Inc. will discontinue academic operations at all of its ITT Technical Institutes permanently after approximately 50 years of continuous service . With what we believe is a complete disregard by the U.S. Department of Education for due process to the company, hundreds of thousands of current students and alumni and more than 8,000 employees will be negatively affected."
    ITT Tech announced it was closing all of its campuses just one week after it stopped enrolling students following a federal crackdown on for-profit colleges. ITT Tech and other higher education companies like it have been widely criticized for accepting billions of dollars in government grants and loans while failing to provide adequate job training for its students. Last year, ITT Tech received an estimated $580 million in federal money (aka taxpayer dollars), according to the Department of Education.

    [Sep 16, 2016] University of California's Outsourcing Is Wrong, Says US Lawmaker

    Sep 16, 2016 | news.slashdot.org
    (computerworld.com) 338 Posted by manishs on Friday September 09, 2016 @01:14PM from the big-questions dept. Earlier this week, University of California hired India-based IT company HCL to outsource some of its work offshore . As part of the announcement, it announced that it was laying off 17 percent of UCSF's total IT staff. The U.S. lawmaker, Rep. Zoe Lofgren (D-Calif) and the IEEE-USA find the outsourcing job "wrong." dcblogs writes: A decision by the University of California to lay off IT employees and send their jobs overseas is under fire from U.S. Rep. Zoe Lofgren (D-Calif) and the IEEE-USA. "How are they [the university] going to tell students to go into STEM fields when they are doing as much as they can to do a number on the engineers in their employment?" said U.S. Rep. Zoe Lofgren (D-Calif). Peter Eckstein, the president of the IEEE-USA, said what the university is doing "is just one more sad example of corporations, a major university system in this case, importing non-Americans to eliminate American IT jobs." The university recently informed about 80 IT workers at its San Francisco campus, including contract employees and vendor contractors, that it hired India-based HCL, under a $50 million contract, to manage infrastructure and networking-related services. The affected employees will leave their jobs in February, after they train their contractor replacements.

    University of California Hires India-Based IT Outsourcer, Lays Off Tech Workers (computerworld.com) 618

    Posted by BeauHD on Wednesday September 07, 2016 @11:30PM from the outsourced dept.
    dcblogs writes from a report via Computerworld: The University of California is laying off a group of IT workers at its San Francisco campus as part of a plan to move work offshore. Laying off IT workers as part of a shift to offshore is somewhere between rare and unheard-of in the public sector. The layoffs will happen at the end of February, but before the final day arrives the IT employees expect to train foreign replacements from India-based IT services firm HCL. The firm is working under a university contract valued at $50 million over five years. This layoff affects 17% of UCSF's total IT staff, broken down this way: 49 IT permanent employees will lose their jobs, along with 12 contract employees and 18 vendor contractors. This number also includes 18 vacant IT positions that won't be filled, according to the university. Governments and publicly supported institutions, such as UC, have contracted with offshore outsourcers, but usually it's for new IT work or to supplement an existing project. The HCL contract with UCSF can be used by other UC campuses, which means the layoffs may expand across its 10 campuses. HCL is a top user of H-1B visa workers.

    [Sep 16, 2016] ITT Tech Is Officially Closing

    Sep 16, 2016 | news.slashdot.org
    (gizmodo.com) 419 Posted by manishs on Tuesday September 06, 2016 @12:40PM from the goodbye dept. Reader Joe_Dragon shares a Gizmodo report: ITT Technical Institute is officially closing all of its campuses following federal sanctions imposed against the company. The for-profit college announced the changes in a statement: "It is with profound regret that we must report that ITT Educational Services, Inc. will discontinue academic operations at all of its ITT Technical Institutes permanently after approximately 50 years of continuous service . With what we believe is a complete disregard by the U.S. Department of Education for due process to the company, hundreds of thousands of current students and alumni and more than 8,000 employees will be negatively affected."
    ITT Tech announced it was closing all of its campuses just one week after it stopped enrolling students following a federal crackdown on for-profit colleges. ITT Tech and other higher education companies like it have been widely criticized for accepting billions of dollars in government grants and loans while failing to provide adequate job training for its students. Last year, ITT Tech received an estimated $580 million in federal money (aka taxpayer dollars), according to the Department of Education.

    [Sep 16, 2016] We Need to Move on from Existing Theories of the Economy

    Notable quotes:
    "... [Dave Elder-Vass accepted my invitation to write a response to my discussion of his recent book, ..."
    "... Profit and Gift in the Digital Economy ..."
    "... ). Elder-Vass is Reader in sociology at Loughborough University and author as well of ..."
    "... The Causal Power of Social Structures: Emergence, Structure and Agency ..."
    "... The Reality of Social Construction ..."
    "... , discussed ..."
    "... . Dave has emerged as a leading voice in the philosophy of social science, especially in the context of continuing developments in the theory of critical realism. Thanks, Dave!] ..."
    "... Profit and Gift in the Digital Economy ..."
    "... Financial Times ..."
    "... the argument for Pareto optimality of real market systems is patently false, but it continues to be trotted out constantly. ..."
    Sep 16, 2016 | economistsview.typepad.com
    by Dave Elder-Vass at Understanding Society: September 15, 2016
    Guest post by Dave Elder-Vass : [Dave Elder-Vass accepted my invitation to write a response to my discussion of his recent book, Profit and Gift in the Digital Economy ( link ). Elder-Vass is Reader in sociology at Loughborough University and author as well of The Causal Power of Social Structures: Emergence, Structure and Agency and The Reality of Social Construction , discussed here and here . Dave has emerged as a leading voice in the philosophy of social science, especially in the context of continuing developments in the theory of critical realism. Thanks, Dave!]

    We need to move on from existing theories of the economy

    Let me begin by thanking Dan Little for his very perceptive review of my book Profit and Gift in the Digital Economy . As he rightly says, it's more ambitious than the title might suggest, proposing that we should see our economy not simply as a capitalist market system but as a collection of "many distinct but interconnected practices". Neither the traditional economist's focus on firms in markets nor the Marxist political economist's focus on exploitation of wage labour by capital is a viable way of understanding the real economy, and the book takes some steps towards an alternative view.

    Both of those perspectives have come to narrow our view of the economy in multiple dimensions. Our very concept of the economy has been derived from the tradition that began as political economy with Ricardo and Smith then divided into the Marxist and neoclassical traditions (of course there are also others, but they are less influential). Although these conflict radically in some respects they also share some problematic assumptions, and in particular the assumption that the contemporary economy is essentially a capitalist market economy, characterised by the production of commodities for sale by businesses employing labour and capital. As Gibson-Graham argued brilliantly in their book The End Of Capitalism (As We Knew It): A Feminist Critique of Political Economy , ideas seep into the ways in which we frame the world, and when the dominant ideas and the main challengers agree on a particular framing of the world it is particularly difficult for us to think outside of the resulting box. In this case, the consequence is that even critics find it difficult to avoid thinking of the economy in market-saturated terms.

    The most striking problem that results from this (and one that Gibson-Graham also identified) is that we come to think that only this form of economy is really viable in our present circumstances. Alternatives are pie in the sky, utopian fantasies, which could never work, and so we must be content with some version of capitalism – until we become so disillusioned that we call for its complete overthrow, and assume that some vague label for a better system can be made real and worthwhile by whoever leads the charge on the Bastille. But we need not go down either of these paths once we recognise that the dominant discourses are wrong about the economy we already have.

    To see that, we need to start defining the economy in functional terms: economic practices are those that produce and transfer things that people need, whether or not they are bought and sold. As soon as we do that, it becomes apparent that we are surrounded by non-market economic practices already. The book highlights digital gifts – all those web pages that we load without payment, Wikipedia's free encyclopaedia pages, and open source software, for example. But in some respects these pale into insignificance next to the household and family economy, in which we constantly produce things for each other and transfer them without payment. Charities, volunteering and in many jurisdictions the donation of blood and organs are other examples.

    If we are already surrounded by such practices, and if they are proliferating in the most dynamic new areas of our economy, the idea that they are unworkably utopian becomes rather ridiculous. We can then start to ask questions about what forms of organising are more desirable ethically. Here the dominant traditions are equally warped. Each has a standard argument that is trotted out at every opportunity to answer ethical questions, but in reality both standard arguments operate as means of suppressing ethical discussions about economic questions. And both are derived from an extraordinarily narrow theory of how the economy works.

    For the mainstream tradition, there is one central mechanism in the economy: price equilibration in the markets, a process in which prices rise and fall to bring demand and supply into balance. If we add on an enormous list of tenuous assumptions (which economists generally admit are unjustified, and then continue to use anyway), this leads to the theory of Pareto optimality of market outcomes: the argument that if we used some other system for allocating economic benefits some people would necessarily be worse off. This in turn becomes the central justification for leaving allocation to the market (and eliminating 'interference' with the market).

    There are many reasons why this argument is flawed. Let me mention just one. If even one market is not perfectly competitive, but instead is dominated by a monopolist or partial monopolist, then even by the standards of economists a market system does not deliver Pareto optimality, and an alternative system might be more efficient. And in practice capitalists constantly strive to create monopolies, and frequently succeed! Even the Financial Times recognises this: in today's issue (Sep 15 2016) Philip Stevens argues, "Once in a while capitalism has to be rescued from the depredations of, well, capitalists. Unconstrained, enterprise curdles into monopoly, innovation into rent-seeking. Today's swashbuckling "disrupters" set up tomorrow's cosy cartels. Capitalism works when someone enforces competition; and successful capitalists do not much like competition".

    So the argument for Pareto optimality of real market systems is patently false, but it continues to be trotted out constantly. It is presented as if it provides an ethical justification for the market economy, but its real function is to suppress discussion of economic ethics: if the market is inherently good for everyone then, it seems, we don't need to worry about the ethics of who gets what any more.

    The Marxist tradition likewise sees one central mechanism in the economy: the extraction of surplus from wage labour by capitalists. Their analysis of this mechanism depends on the labour theory of value, which is no more tenable that mainstream theories of Pareto optimality (for reasons I discuss in the book). Marxists consistently argue as if any such extraction is ethically reprehensible. Marx himself never provides an ethical justification for such a view. On the contrary, he claims that this is a scientific argument and disowns any ethical intent. Yet it functions in just the same way as the argument for Pareto optimality: instead of encouraging ethical debate about who should get what in the economy, Marxists reduce economic ethics to the single question of the need to prevent exploitation (narrowly conceived) of productive workers.

    We need to sweep away both of these apologetics, and recognise that questions of who gets what are ethical issues that are fundamental to justice, legitimacy, and political progress in contemporary societies. And that they are questions that don't have easy 'one argument fits all' answers. To make progress on them we will have to make arguments about what people need and deserve that recognise the complexity of their social situations. But it doesn't take a great deal of ethical sophistication to recognise that the 1% have too much when many in the lower deciles are seriously impoverished, and that the forms of impoverishment extend well beyond underpaying for productive labour.

    I'm afraid that I have written much more than I intended to, and still said very little about the steps I've taken in the book towards a more open and plausible way of theorising how the economy works. I hope that I've at least added some more depth to the reasons Dan picked out for attempting that task.

    Peter K. : , Thursday, September 15, 2016 at 01:37 PM
    "This in turn becomes the central justification for leaving allocation to the market (and eliminating 'interference' with the market)."

    Krugman is a neoliberal, although a softer, kinder neoliberal much better than Mankiw, Cowen or the Republicans.

    "pgl -> Peter K....

    Please find me a Krugman discussion where he says nothing can be done about income inequality. This is so straw man that the winds have blown this stupid lie away.

    Reply Thursday, September 15, 2016 at 12:59 PM"

    http://www.nytimes.com/2016/08/15/opinion/wisdom-courage-and-the-economy.html

    Wisdom, Courage and the Economy
    by Paul Krugman
    AUG. 15, 2016

    It's fantasy football time in political punditry, as commentators try to dismiss Hillary Clinton's dominance in the polls - yes, Clinton Derangement Syndrome is alive and well - by insisting that she would be losing badly if only the G.O.P. had nominated someone else. We will, of course, never know. But one thing we do know is that none of Donald Trump's actual rivals for the nomination bore any resemblance to their imaginary candidate, a sensible, moderate conservative with good ideas.

    Let's not forget, for example, what Marco Rubio was doing in the memorized sentence he famously couldn't stop repeating: namely, insinuating that President Obama is deliberately undermining America. It wasn't all that different from Donald Trump's claim that Mr. Obama founded ISIS. And let's also not forget that Jeb Bush, the ultimate establishment candidate, began his campaign with the ludicrous assertion that his policies would double the American economy's growth rate.

    Which brings me to my main subject: Mrs. Clinton's economic vision, which she summarized last week. It's very much a center-left vision: incremental but fairly large increases in high-income tax rates, further tightening of financial regulation, further strengthening of the social safety net.

    It's also a vision notable for its lack of outlandish assumptions. Unlike just about everyone on the Republican side, she isn't justifying her proposals with claims that they would cause a radical quickening of the U.S. economy. As the nonpartisan Tax Policy Center put it, she's "a politician who would pay for what she promises."

    So here's my question: Is the modesty of the Clinton economic agenda too much of a good thing? Should accelerating U.S. economic growth be a bigger priority?

    For while the U.S. has done reasonably well at recovering from the 2007-2009 financial crisis, longer-term economic growth is looking very disappointing. Some of this is just demography, as baby boomers retire and growth in the working-age population slows down. But there has also been a somewhat mysterious decline in labor force participation among prime-age adults and a sharp drop in productivity growth.

    The result, according to the Congressional Budget Office, is that the growth rate of potential G.D.P. - what the economy could produce at full employment - has declined from around 3.5 percent per year in the late 1990s to around 1.5 percent now. And some people I respect believe that trying to get that rate back up should be a big goal of policy.

    But as I was trying to think this through, I realized that I had Reinhold Niebuhr's famous Serenity Prayer running through my head: "Grant me the serenity to accept the things I cannot change, courage to change the things I can, and wisdom to know the difference." I know, it's somewhat sacrilegious applied to economic policy, but still.

    After all, what do we actually know how to do when it comes to economic policy? We do, in fact, know how to provide essential health care to everyone; most advanced countries do it. We know how to provide basic security in retirement. We know quite a lot about how to raise the incomes of low-paid workers.

    I'd also argue that we know how to fight financial crises and recessions, although political gridlock and deficit obsession has gotten in the way of using that knowledge.

    On the other hand, what do we know about accelerating long-run growth? According to the budget office, potential growth was pretty stable from 1970 to 2000, with nothing either Ronald Reagan or Bill Clinton did making much obvious difference. The subsequent slide began under George W. Bush and continued under Mr. Obama. This history suggests no easy way to change the trend.

    Now, I'm not saying that we shouldn't try. I'd argue, in particular, for substantially more infrastructure spending than Mrs. Clinton is currently proposing, and more borrowing to pay for it. This might significantly boost growth. But it would be unwise to count on it.

    Meanwhile, I don't think enough people appreciate the courage involved in focusing on things we actually know how to do, as opposed to happy talk about wondrous growth.

    When conservatives promise fantastic growth if we give them another chance at Bushonomics, one main reason is that they don't want to admit how much they would have to cut popular programs to pay for their tax cuts. When centrists urge us to look away from questions of distribution and fairness and focus on growth instead, all too often they're basically running away from the real issues that divide us politically.

    So it's actually quite brave to say: "Here are the things I want to do, and here is how I'll pay for them. Sorry, some of you will have to pay higher taxes." Wouldn't it be great if that kind of policy honesty became the norm?

    Peter K. -> Peter K.... , Thursday, September 15, 2016 at 01:39 PM
    "For while the U.S. has done reasonably well at recovering from the 2007-2009 financial crisis,"

    Reasonably well?

    "Now, I'm not saying that we shouldn't try. I'd argue, in particular, for substantially more infrastructure spending than Mrs. Clinton is currently proposing, and more borrowing to pay for it. "

    Then why was he for Hillary over Bernie Sanders who did campaign on substantially more infrastructure spending?

    Instead Krugman argues that we need to lower our hopes and expectations.

    "According to the budget office, potential growth was pretty stable from 1970 to 2000, with nothing either Ronald Reagan or Bill Clinton did making much obvious difference. "

    So the market price mechanism rules and we government can't do much?

    Neoliberal.

    Peter K. -> Peter K.... , Thursday, September 15, 2016 at 01:41 PM
    No queue PGL to tell us that Krugman was saying something that he obviously wasn't.

    What is Hillary going to try to do about inequality and distributional issues?

    Family leave? Raise taxes on the rich?

    Anything else besides minor tweaks and tax incentives?

    A public option for health care?

    Peter K. -> Peter K.... , Thursday, September 15, 2016 at 01:44 PM
    "So here's my question: Is the modesty of the Clinton economic agenda too much of a good thing? Should accelerating U.S. economic growth be a bigger priority?"

    Her agenda is unambitious. It is "center-left" as Krugman puts it which is partly why her poll numbers are in the dumps.

    " It's very much a center-left vision: incremental but fairly large increases in high-income tax rates, further tightening of financial regulation, further strengthening of the social safety net."

    Point me to a blog post where Krugman spells out exactly where he explains how Clinton proposes to do things.

    He doesn't.

    Far East Famine017 said in reply to Peter K.... , Thursday, September 15, 2016 at 01:46 PM

    Raise taxes on the rich?

    Anything else besides minor tweaks and tax
    "

    President Trump has proposed a $25000 standard deduction for each of us, but $50,000 for married couples who prove that they have consummated. Hey! IRS Agents like to watch.

    Peter K. -> Far East Famine017... , Thursday, September 15, 2016 at 01:54 PM
    How does one prove consummation? Video? Pelvic exams? Bedsheets?
    Far East Famine017 said in reply to Peter K.... , Thursday, September 15, 2016 at 06:24 PM

    Tell them what you are about to tell them!

    Tell them!

    Tell them what you have told them!

    But first you have to get their attention. Sorry about the consummation voyeur rib, but getting folks to listen is one of the primary concerns here.

    An attention

    getting
    device --

    anne -> Far East Famine017... , Thursday, September 15, 2016 at 02:54 PM
    Crazy gibberish encourages more of the same and is destructive. The name alone is destructive. The content is mean nonsense. Enough.
    Far East Famine017 said in reply to anne... , Thursday, September 15, 2016 at 06:16 PM

    a $25000 standard deduction
    "

    Can you see how this minimum federal standard-deduction is de-fang-ed by lower state-standard-deduction? Tell me something!

    When state minimum wage is $5 / hour but federal minimum wage is $9 / hour, does employer hiring in same state have to pay $5 or $9? Do you see how that works?

    State's rights are dissolved by the federal statute.

    This dissolution of state's rights means that Congress could as easily pass a law to establish minimum standard-deduction for all state's income tax collection. Tell me something else!

    Would such a minimum standard deduction on all state income tax collection cause any unemployment? Would it bankrupt any small businesses?

    Of course not! By contrast, the federal minimum wage regulation does cause unemployment, does close down some employers of entry level workers, a danger to employment and poverty.

    Economics is all about opportunity costs. The opportunity cost of federal minimum wage is the possibility of federal minimum standard deduction, a more harmless subsidy.

    Get
    it --

    anne -> Far East Famine017... , Thursday, September 15, 2016 at 06:25 PM
    State's rights are dissolved by the federal statute.

    This dissolution of state's rights means that Congress could as easily pass a law to establish minimum standard-deduction for all state's income tax collection. Tell me something else!

    Would such a minimum standard deduction on all state income tax collection cause any unemployment? Would it bankrupt any small businesses?

    Of course not! By contrast, the federal minimum wage regulation does cause unemployment, does close down some employers of entry level workers, a danger to employment and poverty.

    [ Ah, understood. A clever and important argument that I am thinking through. Like the rational for the federal Earned Income Tax Credit. ]

    I am grateful. ]

    anne -> Far East Famine017... , Thursday, September 15, 2016 at 06:27 PM
    https://en.wikipedia.org/wiki/Earned_income_tax_credit

    The United States federal earned income tax credit or earned income credit (EITC) is a refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children. The amount of EITC benefit depends on a recipient's income and number of children. For a person or couple to claim one or more persons as their qualifying child, requirements such as relationship, age, and shared residency must be met. In the 2013 tax year, working families, if they have children, with annual incomes below $37,870 to $51,567 (depending on the number of dependent children) may be eligible for the federal EITC. Childless workers who have incomes below about $14,340 ($19,680 for a married couple) can receive a very small EITC benefit.

    Ben Groves -> Peter K.... , Thursday, September 15, 2016 at 02:26 PM
    Growth is a fixed investment. The investments have been made. Especially older societies, consumption and leisure become more important the nature of purchases change.

    I see Space Exploration as the only thing that will change that narrative. That would probably create another computer revolution, industrial revolution kind of change. People just aren't into it thought. People are happy with the dopamine economy and just want to get high.

    Peter K. : , Thursday, September 15, 2016 at 01:52 PM
    Krugman:

    "Second, less relevant to Sims but very relevant to other helicopter people, a deficit ultimately financed by inflation is just as much of a burden on households as one ultimately financed by ordinary taxes, because inflation is a kind of tax on money holders. From a Ricardian point of view, there's no difference.

    So I'm trying to figure out exactly what Sims is saying. What, ahem, is his model?"

    Inflation hits people with savings who don't have debt.

    Inflation helps people with debt by eating away at the principle. Inflation signals tight job markets with growing incomes as well. That's why you have price pressures. That's why low inflation and loose job markets can be just as bad as deflation.

    Who taxes hit depends on how the government has set up its tax system. Some people and corporations like Apple, Mitt Romney and presumably Trump pay little in taxes.

    Krugman the neoliberal.

    Ben Groves : , Thursday, September 15, 2016 at 02:21 PM
    Capitalism was invented by Sephardic Jews who immigrated to Iberia in the 15th and 16th century. They eventually invented market based economy.

    By 1600's they had a swirling business sector located in Amsterdam and William the Orange spread it into England during the latter 17th century, creating the Bank of England in 1694 and became the worlds central bank via commodity money.

    There is nothing to see here people. It is ponzi scheme and nothing more. Capitalism has only made it because of liberalism. You have to be open to market expansion and have the resources to make it work. It is why "konservatism" is a farce. One, the konservatives were the ones that pushed the decaying "feudal" aristocracy to merge with the merchant caste in the first place and create the bourgeois, despite the aristocracy being the birth place of most of the technology we have now. This morphed into what we call capitalism. Basically the Jews are the Parasites(Finance), "Whites"(the capitalists, which has a abnormal % of homosexuals) the Host and the non-whites the cattle(mass famines and genocide during the 19th and 20th century are what really powered the manpower behind anti-capitalism. Aka the British Empire led to 150 million deaths globally. All global fraternities and organizations like the Skull in Bones to the Council of Foreign relations are a conservative institutions. Yet, those cons won't admit it. As Butler said about his Pacific "campaigns" is is all about spreading capitalism. It is indeed a racket.

    These same forces are what created "Protestantism" and "Mormanism", which were a global financed movement. First led by Catholic turncoat Martin Luther, who was financed by the Jews, then run by Jewish John Cohen(Calvin) who spread the judeo-christian revolution globally. This also led to the farce of "sovereignty" nonsense Mormons have tried to use in the last 40 years to push a plutocracy. Then the other bible thumpers caught on. Destroy the nation, bring on the market totalitarianism. Dumb sheep.

    anne -> Ben Groves... , Thursday, September 15, 2016 at 02:41 PM
    Do you understand that this writing is crazily, horridly, violently prejudiced, madly anti-Semitic? Do you understand just how clinically mad this is?

    This writing reflects a need for professional help. Such help is available and should immediately be sought.

    This prejudice reflects a dangerous illness. Do seek assistance.

    Do not write like this ever again.

    cm -> anne... , Thursday, September 15, 2016 at 10:48 PM
    This is what we have long been used to from Mr. Groves. Ramblings in this style pretty much comment on their own merit and don't need to be graced with rebuttals, as that implies an acknowledgement that at some level a sort of identifiable argument was made.
    BenIsNotYoda : , Thursday, September 15, 2016 at 03:49 PM
    Harvard Study pooh poohs the recovery:

    https://www.scribd.com/document/324137454/Harvard-Study-on-US-Economy-Under-Obama#from_embed

    Choice excerpts:

    "America's economic performance peaked in the late 1990s, and erosion in crucial economic indicators such as the rate of economic growth, productivity growth, job growth, and investment began well before the Great Recession.

    Workforce participation, the proportion of Americans in the productive workforce, peaked in 1997. With fewer working-age men and women in the workforce, per-capita income for the U.S. is reduced.

    Median real household income has declined since 1999, with incomes stagnating across virtually all income levels. Despite a welcome jump in 2015, median household income remains below the peak attained in 1999, 17 years ago. Moreover, stagnating income and limited job prospects have disproportionately affected lower-income and lower-skilled Americans, leading inequality to rise."

    and something I have been going hoarse saying:

    "The U.S. lacks an economic strategy, especially at the federal level. The implicit strategy has been to trust the Federal Reserve to solve our problems through monetary policy."

    the charts alone are worth the effort to check out this excellent study.

    Paine : , Thursday, September 15, 2016 at 06:09 PM
    I really like this


    " Neither the traditional economist's focus on firms in markets nor the Marxist political economist's focus on exploitation of wage labour by capital is a viable way of understanding the real economy, and the book takes some steps towards an alternative view. "


    It is the quintessence of heterodox ambitions

    Publius : , Thursday, September 15, 2016 at 07:58 PM
    Why did East Asia become Star Trek instead of the US? Why didn't the hopeful visions of mid-1960's America become reality for the Americans? Read Ha Joon Chang if you want to know why East Asia is on track to be as rich as the US/USSR portrayed in 2001 Space Odyssey. Western provincialism, or perhaps the corruption of economists by looting banks (as documented by Charles Ferguson) has led Western economists to offer really, really terrible advice to their own governments: free trade forever, don't worry about massive deindustrialization, there will be new jobs, there's no chance the US ends up like Mali.
    kaleberg : , Thursday, September 15, 2016 at 08:45 PM
    One of the big problems of economics is how little of our society it explains. Exactly how many people of either sex actually sit down and decide to have children based on a return on investment calculation? How many people spend time with their friends and families based on some kind of maximization function? When you visit a dying friend or family member at the hospital is this the result of some gift exchange calculus? What about the time one spends listening to music, watching a baseball game or browsing Facebook?

    It might help to start with anthropology and think about human societies and their organization. Start with something like the Lynds' Middletown books to get away from the implicit exoticism that the term anthropology invokes. Societies have certain basic functions: raising children, caring for those who cannot care for themselves, earning a living, spending free time, recognizing one's place in the universe, participating in civil society and so on. Economics only looks at a tiny piece of this, just part of the earning a living section. It's as if chemists never studied anything except hydrogen molecules.

    Economics really does need some new thinking. Starting with Pareto optimality is simply the argument that we live in the best of all possible worlds. It is so transparently bogus that it is hard to believe that anyone ever took it seriously. Oil lamps were hard on torch makers and the automobile destroyed the buggy whip business. We need an economic system to regulate the production and allocation of goods and services, but we also need child custody laws and burial customs.

    I'm a capitalist at heart, but I view capitalism as I view fire. There is nothing quite like fire for cooking food, lighting the dark, scaring wild animals, firing pottery and so on, but fire also needs to be carefully controlled, constantly monitored and subject to societal sanction.

    cm -> kaleberg ... , Thursday, September 15, 2016 at 11:02 PM
    Economics fashions itself (or is being fashioned) as a science, and as such has to restrict itself to measurable, identifiable, and (in principle) predictable phenomena.

    What you are describing is more in the realm of philosophy, psychology, and moral judgement.

    The problem starts when the economics profession and related occupations (business media, etc.) pretend to have identified "market mechanisms" as the unifying theory of society and world, including "explaining" social dynamics in terms of "objective/rational" market transactions and motivations.

    But the desire for grand unified theories and "whole truths" is ever strong, lending credence and support to such efforts.

    reason : , -1
    Now is the time to push for my leisure theory of value. All goods and services traded in the economy are intermediate goods, and value is actually created during leisure time!

    [Sep 15, 2016] Mark Blyth On Neoliberalism, Brexit, and the Global Revolt Against the One Percent and their Unelected

    Jun 28, 2016 | jessescrossroadscafe.blogspot.com
    "...a full 95% of the cash that went to Greece ran a trip through Greece and went straight back to creditors which in plain English is banks. So, public taxpayers money was pushed through Greece to basically bail out banks...So austerity becomes a side effect of a general policy of bank bailouts that nobody wants to own. That's really what happened, ok?

    Why are we peddling nonsense? Nobody wants to own up to a gigantic bailout of the entire European banking system that took six years. Austerity was a cover.

    If the EU at the end of the day and the Euro is not actually improving the lives of the majority of the people, what is it for? That's the question that they've brought no answer to.

    ...the Hamptons is not a defensible position. The Hamptons is a very rich area on Long Island that lies on low lying beaches. Very hard to defend a low lying beach. Eventually people are going to come for you.

    What's clear is that every social democratic party in Europe needs to find a new reason to exist. Because as I said earlier over the past 20 years they have sold their core constituency down the line for a bunch of floaters in the middle who don't protect them or really don't particularly care for them. Because the only offers on the agenda are basically austerity and tax cuts for those who already have, versus austerity, apologies, and a minimum wage."

    Mark Blyth

    Although I may not agree with every particular that Mark Blyth may say, directionally he is exactly correct in diagnosing the problems in Europe.

    And yes, I am aware that the subtitles are at times in error, and sometimes outrageously so. Many of the errors were picked up and corrected in the comments.

    No stimulus, no plans, no official actions, no monetary theories can be sustainably effective in revitalizing an economy that is as bent as these have become without serious reform at the first.

    This was the lesson that was given by Franklin Roosevelt's New Deal. There will be no lasting recovery without it; it is a sine qua non . One cannot turn their economy around when the political and business structures are systemically corrupt, and the elites are preoccupied with looting it, and hiding their spoils offshore.

    [Sep 15, 2016] Elizabeth Warren on Thursday requested a formal investigation into why the Obama administration did not bring criminal charges individuals and corporation involved in the 2008 financial crisis

    www.nakedcapitalism.com
    L

    "Massachusetts Senator Elizabeth Warren on Thursday requested a formal investigation into why the Obama administration did not bring criminal charges individuals and corporation involved in the 2007-2008 financial crisis" [International Business Times]. Why now? Liz edging her hat toward the ring if Clinton comes up lame?

    I can see two possible interpretations for this.

    First, as much as I hate to draw the analogy, she could be positioning herself to take the reigns after a loss in the way that Richard Nixon, Paul Ryan, and later Bill Clinton did. Richard Nixon sat back and concentrated on building up credibility as Barry Goldwater melted down and then quietly stepped in to take over the party after the loss to set up his eventual run. Paul Ryan quietly permitted or perhaps aided the coup against Boehner. And Bill Clinton, through the DLC teed up his control of the party after Dukakis lost.

    Second, with Wells-Fargo and bank fraud once again in the news she could be working to keep prior decisions current both to force better action this time or to nudge the Clinton and Trump into making promises of stronger action in the future.

    Lambert Strether Post author

    It seems to me that both those objectives would be served by continuing to hammer on Wells Fargo, so the question "Why now?" isn't really answered in your comment.

    But if you wanted to take out an option on running a full-throated populist campaign - and throwing bankers in jail would be wildly popular across the entire political spectrum (except Clinton's 10%-ers on up) - in the unhappy event that the party's candidate came up lame, then calling for an account of regulatory decision making in 2009 would be one way to signal that. Note also that would call Obama's "legacy" into question, too; the whole "stand between you and the pitchforks" thing. This is a big deal.

    [Sep 15, 2016] American Antitrust Is Having a Moment: Some Reactions to Commissioner Ohlhausen's Recent Views

    Sep 14, 2016 | economistsview.typepad.com
    Chris Sagers at ProMarket:
    American Antitrust Is Having a Moment: Some Reactions to Commissioner Ohlhausen's Recent Views : Over the summer, Federal Trade Commissioner Maureen Ohlhausen took me and several others to task in a speech , subsequently published as a journal article ... The theme we'd all written about is whether we in the United States have a "monopoly problem," and whether federal policy should try to do something about it. ...

    Commissioner Ohlhausen had some pretty strong words. ... Specifically, she implies a very strong presumption against public interference in private markets, as indicated by her argument that there is not yet sufficient evidence that we have a monopoly problem. The argument seems to be that we must wait until we are very, very sure, beyond any reasonable econometric doubt, apparently, that there's something wrong before we step in. ...

    She is mistaken, and she ignores roughly a library-full of well-known..., sophisticated empirical work. ...

    In the end, the irony of these remarks is captured in this point: Commissioner Ohlhausen is pretty witheringly dismissive of a certain kind of evidence of market power, and implies that it would not support increased enforcement unless it can overcome a high methodological bar. But for her own countervailing evidence that in fact American markets are "fierce[ly] competiti[ve]," she says this: "Consider the new economy, which is a hotbed of technological innovation. That environment does not strike me as one lacking competition."

    In other words, the presumption against antitrust is so strong that evidence of harm must meet the most exacting standards of social science. To prove that markets are in fact competitive, however, needs nothing more than seat-of-the-pants anecdotes. Again, I mean no disrespect, and I think we have an honest difference of opinion. But this stance is not social science, and it is not good, empirically founded public policy. It is just ideology. ...

    It's definitely true that the agencies have brought a bunch of challenges to a bunch of nasty mergers, and perhaps total enforcement numbers have gone up a bit. But that is because we are in the midst of a merger wave in which parties have been proposing breathtakingly massive, overwhelmingly consolidating horizontal deals. While there is a track record to be proud of in the administration's enforcement, especially, as the commissioner observes, in the Commission's campaign against hospital mergers, reverse-payment deals, SEP problems, and patent trolls, and who knows how many other matters, the fact remains that by and large the administration has mostly not taken action that any administration would not have taken, including the Reagan and both Bush administrations. ...

    DrDick : , Wednesday, September 14, 2016 at 11:13 AM

    If we were actually serious about antitrust, which we very much should be, we would not only block most of these mergers, but break up many of existing behemoths (like the big banks, the media giants, Comcast, and many others).
    pgl -> DrDick... , Wednesday, September 14, 2016 at 11:18 AM
    I'm all for breaking up the behemoths when they are indeed stifling competition. The Reagan Revolution to anti-trust was based on a contention that some mergers were about efficiency effects. I think this argument is sometimes overblown but it is not per se false. I do object (see below) to the weak evidence that goes like this. Collective shareholder value rose so ergo the merger is about efficiency effects. Anyone who argues that (see Don Luskin and the premium ice cream proposed merger) is not very bright.
    DeDude -> pgl... , Wednesday, September 14, 2016 at 11:49 AM
    Exactly. Corporations being able to suck more profit out of the costumers (and as a result share prices rising) is the proof that anti-trust has failed. In a fully functional competitive market companies do not make much profit.
    pgl -> DeDude... , Wednesday, September 14, 2016 at 12:07 PM
    Accounting profits? Maybe you should read that paper by the commissioner as she makes a very clear statement about what accounting profit would look like in a competitive market. And it is not zero. Return to capital? Hello?
    DeDude -> pgl... , Wednesday, September 14, 2016 at 12:30 PM
    No if it was zero the whole thing breaks down. However, a small return on capital is an indication that companies are forced to cut prices because of competition- and that is a healthy market. So yes there is (some but) not much profit in a fully functional competitive market.
    pgl -> DeDude... , Wednesday, September 14, 2016 at 12:36 PM
    Let's define "small return". Standard financial economics puts this at the risk-free rate plus a premium for bearing systematic risk. OK - the risk-free return now is quite small. Say 2%. But if the risk premium is say 4%, then we are talking about a 6% expected return to assets. If that is what you mean by small - cool.

    Of course I have seen a lot of "professionals" argue for much higher returns. Of course these professionals would flunk a Finance 101 class.

    DeDude -> pgl... , Wednesday, September 14, 2016 at 12:49 PM
    I don't think the risk premium needs to be more than about 2% unless/until the economy enter a phase where demand outstrips supply (and more investment money needs to be attracted). If there is a glut of investment money then the price of it (=risk free returns) should go down.
    pgl -> DeDude... , Wednesday, September 14, 2016 at 02:05 PM
    This is the kind of thinking that got Hassett and Glassman to tell us about DOW 36000. Some people overestimate the risk premium but 2% is what a regulated utility or a leasing company gets. And neither bears commercial risk. Dude - you can make up whatever number your heart desires but there is market evidence on these things.
    DeDude -> pgl... , Wednesday, September 14, 2016 at 06:25 PM
    Exactly - even those are hugely overcompensated for this supposed risk.
    Gibbon1 -> DeDude... , Wednesday, September 14, 2016 at 04:14 PM
    Ability to better suck profit out of a captive base of customers is an efficiency of a sort. Instead of investing in risky new business processes or technologies one merely has to buy out your competitors. This is practically risk free.
    pgl : , Wednesday, September 14, 2016 at 11:15 AM
    A comment about this:

    "Though she says that "[e]fficiencies are real"-citing no evidence for it in a speech critical of everyone else for failure to supply evidence-there is in fact no meaningful proof that consolidation generates social benefits. Especially in the case of mergers, a large and sophisticated empirical literature has been hunting for decades for evidence that mergers produce "efficiencies" or other benefits. The evidence has not been found. At least with respect to deals among publicly traded firms, the evidence tends to suggest that mergers do no good on average for shareholders of either acquiring or target firms, and if there were some efficiencies or larger social benefits, they should be measurable as benefits to shareholders. The empirical evidence has therefore confirmed the popular wisdom shared on Wall Street for years-that all this activity is not serving any good social purpose, though it might be helping executives and their bankers quite a lot."

    The conservative (Reagan) approach to anti-trust did indeed ask DOJ and FTC to consider whether the merger was about beneficial efficiency effects v. anti-competitive effects. But let's suppose two firms merged and their collective value did rise benefiting shareholders. That does not prove the efficiency effects dominate. No – mergers that lead to less competition will often raise shareholder value even if there are no efficiency effects. Those mergers should be disallowed.

    kurt : , Wednesday, September 14, 2016 at 11:21 AM
    Proof of Monopoly Power - Verizon and ATT's pricing and apparent lack of any interest in maintaining or even knowing where their physical plant is installed. Also - see directTV's recent price increases.
    pgl -> kurt... , Wednesday, September 14, 2016 at 12:07 PM
    Can you hear me now? Oh wait - the Verizon dude now works for Sprint.
    El Epicúreo Del Taco : , Wednesday, September 14, 2016 at 11:26 AM
    American markets are "fierce[ly] competiti[ve]," she says this: "Consider the new economy, which is a hotbed of technological innovation. That environment does not strike me as one lacking competition."

    In other words, the presumption against antitrust is so strong
    "

    You are assumed properly competing until proved monopoly-based. The burden of proof is on the victims. Tell me something!

    Does the government always appear as crystal clear as the mirror of Alice? When we look at local, county, state, and federal rulers, do we always see ourselves? Our own bias? Our own agenda? The government apes its voters.

    Do you see how today's polity is begging for less competition? Less free trade from our trading partners? Do you see how we want to make a monopoly out of America? Build a fence around it so that nobody is allowed to buy anything from anyone other than our monopoly?

    " We have identified the enemy, ourselves. " ~~Pogo~

    DeDude : , Wednesday, September 14, 2016 at 11:46 AM
    Yes you need at least a dozen independent businesses delivering the same (substitutable) products to ensure that there is indeed a competitive market that will not be gamed against the consumers. This is not just needed to ensure that consumers will be offered a fair price, but also to ensure that companies will be forced to continue to innovate and offer better and better products. The oversight of mergers has been a scandal and needs to be tightened by new laws. Obviously we have to make the "dozen rule" a law rather than just common sense guidance.
    pgl -> DeDude... , Wednesday, September 14, 2016 at 12:10 PM
    The dozen rule? Where did that come from? Depends on the market but I would hope we have more than 12 suppliers of beer. BTW - it would be nice to have 12 health insurance companies but we could break up this oligopoly with such one more - the government aka the public option.
    DeDude -> pgl... , Wednesday, September 14, 2016 at 12:34 PM
    Yes some products can benefit from more variation, but at least with 12 suppliers you would not have anybody able to corner the market. The dozen rule is mine, that is how I get my eggs. If Ohlhausen can just make it up - so can I.
    pgl -> DeDude... , Wednesday, September 14, 2016 at 12:37 PM
    Do you remember the 1970's? Something called OPEC? But yea - I buy my eggs by the dozen too.
    pgl -> DeDude... , Wednesday, September 14, 2016 at 12:39 PM
    Speaking of breakfast, consider the maple syrup cartel:

    http://fortune.com/2016/02/26/maple-syrup-cartel

    DeDude -> pgl... , Wednesday, September 14, 2016 at 12:52 PM
    Yes cartels (regardless of number of members) also have to be broken up - for markets and capitalism to work properly.
    Tom aka Rusty : , Wednesday, September 14, 2016 at 12:59 PM
    The FTC has ignored a many major health care mergers but has gone litigation guns a blazin' into small mergers in such less-than-major metro centers as Moscow Idaho and Toledo Ohio.

    Is there a "too big to litigate" standard?

    pgl -> Tom aka Rusty... , Wednesday, September 14, 2016 at 02:06 PM
    Rusty calling for rational regulation as in the FTC doing its job. Stop the presses!
    Tom aka Rusty said in reply to pgl... , Thursday, September 15, 2016 at 04:53 AM
    I'm just asking for coherent policy, something often missing from the Obama administration.
    Anon : , Wednesday, September 14, 2016 at 08:30 PM
    The sad fact is that the right-wing Law and Economics scholars have literally been trained to believe that the only correct null hypothesis is "free markets are good". When the null is not rejected with a 95% confidence interval, they actually think they've won the argument, while you're sitting there scratching your head saying, but when the null hypothesis is "free markets are bad", we can't reject that either. I've never seen logic get much traction with this crowd, because they are literally willing to tell you that economics demonstrates that "free markets are good", so that's the correct null.

    It's very sad, but also very common when talking to lawyers. In fact, I often wonder whether the right-wing didn't create the "Law and Economics" movement in order to slow the exposure of the legal profession to the actual tools of modern economic analysis.

    reason : , -1
    It would be a start if we would simply stop seeing hostile takeovers as something positive (you know ex-ante efficiency improvements) and start seeing them for the interference in natural selection that they actually are (no 40-40 foresight exists).

    [Sep 15, 2016] How did the proud trade consensus crumble so quickly? by Thomas Frank

    Politico

    "But part of the answer lies in something Americans have a hard time talking about: class. Trade is a class issue. The trade agreements we have entered into over the past few decades have consistently harmed some Americans (manufacturing workers) while just as consistently benefiting others (owners and professionals). …

    To understand "free trade" in such a way has made it difficult for people in the bubble of the consensus to acknowledge the actual consequences of the agreements we have negotiated over the years."

    [Sep 15, 2016] The Dysfunctionality of Slavery and Neoliberalism

    Notable quotes:
    "... Despite the neoliberal obsession with wage suppression, history suggests that such a policy is self-destructive. Periods of high wages are associated with rapid technological change. ..."
    "... On the ideological front, the South adopted a shallow, but rigid libertarian perspective which resembled modern neoliberalism. Samuel Johnson may have been the first person to see through the hypocrisy of the hollowness of southern libertarianism. ..."
    "... the famous Powell Memo helped to spark a well-financed movement of well-finance right-wing political activism which morphed into right-wing political extremism both in economics and politics. ..."
    "... In short, neoliberalism was surging ahead and the economy of high wages was now beyond the pale. These new conditions gave new force to the southern "yelps of liberty." The social safety net was taken down and reconstructed as the flag of neoliberalism. The one difference between the rhetoric of the slaveholders and that of the modern neoliberals was that entrepreneurial superiority replaced racial superiority as their battle cry. ..."
    May 18, 2015 | michaelperelman.wordpress.com

    Despite the neoliberal obsession with wage suppression, history suggests that such a policy is self-destructive. Periods of high wages are associated with rapid technological change.

    ... ... ...

    On the ideological front, the South adopted a shallow, but rigid libertarian perspective which resembled modern neoliberalism. Samuel Johnson may have been the first person to see through the hypocrisy of the hollowness of southern libertarianism. Responding to the colonists' complaint that taxation by the British was a form of tyranny, Samuel Johnson published his 1775 tract, "Taxation No Tyranny: An answer to the Resolutions and Address of the American Congress," asking the obvious question, "how is it that we hear the loudest yelps for liberty among the drivers of Negroes?" In The Works of Samuel Johnson, LL. D.: Political Tracts. Political Essays. Miscellaneous Essays (London: J. Buckland, 1787): pp. 60-146, p. 142.

    ... ... ...

    By the late 19th century, David A Wells, an industrial technician who later became the chief economic expert in the federal government, by virtue of his position of overseeing federal taxes. After a trip to Europe, Wells reconsidered his strong support for protectionism. Rather than comparing the dynamism of the northern states with the technological backward of their southern counterparts, he was responding to the fear that American industry could not compete with the cheap "pauper" labor of Europe. Instead, he insisted that the United States had little to fear from, the competition from cheap labor, because the relatively high cost of American labor would ensure rapid technological change, which, indeed, was more rapid in the United States than anywhere else in the world, with the possible exception of Germany. Both countries were about to rapidly surpass England's industrial prowess.

    The now-forgotten Wells was so highly regarded that the prize for the best economics dissertation at Harvard is still known as the David A Wells prize. His efforts gave rise to a very powerful idea in economic theory at the time, known as "the economy of high wages," which insisted that high wages drove economic prosperity. With his emphasis on technical change, driven by the strong competitive pressures from high wages, Wells anticipated Schumpeter's idea of creative destruction, except that for him, high wages rather than entrepreneurial genius drove this process.

    Although the economy of high wages remained highly influential through the 1920s, the extensive growth of government powers during World War I reignited the antipathy for big government. Laissez-faire economics began come back into vogue with the election of Calvin Coolidge, while the once-powerful progressive movement was becoming excluded from the ranks of reputable economics.

    ... ... ...

    With Barry Goldwater's humiliating defeat in his presidential campaign, the famous Powell Memo helped to spark a well-financed movement of well-finance right-wing political activism which morphed into right-wing political extremism both in economics and politics. Symbolic of the narrowness of this new mindset among economists, Milton Friedman's close associate, George Stigler, said in 1976 that "one evidence of professional integrity of the economist is the fact that it is not possible to enlist good economists to defend minimum wage laws." Stigler, G. J. 1982. The Economist as Preacher and Other Essays (Chicago: University of Chicago Press): p. 60.

    In short, neoliberalism was surging ahead and the economy of high wages was now beyond the pale. These new conditions gave new force to the southern "yelps of liberty." The social safety net was taken down and reconstructed as the flag of neoliberalism. The one difference between the rhetoric of the slaveholders and that of the modern neoliberals was that entrepreneurial superiority replaced racial superiority as their battle cry.

    One final irony: evangelical Christians were at the forefront of the abolitionist movement. Today, some of them are providing the firepower for the epidemic of neoliberalism.

    [Sep 15, 2016] Globalization and Neoliberalism

    Notable quotes:
    "... the US has been successful in dictating neoliberal policies, acting partly through the IMF and World Bank and partly through direct pressure. ..."
    "... From roughly the mid 1930s to the mid 1970s a new "interventionist" approach replaced classical liberalism, and it became the accepted belief that capitalism requires significant state regulation in order to be viable. In the 1970s the Old Religion of classical liberalism made a rapid comeback, first in academic economics and then in the realm of public policy. ..."
    "... Neoliberal theory claims that a largely unregulated capitalist system (a "free market economy" not only embodies the ideal of free individual choice but also achieves optimum economic performance with respect to efficiency, economic growth, technical progress, and distributional justice. ..."
    "... The policy recommendations of neoliberalism are concerned mainly with dismantling what remains of the regulationist welfare state. ..."
    "... This paper argues that the resurgence and tenacity of neoliberalism during the past two decades cannot be explained, in an instrumental fashion, by any favorable effects of neoliberal policies on capitalist economic performance. On the contrary, we will present a case that neoliberalism has been harmful for long-run capitalist economic performance, even judging economic performance from the perspective of the interests of capital. It will be argued that the resurgence and continuing dominance of neoliberalism can be explained, at least in part, by changes in the competitive structure of world capitalism, which have resulted in turn from the particular form of global economic integration that has developed in recent decades. The changed competitive structure of capitalism has altered the political posture of big business with regard to economic policy and the role of the state, turning big business from a supporter of state-regulated capitalism into an opponent of it. ..."
    "... Second, the neoliberal model creates instability on the macroeconomic level by renouncing state counter-cyclical spending and taxation policies, by reducing the effectiveness of "automatic stabilizers" through shrinking social welfare programs,3 and by loosening public regulation of the financial sector. This renders the system more vulnerable to major financial crises and depressions. Third, the neoliberal model tends to intensify class conflict, which can potentially discourage capitalist investment.4 ..."
    "... The evidence from GDP and labor productivity growth rates supports the claim that the neoliberal model is inferior to the state regulationist model for key dimensions of capitalist economic performance. There is ample evidence that the neoliberal model has shifted income and wealth in the direction of the already wealthy. However, the ability to shift income upward has limits in an economy that is not growing rapidly. Neoliberalism does not appear to be delivering the goods in the ways that matter the most for capitalism's long-run stability and survival. ..."
    "... Once capitalism had become well established in the US after the Civil War, it entered a period of cutthroat competition and wild accumulation known as the Robber Baron era. In this period a coherent anti-interventionist liberal position emerged and became politically dominant. Despite the enormous inequalities, the severe business cycle, and the outrageous and often unlawful behavior of the Goulds and Rockefellers, the idea that government should not intervene in the economy held sway through the end of the 19th century. ..."
    "... Small business has remained adamantly opposed to the big, interventionist state, from the Progressive Era through the New Deal down to the present. This division between big and small business is chronicled for the Progressive Era in Weinstein (1968). In the decades immediately following World War II one can observe this division in the divergent views of the Business Roundtable, a big business organization which often supported interventionist programs, and the US Chambers of Commerce, the premier small business organization, which hewed to an antigovernment stance. ..."
    "... By contrast, the typical small business faces a daily battle for survival, which prevents attention to long-run considerations and which places a premium on avoiding the short-run costs of taxation and state regulation. This explains the radically different positions that big business and small business held regarding the proper state role in the economy for the first two-thirds of the twentieth century. ..."
    "... This long-standing division between big business and small business appeared to vanish in the US starting in the 1970s. Large corporations and banks which had formerly supported foundations that advocated an active government role in the economy, such as the Brookings Institution, became big donors to neoliberal foundations such as the American Enterprise Institute and the Heritage Foundation. As a result, such right-wing foundations, which previously had to rely mainly on contributions from small business, became very wealthy and influential.10 It was big business=s desertion of the political coalition supporting state intervention and its shift to neoliberalism that rebuilt support for neoliberal theories and policies in the US, starting in the 1970s. With business now unified on economic policy, the shift was dramatic. Big grants became available for economics research having a neoliberal slant. The major media shifted their spin on political developments, and the phrase "government programs" now could not be printed except with the word "bloated" before it. ..."
    "... Globalization is usually defined as an increase in the volume of cross-border economic interactions and resource flows, producing a qualitative shift in the relations between national economies and between nation-states (Baker et. al., 1998, p. 5; Kozul-Wright and Rowthorn, 1998, p. 1). Three kinds of economic interactions have increased substantially in past decades: merchandise trade flows, foreign direct investment, and cross-border financial investments. We will briefly examine each, with an eye on their effects on the competitive structure of contemporary capitalism. ..."
    "... By the close of the twentieth century, capitalism had become significantly more globalized than it had been fifty years ago, and by some measures it is much more globalized than it had been at the previous peak of this process in 1913. The most important features of globalization today are greatly increased international trade, increased flows of capital across national boundaries (particularly speculative short-term capital), and a major role for large TNCs in manufacturing, extractive activities, and finance, operating worldwide yet retaining in nearly all cases a clear base in a single nation-state. ..."
    "... Some analysts argue that globalization has produced a world of such economic interdependence that individual nation-states no longer have the power to regulate capital. However, while global interdependence does create difficulties for state regulation, this effect has been greatly exaggerated. Nation-states still retain a good deal of potential power vis-a-vis capitalist firms, provided that the political will is present to exercise such power. For example, even such a small country as Malaysia proved able to successfully impose capital controls following the Asian financial crisis of 1997, despite the opposition of the IMF and the US government. ..."
    "... Globalization appears to be one factor that has transformed big business from a supporter to an opponent of the interventionist state. It has done so partly by producing TNCs whose tie to the domestic markets for goods and labor is limited. ..."
    "... Globalization has produced a world capitalism that bears some resemblance to the Robber Baron Era in the US. Giant corporations battle one another in a system lacking well defined rules. Mergers and acquisitions abound, including some that cross national boundaries, but so far few world industries have evolved the kind of tight oligopolistic structure that would lay the basis for a more controlled form of market relations. Like the late 19th century US Robber Barons, today's large corporations and banks above all want freedom from political burdens and restraints as they confront one another in world markets.18 ..."
    "... The existence of a powerful bloc of Communist-run states with an alternative "state socialist" socioeconomic system tended to push capitalism toward a state regulationist form. It reinforced the fear among capitalists that their own working classes might turn against capitalism. It also had an impact on relations among the leading capitalist states, promoting inter-state unity behind US leadership, which facilitated the creation and operation of a world-system of state-regulated capitalism.19 The demise of state socialism during 1989-91 removed one more factor that had reinforced the regulationist state. ..."
    "... If state socialism re-emerged in one or more major countries, perhaps this might push the capitalist world back toward the regulationist state. However, such a development does not seem likely. Even if Russia or Ukraine at some point does head in that direction, it would be unlikely to produce a serious rival socioeconomic system to that of world capitalism. ..."
    Jul 05, 2016 | people.umass.edu
    Department of Economics and Political Economy Research Institute Thompson Hall University of Massachusetts Amherst, MA 01003 U.S.A. Telephone 413-545-1248 Fax 413-545-2921 Email [email protected] August, 2000 This paper was published in Rethinking Marxism, Volume 12, Number 2, Summer 2002, pp. 64-79.

    Research assistance was provided by Elizabeth Ramey and Deger Eryar. Research funding was provided by the Political Economy Research Institute of the University of Massachusetts at Amherst. Globalization and Neoliberalism 1 For some two decades neoliberalism has dominated economic policymaking in the US and the UK. Neoliberalism has strong advocates in continental Western Europe and Japan, but substantial popular resistance there has limited its influence so far, despite continuing US efforts to impose neoliberal policies on them. In much of the Third World, and in the transition countries (except for China), the US has been successful in dictating neoliberal policies, acting partly through the IMF and World Bank and partly through direct pressure.

    Neoliberalism is an updated version of the classical liberal economic thought that was dominant in the US and UK prior to the Great Depression of the 1930s. From roughly the mid 1930s to the mid 1970s a new "interventionist" approach replaced classical liberalism, and it became the accepted belief that capitalism requires significant state regulation in order to be viable. In the 1970s the Old Religion of classical liberalism made a rapid comeback, first in academic economics and then in the realm of public policy.

    Neoliberalism is both a body of economic theory and a policy stance. Neoliberal theory claims that a largely unregulated capitalist system (a "free market economy" not only embodies the ideal of free individual choice but also achieves optimum economic performance with respect to efficiency, economic growth, technical progress, and distributional justice. The state is assigned a very limited economic role: defining property rights, enforcing contracts, and regulating the money supply.1 State intervention to correct market failures is viewed with suspicion, on the ground that such intervention is likely to create more problems than it solves.

    The policy recommendations of neoliberalism are concerned mainly with dismantling what remains of the regulationist welfare state. These recommendations include deregulation of business; privatization of public activities and assets; elimination of, or cutbacks in, social welfare programs; and reduction of taxes on businesses and the investing class. In the international sphere, neoliberalism calls for free movement of goods, services, capital, and money (but not people) across national boundaries. That is, corporations, banks, and individual investors should be free to move their property across national boundaries, and free to acquire property across national boundaries, although free cross-border movement by individuals is not part of the neoliberal program. How can the re-emergence of a seemingly outdated and outmoded economic theory be explained? At first many progressive economists viewed the 1970s lurch toward liberalism as a temporary response to the economic instability of that decade. As corporate interests decided that the Keynesian regulationist approach no longer worked to their advantage, they looked for an alternative and found only the old liberal ideas, which could at least serve as an ideological basis for cutting those state programs viewed as obstacles to profit-making. However, neoliberalism has proved to be more than just a temporary response. It has outlasted the late 1970s/early 1980s right-wing political victories in the UK (Thatcher) and US (Reagan). Under a Democratic Party administration in the US and a Labor Party government in the UK in the 1990s, neoliberalism solidified its position of dominance.

    This paper argues that the resurgence and tenacity of neoliberalism during the past two decades cannot be explained, in an instrumental fashion, by any favorable effects of neoliberal policies on capitalist economic performance. On the contrary, we will present a case that neoliberalism has been harmful for long-run capitalist economic performance, even judging economic performance from the perspective of the interests of capital. It will be argued that the resurgence and continuing dominance of neoliberalism can be explained, at least in part, by changes in the competitive structure of world capitalism, which have resulted in turn from the particular form of global economic integration that has developed in recent decades. The changed competitive structure of capitalism has altered the political posture of big business with regard to economic policy and the role of the state, turning big business from a supporter of state-regulated capitalism into an opponent of it.

    The Problematic Character of Neoliberalism

    Neoliberalism appears to be problematic as a dominant theory for contemporary capitalism. The stability and survival of the capitalist system depends on its ability to bring vigorous capital accumulation, where the latter process is understood to include not just economic expansion but also technological progress. Vigorous capital accumulation permits rising profits to coexist with rising living standards for a substantial part of the population over the long-run.2 However, it does not appear that neoliberalism promotes vigorous capital accumulation in contemporary capitalism. There are a number of reasons why one would not expect the neoliberal model to promote rapid accumulation. First, it gives rise to a problem of insufficient aggregate demand over the long run, stemming from the powerful tendency of the neoliberal regime to lower both real wages and public spending. Second, the neoliberal model creates instability on the macroeconomic level by renouncing state counter-cyclical spending and taxation policies, by reducing the effectiveness of "automatic stabilizers" through shrinking social welfare programs,3 and by loosening public regulation of the financial sector. This renders the system more vulnerable to major financial crises and depressions. Third, the neoliberal model tends to intensify class conflict, which can potentially discourage capitalist investment.4

    The historical evidence confirms doubts about the ability of the neoliberal model to promote rapid capital accumulation. We will look at growth rates of gross domestic product (GDP) and of labor productivity. The GDP growth rate provides at least a rough approximation of the rate of capital accumulation, while the labor productivity growth rate tells us something about the extent to which capitalism is developing the forces of production via rising ratios of means of production to direct labor, technological advance, and improved labor skills.5 Table 1 shows average annual real GDP growth rates for six leading developed capitalist countries over two periods, 1950-73 and 1973-99. The first period was the heyday of state-regulated capitalism, both within those six countries and in the capitalist world-system as a whole. The second period covers the era of growing neoliberal dominance. All six countries had significantly faster GDP growth in the earlier period than in the later one.

    While Japan and the major Western European economies have been relatively depressed in the 1990s, the US is often portrayed as rebounding to great prosperity over the past decade. Neoliberals often claim that US adherence to neoliberal policies finally paid off in the 1990s, while the more timid moves away from state-interventionist policies in Europe and Japan kept them mired in stagnation. Table 2 shows GDP and labor productivity growth rates for the US economy for three subperiods during 1948-99.6 Column 1 of Table 2 shows that GDP growth was significantly slower in 1973-90 B a period of transition from state-regulated capitalism to the neoliberal model in the US B than in 1948-73. While GDP growth improved slightly in 1990-99, it remained well below that of the era of state-regulated capitalism. Some analysts cite the fact that GDP growth accelerated after 1995, averaging 4.1% per year during 1995-99 (US Bureau of Economic Analysis, 2000). However, it is not meaningful to compare a short fragment of the 1990s business cycle expansion to the longrun performance of the economy during 1948-73.7

    Column 2 of Table 1 shows that the high rate of labor productivity growth recorded in 1948- 73 fell by more than half in 1973-90. While there was significant improvement in productivity growth in the 1990s, it remained well below the 1948-73 rate, despite the rapid spread of what should be productivity-enhancing communication and information-management technologies during the past decade.

    The evidence from GDP and labor productivity growth rates supports the claim that the neoliberal model is inferior to the state regulationist model for key dimensions of capitalist economic performance. There is ample evidence that the neoliberal model has shifted income and wealth in the direction of the already wealthy. However, the ability to shift income upward has limits in an economy that is not growing rapidly. Neoliberalism does not appear to be delivering the goods in the ways that matter the most for capitalism's long-run stability and survival.

    The Structure of Competition and Economic Policy

    The processes through which the dominant economic ideology and policies are selected in a capitalist system are complex and many-sided. No general rule operates to assure that those economic policies which would be most favorable for capitalism are automatically adopted. History suggests that one important determinant of the dominant economic ideology and policy stance is the competitive structure of capitalism in a given era. Specifically, this paper argues that periods of relatively unconstrained competition tend to produce the intellectual and public policy dominance of liberalism, while periods of relatively constrained, oligopolistic market relations tend to promote interventionist ideas and policies.

    A relation in the opposite direction also exists, one which is often commented upon. That is, one can argue that interventionist policies promote monopoly power in markets, while liberal policies promote greater competition. This latter relation is not being denied here. Rather, it will be argued that there is a normally-overlooked direction of influence, having significant historical explanatory power, which runs from competitive structure to public policy. In the period when capitalism first became well established in the US, during 1800-1860, the government played a relatively interventionist role. The federal government placed high tariffs on competing manufactured goods from Europe, and federal, state, and local levels of government all actively financed, and in some cases built and operated, the new canal and rail system that created a large internal market. There was no serious debate over the propriety of public financing of transportation improvements in that era -- the only debate was over which regions would get the key subsidized routes.

    Once capitalism had become well established in the US after the Civil War, it entered a period of cutthroat competition and wild accumulation known as the Robber Baron era. In this period a coherent anti-interventionist liberal position emerged and became politically dominant. Despite the enormous inequalities, the severe business cycle, and the outrageous and often unlawful behavior of the Goulds and Rockefellers, the idea that government should not intervene in the economy held sway through the end of the 19th century.

    From roughly 1890 to 1903 a huge merger wave transformed the competitive structure of US capitalism. Out of that merger wave emerged giant corporations possessing significant monopoly power in the manufacturing, mining, transportation, and communication sectors. US industry settled down to a more restrained form of oligopolistic rivalry. At the same time, many of the new monopoly capitalists began to criticize the old Laissez Faire ideas and support a more interventionist role for the state.8 The combination of big business support for state regulation of business, together with similar demands arising from a popular anti-monopoly movement based among small farmers and middle class professionals, ushered in what is called the Progressive Era, from 1900-16. The building of a regulationist state that was begun in the Progressive Era was completed during the New Deal era a few decades later, when once again both big business leaders and a vigorous popular movement (this time based among industrial workers) supported an interventionist state. Both in the Progressive Era and the New Deal, big business and the popular movement differed about what types of state intervention were needed. Big business favored measures to increase the stability of the system and to improve conditions for profit-making, while the popular movement sought to use the state to restrain the power and privileges of big business and provide greater security for ordinary people. The outcome in both cases was a political compromise, one weighted toward the interests of big business, reflecting the relative power of the latter in American capitalism.

    Small business has remained adamantly opposed to the big, interventionist state, from the Progressive Era through the New Deal down to the present. This division between big and small business is chronicled for the Progressive Era in Weinstein (1968). In the decades immediately following World War II one can observe this division in the divergent views of the Business Roundtable, a big business organization which often supported interventionist programs, and the US Chambers of Commerce, the premier small business organization, which hewed to an antigovernment stance.

    What explains this political difference between large and small business? When large corporations achieve significant market power and become freed from fear concerning their immediate survival, they tend to develop a long time horizon and pay attention to the requirements for assuring growing profits over time.9 They come to see the state as a potential ally. Having high and stable monopoly profits, they tend to view the cost of government programs as something they can afford, given their potential benefits. By contrast, the typical small business faces a daily battle for survival, which prevents attention to long-run considerations and which places a premium on avoiding the short-run costs of taxation and state regulation. This explains the radically different positions that big business and small business held regarding the proper state role in the economy for the first two-thirds of the twentieth century.

    This long-standing division between big business and small business appeared to vanish in the US starting in the 1970s. Large corporations and banks which had formerly supported foundations that advocated an active government role in the economy, such as the Brookings Institution, became big donors to neoliberal foundations such as the American Enterprise Institute and the Heritage Foundation. As a result, such right-wing foundations, which previously had to rely mainly on contributions from small business, became very wealthy and influential.10 It was big business=s desertion of the political coalition supporting state intervention and its shift to neoliberalism that rebuilt support for neoliberal theories and policies in the US, starting in the 1970s. With business now unified on economic policy, the shift was dramatic. Big grants became available for economics research having a neoliberal slant. The major media shifted their spin on political developments, and the phrase "government programs" now could not be printed except with the word "bloated" before it.

    This switch in the dominant economic model first showed up in the mid 1970s in academic economics, as the previously marginalized Chicago School spread its influence far beyond the University of Chicago. This was soon followed by a radical shift in the public policy arena. In 1978- 79 the previously interventionist Carter Administration began sounding the very neoliberal themes B deregulation of business, cutbacks in social programs, and general fiscal and monetary austerity B that were to become the centerpiece of Reagan Administration policies in 1981. What caused the radical change in the political posture of big business regarding state intervention in the economy? This paper argues that a major part of the explanation lies in the effects of the globalization of the world capitalist economy in the post-World War II period.

    Globalization and Competition

    Globalization is usually defined as an increase in the volume of cross-border economic interactions and resource flows, producing a qualitative shift in the relations between national economies and between nation-states (Baker et. al., 1998, p. 5; Kozul-Wright and Rowthorn, 1998, p. 1). Three kinds of economic interactions have increased substantially in past decades: merchandise trade flows, foreign direct investment, and cross-border financial investments. We will briefly examine each, with an eye on their effects on the competitive structure of contemporary capitalism.

    Table 3 shows the ratio of merchandise exports to gross domestic product for selected years from 1820 to 1992, for the world and also for Western Europe, the US, and Japan. Capitalism brought a five-fold rise in world exports relative to output from 1820-70, followed by another increase of nearly three-fourths by 1913. After declining in the interwar period, world exports reached a new peak of 11.2% of world output in 1973, rising further to 13.5% in 1992. The 1992 figure was over fifty per cent higher than the pre-World War I peak.

    Merchandise exports include physical goods only, while GDP includes services, many of which are not tradable, as well as goods. In the twentieth century the proportion of services in GDP has risen significantly. Table 4 shows an estimate of the ratio of world merchandise exports to the good-only portion of world GDP. This ratio nearly tripled during 1950-92, with merchandise exports rising to nearly one-third of total goods output in the latter year. The 1992 figure was 2.6 times as high as that of 1913.

    Western Europe, the US, and Japan all experienced significant increases in exports relative to GDP during 1950-92, as Table 3 shows. All of them achieved ratios of exports to GDP far in excess of the 1913 level. While exports were only 8.2% of the total GDP of the US in 1992, exports amounted to 22.0% of the non-service portion of GDP that year (Economic Report of the President, 1999, pp. 338, 444).

    Many analysts view foreign direct investment as the most important form of cross-border economic interchange. It is associated with the movement of technology and organizational methods, not just goods. Table 5 shows two measures of foreign direct investment. Column 1 gives the outstanding stock of foreign direct investment in the world as a percentage of world output. This measure has more than doubled since 1975, although it is not much greater today than it was in 1913. Column 2 shows the annual inflow of direct foreign investment as a percentage of gross fixed capital formation. This measure increased rapidly during 1975-95. However, it is still relatively low in absolute terms, with foreign direct investment accounting for only 5.2 per cent of gross fixed capital formation in 1995.

    Not all, or even most, international capital flows take the form of direct investment. Financial flows (such as cross-border purchases of securities and deposits in foreign bank accounts) are normally larger. One measure that takes account of financial as well as direct investment is the total net movement of capital into or out of a country. That measure indicates the extent to which capital from one country finances development in other countries. Table 6 shows the absolute value of current account surpluses or deficits as a percentage of GDP for 12 major capitalist countries. Since net capital inflow or outflow is approximately equal to the current account deficit or surplus (differing only due to errors and omissions), this indicates the size of net cross-border capital flows. The ratio nearly doubled from 1970-74 to 1990-96, although it remained well below the figure for 1910-14.

    Cross-border gross capital movements have grown much more rapidly than cross-border net capital movements.11 In recent times a very large and rapidly growing volume of capital has moved back and forth across national boundaries. Much of this capital flow is speculative in nature, reflecting growing amounts of short-term capital that are moved around the world in search of the best temporary return. No data on such flows are available for the early part of this century, but the data for recent decades are impressive. During 1980-95 cross-border transactions in bonds and equities as a percentage of GDP rose from 9% to 136% for the US, from 8% to 168% for Germany, and from 8% to 66% for Japan (Baker et. al., 1998, p. 10). The total volume of foreign exchange transactions in the world rose from about $15 billion per day in 1973 to $80 billion per day in 1980 and $1260 billion per day in 1995. Trade in goods and services accounted for 15% of foreign exchange transactions in 1973 but for less than 2% of foreign exchange transactions in 1995 (Bhaduri, 1998, p. 152).

    While cross-border flows of goods and capital are usually considered to be the best indicators of possible globalization of capitalism, changes that have occurred over time within capitalist enterprises are also relevant. That is, the much-discussed rise of the transnational corporation (TNC) is relevant here, where a TNC is a corporation which has a substantial proportion of its sales, assets, and employees outside its home country.12 TNCs existed in the pre-World War I era, primarily in the extractive sector. In the post-World War II period many large manufacturing corporations in the US, Western Europe, and Japan became TNCs.

    The largest TNCs are very international measured by the location of their activities. One study found that the 100 largest TNCs in the world (ranked by assets) had 40.4% of their assets abroad, 50.0% of output abroad, and 47.9% of employment abroad in 1996 (Sutcliffe and Glyn, 1999, p. 125). While this shows that the largest TNCs are significantly international in their activities, all but a handful have retained a single national base for top officials and major stockholders.13 The top 200 TNCs ranked by output were estimated to produce only about 10 per cent of world GDP in 1995 (Sutcliffe and Glyn, 1999, p. 122).

    By the close of the twentieth century, capitalism had become significantly more globalized than it had been fifty years ago, and by some measures it is much more globalized than it had been at the previous peak of this process in 1913. The most important features of globalization today are greatly increased international trade, increased flows of capital across national boundaries (particularly speculative short-term capital), and a major role for large TNCs in manufacturing, extractive activities, and finance, operating worldwide yet retaining in nearly all cases a clear base in a single nation-state.

    While the earlier wave of globalization before World War I did produce a capitalism that was significantly international, two features of that earlier international system differed from the current global capitalism in ways that are relevant here. First, the pre-world War I globalization took place within a world carved up into a few great colonial empires, which meant that much of the so-called "cross-border" trade and investment of that earlier era actually occurred within a space controlled by a single state. Second, the high level of world trade reached before World War I occurred within a system based much more on specialization and division of labor. That is, manufactured goods were exported by the advanced capitalist countries in exchange for primary products, unlike today when most trade is in manufactured goods. In 1913 62.5% of world trade was in primary products (Bairoch and Kozul-Wright, 1998, p. 45). By contrast, in 1970 60.9% of world exports were manufactured goods, rising to 74.7% in 1994 (Baker et. al., 1998, p. 7).

    Some analysts argue that globalization has produced a world of such economic interdependence that individual nation-states no longer have the power to regulate capital. However, while global interdependence does create difficulties for state regulation, this effect has been greatly exaggerated. Nation-states still retain a good deal of potential power vis-a-vis capitalist firms, provided that the political will is present to exercise such power. For example, even such a small country as Malaysia proved able to successfully impose capital controls following the Asian financial crisis of 1997, despite the opposition of the IMF and the US government. A state that has the political will to exercise some control over movements of goods and capital across its borders still retains significant power to regulate business. The more important effect of globalization has been on the political will to undertake state regulation, rather than on the technical feasibility of doing so. Globalization has had this effect by changing the competitive structure of capitalism. It appears that globalization in this period has made capitalism significantly more competitive, in several ways. First, the rapid growth of trade has changed the situation faced by large corporations. Large corporations that had previously operated in relatively controlled oligopolistic domestic markets now face competition from other large corporations based abroad, both in domestic and foreign markets. In the US the rate of import penetration of domestic manufacturing markets was only 2 per cent in 1950; it rose to 8% in 1971 and 16% by 1993, an 8-fold increase since 1950 (Sutcliffe and Glyn, 1999, p. 116).

    Second, the rapid increase in foreign direct investment has in many cases placed TNCs production facilities in the home markets of their foreign rivals. General Motors not only faces import competition from Toyota and Honda but has to compete with US-produced Toyota and Honda vehicles. Third, the increasingly integrated and open world financial system has thrown the major banks and other financial institutions of the leading capitalist nations increasingly into competition with one another.

    Globalization appears to be one factor that has transformed big business from a supporter to an opponent of the interventionist state. It has done so partly by producing TNCs whose tie to the domestic markets for goods and labor is limited. More importantly, globalization tends to turn big business into small business. The process of globalization has increased the competitive pressure faced by large corporations and banks, as competition has become a world-wide relationship.17 Even if those who run large corporations and financial institutions recognize the need for a strong nationstate in their home base, the new competitive pressure they face shortens their time horizon. It pushes them toward support for any means to reduce their tax burden and lift their regulatory constraints, to free them to compete more effectively with their global rivals. While a regulationist state may seem to be in the interests of big business, in that it can more effectively promote capital accumulation in the long run, in a highly competitive environment big business is drawn away from supporting a regulationist state.

    Globalization has produced a world capitalism that bears some resemblance to the Robber Baron Era in the US. Giant corporations battle one another in a system lacking well defined rules. Mergers and acquisitions abound, including some that cross national boundaries, but so far few world industries have evolved the kind of tight oligopolistic structure that would lay the basis for a more controlled form of market relations. Like the late 19th century US Robber Barons, today's large corporations and banks above all want freedom from political burdens and restraints as they confront one another in world markets.18

    The above interpretation of the rise and persistence of neoliberalism attributes it, at least in part, to the changed competitive structure of world capitalism resulting from the process of globalization. As neoliberalism gained influence starting in the 1970s, it became a force propelling the globalization process further. One reason for stressing the line of causation running from globalization to neoliberalism is the time sequence of the developments. The process of globalization, which had been reversed to some extent by political and economic events in the interwar period, resumed right after World War II, producing a significantly more globalized world economy and eroding the monopoly power of large corporations well before neoliberalism began its second coming in the mid 1970s. The rapid rise in merchandise exports began during the Bretton Woods period, as Table 3 showed. So too did the growing role for TNC's. These two aspects of the current globalization had their roots in the postwar era of state-regulated capitalism. This suggests that, to some extent, globalization reflects a long-run tendency in the capital accumulation process rather than just being a result of the rising influence of neoliberal policies. On the other hand, once neoliberalism became dominant, it accelerated the process of globalization. This can be seen most clearly in the data on cross-border flows of both real and financial capital, which began to grow rapidly only after the 1960s.

    Other Factors Promoting Neoliberalism

    The changed competitive structure of capitalism provides part of the explanation for the rise from the ashes of classical liberalism and its persistence in the face of widespread evidence of its failure to deliver the goods. However, three additional factors have played a role in promoting neoliberal dominance. These are the weakening of socialist movements in the industrialized capitalist countries, the demise of state socialism, and the long period that has elapsed since the last major capitalist economic crisis. There is space here for only some brief comments about these additional factors.

    The socialist movements in the industrialized capitalist countries have declined in strength significantly over the past few decades. While Social Democratic parties have come to office in several European countries recently, they no longer represent a threat of even significant modification of capitalism, much less the specter of replacing capitalism with an alternative socialist system. The regulationist state was always partly a response to the fear of socialism, a point illustrated by the emergence of the first major regulationist state of the era of mature capitalism in Germany in the late 19th century, in response to the world=s first major socialist movement. As the threat coming from socialist movements in the industrialized capitalist countries has receded, so too has to incentive to retain the regulationist state.

    The existence of a powerful bloc of Communist-run states with an alternative "state socialist" socioeconomic system tended to push capitalism toward a state regulationist form. It reinforced the fear among capitalists that their own working classes might turn against capitalism. It also had an impact on relations among the leading capitalist states, promoting inter-state unity behind US leadership, which facilitated the creation and operation of a world-system of state-regulated capitalism.19 The demise of state socialism during 1989-91 removed one more factor that had reinforced the regulationist state.

    The occurrence of a major economic crisis tends to promote an interventionist state, since active state intervention is required to overcome a major crisis. The memory of a recent major crisis tends to keep up support for a regulationist state, which is correctly seen as a stabilizing force tending to head off major crises. As the Great Depression of the 1930s has receded into the distant past, the belief has taken hold that major economic crises have been banished forever. This reduces the perceived need to retain the regulationist state.

    Concluding Comments

    If neoliberalism continues to reign as the dominant ideology and policy stance, it can be argued that world capitalism faces a future of stagnation, instability, and even eventual social breakdown.20 However, from the factors that have promoted neoliberalism one can see possible sources of a move back toward state-regulated capitalism at some point. One possibility would be the development of tight oligopoly and regulated competition on a world scale. Perhaps the current merger wave might continue until, as happened at the beginning of the 20th century within the US and in other industrialized capitalist economies, oligopoly replaced cutthroat competition, but this time on a world scale. Such a development might revive big business support for an interventionist state. However, this does not seem to be likely in the foreseeable future. The world is a big place, with differing cultures, laws, and business practices in different countries, which serve as obstacles to overcoming the competitive tendency in market relations. Transforming an industry=s structure so that two to four companies produce the bulk of the output is not sufficient in itself to achieve stable monopoly power, if the rivals are unable to communicate effectively with one another and find common ground for cooperation. Also, it would be difficult for international monopolies to exercise effective regulation via national governments, and a genuine world capitalist state is not a possibility for the foreseeable future.

    If state socialism re-emerged in one or more major countries, perhaps this might push the capitalist world back toward the regulationist state. However, such a development does not seem likely. Even if Russia or Ukraine at some point does head in that direction, it would be unlikely to produce a serious rival socioeconomic system to that of world capitalism.

    A more likely source of a new era of state interventionism might come from one of the remaining two factors considered above. The macro-instability of neoliberal global capitalism might produce a major economic crisis at some point, one which spins out of the control of the weakened regulatory authorities. This would almost certainly revive the politics of the regulationist state. Finally, the increasing exploitation and other social problems generated by neoliberal global capitalism might prod the socialist movement back to life at some point. Should socialist movements revive and begin to seriously challenge capitalism in one or more major capitalist countries, state regulationism might return in response to it. Such a development would also revive the possibility of finally superceding capitalism and replacing it with a system based on human need rather than private profit.

    [Sep 15, 2016] Whats Behind The Revolt Against Global Integration?

    Notable quotes:
    "... Elites can continue on the current path of pursuing integration projects and defending existing integration, hoping to win enough popular support that their efforts are not thwarted. On the evidence of the U.S. presidential campaign and the Brexit debate, this strategy may have run its course. ... ..."
    "... I think some fellows already had this idea: "Much more promising is this idea: The promotion of global integration can become a bottom-up rather than a top-down project" -- "Workers of the World, Unite. You have nothing to lose but your chains!" ~Marx/Engels, 1848 ..."
    "... Krugman sort of said this when he saw that apparel multinationals were shifting jobs out of China to Bangladesh. Like $3 an hour is just way too high for workers. ..."
    "... The "populists" are raging against global trade which benefits the world poor. The Very Serious economists know what is really going on and have to interests of the poor at heart. Plus they are smarter than the "populists" who are just dumb hippies. ..."
    "... And what about neocolonialism and debt slavery ? http://historum.com/blogs/solidaire/245-debt-slavery-neo-colonialism-neoliberalism.html ..."
    "... International debtors are the modern colonialists, sucking the marrow of countries; no armies are needed anymore to keep those countries subjugated. Debt is the modern instrument of enslavement, the international banks, corporations and hedge funds the modern colonial powers, and its enforcers are instruments like the Global Bank, the IMF, and the corrupt, collaborationist governments (and totalitarian regimes) of those countries, supported and propped up by these neo-colonials. ..."
    "... Cover your a$$ much Larry? No mention of mass immigration? No mention of the elites' conscious, planned attack on homogeneous societies in Western Europe, the US, and now Japan? ..."
    "... The US was 88% European as of 1960. As of 1800 it was like 90% English. So yes, it was basically a homogeneous society prior to the immigration act of 1965. Today it is extremely hard for Europeans to get into the US -- but easier for non-Europeans. Now why would that be? Hmm .... ..."
    "... The only trade that is actually free is trade not covered by laws and/or treaties. All other trade is regulated trade. ..."
    "... Here's a good rule to follow. When someone calls something the exact opposite of what it is, in all probability they are trying to hustle your wallet. ..."
    "... ISIS was invented by Wall Street who financed them. ISIS is a scam, just like Bin Laden's group, just like "COMMUNISM!!!!" to control people. To manipulate them. ..."
    "... Guys, the bourgeois state is a protection racket and always has been. It makes you feel safe, secure and "feel like man". So we can enjoy every indulgent individual lust the world has to offer. Then comes in dialectics of what that protection racket should do. ..."
    "... To me, the bourgeois state is nothing more than a protection racket for the rich, something you should not forget. ..."
    "... I find it rather precious that Summers pretends not to understand why people hate TPP. I do not think there is any real widespread antipathy toward global integration, though it does pose some rather substantial systemic dangers, as we saw in the global financial collapse. What people, including me, oppose is how that integration is structured. These agreements are about is not "free trade", but removing all restrictions on global capital and that is a big problem. ..."
    "... TPP is not free trade. It is protectionism for the rich. ..."
    "... All or most modern "free trade" agreements are like that. What people oppose is agreements which impoverish them and enrich capital. ..."
    "... More free trade arrangement are not always better trade arrangements. People have seen the results of the labor race to the bottom caused by earlier free trade agreements; and now they are guessing we're going to get the same kind of race to the bottom with TPP when we have to put all of our environmental laws and other domestic regulations into capitalist competition with backward countries. ..."
    "... progressive states (WA, OR, CA, NV, IL, NY, MD) could simply treat union busting the same way any OTHER major muscling or manipulation of the free market is treated: make it a felony. ..."
    "... Summers: "Pie in the Sky" So trade negotiations would have to be lead by labor advocates and environmental groups -- sounds great to me, but I can't for the life of me figure out why the goods and service producers (i.e. capital owners) would have any incentive to promote trade under such a negotiated trade agreement... or that trade would actually occur. You'd have to eliminate private enterprise incentives to profit I think.. not something the U.S.'s "individualism" god can't tolerate. ..."
    "... Alas, the Kaiser, the Tsar, and the Emperor did not act in accord with its tenets. Either increased global trade is irrelevant to war and peace, or World War I didn't happen. Your pick which to believe. ..."
    Apr 11, 2016 | economistsview.typepad.com
    Larry Summers:
    What's behind the revolt against global integration? : Since the end of World War II, a broad consensus in support of global economic integration as a force for peace and prosperity has been a pillar of the international order. ...

    This broad program of global integration has been more successful than could reasonably have been hoped. ... Yet a revolt against global integration is underway in the West. ...

    One substantial part of what is behind the resistance is a lack of knowledge. ...The core of the revolt against global integration, though, is not ignorance. It is a sense - unfortunately not wholly unwarranted - that it is a project being carried out by elites for elites, with little consideration for the interests of ordinary people. ...

    Elites can continue on the current path of pursuing integration projects and defending existing integration, hoping to win enough popular support that their efforts are not thwarted. On the evidence of the U.S. presidential campaign and the Brexit debate, this strategy may have run its course. ...

    Much more promising is this idea: The promotion of global integration can become a bottom-up rather than a top-down project. The emphasis can shift from promoting integration to managing its consequences. This would mean a shift from international trade agreements to international harmonization agreements, whereby issues such as labor rights and environmental protection would be central, while issues related to empowering foreign producers would be secondary. It would also mean devoting as much political capital to the trillions of dollars that escape taxation or evade regulation through cross-border capital flows as we now devote to trade agreements. And it would mean an emphasis on the challenges of middle-class parents everywhere who doubt, but still hope desperately, that their kids can have better lives than they did.

    Tom aka Rusty : , Monday, April 11, 2016 at 07:15 AM
    Is Summers really this naive?
    Jedgar Mihelic : , Monday, April 11, 2016 at 07:21 AM
    I think some fellows already had this idea: "Much more promising is this idea: The promotion of global integration can become a bottom-up rather than a top-down project" -- "Workers of the World, Unite. You have nothing to lose but your chains!" ~Marx/Engels, 1848
    pgl -> Jedgar Mihelic ... , Monday, April 11, 2016 at 07:28 AM
    Krugman sort of said this when he saw that apparel multinationals were shifting jobs out of China to Bangladesh. Like $3 an hour is just way too high for workers.
    pgl : Monday, April 11, 2016 at 07:32 AM
    A large part of the concern over free trade comes from the weak economic performances around the globe. Summers could have addressed this. Jared Bernstein and Dean Baker - both sensible economists - for example recently called on the US to do its own currency manipulation so as to reverse the US$ appreciation which is lowering our net exports quite a bit.

    What they left out is the fact that both China and Japan have seen currency appreciations as well. If we raise our net exports at their expense, that lowers their economic activity. Better would be global fiscal stimulus. I wish Larry had raised this issue here.

    Peter -> pgl... , Monday, April 11, 2016 at 08:12 AM
    The "populists" are raging against global trade which benefits the world poor. The Very Serious economists know what is really going on and have to interests of the poor at heart. Plus they are smarter than the "populists" who are just dumb hippies.
    likbez -> pgl... , Monday, April 11, 2016 at 04:48 PM
    pgl,

    And what about neocolonialism and debt slavery ? http://historum.com/blogs/solidaire/245-debt-slavery-neo-colonialism-neoliberalism.html

    === quote ===

    One of the most fundamental reasons for the poverty and underdevelopment of Africa (and of almost all "third world" countries) is neo-colonialism, which in modern history takes the shape of external debt.

    When countries are forced to pay 40,50,60% of their government budgets just to pay the interests of their enormous debts, there is little room for actual prosperity left.

    International debtors are the modern colonialists, sucking the marrow of countries; no armies are needed anymore to keep those countries subjugated. Debt is the modern instrument of enslavement, the international banks, corporations and hedge funds the modern colonial powers, and its enforcers are instruments like the Global Bank, the IMF, and the corrupt, collaborationist governments (and totalitarian regimes) of those countries, supported and propped up by these neo-colonials.

    In reality, not much has changed since the fall of the great colonial empires. In paper, countries have gained their sovereignty, but in reality they are enslaved to the international credit system.

    The only thing that has changed, is that now the very colonial powers of the past, are threatened to become debt colonies themselves. You see, global capitalism and credit system has no country, nationality, colour; it only recognises the colour of money, earned at all cost by the very few, on the expense of the vast, unsuspected and lulled masses.

    Debt had always been a very efficient way of control, either on a personal, or state level. And while most of us are aware of the implementations of personal debt and the risks involved, the corridors of government debt are poorly lit, albeit this kind of debt is affecting all citizens of a country and in ways more profound and far reaching into the future than those of private debt.

    Global capitalism was flourishing after WW2, and reached an apex somewhere in the 70's.

    The lower classes in the mature capitalist countries had gained a respectable portion of the distributed wealth, rights and privileges inconceivable several decades before. The purchasing power of the average American for example, was very satisfactory, fully justifying the American dream. Similar phenomena were taking place all over the "developed" world.

    Kgaard : , Monday, April 11, 2016 at 07:32 AM
    Cover your a$$ much Larry? No mention of mass immigration? No mention of the elites' conscious, planned attack on homogeneous societies in Western Europe, the US, and now Japan?
    anne -> Kgaard... , Monday, April 11, 2016 at 07:44 AM
    There is of course no reasonable answering to prejudice, since prejudice is always unreasonable, but should there be a question, when was the last time that, say, the United States or the territory that the US now covers was a homogeneous society?

    Before the US engulfed Spanish peoples? Before the US engulfed African peoples? Before the US engulfed Indian peoples? When did the Irish, just to think of a random nationality, ruin "our" homogeneity?

    I could continue, but how much of a point is there in being reasonable?

    Kgaard -> anne... , Monday, April 11, 2016 at 11:21 AM
    The US was 88% European as of 1960. As of 1800 it was like 90% English. So yes, it was basically a homogeneous society prior to the immigration act of 1965. Today it is extremely hard for Europeans to get into the US -- but easier for non-Europeans. Now why would that be? Hmm ....

    Also ... What is your definition of prejudice?

    Benedict@Large -> pgl... , Monday, April 11, 2016 at 08:56 AM
    The only trade that is actually free is trade not covered by laws and/or treaties. All other trade is regulated trade.

    Here's a good rule to follow. When someone calls something the exact opposite of what it is, in all probability they are trying to hustle your wallet.

    Has anyone been trying to hustle the wallets of the people who became ISIS? Oh please. That's a stupid question to even ask.

    So is free trade, as in regulated trade that is called the opposite of what it is, responsible for ISIS? Of course it is.

    Ben Groves -> pgl... , Monday, April 11, 2016 at 10:10 AM
    ISIS was invented by Wall Street who financed them. ISIS is a scam, just like Bin Laden's group, just like "COMMUNISM!!!!" to control people. To manipulate them.

    It is like using the internet to think you are "edgy". Some dudes like psuedo-science scam artist Mike Adams are uncovering secrets to this witty viewer............then you wonder why society is degenerating. What should happen with Mike Adams is, he should be beaten up and castrated. My guess he would talk then. Boy would his idiot followers get a surprise and that surprise would have results other than "poor mikey, he was robbed".

    This explains why guys like Trump get delegates. Not because he uses illegal immigrants in his old businesses, not because of some flat real wages going over 40 years, not because he is a conman marketer.........he makes them feel safe. That is purely it. I think its pathetic, but that is what happens in a emasculated world. Safety becomes absolute concern. "Trump makes me feel safe".

    Guys, the bourgeois state is a protection racket and always has been. It makes you feel safe, secure and "feel like man". So we can enjoy every indulgent individual lust the world has to offer. Then comes in dialectics of what that protection racket should do.

    To me, the bourgeois state is nothing more than a protection racket for the rich, something you should not forget.

    DrDick : , Monday, April 11, 2016 at 07:35 AM
    I find it rather precious that Summers pretends not to understand why people hate TPP. I do not think there is any real widespread antipathy toward global integration, though it does pose some rather substantial systemic dangers, as we saw in the global financial collapse. What people, including me, oppose is how that integration is structured. These agreements are about is not "free trade", but removing all restrictions on global capital and that is a big problem.
    pgl -> DrDick ... , Monday, April 11, 2016 at 07:57 AM
    OK - some substance finally. TPP is not free trade. It is protectionism for the rich.
    DrDick -> pgl... , Monday, April 11, 2016 at 11:10 AM
    Actually, this is my first actual response to the post itself, but you were too busy being and a*****e to notice. All or most modern "free trade" agreements are like that. What people oppose is agreements which impoverish them and enrich capital.
    Dan Kervick -> pgl... , Monday, April 11, 2016 at 03:33 PM
    This has become a popular line, and it's not exactly false. But so what if it were a "free trade" agreement? More free trade arrangement are not always better trade arrangements. People have seen the results of the labor race to the bottom caused by earlier free trade agreements; and now they are guessing we're going to get the same kind of race to the bottom with TPP when we have to put all of our environmental laws and other domestic regulations into capitalist competition with backward countries.
    Denis Drew : , Monday, April 11, 2016 at 07:38 AM
    " The promotion of global integration can become a bottom-up rather than a top-down project. "

    " ... whereby issues such as labor rights and environmental protection would be central ... "

    +1

    Now if we could just adopt that policy internally in the United States first we could then (and only then) support it externally across the world.

    Easy approach: (FOR THE TEN MILLIONTH TIME!) progressive states (WA, OR, CA, NV, IL, NY, MD) could simply treat union busting the same way any OTHER major muscling or manipulation of the free market is treated: make it a felony. FYI (for those who are not aware) states can add to federal labor protections, just not subtract.

    A completely renewed, re-constituted democracy would be born.

    Biggest obstacle to this being done in my (crackpot?) view: human males. Being instinctive pack hunters, before they check out any idea they, first, check in with the pack (all those other boys who are also checking in with the pack) -- almost automatically infer impossibility to overcome what they see (correctly?) as wheels within wheels of inertia.

    Self-fulfilling prophecy: nothing (not the most obvious, SHOULD BE easiest possible to get support for actions) ever gets done.

    Peter : , Monday, April 11, 2016 at 08:31 AM
    http://jaredbernsteinblog.com/new_path_forward/

    I'm not the only one seeking a new path forward on trade.

    by Jared Bernstein

    April 11th, 2016 at 9:20 am

    "...

    Here's Larry's view of the way forward:

    "The promotion of global integration can become a bottom-up rather than a top-down project. The emphasis can shift from promoting integration to managing its consequences. This would mean a shift from international trade agreements to international harmonization agreements, whereby issues such as labor rights and environmental protection would be central, while issues related to empowering foreign producers would be secondary. It would also mean devoting as much political capital to the trillions of dollars that escape taxation or evade regulation through cross-border capital flows as we now devote to trade agreements. And it would mean an emphasis on the challenges of middle-class parents everywhere who doubt, but still hope desperately, that their kids can have better lives than they did.

    Good points, all. "Bottom-up" means what I've been calling a more representative, inclusive process. But what's this about "international harmonization?""

    It's a way of saying that we need to reduce the "frictions" and thus costs between trading partners at the level of pragmatic infrastructure, not corporate power. One way to think of this is TFAs, not FTAs. TFAs are trade facilitation agreements, which are more about integrating ports, rail, and paperwork than patents that protect big Pharma.

    It's refreshing to see mainstreamers thinking creatively about the anger that's surfaced around globalization. Waiting for the anger to dissipate and then reverting back to the old trade regimes may be the preferred path for elites, but that path may well be blocked. We'd best clear a new, wider path, one that better accommodates folks from all walks of life, both here and abroad."

    anne : , Monday, April 11, 2016 at 09:12 AM
    "What's Behind The Revolt Against Global Integration?" -- Washington Post editors title.

    "Global trade should be remade from the bottom up" -- Lawrence Summers title.

    I find the difference in titles important in showing just how slanted Washington Post editors are.

    Longtooth : , Monday, April 11, 2016 at 01:41 PM
    Summers: "Pie in the Sky" So trade negotiations would have to be lead by labor advocates and environmental groups -- sounds great to me, but I can't for the life of me figure out why the goods and service producers (i.e. capital owners) would have any incentive to promote trade under such a negotiated trade agreement... or that trade would actually occur. You'd have to eliminate private enterprise incentives to profit I think.. not something the U.S.'s "individualism" god can't tolerate.
    pgl -> Longtooth... , Monday, April 11, 2016 at 01:46 PM
    Imagine a trade deal negotiated by the AFL-CIO. Labor wins a lot and capital owners lose a little. We can all then smile and say to the latter - go get your buddies in Congress more serious about the compensation principle. Turn the table!
    kthomas -> pgl... , Monday, April 11, 2016 at 03:01 PM
    Not being rude, but I fail to understand your response.

    AFL-CIO? turn the table?

    Peter -> kthomas... , Monday, April 11, 2016 at 03:51 PM
    It's okay. He's drunk again.
    New Deal democrat : , Monday, April 11, 2016 at 03:07 PM
    "consensus in support of global economic integration as a force for peace and prosperity " -- "The Great Illusion" ( https://en.m.wikipedia.org/wiki/The_Great_Illusion )
    That increased trade is a bulwark against war rears its ugly head again. The above book which so ironically delivered the message was published in 1910.

    Alas, the Kaiser, the Tsar, and the Emperor did not act in accord with its tenets. Either increased global trade is irrelevant to war and peace, or World War I didn't happen. Your pick which to believe.

    George H. Blackford :
    Our problems began back in the 1970s when we abandoned the Bretton Woods international capital controls and then broke the unions, cut taxes on corporations and upper income groups, and deregulated the financial system. This eventually led a stagnation of wages in the US and an increase in the concentration of income at the top of the income distribution throughout the world: http://www.rwEconomics.com/Ch_1.htm

    The export-led growth model that began in the 1990s seriously exacerbated this problem as it proved to be unsustainable: http://www.rwEconomics.com/htm/WDCh_2.htm

    When combined with tax cuts and financial deregulation it led to increasing debt relative to income in the importing countries that caused the financial catastrophe we went through in 2008, the economic stagnation that followed, and the social unrest we see throughout the world today. This, in turn, created a situation in which the full utilization of our economic resources can only be maintained through an unsustainable increase in debt relative to income: http://www.rwEconomics.com/htm/WDCh3e.htm

    This is what has to be overcome if we are to get out of the mess the world is in today, and it's not going to be overcome by pretending that it's just going to go away if people can just become educated about the benefits of trade. At least that's not the way it worked out in the 1930s: http://www.rwEconomics.com/LTLGAD.htm

    [Sep 15, 2016] How neoliberalism created an age of activism by Juan Cole

    Notable quotes:
    "... From Tunis to Tel Aviv, Madrid to Oakland, a new generation of youth activists is challenging the neoliberal state that has dominated the world ever since the Cold War ended. ..."
    "... young rebels are reacting to a single stunning worldwide development: the extreme concentration of wealth in a few hands thanks to neoliberal policies of deregulation and union busting. They have taken to the streets, parks, plazas and squares to protest against the resulting corruption, the way politicians can be bought and sold, and the impunity ..."
    "... In the "glorious thirty years" after World War II, North America and Western Europe achieved remarkable rates of economic growth and relatively low levels of inequality for capitalist societies, while instituting a broad range of benefits for workers, students and retirees. From roughly 1980 on, however, the neoliberal movement, rooted in the laissez-faire economic theories of Milton Friedman, launched what became a full-scale assault on workers' power and an attempt, often remarkably successful, to eviscerate the social welfare state. ..."
    "... "Washington consensus" meant that the urge to impose privatisation on stagnating, nepotistic postcolonial states would become the order of the day. ..."
    "... While neoliberalism has produced more unequal societies throughout the world, nowhere else has the income of the poor declined quite so strikingly. The concentration of wealth in a few hands profoundly contradicts the founding principles of Israel's Labour Zionism, and results from decades of right-wing Likud policies punishing the poor and middle classes and shifting wealth to the top of society. ..."
    "... Juan Cole is the Richard P. Mitchell Professor of History and the director of the Centre for South Asian Studies at the University of Michigan. His latest book, ..."
    "... Engaging the Muslim World , is just out in a revised paperback edition from Palgrave Macmillan. He runs the Informed Comment website. ..."
    "... A version of this article was first published on Tom Dispatch . ..."
    "... The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy. ..."
    Nov 15, 2011 | aljazeera.com

    Decades of neoliberal economic policies have concentrated wealth and are now spurring a global backlash.

    Politics, US & Canada, Latin America, Chile, Egypt

    ANN ARBOR, MICHIGAN - From Tunis to Tel Aviv, Madrid to Oakland, a new generation of youth activists is challenging the neoliberal state that has dominated the world ever since the Cold War ended. The massive popular protests that shook the globe this year have much in common, though most of the reporting on them in the mainstream media has obscured the similarities.

    Whether in Egypt or the United States, young rebels are reacting to a single stunning worldwide development: the extreme concentration of wealth in a few hands thanks to neoliberal policies of deregulation and union busting. They have taken to the streets, parks, plazas and squares to protest against the resulting corruption, the way politicians can be bought and sold, and the impunity

    ANN ARBOR, MICHIGAN - From Tunis to Tel Aviv, Madrid to Oakland, a new generation of youth activists is challenging the neoliberal state that has dominated the world ever since the Cold War ended. The massive popular protests that shook the globe this year have much in common, though most of the reporting on them in the mainstream media has obscured the similarities.

    Whether in Egypt or the United States, young rebels are reacting to a single stunning worldwide development: the extreme concentration of wealth in a few hands thanks to neoliberal policies of deregulation and union busting. They have taken to the streets, parks, plazas and squares to protest against the resulting corruption, the way politicians can be bought and sold, and the impunity of the white-collar criminals who have run riot in societies everywhere. They are objecting to high rates of unemployment, reduced social services, blighted futures and above all the substitution of the market for all other values as the matrix of human ethics and life.

    Pasha the Tiger

    In the "glorious thirty years" after World War II, North America and Western Europe achieved remarkable rates of economic growth and relatively low levels of inequality for capitalist societies, while instituting a broad range of benefits for workers, students and retirees. From roughly 1980 on, however, the neoliberal movement, rooted in the laissez-faire economic theories of Milton Friedman, launched what became a full-scale assault on workers' power and an attempt, often remarkably successful, to eviscerate the social welfare state.

    Neoliberals chanted the mantra that everyone would benefit if the public sector were privatised, businesses deregulated and market mechanisms allowed to distribute wealth. But as economist David Harvey argues, from the beginning it was a doctrine that primarily benefited the wealthy, its adoption allowing the top one per cent in any neoliberal society to capture a disproportionate share of whatever wealth was generated.

    In the global South, countries that gained their independence from European colonialism after World War II tended to create large public sectors as part of the process of industrialization. Often, living standards improved as a result, but by the 1970s, such developing economies were generally experiencing a levelling-off of growth. This happened just as neoliberalism became ascendant in Washington, Paris and London as well as in Bretton Woods institutions like the International Monetary Fund. This "Washington consensus" meant that the urge to impose privatisation on stagnating, nepotistic postcolonial states would become the order of the day.

    Egypt and Tunisia, to take two countries in the spotlight for sparking the Arab Spring, were successfully pressured in the 1990s to privatise their relatively large public sectors. Moving public resources into the private sector created an almost endless range of opportunities for staggering levels of corruption on the part of the ruling families of autocrats Zine El Abidine Ben Ali in Tunis and Hosni Mubarak in Cairo. International banks, central banks and emerging local private banks aided and abetted their agenda.

    It was not surprising then that one of the first targets of Tunisian crowds in the course of the revolution they made last January was the Zitouna bank, a branch of which they torched. Its owner? Sakher El Materi, a son-in-law of President Ben Ali and the notorious owner of Pasha, the well-fed pet tiger that prowled the grounds of one of his sumptuous mansions. Not even the way his outfit sought legitimacy by practicing "Islamic banking" could forestall popular rage. A 2006 State Department cable released by WikiLeaks observed, "One local financial expert blames the [Ben Ali] Family for chronic banking sector woes due to the great percentage of non-performing loans issued through crony connections, and has essentially paralysed banking authorities from genuine recovery efforts." That is, the banks were used by the regime to give away money to his cronies, with no expectation of repayment.

    Tunisian activists similarly directed their ire at foreign banks and lenders to which their country owes $14.4bn. Tunisians are still railing and rallying against the repayment of all that money, some of which they believe was borrowed profligately by the corrupt former regime and then squandered quite privately.

    Tunisians had their own one per cent, a thin commercial elite, half of whom were related to or closely connected to President Ben Ali. As a group, they were accused by young activists of mafia-like, predatory practices, such as demanding pay-offs from legitimate businesses, and discouraging foreign investment by tying it to a stupendous system of bribes. The closed, top-heavy character of the Tunisian economic system was blamed for the bottom-heavy waves of suffering that followed: cost of living increases that hit people on fixed incomes or those like students and peddlers in the marginal economy especially hard.

    It was no happenstance that the young man who immolated himself and so sparked the Tunisian rebellion was a hard-pressed vegetable peddler. It's easy now to overlook what clearly ties the beginning of the Arab Spring to the European Summer and the present American Fall: the point of the Tunisian revolution was not just to gain political rights, but to sweep away that one per cent, popularly imagined as a sort of dam against economic opportunity.

    Tahrir Square, Zuccotti Park, Rothschild Avenue

    The success of the Tunisian revolution in removing the octopus-like Ben Ali plutocracy inspired the dramatic events in Egypt, Libya, Yemen, Syria and even Israel that are redrawing the political map of the Middle East. But the 2011 youth protest movement was hardly contained in the Middle East. Estonian-Canadian activist Kalle Lasn and his anti-consumerist colleagues at the Vancouver-based Adbusters Media Foundation were inspired by the success of the revolutionaries in Tahrir Square in deposing dictator Hosni Mubarak.

    Their organisation specialises in combatting advertising culture through spoofs and pranks. It was Adbusters magazine that sent out the call on Twitter in the summer of 2011 for a rally at Wall Street on September 17, with the now-famous hash tag #OccupyWallStreet. A thousand protesters gathered on the designated date, commemorating the 2008 economic meltdown that had thrown millions of Americans out of their jobs and their homes. Some camped out in nearby Zuccotti Park, another unexpected global spark for protest.

    The Occupy Wall Street movement has now spread throughout the United States, sometimes in the face of serious acts of repression, as in Oakland, California. It has followed in the spirit of the Arab and European movements in demanding an end to special privileges for the richest one per cent, including their ability to more or less buy the US government for purposes of their choosing. What is often forgotten is that the Ben Alis, Mubaraks and Gaddafis were not simply authoritarian tyrants. They were the one per cent and the guardians of the one per cent, in their own societies - and loathed for exactly that.

    Last April, around the time that Lasn began imagining Wall Street protests, progressive activists in Israel started planning their own movement. In July, sales clerk and aspiring filmmaker Daphne Leef found herself unable to cover a sudden rent increase on her Tel Aviv apartment. So she started a protest Facebook page similar to the ones that fuelled the Arab Spring and moved into a tent on the posh Rothschild Avenue where she was soon joined by hundreds of other protesting Israelis. Week by week, the demonstrations grew, spreading to cities throughout the country and culminating on September 3 in a massive rally, the largest in Israel's history. Some 300,000 protesters came out in Tel Aviv, 50,000 in Jerusalem and 40,000 in Haifa. Their demands included not just lower housing costs, but a rollback of neoliberal policies, less regressive taxes and more progressive, direct taxation, a halt to the privatisation of the economy, and the funding of a system of inexpensive education and child care.

    Many on the left in Israel are also deeply troubled by the political and economic power of right-wing settlers on the West Bank, but most decline to bring the Palestinian issue into the movement's demands for fear of losing support among the middle class. For the same reason, the way the Israeli movement was inspired by Tahrir Square and the Egyptian revolution has been downplayed, although "Walk like an Egyptian" signs - a reference both to the Cairo demonstrations and the 1986 Bangles hit song - have been spotted on Rothschild Avenue.

    Most of the Israeli activists in the coastal cities know that they are victims of the same neoliberal order that displaces the Palestinians, punishes them and keeps them stateless. Indeed, the Palestinians, altogether lacking a state but at the complete mercy of various forms of international capital controlled by elites elsewhere, are the ultimate victims of the neoliberal order. But in order to avoid a split in the Israeli protest movement, a quiet agreement was reached to focus on economic discontents and so avoid the divisive issue of the much-despised West Bank settlements.

    There has been little reporting in the Western press about a key source of Israeli unease, which was palpable to me when I visited the country in May. Even then, before the local protests had fully hit their stride, Israelis I met were complaining about the rise to power of an Israeli one per cent. There are now 16 billionaires in the country, who control $45bn in assets, and the current crop of 10,153 millionaires is 20 per cent larger than it was in the previous fiscal year. In terms of its distribution of wealth, Israel is now among the most unequal of the countries in the Organisation for Economic Cooperation and Development. Since the late 1980s, the average household income of families in the bottom fifth of the population has been declining at an annual rate of 1.1 per cent. Over the same period, the average household income of families among the richest 20 per cent went up at an annual rate of 2.4 per cent.

    While neoliberalism has produced more unequal societies throughout the world, nowhere else has the income of the poor declined quite so strikingly. The concentration of wealth in a few hands profoundly contradicts the founding principles of Israel's Labour Zionism, and results from decades of right-wing Likud policies punishing the poor and middle classes and shifting wealth to the top of society.

    The indignant ones

    European youth were also inspired by the Tunisians and Egyptians - and by a similar flight of wealth. I was in Barcelona on May 27, when the police attacked demonstrators camped out at the Placa de Catalunya, provoking widespread consternation. The government of the region is currently led by the centrist Convergence and Union Party, a moderate proponent of Catalan nationalism. It is relatively popular locally, and so Catalans had not expected such heavy-handed police action to be ordered. The crackdown, however, underlined the very point of the protesters, that the neoliberal state, whatever its political makeup, is protecting the same set of wealthy miscreants.

    Spain's "indignados" (indignant ones) got their start in mid-May with huge protests at Madrid's Puerta del Sol Plaza against the country's persistent 21 per cent unemployment rate (and double that among the young). Egyptian activists in Tahrir Square immediately sent a statement of warm support to those in the Spanish capital (as they would months later to New York's demonstrators). Again following the same pattern, the Spanish movement does not restrict its objections to unemployment (and the lack of benefits attending the few new temporary or contract jobs that do arise). Its targets are the banks, bank bailouts, financial corruption and cuts in education and other services.

    Youth activists I met in Toledo and Madrid this summer denounced both of the country's major parties and, indeed, the very consumer society that emphasised wealth accumulation over community and material acquisition over personal enrichment. In the past two months Spain's young protesters have concentrated on demonstrating against cuts to education, with crowds of 70,000 to 90,000 coming out more than once in Madrid and tens of thousands in other cities. For marches in support of the Occupy Wall Street movement, hundreds of thousands reportedly took to the streets of Madrid and Barcelona, among other cities.

    The global reach and connectedness of these movements has yet to be fully appreciated. The Madrid education protesters, for example, cited for inspiration Chilean students who, through persistent, innovative, and large-scale demonstrations this summer and fall, have forced that country's neoliberal government, headed by the increasingly unpopular billionaire president Sebastian Pinera, to inject $1.6bn in new money into education. Neither the crowds of youth in Madrid nor those in Santiago are likely to be mollified, however, by new dorms and laboratories. Chilean students have already moved on from insisting on an end to an ever more expensive class-based education system to demands that the country's lucrative copper mines be nationalised so as to generate revenues for investment in education. In every instance, the underlying goal of specific protests by the youthful reformists is the neoliberal order itself.

    The word "union" was little uttered in American television news coverage of the revolutions in Tunisia and Egypt, even though factory workers and sympathy strikes of all sorts played a key role in them. The right-wing press in the US actually went out of its way to contrast Egyptian demonstrations against Mubarak with the Wisconsin rallies of government workers against Governor Scott Walker's measure to cripple the bargaining power of their unions.

    The Egyptians, Commentary typically wrote, were risking their lives, while Wisconsin's union activists were taking the day off from cushy jobs to parade around with placards, immune from being fired for joining the rallies. The implication: the Egyptian revolution was against tyranny, whereas already spoiled American workers were demanding further coddling.

    The American right has never been interested in recognising this reality: that forbidding unions and strikes is a form of tyranny. In fact, it wasn't just progressive bloggers who saw a connection between Tahrir Square and Madison. The head of the newly formed independent union federation in Egypt dispatched an explicit expression of solidarity to the Wisconsin workers, centering on worker's rights.

    At least, Commentary did us one favour: it clarified why the story has been told as it has in most of the American media. If the revolutions in Tunisia, Egypt and Libya were merely about individualistic political rights - about the holding of elections and the guarantee of due process - then they could be depicted as largely irrelevant to politics in the US and Europe, where such norms already prevailed.

    If, however, they centered on economic rights (as they certainly did), then clearly the discontents of North African youth when it came to plutocracy, corruption, the curbing of workers' rights, and persistent unemployment deeply resembled those of their American counterparts.

    The global protests of 2011 have been cast in the American media largely as an "Arab Spring" challenging local dictatorships - as though Spain, Chile and Israel do not exist. The constant speculation by pundits and television news anchors in the US about whether "Islam" would benefit from the Arab Spring functioned as an Orientalist way of marking events in North Africa as alien and vaguely menacing, but also as not germane to the day to day concerns of working Americans. The inhabitants of Zuccotti Park in lower Manhattan clearly feel differently.

    Facebook flash mobs

    If we focus on economic trends, then the neoliberal state looks eerily similar, whether it is a democracy or a dictatorship, whether the government is nominally right of centre or left of centre. As a package, deregulation, the privatisation of public resources and firms, corruption and forms of insider trading and interference in the ability of workers to organise or engage in collective bargaining have allowed the top one per cent in Israel, just as in Tunisia or the US, to capture the lion's share of profits from the growth of the last decades.

    Observers were puzzled by the huge crowds that turned out in both Tunis and Tel Aviv in 2011, especially given that economic growth in those countries had been running at a seemingly healthy five per cent per annum. "Growth", defined generally and without regard to its distribution, is the answer to a neoliberal question. The question of the 99 per cent, however, is: Who is getting the increased wealth? In both of those countries, as in the US and other neoliberal lands, the answer is: disproportionately the one per cent.

    If you were wondering why outraged young people around the globe are chanting such similar slogans and using such similar tactics (including Facebook "flash mobs"), it is because they have seen more clearly than their elders through the neoliberal shell game.

    Juan Cole is the Richard P. Mitchell Professor of History and the director of the Centre for South Asian Studies at the University of Michigan. His latest book, Engaging the Muslim World, is just out in a revised paperback edition from Palgrave Macmillan. He runs the Informed Comment website.

    A version of this article was first published on Tom Dispatch.

    The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy.

    [Sep 15, 2016] Global Capitalism Crisis of Humanity and the Specter of 21st Century Fascism

    Yet another response [ to globalization] is that I term 21stcentury fascism. The ultra-right is an insurgent force in many countries. In broad strokes, this project seeks to fuse reactionary political power with transnational capital and to organise a mass base among historically privileged sectors of the global working class – such as white workers in the North and middle layers in the South – that are now experiencing heightened insecurity and the specter of downward mobility. It involves militarism, extreme masculinisation, homophobia, racism and racist mobilisations, including the search for scapegoats, such as immigrant workers and, in the West, Muslims. Twenty-first century fascism evokes mystifying ideologies, often involving race/culture supremacy and xenophobia, embracing an idealised and mythical past. Neo-fascist culture normalises and glamorises warfare and social violence, indeed, generates a fascination with domination that is portrayed even as heroic.
    Notable quotes:
    "... over-accumulation ..."
    "... Cyclical crises ..."
    "... . Structural crises ..."
    "... systemic crisis ..."
    "... social reproduction. ..."
    "... crisis of humanity ..."
    "... 1984 has arrived; ..."
    "... The crisis has resulted in a rapid political polarisation in global society. ..."
    "... In broad strokes, this project seeks to fuse reactionary political power with transnational capital and to organise a mass base among historically privileged sectors of the global working class ..."
    "... It involves militarism, extreme masculinisation, homophobia, racism and racist mobilisations, including the search for scapegoats, such as immigrant workers and, in the West, Muslims. ..."
    "... Neo-fascist culture normalises and glamorises warfare and social violence, indeed, generates a fascination with domination that is portrayed even as heroic. ..."
    May 27, 2014 | The World Financial Review

    World capitalism is experiencing the worst crisis in its 500 year history. Global capitalism is a qualitatively new stage in the open ended evolution of capitalism characterised by the rise of transnational capital, a transnational capitalist class, and a transnational state. Below, William I. Robinson argues that the global crisis is structural and threatens to become systemic, raising the specter of collapse and a global police state in the face of ecological holocaust, concentration of the means of violence, displacement of billions, limits to extensive expansion and crises of state legitimacy, and suggests that a massive redistribution of wealth and power downward to the poor majority of humanity is the only viable solution.

    The New Global Capitalism and the 21st Century Crisis

    The world capitalist system is arguably experiencing the worst crisis in its 500 year history. World capitalism has experienced a profound restructuring through globalisation over the past few decades and has been transformed in ways that make it fundamentally distinct from its earlier incarnations. Similarly, the current crisis exhibits features that set it apart from earlier crises of the system and raise the stakes for humanity. If we are to avert disastrous outcomes we must understand both the nature of the new global capitalism and the nature of its crisis. Analysis of capitalist globalisation provides a template for probing a wide range of social, political, cultural and ideological processes in this 21st century. Following Marx, we want to focus on the internal dynamics of capitalism to understand crisis. And following the global capitalism perspective, we want to see how capitalism has qualitatively evolved in recent decades.

    The system-wide crisis we face is not a repeat of earlier such episodes such as that of the the 1930s or the 1970s precisely because capitalism is fundamentally different in the 21st century. Globalisation constitutes a qualitatively new epoch in the ongoing and open-ended evolution of world capitalism, marked by a number of qualitative shifts in the capitalist system and by novel articulations of social power. I highlight four aspects unique to this epoch.1

    First is the rise of truly transnational capital and a new global production and financial system into which all nations and much of humanity has been integrated, either directly or indirectly. We have gone from a world economy, in which countries and regions were linked to each other via trade and financial flows in an integrated international market, to a global economy, in which nations are linked to each more organically through the transnationalisation of the production process, of finance, and of the circuits of capital accumulation. No single nation-state can remain insulated from the global economy or prevent the penetration of the social, political, and cultural superstructure of global capitalism. Second is the rise of a Transnational Capitalist Class (TCC), a class group that has drawn in contingents from most countries around the world, North and South, and has attempted to position itself as a global ruling class. This TCC is the hegemonic fraction of capital on a world scale. Third is the rise of Transnational State (TNS) apparatuses. The TNS is constituted as a loose network made up of trans-, and supranational organisations together with national states. It functions to organise the conditions for transnational accumulation. The TCC attempts to organise and institutionally exercise its class power through TNS apparatuses. Fourth are novel relations of inequality, domination and exploitation in global society, including an increasing importance of transnational social and class inequalities relative to North-South inequalities.

    Cyclical, Structural, and Systemic Crises

    Most commentators on the contemporary crisis refer to the "Great Recession" of 2008 and its aftermath. Yet the causal origins of global crisis are to be found in over-accumulation and also in contradictions of state power, or in what Marxists call the internal contradictions of the capitalist system. Moreover, because the system is now global, crisis in any one place tends to represent crisis for the system as a whole. The system cannot expand because the marginalisation of a significant portion of humanity from direct productive participation, the downward pressure on wages and popular consumption worldwide, and the polarisation of income, has reduced the ability of the world market to absorb world output. At the same time, given the particular configuration of social and class forces and the correlation of these forces worldwide, national states are hard-pressed to regulate transnational circuits of accumulation and offset the explosive contradictions built into the system.

    Is this crisis cyclical, structural, or systemic? Cyclical crises are recurrent to capitalism about once every 10 years and involve recessions that act as self-correcting mechanisms without any major restructuring of the system. The recessions of the early 1980s, the early 1990s, and of 2001 were cyclical crises. In contrast, the 2008 crisis signaled the slide into astructural crisis. Structural crises reflect deeper contradictions that can only be resolved by a major restructuring of the system. The structural crisis of the 1970s was resolved through capitalist globalisation. Prior to that, the structural crisis of the 1930s was resolved through the creation of a new model of redistributive capitalism, and prior to that the structural crisis of the 1870s resulted in the development of corporate capitalism. A systemic crisis involves the replacement of a system by an entirely new system or by an outright collapse. A structural crisis opens up the possibility for a systemic crisis. But if it actually snowballs into a systemic crisis – in this case, if it gives way either to capitalism being superseded or to a breakdown of global civilisation – is not predetermined and depends entirely on the response of social and political forces to the crisis and on historical contingencies that are not easy to forecast. This is an historic moment of extreme uncertainty, in which collective responses from distinct social and class forces to the crisis are in great flux.

    Hence my concept of global crisis is broader than financial. There are multiple and mutually constitutive dimensions – economic, social, political, cultural, ideological and ecological, not to mention the existential crisis of our consciousness, values and very being. There is a crisis of social polarisation, that is, of social reproduction. The system cannot meet the needs or assure the survival of millions of people, perhaps a majority of humanity. There are crises of state legitimacy and political authority, or of hegemony and domination. National states face spiraling crises of legitimacy as they fail to meet the social grievances of local working and popular classes experiencing downward mobility, unemployment, heightened insecurity and greater hardships. The legitimacy of the system has increasingly been called into question by millions, perhaps even billions, of people around the world, and is facing expanded counter-hegemonic challenges. Global elites have been unable counter this erosion of the system's authority in the face of worldwide pressures for a global moral economy. And a canopy that envelops all these dimensions is a crisis of sustainability rooted in an ecological holocaust that has already begun, expressed in climate change and the impending collapse of centralised agricultural systems in several regions of the world, among other indicators.

    By a crisis of humanity I mean a crisis that is approaching systemic proportions, threatening the ability of billions of people to survive, and raising the specter of a collapse of world civilisation and degeneration into a new "Dark Ages."2

    Global capitalism now couples human and natural history in such a way as to threaten to bring about what would be the sixth mass extinction in the known history of life on earth.

    This crisis of humanity shares a number of aspects with earlier structural crises but there are also several features unique to the present:

    1. The system is fast reaching the ecological limits of its reproduction. Global capitalism now couples human and natural history in such a way as to threaten to bring about what would be the sixth mass extinction in the known history of life on earth.3 This mass extinction would be caused not by a natural catastrophe such as a meteor impact or by evolutionary changes such as the end of an ice age but by purposive human activity. According to leading environmental scientists there are nine "planetary boundaries" crucial to maintaining an earth system environment in which humans can exist, four of which are experiencing at this time the onset of irreversible environmental degradation and three of which (climate change, the nitrogen cycle, and biodiversity loss) are at "tipping points," meaning that these processes have already crossed their planetary boundaries.
    2. The magnitude of the means of violence and social control is unprecedented, as is the concentration of the means of global communication and symbolic production and circulation in the hands of a very few powerful groups. Computerised wars, drones, bunker-buster bombs, star wars, and so forth, have changed the face of warfare. Warfare has become normalised and sanitised for those not directly at the receiving end of armed aggression. At the same time we have arrived at the panoptical surveillance society and the age of thought control by those who control global flows of communication, images and symbolic production. The world of Edward Snowden is the world of George Orwell; 1984 has arrived;
    3. Capitalism is reaching apparent limits to its extensive expansion. There are no longer any new territories of significance that can be integrated into world capitalism, de-ruralisation is now well advanced, and the commodification of the countryside and of pre- and non-capitalist spaces has intensified, that is, converted in hot-house fashion into spaces of capital, so that intensive expansion is reaching depths never before seen. Capitalism must continually expand or collapse. How or where will it now expand?
    4. There is the rise of a vast surplus population inhabiting a "planet of slums,"4 alienated from the productive economy, thrown into the margins, and subject to sophisticated systems of social control and to destruction – to a mortal cycle of dispossession-exploitation-exclusion. This includes prison-industrial and immigrant-detention complexes, omnipresent policing, militarised gentrification, and so on;
    5. There is a disjuncture between a globalising economy and a nation-state based system of political authority. Transnational state apparatuses are incipient and have not been able to play the role of what social scientists refer to as a "hegemon," or a leading nation-state that has enough power and authority to organise and stabilise the system. The spread of weapons of mass destruction and the unprecedented militarisation of social life and conflict across the globe makes it hard to imagine that the system can come under any stable political authority that assures its reproduction.

    Global Police State

    How have social and political forces worldwide responded to crisis? The crisis has resulted in a rapid political polarisation in global society. Both right and left-wing forces are ascendant. Three responses seem to be in dispute.

    One is what we could call "reformism from above." This elite reformism is aimed at stabilising the system, at saving the system from itself and from more radical responses from below. Nonetheless, in the years following the 2008 collapse of the global financial system it seems these reformers are unable (or unwilling) to prevail over the power of transnational financial capital. A second response is popular, grassroots and leftist resistance from below. As social and political conflict escalates around the world there appears to be a mounting global revolt. While such resistance appears insurgent in the wake of 2008 it is spread very unevenly across countries and regions and facing many problems and challenges.

    Yet another response is that I term 21stcentury fascism.5 The ultra-right is an insurgent force in many countries. In broad strokes, this project seeks to fuse reactionary political power with transnational capital and to organise a mass base among historically privileged sectors of the global working class – such as white workers in the North and middle layers in the South – that are now experiencing heightened insecurity and the specter of downward mobility. It involves militarism, extreme masculinisation, homophobia, racism and racist mobilisations, including the search for scapegoats, such as immigrant workers and, in the West, Muslims. Twenty-first century fascism evokes mystifying ideologies, often involving race/culture supremacy and xenophobia, embracing an idealised and mythical past. Neo-fascist culture normalises and glamorises warfare and social violence, indeed, generates a fascination with domination that is portrayed even as heroic.

    The need for dominant groups around the world to secure widespread, organised mass social control of the world's surplus population and rebellious forces from below gives a powerful impulse to projects of 21st century fascism. Simply put, the immense structural inequalities of the global political economy cannot easily be contained through consensual mechanisms of social control. We have been witnessing transitions from social welfare to social control states around the world. We have entered a period of great upheavals, momentous changes and uncertainties. The only viable solution to the crisis of global capitalism is a massive redistribution of wealth and power downward towards the poor majority of humanity along the lines of a 21st century democratic socialism, in which humanity is no longer at war with itself and with nature.

    About the Author

    William I. Robinson is professor of sociology, global and international studies, and Latin American studies, at the University of California-Santa Barbara. Among his many books are Promoting Polyarchy (1996), Transnational Conflicts (2003), A Theory of Global Capitalism (2004), Latin America and Global Capitalism (2008), and Global Capitalism and the Crisis of Humanity (2014).

    [Sep 15, 2016] 15 Facts About US Poverty the Government Doesn't Want You to Know

    Notable quotes:
    "... This first appeared in The Daily Signal here . ..."
    Sep 15, 2016 | nationalinterest.org
    by Robert Rector Rachel Sheffield

    September 14, 2016 | The National Interest Blog

    On Tuesday, the Census Bureau released its annual poverty report declaring that 43.1 million Americans lived in poverty in 2015.

    We should be concerned about any American living in real material hardship, but much of what the Census reports about poverty is misleading.

    Here are 15 facts about poverty in America that may surprise you. (All statistics are taken from U.S. government surveys.)

    - Poor households routinely report spending $2.40 for every $1 of income the Census says they have. - The average poor American lives in a house or apartment that is in good repair and has more living space than the average nonpoor person in France, Germany, or England. - Eighty-five percent of poor households have air conditioning. - Nearly three-fourths of poor households have a car or truck, and 31 percent have two or more cars or trucks. - Nearly two-thirds of poor households have cable or satellite TV. - Half have a personal computer; 43 percent have internet access. - Two-thirds have at least one DVD player - More than half of poor families with children have a video game system, such as an Xbox or PlayStation. - One-third have a wide-screen plasma or LCD TV.

    (The above data on electronic appliances owned by poor households come from a 2009 government survey so the ownership rates among the poor today are most likely higher.)

    Poverty and Hunger:

    Activist groups spread alarming stories about widespread hunger in the nation, but in reality, most of the poor do not experience hunger or food shortages. The U.S. Department of Agriculture collects data on these topics in its household food security survey. For 2009, the survey showed:

    - Only 4 percent of poor parents reported that their children were hungry even once during the prior year because they could not afford food. - Some 18 percent of poor adults reported they were hungry even once in the prior year due to lack of money for food.

    Poverty and Housing

    The following are facts about the housing conditions of the poor.

    - Poverty and homelessness are sometimes confused. Over the course of a year, only 4 percent of poor persons become homeless (usually a temporary condition). - Only 9.5 percent of the poor live in mobile homes or trailers; the rest live in apartments or houses. - Forty percent of the poor own their own homes, typically, a three-bedroom house with one-and-a-half baths that is in good repair.

    Facts About Extreme Poverty

    - The left claims that one in 25 families with children live in " extreme poverty " on less than $2 per person per day. Government surveys of self-reported spending by families show the actual number is one in 4,469, not one in 25. The typical family allegedly in "extreme poverty" reports spending $25 for every $1 of income the left claims they have.

    In Calculating Poverty, Census Ignores the Almost Entire Welfare State:

    Why does the Census identify so many individuals as "poor" who do not appear to be poor in any normal sense of the term? The answer lies in the misleading way the Census measures "poverty." The Census defines a family as poor if its income falls below a specified income threshold. (For example, the poverty threshold for a family of four in 2015 was $24,036.) But in counting "income," the Census excludes nearly all welfare benefits.

    In 2014, government spent over $1 trillion on means-tested welfare for poor and low income people. (This figure does not include Social Security or Medicare.) Welfare spending on cash, food, and housing was $342 billion.

    The cash, food, and housing spending alone was 150 percent of the amount needed to eliminate all poverty in the U.S. But the Census ignored more than four-fifths of these benefits for purposes of measuring poverty. Effectively, the Census counts poverty in the U.S. by ignoring almost the entire welfare state.

    Poverty and Self-Sufficiency

    Do the higher living standards of families receiving welfare mean the welfare state is successful ? The answer is no. The real aim of welfare should be to make families self-sufficient: capable of supporting themselves above the poverty income threshold without reliance on government welfare aid.

    Despite having spent over $25 trillion on means-tested welfare since the beginning of the War on Poverty under President Lyndon Johnson, many Americans are less capable of self-sufficiency today than when the War on Poverty began.

    The pathways to self-sufficiency are work and marriage. We should reform the welfare state to promote these. Able-bodied recipients should be required to work or prepare for work as a condition of getting aid. Penalties against marriage in welfare programs should be removed.

    Let's make welfare a hand-up, not a handout.

    This first appeared in The Daily Signal here .

    [Sep 14, 2016] Yes, Donald Trump is wrong about unemployment. But he's not the only one

    Spirited defense of the establishment from one of financial oligarchy members. " The economy overall is doing just fine." Does this include QE? If the Fed is pouring billions of new money into the economy, how accurate is it to say that the economy is doing just fine?
    Notable quotes:
    "... "That was a number that was devised, statistically devised, to make politicians - and in particular, presidents - look good. And I wouldn't be getting the kind of massive crowds that I'm getting if the number was a real number." ..."
    "... In the 1950s and 1960s, for instance, organized labor was fairly convinced that the government was purposely underestimating inflation and the cost of living to keep Social Security payments low and wages from rising. George Meany, the powerful head of the American Federation of Labor at the time, claimed that the Bureau of Labor Statistics, which compiled both employment and inflation numbers, had "become identified with an effort to freeze wages and is not longer a free agency of statistical research." ..."
    "... Employment figures are sometimes seen as equally suspect. Jack Welch, the once-legendary former CEO of GE, blithely accused the Obama administration of manipulating the final employment report before the 2012 election to make the economic recovery look better than it was. "Unbelievable jobs numbers … these Chicago guys will do anything … can't debate so change numbers," he tweeted ..."
    "... His arguments were later fleshed out by New York Post columnist John Crudele , who went on to charge the Census Bureau (which works with BLS to create the samples for the unemployment rate) with faking and fabricating the numbers to help Obama win reelection. ..."
    "... The chairman of the Gallup organization, Jim Clifton, sees so many flaws with the way unemployment is measured that he has called the official rate a "Big Lie." In the Democratic presidential campaign, Bernie Sanders has also weighed in, saying the real unemployment rate is at best above 10 percent. ..."
    "... What a useless article. The author explains precisely nothing about what the official statistics do and do not measure, what they miss and what they capture. ..."
    "... I had the same impression as well. Notice he does not mention that the Gallop number is over 10% and is based on their polling data. ..."
    "... But never mentioned that Reagan changed how Unemployment was figured in the early 80's. He included all people in the military service, as employed. Before that, they was counted neither way. He also intentionally left out that when Obama, had the unemployed numbers dropped one month before the election, from 8.1% to 7.8% --because it was believed that no one could be reelected if it was above 8%. ..."
    "... U6 is 9.8% for March 2016. We still have 94 million unemployed and you want to say its 5 % what journalistic malpractice. ..."
    "... Trump has emphasized that he is looking at the percent of the population that is participating in the workforce - and that this participation rate is currently at historical lows -- and Trump has been clear that his approach to paying down the national debt is based on getting the participation rates back to historical levels ..."
    "... "The government can't lie about a hundred billion dollars of Social Security money stolen for the Clinton 'balanced budget', that would be a crime against the citizens, they would revolt. John, come one now. " ..."
    "... I didn't say it first, Senator Ernest Hollings did, on the Senate floor. ..."
    "... And here is how they did it: http://www.craigsteiner.us/articles/16 ..."
    "... There is plenty of evidence the figures are cooked, folks, enough to fill a book: Atlas Shouts. Don't believe trash like this article claims. GDP, unemployment and inflation are all manipulated numbers, as Campbell's Law predicts. ..."
    "... I can't believe the Washington Post prints propaganda like this. ..."
    "... I do remember when the officially-announced unemployment rate stopped including those who were no longer looking for work. That *was* a significant shift, and there's no doubt it made politicians (Reagan, I think it was) look better; of course, no President since then has reversed it, as it would instantly make themselves look worse. ..."
    "... Working one hour a week, at minimum wage, is 'employed', according to the government. No wonder unemployment is at 5%. ..."
    "... Add in people who are working, but want and need full time jobs, add in people who have dropped out of the labor market and/or retired earlier than they wanted to, and unemployment is at least 10%. Ten seconds on Google will show you that. ..."
    "... The writer should be sacked for taking a very serious issue and turning it into a piece of non-informative fluff. Bad mouthing Trump and Sanders is the same as endorsing Hilly. ..."
    Apr 08, 2016 | The Washington Post
    Yes, Donald Trump is wrong about unemployment. But he's not the only one. - The Washington Post

    Listen to President Obama, and you'll hear that job growth is stronger than at any point in the past 20 years, and - as he said in his final State of the Union address - "anyone claiming that America's economy is in decline is peddling fiction."

    Listen to Donald Trump and you'll hear something completely different. The billionaire Republican candidate for president told The Washington Post last week that the economy is one big Federal Reserve bubble waiting to burst, and that as for job growth, "we're not at 5 percent unemployment. We're at a number that's probably into the 20s if you look at the real number." Not only that, Trump said, but the numbers are juiced: "That was a number that was devised, statistically devised, to make politicians - and in particular, presidents - look good. And I wouldn't be getting the kind of massive crowds that I'm getting if the number was a real number."

    It's easy enough to dismiss - as a phalanx of economists and analysts did - Trump's claims as yet another one of his all-too-frequent campaign lines that have little to do with reality. But with this one, at least, Trump is tapping into a deep and mostly overlooked well of popular suspicion of government numbers and a deeply held belief that what "we the people" are told about the economy by the government is lies, damn lies and statistics designed to benefit the elite at the expense of the working class. The stubborn persistence of these beliefs should be a reminder that just because the United States is doing well in general, that doesn't mean everyone in the country is. It's also a warning to experts and policymakers that in the real world, there is no "the economy," there are many, and generalizations have a way of glossing over some very rough patches.

    Since the mid-20th century, when the U.S. government began keeping and compiling our modern suite of economic numbers, there has been constant skepticism of the reports, coming from different corners depending on economic trends and the broader political climate. In the 1950s and 1960s, for instance, organized labor was fairly convinced that the government was purposely underestimating inflation and the cost of living to keep Social Security payments low and wages from rising. George Meany, the powerful head of the American Federation of Labor at the time, claimed that the Bureau of Labor Statistics, which compiled both employment and inflation numbers, had "become identified with an effort to freeze wages and is not longer a free agency of statistical research."

    Over the decades, those views hardened. Throughout the 1970s, as workers struggled with unemployment and stagflation, the government continually tweaked its formulas for measuring prices. By and large, these changes and new formulas were designed to make the figures more accurate in a fast-changing world. But for those who were already convinced the government was trying to paint a deliberately false picture, the tweaks and innovations were interpreted as a devious way to avoid spending money to help the ailing middle class, not trying to measure what was actually happening to design policies to help address it. The commissioner of BLS at the time, Janet Norwood, dismissed those concerns in testimony to Congress in the late 1970s, saying that when people don't get the number they want, "they feel there must be something wrong with the indicator itself."

    Employment figures are sometimes seen as equally suspect. Jack Welch, the once-legendary former CEO of GE, blithely accused the Obama administration of manipulating the final employment report before the 2012 election to make the economic recovery look better than it was. "Unbelievable jobs numbers … these Chicago guys will do anything … can't debate so change numbers," he tweeted after that last October report showed better-than-expected job growth and lower-than-anticipated unemployment rate. His arguments were later fleshed out by New York Post columnist John Crudele, who went on to charge the Census Bureau (which works with BLS to create the samples for the unemployment rate) with faking and fabricating the numbers to help Obama win reelection.

    These views are not fringe. Type the search terms "inflation is false" into Google, and you will get reams of articles and analysis from mainstream outlets and voices, including investment guru Bill Gross (who referred to inflation numbers as a "haute con job"). Similar results pop up with the terms "real unemployment rate," and given how many ways there are to count employment, there are legitimate issues with the headline number.

    The cohort that responds to Trump reads those numbers in a starkly different light from the cohort laughing at him for it. Whenever the unemployment rate comes out showing improvement and hiring, those who are experiencing dwindling wages and shrinking opportunities might see a meticulously constructed web of lies meant to paint a positive picture so that the plight of tens of millions who have dropped out of the workforce can be ignored. The chairman of the Gallup organization, Jim Clifton, sees so many flaws with the way unemployment is measured that he has called the official rate a "Big Lie." In the Democratic presidential campaign, Bernie Sanders has also weighed in, saying the real unemployment rate is at best above 10 percent.

    Beneath the anger and the distrust - which extend to a booming stock market that helps the wealthy and banks flush with profit even after the financial crisis - there lies a very real problem with how economists, the media and policymakers discuss economics. No, the bureaucrats in the Labor and Commerce departments who compile these numbers aren't a cabal engaged in a cover-up. And no, the Fed is not an Illuminati conspiracy. But the idea that a few simple big numbers that are at best averages to describe a large system we call "the economy" can adequately capture the stories of 320 million people is a fiction, one that we tell ourselves regularly, and which millions of people know to be false to their own experience.

    It may be true that there is a national unemployment rate measured at 5 percent. But it is also true that for white men without a college degree, or white men who had worked factory jobs until the mid-2000s with no more than a high school education, the unemployment reality is much worse (though it's even worse for black and Hispanic men, who don't seem to be responding by flocking to Trump in large numbers). Even when those with these skill sets can get a job, the pay is woefully below a living wage. Jobs that don't pay well still count, in the stats, as jobs. Telling people who are barely getting by that the economy is just fine must appear much more than insensitive. It is insulting, and it feels like a denial of what they are experiencing.

    The chords Trump strikes when he makes these claims, therefore, should be taken more seriously than the claims themselves. We need to be much more diligent in understanding what our national numbers do and do not tell us, and how much they obscure. In trying to hang our sense of what's what on a few big numbers, we risk glossing over the tens of millions whose lives don't fit those numbers and don't fit the story. "The economy" may be doing just fine, but that doesn't mean that everyone is. Inflation might be low, but millions can be struggling to meet basic costs just the same.

    So yes, Trump is wrong, and he's the culmination of decades of paranoia and distrust of government reports. The economy overall is doing just fine. But people are still struggling. We don't have to share the paranoia or buy into the conspiratorial narrative to acknowledge that. A great nation, the one Trump promises to restore, can embrace more than one story, and can afford to speak to those left out of our rosy national numbers along with those whose experience reflect them.

    the3sattlers, 4/8/2016 1:05 PM EDT

    " The economy overall is doing just fine." Does this include QE? If the Fed is pouring billions of new money into the economy, how accurate is it to say that the economy is doing just fine?

    james_harrigan, 4/8/2016 10:14 AM EDT

    What a useless article. The author explains precisely nothing about what the official statistics do and do not measure, what they miss and what they capture.

    Derbigdog, 4/8/2016 11:40 AM EDT

    I had the same impression as well. Notice he does not mention that the Gallop number is over 10% and is based on their polling data.

    captdon1, 4/8/2016 5:51 AM EDT

    Not reported by WP
    The first two years of Obama's presidency Democrats controlled the house and Senate. The second two years, Republicans controlled the Senate. The last two years of Obama's term, the Republicans controlled house and Senate. During this six years the national debt increase $10 TRILLION and the Government collected $9 TRILLION in taxes and borrowed $10 TRILLION. ($19 Trillion In Six Years!!!) (Where did our lovely politicians spend this enormous amount of money??? (Republicans and Democrats!)

    reussere, 4/8/2016 1:43 AM EDT

    Reading the comments below it strikes me again and again how far out of whack most people are with reality. It's absolutely true that using a single number for the employment rate reflects the overall average of the economy certainly doesn't measure how every person is doing, anymore than an average global temperature doesn't measure any local temperatures.

    One thing not emphasized in the article is that there is a number of different statistics. The 5% figure refers to the U-3 statistic. Nearly all of the rest of the employment statistics are higher, some considerably so because they include different groups of people. But when you compare U-3 from different years, you are comparing apples and apples. The rest of the numbers very closely track with U-3. That is when U-3 goes up and down, U-6 go up and down pretty much in lockstep.

    It is unfortunate that subpopulations of Americans are doing far worse (and some doing far better) than average. But that is the nature of averages after all. It is simply impossible for a single number (or even a group of a dozen different employment measurements) to accurately reflect a complex reality.

    Smoothcountryside, 4/8/2016 12:04 PM EDT

    The alternative measures of labor underutilization are defined as U-1 through U-6 with U-6 being the broadest measure and probably the closes to the "true" level of unemployment. Otherwise, all the rest of your commentary is correct.

    southernbaked, 4/7/2016 11:02 PM EDT

    Because this highly educated writer is totally bias, he left out some key parts, I personally lived though. He referred back to the late 70's twice. But never mentioned that Reagan changed how Unemployment was figured in the early 80's. He included all people in the military service, as employed. Before that, they was counted neither way. He also intentionally left out that when Obama, had the unemployed numbers dropped one month before the election, from 8.1% to 7.8% --because it was believed that no one could be reelected if it was above 8%.

    Then after he was sworn in--- in January, they had to readjust the numbers back up. They blamed it on one employees mistakes-- PS. no one was fired or disciplined for fudging. Bottom line is, for every 1.8 manufacturing job, there are 2 government jobs, that is disaster. Because this writer is to young to have lived in America when it was great. When for every 1 government job, you had 3 manufacturing jobs.

    I will enlighten him. I joined the workforce -- With no higher education -- when you merely walked down the road, and picked out a job. Because jobs hang on trees like apples. By 35 I COMPLETELY owned my first 3 bedroom brick house, and the 2 newer cars parked in the driveway. Anyone care to try that now ??

    As for all this talk about education-- I have a bit of knowledge about that subject-- because I paid in full to send all under my roof through it. Without one dime of aide from anyone. The above writer is proof-- you can be heavily educated, and DEAD WRONG. There is nothing good about this economy. Signed, UN-affiliated to either corrupted party

    Bluhorizons, 4/7/2016 9:43 PM EDT

    "we're not at 5 percent unemployment. We're at a number that's probably into the 20s if you look at the real number." Trump is correct. The unemployment data is contrived from data about people receiving unemployment compensation but the people who's unemployment has ended and people who have just given up is invisible.

    "It may be true that there is a national unemployment rate measured at 5 percent. But it is also true that for white men without a college degree, or white men who had worked factory jobs until the mid-2000s with no more than a high school education, the unemployment reality is much worse "

    The author goes on and on about the legitimate distrust of government unemployment data and then tells us Trump is wrong. But the article convinces us Trump is right! So, this article its not really about the legitimate distrust of government data is is about the author's not liking Trump. Typical New Left bs

    Aushax, 4/7/2016 8:24 PM EDT

    Last jobs report before the 2012 election the number unusually dropped then was readjusted up after the election. Coincidentally?

    George Mason, 4/7/2016 8:15 PM EDT

    U6 is 9.8% for March 2016. We still have 94 million unemployed and you want to say its 5 % what journalistic malpractice.

    F mackey, 4/7/2016 7:57 PM EDT

    hey reporter,Todays WSJ, More than 40% of the student borrowers aren't making payments? WHY? easy,they owe big $ money$ & cant get a job or a well paying job to pay back the loans,hey reporter,i'd send you $10 bucks to buy a clue,but you'd probably get lost going to the store,what a %@%@%@,another reporter,who doesn't have a clue on whats going on,jmo

    SimpleCountryActuary, 4/7/2016 7:57 PM EDT

    This reporter is a Hillary tool. Even the Los Angeles Times on March 6th had to admit:

    "Trump is partly right in saying that trade has cost the U.S. economy jobs and held down wages. He may also be correct - to a degree - in saying that low-skilled immigrants have depressed salaries for certain jobs or industries..."

    If this is the quality of reporting the WaPo is going to provide, namely even worse than the Los Angeles Times, then Bezos had better fire the editorial staff and buy a new one.

    Clyde4, 4/7/2016 7:34 PM EDT [Edited]

    This article dismissing Trump is exactly what is wrong with journalism today - all about creating a false reality for people instead of investigating and reporting

    Trump has emphasized that he is looking at the percent of the population that is participating in the workforce - and that this participation rate is currently at historical lows -- and Trump has been clear that his approach to paying down the national debt is based on getting the participation rates back to historical levels

    The author completely ignored the big elephant in the room -- that is irresponsible journalism

    The author may want to look into how the unemployment rate shot up in 2008 when the government extended benefits and then the unemployment rate plummeted again when unemployment benefits were decrease (around 2011, I believe) - if I were the author I would do a little research into whether the unemployment rate correlates with how much is paid out in benefits or with unemployment determined through some other approach (like surveys

    dangerbird1225, 4/7/2016 7:25 PM EDT

    Bunch of crap. If you stop counting those that stop looking for a job, your numbers are wrong. Period. Why didn't this apologist for statistics mention that?

    watchkeptoverthewatcher, 4/7/2016 6:27 PM EDT

    Ya with a labor participation rate of 63%

    http://data.bls.gov/timeseries/LNS11300000

    AtlasRocked, 4/7/2016 5:12 PM EDT

    "The government can't lie about a hundred billion dollars of Social Security money stolen for the Clinton 'balanced budget', that would be a crime against the citizens, they would revolt. John, come one now. "

    I didn't say it first, Senator Ernest Hollings did, on the Senate floor.

    "Both Democrats and Republicans are all running this year and next and saying surplus, surplus. Look what we have done. It is false. The actual figures show that from the beginning of the fiscal year until now we had to borrow $127,800,000,000." - Senate speech, Democratic Senator Ernest Hollings, October 28, 1999

    http://www.c-span.org/video/?c3319676 at 5:30

    And here is how they did it: http://www.craigsteiner.us/articles/16

    rgengel, 4/7/2016 5:03 PM EDT

    Go to New Orleans Chicago Atlanta Los Angeles Detroit stop anybody on the street and ask if unemployment is 5% and that there is a 95% chance a guy can get a job.

    Then you will have a statistic reference point. Its not a Democratic or republican issue because both of them have manipulated the system for so long its meaningless. Go Trump 2016 and get this crap sorted out with common sense plain English

    AtlasRocked, 4/7/2016 4:37 PM EDT

    There is plenty of evidence the figures are cooked, folks, enough to fill a book: Atlas Shouts. Don't believe trash like this article claims. GDP, unemployment and inflation are all manipulated numbers, as Campbell's Law predicts.

    I can't believe the Washington Post prints propaganda like this.

    TimberDave, 4/7/2016 2:23 PM EDT

    I do remember when the officially-announced unemployment rate stopped including those who were no longer looking for work. That *was* a significant shift, and there's no doubt it made politicians (Reagan, I think it was) look better; of course, no President since then has reversed it, as it would instantly make themselves look worse.

    astroboy_2000, 4/7/2016 1:28 PM EDT

    This would be a much more intelligent article if the writer actually said what the government considers as 'employed'.

    Working one hour a week, at minimum wage, is 'employed', according to the government. No wonder unemployment is at 5%.

    Add in people who are working, but want and need full time jobs, add in people who have dropped out of the labor market and/or retired earlier than they wanted to, and unemployment is at least 10%. Ten seconds on Google will show you that.

    The writer should be sacked for taking a very serious issue and turning it into a piece of non-informative fluff. Bad mouthing Trump and Sanders is the same as endorsing Hilly.

    Manchester0913, 4/7/2016 2:12 PM EDT

    The number you're referencing is captured under U6. However, U3 is the traditional measure.

    Son House, 4/7/2016 2:24 PM EDT

    The government doesn't claim that working one hour a week is employed. Google U 3 unemployment. Then google U 6 unemployment. You can be enlightened.

    Liz in AL, 4/7/2016 7:21 PM EDT

    I've found this compilation of all 6 of the "U-rates" very useful. It encompasses the most restrictive (and thus smallest) U-1 rate, though the most expansive U-6. It provides brief descriptions of what gets counted for each rate, and (at least for more recent years) provides the ability to compare at the monthly level of detail. U6 Unemployment Rate Portal Seven

    [Sep 14, 2016] The Global Economic Crisis and the Future of Neoliberal Globalization Rupture Versus Continuity by Ali Burak Güven, Ziya Öni

    papers.ssrn.com

    This article outlines the main elements of rupture and continuity in the global political economy since the global economic crisis of 2008-2009. While the current calamity poses a more systemic challenge to neoliberal globalization than genetically similar turbulences in the semi-periphery during the 1990s, we find that evidence for its transformative significance remains mixed. Efforts to reform the distressed capitalist models in the North encounter severe resistance, and the broadened multilateralism of the G-20 is yet to provide effective global economic governance. Overall, neoliberal globalization looks set to survive, but in more heterodox and multipolar fashion. Without tighter coordination between old and emerging powers, this new synthesis is unlikely to inspire lasting solutions to pressing global problems such as an unsustainable international financial architecture and the pending environmental catastrophe, and may even fail to preserve some modest democratic and developmental gains of the recent past.

    [Sep 14, 2016] Its not hard to see the thinking behind BIG from the Silicon Valley, elite perspective

    Notable quotes:
    "... A growing body of research indicates that the financial and psychological damage from a period of joblessness can be significant and long-lasting, especially for people who remain out of work for an extended period. ..."
    "... Friedman is just doing his job. The Saddam's WMDs paper endorsed Hillary on Jan 31st, and is part of the campaign of lies, deceptions and cover-ups. ..."
    "... As with television, it's healthier not to pollute one's mind with NYT propaganda. Reading the idiotic headlines is enough to realize that the "content" is crap. ..."
    "... Predictably, the comments on the NYT op-ed (by the "Suck on this, Iraq!" Friedman) are more thoughtful and reality-based than the author's column. ..."
    "... Libya and Syria and Ukraine were NOT just bad judgment calls. However, they were three consecutive bad judgment calls, with no good ones to offset. That still matters. ..."
    "... Libya and Syria and Ukraine were also lies, coming from the mouth of Hillary, and harming the country by tossing us into more wars. ..."
    "... I really wonder how Friedman and the other NYT Iraq war cheerleaders can look at themselves in the mirror each morning. And excellent point about Snowden, of course. ..."
    Jun 01, 2016 | www.nakedcapitalism.com
    diptherio , June 1, 2016 at 2:40 pm

    It's not hard to see the thinking behind BIG from the Silicon Valley, elite perspective. They understand that putting everybody out of work from robotics or out-sourcing is a sure-fire way to create massive discontent. They think this is a clever way of keeping the losers contented (enough to not revolt) while maintaining their elevated position within the system. They don't care what the system looks like, really, just so long as they get to sit on top. They think this is a way to avert the revolution that they know, from reading Marx and thinking about it a little, their actions are sure to lead to, ceteris paribus .

    However, I think they underestimate the extent to which our continual trade deficits are predicated on the US dollar being the world's reserve currency. That status may not be in danger in the short term, but I think it's doomed to extinction over the medium term, as the BRICS and other countries maneuver their way out from under the thumb of the petro-dollar.

    But the up-side is that they're mainstreaming an MMT understanding of macroeconomics and, as old John used to say, "ideas have a way of taking on a life of their own." Also, some poor people might actually end up being benefited as a side-effect of the elites trying to keep the lower orders manageable. I mean, that's really what the New Deal was about, no? FDR wasn't fighting for the working man, he just realized that exploiting them too much could crash the whole system and be much worse for his class, the elites, than a little Social Security was. FDR wasn't looking to overturn class relations, but maintain them. He just had a more nuanced understanding of self-interest than many of his class peers (that oughta get some people fuming). Still, whatever the motivation, the programs had the practical effect of making a lot of people's lives better. Why shouldn't it be the same in this situation?

    Lambert Strether Post author , June 1, 2016 at 2:53 pm

    Not that I'm foily, but if you combine the abolition of cash, BIG in the form of a digital deposit, retail tracking everywhere, and the precedent (from ObamaCare) of a mandate to participate in certain markets, you can concoct quite a dystopia….

    diptherio , June 1, 2016 at 4:00 pm

    Yeah, the "BIG Brother" jokes are just too easy.

    I think we need to have a movement to defend cash. Small business owners should lead the charge, since card fees hit them the hardest. I see a possible coalition…anti-surveillance activists and guys like the owner of the pizza joint I frequent whose register bears a sign that reads "Cards accepted, Cash preferred."

    diptherio , June 1, 2016 at 4:04 pm

    Also, a BIG would be a great excuse to start-up the Postal Bank. Everybody will get an account tied to their SSN that their BIG gets deposited in, accessible (in cash) at any post office. It might just be sell-able…at least to the public, if not to Wall Street.

    Romancing the Loan , June 1, 2016 at 4:18 pm

    Take it another step and have "consumer choice" in lieu of voting. I like it; a good sci-fi writer needs to get on this.

    ChiGal , June 1, 2016 at 4:51 pm

    Whenever I hear about TPTB doing away with cash I am reminded of Margaret Atwood's prescient (from the 80s I think!) novel about a patriarchal dystopian future, The Handmaid's Tale – freezing the bank accounts is how it all started.

    aletheia33 , June 1, 2016 at 2:51 pm

    "A growing body of research indicates that the financial and psychological damage from a period of joblessness can be significant and long-lasting, especially for people who remain out of work for an extended period."

    quelle surprise! are poor, working, and middle-class people's well-being actually closely tied to how many days in their lives they can work? hoocoodanode?

    jrs , June 1, 2016 at 3:11 pm

    I hear they have really low well being in Europe with their 6 weeks vacations and way more holidays and stuff. They throw themselves off bridges at the start of every vacation season. Nah it's tied to having an income or not, not how many days they work.

    aletheia33 , June 1, 2016 at 3:24 pm

    right, thanks!

    i always forget about that because i've always worked as in independent contractor, staying sane by pretending benefits and paid holidays and vacations are not all that important in life. and i must say, lately i do see TPTB cashing in on my idea, bigtime. i should have placed some bets on that happening…

    polecat , June 1, 2016 at 9:50 pm

    I haven't worked a paying job for about 14 years….the wife works the day gig, while I maintain the abode, do household repairs, garden, tend to the bees & chickens…..etc. …… I'm 'working' my way on the downslope of collapse…'avoiding the rush' as John M Greer is fond of saying…..

    ….still sane!

    MyLessThanPrimeBeef , June 1, 2016 at 3:26 pm

    That only happens to Sapiens humans.

    A cat's well-being is rarely tied to how many days it is out of work.

    Thus, I suspect either 1. we are not that superior or 2. we have been brainwashed.

    Or both.

    aletheia33 , June 1, 2016 at 3:35 pm

    i meant, in our current industrialized, work-ethic-based western society. which not coincidentally has had a lousy mental and physical health outcome for millions of people over time.
    but never mind. a rising water floats all boats.
    until it doesn't.

    C , June 1, 2016 at 3:01 pm

    'Hillary's fibs or lack of candor are all about bad judgments she made on issues that will not impact the future of either my family or my country. Private email servers? Cattle futures? Goldman Sachs lectures? All really stupid, but my kids will not be harmed by those poor calls. Debate where she came out on Iraq and Libya, if you will, but those were considered judgment calls, and if you disagree don't vote for her" [The Moustache of Understanding, New York Times]. You tell 'em, Tommy! Who cares about corruption? Corruption had nothing to do with Iraq!

    Of course they won't. You are well-off, well-connected, and work for a virtual organ of the state that has backed her every move. You and your framily are on the inside track and will of course be protected.

    It is everyone else that will be screwed.

    Jim Haygood , June 1, 2016 at 3:13 pm

    Friedman is just doing his job. The Saddam's WMDs paper endorsed Hillary on Jan 31st, and is part of the campaign of lies, deceptions and cover-ups.

    Journo-hos … the only surprise is that you can buy them so cheap.

    As with television, it's healthier not to pollute one's mind with NYT propaganda. Reading the idiotic headlines is enough to realize that the "content" is crap.

    MyLessThanPrimeBeef , June 1, 2016 at 3:44 pm

    Sounds like everyone should work for an organ (or a virtual organ, either way) of the state. Just make sure you're well-connected (the importance of being social – don't just bury yourself in books).

    Pavel , June 1, 2016 at 4:16 pm

    Predictably, the comments on the NYT op-ed (by the "Suck on this, Iraq!" Friedman) are more thoughtful and reality-based than the author's column. Here is a sample:

    Thomas Friedman on lies that hurt the country? Let's start that with the Iraq War.

    I agree that the emails probably didn't hurt the country, even if they were illegal and even if she does lie about them. However, Snowden did not hurt the country either, he told the truth, and Hillary goes after him with a vengeance for doing that in ways that benefited the country, that the NYT of Pentagon Papers days should support. She does that even while she lies about her emails, and that is a relevant character issue for the power she seeks.

    Libya and Syria and Ukraine were NOT just bad judgment calls. However, they were three consecutive bad judgment calls, with no good ones to offset. That still matters.

    Libya and Syria and Ukraine were also lies, coming from the mouth of Hillary, and harming the country by tossing us into more wars.

    –NYT comment by Mark Thomason

    I really wonder how Friedman and the other NYT Iraq war cheerleaders can look at themselves in the mirror each morning. And excellent point about Snowden, of course.

    [Sep 14, 2016] An effective subsidy of 54 thousand dollars per student at Princeton

    profile.theguardian.com
    apolitical_paddy 4 May 2016 16:26

    I decided to look up an answer to my question and found this http://www.bloombergview.com/articles/2012-03-18/princeton-reaps-tax-breaks-as-state-colleges-beg which suggests an effective subsidy of " $54,000 per student " at Princeton.

    The author goes on to write which I find a bit odd " To me, income inequality is an overrated problem in American life, and has even propelled the American entrepreneurial spirit. "

    He then seems to imply that maybe there is an emergent, de facto bad outcome: Yet it remains true that, considering all federal government policies, including tax exemptions, the rich schools have benefited more than the poor ones -- a regressive social policy that many would argue is inconsistent with using higher education as a tool in promoting the American Dream.

    Anyway, direct funding of third-level education by federal and state subsidies seems like a great idea and something that I would be very happy for my tax dollars to be used towards and -- moreover -- I would be happy paying more taxes if they were put to such purposes.

    [Sep 14, 2016] Bill Black We Send Teachers to Prison for Rigging the Numbers, Why Not Bankers

    Notable quotes:
    "... By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly published with New Economic Perspectives ..."
    "... he's pursued abroad many also intuitively believe that there's no one who will hit back harder. There's some of that 'he may be a son-of-a-bitch but he's our son-of-a-bitch' quality to the president's support on national security issues. ..."
    "... Hence teachers weren't divisive enough and therefore are/were seen as part of the "problem". ..."
    Apr 02, 2015 | naked capitalism

    Yves here. One has to wonder if the prosecutorial investment in bringing down a public school test-cheating ring has less to do with concern about the students and more to do with charter schools.

    By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly published with New Economic Perspectives

    The New York Times ran the story on April Fools' Day of a jury convicting educators of gaming the test numbers and lying about their actions to investigators.

    ATLANTA - In a dramatic conclusion to what has been described as the largest cheating scandal in the nation's history, a jury here on Wednesday convicted 11 educators for their roles in a standardized test cheating scandal that tarnished a major school district's reputation and raised broader questions about the role of high-stakes testing in American schools.

    On their eighth day of deliberations, the jurors convicted 11 of the 12 defendants of racketeering, a felony that carries up to 20 years in prison. Many of the defendants - a mixture of Atlanta public school teachers, testing coordinators and administrators - were also convicted of other charges, such as making false statements, that could add years to their sentences.

    This was complicated trial that took six months to present and required eight days of jury deliberations. It was a major commitment of investigative and prosecutorial resources. But it was not investigated and prosecuted by the FBI and AUSAs, but by state and local officials. In addition to the trial success, the prosecutors secured 21 guilty pleas.

    Atlanta's public schools, of course, did not engage in "the largest cheating scandal in the nation's history." The big banks' cheating scandals left the Atlanta educators in the dust.

    The two obvious questions are why the educators cheated and how they got caught. "High-stakes testing" cannot explain the scandal because we have had such tests for over 50 years. The article explains the real drivers – compensation, promotions, fear, and ego (aka "reputation").

    "Officials said the cheating allowed employees to collect bonuses and helped improve the reputations of both Dr. Hall and the perpetually troubled school district she had led since 1999.

    Investigators wrote in the report that Dr. Hall and her aides had 'created a culture of fear, intimidation and retaliation' that had permitted "cheating - at all levels - to go unchecked for years."

    Any reader familiar with my work should be running over in their mind Citigroup's vastly larger cheating frauds that senior managers produced by using exactly the same tactics to produce hundreds of billions of dollars in fraud.

    How did people become suspicious and decide to conduct a real investigation? They realized that the reported results were too good to be true. That too is directly parallel to Citi, where massive purchases of "liar's" loans known to be 90% fraudulent supposedly led to massive profits.

    The dozen educators who stood trial, including five teachers and a principal, were indicted in 2013 after years of questions about how Atlanta students had substantially improved their scores on the Criterion-Referenced Competency Test, a standardized examination given throughout Georgia.

    In 2009, The Atlanta Journal-Constitution started publishing a series of articles that sowed suspicion about the veracity of the test scores, and Gov. Sonny Perdue ultimately ordered an investigation.

    Wow, a newspaper did a series of articles, and documented a scandal built on deceit. Imagine if the New York Times and the Wall Street Journal were to do an "unsparing" investigation into banking fraud – and into Attorney General Eric Holder's refusal to prosecute. What if they actually looked at culpability in the C-suites?

    The inquiry, which was completed in 2011, led to findings that were startling and unsparing: Investigators concluded that cheating had occurred in at least 44 schools and that the district had been troubled by "organized and systemic misconduct." Nearly 180 employees, including 38 principals, were accused of wrongdoing as part of an effort to inflate test scores and misrepresent the achievement of Atlanta's students and schools.

    The investigators wrote that cheating was particularly ingrained in individual schools - at one, for instance, a principal wore gloves while she altered answer sheets - but they also said that the district's top officials, including Superintendent Beverly L. Hall, bore some responsibility.

    Dr. Hall, who died on March 2, insisted that she had done nothing wrong and that her approach to education, which emphasized data, was not to blame. "I can't accept that there's a culture of cheating," Dr. Hall said in an interview in 2011. "What these 178 are accused of is horrific, but we have over 3,000 teachers."

    But a Fulton County grand jury later accused her and 34 other district employees of being complicit in the cheating. Twenty-one of the educators reached plea agreements; two defendants, including Dr. Hall, died before they could stand trial.

    Of course, Hall's "approach to education" did not "emphasize data" – it emphasized faux data – like Citi's accounting alchemists under Robert Rubin who transmuted fraudulent net liabilities (liar's loans) into supposedly wondrously valuable assets that had zero risk (Super Senior CDO tranches).

    A more general point is in order. Atlanta is the culmination of destructive national trends and failing to mention Houston in the story was unfortunate. First, the "reinventing government" movement decided the public sector was bad and the private sector was magnificent and said that the public sector should adopt private sector approaches including quite specifically "performance pay" based on quantitative measures. This brought to the public sector the perverse incentives that were ruining the private sector and about to bring on Enron-era fraud epidemic and then the most recent three fraud epidemics. Second, we were assured by proponents of the change that a concern for "reputation" would trump any perverse incentives. What the proponents failed to see, of course, was that in both the private and public sectors the way to create a superb reputation was to report inflated data.

    Reputation, instead of the "trump" ensuring good conduct, was a leading motive to engage in bad conduct. Third, we were told that giving public administrators far more power to squash teachers was the key to success in education. Lord Acton warned that absolute power leads to absolute corruption whether in Atlanta or Citi's C-suite.

    Houston should have been mentioned because the modern movement toward educational fraud began in Houston under Rod Paige – who became Secretary of Education based on massive fraudulent misrepresentation of data. Paige kicked off the testing insanity, claiming it would produce objective, fact-based policies based on what educational measures actually worked. As a famous takedown of Paige's claims ends – the lesson is that it was too good to be true. President Bush, however, bought it hook, line, sinker, bobber, rod, and the boat Paige rowed out in.

    In any event, if Fulton County, Georgia can jail educators who lie and gimmick the data, Holder can send the elite bankers to prison on the same grounds.

    lakewoebegoner, April 2, 2015 at 10:41 am

    *** One has to wonder if the prosecutorial investment in bringing down a public school test-cheating ring has less to do with concern about the students and more to do with charter schools. ***

    I believe it's even simpler than that…..prosecuting teachers is perfect fodder for the local 11 o'clock news-you're prosecuting publiclly paid low-hanging fruit, the crime is understandable (versus explaining accounting fraud or intentional misvaluation of assets) and of course-my gosh, think of the children!

    NotTimothyGeithner, April 2, 2015 at 11:07 am

    Local DAs have incentive to prosecute large cases, and Holder made sure to make token plea deals with the banks. A successful state AG who brought down a major financial player would destroy the Obama Administration just by existing two years into the first term because there would be no excuse. Plenty of loyal Team Blue voters if pressed will explain the lack of prosecution as a GOP plot, but with a counter example in the papers they would be more demoralized than they are.

    RUKidding, April 2, 2015 at 12:11 pm

    Neither Team Blue or Team Red voters want to confront reality and truly see and acknowledge what's going on. The crooks in the District of Criminals have perfected their Kabuki Show of "hiding" behind each other's skirts and blaming the other side for all kinds of ills and perfidy. Tribalistic authoritarians can be lazy and not have to think for themselves and really DO something; just pass the clicker; lets all watch some "reality" tv show instead. Talk about the matrix….

    An example is my rightwing family members just recently celebrating quite a bit that Harry Reid has announced his retirement – as IF that'll be this amazingly good thing. Like: what will happen then? HOW, exactly, will "things get better" just bc they can't kick Harry Reid around anymore.

    Disclaimer: no love lost on my part vis Harry Reid. He's as much of a crook and worthless waste of space as all of the others, no matter which Team Jacket they wear. My take? What possible difference will it make if Reid retires or stays in the Senate indefinitely?

    RUKidding, April 2, 2015 at 10:59 am

    Teachers have no money. Bankers have a TON of money. Sucks to be in the 99s.

    Good comments. Right now, too, teachers have been deliberately painted to be the evilest of the vile because unions! get paid too much! can't be fired! blah de blah…. it's something easy for the masses to grasp – all those dreadful overpaid teachers who can't be fired "robbing" us of our taxes, while allegedly doing a totally shitty job. Yeah right. Of course privatized school teachers would most definitely do a "better" jawb.

    It's all "look over there!!!!!" while the bankers are the ones robbing us blind deaf dumb stupid etc.

    And yes, Charter Schools! Another way for the crooks at the top to rip off the 99s! woot!

    And the beat down goes on…..

    djrichard, April 2, 2015 at 12:09 pm

    I remember back when the Supreme Court was debating W vs Gore, I put it to my neighbors that W would be under the influence of big oil and other powers that be. One of my neighbors countered that Gore would be under the influence of teachers. I was the minority opinion in that conversation.

    RUKidding, April 2, 2015 at 12:14 pm

    No love lost on my part vis Gore, but seriously??? LIke Gore is "under the influence" of teachers??? Yeah, unions, but really? Like it's just so ridiculous. Teachers v Big Oil. Uh, er, that's pretty much like David v Goliath, but in this case Goliath/BigOil has totally crushed David/the 99s.

    djrichard, April 2, 2015 at 12:37 pm

    I'm surprised I found this, but I think this captures it.

    Bush's bully-boy campaign tactics play to his strengths, albeit unstated and unlovely ones. Many of the polls of the president have shown that while people don't necessarily agree with the specific policies he's pursued abroad many also intuitively believe that there's no one who will hit back harder. There's some of that 'he may be a son-of-a-bitch but he's our son-of-a-bitch' quality to the president's support on national security issues.

    This was from W v Kerry days. But I think the same principle was operating during W v Gore. During 2004, the idea was to continue to inflict W on the middle east. During 2000, I think the idea was to inflict W on the "deserving elements" inside the US (whatever those deserving elements are/were at the time).

    Teachers if anything represent a "big tent" mind-set, one in which there are no losers, or vice-versa one in which everyone is deserving of winning. Hence teachers weren't divisive enough and therefore are/were seen as part of the "problem".

    [Sep 12, 2016] http://krugman.blogs.nytimes.com/2009/10/09/modified-goldbugism-at-the-wsj/

    Sep 12, 2016 | blogs.nytimes.com

    October 9, 2009

    Modified Goldbugism At the WSJ
    By Paul Krugman

    So I was peacefully drinking my coffee this morning, and was accosted by someone waving the latest Wall Street Journal editorial on the dollar * in my face, demanding my reaction. Um, this is not cool. Also, with apologies to Brad DeLong, when reading WSJ editorials you need to bear two things in mind:

    1. The WSJ editorial page is wrong about everything.
    2. If you think the WSJ editorial page is right about something, see rule #1.

    After all, here's what you would have believed if you listened to that page over the years: Clinton's tax hike will destroy the economy, you really should check out those people suggesting that Clinton was a drug smuggler, Dow 36000, the Bush tax cuts will bring surging prosperity, Saddam is backing Al Qaeda and has WMD, there isn't any housing bubble, US households have a high savings rate if you measure it right. I'm sure I missed another couple of dozen high points.

    Today's editorial was in the grand tradition. A few months ago falling stock prices showed Obama's failure - never mind, we meant the falling dollar. And just to provide extra spice, the editorial cited David Malpass ** as the wise expert on all this.

    But more specifically, you need to see the Journal's fear of a weak dollar in terms of its long-term gold-bug position. The Journal has always maintained that changes in exchange rates play no useful role, that stable exchange rates - preferably enforced by some barbarous relic like the gold standard - are the essence of sound policy.

    I explained why this is all wrong a long time ago. *** But it's especially important to understand the wrongness of this view right now. If there's one overwhelming lesson from the Great Depression, it is that putting a higher priority on stabilizing your currency than on domestic recovery is utterly disastrous. Barry Eichengreen **** pointed out years ago that major economies went off gold in the following order: Japan, Britain, Germany, US, France. And here's what happened to their industrial output:

    [Slowest to leave the gold standard, slowest to recover.
    All that glitters went off gold.]

    The WSJ may not realize it, but it wants us to be France in the 1930s. Let's not.

    * http://online.wsj.com/article/SB10001424052748703746604574461473511618150.html

    ** http://bigpicture.typepad.com/comments/2008/03/malpass-ass.html

    *** http://www.pkarchive.org/cranks/goldbug.html

    **** http://braddelong.posterous.com/eichengreen-origins-and-nature

    Reply Saturday, November 14, 2015 at 05:19 PM

    anne said in reply to anne...

    http://www.pkarchive.org/cranks/goldbug.html

    November 22, 1996

    The Gold Bug Variations
    By Paul Krugman - Slate

    The legend of King Midas has been generally misunderstood. Most people think the curse that turned everything the old miser touched into gold, leaving him unable to eat or drink, was a lesson in the perils of avarice. But Midas' true sin was his failure to understand monetary economics. What the gods were really telling him is that gold is just a metal. If it sometimes seems to be more, that is only because society has found it convenient to use gold as a medium of exchange--a bridge between other, truly desirable, objects. There are other possible mediums of exchange, and it is silly to imagine that this pretty, but only moderately useful, substance has some irreplaceable significance.

    But there are many people--nearly all of them ardent conservatives--who reject that lesson. While Jack Kemp, Steve Forbes, and Wall Street Journal editor Robert Bartley are best known for their promotion of supply-side economics, they are equally dedicated to the belief that the key to prosperity is a return to the gold standard, which John Maynard Keynes pronounced a "barbarous relic" more than 60 years ago. With any luck, these latter-day Midases will never lay a finger on actual monetary policy. Nonetheless, these are influential people--they are one of the factions now struggling for the Republican Party's soul--and the passionate arguments they make for a gold standard are a useful window on how they think.

    There is a case to be made for a return to the gold standard. It is not a very good case, and most sensible economists reject it, but the idea is not completely crazy. On the other hand, the ideas of our modern gold bugs are completely crazy. Their belief in gold is, it turns out, not pragmatic but mystical.

    The current world monetary system assigns no special role to gold; indeed, the Federal Reserve is not obliged to tie the dollar to anything. It can print as much or as little money as it deems appropriate. There are powerful advantages to such an unconstrained system. Above all, the Fed is free to respond to actual or threatened recessions by pumping in money. To take only one example, that flexibility is the reason the stock market crash of 1987--which started out every bit as frightening as that of 1929--did not cause a slump in the real economy.

    While a freely floating national money has advantages, however, it also has risks. For one thing, it can create uncertainties for international traders and investors. Over the past five years, the dollar has been worth as much as 120 yen and as little as 80. The costs of this volatility are hard to measure (partly because sophisticated financial markets allow businesses to hedge much of that risk), but they must be significant. Furthermore, a system that leaves monetary managers free to do good also leaves them free to be irresponsible--and, in some countries, they have been quick to take the opportunity. That is why countries with a history of runaway inflation, like Argentina, often come to the conclusion that monetary independence is a poisoned chalice. (Argentine law now requires that one peso be worth exactly one U.S. dollar, and that every peso in circulation be backed by a dollar in reserves.)

    So, there is no obvious answer to the question of whether or not to tie a nation's currency to some external standard. By establishing a fixed rate of exchange between currencies--or even adopting a common currency--nations can eliminate the uncertainties of fluctuating exchange rates; and a country with a history of irresponsible policies may be able to gain credibility by association. (The Italian government wants to join a European Monetary Union largely because it hopes to refinance its massive debts at German interest rates.) On the other hand, what happens if two nations have joined their currencies, and one finds itself experiencing an inflationary boom while the other is in a deflationary recession? (This is exactly what happened to Europe in the early 1990s, when western Germany boomed while the rest of Europe slid into double-digit unemployment.) Then the monetary policy that is appropriate for one is exactly wrong for the other. These ambiguities explain why economists are divided over the wisdom of Europe's attempt to create a common currency. I personally think that it will lead, on average, to somewhat higher European unemployment rates; but many sensible economists disagree.

    So where does gold enter the picture?...

    Reply Saturday, November 14, 2015 at 05:21 PM

    ax

    [Sep 12, 2016] The Strong Case Against Central Bank Independence Critically Examined

    Notable quotes:
    "... The deficit obsession that governments have shown since 2010 has helped produce a recovery that has been far too slow, even in the US. ..."
    "... The Zero Lower Bound (ZLB) raises an acute problem for what I call the consensus assignment (leaving macroeconomic stabilisation to an independent, inflation targeting central bank), but add in austerity and you get major macroeconomic costs. ICBs appear to rule out the one policy (money financed fiscal expansion) that could combat both the ZLB and deficit obsession. ..."
    Mar 8, 2016 | economistsview.typepad.com
    Simon Wren-Lewis has a follow-up to his recent post on central bank independence:
    The 'strong case' critically examined : Perhaps it was too unconventional setting out an argument (against independent central banks, ICBs) that I did not agree with, even though I made it abundantly clear that was what I was doing. It was too much for one blogger, who reacted by deciding that I did agree with the argument, and sent a series of tweets that are best forgotten. But my reason for doing it was also clear enough from the final paragraph. The problem it addresses is real enough, and the problem appears to be linked to the creation of ICBs.

    The deficit obsession that governments have shown since 2010 has helped produce a recovery that has been far too slow, even in the US. It would be nice if we could treat that obsession as some kind of aberration, never to be repeated, but unfortunately that looks way too optimistic.

    The Zero Lower Bound (ZLB) raises an acute problem for what I call the consensus assignment (leaving macroeconomic stabilisation to an independent, inflation targeting central bank), but add in austerity and you get major macroeconomic costs. ICBs appear to rule out the one policy (money financed fiscal expansion) that could combat both the ZLB and deficit obsession.

    I wanted to put that point as strongly as I could. Miles Kimball does something similar here , although without the fiscal policy perspective ...

    Skipping ahead (and omitting quite a bit of the argument):

    ... The basic flaw with my strong argument against ICBs is that the ultimate problem (in terms of not ending recessions quickly) lies with governments. There would be no problem if governments could only wait until the recession was over (and interest rates were safely above the ZLB) before tackling their deficit, but the recession was not over in 2010. Given this failure by governments, it seems odd to then suggest that the solution to this problem is to give governments back some of the power they have lost. Or to put the same point another way, imagine the Republican Congress in charge of US monetary policy.

    But if abolishing ICBs is not the answer to the very real problem I set out, does that mean we have to be satisfied with the workarounds? One possibility that a few economists like Miles Kimball have argued for is to effectively abolish paper money as we know it, so central banks can set negative interest rates. Another possibility is that the government (in its saner moments) gives ICBs the power to undertake helicopter money.

    Both are complete solutions to the ZLB problem rather than workarounds. Both can be accused of endangering the value of money. But note also that both proposals gain strength from the existence of ICBs: governments are highly unlikely to ever have the courage to set negative rates, and ICBs stop the flight times of helicopters being linked to elections.

    These are big (important and complex) issues. There should be no taboos that mean certain issues cannot be raised in polite company. I still think blog posts are the best medium we have to discuss these issues, hopefully free from distractions like partisan politics.

    Posted by Mark Thoma on Tuesday, March 8, 2016 at 12:24 AM in Economics , Fiscal Policy , Monetary Policy , Politics | Permalink Comments (28)

    [Sep 12, 2016] Neoliberal pseudo theories vs tobin

    Notable quotes:
    "... We don't get to do many controlled experiments in economics, so history is mainly what we have to go on. ..."
    "... What did orthodox salt-water macroeconomists believe about disinflation on the eve of the Paul Volcker contraction? As it happens, we have an excellent source document: James Tobin's "Stabilization Policy Ten Years After," * presented at Brookings in early 1980. ..."
    "... Unemployment shot up faster than in Tobin's simulation, then came down faster, because the Fed didn't follow the simple rule he assumed. But the basic shape - a clockwise spiral, with inflation coming down thanks to a period of very high unemployment - was very much in line with what standard Keynesian macro said would happen. ..."
    "... trade between any two regional economies is roughly proportional to the product of their GDPs and inversely related to distance. Neat. ..."
    Sep 02, 2015 | economistsview.typepad.com

    anne said...

    http://krugman.blogs.nytimes.com/2015/09/01/the-triumph-of-backward-looking-economics/

    September 1, 2015

    The Triumph of Backward-Looking Economics

    By Paul Krugman

    We don't get to do many controlled experiments in economics, so history is mainly what we have to go on. Unfortunately, many people who imagine that they know how the economy works go with what they think they heard about history, not with what actually happened. And I'm not just talking about the great unwashed; quite a few well-known economists seem not to have heard about FRED, or at least haven't picked up the habit of doing a quick scan of the actual data before making assertions about facts.

    And there's one decade in particular where people are weirdly unaware of the realities: the 1980s. A lot of this has to do with Reaganolatry: the usual suspects have repeated so often that it was a time of extraordinary, incredible success that I often encounter liberals who believe that something special must have happened, that somehow the events were at odds with what the prevailing macroeconomic models of the time said would happen.

    But nothing special happened, aside from the unexpected willingness of the Federal Reserve to impose incredibly high unemployment in order to bring inflation down.

    What did orthodox salt-water macroeconomists believe about disinflation on the eve of the Paul Volcker contraction? As it happens, we have an excellent source document: James Tobin's "Stabilization Policy Ten Years After," * presented at Brookings in early 1980. Among other things, Tobin laid out a hypothetical disinflation scenario based on the kind of Keynesian model people like him were using at the time (which was also the model laid out in the Dornbusch-Fischer and Robert Gordon textbooks).

    These models included an expectations-augmented Phillips curve, ** with no long-run tradeoff between inflation and unemployment - but expectations were assumed to adjust gradually based on experience, rather than changing rapidly via forward-looking assessments of Fed policy.

    This was, of course, the kind of model the Chicago School dismissed scathingly as worthy of nothing but ridicule, and which was more or less driven out of the academic literature, even as it continued to be the basis of a lot of policy analysis.

    So here was Tobin's picture:

    [Picture]

    Here's what actually happened:

    [Graph]

    Unemployment shot up faster than in Tobin's simulation, then came down faster, because the Fed didn't follow the simple rule he assumed. But the basic shape - a clockwise spiral, with inflation coming down thanks to a period of very high unemployment - was very much in line with what standard Keynesian macro said would happen. On the other hand, there was no sign whatsoever of the kind of painless disinflation rational-expectations models suggested would happen if the Fed credibly announced its disinflation plans.

    anne said...

    http://krugman.blogs.nytimes.com/2015/09/01/gravity/

    September 1, 2015

    Gravity
    By Paul Krugman

    Now that's fun: Adam Davidson tells us * about trade in the ancient Near East, as documented by archives found in Kanesh - and reports that the volume of trade between Kanesh and various trading partners seems to fit a gravity equation: trade between any two regional economies is roughly proportional to the product of their GDPs and inversely related to distance. Neat.

    But what does the seemingly universal applicability of the gravity equation tell us? Davidson suggests that it's an indication that policy can't do much to shape trade. That's not where I would have gone, and it's not where those who have studied the issue closely ** have gone.

    Here's my take: Think about two cities with the same per capita GDP - we can relax that assumption in a minute. They will trade if residents of city A find things being sold by residents of city B that they want, and vice versa.

    So what's the probability that an A resident will find a B resident with something he or she wants? Applying what one of my old teachers used to call the principle of insignificant reason, a good first guess would be that this probability is proportional to the number of potential sellers - B's population.

    And how many such desirous buyers will there be? Again applying insignificant reason, a good guess is that it's proportional to the number of potential buyers - A's population.

    So other things equal we would expect exports from B to A to be proportional to the product of their populations.

    What if GDP per capita isn't the same? You can think of this as increasing the "effective" population, both in terms of producers and in terms of consumers. So the attraction is now the product of the GDPs.

    Is there anything surprising about the fact that this relationship works pretty well? A bit. Standard pre-1980 trade theory envisaged countries specializing in accord with their comparative advantage - England does cloth, Portugal wine. And these models suggest that how much countries trade should have a lot to do with whether they are similar or not. Cloth exporters shouldn't be selling much to each other, but should instead do their trading with wine exporters. In reality, however, there's basically no sign of any such effect: even seemingly similar countries trade about as much as a gravity equation says they should.

    Calibrated models of trade have long dealt with this reality, somewhat awkwardly, with the so-called Armington assumption, *** which simply assumes that even the apparently same good from different countries is treated by consumers as a differentiated product - a banana isn't just a banana, it's an Ecuador banana or a Saint Lucia banana, which are imperfect substitutes. The new trade theory some of us introduced circa 1980 - or as some now call it, the "old new trade theory" - does a bit more, and possibly better, by introducing monopolistic competition and increasing returns to explain why even similar countries produce differentiated products.

    And there's also a puzzle about both the effect of distance and the effect of borders, both of which seem larger than concrete costs can explain. Work continues.

    Does any of this suggest the irrelevance of trade policy? Not really. Changes in trade policy do have obvious effects on how much countries trade. Look at what happened when Mexico opened up starting in the late 1980s, as compared with Canada, which was fairly open all along - and which, like Mexico, mainly trades with the US:

    [Graph]

    So what does gravity tell us? Simple Ricardian comparative advantage is clearly incomplete; the process of international trade is subtler, with invisible as well as visible costs. Not trivial, but not too unsettling. And gravity models are very useful as a benchmark for assessing other effects.

    * http://www.nytimes.com/2015/08/30/magazine/the-vcs-of-bc.html

    ** https://www2.bc.edu/~anderson/GravitySlides.pdf

    *** http://wits.worldbank.org/wits/wits/witshelp/Content/SMART/Demand%20side%20the%20Armington.htm

    anne -> anne...

    http://www.nytimes.com/2015/08/30/magazine/the-vcs-of-bc.html

    August 29, 2015

    The V.C.s of B.C.
    By ADAM DAVIDSON

    One morning, just before dawn, an old man named Assur-idi loaded up two black donkeys. Their burden was 147 pounds of tin, along with 30 textiles, known as kutanum, that were of such rare value that a single garment cost as much as a slave. Assur-idi had spent his life's savings on the items, because he knew that if he could convey them over the Taurus Mountains to Kanesh, 600 miles away, he could sell them for twice what he paid.

    At the city gate, Assur-idi ran into a younger acquaintance, Sharrum-Adad, who said he was heading on the same journey. He offered to take the older man's donkeys with him and ship the profits back. The two struck a hurried agreement and wrote it up, though they forgot to record some details. Later, Sharrum-­Adad claimed he never knew how many textiles he had been given. Assur-idi spent the subsequent weeks sending increasingly panicked letters to his sons in Kanesh, demanding they track down Sharrum-Adad and claim his profits.

    These letters survive as part of a stunning, nearly miraculous window into ancient economics. In general, we know few details about economic life before roughly 1000 A.D. But during one 30-year period - between 1890 and 1860 B.C. - for one community in the town of Kanesh, we know a great deal. Through a series of incredibly unlikely events, archaeologists have uncovered the comprehensive written archive of a few hundred traders who left their hometown Assur, in what is now Iraq, to set up importing businesses in Kanesh, which sat roughly at the center of present-day Turkey and functioned as the hub of a massive global trading system that stretched from Central Asia to Europe. Kanesh's traders sent letters back and forth with their business partners, carefully written on clay tablets and stored at home in special vaults. Tens of thousands of these records remain. One economist recently told me that he would love to have as much candid information about businesses today as we have about the dealings - and in particular, about the trading practices - of this 4,000-year-old community.

    Trade is central to every key economic issue we face. Whether the subject is inequality, financial instability or the future of work, it all comes down to a discussion of trade: trade of manufactured goods with China, trade of bonds with Europe, trade over the Internet or enabled by mobile apps. For decades, economists have sought to understand how trade works. Can we shape trade to achieve different outcomes, like a resurgence of manufacturing or a lessening of inequality? Or does trade operate according to fairly fixed rules, making it resistant to conscious planning?

    Economists, creating models of trade, have faced a challenge, because their data have derived exclusively from the modern world. Are their models universal or merely reflections of our time? It's a crucial question, because many in our country would like to change our trading system to protect American jobs and to improve working conditions here and abroad. The archives of Kanesh have proved to be the greatest single source of information about trade from an entirely premodern milieu.

    In a beautifully detailed new book - ''Ancient Kanesh,'' written by a scholar of the archive, Mogens Trolle Larsen, to be published by Cambridge University Press later this year - we meet dozens of the traders of Kanesh and their relatives back home in Assur. Larsen has been able to construct family trees, detailing how siblings and cousins, parents and spouses, traded with one another and often worked against one another. We meet struggling businessmen, like Assur-idi, and brilliant entrepreneurs, like Shalim-Assur, who built a wealthy dynasty that lasted generations. In 2003, while covering the war in Iraq, I traveled to many ancient archaeological sites; the huge burial mounds, the carvings celebrating kings as relatives to the gods, all gave the impression of a despotic land in which a tiny handful of aristocrats and priests enjoyed dictatorial control. But the Kanesh documents show that at least some citizens had enormous power over their own livelihoods, achieving wealth and power through their own entrepreneurial endeavors.

    The details of daily life are amazing, but another scholar, Gojko Barjamovic, of Harvard, realized that the archive also offered insight into something potentially more compelling. Many of the texts enumerate specific business details: the price of goods purchased and sold, the interest ate on debt, the costs of transporting goods and the various taxes in the many city-states that the donkey caravans passed on the long journey from Assur to Kanesh. Like most people who have studied Kanesh, Barjamovic is an Assyriologist, an expert in ancient languages and culture. Earlier this year, he joined some economists, as well as some other Assyriologists and archaeologists, on a team that analyzed Kanesh's financial statistics. The picture that emerged of economic life is staggeringly advanced. The traders of Kanesh used financial tools that were remarkably similar to checks, bonds and joint-stock companies. They had something like venture-capital firms that created diversified portfolios of risky trades. And they even had structured financial products: People would buy outstanding debt, sell it to others and use it as collateral to finance new businesses. The 30 years for which we have records appear to have been a time of remarkable financial innovation....

    anne said...

    http://krugman.blogs.nytimes.com/2015/09/01/multipliers-what-we-should-have-known/

    September 1, 2015

    Multipliers: What We Should Have Known
    By Paul Krugman

    There's a very nice interview * with Olivier Blanchard, who is leaving the International Monetary Fund, in which among other things Olivier says the right thing about changing one's mind:

    "With respect to outside, the issue I have been struck by is how to indicate a change of views without triggering headlines of 'mistakes,' 'Fund incompetence,' and so on. Here, I am thinking of fiscal multipliers. The underestimation of the drag on output from fiscal consolidation was not a 'mistake' in the way people think of mistakes, e.g. mixing up two cells in an excel sheet. It was based on a substantial amount of prior evidence, but evidence which turned out to be misleading in an environment where interest rates are close to zero and monetary policy cannot offset the negative effects of budget cuts. We got a lot of flak for admitting the underestimation, and I suspect we shall continue to get more flak in the future. But, at the same time, I believe that we, the Fund, substantially increased our credibility, and used better assumptions later on. It was painful, but it was useful."

    Indeed. There are a lot of people out there whose idea of a substantive argument is "you used to say X, now you say Y" - never mind the reasons why you changed your view, and whether it was right to do so.It's important not to fall into the trap of being afraid to let new evidence or analysis speak.

    One thing I would say, however, is that on this particular issue the Fund should have known better. Olivier says that the evidence "turned out to be misleading in an environment where interest rates are close to zero and monetary policy cannot offset the negative effects of budget cuts", but didn't we know that? I certainly did. **

    And let me also beat one of my favorite drums: the prediction that multipliers would be much larger in a liquidity trap came out of IS-LMish macro (or, to be fair, New Keynesian models) and has been overwhelmingly confirmed by experience. So this was yet another victory for Keynesian analysis, the success story nobody will believe.

    * http://www.imf.org/external/pubs/ft/survey/so/2015/RES083115A.htm

    ** http://krugman.blogs.nytimes.com/2009/11/10/depression-multipliers/

    anne -> anne...

    http://krugman.blogs.nytimes.com/2009/11/10/depression-multipliers/

    November 10, 2009

    Depression Multipliers
    By Paul Krugman

    Barry Eichengreen and Kevin O'Rourke have lately been scoring a series of research coups, based on the combination of historical perspective and a global view. Most famously, they showed that on a global basis the first year of the current crisis was every bit as severe * as the first year of the Great Depression.

    Now they and collaborators have a new piece on policy effects, ** especially fiscal multipliers.

    The background here is that there are two problems with estimating multipliers relevant to our current situation. First, you need to look at what happens under liquidity-trap conditions - and except in Japan,these haven't prevailed anywhere since the 1930s. The second is that in the United States, fiscal policy was never forceful enough to provide a useful natural experiment. We didn't have a really big fiscal expansion until World War II; and WWII isn't a good experiment because the surge in defense spending was accompanied by government policies that suppressed private demand, such as rationing and restrictions on investment. (I really, really don't understand why this point has been so hard to get across.)

    What E&R do here is use a broad international cross-section to overcome this problem. This works because a number of countries had major military buildups during the 1930s - fiscal expansions that can be regarded as exogenous to the economic situation, since they were

    "driven above all by Hitler's rearmament programmes and other nations' efforts to match the Nazis in this sphere, and by one-off events like Italy's war in Abyssinia."

    What do E&R find? Initial fiscal multipliers of 2 or more, although they shrink over time. Yes, fiscal expansion is expansionary.

    * http://www.voxeu.org/index.php?q=node/3421

    ** http://www.econ.berkeley.edu/~eichengr/great_dep_great_cred_11-09.pdf

    So how does the decade of the 1980s end up being perceived as a defeat for Keynesians? To see it that way you have to systematically misrepresent both what happened to the economy and what people like Tobin were saying at the time. In reality, Tobinesque economics looks very good in the light of events.

    * http://www.brookings.edu/~/media/Projects/BPEA/1980-1/1980a_bpea_tobin.PDF

    ** http://en.wikipedia.org/wiki/Phillips_curve

    In economics, the Phillips curve is a historical inverse relationship between rates of unemployment and corresponding rates of inflation that result in an economy. Stated simply, decreased unemployment, (i.e. increased levels of employment) in an economy will correlate with higher rates of inflation.

    [Sep 12, 2016] Future Economists Will Probably Call This Decade the 'Longest Depression'

    Sep 12, 2016 | economistsview.typepad.com
    Brad DeLong:
    Future Economists Will Probably Call This Decade the 'Longest Depression' : ... Back before 2008, I used to teach my students that during a disturbance in the business cycle, we'd be 40 percent of the way back to normal in a year. The long-run trend of economic growth, I would say, was barely affected by short-run business cycle disturbances. There would always be short-run bubbles and panics and inflations and recessions. They would press production and employment away from its long-run trend -- perhaps by as much as 5 percent. But they would be transitory.
    After the shock hit, the economy would rapidly head back to normal. The equilibrium-restoring logic and magic of supply and demand would push the economy to close two-fifths of the gap to normal each year. After four years, only a seventh of the peak disturbance would remain.
    In the aftermath of 2008, Stiglitz was indeed one of those warning that I and economists like me were wrong. Without extraordinary, sustained and aggressive policies to rebalance the economy, he said, we would never get back to what before 2008 we had thought was normal.
    I was wrong. He was right. ...

    [Sep 12, 2016] 'It Pays to Work: Work Incentives and the Safety Net'

    Sep 12, 2016 | economistsview.typepad.com
    Via Brad DeLong:
    It Pays to Work: Work Incentives and the Safety Net: Isaac Shapiro, Robert Greenstein, Danilo Trisi, and Bryann DaSilva, CBPP : Some critics of various low-income assistance programs argue that the safety net discourages work. In particular, they contend that people receiving assistance from these programs can receive more, or nearly as much, from not working - and receiving government aid - than from working. Or they argue that low-paid workers have little incentive to work more hours or seek higher wages because losses in government aid will cancel out the earnings gains.
    Careful analysis of the data and research demonstrates, however, that such charges are largely incorrect and that it pays to work. In the overwhelming majority of cases, in fact, adults in poverty are significantly better off if they get a job, work more hours, or receive a wage hike.

    Various changes in the safety net over the past two decades have transformed it into more of what analysts call a "work-based safety net" and substantially increased incentives to work for people in poverty. ...

    [Sep 12, 2016] Economist's View 'Why is U.S. Labor Market Fluidity Drying Up'

    Sep 12, 2016 | economistsview.typepad.com

    'Why is U.S. Labor Market Fluidity Drying Up?'

    Nick Bunker:
    Why is U.S. labor market fluidity drying up ?: The U.S. labor market is a far less dynamic place than it was 30 years ago. Workers today are less likely to get a job while unemployed, move into unemployment, switch jobs, or move across state lines. You'd think just the opposite would be true given some of the discussion about our rapidly changing digital economy, but the data show what the data show. Even still, the reason-or reasons-for the decline in fluidity aren't known.
    A new working paper -by economists Raven Molloy, Christopher L. Smith, and Riccardo Trezzi of the Federal Reserve and Abigail Wozniak of the University of Notre Dame-takes a closer look at the decline in labor market fluidity and tries to find the causes. While the authors find nothing close to a smoking gun, they point to interesting avenues of future research. ...

    jonny bakho : , Wednesday, March 09, 2016 at 03:35 AM
    Would slack demand have anything to do with fluidity?
    DrDick -> jonny bakho... , Wednesday, March 09, 2016 at 07:27 AM
    That seems like it would be a good possibility.
    jonny bakho : , Wednesday, March 09, 2016 at 04:13 AM
    Dual careers make relocation more difficult.
    DrDick -> jonny bakho... , Wednesday, March 09, 2016 at 07:28 AM
    Stagnant and declining wages also make it more expensive.
    tew -> DrDick... , Wednesday, March 09, 2016 at 08:10 AM
    No, DrDick, a person's income does not change mobility unless it is extraordinarily low (in other words, they already can't pay rent and pay for a moving truck). If absolute income reduced mobility, then we would expect mobility to have been lower in the past.
    DrDick -> tew... , Wednesday, March 09, 2016 at 11:41 AM
    You obviously have no idea what you are talking about. Your last statement is clearly false, if you control for inflation. Minimum wage in 1960 ($1.65), for instance translates into over $10/hour today. It is certainly true that even relatively poor people will move if there are no jobs available locally, as in the Dust Bowl migrations or the migrations from the Rust Belt to Texas, Oklahoma, and Louisiana in the late 70s. No such mobility exists for low to moderate income people unless they are truly desperate.

    http://harvardmagazine.com/2013/01/immobile-labor

    https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&ved=0ahUKEwjgrav0qrTLAhUY-mMKHbfhCmAQFghCMAQ&url=http%3A%2F%2Fwww.aw-bc.com%2Finfo%2Fehrenberg_smith%2FChapter10.pdf&usg=AFQjCNEc0Cr3gQKfmnhaz8XxASHzZlos1Q&cad=rja

    https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=17&ved=0ahUKEwjk0t2qrLTLAhVP12MKHbDvAcQ4ChAWCFQwBg&url=http%3A%2F%2Fftp.iza.org%2Fdp9258.pdf&usg=AFQjCNHUHzg3oE9xkZAV7nvZBTZY6ZbeKw&cad=rja

    Syaloch -> jonny bakho... , Wednesday, March 09, 2016 at 10:34 AM
    Home ownership also substantially reduces mobility, particularly if you're unlucky enough to live in a region suffering from long-term economic decline.
    A1 -> Syaloch... , Wednesday, March 09, 2016 at 11:07 AM
    Close but cost of housing in certain markets is also a hindrance for labor mobility. Hard to move to places like Seattle or New York where there are jobs and high wages but the cost of housing has outpaced the salary increases.
    lower middle class : , Wednesday, March 09, 2016 at 05:46 AM
    Urban specialization in the industries of Healthcare, Technology, Finance and Logistics. High cost of living acts as an economic filter to ensure "the best people" are local.
    anne : , Wednesday, March 09, 2016 at 06:56 AM
    Alan Greenspan recognized * early on that the nature of business cycles in the United States was changing from inventory adjustment to labor adjustment cycles. As business inventory was made learner and leaner, with a movement to the just-in-time inventory delivery practices followed through Japan, Greenspan suggested that as economic conditions changed businesses would react by adjusting employment.

    The recession of the Bush presidency in the early 1990s unlike the Reagan recession of the early 1980s was for Greenspan an employment adjustment rather than inventory adjustment recession. Employment then has become accepted as less and less of a long term commitment by employers to workers and workers have have more poorly accordingly.

    * I do not know where the Greenspan speech on the changing nature of businesses cycles can be found and would be grateful for a reference.

    anne -> anne... , Wednesday, March 09, 2016 at 08:38 AM
    http://www.federalreserve.gov/boarddocs/hh/2001/february/testimony2.htm

    February 28, 2001

    [ Here is Alan Greenspan speaking of the speed of inventory adjustments, but I think Greenspan had recognized this before he became Federal Reserve Chair in 1987. The problem he confronted at the Fed was employment adjustment.

    Again, I will look for earlier discussion of the matter. ]

    Paine -> anne... , Wednesday, March 09, 2016 at 09:35 AM
    Swings in employment were always part of the cycle

    I find green spans distinction to be......
    Politics

    It might be the case that a relatively closed economy with high employment share in industrial production
    Would show cuts in production and inventory shrink
    Where a open system would show a drop in imports

    We have become more open since we dropped the dollar to gold peg
    And industries job share has dropped

    This is only part of an answer to the numbers
    Which btw show lower lay off rates per drop in output


    The quit rate shows both longer periods of low rates then in cycles from the 50's

    This is all out of my faulty memory banks

    Yup

    Toss the salt over your left shoulder

    anne -> Paine... , Wednesday, March 09, 2016 at 12:21 PM
    The nature of recessions in terms of employment indeed changed after the Reagan recession:

    http://www.bls.gov/webapps/legacy/cesbtab1.htm
    http://wwwdev.nber.org/cycles/cyclesmain.html

    January 3, 2016

    Recessions and Total Employment Cycles, 1943-2010: Decline

    Employment declined for 24 months around the 18 month recession of 2007-2009, from January 2008 to February 2010.

    Employment declined for 28 months around the 8 month recession of 2001, from February 2001 to June 2003.

    Employment declined for 20 months around the 8 month recession of 1990-1991, from June 1990 to February 1992.

    Employment declined for 17 months around the 16 month recession of 1981-1882, from July 1981 to December 1982.

    anne -> Paine... , Wednesday, March 09, 2016 at 12:22 PM
    http://www.bls.gov/webapps/legacy/cesbtab1.htm
    http://wwwdev.nber.org/cycles/cyclesmain.html

    January 3, 2014

    Recessions and Total Employment Cycles, 1943-2014: Recovery

    Recovery in employment from the 18 month recession of 2007-2009, coming in May 2014 or 76 months.

    Recovery in employment from the 8 month recession of 2001, coming in February 2005 or 48 months.

    Recovery in employment from the 8 month recession of 1990-1991, coming in February 1993 or 32 months.

    Recovery in employment from the 16 month recession of 1981-1982, coming in November 1983 or 28 months.

    anne -> Paine... , Wednesday, March 09, 2016 at 12:30 PM
    I have read the criticism several times, but do not quite understand what is being argued. Employment recovery has surely become increasingly lengthy in each recession since 1981-1982:

    28
    32
    48
    76 months respectively.

    anne -> Paine... , Thursday, March 10, 2016 at 07:08 AM
    Clearer:

    http://www.bls.gov/webapps/legacy/cesbtab1.htm
    http://wwwdev.nber.org/cycles/cyclesmain.html

    January 4, 2016

    Recessions and Private Employment Cycles, 1943-2010: Decline

    Private employment declined for 24 months around the 18 month recession of 2007-2009, from January 2008 to February 2010.

    Private employment declined for 31 months around the 8 month recession of 2001, from December 2000 to July 2003.

    Private employment declined for 23 months around the 8 month recession of 1990-1991, from March 1990 to February 1992.

    Private employment declined for 16 months around the 16 month recession of 1981-1882, from August 1981 to December 1982.


    http://www.bls.gov/webapps/legacy/cesbtab1.htm
    http://wwwdev.nber.org/cycles/cyclesmain.html

    January 4, 2016

    Recessions and Private Employment Cycles, 1943-2014: Recovery

    Recovery in private employment from the 18 month recession of 2007-2009, coming in March 2014 or 74 months.

    Recovery in private employment from the 8 month recession of 2001, coming in June 2005 or 54 months.

    Recovery in private employment from the 8 month recession of 1990-1991, coming in May 1993 or 38 months.

    Recovery in private employment from the 16 month recession of 1981-1982, coming in November 1983 or 27 months.

    anne -> Paine... , Thursday, March 10, 2016 at 07:09 AM
    I have read the criticism several times, but do not quite understand what is being argued. Privater employment recovery has surely become increasingly lengthy in each recession since 1981-1982:

    27
    38
    54
    74 months respectively.

    Jurassic Carl : , Wednesday, March 09, 2016 at 07:23 AM
    1. HR doesn't know what it's doing. That's why labor matching is so awful.
    http://www.corcodilos.com/blog/6249/why-hr-should-get-out-of-the-hiring-business

    http://www.inc.com/suzanne-lucas/theres-not-a-talent-shortage-you-just-stink-at-hiring.html

    http://www.upenn.edu/gazette/0113/PennGaz0113_feature2.pdf

    https://hbr.org/2015/07/why-we-love-to-hate-hr-and-what-hr-can-do-about-it


    2. They are not trying to hire (fake ads, H1B b.s., testing the market)

    http://www.epi.org/publication/congressional-testimony-the-impact-of-high-skilled-immigration-on-u-s-workers-4/

    https://www.youtube.com/watch?v=TCbFEgFajGU
    "running classified ads with the goal of NOT finding any qualified applicants, and the steps they go through to disqualify even the most qualified Americans in order to secure green cards for H-1b workers"

    3. Employers are overworking /stretching existing (overtime pay exempt) staff

    4. Weak aggregate demand.

    5. Increased use of informal and 1099/contractor positions

    6. Social Stigma of unemployment

    7. A bunch more reasons...

    reason : , Wednesday, March 09, 2016 at 08:03 AM
    Johnny Backho beat me to it regarding dual careers. Single earner households are much more likely to be prepared to move. It also causes people to leave companies or turn down promotions, as well.
    tew -> reason... , Wednesday, March 09, 2016 at 08:15 AM
    This is obvious and observable, but you will see a chunk of people vigorously deny it for two reasons:
    1) They project an anti-feminist perspective onto it. In other words, they think that finding anything at all that could be perceived to be not positive about dual incomes is an assault on women working outside the home.
    2) Even more twisted, they think that because many people are in dual income households for economic reasons (they need both incomes for "basic" needs), that declaring that the dual income reduces mobility is a negative comment about the dual income households.
    reason : , Wednesday, March 09, 2016 at 08:06 AM
    But I should also point out that the flow of government money has become less decentralised over time (if not regionally, then in terms of individuals) so that financial incentives to move have also fallen. Money flows up, not down and if there is no decentralising force (for instance government services and transfer payments) it tends to increasingly concentrate.
    tew : , Wednesday, March 09, 2016 at 08:08 AM
    It's called hunkering down, holding onto your desk.

    This seems like an area of research as much for (social) psychologists as economists. Consider the behavior of people after they have suffered or witnessed a (series of) traumatic event(s). Everyone who lost a job and got another is holding onto it like a life raft. Those who didn't lose their jobs hold on as dearly, knowing that if they lose it, they could be out in the wilderness for a long time and never get back to where they were.

    Jurassic Carl said in reply to tew... , Wednesday, March 09, 2016 at 08:14 AM
    Oh, definitely. Fear.

    And movement from life raft to life raft is hardly tempting, in most cases. Little salary or no bump with uncertain stability. The devil you know is better than the devil you don't know.

    tew -> Jurassic Carl... , Wednesday, March 09, 2016 at 08:16 AM
    And we have to wonder if there is hysteresis with productivity. In other words, fearful workers are less likely to embrace projects and systems that increase productivity and management is less likely to pursue them due to docile, affordable workers.
    Paine -> tew... , Wednesday, March 09, 2016 at 09:41 AM
    From the end of the Spainish war to Pearl Harbor

    Farm economy explained lots of the doldrum times
    As It contracted enormously with each down cycle

    Now it's industrial contraction

    Since Nixon time
    That explains the doldrums
    As it has contracted


    Each sector had very different emergent characteristic

    So each eras doldrums had unique dynamics

    DrDick -> tew... , Wednesday, March 09, 2016 at 11:43 AM
    And you denied this effect when I brought it up above.
    Dan Kervick -> tew... , Wednesday, March 09, 2016 at 02:15 PM
    Yup. Makes companies less productive and innovative too. Common workplace cause in keeping things stable, since change is punished.
    BobZ -> tew... , Wednesday, March 09, 2016 at 02:47 PM
    I think fear, (actually, sheer terror) explains 99% of this. It's like the entire workforce is experiencing PTSD.

    There is very little confidence that you'll be able to find a new job if you get laid off, and even less confidence that a new job will be any better than your current one.

    I know that professional STEM recruiters are having a much tougher time getting people to leave an existing job. Oddly, the one thing that I find perplexing is that the bias against hiring someone who's unemployed is much stronger than ever.

    Jurassic Carl said in reply to BobZ ... , Wednesday, March 09, 2016 at 04:42 PM
    This.

    Recruiter and HR biases and inefficiencies are quite unhelpful.


    Further, I would never, ever, ever leave a job without a raise and a legit, iron-clad, in-hand and legally enforceable signed offer.

    Nick Corcodilos, a recruiter in Silicon Valley, often talks about a rash of rescinded offers. The whole process of changing jobs is filled with a series of landmines that could land you into unemployment leprosy if things don't work out perfectly.

    http://www.corcodilos.com/blog/8454/protect-yourself-from-exploding-job-offers
    http://www.pbs.org/newshour/making-sense/ask-headhunter-job-offer-giving-notice-old-job/
    http://www.corcodilos.com/blog/8498/protect-your-job-dont-give-notice-when-accepting-a-new-job


    SomeCallMeTim : , -1
    Related to fear: Declining job tenure length, and maybe the growth of corporate 'rightsizing' - an MBA finance VP I know had 3 sizable companies shot out from under him during his career, and was constantly upgrading software skills to stay within shouting distance of up to date.

    [Sep 12, 2016] Volcker overcorrected and defanged labor to the delight of the wealthy elites.

    September 02, 2015 economistsview.typepad.com

    bakho said...

    The late 70s 80s inflation was due to 2 components.
    1. Wage inflation fueled by COLA.
    2. Price inflation fueled by the oil shock and the response of fuel switching and conservation, both of which were expensive and subtracted from productivity. (Same amount of product made, more work if you count work dedicated to remediation).

    Volcker overcorrected and defanged labor to the delight of the wealthy elites.

    That inflation did not return even when unemployment declined to low levels validates that other factors were driving inflation (oil) and that was corrected by Carter energy policy.

    The wealthy elites give zero credit to regulatory and fiscal policy under Carter for fixing the problem. Reagan fiscal policy made inflation worse, but by then, Carter energy policy had taken full effect.

    During the Great Moderation, we do see inflation start to appear during oil shocks (such as Gulf War 1).

    We have rewritten history discounting policies that worked, thus preventing us from learning the truth about the value of fiscal and regulatory policy and limitations of monetary policy.

    Monetary policy only worked by creating a bad recession with high unemployment.

    Fiscal and regulatory policy tackled the energy issues without causing the social harm from high unemployment.

    [Sep 12, 2016] 10 Investment Quotes To Live By

    Notable quotes:
    "... Most investors do fairly well at "buying" but stink at "selling." The reason is purely emotional driven primarily by "greed" and "fear." Like pruning and weeding a garden; a solid discipline of regularly taking profits, selling laggards and rebalancing the allocation leads to a healthier portfolio over time. ..."
    "... once you run out of chips you are out of the game. ..."
    Zero Hedge

    Submitted by Lance Roberts via STA Wealth Management,

    As markets hover near all-time highs, investors have become quite complacent that the current bull market trend will continue indefinitely. But why shouldn't they? After all, the Central Banks of the world have made it a primary mission to ensure that asset prices don't fall in order to keep extremely weak economies limping along. Interest rates hover near historic lows, and inflationary pressures are non-existent. Of course, these arguments are used to justify the second highest levels of valuation in history and a market that has set records for the longest stretch without a 10% correction. This time is truly different...right?

    Of course, a quick look at history tells us that this time is not different. In March of 2008, I was giving a seminar discussing why we had already likely entered into a recession and that a market swoon of mass proportions was approaching. While that advice fell on deaf ears as we were in a "Goldilocks" economy, and "subprime" was contained, the bubble ended just a few short months later. Why? Because that "bubble" was no "different" than any other time in history. The slide below was from the presentation:

    this time is different

    Of course, the next time I make this presentation I will have to add "Central Bank Interventions" to the list.

    The reality is that markets cycle from peaks to troughs as excesses built up during the previous bull market cycle are liquidated. The chart below shows the secular cycles of the market going back to 1871 adjusted for inflation. What is important is that historically, bull markets are launched from ver low valuations (buy low) and have historically ended with valuations around 23x earnings (sell high).

    SP500-PE-Recessions-031815

    This time is not different. The excesses being built up in the markets today will eventually revert just as they have been at every other peak in market history. The only question, of which no one has the answer to, is exactly when this occurs.

    With this in mind, there are 10-basic investment rules that have historically kept investors out of trouble over the long term. These are not unique by any means but rather a list of investment rules that in some shape, or form, has been uttered by every great investor in history.

    1) You are a "saver" - not an investor

    Unlike Warren Buffet who takes control of a company and can affect its financial direction - you are speculating that a purchase of a share of stock today can be sold at a higher price in the future. Furthermore, you are doing this with your hard earned savings. If you ask most people if they would bet their retirement savings on a hand of poker in Vegas they would tell you "no." When asked why, they will say they don't have the skill to be successful at winning at poker. However, on a daily basis these same individuals will buy shares of a company in which they have no knowledge of operations, revenue, profitability, or future viability simply because someone on television told them to do so.

    Keeping the right frame of mind about the "risk" that is undertaken in a portfolio can help stem the tide of loss when things inevitably go wrong. Like any professional gambler - the secret to long term success was best sung by Kenny Rogers; "You gotta know when to hold'em...know when to fold'em."

    2) Don't forget the income.

    As stated by the "Investment Brothers," an investment is an asset or item that will generate appreciation OR income in the future. In today's highly correlated world, there is little diversification left between equity classes. Markets rise and fall in unison as high-frequency trading and monetary flows push related asset classes in a singular direction. This is why including other asset classes, like fixed income which provides a return of capital function with an income stream, can reduce portfolio volatility. Lower volatility portfolios will consistently outperform over the long term by reducing the emotional mistakes caused by large portfolio swings.

    3) You can't "buy low" if you don't "sell high"

    Buy-Low-Sell-High-Rogers

    Most investors do fairly well at "buying" but stink at "selling." The reason is purely emotional driven primarily by "greed" and "fear." Like pruning and weeding a garden; a solid discipline of regularly taking profits, selling laggards and rebalancing the allocation leads to a healthier portfolio over time.

    Most importantly, while you may "beat the market" with "paper profits" in the short term, it is only the realization of those gains that generate "spendable wealth."

    4) Patience And Discipline Are What Wins

    Most individuals will tell you that they are "long-term investors." However, as Dalbar studies have repeatedly shown investors are driven more by emotions than not. The problem is that while individuals have the best of intentions of investing long-term, they ultimately allow "greed" to force them to chasing last year's hot performers. However, this has generally resulted in severe underperformance in the subsequent year as individuals sell at a loss and then repeat the process.

    This is why the truly great investors stick to their discipline in good times and bad. Over the long term - sticking to what you know, and understand, will perform better than continually jumping from the "frying pan into the fire."

    5) Don't Forget Rule No. 1

    As any good poker player knows - once you run out of chips you are out of the game. This is why knowing both "when" and "how much" to bet is critical to winning the game. The problem for most investors is that they are consistently betting "all in, all of the time."

    The "fear" of missing out in a rising market leads to excessive risk buildup in portfolios over time. It also leads to a violation of the simple rule of "sell high."

    As discussed recently, the reality is that opportunities to invest in the market come along as often as taxi cabs in New York City. However, trying to make up lost capital by not paying attention to the risk is a much more difficult thing to do.

    6) You most valuable, and irreplaceable commodity, is "time."

    Since the turn of the century, investors have recovered, theoretically, from two massive bear market corrections. After 15 years, investors are now back to where they were in 2000 after adjusting for inflation. The problem is that there has been an irreplaceable loss; the "time" that was available to "save" for retirement is gone, forever.

    For investors getting back to even is not an investment strategy. We are all "savers" that have a limited amount of time within which to save money for our retirement. If we were 15 years from retirement in 2000 - we are now staring it in the face with no more to show for it than what we had over a decade ago. Do not discount the value of "time" in your investment strategy.

    7) Don't mistake a "cyclical trend" as an "infinite direction."

    The-trend-is-your-friend

    There is an old Wall Street axiom that says the "trend is your friend." Unfortunately, investors repeatedly extrapolate the current trend into infinity. In 2007, the markets were expected to continue to grow as investors piled into the market top. In late 2008, individuals were convinced that the market was going to zero. Extremes are never the case.

    It is important to remember that the "trend is your friend." That is as long as you are paying attention to it and respecting its direction. Get on the wrong side of the trend, and it can become your worst enemy.

    8) Success breeds over-confidence

    Overconfidence

    Individuals go to college to become doctors, lawyers, and even circus clowns. Yet, every day, individuals pile into one of the most complicated games on the planet with their hard earned savings with little, or no, education at all.

    For most individuals, when the markets are rising, their success breeds confidence. The longer the market rises; the more individuals attribute their success to their own skill. The reality is that a rising market covers up the multitude of investment mistakes that individuals make by taking on excessive risk, poor asset selection or weak management skills. These errors are revealed by the forthcoming correction.

    9) Being a contrarian is tough, lonely and generally right.

    Buy-Fear-Sell-Greed

    Howard Marks once wrote that:

    ""Resisting – and thereby achieving success as a contrarian – isn't easy. Things combine to make it difficult; including natural herd tendencies and the pain imposed by being out of step, since momentum invariably makes pro-cyclical actions look correct for a while. (That's why it's essential to remember that 'being too far ahead of your time is indistinguishable from being wrong.')

    Given the uncertain nature of the future, and thus the difficulty of being confident your position is the right one – especially as price moves against you – it's challenging to be a lonely contrarian."

    The best investments are generally made when going against the herd. Selling to the "greedy" and buying from the "fearful" are extremely difficult things to do without a very strong investment discipline, management protocol, and intestinal fortitude. For most investors the reality is that they are inundated by "media chatter" which keeps them from making logical and intelligent investment decisions regarding their money which, unfortunately, leads to bad outcomes.

    10) Comparison is your worst investment enemy

    paint-dry

    The best thing you can do for your portfolio is to quit benchmarking against a random market index that has absolutely nothing to do with your goals, risk tolerance or time horizon.

    Comparison in the financial arena is the main reason clients have trouble patiently sitting on their hands, letting whatever process they are comfortable with work for them. They get waylaid by some comparison along the way and lose their focus. If you tell a client that they made 12% on their account, they are very pleased. If you subsequently inform them that 'everyone else' made 14%, you have made them upset. The whole financial services industry, as it is constructed now, is predicated on making people upset so they will move their money around in a frenzy. Money in motion creates fees and commissions. The creation of more and more benchmarks and style boxes is nothing more than the creation of more things to COMPARE to, allowing clients to stay in a perpetual state of outrage."

    The only benchmark that matters to you is the annual return that is specifically required to obtain your retirement goal in the future. If that rate is 4%, then trying to obtain 6% more than doubles the risk you have to take to achieve that return. The end result of taking on more risk than necessary will be the deviation away from your goals when something inevitably goes wrong.

    It's all in the risk

    Robert Rubin, former Secretary of the Treasury, changed the way I thought about risk when he wrote:

    "As I think back over the years, I have been guided by four principles for decision making. First, the only certainty is that there is no certainty. Second, every decision, as a consequence, is a matter of weighing probabilities. Third, despite uncertainty we must decide and we must act. And lastly, we need to judge decisions not only on the results, but on how they were made.

    Most people are in denial about uncertainty. They assume they're lucky, and that the unpredictable can be reliably forecast. This keeps business brisk for palm readers, psychics, and stockbrokers, but it's a terrible way to deal with uncertainty. If there are no absolutes, then all decisions become matters of judging the probability of different outcomes, and the costs and benefits of each. Then, on that basis, you can make a good decision."

    It should be obvious that an honest assessment of uncertainty leads to better decisions, but the benefits of Rubin's approach goes beyond that. For starters, although it may seem contradictory, embracing uncertainty reduces risk while denial increases it. Another benefit of "acknowledged uncertainty" is it keeps you honest. A healthy respect for uncertainty, and a focus on probability, drives you never to be satisfied with your conclusions. It keeps you moving forward to seek out more information, to question conventional thinking and to continually refine your judgments and understanding that difference between certainty and likelihood can make all the difference.

    The reality is that we can't control outcomes; the most we can do is influence the probability of certain outcomes which is why the day to day management of risks and investing based on probabilities, rather than possibilities, is important not only to capital preservation but to investment success over time.

    Average:

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    Zirpedge

    #11 Money Talks and Bullshit Walks

    #12 Cash is King!

    summerof71

    "What's a trillion between friends?" - Bernank

    kaiserhoff

    kaiserhoff's picture

    So what's the point in saving if the return is less than zero...,

    a lot less?

    max2205

    Only go all in when the fed owns and buys the market every Fucking day for 8 Fucking years

    asteroids

    Don't fucking play! Stay in cash and wait for the inevitable crashes. They will happen. Buy gold and silver to keep away the fucking vampires. Invest in yourself.

    malek

    Seems Robert Rubin optimized principles out of the equations. The outcomes from his decisions support that view.

    A Lunatic

    #13. Sell in March, have nuclear holocaust in May........

    ronron

    well the fucker left out. sell in may and run away.

    indaknow

    #11.......Don't get high on your own supply

    Seek_Truth

    Missed one:

    "The rich rule over the poor, and the borrower is slave to the lender." - Proverbs 22:7

    Eo Ipso: Never buy what you can't afford without borrowing.

    Tinky

    My personal favorite:

    Journalist: "To what do you attribute your great success in the market?"

    Bernard Baruch: "Selling too early."

    davidalan1

    "You can get more money but not more time"...ok...this was demonstrated to me one beautiful Saturday in spring. I had an almost 30yr old toro lawnmower that I LOVED. Called him "the old man" during his last days. 2.5 briggs and stratton. Towards the end he was put together with liquid cement. Looked like hell, but i kept the blade sharp. At one point i took him to the shop to get a pull string replace and the workers thought it was a junk mower and took it 45min away to be junked. Much to their chagrin the small motor shop had to go retrieve the old man.

    Anyhoo...back to the story. He started cutting out on inclines. Took the carb apart, googled and shit to no avail... Had him out front on said Saturday in question. An old guy, maybe 80-90 years old pulls up out of NOWHERE.. walks up and says. "Thats an old toro". I said yes sir it is, appreciating his knowledge. He says. "having any trouble with her"...I was blown away. Explained the situation and he says, "got a flashlight and flat head"? "Yes Sir"...anyway he fixed it..I was BLOWN away...

    As he was walking back to his car, I made the stupid comment. "You should open a lawnmower shop you could make alot of money". Omg what a dork comment.

    He turns around and says. "son I have plenty of money, its time Im running out of"...

    True story

    A Lunatic

    Just goes to show you that having a flat head is very important.......

    I Write Code

    I'm a mediocre investor, so stop rubbing it in already.

    Panic Mode

    The house always wins.

    stant

    I was only helping the muppets over the yield fence

    King Rear

    In the short term the market is a voting mechanism, in the long run it is a weighing mechanism. - Ben Graham

    Patton

    #1 is Horseshit. Studies have shown that holding the best American companies over the long term can generate crazy returns. Look where you would be right now if you had held companies like IBM, KO, WMT, MCD, T, V, GOOG, etc even through all the crashes. Markets crash, but they ALWAYS recover. This is an undisputable fact. If you hold stocks for decades and reinvest the dividends, you will be rich. That's a guarantee.

    TheGreatRecovery

    Since 1988, the SP500 has returned 8.17% compounded annually. I agree with you BUT I fear that inflation may actually be running 8%, and therefore eating up everything a stock market investor makes. (Of course, 8% inflation would more than eat up everything a bond investor makes, and I think it would eat up even what a buy-and-hold real estate investor "makes".)

    Michigander

    Even a stopped clock is right twice a day. So what the fuck do you if you needed your "riches" on 1/1/09?

    #11 Timing is everything.

    Who was that ma...

    Who was that masked man's picture

    #11 "The person who risks nothing, does nothing, has nothing, is nothing, and becomes nothing. He may avoid suffering and sorrow, but he simply cannot learn and feel and change..."

    Leo Buscaglia

    #12 "I am more interested in the return of my capital than the return on my capital."

    Mark Twain

    #13 "You've got to go out on a limb sometimes because that's where the fruit is."

    #14 Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it.

    – Will Rogers (1879 – 1935)

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    WTFRLY

    WTFRLY's picture

    9/11 Truth: Judges shocked by first time seeing video of WTC 7 collapse in Denmark court

    FPearl602

    "If you liked it at $50, you gotta LOVE it at $40; if ya luvved it at $40, u gotta ADORE it at $20; if it continues to drop, shoot yourself."

    - Jim Cramer

    kchrisc

    "10 Investment Quotes To Live By"

    10 Investment Quotes to Survive By

    1. Buy and hold gold and silver.
    2. Buy and hold steal.
    3. Buy and hold lead.
    4. Buy and hold brass.
    5. Buy and hold primers and powder.
    6. Buy and hold food and water.
    7. Buy and hold filters.
    8. Buy and hold fuel.
    9. Buy and hold land.
    10. Buy and use guillotines.

    The banksters need to repay us.

    83_vf_1100_c

    'The banksters need to repay us.'

    I like your tag line but you do know it will never happen. Maybe after all the descendants of slaves finally get their 40 acres and a mule... never.

    kchrisc

    You are thinking of payment in gold or silver, when heads will also gladly be accepted.

    With that said, they WILL repay us.

    The banksters need to repay us.

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    Thu, 03/19/2015 - 06:52 | 5905303 Firewood

    Firewood's picture

    2. Buy and hold steal

    I think that should be

    2. Steal hold and buy

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    Thu, 03/19/2015 - 00:16 | 5904979 Kina

    Kina's picture

    Nobody ever lost money taking their profits.

    Plenty lose money waiting for higher and higher profits.

    Never chase a climbing stock price.

    Always take your losses at your pre-decided margin.

    Penny stocks are penny stocks for a reason.

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    armageddon addahere

    How did you get so rich?

    Good decisions!

    How do you make good decisions?

    Experience!

    How do you get experience?

    Bad decisions!

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    Thu, 03/19/2015 - 00:27 | 5904997 armageddon addahere

    armageddon addahere's picture

    I never buy at the bottom, and I always sell too soon.

    - Baron Rothschild

    [Sep 11, 2016] Trump is afraid the neoliberal imperial global order presided by the US is about to crash and thinks he will be able to steer the country into a soft landing by accepting that other world powers have interests, by disengaging from costly and humiliating military interventions, by re-negotiating trade deals, and by stopping the mass immigration of poor people. Plus a few well-placed bombs.

    Notable quotes:
    "... I think Trump is afraid the imperial global order presided by the US is about to crash and thinks he will be able to steer the country into a soft landing by accepting that other world powers have interests, by disengaging from costly and humiliating military interventions, by re-negotiating trade deals, and by stopping the mass immigration of poor people. Plus a few well-placed bombs ..."
    "... Much has been written about the internet revolution, about the impact of people having access to much more information than before. The elite does not recognize this and is still organizing political and media campaigns as if it were 1990, relying on elder statesmen like Blair, Bush, Mitterrand, Clinton, and Obama to influence public opinion. They are failing miserably, to the point of being counterproductive. ..."
    "... I don't think something as parochial as racism is sustaining Trump, but rather the fear of the loss of empire by a population with several orders of magnitude more information and communication than in 2008, even 2012. ..."
    "... No one has literally argued that people should be glad to lose employment: that part was hyperbole. But the basic argument is often made quite seriously. See e.g. outsource Brad DeLong . ..."
    "... The same thing has happened in Mexico with neoliberal government after neoliberal government being elected. There are many democratically elected neoliberal governments around the world. ..."
    "... In the case of Mexico, because Peña Nieto's wife is a telenovela star. How cool is that? It places Mexico in the same league as 1st world countries, such as France, with Carla Bruni. ..."
    "... To the guy who asked- poor white people keep voting Republican even though it screws them because they genuinely believe that the country is best off when it encourages a culture of "by the bootstraps" self improvement, hard work, and personal responsibility. They view taxing people in order to give the money to the supposedly less fortunate as the anti thesis of this, because it gives people an easy out that let's them avoid having to engage in the hard work needed to live independently. ..."
    "... The extent to which "poor white people" vote against their alleged economic interests is overblown. To a large extent, they do not vote at all nor is anyone or anything on the ballot to represent their interests. And, yes, they are misinformed systematically by elites out to screw them and they know this, but cannot do much to either clear up their own confusion or fight back. ..."
    "... The mirror image problem - of elites manipulating the system to screw the poor and merely middle-class - is daily in the news. Both Presidential candidates have been implicated. So, who do you recommend they vote for? ..."
    "... I think you're missing Patrick's point. These voters are switching from one Republican to another. They've jettisoned Bush et. al. for Trump. These guys despise Bush. ..."
    "... They've figured out that the mainstream party is basically 30 years of affinity fraud. ..."
    "... My understanding is trumps support disproportionately comes from the small business owning classes, Ie a demographic similar to the petite bourgeoisie who have often been heavily involved in reactionary movements. This gets oversold as "working class" when class is defined by education level rather than income. ..."
    "... Layman - Why are these voters switching from Bush et al to Trump? Once again, Corey's whole point is that there is very little difference between the racism of Trump and the mainstream party since Nixon. Is Trump just more racist? Or are the policies of Trump resonating differently than Bush for reasons other than race? ..."
    "... Eric Berne, in The Structures and Dynamics of Organizations and Groups, proposed that among the defining characteristics of a coherent group is an explicit boundary which determines whether an individual is a member of the group or not. (If there is no boundary, nothing binds the assemblage together; it is a crowd.) The boundary helps provide social cohesion and is so important that groups will create one if necessary. Clearly, boundaries exclude as well as include, and someone must play the role of outsider. ..."
    "... For a time, the balkanization of American political communities by race, religion and ethnicity was an effective means to the dominance of an tiny elite with ties to an hegemonic community, but it backfired. Dismantling that balkanization has left the country with a very low level of social affiliation and thus a low capacity to organize resistance to elite depredations. ..."
    Aug 04, 2016 | crookedtimber.org

    Lupita 08.04.16 at 4:23 am 167

    I think Trump is afraid the imperial global order presided by the US is about to crash and thinks he will be able to steer the country into a soft landing by accepting that other world powers have interests, by disengaging from costly and humiliating military interventions, by re-negotiating trade deals, and by stopping the mass immigration of poor people. Plus a few well-placed bombs .

    Much has been written about the internet revolution, about the impact of people having access to much more information than before. The elite does not recognize this and is still organizing political and media campaigns as if it were 1990, relying on elder statesmen like Blair, Bush, Mitterrand, Clinton, and Obama to influence public opinion. They are failing miserably, to the point of being counterproductive.

    I don't think something as parochial as racism is sustaining Trump, but rather the fear of the loss of empire by a population with several orders of magnitude more information and communication than in 2008, even 2012.

    Layman 08.04.16 at 11:59 am

    Rich P: "Neoliberals often argue that people should be glad to lose employment at 50 so that people from other countries can have higher incomes "

    I doubt this most sincerely. While this may be the effect of some neoliberal policies, I can't recall any particular instance where someone made this argument.

    Rich Puchalsky 08.04.16 at 12:03 pm

    "I can't recall any particular instance where someone made this argument."

    No one has literally argued that people should be glad to lose employment: that part was hyperbole. But the basic argument is often made quite seriously. See e.g. outsource Brad DeLong .

    engels 08.04.16 at 12:25 pm

    While this may be the effect of some neoliberal policies, I can't recall any particular instance where someone made this argument

    Maybe this kind of thing rom Henry Farrell? (There may well be better examples.)

    Is some dilution of the traditional European welfare state acceptable, if it substantially increases the wellbeing of current outsiders (i.e. for example, by bringing Turkey into the club). My answer is yes, if European leftwingers are to stick to their core principles on justice, fairness, egalitarianism etc

    http://crookedtimber.org/2005/05/31/talking-turkey-over-welfare/

    Lupita 08.04.16 at 2:42 pm

    Large numbers of low-income white southern Americans consistently vote against their own economic interests. They vote to award tax breaks to wealthy people and corporations, to cut unemployment benefits, to bust unions, to reward companies for outsourcing jobs, to resist wage increases, to cut funding for health care for the poor, to cut Social Security and Medicare, etc.

    The same thing has happened in Mexico with neoliberal government after neoliberal government being elected. There are many democratically elected neoliberal governments around the world.

    Why might this be?

    In the case of Mexico, because Peña Nieto's wife is a telenovela star. How cool is that? It places Mexico in the same league as 1st world countries, such as France, with Carla Bruni.

    Patrick 08.04.16 at 4:32 pm

    To the guy who asked- poor white people keep voting Republican even though it screws them because they genuinely believe that the country is best off when it encourages a culture of "by the bootstraps" self improvement, hard work, and personal responsibility. They view taxing people in order to give the money to the supposedly less fortunate as the anti thesis of this, because it gives people an easy out that let's them avoid having to engage in the hard work needed to live independently.

    They see it as little different from letting your kid move back on after college and smoke weed in your basement. They don't generally mind people being on unemployment transitionally, but they're supposed to be a little embarrassed about it and get it over with as soon as possible. They not only worry that increased government social spending will incentivize bad behavior, they worry it will destroy the cultural values they see as vital to Americas past prosperity. They tend to view claims about historic or systemic injustice necessitating collective remedy because they view the world as one in which the vagaries of fate decree that some are born rich or poor, and that success is in improving ones station relative to where one starts. Attempts at repairing historical racial inequity read as cheating in that paradigm, and even as hostile since they can easily observe white people who are just as poor or poorer than those who racial politics focuses upon. Left wing insistence on borrowing the nastiest rhetoric of libertarians ("this guy is poor because his ancestors couldn't get ahead because of historical racial injustice so we must help him; your family couldn't get ahead either but that must have been your fault so you deserve it") comes across as both antithetical to their values and as downright hostile within the values they see around them.

    All of this can be easily learned by just talking to them.

    It's not a great world view. It fails to explain quite a lot. For example, they have literally no way of explaining increased unemployment without positing either that everyone is getting too lazy to work, or that the government screwed up the system somehow, possibly by making it too expensive to do business in the US relative to other countries. and given their faith in the power of hard work, they don't even blame sweatshops- they blame taxes and foreign subsidies.

    I don't know exactly how to reach out to them, except that I can point to some things people do that repulse them and say "stop doing that."

    bruce wilder 08.04.16 at 5:50 pm

    The extent to which "poor white people" vote against their alleged economic interests is overblown. To a large extent, they do not vote at all nor is anyone or anything on the ballot to represent their interests. And, yes, they are misinformed systematically by elites out to screw them and they know this, but cannot do much to either clear up their own confusion or fight back.

    The mirror image problem - of elites manipulating the system to screw the poor and merely middle-class - is daily in the news. Both Presidential candidates have been implicated. So, who do you recommend they vote for?

    There is serious deficit of both trust and information among the poor. Poor whites hardly have a monopoly; black misleadership is epidemic in our era of Cory Booker socialism.


    bruce wilder 08.04.16 at 7:05 pm

    Politics is founded on the complex social psychology of humans as social animals. We elevate it from its irrational base in emotion to rationalized calculation or philosophy at our peril.


    T 08.04.16 at 9:17 pm

    @Layman

    I think you're missing Patrick's point. These voters are switching from one Republican to another. They've jettisoned Bush et. al. for Trump. These guys despise Bush.

    They've figured out that the mainstream party is basically 30 years of affinity fraud.

    So, is your argument is that Trump even more racist? That kind of goes against the whole point of the OP. Not saying that race doesn't matter. Of course it does. But Trump has a 34% advantage in non-college educated white men. It just isn't the South. Why does it have to be just race or just class?


    Ronan(rf) 08.04.16 at 10:35 pm

    "I generally don't give a shit about polls so I have no "data" to evidence this claim, but my guess is the majority of Trump's support comes from this broad middle"

    My understanding is trumps support disproportionately comes from the small business owning classes, Ie a demographic similar to the petite bourgeoisie who have often been heavily involved in reactionary movements. This gets oversold as "working class" when class is defined by education level rather than income.

    This would make some sense as they are generally in economically unstable jobs, they tend to be hostile to both big govt (regulations, freeloaders) and big business (unfair competition), and while they (rhetorically at least) tend to value personal autonomy and self sufficiency , they generally sell into smaller, local markets, and so are particularly affected by local demographic and cultural change , and decline. That's my speculation anyway.

    T 08.05.16 at 3:12 pm

    @patrick @layman

    Patrick, you're right about the Trump demographic. https://fivethirtyeight.com/features/the-mythology-of-trumps-working-class-support/

    Layman - Why are these voters switching from Bush et al to Trump? Once again, Corey's whole point is that there is very little difference between the racism of Trump and the mainstream party since Nixon. Is Trump just more racist? Or are the policies of Trump resonating differently than Bush for reasons other than race?

    Are the folks that voted for the other candidates in the primary less racist so Trump supporters are just the most racist among Republicans? Cruz less racist? You have to explain the shift within the Republican party because that's what happened.

    Anarcissie 08.06.16 at 3:00 pm

    Faustusnotes 08.06.16 at 1:50 pm @ 270 -

    Eric Berne, in The Structures and Dynamics of Organizations and Groups, proposed that among the defining characteristics of a coherent group is an explicit boundary which determines whether an individual is a member of the group or not. (If there is no boundary, nothing binds the assemblage together; it is a crowd.) The boundary helps provide social cohesion and is so important that groups will create one if necessary. Clearly, boundaries exclude as well as include, and someone must play the role of outsider. While Berne's theories are a bit too nifty for me to love them, I have observed a lot of the behaviors he predicts. If one wanted to be sociobiological, it is not hard to hypothesize evolutionary pressures which could lead to this sort of behavior being genetically programmed. If a group of humans, a notably combative primate, does not have strong social cohesion, the war of all against all ensues and everybody dies. Common affections alone do not seem to provide enough cohesion.

    In an earlier but related theory, in the United States, immigrants from diverse European communities which fought each other for centuries in Europe arrived and managed to now get along because they had a major Other, the Negro, against whom to define themselves (as the White Race) and thus to cohere sufficiently to get on with business. The Negro had the additional advantage of being at first a powerless slave and later, although theoretically freed, was legally, politically, and economically disabled - an outsider who could not fight back very effectively, nor run away. Even so, the US almost split apart and there continue to be important class, ethnic, religious, and regional conflicts. You can see how these two theories resonate.

    It may be that we can't have communities without this dark side, although we might be able to mitigate some of its destructive effects.

    bruce wilde r 08.06.16 at 4:28 pm

    I am somewhat suspicious of leaving dominating elites out of these stories of racism as an organizing principle for political economy or (cultural) community.

    Racism served the purposes of a slaveholding elite that organized political communities to serve their own interests. (Or, vis a vis the Indians a land-grab or genocide.)

    Racism serves as an organizing principle. Politically, in an oppressive and stultifying hierarchy like the plantation South, racism not incidentally buys the loyalty of subalterns with ersatz status. The ugly prejudices and resentful arrogance of working class whites is thus a component of how racism works to organize a political community to serve a hegemonic master class. The business end of racism, though, is the autarkic poverty imposed on the working communities: slaves, sharecroppers, poor blacks, poor whites - bad schools, bad roads, politically disabled communities, predatory institutions and authoritarian governments.

    For a time, the balkanization of American political communities by race, religion and ethnicity was an effective means to the dominance of an tiny elite with ties to an hegemonic community, but it backfired. Dismantling that balkanization has left the country with a very low level of social affiliation and thus a low capacity to organize resistance to elite depredations.

    engels 08.07.16 at 1:02 am

    But how did that slavery happen

    Possible short answer: the level of technological development made slavery an efficient way of exploiting labour. At a certain point those conditions changed and slavery became a drag on further development and it was abolished, along with much of the racist ideology that legitimated it.

    Lupita 08.07.16 at 3:40 am

    But how did that slavery happen

    In Mesoamerica, all the natives were enslaved because they were conquered by the Spaniards. Then, Fray Bartolomé de las Casas successfully argued before the Crown that the natives had souls and, therefore, should be Christianized rather than enslaved. As Bruce Wilder states, this did not serve the interests of the slaveholding elite, so the African slave trade began and there was no Fray Bartolomé to argue their case.

    It is interesting that while natives were enslaved, the Aztec aristocracy was shipped to Spain to be presented in court and study Latin. This would not have happened if the Mesoamericans were considered inferior (soulless) as a race. Furthermore, the Spaniards needed the local elite to help them out with their empire and the Aztecs were used to slavery and worse. This whole story can be understood without recurring to racism. The logic of empire suffices.

    [Sep 11, 2016] "Equity," an intelligent and enthralling thriller set in a shark tank of New York investment bankers, hedge-fund executives and tech entrepreneurs,

    Notable quotes:
    "... The film, directed by Meera Menon and written by Amy Fox , is as ruthless and hypnotic a study of a cutthroat species as the documentary I saw about the carnivorous fish. Maybe it is even more so, as it is a story of alpha females, as well as males. ..."
    "... a movie implicitly critical of Wall Street and explicitly damning of hedge funds. ..."
    truthdig.com

    Not long ago, I saw a documentary about sharks in the wild. The male bites the frisky female on her flank, both to show his interest and to subdue her as he attempts penetration. Initially the female resists; one was filmed wriggling free of a series of circling males until she becomes exhausted and an alpha male has his way with her.

    According to the narrator, shark reproduction favors the most powerful males and strongest females. Over time, the female evolves tougher skin to endure, or perhaps elude, the male love bite.

    If that's what happens in the open sea, what must it be like in tighter quarters?

    "Equity," an intelligent and enthralling thriller set in a shark tank of New York investment bankers, hedge-fund executives and tech entrepreneurs, imagines just that.

    The film, directed by Meera Menon and written by Amy Fox, is as ruthless and hypnotic a study of a cutthroat species as the documentary I saw about the carnivorous fish. Maybe it is even more so, as it is a story of alpha females, as well as males.

    This female-driven production about driven females stars Anna Gunn ("Breaking Bad") as banker Naomi Bishop, the firm rainmaker lately experiencing a drought. Sarah Megan Thomas is Erin Manning, her assistant, and Alysia Reiner ("Orange is the New Black") plays Samantha, an assistant U.S. attorney investigating Gunn's firm. That storyline provides one of the plot's conflicts. Another is that banker and assistant each want promotions and are denied.

    At the outset, it's hard to like Naomi. She announces herself as the female Gordon Gekko (the character Michael Douglas played in "Wall Street"). While he exhorted that "greed is good," she forthrightly admits that she "likes money." She likes the numbers, likes the adrenaline rush of risking it on a new venture and, most of all, she likes the power it represents.

    She makes few concessions to femininity and none to glamor. Her body is womanly, rather than girlish, her clothes purely functional. Naomi lets off steam by slipping into boxing gloves and taking the stuffing out of the punching bag. She is in control of her emotions.

    At the outset, it's easy to like Erin and Samantha, both model-slim and flirty (even though both are married). From Erin's perspective, Naomi is the boss from hell. From Samantha's, the banker is insufficiently idealistic. "Equity" asks us at first to align with the younger women because, well, they look like the sexy creatures of most Hollywood films. But as it continues, the movie asks us to question our first impressions. It's a film about not making snap judgments, in business, in love or in life.

    Is there a difference when women are behind both the camera and the story? In this case, yes and no. It's no surprise that this movie features a trio of three-dimensional women at its center. For the most part, though, its male characters are generic and cardboard-flat. There's entitled hedge-fund guy Michael (James Purefoy), Naomi's mentor and boyfriend, all about the money and the game. There's the entitled tech entrepreneur Ed (Samuel Roukin), who is all about the money and the sex. The one good guy is a warm and supportive U.S. attorney who steers Samantha toward remaining in her ethical lane. Here is a movie implicitly critical of Wall Street and explicitly damning of hedge funds.

    Despite the one-dimensional men, I was surprised by the film's deceptions and detours. The greatest asset of "Equity" is Gunn, whose face is a Kabuki mask and whose skin is impenetrable as that of a female shark. While watching her I thought once or twice that hers was a one-note performance. But by movie's end, I realized it was a symphony of invincibility and vulnerability.

    [Sep 10, 2016] Higher Education Faculty News As Free Textbooks Go Mainstream, Advocate Says Colleges Should Do More to Support Them

    Notable quotes:
    "... In June, 38 community colleges announced plans to make free online materials standard in every course in some degree programs as part of a new effort coordinated by Achieving the Dream. Just a few weeks later, Gov. Jerry Brown of California, a Democrat, signed a 2016-17 budget that includes $5 million for community colleges in the state to create their own ZTC degrees ..."
    "... Hal Plotkin, a longtime advocate of open education resources, or OER, says the moves could eventually save students billions of dollars. As he argued in a recent commentary, California's new ZTC program is "easily the most ambitious state-level effort to promote the use of OER in public higher education to date." ..."
    Jul 12, 2016 | higheredfaculty.blogspot.com

    The Chronicle of Higher Education By Goldie Blumenstyk July 12, 2016

    It's been a big few weeks for the movement to replace commercial textbooks with free online materials, thanks to the sudden rise of something called the Zero Textbook Cost degree.

    In June, 38 community colleges announced plans to make free online materials standard in every course in some degree programs as part of a new effort coordinated by Achieving the Dream. Just a few weeks later, Gov. Jerry Brown of California, a Democrat, signed a 2016-17 budget that includes $5 million for community colleges in the state to create their own ZTC degrees.

    Hal Plotkin, a longtime advocate of open education resources, or OER, says the moves could eventually save students billions of dollars. As he argued in a recent commentary, California's new ZTC program is "easily the most ambitious state-level effort to promote the use of OER in public higher education to date."

    Yet while cheering both the California and Achieving the Dream initiatives, Mr. Plotkin, a senior open-policy fellow at Creative Commons USA, argues that college leaders could and should be doing far more to promote the use of free, openly licensed materials, to prevent publishers from treating students "like walking cash registers."

    Go to the full article.

    [Sep 10, 2016] Removing a governments control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession

    Notable quotes:
    "... The euro would really do its work when crises hit, Mundell explained. Removing a government's control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession. ..."
    "... He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace ..."
    "... Mundell was also the driving force for Reagan's supply side economics. ..."
    Jun 28, 2016 | www.nakedcapitalism.com
    Pookah Harvey , June 26, 2016 at 10:21 pm

    According to investigative journalist Greg Palast; Nobel winning economist Robert Mundell, who is thought to be the father of the Euro, designed the EU to take macroeconomics away from elected politicians and forcing deregulation were part of the plan .

    The euro would really do its work when crises hit, Mundell explained. Removing a government's control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.

    "It puts monetary policy out of the reach of politicians," he said. "[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business."

    He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace

    Mundell was also the driving force for Reagan's supply side economics.

    [Sep 10, 2016] The Pitchforks Are Coming For Us Plutocrats

    Notable quotes:
    "... At the same time that people like you and me are thriving beyond the dreams of any plutocrats in history, the rest of the country-the 99.99 percent-is lagging far behind. The divide between the haves and have-nots is getting worse really, really fast. In 1980, the top 1 percent controlled about 8 percent of U.S. national income. The bottom 50 percent shared about 18 percent. Today the top 1 percent share about 20 percent; the bottom 50 percent, just 12 percent. ..."
    "... The model for us rich guys here should be Henry Ford, who realized that all his autoworkers in Michigan weren't only cheap labor to be exploited; they were consumers, too. Ford figured that if he raised their wages, to a then-exorbitant $5 a day, they'd be able to afford his Model Ts. ..."
    Aug 25, 2016 | www.politico.com

    Memo: From Nick Hanauer
    To: My Fellow Zillionaires

    You probably don't know me, but like you I am one of those .01%ers, a proud and unapologetic capitalist. I have founded, co-founded and funded more than 30 companies across a range of industries-from itsy-bitsy ones like the night club I started in my 20s to giant ones like Amazon.com, for which I was the first nonfamily investor. Then I founded aQuantive, an Internet advertising company that was sold to Microsoft in 2007 for $6.4 billion. In cash. My friends and I own a bank. I tell you all this to demonstrate that in many ways I'm no different from you. Like you, I have a broad perspective on business and capitalism. And also like you, I have been rewarded obscenely for my success, with a life that the other 99.99 percent of Americans can't even imagine. Multiple homes, my own plane, etc., etc. You know what I'm talking about. In 1992, I was selling pillows made by my family's business, Pacific Coast Feather Co., to retail stores across the country, and the Internet was a clunky novelty to which one hooked up with a loud squawk at 300 baud. But I saw pretty quickly, even back then, that many of my customers, the big department store chains, were already doomed. I knew that as soon as the Internet became fast and trustworthy enough-and that time wasn't far off-people were going to shop online like crazy. Goodbye, Caldor. And Filene's. And Borders. And on and on.

    Realizing that, seeing over the horizon a little faster than the next guy, was the strategic part of my success. The lucky part was that I had two friends, both immensely talented, who also saw a lot of potential in the web. One was a guy you've probably never heard of named Jeff Tauber, and the other was a fellow named Jeff Bezos. I was so excited by the potential of the web that I told both Jeffs that I wanted to invest in whatever they launched, big time. It just happened that the second Jeff-Bezos-called me back first to take up my investment offer. So I helped underwrite his tiny start-up bookseller. The other Jeff started a web department store called Cybershop, but at a time when trust in Internet sales was still low, it was too early for his high-end online idea; people just weren't yet ready to buy expensive goods without personally checking them out (unlike a basic commodity like books, which don't vary in quality-Bezos' great insight). Cybershop didn't make it, just another dot-com bust. Amazon did somewhat better. Now I own a very large yacht.

    But let's speak frankly to each other. I'm not the smartest guy you've ever met, or the hardest-working. I was a mediocre student. I'm not technical at all-I can't write a word of code. What sets me apart, I think, is a tolerance for risk and an intuition about what will happen in the future. Seeing where things are headed is the essence of entrepreneurship. And what do I see in our future now?

    I see pitchforks.

    At the same time that people like you and me are thriving beyond the dreams of any plutocrats in history, the rest of the country-the 99.99 percent-is lagging far behind. The divide between the haves and have-nots is getting worse really, really fast. In 1980, the top 1 percent controlled about 8 percent of U.S. national income. The bottom 50 percent shared about 18 percent. Today the top 1 percent share about 20 percent; the bottom 50 percent, just 12 percent.

    But the problem isn't that we have inequality. Some inequality is intrinsic to any high-functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day. Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution.

    Memo: From Nick Hanauer
    To: My Fellow Zillionaires

    You probably don't know me, but like you I am one of those .01%ers, a proud and unapologetic capitalist. I have founded, co-founded and funded more than 30 companies across a range of industries-from itsy-bitsy ones like the night club I started in my 20s to giant ones like Amazon.com, for which I was the first nonfamily investor. Then I founded aQuantive, an Internet advertising company that was sold to Microsoft in 2007 for $6.4 billion. In cash. My friends and I own a bank. I tell you all this to demonstrate that in many ways I'm no different from you. Like you, I have a broad perspective on business and capitalism. And also like you, I have been rewarded obscenely for my success, with a life that the other 99.99 percent of Americans can't even imagine. Multiple homes, my own plane, etc., etc. You know what I'm talking about. In 1992, I was selling pillows made by my family's business, Pacific Coast Feather Co., to retail stores across the country, and the Internet was a clunky novelty to which one hooked up with a loud squawk at 300 baud. But I saw pretty quickly, even back then, that many of my customers, the big department store chains, were already doomed. I knew that as soon as the Internet became fast and trustworthy enough-and that time wasn't far off-people were going to shop online like crazy. Goodbye, Caldor. And Filene's. And Borders. And on and on.

    Realizing that, seeing over the horizon a little faster than the next guy, was the strategic part of my success. The lucky part was that I had two friends, both immensely talented, who also saw a lot of potential in the web. One was a guy you've probably never heard of named Jeff Tauber, and the other was a fellow named Jeff Bezos. I was so excited by the potential of the web that I told both Jeffs that I wanted to invest in whatever they launched, big time. It just happened that the second Jeff-Bezos-called me back first to take up my investment offer. So I helped underwrite his tiny start-up bookseller. The other Jeff started a web department store called Cybershop, but at a time when trust in Internet sales was still low, it was too early for his high-end online idea; people just weren't yet ready to buy expensive goods without personally checking them out (unlike a basic commodity like books, which don't vary in quality-Bezos' great insight). Cybershop didn't make it, just another dot-com bust. Amazon did somewhat better. Now I own a very large yacht.

    But let's speak frankly to each other. I'm not the smartest guy you've ever met, or the hardest-working. I was a mediocre student. I'm not technical at all-I can't write a word of code. What sets me apart, I think, is a tolerance for risk and an intuition about what will happen in the future. Seeing where things are headed is the essence of entrepreneurship. And what do I see in our future now?

    I see pitchforks.

    At the same time that people like you and me are thriving beyond the dreams of any plutocrats in history, the rest of the country-the 99.99 percent-is lagging far behind. The divide between the haves and have-nots is getting worse really, really fast. In 1980, the top 1 percent controlled about 8 percent of U.S. national income. The bottom 50 percent shared about 18 percent. Today the top 1 percent share about 20 percent; the bottom 50 percent, just 12 percent.

    But the problem isn't that we have inequality. Some inequality is intrinsic to any high-functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day. Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution.

    And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won't last.

    If we don't do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn't eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It's not if, it's when.

    Many of us think we're special because "this is America." We think we're immune to the same forces that started the Arab Spring-or the French and Russian revolutions, for that matter. I know you fellow .01%ers tend to dismiss this kind of argument; I've had many of you tell me to my face I'm completely bonkers. And yes, I know there are many of you who are convinced that because you saw a poor kid with an iPhone that one time, inequality is a fiction.

    Here's what I say to you: You're living in a dream world. What everyone wants to believe is that when things reach a tipping point and go from being merely crappy for the masses to dangerous and socially destabilizing, that we're somehow going to know about that shift ahead of time. Any student of history knows that's not the way it happens. Revolutions, like bankruptcies, come gradually, and then suddenly. One day, somebody sets himself on fire, then thousands of people are in the streets, and before you know it, the country is burning. And then there's no time for us to get to the airport and jump on our Gulfstream Vs and fly to New Zealand. That's the way it always happens. If inequality keeps rising as it has been, eventually it will happen. We will not be able to predict when, and it will be terrible-for everybody. But especially for us.
    ***

    The most ironic thing about rising inequality is how completely unnecessary and self-defeating it is. If we do something about it, if we adjust our policies in the way that, say, Franklin D. Roosevelt did during the Great Depression-so that we help the 99 percent and preempt the revolutionaries and crazies, the ones with the pitchforks-that will be the best thing possible for us rich folks, too. It's not just that we'll escape with our lives; it's that we'll most certainly get even richer.

    The model for us rich guys here should be Henry Ford, who realized that all his autoworkers in Michigan weren't only cheap labor to be exploited; they were consumers, too. Ford figured that if he raised their wages, to a then-exorbitant $5 a day, they'd be able to afford his Model Ts.

    What a great idea. My suggestion to you is: Let's do it all over again. We've got to try something. These idiotic trickle-down policies are destroying my customer base. And yours too.

    It's when I realized this that I decided I had to leave my insulated world of the super-rich and get involved in politics. Not directly, by running for office or becoming one of the big-money billionaires who back candidates in an election. Instead, I wanted to try to change the conversation with ideas-by advancing what my co-author, Eric Liu, and I call "middle-out" economics. It's the long-overdue rebuttal to the trickle-down economics worldview that has become economic orthodoxy across party lines-and has so screwed the American middle class and our economy generally. Middle-out economics rejects the old misconception that an economy is a perfectly efficient, mechanistic system and embraces the much more accurate idea of an economy as a complex ecosystem made up of real people who are dependent on one another.

    Which is why the fundamental law of capitalism must be: If workers have more money, businesses have more customers. Which makes middle-class consumers, not rich businesspeople like us, the true job creators. Which means a thriving middle class is the source of American prosperity, not a consequence of it. The middle class creates us rich people, not the other way around.

    On June 19, 2013, Bloomberg published an article I wrote called "The Capitalist's Case for a $15 Minimum Wage." Forbes labeled it "Nick Hanauer's near insane" proposal. And yet, just weeks after it was published, my friend David Rolf, a Service Employees International Union organizer, roused fast-food workers to go on strike around the country for a $15 living wage. Nearly a year later, the city of Seattle passed a $15 minimum wage. And just 350 days after my article was published, Seattle Mayor Ed Murray signed that ordinance into law. How could this happen, you ask?

    It happened because we reminded the masses that they are the source of growth and prosperity, not us rich guys. We reminded them that when workers have more money, businesses have more customers-and need more employees. We reminded them that if businesses paid workers a living wage rather than poverty wages, taxpayers wouldn't have to make up the difference. And when we got done, 74 percent of likely Seattle voters in a recent poll agreed that a $15 minimum wage was a swell idea.

    The standard response in the minimum-wage debate, made by Republicans and their business backers and plenty of Democrats as well, is that raising the minimum wage costs jobs. Businesses will have to lay off workers. This argument reflects the orthodox economics that most people had in college. If you took Econ 101, then you literally were taught that if wages go up, employment must go down. The law of supply and demand and all that. That's why you've got John Boehner and other Republicans in Congress insisting that if you price employment higher, you get less of it. Really?

    The thing about us businesspeople is that we love our customers rich and our employees poor.

    Because here's an odd thing. During the past three decades, compensation for CEOs grew 127 times faster than it did for workers. Since 1950, the CEO-to-worker pay ratio has increased 1,000 percent, and that is not a typo. CEOs used to earn 30 times the median wage; now they rake in 500 times. Yet no company I know of has eliminated its senior managers, or outsourced them to China or automated their jobs. Instead, we now have more CEOs and senior executives than ever before. So, too, for financial services workers and technology workers. These folks earn multiples of the median wage, yet we somehow have more and more of them.

    The thing about us businesspeople is that we love our customers rich and our employees poor. So for as long as there has been capitalism, capitalists have said the same thing about any effort to raise wages. We've had 75 years of complaints from big business-when the minimum wage was instituted, when women had to be paid equitable amounts, when child labor laws were created. Every time the capitalists said exactly the same thing in the same way: We're all going to go bankrupt. I'll have to close. I'll have to lay everyone off. It hasn't happened. In fact, the data show that when workers are better treated, business gets better. The naysayers are just wrong.
    Most of you probably think that the $15 minimum wage in Seattle is an insane departure from rational policy that puts our economy at great risk. But in Seattle, our current minimum wage of $9.32 is already nearly 30 percent higher than the federal minimum wage. And has it ruined our economy yet? Well, trickle-downers, look at the data here: The two cities in the nation with the highest rate of job growth by small businesses are San Francisco and Seattle. Guess which cities have the highest minimum wage? San Francisco and Seattle. The fastest-growing big city in America? Seattle. Fifteen dollars isn't a risky untried policy for us. It's doubling down on the strategy that's already allowing our city to kick your city's ass.

    It makes perfect sense if you think about it: If a worker earns $7.25 an hour, which is now the national minimum wage, what proportion of that person's income do you think ends up in the cash registers of local small businesses? Hardly any. That person is paying rent, ideally going out to get subsistence groceries at Safeway, and, if really lucky, has a bus pass. But she's not going out to eat at restaurants. Not browsing for new clothes. Not buying flowers on Mother's Day.

    Is this issue more complicated than I'm making out? Of course. Are there many factors at play determining the dynamics of employment? Yup. But please, please stop insisting that if we pay low-wage workers more, unemployment will skyrocket and it will destroy the economy. It's utter nonsense. The most insidious thing about trickle-down economics isn't believing that if the rich get richer, it's good for the economy. It's believing that if the poor get richer, it's bad for the economy.

    I know that virtually all of you feel that compelling our businesses to pay workers more is somehow unfair, or is too much government interference. Most of you think that we should just let good examples like Costco or Gap lead the way. Or let the market set the price. But here's the thing. When those who set bad examples, like the owners of Wal-Mart or McDonald's, pay their workers close to the minimum wage, what they're really saying is that they'd pay even less if it weren't illegal. (Thankfully both companies have recently said they would not oppose a hike in the minimum wage.) In any large group, some people absolutely will not do the right thing. That's why our economy can only be safe and effective if it is governed by the same kinds of rules as, say, the transportation system, with its speed limits and stop signs.

    Wal-Mart is our nation's largest employer with some 1.4 million employees in the United States and more than $25 billion in pre-tax profit. So why are Wal-Mart employees the largest group of Medicaid recipients in many states? Wal-Mart could, say, pay each of its 1 million lowest-paid workers an extra $10,000 per year, raise them all out of poverty and enable them to, of all things, afford to shop at Wal-Mart. Not only would this also save us all the expense of the food stamps, Medicaid and rent assistance that they currently require, but Wal-Mart would still earn more than $15 billion pre-tax per year. Wal-Mart won't (and shouldn't) volunteer to pay its workers more than their competitors. In order for us to have an economy that works for everyone, we should compel all retailers to pay living wages-not just ask politely.

    We rich people have been falsely persuaded by our schooling and the affirmation of society, and have convinced ourselves, that we are the main job creators. It's simply not true. There can never be enough super-rich Americans to power a great economy. I earn about 1,000 times the median American annually, but I don't buy thousands of times more stuff. My family purchased three cars over the past few years, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. I bought two pairs of the fancy wool pants I am wearing as I write, what my partner Mike calls my "manager pants." I guess I could have bought 1,000 pairs. But why would I? Instead, I sock my extra money away in savings, where it doesn't do the country much good.

    So forget all that rhetoric about how America is great because of people like you and me and Steve Jobs. You know the truth even if you won't admit it: If any of us had been born in Somalia or the Congo, all we'd be is some guy standing barefoot next to a dirt road selling fruit. It's not that Somalia and Congo don't have good entrepreneurs. It's just that the best ones are selling their wares off crates by the side of the road because that's all their customers can afford.

    So why not talk about a different kind of New Deal for the American people, one that could appeal to the right as well as left-to libertarians as well as liberals? First, I'd ask my Republican friends to get real about reducing the size of government. Yes, yes and yes, you guys are all correct: The federal government is too big in some ways. But no way can you cut government substantially, not the way things are now. Ronald Reagan and George W. Bush each had eight years to do it, and they failed miserably.

    Republicans and Democrats in Congress can't shrink government with wishful thinking. The only way to slash government for real is to go back to basic economic principles: You have to reduce the demand for government. If people are getting $15 an hour or more, they don't need food stamps. They don't need rent assistance. They don't need you and me to pay for their medical care. If the consumer middle class is back, buying and shopping, then it stands to reason you won't need as large a welfare state. And at the same time, revenues from payroll and sales taxes would rise, reducing the deficit.

    This is, in other words, an economic approach that can unite left and right. Perhaps that's one reason the right is beginning, inexorably, to wake up to this reality as well. Even Republicans as diverse as Mitt Romney and Rick Santorum recently came out in favor of raising the minimum wage, in defiance of the Republicans in Congress.

    ***

    One thing we can agree on-I'm sure of this-is that the change isn't going to start in Washington. Thinking is stale, arguments even more so. On both sides.

    But the way I see it, that's all right. Most major social movements have seen their earliest victories at the state and municipal levels. The fight over the eight-hour workday, which ended in Washington, D.C., in 1938, began in places like Illinois and Massachusetts in the late 1800s. The movement for social security began in California in the 1930s. Even the Affordable Health Care Act-Obamacare-would have been hard to imagine without Mitt Romney's model in Massachusetts to lead the way.

    Sadly, no Republicans and few Democrats get this. President Obama doesn't seem to either, though his heart is in the right place. In his State of the Union speech this year, he mentioned the need for a higher minimum wage but failed to make the case that less inequality and a renewed middle class would promote faster economic growth. Instead, the arguments we hear from most Democrats are the same old social-justice claims. The only reason to help workers is because we feel sorry for them. These fairness arguments feed right into every stereotype of Obama and the Democrats as bleeding hearts. Republicans say growth. Democrats say fairness-and lose every time.

    But just because the two parties in Washington haven't figured it out yet doesn't mean we rich folks can just keep going. The conversation is already changing, even if the billionaires aren't onto it. I know what you think: You think that Occupy Wall Street and all the other capitalism-is-the-problem protesters disappeared without a trace. But that's not true. Of course, it's hard to get people to sleep in a park in the cause of social justice. But the protests we had in the wake of the 2008 financial crisis really did help to change the debate in this country from death panels and debt ceilings to inequality.

    It's just that so many of you plutocrats didn't get the message.

    Dear 1%ers, many of our fellow citizens are starting to believe that capitalism itself is the problem. I disagree, and I'm sure you do too. Capitalism, when well managed, is the greatest social technology ever invented to create prosperity in human societies. But capitalism left unchecked tends toward concentration and collapse. It can be managed either to benefit the few in the near term or the many in the long term. The work of democracies is to bend it to the latter. That is why investments in the middle class work. And tax breaks for rich people like us don't. Balancing the power of workers and billionaires by raising the minimum wage isn't bad for capitalism. It's an indispensable tool smart capitalists use to make capitalism stable and sustainable. And no one has a bigger stake in that than zillionaires like us.

    The oldest and most important conflict in human societies is the battle over the concentration of wealth and power. The folks like us at the top have always told those at the bottom that our respective positions are righteous and good for all. Historically, we called that divine right. Today we have trickle-down economics.

    What nonsense this is. Am I really such a superior person? Do I belong at the center of the moral as well as economic universe? Do you?

    My family, the Hanauers, started in Germany selling feathers and pillows. They got chased out of Germany by Hitler and ended up in Seattle owning another pillow company. Three generations later, I benefited from that. Then I got as lucky as a person could possibly get in the Internet age by having a buddy in Seattle named Bezos. I look at the average Joe on the street, and I say, "There but for the grace of Jeff go I." Even the best of us, in the worst of circumstances, are barefoot, standing by a dirt road, selling fruit. We should never forget that, or forget that the United States of America and its middle class made us, rather than the other way around.

    Or we could sit back, do nothing, enjoy our yachts. And wait for the pitchforks.

    [Sep 09, 2016] Michael Greenberger: Setting the Stage For the Next Wall Street Crisis

    Financial oligarchy rule is now indisputable and subservience of politicians in congress and administration is close to absolute. Financial oligarchy is the dominant power under neoliberalism. No question about it. As Andrew Mellon (US Treasury Secretary, 1921 to 1932) used to say "Strong men have sound ideas, and the force to make these ideas effective." Making Al Capone famous quote more modern, "You can get more with a kind word and money than you can with a kind word alone."
    Notable quotes:
    "... I think that as Greenberger points out, once we were able to see Obama's early financial appointments, we knew that we had been had, once again. Despite his soaring rhetoric for change, he was a loyal member of the Wall Street wing. ..."
    "... Obama and the Wall Street wing of the Democratic party, founded by the Clintons, is a brand , cobbled together and groomed for office by the moneyed interests, designed to misdirect and diffuse the angry reaction for reform by the people in the aftermath of the financial crisis. And it was a job well done. ..."
    "... I strongly believe that Hillary has been and still remains a product of Wall Street money, and will continue to follow the money once in office no matter what rhetoric she may wear during any political campaign. ..."
    Feb 10, 2015 | Jesse's Café Américain

    Michael Greenberger has long been one of my favorite commenters on regulation, and in particular on futures price manipulation.

    Within the context of the uphill battle against the status quo, Gary Gensler and Bart Chilton may have looked 'good' as regulators, but all in all they looked better only by comparison with some very horrible alternatives. Chilton, as you may recall, did not waste much time going through the revolving door to put on the feedbag from the HFT crowd.

    I think that as Greenberger points out, once we were able to see Obama's early financial appointments, we knew that we had been had, once again. Despite his soaring rhetoric for change, he was a loyal member of the Wall Street wing.

    Obama and the Wall Street wing of the Democratic party, founded by the Clintons, is a brand, cobbled together and groomed for office by the moneyed interests, designed to misdirect and diffuse the angry reaction for reform by the people in the aftermath of the financial crisis. And it was a job well done.

    No matter what she says, no matter what promises she may make, no matter what identity branding they may choose to spin for her, I strongly believe that Hillary has been and still remains a product of Wall Street money, and will continue to follow the money once in office no matter what rhetoric she may wear during any political campaign.

    Further, the only major difference between the parties now is that the Republicans have sold out wholesale to the moneyed interests, whereas the Dems have been doing it one despicable betrayal at a time. They merely wear different masks. Money conquers all with this venal brood of vipers.

    Financial reform comes with political campaign money reform. The two are inseparable.


    Posted by Jesse at 1:24 PM

    [Sep 09, 2016] Dollar strength affects china oil consumption

    Notable quotes:
    "... I think this *might* be true if one disregards the fact that China has already negotiated major energy deals, including oil, that are settled in yuan and not dollars. ..."
    Aug 14, 2015 | Economist's View
    anne said...
    http://www.cepr.net/blogs/beat-the-press/because-oil-is-priced-in-euros-china-will-buy-less-oil-now-that-the-value-of-the-yuan-has-fallen

    August 13, 2015

    Because Oil Is Priced in Euros, China Will Buy Less Oil Now That the Value of the Yuan Has Fallen

    Yes, I know, oil is priced in dollars, not euros, but it doesn't make one iota of difference. In an article on the meaning of the drop in the value of the yuan on people in the United States, USA Today told readers: *

    "China, the world's second largest economy, consumes a lot of oil, second only to the U.S. However, oil prices are denominated in dollars, so a gutted yuan means China's purchasing power is reduced, which could prompt the Chinese to spend less on oil-based products. That reduction in demand could lower prices, an upside for American drivers."

    Everything in this paragraph would be equally true if oil was priced in euros. The Chinese currency is now worth less measured in dollars, euros, yen, or oil. The loss of purchasing power will lead China to buy less of everything that is produced abroad, including oil. The fact that oil is priced in dollars matters not at all.

    As a practical matter, anyone hoping to get super cheap gas due to less demand from China is likely to be disappointed. If we assume that the 2 percent drop in the value of the yuan leads to 2 percent higher gas prices in China, and we assume an elasticity of demand of 0.3, then China's gas consumption will fall by roughly 0.6 percent as a result of the devaluation. This almost certainly has less impact on the demand for gas than even a one-year reduction in China's growth rate by 2 percentage points. If the devaluation and other stimulatory policies speed growth in China, then we may see increased rather than decreased demand for oil from China.

    The piece also gets the story of U.S. companies manufacturing in China somewhat confused. It tells readers:

    "Many U.S. companies do a considerable amount of their business abroad, either selling directly to Chinese consumers, manufacturing or via overseas units that produce income in the local currency. Apple, for example, relies on China to make its iPhone and iPad. A stronger dollar compared to the yuan means any income generated in China loses value as it is repatriated back to America."

    Actually the impact is the opposite. The lower valued yuan increases the profits from manufacturing in China rather than the United States. Apple will likely still sell its iPhones and iPads at the same price in the United States and other countries, even though it now costs them less money to manufacture them because of the lower price of the yuan. This means greater profits.

    This is an important point because the issue of currency values is often presented as one pitting the United States against China. That is not accurate. Many companies that manufacture in China or rely on importing low cost goods produced in China, like Walmart, have a real stake in keeping down the value of the yuan against the dollar. These powerful interests are a main reason that the United States has not made raising the value of the yuan a top priority in trade negotiations with China.

    If it really was the case that the United States government considered it a top priority to raise the value of the yuan against the dollar, and was prepared to make concessions in other areas, like enforcement of Microsoft's copyrights and Pfizer's patents, then China would almost certainly have agreed to raise the value of the yuan by more than it has.

    * http://www.usatoday.com/story/money/business/2015/08/12/yuan-and-you-how-chinas-devalued-currency-affects-us-consumers/31524925/

    -- Dean Baker

    Jesse said in reply to anne...

    I think this *might* be true if one disregards the fact that China has already negotiated major energy deals, including oil, that are settled in yuan and not dollars.

    I posted this same comment at Dean's site when he first wrote this.

    Am I the only one who is watching China closely? There are some very big changes in the world economy underway, particularly with regard to the long standing Bretton Woods II agreement as some have called it, and few are noticing them.

    anne said in reply to Jesse...

    I think this *might* be true if one disregards the fact that China has already negotiated major energy deals, including oil, that are settled in yuan and not dollars.

    [ Right, right, China has negotiated a range of important long term oil and gas, and delivery, agreements this year. ]

    [Sep 09, 2016] Brexit and Americas Growing Nationalism Movement

    Looks like now line in 1920th the global pendulum moves toward nationalism. So in a way neoliberalism breeds nationalism and transnational elite paves the way for dictators like Mussolini, Hitler and Stalin in the past. Transnational elites start to recognize the danger, but they can do nothing about it as Trump has shown so vividly in the USA.
    High unemployment logically lead to nationalism and all those neoliberal politicians understood that they are destroying the county but continue to plunder it anyway. Biden already cried uncle about the danger of far right nationalism on CNN. But reality in the USA is not then different from the reality in Britain.
    Notable quotes:
    "... No wonder Donald Trump's campaign has ignited a growing nationalism movement. We're creating jobs and giving them away. We've let globalization get away from us. It's abundantly clear that we don't have the right public policies in place to incentivize corporations to keep Americans gainfully employed. ..."
    "... Grove's bold piece was embraced by some, panned by others and largely ignored. Whether he or Trump have exactly the right solution to the globalization and immigration problems plaguing free-market economies throughout the western world doesn't matter. What matters is that they've identified a problem that needs to be solved before it's too late. So did the British people when they voted to exit the EU. ..."
    "... Economic prosperity and security must trump political correctness and ideology. The Brits got it right. Will we? ..."
    Jul 04, 2016 | Fox Business
    Just five weeks ago, polling indicated that Brits overwhelmingly favored remaining in the European Union by an 18-point margin, 57% to 39%. What changed? Maybe it was a startling report showing that 80% of new jobs over the past year had gone to foreign-born workers taking advantage of the EU's free movement policy.

    It's hard to say if that was the wakeup call that led to a sharp reversal and Thursday's historic vote to leave the EU, but it was nevertheless a stunning realization that Prime Minister David Cameron had failed to stem the tide of immigrant workers flooding the UK's job market, as he had promised to do.

    Meanwhile, a laundry list of commentators from the Washington Post and Esquire to Vox and the New York Times chalked it all up to millions of racist xenophobes who are terrified of immigrants mucking up their pristine white privileged world. If that sounds at all similar to the anti-Trump rhetoric, you can sort of see where this is going.

    The thing is, there's nothing even remotely irrational or bigoted about the alarming transformation of Britain's job market. Since 1997, the number of foreign-born workers has doubled to one in six. And since 2014, three EU migrants have found jobs for every Brit, according to official government figures. And, as we'll see in a minute, there are concerning parallels on this side of the pond, as well.

    I hear from college grads and experienced professionals looking for jobs all the time, but a recent inquiry from a 27-year-old Edinburgh, Scotland woman with a BS in microbiology and excellent grades got my attention. She has applied for more than 400 jobs without managing to secure an interview. Not a single one.

    ... ... ...

    While the situation in America isn't nearly as bad, there are clear parallels. In 1970, foreign-born workers accounted for just 5% of the U.S. civilian labor force, but that number has since more than tripled to one in six – identical to the UK figure.

    More concerning is that the workforce itself has continued to shrink over the same period. Whether that reflects increasing competition, lack of in-demand skillsets or both doesn't really matter. The net result is that foreigners are getting more of our jobs, and that's as true of offshore jobs as it is of onshore jobs.

    Think about it. Apple has created well over a million jobs, but 90% of them are outsourced to China. Google may not make phones and tablets, but the vast majority of Android-enabled mobile devices are manufactured in Asia. Of course, that's true of nearly every industry, old or new.

    We may not face the identical migrant worker problem that the UK has, but the net result is the same: By giving up more and more jobs we create to foreign-born immigrants and offshore contractors, that leaves fewer and fewer jobs and increasing competition for American citizens.

    No wonder Donald Trump's campaign has ignited a growing nationalism movement. We're creating jobs and giving them away. We've let globalization get away from us. It's abundantly clear that we don't have the right public policies in place to incentivize corporations to keep Americans gainfully employed.

    Back in 2010, former Intel chairman Andy Grove penned How America Can Create Jobs. The front-page Bloomberg BusinessWeek feature clearly outlined the perils of losing our manufacturing muscle and declared the need for public policy that puts jobs first, even if it does means constraining free trade with tariffs, trade war be damned.

    Grove's bold piece was embraced by some, panned by others and largely ignored. Whether he or Trump have exactly the right solution to the globalization and immigration problems plaguing free-market economies throughout the western world doesn't matter. What matters is that they've identified a problem that needs to be solved before it's too late. So did the British people when they voted to exit the EU.

    Economic prosperity and security must trump political correctness and ideology. The Brits got it right. Will we?

    [Sep 05, 2016] Trump predicts landslide support from black voters if he gets to seek a second term as president

    [Dec 05, 2016] | latimes.com

    "You're living in poverty, your schools are no good, you have no jobs, 58% of your youth is unemployed. What the hell do you have to lose" by voting for Trump? the candidate asked. "At the end of four years, I guarantee I will get over 95% of the African American vote."

    The statement – highly unlikely given how poorly Republicans fare among black voters – continues a theme the GOP presidential nominee has pounded this week as he courted African American voters. He said Democrats take black voters for granted and have ignored their needs while governing cities with large African American populations.

    "America must reject the bigotry of Hillary Clinton, who sees communities of color only as votes, not as human beings worthy of a better future," he said of his Democratic opponent.

    ... ... ...

    Trump argued that Democratic presidential nominee Hillary Clinton's policies on issues such as immigration and refugee resettlement harm African Americans.

    [Sep 05, 2016] The power of neoliberal brainwashing and indoctrination of population via MSM, schools and universities.

    [Dec 05, 2016] | economistsview.typepad.com

    nikbez: August 28, 2016 at 10:06 AM

    That's simply naïve:

    === quote ===
    It has recently become commonplace to argue that globalization can leave people behind, and that this can have severe political consequences. Since 23 June, this has even become conventional wisdom. While I welcome this belated acceptance of the blindingly obvious, I can't but help feeling a little frustrated, since this has been self-evident for many years now. What we are seeing, in part, is what happens to conventional wisdom when, all of a sudden, it finds that it can no longer dismiss as irrelevant something that had been staring it in the face for a long time.
    === end of quote ==

    This is not about "conventional wisdom". This is about the power of neoliberal propaganda, the power of brainwashing and indoctrination of population via MSM, schools and universities.

    And "all of a sudden, it finds that it can no longer dismiss as irrelevant something that had been staring it in the face for a long time." also has nothing to do with conventional wisdom.

    This is about the crisis of neoliberal ideology and especially Trotskyism part of it (neoliberalism can be viewed as Trotskyism for the rich). The following integral elements of this ideology no longer work well and are starting to cause the backlash:

    1. High level of inequality as the explicit, desirable goal (which raises the productivity). "Greed is good" or "Trickle down economics" -- redistribution of wealth up will create (via higher productivity) enough scrapes for the lower classes, lifting all boats.

    2. "Neoliberal rationality" when everything is a commodity that should be traded at specific market. Human beings also are viewed as market actors with every field of activity seen as a specialized market. Every entity (public or private, person, business, state) should be governed as a firm. "Neoliberalism construes even non-wealth generating spheres-such as learning, dating, or exercising-in market terms, submits them to market metrics, and governs them with market techniques and practices." People are just " human capital" who must constantly tend to their own present and future market value.

    3. Extreme financialization or converting the economy into "casino capitalism" (under neoliberalism everything is a marketable good, that is traded on explicit or implicit exchanges.

    4. The idea of the global, USA dominated neoliberal empire and related "Permanent war for permanent peace" -- wars for enlarging global neoliberal empire via crushing non-compliant regimes either via color revolutions or via open military intervention.

    5. Downgrading ordinary people to the role of commodity and creating three classes of citizens (moochers, or Untermensch, "creative class" and top 0.1%), with the upper class (0.1% or "Masters of the Universe") being above the law like the top level of "nomenklatura" was in the USSR.

    6. "Downsizing" sovereignty of nations via international treaties like TPP, and making transnational corporations the key political players, "the deciders" as W aptly said. Who decide about level of immigration flows, minimal wages, tariffs, and other matters that previously were prerogative of the state.

    So after 36 (or more) years of dominance (which started with triumphal march of neoliberalism in early 90th) the ideology entered "zombie state". That does not make it less dangerous but its power over minds of the population started to evaporate. Far right ideologies now are filling the vacuum, as with the discreditation of socialist ideology and decimation of "enlightened corporatism" of the New Deal in the USA there is no other viable alternatives.

    The same happened in late 1960th with the Communist ideology. It took 20 years for the USSR to crash after that with the resulting splash of nationalism (which was the force that blow up the USSR) and far right ideologies.

    It remains to be seen whether the neoliberal US elite will fare better then Soviet nomenklatura as challenges facing the USA are now far greater then challenges which the USSR faced at the time. Among them is oil depletion which might be the final nail into the coffin of neoliberalism and, specifically, the neoliberal globalization.

    [Sep 04, 2016] Neoliberalism is every bit the wellspring of neofascism

    Notable quotes:
    "... It is fascinating that younger US neoliberals (e.g. Matthew Yglesias) are totally sold on the the positives of 'metrics', statistics, testing, etc, to the point where they ignore all the negatives of those approaches, but absolutely and utterly loathe being tracked, having the performance of their preferred policies and predictions analyzed, and called out on the failures thereof. Is sure seems to me that the campaign to quash the use of the US, Charles Peters version of neoliberal is part of the effort to avoid accountability for their actions. ..."
    "... If "conservative" is to be a third way to the opposition of "reactionary" and "revolutionary", the "liberals" are a species of conservative - like all conservatives, seeking to preserve the existing order as far as this is possible, but appealing to reason, reason's high principles, and a practical politics of incremental reform and "inevitable" progress. The liberals disguise their affection for social and political hierarchy as a preference for "meritocracy" and place their faith in the powers of Reason and Science to discover Truth. ..."
    "... Liberalism adopts nationalism as a vehicle for popular mobilization which conservatives can share and as an ideal of governance, the self-governing democratic nation-state with a liberal constitution. ..."
    "... It wasn't Liberalism Triumphant that faced a challenge from fascism; it was the abject failures of Liberalism that created fascism. ..."
    "... he Liberal projects to create liberal democratic nation-states ran aground in Germany, Austria-Hungary and Russia between 1870 and 1910 and instead of gradual reform of the old order, Europe experienced catastrophic collapse, and Liberalism was ill-prepared to devise working governments and politics in the crisis that followed. ..."
    "... What is called neoliberalism in American politics has a lot to do with New Deal liberalism running out of steam and simply not having a program after 1970. Some of that is circumstantial in a way - the first Oil Crisis, the breakup of Bretton Woods - but even those circumstances were arguably results of the earlier program's success. ..."
    Sep 04, 2016 | crookedtimber.org

    Cranky Observer 09.03.16 at 6:28 pm

    = = = I am actually honestly suggesting an intellectual exercise which, I think, might be worth your (extremely valuable) time. I propose you rewrite this post without using the word "neoliberalism" (or a synonym). = = =

    It is fascinating that younger US neoliberals (e.g. Matthew Yglesias) are totally sold on the the positives of 'metrics', statistics, testing, etc, to the point where they ignore all the negatives of those approaches, but absolutely and utterly loathe being tracked, having the performance of their preferred policies and predictions analyzed, and called out on the failures thereof. Is sure seems to me that the campaign to quash the use of the US, Charles Peters version of neoliberal is part of the effort to avoid accountability for their actions.

    bruce wilder 09.03.16 at 7:47 pm
    In the politics of antonyms, I suppose we are always going get ourselves confused.

    Perhaps because of American usage of the root, liberal, to mean the mildly social democratic New Deal liberal Democrat, with its traces of American Populism and American Progressivism, we seem to want "liberal" to designate an ideology of the left, or at least, the centre-left. Maybe, it is the tendency of historical liberals to embrace idealistic high principles in their contest with reactionary claims for hereditary aristocracy and arbitrary authority.

    If "conservative" is to be a third way to the opposition of "reactionary" and "revolutionary", the "liberals" are a species of conservative - like all conservatives, seeking to preserve the existing order as far as this is possible, but appealing to reason, reason's high principles, and a practical politics of incremental reform and "inevitable" progress. The liberals disguise their affection for social and political hierarchy as a preference for "meritocracy" and place their faith in the powers of Reason and Science to discover Truth.

    All of that is by way of preface to a thumbnail history of modern political ideology different from the one presented by Will G-R.

    Modern political ideology is a by-product of the Enlightenment and the resulting imperative to find a basis and purpose for political Authority in Reason, and apply Reason to the design of political and social institutions.

    Liberalism doesn't so much defeat conservatism as invent conservatism as an alternative to purely reactionary politics. The notion of an "inevitable progress" allows liberals to reconcile both themselves and their reactionary opponents to practical reality with incremental reform. Political paranoia and rhetoric are turned toward thinking about constitutional design.

    Mobilizing mass support and channeling popular discontents is a source of deep ambivalence and risk for liberals and liberalism. Popular democracy can quickly become noisy and vulgar, the proliferation of ideas and conflicting interests paralyzing. Inventing a conservatism that competes with the liberals, but also mobilizes mass support and channels popular discontent, puts bounds on "normal" politics.

    Liberalism adopts nationalism as a vehicle for popular mobilization which conservatives can share and as an ideal of governance, the self-governing democratic nation-state with a liberal constitution.

    I would put the challenges to liberalism from the left and right well behind in precedence the critical failures and near-failures of liberalism in actual governance.

    Liberalism failed abjectly to bring about a constitutional monarchy in France during the first decade of the French Revolution, or a functioning deliberative assembly or religious toleration or even to resolve the problems of state finance and legal administration that destroyed the ancient regime. In the end, the solution was found in Napoleon Bonaparte, a precedent that would arguably inspire the fascism of dictators and vulgar nationalism, beginning with Napoleon's nephew fifty years later.

    It wasn't Liberalism Triumphant that faced a challenge from fascism; it was the abject failures of Liberalism that created fascism. And, this was especially true in the wake of World War I, which many have argued persuasively was Liberalism's greatest and most catastrophic failure. T he Liberal projects to create liberal democratic nation-states ran aground in Germany, Austria-Hungary and Russia between 1870 and 1910 and instead of gradual reform of the old order, Europe experienced catastrophic collapse, and Liberalism was ill-prepared to devise working governments and politics in the crisis that followed.

    If liberals invented conservatism, it seems to me that would-be socialists were at pains to re-invent liberalism, and they did it several times going in radically different directions, but always from a base in the basic liberal idea of rationalizing authority. A significant thread in socialism adopted incremental progress and socialist ideas became liberal and conservative means for taming popular discontent in an increasingly urban society.

    Where and when liberalism actually was triumphant, both the range of liberal views and the range of interests presenting a liberal front became too broad for a stable politics. Think about the Liberal Party landslide of 1906, which eventually gave rise to the Labour Party in its role of Left Party in the British two-party system. Or FDR's landslide in 1936, which played a pivotal role in the march of the Southern Democrats to the Right. Or the emergence of the Liberal Consensus in American politics in the late 1950s.

    What is called neoliberalism in American politics has a lot to do with New Deal liberalism running out of steam and simply not having a program after 1970. Some of that is circumstantial in a way - the first Oil Crisis, the breakup of Bretton Woods - but even those circumstances were arguably results of the earlier program's success.

    It is almost a rote reaction to talk about the Republican's Southern Strategy, but they didn't invent the crime wave that enveloped the country in the late 1960s or the riots that followed the enactment of Civil Rights legislation.

    Will G-R's "As soon [as] liberalism feels it can plausibly claim to have . . .overcome the socialist and fascist challenges [liberals] are empowered to act as if liberalism's adaptive response to the socialist and fascist challenges was never necessary in the first place - bye bye welfare state, hello neoliberalism" doesn't seem to me to concede enough to Clinton and Blair entrepreneurially inventing a popular politics in response to Reagan and Thatcher, after the actual failures of an older model of social democratic programs and populist politics on its behalf.

    Rich Puchalsky 09.03.16 at 11:09 pm
    I write more about this over at my blog (in a somewhat different context).
    John Quiggin 09.04.16 at 6:57 am
    RW @113 I wrote a whole book using "market liberalism" instead of "neoliberalism", since I wanted a term more neutral and less pejorative. So, going back to "neoliberalism" was something I did advisedly. You say
    The word is abstract and has completely different meanings west and east of the Atlantic. In the USA it refers to weak tea center leftisms. In Europe to hard core liberalism.
    Well, yes. That's precisely why I've used the term, introduced the hard/soft distinction and explained the history. The core point is that, despite their differences soft (US meaning) and hard (European meaning) neoliberalism share crucial aspects of their history, theoretical foundations and policy implications.
    likbez 09.04.16 at 4:18 pm
    I would say that neoliberalism is closer to market fundamentalism, then market liberalism. See, for example:
    http://www.softpanorama.org/Skeptics/Political_skeptic/Neoliberalism/Articles/definitions_of_neoliberalism.shtml

    === quote ===
    Neoliberalism is an ideology of market fundamentalism based on deception that promotes "markets" as a universal solution for all human problems in order to hide establishment of neo-fascist regime (pioneered by Pinochet in Chile), where militarized government functions are limited to external aggression and suppression of population within the country (often via establishing National Security State using "terrorists" threat) and corporations are the only "first class" political players. Like in classic corporatism, corporations are above the law and can rule the country as they see fit, using political parties for the legitimatization of the regime.

    The key difference with classic fascism is that instead of political dominance of the corporations of particular nation, those corporations are now transnational and states, including the USA are just enforcers of the will of transnational corporations on the population. Economic or "soft" methods of enforcement such as debt slavery and control of employment are preferred to brute force enforcement. At the same time police is militarized and due to technological achievements the level of surveillance surpasses the level achieved in Eastern Germany.

    Like with bolshevism in the USSR before, high, almost always hysterical, level of neoliberal propaganda and scapegoating of "enemies" as well as the concept of "permanent war for permanent peace" are used to suppress the protest against the wealth redistribution up (which is the key principle of neoliberalism) and to decimate organized labor.

    Multiple definitions of neoliberalism were proposed. Three major attempts to define this social system were made:

    1. Definitions stemming from the concept of "casino capitalism"
    2. Definitions stemming from the concept of Washington consensus
    3. Definitions stemming from the idea that Neoliberalism is Trotskyism for the rich. This idea has two major variations:
      • Definitions stemming from Professor Wendy Brown's concept of Neoliberal rationality which developed the concept of Inverted Totalitarism of Sheldon Wolin
      • Definitions stemming Professor Sheldon Wolin's older concept of Inverted Totalitarism - "the heavy statism forging the novel fusions of economic with political power that he took to be poisoning democracy at its root." (Sheldon Wolin and Inverted Totalitarianism Common Dreams )

    The first two are the most popular.

    likbez 09.04.16 at 5:03 pm

    bruce,

    @117

    Thanks for your post. It contains several important ideas:

    "It wasn't Liberalism Triumphant that faced a challenge from fascism; it was the abject failures of Liberalism that created fascism."

    "What is called neoliberalism in American politics has a lot to do with New Deal liberalism running out of steam and simply not having a program after 1970. Some of that is circumstantial in a way - the first Oil Crisis, the breakup of Bretton Woods - but even those circumstances were arguably results of the earlier program's success."

    Moreover as Will G-R noted:

    "neoliberalism will be every bit the wellspring of fascism that old-school liberalism was."

    Failure of neoliberalism revives neofascist, far right movements. That's what the rise of far right movements in Europe now demonstrates pretty vividly.

    [Sep 03, 2016] September 2, 2016 at 3:34 pm

    Notable quotes:
    "... The article on the difficulty of taking over the Democratic Party hits the nail on the head, but it misses the Michels-ian problem: organizations have a tendency (but not this is a tendency, not a rule or fate) towards increasing oligarchy over time, and organizational members are socialized to trust and obey party leadership. ..."
    "... if you and a faction entered and created a "Destroy the Dems" faction you'd be ignored or hunted out of the party, especially if you pointedly attacked the Dems oligarchy and were openly hostile to their officials, platform and the president – though I would argue you'd need exactly a "Destroy the Dems" faction to succeed in smashing the party oligarchy and changing the culture. ..."
    "... Lack of democracy is a persistent theme in studies of parties for the last century. ..."
    Sep 03, 2016 | www.nakedcapitalism.com

    The article on the difficulty of taking over the Democratic Party hits the nail on the head, but it misses the Michels-ian problem: organizations have a tendency (but not this is a tendency, not a rule or fate) towards increasing oligarchy over time, and organizational members are socialized to trust and obey party leadership. Factional dissidents within the Dems have to contend not only with the party oligarchy and its formidable resources, the decentralized and sprawling nature of the organization, but with a membership that barely participates but, when it does, turns out when and how the leadership wants.

    The Militant Labour tendency example isn't perfect – entryism into a Parliamentary party is easier than our party system – but it speaks volumes. To get a hearing from the party membership you can only criticize so much of the organization itself; if you and a faction entered and created a "Destroy the Dems" faction you'd be ignored or hunted out of the party, especially if you pointedly attacked the Dems oligarchy and were openly hostile to their officials, platform and the president – though I would argue you'd need exactly a "Destroy the Dems" faction to succeed in smashing the party oligarchy and changing the culture.

    Keep in mind I do say this as a Green and a person who did his PhD on inner-party democracy (or lack thereof). Lack of democracy is a persistent theme in studies of parties for the last century.

    It would make more sense to really unite the left around electoral reform in the long run and push for proportional representation at the state/local level for legislatures and city councils. While it would probably be preferable for democracy's sake to have one big district elected with an open-list vote, in the US context we'd probably go the German route of mixed-member proportional that combines geographical single-member districts with proportional voting.

    [Sep 02, 2016] The same morons that gave us "lean manufacturing" have also given us "lean logistics".

    Sep 02, 2016 | www.nakedcapitalism.com
    Paid Minion , September 2, 2016 at 3:04 pm

    The same morons that gave us "lean manufacturing" have also given us "lean logistics".

    Redundancy is "money left on the table". Excess capacity in case of Black Swans and "Plan Bs"are a big waste of money. Any law that forces you to incorporate some redundancy (in spite of yourself) is "excess regulation"

    Of course, costs must be reduced and corners must be cut, when you are competing against bankster returns of 5-6%, with any losses made good by Uncle Sugar

    GF , September 2, 2016 at 4:12 pm

    Hanjin Shipping fiasco

    Since each modern container ship holds between 3,000 and 14,000 shipping containers, 98 ships stranded with cargo is a lot of freight. S. Korea should probably think twice about not bailing them out (unless all the cargo is from China and they want to do some damage??)

    geoff , September 2, 2016 at 4:58 pm

    Re the Hanjin bankruptcy, the "2.9% of world shipping trade" figure understates Hanjin's overall share in the market that matters most to US retailers and consumers: the transpacific trade, where Hanjin handles 7.8% of the volume per Forbes.

    http://fortune.com/2016/09/02/hanjin-shipping-ports-us-firms/

    So at the very least, we're looking at a significant reduction in already falling (US) intermodal rail traffic, and quite possibly a small reduction in the trade deficit as imports are reduced. Hanjin's bankruptcy also could not possibly have come at a worse time, as Sept./ Oct. is traditionally "peak season" for US imports ahead of the holiday retail season, which will probably also take a hit.

    Personally, I'm shocked that a carrier as large and dominant as Hanjin could go under.

    [Sep 01, 2016] Demand-Driven University Delivers Pay Dirt for Vice-Chancellors

    Notable quotes:
    "... By Leith van Onselen is an economist and has previously worked at the Australian Treasury, Victorian Treasury, and Goldman Sachs. Originally published at MacroBusiness . ..."
    "... The Australian ..."
    Sep 01, 2016 | www.nakedcapitalism.com

    Posted on September 1, 2016

    Lambert here: It looks like the United States isn't the only country to have credentialism and corruption problems in its universities; or too few jobs chasing too much student debt.

    By Leith van Onselen is an economist and has previously worked at the Australian Treasury, Victorian Treasury, and Goldman Sachs. Originally published at MacroBusiness .

    I have complained previously that Australia's universities have turned into 'degree factories', whereby they teach as many students as possible to accumulate Commonwealth government funding through HELP/HECS debts. At the same time, quality of teaching, and students' ability to secure subsequent employment, remain distant priorities.

    This view is evidenced by the escalation of total outstanding HELP loans, much of which will never be repaid, putting increasing pressures on the federal Budget:

    ... ... ...

    There is, however, one segment of society that has benefited greatly from the uncapping of university places in 2009, which led to a $2.8 billion taxpayer-funded bonanza for universities: vice chancellors. As reported in The Australian earlier this week ( here and here ), vice chancellors have seen their salaries balloon since the demand-driven university system was implemented, with nine now earning more than $1 million per year:

    Nine vice-chancellors earned more than $1 million each last year, with University of Sydney chief Michael Spence topping the list with a salary package of $1,385,000. [Dr Spence's] salary package has increased by more than 60 per cent since 2010 when he earned $849,000

    Jay , September 1, 2016 at 11:54 am

    In a classic university setting, the point of getting an education . . . is to become educated. Employment prospects are incidental, as it is assumed that someone who has the capability and perseverance to attain a degree has learned *how* to learn, how to negotiate the tricky choices of young adulthood, and how to survive the many perils of academia, would be a good employment prospect.

    Fred , September 1, 2016 at 12:36 pm

    'degree factories' Hah. In Michigan we have "dropout" factories that accomplish the same objectives – full employment at high wages for executives and administrators of said universities. As you say "Nice work if you can get it!" Better have a phd and connections though .

    [Sep 01, 2016] The scholarly publishing world has become quite a racket.

    Notable quotes:
    "... The scholarly publishing world has become quite a racket. I work at a small community college and our monograph budget has been eaten away over the years due to the high & continually increasing costs of subscriptions to academic journals, trade and general magazines. ..."
    "... In 2015, Elsevier reported a profit margin of approximately 37% on revenues of £2.070 billion. ..."
    "... I'm sensing a resurgence of the conversation, what with trade pacts and digital rights and whatnot. How can an abstraction have wants? Information may be very cheap to reproduce but takes energy to maintain. ..."
    Sep 01, 2016 | www.nakedcapitalism.com
    Cynthia , September 1, 2016 at 2:20 am

    As a librarian in Canada, I can tell you that my profession has long advocated for open access to scholarly research. There are many institutions with policies that ask or expect their faculty to publish in open access journal or institutional repositories. https://en.m.wikipedia.org/wiki/Open_access

    The scholarly publishing world has become quite a racket. I work at a small community college and our monograph budget has been eaten away over the years due to the high & continually increasing costs of subscriptions to academic journals, trade and general magazines.

    It is crazy that libraries in public institutions are paying so much money to access research funded wholy or in part by themselves or other public institutions. Advocating for open access and advising faculty about their options and advocating that they not give away copyright to big publishers like Wiley and Elsevier is part of what many academic librarians do these days.

    Jim Haygood , August 31, 2016 at 8:05 pm

    Upload a paper, starve an Elsevier:

    In 2015, Elsevier reported a profit margin of approximately 37% on revenues of £2.070 billion.

    https://en.wikipedia.org/wiki/Elsevier

    "Knowledge wants to be free."

    Cynthia , September 1, 2016 at 2:26 am

    The phrase is "Information wants to be free". Here's an interesting origin story: https://backchannel.com/the-definitive-story-of-information-wants-to-be-free-a8d95427641c#.fbf9cq38l

    Steve H. , September 1, 2016 at 10:30 am

    That's a wonderful story, Cynthia, thank you.

    I'm sensing a resurgence of the conversation, what with trade pacts and digital rights and whatnot. How can an abstraction have wants? Information may be very cheap to reproduce but takes energy to maintain.

    Excellent back and forth between Woz and Brand.

    [Sep 01, 2016] What will come out of neoliberalism destruction of the world economies

    Sep 01, 2016 | www.nakedcapitalism.com

    Ulysses , August 31, 2016 at 6:02 pm

    "I am the spirit that negates.
    And rightly so, for all that comes to be
    Deserves to perish wretchedly;
    'Twere better nothing would begin.
    Thus everything that that your terms, sin,
    Destruction, evil represent-
    That is my proper element."

    Johann Wolfgang von Goethe

    diptherio , August 31, 2016 at 2:17 pm

    Switzerland to vote on "circular economy strategy"

    Reason enough for the Green Party of Switzerland to call for a fundamental change in the country's economic system. Its initiative gathered about 110,000 signatures within the required 18 months and was handed in to the authorities in 2012.

    It calls for a "circular economy strategy", including measures to adopt new product regulations, encourage recycling, and promote research and innovation, thereby reducing the country's ecological footprint by two-thirds.

    The proponents want Switzerland to play a pioneering role, promoting a sustainable model for the economy, including a tax policy tied to the use of natural resources. The government is asked to define sustainability targets both for a short and medium term and present a progress report every four years.

    What a Caring Organization Looks Like

    A Facebook friend (we're barely acquaintances really) asked this question on Friday:

    "What do you think are the most critical things (I'm talking specific processes, policies, and structures rather than values) that make up non-competitive and more collaborative and caring workplaces? Spaces where people are encouraged to really praise and acknowledge someone else's work rather than hide someone else's contribution, where people want to spend time on the collective good rather than next personal gain, and where the often invisible and gendered work of caring and 'organisation culture' is prioritised and publicly valued as critically important? What are some practical things you can implement, aside from the destruction of capitalism? Ideas, you wise group of souls?"

    I've spent the last couple of years working with an incredible bunch of people to build an organisation that is exactly like that: caring, collaborative, and non-competitive, a space where we praise and acknowledge each other, where the work of caring is shared equally, regardless of gender.

    Cripes I am a lucky dude, it rules. It is a total privilege, so I'm trying to figure out if there's something about our organisation that we can share with others.

    It's a subtle thing, so I'm not sure if I can totally nail it down with words. Let's try something…

    [Sep 01, 2016] Liqudity and 401K investor

    Notable quotes:
    "... So, what benefit does society get from all this secondary market trading, besides very rich and self-satisfied bankers like Blankfein? The bankers would tell you that we get "liquidity"–the ability for investors to sell their investments relatively quickly. The problem with this line of argument is that Wall Street is providing far more liquidity (at a hefty price-remember that half-trillion-dollar payroll) than investors really need. Most of the money invested in stocks, bonds, and other securities comes from individuals who are saving for retirement, either by investing directly or through pension and mutual funds. These long-term investors don't really need much liquidity, and they certainly don't need a market where 165 percent of shares are bought and sold every year. ..."
    "... In 1976, when the transactions costs associated with buying and selling securities were much higher, fewer than 20 percent of equity shares changed hands every year. Yet no one was complaining in 1976 about any supposed lack of liquidity. Today we have nearly 10 times more trading, without any apparent benefit for anyone (other than Wall Street bankers and traders) from all that "liquidity." ..."
    Sep 01, 2016 | www.nakedcapitalism.com

    Kim Kaufman , August 31, 2016 at 6:21 pm

    Wall Street Whistle-Blower Awarded $22 Million for Revealing the Truth About Monsanto
    by Emily Jane Fox
    August 31, 2016 9:49 am

    http://www.vanityfair.com/news/2016/08/wall-street-whistle-blower-monsanto?mbid=nl_CH_57c711fb684596f3798768f7&CNDID=15621256&spMailingID=9444845&spUserID=MTMzMTgyMzgwODcwS0&spJobID=982928780&spReportId=OTgyOTI4NzgwS0

    "The easiest way to make a quick buck on Wall Street these days seems to be through loose lips."

    fresno dan , August 31, 2016 at 6:50 pm

    https://promarket.org/wall-street-gods-work-even-anything-useful/

    So, what benefit does society get from all this secondary market trading, besides very rich and self-satisfied bankers like Blankfein? The bankers would tell you that we get "liquidity"–the ability for investors to sell their investments relatively quickly. The problem with this line of argument is that Wall Street is providing far more liquidity (at a hefty price-remember that half-trillion-dollar payroll) than investors really need. Most of the money invested in stocks, bonds, and other securities comes from individuals who are saving for retirement, either by investing directly or through pension and mutual funds. These long-term investors don't really need much liquidity, and they certainly don't need a market where 165 percent of shares are bought and sold every year.

    They could get by with much less trading-and in fact, they did get by, quite happily. In 1976, when the transactions costs associated with buying and selling securities were much higher, fewer than 20 percent of equity shares changed hands every year. Yet no one was complaining in 1976 about any supposed lack of liquidity. Today we have nearly 10 times more trading, without any apparent benefit for anyone (other than Wall Street bankers and traders) from all that "liquidity."

    =====================================
    Thing of it is, the most thirsty never get a drink….

    [Aug 29, 2016] T he Charter Schools as a classic neoliberal and libertarian wet dream

    Aug 29, 2016 | www.nakedcapitalism.com

    steelhead , August 29, 2016 at 2:49 pm

    As a individual who graduated from Nampa(Idaho) High School before 1980, I find the "Charter School" as a classic neoliberal and libertarian wet dream. No collective contract interference, the support of Bill Gates(educated exclusively in private schools) and another crony capitalism scheme. The public education system has been fu**ked.

    Adam Eran , August 29, 2016 at 5:12 pm

    Worth noting: The "reformers" (like Michelle Rhee) promote merit pay (because teachers are so financially motivated), (union-busting) charter schools and testing, testing, testing as the means to improve educational outcomes. No science validates this.

    Yet with billionaire funding, "reformers" have even made a propaganda film: "Waiting for Superman" touting Michelle Rhee's "tough love" approach to school management (she fired lots of D.C. teachers), and holding up Finnish schools as the ones to emulate.

    Don't get me wrong, the Finns have great schools. But Waiting for Superman neglects to mention that the Finnish teachers are well-paid, tenured and unionized. Curious omissions, no?

    So while the "reformers'" tactics fail scientific validation when compared to educational outcomes, one thing does not fail: Educational outcomes correlate strongly with levels of childhood poverty.

    Finland's childhood poverty rate: 2%. Meanwhile, in the U.S., it's 23% (and headed north).

    Could this entire focus on schools out of their social context, without any reference to what science says, be a gigantic campaign of misdirection, distracting Joe Public from the plutocracy we live in?

    and is that pope fellow still catholic? (for more, see http://www.notwaitingforsuperman.org/ )

    jo6pac , August 29, 2016 at 6:33 pm

    The other cool thing about schools in Finland is the teachers stay with their students as they move up in grades.

    Years ago the gentleman who created the Finnish system was asked why he didn't come to Amerika and help our system. The answer was Amerika is head down and no one in power cares. Doomed

    Benedict@Large , August 29, 2016 at 6:56 pm

    Chaster schools are about one thing, and one thing only. Wall street gets access to (and takes a cut of) the cash flow stream of our tax money before it gets to where we wanted it spent. All privatization efforts are about this same thing.

    Secure steady cash flows (and tax levies are one of the largest) have a valur, and that value can be sold to private investors. That's what Wall Street does with privatization; sell off the value of our taxes as cash flow.

    All of this means less of your tax money gets to where you want it to go.

    [Aug 27, 2016] Social Fragmentation Suits the Powers That Be

    Notable quotes:
    "... The Elites have successfully revolted against the political and economic constraints on their wealth and power, and now the unprivileged, unprotected non-Elites are rebelling in the only way left open to them: voting for anyone who claims to be outside the privileged Elites that dominate our society and economy. ..."
    Jul 29, 2016 | www.oftwominds.com

    The Elites have successfully revolted against the political and economic constraints on their wealth and power.

    Ours is an Age of Fracture (the 2011 book by Daniel Rodgers) in which "earlier notions of history and society that stressed solidity, collective institutions, and social circumstances gave way to a more individualized human nature that emphasized choice, agency, performance, and desire."

    A society that is fragmenting into cultural groups that are themselves fracturing into smaller units of temporary and highly contingent solidarity is ideal for Elites bent on maintaining political and financial control.

    A society that has fragmented into a media-fed cultural war of hot-button identity-gender-religious politics is a society that is incapable of resisting concentrations of power and wealth in the hands of the few at the expense of the many.

    If we set aside the authentic desire of individuals for equal rights and cultural liberation and examine the political and financial ramifications of social fragmentation, we come face to face with Christopher Lasch's insightful analysis on The Revolt of the Elites and the Betrayal of Democracy (1996 book).

    "The new elites, the professional classes in particular, regard the masses with mingled scorn and apprehension.... Middle Americans, as they appear to the makers of educated opinion, are hopelessly shabby, unfashionable, and provincial, ill informed about changes in taste or intellectual trends, addicted to trashy novels of romance and adventure, and stupefied by prolonged exposure to television. They are at once absurd and vaguely menacing."

    Though better known for his book on the disastrous consequences of consumerism in an era of economic stagnation, The Culture of Narcissism: American Life in an Age of Diminishing Expectations , Lasch's The Revolt of the Elites and the Betrayal of Democracy is the more politically profound analysis, as it links Elite dominance of the media, higher education and cultural narratives to the erosion of democracy as a functioning institution.

    Extreme concentrations of wealth and power are incompatible with democracy, as Elites buy political influence and promote cultural narratives that distract the citizenry with emotionally charged issues. A focus on individual liberation from all constraints precludes an awareness of common economic-political interests beyond the narrow boundaries of fragmenting culturally defined identities.

    In a society stripped of broad-based social contracts and narratives that focus on the structural forces dismantling democracy and social mobility, the Elites have a free hand to consolidate their own personal wealth and power and use those tools to further fragment any potential political resistance to their dominance.

    The Elites have successfully revolted against the political and economic constraints on their wealth and power, and now the unprivileged, unprotected non-Elites are rebelling in the only way left open to them: voting for anyone who claims to be outside the privileged Elites that dominate our society and economy.

    [Aug 27, 2016] It sounds like the rentiers are beginning to get a little nervou

    Notable quotes:
    "... It sounds like the rentiers are beginning to get a little nervous. Good. Whatever we can do to drain some money out of the FIRE sector is a good thing. I wonder what those fund managers think about the folks over at Vanguard. ..."
    Aug 27, 2016 | www.nakedcapitalism.com
    voteforno6 , August 26, 2016 at 3:22 pm

    Re: Passive Investing Is Worse for Society Than Marxism

    It sounds like the rentiers are beginning to get a little nervous. Good. Whatever we can do to drain some money out of the FIRE sector is a good thing. I wonder what those fund managers think about the folks over at Vanguard.

    [Aug 27, 2016] Economist's View Today's Inequality Could Easily Become Tomorrow's Catastrophe

    Aug 27, 2016 | economistsview.typepad.com

    Today's Inequality Could Easily Become Tomorrow's Catastrophe

    Robert Shiller:
    Today's Inequality Could Easily Become Tomorrow's Catastrophe : Economic inequality is already a concern, but it could become a nightmare in the decades ahead, and I fear that we are not well equipped to deal with it. ...
    One way to judge the likely outcome is to look at what has happened in the past. ...Kenneth Scheve ... and David Stasavage ... looked at 20 countries over two centuries to see how societies have responded to the less fortunate. Their primary finding may seem disheartening: Taxes on the rich generally have not gone up when inequality and economic hardship has increased. ...
    Professor Scheve and Professor Stasavage found that democratic countries have not consistently embraced more redistributive tax policies, and most people do not vote strictly in their narrow self-interest. ...
    This is consistent with my own survey results, which focused on inheritance taxes. ... Taxing around a third of wealth, more or less, seemed fair to people. And perhaps it is reasonable, in the abstract, yet what will we do in the future if this degree of taxation won't produce enough revenue to meaningfully help the very poor as well as the sagging middle class? ...
    Angus Deaton..., commenting on what he called the "grotesque expansions in inequality of the past 30 years," gave a pessimistic prediction: "Those who are doing well will organize to protect what they have, including in ways that benefit them at the expense of the majority. " And Robert M. Solow ... said, "We are not good at large-scale redistribution of income." ...
    No one seems to have an effective plan to deal with the possibility of much more severe inequality, should it develop. ...
    Despite past failures, we should not lose hope in our ability to improve the world. ...
    vic twente : , Friday, August 26, 2016 at 10:17 AM
    Wow, even Shiller's going heterodox.
    pgl -> vic twente ... , -1
    Shiller made his name challenging the Efficient Markets Hypothesis. I would call that heterodox even if it won him a Nobel Prize. BTW - many economists have noted that we have not done nearly enough to slow growing inequality. Good to see Shiller's emphasis on this.
    rayward : , -1
    Excessive inequality is self-correcting, absent intervention by the government and the central bank. History confirms it, recent history (2008) no less. Excessive inequality leads to excessive risk taking (as aggregate demand and returns falter) and ultimately financial crisis and collapsing asset prices. Collapsing asset prices, in turn, correct excessive inequality (since the wealthy own most of the assets). Of course, the correction can be painful; hence, intervention by the government and central bank to restore asset prices and, hence, inequality for the process to repeat. In his book, Piketty assumes that governments and central banks will always intervene in a financial crisis. Really?
    Death Cry O F A Rally -> rayward... , -1

    collapsing asset prices. Collapsing asset prices, in turn, correct excessive inequality (since the wealthy own most of the assets). Of course, the correction can be painful;
    "

    painful to those who own the assets, the overlords! Painful until FG buy up enough MBS, mortgage backed securities to prop the price of both MBS and the underlying asset, the houses enough to reinforce the inequality, buy up securities and simultaneously expand the money stock to inflate prices. Hey! If we can just prop up the price of your home, them poor folks will never be able to move into your neighbourhood. Happiness is never having to say, "There goes the

    neighbourhood
    " --

    pgl : , -1
    Never trust Mankiw without reading the source:

    http://gregmankiw.blogspot.com/2016/08/uwe-reinhardt-on-obamacare.html

    Did Uwe Reinhardt claim a free market health care system is good while ObamaCare is doomed? Here is Uwe and this is not what he said:

    http://www.vox.com/2016/8/25/12630214/obamacare-marketplaces-death-spiral

    We should hammer Mankiw's comment box. Oh wait – he closed it.

    djb : , Friday, August 26, 2016 at 11:48 AM
    "Despite past failures, we should not lose hope in our ability to improve the world. ..."

    yea because the economic solution is simple, people need to keep shouting it

    Peter K. : , Friday, August 26, 2016 at 12:45 PM
    "Despite past failures, we should not lose hope in our ability to improve the world. In a recent column, I described ways in which society might change a deep-rooted sense of entitlement by radically broadening wage and job insurance. Such a program would be a start in getting us prepared to deal with some of the immense challenges that may lie ahead."

    And what are Hillary's center-left proposals to tackle inequality? Minimal. Even center-left flack Krugman admits her infrastructure plans are substantially too small.

    What are her plans for revenue sharing and aid to the states? Does she have any? I doubt it.

    Just the typical "leverage" the private sector with inducements.

    We need to become much more like the European welfare-states but center-leftists like Hillary say it's a bad idea.

    pgl : , -1
    ECB buying corporate bonds. An enhanced version of QE:

    https://www.ft.com/content/2e4c5b94-693f-11e6-a0b1-d87a9fea034f

    The goal is to lower corporate bond spreads and it seems to be working. Of course this news will drive our gold bugs insane.

    pgl -> pgl... , -1
    This measure of the credit spread for AAA rated US corporate bonds puts it at 0.77%:

    https://fred.stlouisfed.org/series/BAMLC0A1CAAA

    In Europe, it is only 0.35% right now. Maybe the FED should do something similar.

    ken melvin : , -1


    How to cope with our changing economics:

    Citizens of the United States and Europe now live in a very changed economic environment, an economic environment different from that of the middle twentieth century, different from any we have ever known, different from any that ever existed. Coming off a period of some forty years of the mid twentieth century during which jobs in industry provided the basis of the economy, and, through unions, the most significant means of wealth distribution, we are now well into the post industrial age, an age of technology, a time when we don't have good and sufficient mechanisms for insuring wealth distribution. Going forward, there will less and less demand for labor for fewer and fewer good jobs; labor will lose leverage, any claim to parity it might once have had.

    What to do in the face of this great transition? In the past, with such periods of great transitions, we simply muddled through. It took about 175 years to go from agrarian based economic model to an industrial based economic model that worked well. During which, every draconian solution imaginable was applied at least once while good, well intentioned minds sought solutions to the problems presented by the transition.

    The first step may be to recognize the change, the magnitude of the change. How long before the leaders of the eighteenth century grasp the scope, scale of the change? What prompted Smith to take his critical look? Was Smith without prejudice? Why the appearance of continuum from slavery, serfdom, and capitalism? How great the weight of the status quo when looking at a time of transition?

    We are now some forty years into this great transition. Its coming was not a real surprise; but rather a common topic in every computer science class in every university by the late nineteen sixties. Was Rawls our Smith? Who will be the Marx and how long before he or she steps on stage? Fair to say any great insight will again come from philosophers? Why philosophers? Because such as laws and economics change when we change the way we think about such things. This mean that we will not break the bonds of the past until we take a critical look at the present. The answer to the problems created by this great transition do not lie in the past. No, presidential and congressional candidates, we do not need to go back to what we were doing in the past; we need to adapt to the reality of our new technology based age.

    Most of the economic models in use today evolved to facilitate the economics of the industrial age. Our adaptation to this new technologically dominated, resource constrained, era will certainly require changes to these economic models. We might even be better off to start anew; to not carry forward the remnants of slavery, serfdom, … capitalism - to let the application dictate.

    Information Subway : , Friday, August 26, 2016 at 06:02 PM
    most people do not vote strictly in their narrow self-interest. ...

    This is consistent with
    "
    ~~Robert Shiller~

    Most folks do vote strictly their own interest when there is a policy to vote. In USA most of what we vote is not policy but nominee. Sure!

    There was proposition 13 in California, but most of our choices are between two nearly identical candidates equally capable of robbing the poor.

    At the moment political solution to inequality is merely a dream. A more practical solution to inequality is frugality, hard work, and strict birth control that will shrink the labour force thus raise wages by the law of supply and demand

    unemployed work force / wage level / job openings

    supply / price / demand

    Birth control will raise wages. Politicians will only rob the poor. Hey! They can't rob the wealthy. Wealthy are heavily armed,

    armed and
    dangerous --

    Il carnevale di Venezia -> Information Subway... , -1

    Did a famous investor once quip, "I can pay half the workers to knock up the other half of the workers"?

    Imprecisely, yet left us with a

    timely economic
    principle

    David : , Friday, August 26, 2016 at 07:12 PM
    The problem of income inequality, which has been deepening these past thirty years, is profound and has potentially complex consequences.

    First is economic. Advanced economies still depend largely on consumer spending. IF that money is sitting in equities accounts or tax havens it's sitting idle and demand is slack.

    Second is ethical:the purpose our government is to "promote the general welfare". Human well being, because we are social and sentient, is relative; if we are poorer than our neighbor, we feel bad. If we are poorer than our parents, we feel a failure (some at least).

    Third, most darkly, is political.If we continue down the current path of inequality, demagogues, racial acrimony and scapegoating, and all manner of instability could ensue.

    The US is still a very rich country, and there is no need to risk divisions that would harm even the top 1 percent.

    Peter K. -> David ... , -1
    "Third, most darkly, is political.If we continue down the current path of inequality, demagogues, racial acrimony and scapegoating, and all manner of instability could ensue."

    The sellout totebaggers like PGL want to point the finger at Republicans but it's the center-left who are not doing enough to solve the problem.

    All PGL's BS is a red herring.

    [Aug 25, 2016] Trump University Was a Massive Scam

    Aug 25, 2016 | www.nationalreview.com
    Mitt Robmey

    Yes, Trump University Was a Massive Scam

    Many people believe that higher education is a de facto scam. Trump University, Donald Trump's real-estate institution, was a de jure one.

    First thing first, Trump University was never a university. When the "school" was established in 2005, the New York State Education Department warned that it was in violation of state law for operating without a NYSED license. Trump ignored the warnings. (The institution is now called, ahem, "Trump Entrepreneur Initiative.") Cue lawsuits.

    Trump University is currently the defendant in three lawsuits - two class-action lawsuits filed in California, and one filed in New York by then-attorney general Eric Schneiderman, who told CNN's New Day in 2013: "We started looking at Trump University and discovered that it was a classic bait-and-switch scheme. It was a scam, starting with the fact that it was not a university."

    Trump U "students" say the same. In his affidavit, Richard Hewson reported that he and his wife "concluded that we had paid over $20,000 for nothing, based on our belief in Donald Trump and the promises made at the [organization's] free seminar and three-day workshop." But "the whole thing was a scam."

    In fact, $20,000 is only a mid-range loss. The lead plaintiff in one of the California suits, yoga instructor Tarla Makaeff, says she was "scammed" out of $60,000 over the course of her time in Trump U.

    How could that have happened? The New York suit offers a suggestion:

    'The free seminars were the first step in a bait and switch to induce prospective students to enroll in increasingly expensive seminars starting with the three-day $1495 seminar and ultimately one of respondents' advanced seminars such as the "Gold Elite" program costing $35,000. At the "free" 90-minute introductory seminars to which Trump University advertisements and solicitations invited prospective students, Trump University instructors engaged in a methodical, systematic series of misrepresentations designed to convince students to sign up for the Trump University three-day seminar at a cost of $1495.'

    The Atlantic, which got hold of a 41-page "Private & Confidential" playbook from Trump U, has attested to the same:

    'The playbook says almost nothing about the guest speaker presentations, the ostensible reason why people showed up to the seminar in the first place. Instead, the playbook focuses on the seminars' real purpose: to browbeat attendees into purchasing expensive Trump University course packages.'

    To do that, instructors touted Trump's own promises: that students would be "mentored" by "handpicked" real-estate experts, who would use Trump's own real-estate strategies.

    But according to the New York complaint, none of the instructors was "handpicked" by Trump, many of them came from fields having nothing to do with real estate, and Trump "'never' reviewed any of Trump University's curricula or programming materials." The materials were "in large part developed by a third-party company that creates and develops materials for an array of motivational speakers and seminar and timeshare rental companies."

    Furthermore, Trump's promises that the three-day seminar ($1,495) would include "access to 'private' or 'hard money' lenders and financing," that it would include a "year-long 'apprenticeship support' program," and that it would "​improve the credit scores"​ of students were empty.

    Those empty promises are the subject of a new series of anti-Trump ads by superPAC American Future Fund. According to Bob, "I never heard from anybody about giving me a list of hard-money lenders". Kevin, another Trump U "student," says Trump University "ruined" his credit score. And according to Sherri, a single mother who participated in Trump U: "It was all supposedly supervised by Donald Trump, run by Donald Trump. All of it was just a fake."

    In fact, Sherri isn't alone. No student ever met the Donald. Despite hints from Trump University instructors that Trump was "going to be in town," "often drops by," or "might show up," he never did. As Matt Labash recounted in The Weekly Standard: "At one seminar, attendees were told they'd get to have their picture taken with Trump. Instead, they ended up getting snapped with his cardboard cutout." Bob, above, had such an "opportunity".

    There could be many more ads to come. The New York lawsuit alone represents some 5,000 victims.

    Meanwhile, Trump - who maintains that Trump University was "a terrific school that did a fantastic job" - has tried to bully his opponents out of the suit. Lawyers for Tarla Makaeff have requested a protective order from the court "to protect her from further retaliation." According to court documents, Trump has threatened to sue Makaeff personally, as well as her attorneys. He's already brought a $100 million counterclaim against the New York attorney general's office.

    But it's not working. Trump himself will have to take the witness stand in San Diego federal court sometime during the election season - and because of the timeline of the cases, a "President Trump" would be embroiled in these suits long after November.

    Meanwhile, if there is any doubt that Trump U was designed to be a scam, The Atlantic puts that to rest with a few other choice tidbits from that "Private & Confidential" playbook used by Trump presenters:

    'Every university has admission standards and Trump University was no exception. The playbook spells out the one essential qualification in caps: "ALL PAYMENTS MUST BE RECEIVED IN FULL." Basically, anyone with a valid credit card was "admitted" to Trump University. . . . If a member of the media happened to approach the registration table, Trump staffers were instructed not to talk to him or her under any circumstance. "Reporters are rarely on your side and they are not sympathetic," the playbook advises.'

    And: At one point, the playbook advises Trump staffers: "If a district attorney arrives on the scene, contact the appropriate media spokesperson immediately." Sounds legit.

    Read more at: http://www.nationalreview.com/corner/432010/trump-university-scam

    [Aug 25, 2016] Credentialism and Corruption Vile College Presidents Edition

    Welcome to Neoliberal U!
    Notable quotes:
    "... The corruption I'm going to describe seems more along the lines of converting a public institution to serve private purposes (assuming higher education to be a public institution, which I do, because education is a public good)[3]. ..."
    "... Now, human nature being what it is, a certain amount of empire-building and concern for one's rice bowl has always been inevitable, but when greed for one's self, or one's class, becomes the institutional driver, it's time for a thorough cleansing. ..."
    "... New York University students carry some of the highest debt loads in the nation, a fact they are bound to remember through gritted teeth when they read the New York Times report about the school's loans to top faculty for vacation homes in places like Fire Island and the Hamptons. ..."
    "... The house, which is owned by John Sexton, the president of New York University, was bought with a $600,000 loan from an N.Y.U. foundation that eventually grew to be $1 million, according to Suffolk County land records. ..."
    "... I think this perfectly describes what I've observed with public school superintendents also. They are like 'The Music Man.' Selling dreams that our children will be smarter, better looking, and above average if we just get with the program. While our school district has a local in charge who appears to be here for the long term, a neighboring district had a 'Music Man' or rather, woman, who got the city to float a $10 million bond issue so every fourth grader could have an I-Pad. She then left to do the same (for a higher salary) in another state. Another, much poorer, district nearby wanted to get rid of a super who had allegedly threatened subordinates with bodily harm: they bought out her contract for $300,000. In a county with a population of 20,000 and ten percent unemployment. ..."
    "... It is not only at the college level that those in charge are engaging is questionable behavior. It is a society wide problem. ..."
    "... To a naive student with no experience in institutional politics, their stories of resentment, gossip, backbiting, and the politics of personal reputational destruction were like a glimpse into an unimagined world. ..."
    "... It used to be that there was a saying in academe: the competition is so great because the stakes are so low. But, if there is a path to six or seven figures, now I see that there is serious cash to be banked to justify working in the university racket. ..."
    Aug 24, 2016 | www.nakedcapitalism.com
    By Lambert Strether of Corrente .

    I haven't posted on higher education before, and a series of posts on credentialism really should focus on the institutions where those credentials are, in the main, granted. But rather than a serious analytical piece on the state of the university, this will be a light-hearted romp through some spectacular examples of executive malfeasance at NYU, Baylor, and Penn State.[1] (Tomorrow I'll look at the adjunct system, and potential effects of yesterday's NLRB decision . And there will be more posts to come on this topic, as I come to understand it better.)

    Before I begin, though, let's recall Zephyr Teachout's definition of corruption. Not a quid pro quo - that's the Citizen's United doctrine, now supported by the Clinton campaign - but the use of public office for private ends. What does corruption look like in a university setting, given that some universities are private to begin with, and that "ends," in the ancient and tricky academe, may not always be immediately evident?

    Here's a story from the University of Maine, Maine's "flagship" university. Our last President, Robert Kennedy, gave the contract for sports broadcasting to ClearChannel, thereby moving the profits out of state, because he took the contract away from Stephen King's radio station (yes, that Stephen King). Naturally, this ticked King off, and King - up to that point the university's largest donor, and the funder of many good works round the state, like dental clinics and libraries - decided he would no longer give to the university. (Kennedy then rotated out to the University of Connecticut, for a hefty salary increase, where he was shortly axed by the Regents for a cronyism scandal . Dodged a bullet, there, Maine!)

    Dollying back to the larger picture, King came up through the much despised and derided English Department, in the humanities, which powerful institution forces in the administration and the Board of Trustees are shifting resources away from, in favor of more pragmatic, "business-friendly," corporate majors (graduates, that is, that they themselves can hire[2]. Even though King was the university's largest donor.)

    Is there corruption here? I would argue yes, but I'm not sure that Teachout's definition quite meets the case. The corruption I'm going to describe seems more along the lines of converting a public institution to serve private purposes (assuming higher education to be a public institution, which I do, because education is a public good)[3]. This is evident from the King story in two ways. First, Kennedy is only one of many university administrators who stay a couple years at an institution, punch their ticket, and move on to a higher salaried position elsewhere. Second, optimizing university curricula, grounds, personnel decisions, etc. for corporate ends is about as corrupt as you can get (as are the concomitant rationalizations and cover-ups that occur when scandal breaks). Now, human nature being what it is, a certain amount of empire-building and concern for one's rice bowl has always been inevitable, but when greed for one's self, or one's class, becomes the institutional driver, it's time for a thorough cleansing.

    With that, let's look at the case of John Sexton, once President of NYU. (NYU is an important nexus for the Democrat nomenklatura , so we'll have more to say about NYU in the future.)

    John Sexton, NYU

    John Sexton (salary: $1.5 million ) was President of New York University from 2002 to 2015, and for a portion of that time doubel-dipped as Chairman of the Board of the Federal Reserve Bank of New York. For the connoisseur of corruption, his long tenure provides an embarrassment of riches - the union busting , the faculty no-confidence votes , the Abu Dhabi debacle (among other issues, the campus was built using slave labor ), the lavish compensation packages , the tacos made from endangered shark meat - but I'm going to focus on just one. The apartments. No, I don't mean the faculty apartment NYU remodeled for Sexton's son :

    NYU gave president's aspiring actor son apartment on campus

    Jed Sexton, whose sole affiliation with NYU was his status as the president's son, for years enjoyed a spacious faculty apartment while the university experienced a "severe" housing shortage, The Post has learned.

    In spring 2002, NYU ordered that a pair of one-bedroom apartments normally reserved for law school faculty be combined into a lavish, two-story spread in the heart of Greenwich Village, property records show.

    The Harvard-educated Sexton, who was a 33-year-old aspiring actor at the time, shared the new duplex with his newlywed wife, Danielle Decrette, for the next five years, according to documents and people briefed on the situation.

    That's despite the fact that NYU officials, just weeks earlier, had warned in a written report of a "severe housing shortage" for faculty, "especially of larger units."

    How cozy! No, I mean the vacation properties, plural, that NYU under Sexton doled out as perks to insiders :

    NYU Offers Top Talent a Path to Beachfront Property

    New York University students carry some of the highest debt loads in the nation, a fact they are bound to remember through gritted teeth when they read the New York Times report about the school's loans to top faculty for vacation homes in places like Fire Island and the Hamptons. The loans, which have gone to at least five faculty members in the medical and law schools as well as university president John Sexton, sometimes get forgiven over time as their recipients continue to work at the university. Mortgage loans apparently aren't unheard of as compensation packages for professors and executives in tight real estate markets, but they're usually for homes, not vacation properties.

    From the New York Times , which broke the story, it seems that Sexton gifted himself a house, an "an elegant modern beach house that extends across three lots":

    The house, which is owned by John Sexton, the president of New York University, was bought with a $600,000 loan from an N.Y.U. foundation that eventually grew to be $1 million, according to Suffolk County land records.

    Others, too :

    Since the late 1990s, at least five medical or law school faculty members at N.Y.U. have received loans on properties in the Hamptons or Fire Island, in addition to Dr. Sexton.

    NYU's Chief Financial Officer Martin Dorph argued that arrangements like this are necessary to retain top personnel :

    While that feeling is understandable, it is important to note the economic truth that the markets for different positions often dictate different levels of compensation, whether that is embodied in salary payments, loans, or an overarching agreement about terms of employment. And, when we commit to provide such compensation, we do so only when we are sure

    that the benefit to the University far exceeds the cost.

    First, CEO compensation and shareholder returns are inversely correllated ; even if we grant Dorph's premise, and a corporate model for the university, it's just not clear that top compensation means top talent. Second, why doesn't NYU simply pay its talent more? Why complicate matters by bringing in vacation housing? Why not just write a fatter check? The answer can only be arbitrage of some sort: NYU giving access to property that otherwise isn't on the market, tax advantages of some kind, a better rate on the mortgage, or whatever; some way in which NYU uses its muscle on behalf of the compensated. But that is, precisely, converting a public institution to serve private purposes. Not to mention Sexton openly using NYU facilities to house his son and for his own vacation home on Fire Island. Come on. Why is that not self-dealing? And the rest of looks suspiciously like powerful faculty members feathering their own nests. "Why not? We deserve it."

    Naturally, NYU has learned nothing, and is in fact doubling down: " N.Y.U. President's Penthouse Gets a Face-Lift Worth $1.1 Million (or More) ." For Sexton's successor, Andrew Hamilton (salary: not disclosed):

    The 19th and topmost floor of the building will be turned into a master-bedroom suite, where Dr. Hamilton will have private exits - one from the bedroom and one from the bathroom - onto a terrace overlooking Washington Square and, to the south, the financial district skyline, according to documents filed with New York City.

    "Private exits." Perhaps he'll need them.

    Ken Starr, Baylor University

    We now turn to the simpler case of Baylor President Ken Starr (salary: $1 million ), last seen unloading a dumpster-load of lascivious footnotes onto the steps of Capitol Hill during the Lewinsky matter (thank you, Monica, for helping to save Social Security from Bill Clinton ). Former Manhattan assistant DA Bennett L. Gershman has a good summation, in full "What did he know, and when did he know it?" mode:

    Baylor University, the country's largest Baptist university and a bastion of Christian values, has just been denounced in a blistering report by the University's Board of Regents for "mishandling" - covering up might be a more apt description - credible allegations of horrific sexual violence against female students, especially alleged assaults by members of the football team. The Board of Regents said it was "shocked," "outraged" and "horrified" by the extent of the acts of sexual violence on the campus, which covered years 2012 through 2015, and the failure of the University to take appropriate action to punish violators and prevent future violations. The Board issued an "apology to Baylor Nation," fired the football coach, and "transitioned" (the Regents' term) Baylor's President, Kenneth Starr, to the role of Chancellor. Starr also was allowed to retain his lucrative Chair and Professorship of constitutional law at Baylor's law school .

    As Baylor's president from 2010 to 2016, the vexing question is the level of Starr's culpability for the "shocking," "outrageous," and "horrendous" sex scandal. What exactly did Starr know? The allegations of sexual violence on the campus were rampant and notorious, especially by the football players. Starr had to know something about the extent of the University's response to the complaints, and most likely the failure to address these complaints properly. Indeed, there were several Title IX investigations by the Justice Department at the time that Starr must have known about. Moreover, there are plenty of egregious examples of sexual violence on the campus that had to have been reported. In one egregious case, an All-Big 12 football player was accused in 2013 of sexual violence against a student. Although Waco police contacted university officials, nobody in the university investigated the case until two years later, after a Title IX investigation was underway, and media reports highlighted the case. This was after several other Baylor football players were indicted and convicted of sexual assaults. It was only then that the University hired an outside investigator. Notably, the headlines also prompted a public outcry, and a candlelight vigil at Starr's residence.

    The Board of Regents Report describes the breadth of the independent investigation into the university's failure to properly address the University's dereliction. The investigators interviewed numerous University officials, but there is no mention whether they interviewed Starr, and if so, what he may have said. Starr may have claimed to be unaware of the repeated failures of university officials to investigate these complaints, but is that contention credible? Starr presumably had to know that aggressively investigating these allegations - indeed, as aggressively as he investigated the sexual misdeeds of President Clinton - might have interfered with his intensive multi-million dollar fundraising efforts to build a new and lavish football stadium, which opened in 2014. And Starr may have believed that getting too deep into the mud of the roiling sexual scandal would undermine the public perception of Baylor's "Christian commitment within a caring community" - again the Board of Regents' description - as well as compromise the heroic efforts of the Baylor football team to win a national championship.

    So Starr is no longer the university's president. To be sure, it's a demotion of sorts. He was allowed to keep his Chancellorship, which he just relinquished, but he still gets to keep his Chair and Professorship at the Law School. One might think this is not a very harsh result, certainly not if Starr knowingly violated federal law, or by his deliberate indifference allowed serious criminal conduct to take place at the university he led.

    Alternet is, as one would expect, a bit more direct in connecting the dots :

    Not to put too fine of a point on it, but Ken Starr is accused of ignoring sexual violence at Baylor University mostly because doing something about it would have jeopardized a cash cow.

    (Note that the disgraced Baylor football coach's salay, $6 million , was six (6) times college President "Judge Starr." Starr will also retain his position on the faculty. Priorities!) The New York Times says what Alternet says , in its own more muffled language:

    [Baylor] also fired the football coach, Art Briles, whose ascendant program brought in millions of dollars in revenue but was dogged by accusations of sexual assault committed by its players - an increasingly familiar combination in big-time college sports.

    "Was dogged by." What we have here is a football team acting as a standalone, dominating entity , rather like a parasite controlling the behavior of the host univeristy:

    Among the firm's findings was that football coaches and athletics administrators at the school in the central Texas city of Waco had run their own improper investigations into rape claims and that in some cases they chose not to report such allegations to an administrator outside of athletics.

    By running their own "untrained" investigations and meeting directly with a complainant, football staff "improperly discredited" complainants' claims and "denied them a right to a fair, impartial and informed investigation."

    Starr wanted the revenues. Briles wanted the revenues, the facilities, the salaries, the ticket to be punched, etc. Again, this is quite directly converting a public institution to serve private purposes. And like NYU, Baylor appears to have learned nothing. Starr still has a job, and was never censured. The full report was never released. And from an ad taken out by Baylor alumni : "Thank You Judge Ken Starr - For your integrity, leadership, character and humble nature."

    Eric Barron, Penn State

    Finally, we come to Eric Barron, President of Penn State (salary: $1.2 million with incentives ). I'm not going to focus on whether Penn State hiring Barron in the wake of his dubious handling of a festering rape scandal at Florida State was odd , or not. And I'm not going to focus on climatologist Barron's relationship with Koch Brothers funding . Or his conflation of "incredulous" with "incredible"; who among us, etc. No, I'm going to focus on this amazing piece of puffery. From an interview with Barron on "entrepreneurship" and "proactive leadership" :

    ERIC J. BARRON: We actually have launched a whole program, which is titled " Invent Penn State ," and there are several different elements of this. One is to do more to incentivize people on campus to get their ideas out into the marketplace. We have many, many student events that are competitions and have scholarship funds at the end of it. The second part of it is to add more visibility to our intellectual property. A third part is to build an ecosystem around our campuses that promote startups and partnerships with communities.

    A general view, in my opinion, is that many universities are focused on this topic as a source of revenue, not as educational experiences for students and opportunities for them to do startups. We have a lot of effort on the student side. The minors have expanded. I think we have six or seven entrepreneurship minors now that are embedded in curriculum for different colleges if you want. Last year, we started having any student with any major to be able to get all the credits equivalent to a minor in business. There's a lot on that side plus startup weeks and other activities with a scholarship side of it.

    We have funded but have not yet cut the ribbon on a total of 20 incubators and accelerators around the state of Pennsylvania associated with our campuses. In March, we cut the ribbon on what's called Happy Valley Launch Box, which is here in State College, with the idea of having 30 startups in there at any one time. I think we had about 15 before even 30 days. All of these have gone through some sort of vetting process or competition for which they were winners. It's growing just left and right. Many of them, we've given them seed money and they've gotten many times more money from their community and other partners that want to enable the students.

    Never mind converting an entire student population into "winners" and "losers." Never mind that 90% of start-ups fail . Never mind that when startups succeed, it's as much a matter of luck, and especially the luck of having been born into the right social network. Thomas Frank has already described Barron's program, and where it leads. This is the innovation cult ! Quoting Frank once more:

    I just finished Thomas Frank's excellent Listen, Liberal , and he has a great rant about "innovation," of which I will show a great slab here, from p 186 et seq. Frank even helpfully quotes the more egregious bullshit tells, so I don't have to highlight them! Do read it in full. After visiting hollowed out mill town Fall River, Frank goes to Boston:

    And:

    1_frank
    2_frank

    Let's also leave aside the issue of whether "innovation" culture increases "income inequality." Suppose Penn State structures its curriculum to optimize for startups (and not for education as such; critical thinking skills, the construction of narratives, the sciences, research, even (relatively) humdrum majors like accounting). What happens to the students when 90% of their startups fail, as history tells us they will? What will they have to fall back on, if everything has been optimized for startups, and the rest of the university's assets have been stripped?

    The future lies ahead on that question. For now, I'm uncertain whether "the innovation" cult is corrupt as such, or not. Certainly it provides almost limitles opportunities for backscratching, logrolling, bezzle creation, and so forth. And Barron seems to conceive of it as a big revenue generating opportunity for Penn State (rather like the football team, if it comes to that). If the program fails, and is seen to fail, will Penn State learn from the experience? It's hard to know, but Barron's handling of the fallout from the Sandusky matter does not inspire confidence .

    Conclusion

    So, what we've got here is an NYU President handing a New York apartment, meant for faculty, to his son, and what looks rather like powerful faculty members feathering their own nests with cheap housing; we've got a Baylor President not wanting to cross a powerful and wealthy football team, even to the extent of failing to handle a rape scandal; and at Penn State we've got a President who's a member of the "innovation cult," when it's not at all clear this will benefit the student body as a whole. Have any of these institutions learned from these experiences? No. Are these college Presidents personally responsible for corruption at their universities - for converting a public institution to serve private purposes? Sexton and Start, yes. For Barron, the jury is still out.

    And these are the institutions of higher education that are granting credentials. Not a good look. More examples from readers welcome!

    NOTES

    • [1] I should disclose my priors and/or prejudices: I'm a university brat with a humanities background. Family tradition mandates that I instinctively distrust college administrators, Big Football, fraternities, and sororities (and, my parents would urge, for very good reasons). Only the first two will be at issue here.
    • [2] That is, they're creating hires, as opposed to creating graduates some of whom might be creative enough to come up with businesses that compete with their own.
    • [3] If you think that implies that neoliberalism is intrinsically corrupt, since it will put everything up for sale, including itself, you're not wrong.
    pretzelattack, August 24, 2016 at 1:11 pm

    iirc starr's work as independent counsel helped (was the biggest factor maybe) in getting the job at baylor.

    Anonymous, August 24, 2016 at 1:12 pm

    Lambert:

    'First, Kennedy is only one of many university administrators who stay a couple years at an institution, punch their ticket, and move on to a higher salaried position elsewhere.'

    I think this perfectly describes what I've observed with public school superintendents also. They are like 'The Music Man.' Selling dreams that our children will be smarter, better looking, and above average if we just get with the program. While our school district has a local in charge who appears to be here for the long term, a neighboring district had a 'Music Man' or rather, woman, who got the city to float a $10 million bond issue so every fourth grader could have an I-Pad. She then left to do the same (for a higher salary) in another state. Another, much poorer, district nearby wanted to get rid of a super who had allegedly threatened subordinates with bodily harm: they bought out her contract for $300,000. In a county with a population of 20,000 and ten percent unemployment.

    It is not only at the college level that those in charge are engaging is questionable behavior. It is a society wide problem.

    trent, August 24, 2016 at 2:47 pm

    'The Music Man.'

    so fraud?

    Anonymous, August 24, 2016 at 3:06 pm

    For willing dupes.

    Jagger, August 24, 2016 at 8:51 pm

    It is not only at the college level that those in charge are engaging is questionable behavior. It is a society wide problem.

    That is my impression as well-corruption is a society wide problem from top to bottom. The small town mayors, courts, police, newspapers, insiders, etc may be playing with small potatoes but corruption is corruption whether it is $1000 or a $1,000,000. I know it can't be everyone with a little power but way too many. Makes you doubt the whole system.

    Arizona Slim, August 24, 2016 at 1:12 pm

    Greetings from one of those coworking spaces that Mr. Frank took to task in Listen, Liberal .

    Let me tell you a dirty little secret about this place. And, no, I'm not talking about who left a lunch in the fridge for too long. This is an even dirtier secret. Here it is:

    Most of us are not innovators.

    That's right. I said it.

    The truth is, most of us are working on things that are, well, pretty run of the mill. Guy behind me is doing digital marketing work for his out-of-state employer, an ad agency. Lady over there is doing marketing for a resort in Mexico. Oh, and the guy who's my best friend here? We're both photographers. His other main hustle is graphic design and mine is writing for business.

    We have a handful of what could be described as startups, but those businesses are definitely in the minority.

    a different chris, August 24, 2016 at 1:43 pm

    Well we don't need a sh&t pot full of "innovators" . we need people that can do what they do well. Does everybody have to create something "new"?? I don't think so.* Edison wasn't the greatest guy in the world overall, but as he said getting something up is 99% perspiration and only 1% inspiration – I think he would have spit at the word "innovation", btw.

    In fact, he has another lesson for the "innovators" in that a lot of his perspiration was generated due to his efforts in stealing ideas from other people. Which is going to happen to almost all of the (if we take their optimistic slices) 10% that do come up with something anybody cares about.

    *For a good example, I love the improvement of the American pub scene over the past few decades. But the best beer and grub isn't the best because it is "innovative" - sometimes it is a bit different, sometimes not - but because it is very, very well done.

    Wait, we pay you enrich yourself?, August 24, 2016 at 2:32 pm

    Slim, in your home town town there is one of the perfumed princes that could have fit nicely into Lambert's post. Us AZ residents are paying neoliberal scumbag a premium price for their "talents" of enriching themselves.

    Super scum: https://www.azpm.org/p/featured-news/2016/4/6/85310-arizona-lawmakers-call-for-ua-presidents-resignation-following-board-appointment-to-for-profit-college-company/

    Oh, and if you are referring to the same work space, I worked for a total pump and dump "startup", there.

    Arizona Slim, August 24, 2016 at 4:00 pm

    Oh, brother. Ann Weaver Hart. Don't get me started.

    Okay, I am started. So, here goes

    A couple of summers ago, I was meeting with a longtime acquaintance and potential client on the University of Arizona campus. Madame Presidente was about to move her office into Old Main, which is the UA's oldest building. It's revered as this sacred space. Or something like that.

    Any-hoo, I was in a pretty spacious office in a building near Old Main. But my meeting host told me that Ann Weaver Hart's Old Main *bathroom* was bigger than that office.

    Yeesh.

    Oh, as for the work space, were you involved in the one that had a pirate theme? Because that place was - and is - full of pump -n- dump startups.

    Lambert Strether Post author , August 24, 2016 at 4:46 pm

    I considered writing Anne Weaver Hart up, but the other ones were worse. There's only so much one can do to shovel back the tide

    Jim Haygood, August 24, 2016 at 1:23 pm

    'King came up through the much despised and derided English Department, in the humanities.'

    Although not a product of the English department at my alma mater, Whatsamatta U., I knew some professors in the department.

    To a naive student with no experience in institutional politics, their stories of resentment, gossip, backbiting, and the politics of personal reputational destruction were like a glimpse into an unimagined world.

    Lambert Strether Post author , August 24, 2016 at 2:50 pm

    I know, I know. So totally unlike the corporate environment.

    Wait, we pay you to enrich yourself?, August 24, 2016 at 3:04 pm

    It used to be that there was a saying in academe: the competition is so great because the stakes are so low. But, if there is a path to six or seven figures, now I see that there is serious cash to be banked to justify working in the university racket.

    Lambert Strether Post author , August 24, 2016 at 3:41 pm

    And if you're an administrator, you can redistribute the budget to your own advantage by screwing the faculty, especially adjuncts.

    Uahsenaa, August 24, 2016 at 5:12 pm

    Nowadays I bristle when someone describes me as "faculty," even though it's technically correct, because it papers over the fact that some of the people doing the exact same job as me have full employment, a full salary, and fringe benefits, where the people in my position get paid per credit with no benefits. We are "permitted" to buy into university health insurance, at full cost, but that's the extent of our bennies.

    If you're getting to the employment situation in a further post, I'll save my more extensive comments for that.

    DanB, August 24, 2016 at 2:05 pm

    Update: one of the articles cited in this essay says Ken Starr resigned from Baylor Law School and severed all ties with the university this past Friday.
    As someone who has a university background, as a grad student in three different universities, and short stints as a faculty member and an administrator (I was shoved out/left in disgust from administration)- I attest that this kind of neoliberal thinking, which automatically generates converting public responsibility to private advantage, is commonplace. As readers here know, the university is a place where one must strive to present oneself - and simultaneously fool oneself - as creative and independent-minded within the confines of the matrix. This is most pronounced in the professional school because they are most beholden to corporate money. A final note: you will find the best to the worst of humanity in universities.

    Lambert Strether Post author , August 24, 2016 at 2:51 pm

    So, karma works. Thanks for the update.

    Torsten, August 24, 2016 at 6:45 pm

    David Riesman: "I would never advise anyone to go into teaching because the people are so nice."

    allan, August 24, 2016 at 2:35 pm

    One more for the honor roll: West Virginia University's former president Michael Garrison, who ordered the granting of an M.B.A. to moral leper Mylan CEO and Epi-Pen price optimizer Heather Bresch in 2007,

    even though she had fewer than half the credits required.

    Lambert Strether Post author , August 24, 2016 at 2:53 pm

    Blue Dog Joe Manchin's daughter . All things work together for good, don't they?

    trent, August 24, 2016 at 3:04 pm

    seems like she's only where she is because of daddy

    DrBob, August 24, 2016 at 4:17 pm

    This particular CEO (and Senator's daughter) has a history of using Congress for favorable outcomes:

    https://theintercept.com/2016/08/24/epipen-uproar-highlights-companys-family-ties-to-congress/

    allan, August 24, 2016 at 4:37 pm

    To paraphrase Harry Reid, Joe's with us on everything except the war basic human decency.

    KurtisMayfield, August 24, 2016 at 3:21 pm

    You forgot to mention she was a Senator's daughter. That one is a combo of both government, corporate, and university corruption. Well done!

    Torsten, August 24, 2016 at 2:39 pm

    I have to repeat my favorite historical anecdote here (h/t the late, great Paul Goodman, from his Compulsory Miseducation, I believe).

    It seems that in the summer of 1650, while the faculty was away helping in the fields, Henry Dunster sold Harvard to a group of Boston businessmen, creating the first Corporation in the New World, and making himself "President" thereof.

    Now Wikipedia claims that Dunster "set up as well as taught Harvard's entire curriculum alone for many years, graduating the first college class in America, the Class of 1642". So perhaps Dunster was simply ahead of his time in creating the prototype for Trump University.

    Ulysses, August 24, 2016 at 3:48 pm

    Administrators in academia hold themselves to the same high ethical standards as officials in government. In other words, they do whatever they can get away with, and then sputter about future "transparency," and "doing better," when their misdeeds come to light.

    This blather from Austin, Texas, could just as well have come from Washington, D.C.:

    "I've read the report a half-dozen times in totality, and I found no willful misconduct , no criminal activity on the part of any of the folks at the University of Texas at Austin, and have told the Board of Regents that I intend to take no disciplinary action," he said.

    "Can we do things better? You bet," he continued. "Should we have been more transparent? Absolutely. Are we going to get this fixed? No doubt about it."

    Mr. Powers pushed back against the report's suggestion that he had not been forthcoming, saying he had been "truthful and not evasive" in his dealings with investigators.

    Investigators took a different view . "

    http://chronicle.com/article/Admissions-Report-Chips-at/190021/

    ekstase, August 24, 2016 at 4:11 pm

    Just a hypothetical question: what would one do if they felt they were losing some of their idealism?

    Lambert Strether Post author , August 24, 2016 at 4:48 pm

    I very rarely laugh out loud; thanks, it's good for the health!

    Foppe, August 24, 2016 at 4:22 pm

    My $2c; apologies that they're a bit unpolished: One question you/we might ponder is how (a desire for) obvious nepotism engenders privatization, versus more "principled" demands for privatization of public goods/services. To give a very brief summary of the developments since WWII inspired by my reading of David Harvey's The Enigma of Capital : privatization became important once western economies 'matured', because of how this meant that there were ever fewer (obvious) opportunities for growth. And secondly because, once more and more people started getting degrees, there was an explosion in the number of people who were "trained" (only) for middle/upper management positions; for who there was fairly little demand in public institutions, probably because workers had decent unions/voice, so that the people who ran those places couldn't easily justify managerial metastasis and the taking away of job-related autonomy (to create demand for "decision-makers") by creating cultures of institutionalized distrust (via yammering about the importance of "accountability"). (Though the latter was/is still an issue, it gets worse the more neoliberalized the organizational mode gets, because of neoliberalisms implicit (rational-actor) misanthropic world view.) Those developments strike me as separate from the more narcissistic ( professional class/meritocratic-reasoning )-related forms of corruption/grift/etc. that you discuss above, though.

    Foppe, August 24, 2016 at 4:44 pm

    (To clarify, Harvey doesn't talk about professionalization; that's just me combining observations made by Graeber with those made by Tom Frank in Listen, Liberal .)

    Lambert Strether Post author , August 24, 2016 at 4:50 pm

    Graeber, or Harvey? The Harvey book looks interesting.

    Foppe, August 24, 2016 at 5:22 pm

    Harvey's book is great; as for Frank & Graeber, I was thinking of Graeber's remarks about what he (in Debt) calls the crisis of inclusion (which he's also talked about elsewhere, e.g. in the Army of Altruists essay in Revolutions in Reverse ). Graeber there (as I assume you recall) only talks about the fact that those who don't belong to what Frank calls the professional class (and those who self-identify with them), only have the army and the church open to them if they wish to pursue goals other than accumulating money/power; yet the higher-ed explosion must've also had enormous consequences for the supply of people with managerial and similar training. But I only started pondering that question recently, after reading Frank woke me up to the obvious.

    petal, August 24, 2016 at 4:28 pm

    Ugh can we tack The World Bank's Jim Kim(former Dartmouth pres) on there, too?

    Lord Koos, August 24, 2016 at 4:37 pm

    How about Cooper Union president Jamshed Bharucha - who managed to screw up the school's endowment that had been in place since 1859. Check out the movie "Ivory Tower".

    Lambert Strether Post author , August 24, 2016 at 4:51 pm

    See here .

    Fool, August 24, 2016 at 4:38 pm

    NYU is a school run by money, and it's so transparent that for a board populated by billionaires, run by a press-shy guy who helped a lot of them become billionaires, that they prop up the flamboyant Sexton's supposed fundraising abilities and "imperial" presidency. Fortunately for Sexton and NYU, he's paid enough money to take the press's lashings like a good boy.

    But surely such a mediocre pedant isn't the mastermind behind the bloated, technocratic, real estate development company and vanity project (which also offers classes, which are taught by #publicintellectuals).

    Lambert Strether Post author , August 24, 2016 at 4:54 pm

    New York real estate is a clean business, right? No story there .

    Michael Fiorillo, August 24, 2016 at 6:47 pm

    NYU: a real estate development company with a tax-exempt higher education subsidiary.

    relstprof, August 24, 2016 at 7:41 pm

    http://columbiaspectator.com/spectrum/2016/04/07/concerned-residents-push-back-against-jts-uts-plans-sell-property-developers

    Carolinian, August 24, 2016 at 5:43 pm

    Pam Martens has written several posts at Wallstreetonparade talking about NYU's corruption, connections to Wall St, and Jack Lew. Don't have links handy but easy to Google.

    Anon, August 24, 2016 at 6:37 pm

    I would like to point out that Chancellors Linda Katehi (UC Davis)and Nicholas Dirks (UC Berkeley) have both recently resigned under pressure from UC Top Honcho Janet Napolitano. It seems Administrator transgressions (impunity and self-dealing) are finding its way into the "sunlight".

    relstprof, August 24, 2016 at 6:44 pm

    Good stuff. Really looking forward to future posts.

    Knute Rife, August 24, 2016 at 8:56 pm

    Some people starting up can get "small loans" of $1,000,000 from the old man and have those kinds of resources to fall back on if they flop. The other 99.99% of us? Not so much. How is this innovation dogma supposed to work for those of us who can't buy our way into the Creative Class?

    [Aug 25, 2016] Trump University Was a Massive Scam

    Aug 25, 2016 | www.nationalreview.com
    Mitt Robmey

    Yes, Trump University Was a Massive Scam

    Many people believe that higher education is a de facto scam. Trump University, Donald Trump's real-estate institution, was a de jure one.

    First thing first, Trump University was never a university. When the "school" was established in 2005, the New York State Education Department warned that it was in violation of state law for operating without a NYSED license. Trump ignored the warnings. (The institution is now called, ahem, "Trump Entrepreneur Initiative.") Cue lawsuits.

    Trump University is currently the defendant in three lawsuits - two class-action lawsuits filed in California, and one filed in New York by then-attorney general Eric Schneiderman, who told CNN's New Day in 2013: "We started looking at Trump University and discovered that it was a classic bait-and-switch scheme. It was a scam, starting with the fact that it was not a university."

    Trump U "students" say the same. In his affidavit, Richard Hewson reported that he and his wife "concluded that we had paid over $20,000 for nothing, based on our belief in Donald Trump and the promises made at the [organization's] free seminar and three-day workshop." But "the whole thing was a scam."

    In fact, $20,000 is only a mid-range loss. The lead plaintiff in one of the California suits, yoga instructor Tarla Makaeff, says she was "scammed" out of $60,000 over the course of her time in Trump U.

    How could that have happened? The New York suit offers a suggestion:

    'The free seminars were the first step in a bait and switch to induce prospective students to enroll in increasingly expensive seminars starting with the three-day $1495 seminar and ultimately one of respondents' advanced seminars such as the "Gold Elite" program costing $35,000. At the "free" 90-minute introductory seminars to which Trump University advertisements and solicitations invited prospective students, Trump University instructors engaged in a methodical, systematic series of misrepresentations designed to convince students to sign up for the Trump University three-day seminar at a cost of $1495.'

    The Atlantic, which got hold of a 41-page "Private & Confidential" playbook from Trump U, has attested to the same:

    'The playbook says almost nothing about the guest speaker presentations, the ostensible reason why people showed up to the seminar in the first place. Instead, the playbook focuses on the seminars' real purpose: to browbeat attendees into purchasing expensive Trump University course packages.'

    To do that, instructors touted Trump's own promises: that students would be "mentored" by "handpicked" real-estate experts, who would use Trump's own real-estate strategies.

    But according to the New York complaint, none of the instructors was "handpicked" by Trump, many of them came from fields having nothing to do with real estate, and Trump "'never' reviewed any of Trump University's curricula or programming materials." The materials were "in large part developed by a third-party company that creates and develops materials for an array of motivational speakers and seminar and timeshare rental companies."

    Furthermore, Trump's promises that the three-day seminar ($1,495) would include "access to 'private' or 'hard money' lenders and financing," that it would include a "year-long 'apprenticeship support' program," and that it would "​improve the credit scores"​ of students were empty.

    Those empty promises are the subject of a new series of anti-Trump ads by superPAC American Future Fund. According to Bob, "I never heard from anybody about giving me a list of hard-money lenders". Kevin, another Trump U "student," says Trump University "ruined" his credit score. And according to Sherri, a single mother who participated in Trump U: "It was all supposedly supervised by Donald Trump, run by Donald Trump. All of it was just a fake."

    In fact, Sherri isn't alone. No student ever met the Donald. Despite hints from Trump University instructors that Trump was "going to be in town," "often drops by," or "might show up," he never did. As Matt Labash recounted in The Weekly Standard: "At one seminar, attendees were told they'd get to have their picture taken with Trump. Instead, they ended up getting snapped with his cardboard cutout." Bob, above, had such an "opportunity".

    There could be many more ads to come. The New York lawsuit alone represents some 5,000 victims.

    Meanwhile, Trump - who maintains that Trump University was "a terrific school that did a fantastic job" - has tried to bully his opponents out of the suit. Lawyers for Tarla Makaeff have requested a protective order from the court "to protect her from further retaliation." According to court documents, Trump has threatened to sue Makaeff personally, as well as her attorneys. He's already brought a $100 million counterclaim against the New York attorney general's office.

    But it's not working. Trump himself will have to take the witness stand in San Diego federal court sometime during the election season - and because of the timeline of the cases, a "President Trump" would be embroiled in these suits long after November.

    Meanwhile, if there is any doubt that Trump U was designed to be a scam, The Atlantic puts that to rest with a few other choice tidbits from that "Private & Confidential" playbook used by Trump presenters:

    'Every university has admission standards and Trump University was no exception. The playbook spells out the one essential qualification in caps: "ALL PAYMENTS MUST BE RECEIVED IN FULL." Basically, anyone with a valid credit card was "admitted" to Trump University. . . . If a member of the media happened to approach the registration table, Trump staffers were instructed not to talk to him or her under any circumstance. "Reporters are rarely on your side and they are not sympathetic," the playbook advises.'

    And: At one point, the playbook advises Trump staffers: "If a district attorney arrives on the scene, contact the appropriate media spokesperson immediately." Sounds legit.

    Read more at: http://www.nationalreview.com/corner/432010/trump-university-scam

    [Aug 25, 2016] If shock market crashes we will get Trump in November, otherwise probably Hillary

    Aug 25, 2016 | jessescrossroadscafe.blogspot.com
    This market looks precarious. It may continue on higher as long as real, versus manufactured, volume remains unusually low.

    There are enough corporate buyback programs and sovereign entities, including central banks, willing to buy US equities at these levels. The general public and institutions seem to be sitting this one out.

    I suspect that when an event of sufficient magnitude or type occurs, as they do from time to time, a slide will be triggered, and the wash and rinse of the general public, their pensions and their savings, will begin once again.

    The longer this goes on, the broader the set of events that can trigger the unlikely slide of consequence seems to grow.

    Still, an outright crash would favor the orange-haired presidential contender, and not the poster child for the financial establishment. So that may be an unlikely bet to make before November. They seem to be going all out to sustain the unsustainable.

    This is exciting only if you can see the tensions growing beneath the surface, which is dullsville to the casual observer to say the least. I have to admit I have been growing jaded on this nonsense of late. But a whiff of Autumn is in the air, and after many a Summer, dies the swan.

    So let's see what happens.

    Have a pleasant evening.

    [Aug 24, 2016] Good jobs disaappered and middle class had shruk dramatically in the USA

    Notable quotes:
    "... That said, what I believe is needed in the USA is a doubling down on Corporate Boards of Directors and CEOs to create a crisis, an American intervention, if you will, that demands companies bring back the idea that Profits alone are not all that matters. Serving the Nation you are born in, raised in, educated in, and then making a profitable income from certainly needs to be focused in on. ..."
    "... An additional factor in the financial woes of the falling middle class is the changing demographics here in the US - the growing numbers of single mothers, who are far more likely to struggle financially than a two income household. I make no judgment regarding how people form their family units, but life is especially hard for single mothers. ..."
    "... Its even more difficult for journalists in Guardian. They have to destroy chances of only candidate addressing inequality and climate change (Bernie), completely surrender their integrity to corporations, lament over those issues post factum, and yet be paid miserably only in hundreds of thousands for such colossal betrayal of humanity. Its worth at billions to actively participate in destroying future of your kids. Or is it? ..."
    "... We need a new Federal Minimum Wage, and the wealthiest need to start paying up. Trump claims that business in the US pay the highest tax rate. That's just not true. I'm not talking about putting the burden on small business, but the multi-nationals and Wall Street. ..."
    "... And we can blame Billary and Hussein for it. Their "free-trade" decisions, along with their shameful endorsement of open-borders, have lowered wages for everyone, except for financiers. Interestingly, it was those who've suffered the brunt of the elites' decisions who voted for Britain to leave the EU. Ironically, those who professed to stand for the middle and lower classes, revealed their hypocrisy when they joined the Mandarins in opposing for Britain to leave the totalitarian EU. ..."
    "... Like the Trojans fearing present-giving presents, so should the working man loath the elites who promised to have their best interests at heart. That is the same promise communism gave the workers, only to turn on and enslave them. Today the workers don't stand a chance: the Marxists and bankers are on the same side sneering at the working classes who are demeaned as being racist, jingoistic xenophobes. ..."
    "... An article in Forbes that explains why Obamacare is a scam. ObamaCare Enriches Only The Health Insurance Giants and Their Shareholders ..."
    "... I agree with you that he never did. Obama is a corporatist and globalist. If you think Obamacare is bad wait until his trade deals are past. He sold Americans out for the profits of multinational corporations. Hillary will continue his work. I understand the true meaning of his words now. ..."
    "... The US middle class has been disintegrating for decades as inequity grows ..."
    "... Clinton is in hiding. I can't find her in the Guardian today. She is a habitual liar and the whole world has all the evidence it needs. All of her promises are bullshit. Bernie has been right the whole time and he is smart not to endorse. Bernie has always known what she is and Bernie's supporters have no reason to support her. ..."
    "... It means she is corrupt, dishonest, and unqualified to be anything but an inmate. ..."
    "... the middle class has been decimated.. This financial category is only about 35% of was it was in the early 70's.. additionally the definition of middle class has changed drastically as well.. believe it or not your middle class if your earn more than 50k a year!.. this is part of the reason we are as a nation borrowing a trillion dollars a year.. when will the silenced majority wake up and start voting and stop spending on products that are vastly over priced. ..."
    "... My kid had a persistent tummy ache. Doc said intestinal blockage; take him to the ER immediately. Seven hours and one inconclusive CAT scan later, he's home again with symptoms unchanged. Two days later the pain went away. Cost: $12,000 with about $10,000 covered by union health insurance. So that's at least $2,000 out of pocket to me for seven hours in hospital, zero diagnosis and zero relief from symptoms. Medicine as a criminal enterprise? So what? Who's gonna stop it? The press? The law? ..."
    "... I sympathize. I also agree with you. The US medical system is criminal. It is cruel, discriminatory, ruthless, often ineffective, and often incompetent. The only reason the administrators ("health" maintenance corporations) aren't in jail is because they use some of their obscene profits to buy Congress -- which passes laws like Obama's ACA or Bush's big Pharma swindle. I have no idea what to do about it though -- maybe if everyone refused to pay their premiums and medical bills, the money managers would notice. A sort of strike. ..."
    "... SIngle-payer is the answer. Of course, the insurance companies and big pharma use scare tactics to stop that from happening. They talk about government waste, completely ignoring their own waste. They ignore the billions of dollars that they skim off of the top each year before applying any money for actual medical care. Wake up, people. Medical care should be run by the government or non-profit organizations, not by for-profit corporations. ..."
    "... Despite the financial situation in middle-and lower income families that has been steadily declining under the past 8 years of the Obama administration, most in that group will support Hillary and propagate the Same problems for 4 more years. They stand no hope unless they break from the knee-jerk support of the "Democratic" Party. ..."
    "... So they should support Donald Trump and the conservative party? Last time I checked raising taxes on the middle class while lowering taxes on the rich didn't really help anyone but the rich. The Republican party never gave two shits about middle and lower class, and there's no point believing they will start now. ..."
    "... Isn't choosing to have three children very selfish if you cannot support them financially. People always find someone else to blame. ..."
    "... "Race" card!!?? Where the hell did I mention anything about race or are you really as dumb as your reply suggests. Plus, you don't require a test to decide if you can afford children or not. It basic family planning. It's people like you in society that has the place in a mess with your "blame anyone but meself attitude" If I'm considered horrible, at least I'm not totally dumb and irrisponsible like you. ..."
    "... Bill Maher recently (July 1, 2016; Overtime) editorialized about the state "laboratories" where new ideas are tested and evaluated. Maher compared the divergent fates of California and Kansas plus Louisiana. ..."
    "... It's interesting. According to my household income I'm in the "upper" tier for the DC-metro region. But it really doesn't feel that way. Even those of us who make a good income are more and more stretched. In comparison to most of the country, I am well off. I own a car, just bought a house, I can afford to go out to eat a couple times a week. But, I even get to the end of the month with only $100 in the bank. That's because other downward pressures on pay aren't taken into account, such as student debt. My expensive undergraduate and graduate education didn't come cheap, and while that education affords people higher pay, if you end up taking less of it home. It kinda equals out. ..."
    "... Sometimes my husband and I think about having kids, and then we realise that even with our good paying jobs, we can't afford day care in our area. I get paid the most, so I can't quit my job but if my husband quit to care for a child, we would really be strapped. Can I really be considered an upper tier household if I can't afford to have kids? If I can't afford to go on vacation once a year? If I haven't bought new clothes in two years? If I have no savings and a freak medical bill might just tip me over the edge? ..."
    "... Suggest you give Andrew Tobias' book a read to think outside the box a good education often constructs for us: https://www.amazon.com/Only-Investment-Guide-Youll-Ever/dp/0544781937?ie=UTF8&ref_=asap_bc ..."
    "... You can cut student debt in the U.S. by attending a good community college for two years and then transferring to a state university. Most kids are unwilling to do this--no frats or prestige in community colleges! ..."
    "... Beginning in the 1970s, a majority of the middle class began to resent the taxation needed to continue support for these liberal policies, and they began to vote for conservative politicians who promised to remove them as they "only helped the undeserving poor." White racism played a role in this as the lower class was invariably portrayed in political speeches and advertising as group of lazy black people. ..."
    "... No, it was created in response to the Bolshevik revolution, in particular, to that genius who said "Let's just shoot the royal family and be done with this." ..."
    "... All of these things have come under attack since the USSR fell apart, probably on that exact day. And who overthrew the USSR? Overeducated middle class, not the poor or the rich. Who was Occupy Wall Street, Arab Spring... the recent protests against the French labor law tightenings, ALL the middle class. ..."
    "... The greatest threat to governments has, and always will be, from within. And this threat is from the middle class, almost exclusively. Therefore, we are to be crushed and controlled tightly ..."
    "... funny how this media outlet didn't publish these types of reports while the primary was hot. It was all "Hilary is inevitable and supporting Bernie is supporting Trump" type garbage. ..."
    "... Probably he means to say Americans habitually ask new acquaintances, "What do you do for a living?" That's absolutely a query about income and personal worth, though slightly disguised, and it's a question I have never widely encountered anywhere else in the world, nor while living overseas the last ten years. ..."
    "... This article is extremely dishonest. First, it claims that she has 'three other jobs'. Second, she has children, for whom she presumably gets child support. So what's her *real* income? ..."
    "... When those in poverty or on the verge of it are single mothers, you tend to wonder if there are some other issues as well. I don't recall a time in American history where a single mother of several children could take care of herself when completely on her own. ..."
    "... I teach in inner city schools. There are so many problems, money is one of them but all the money won't solve the problem of poor learning attitudes, disaffection, poor discipline and nonexistent work ethic . ..."
    "... A lot of the students get no discipline at home and their parents don't expect them to learn anything. They are resistant to the whole process of focus on new knowledge , absorb, drill, recall , deploy newly learned thing. ..."
    "... I don't know what solution there is to this. My nieces and nephews did well in school, studied hard, and went on to university. They didn't do drugs, rape or be raped, and stayed away from unsavory kids. BUT--they went home to two parents every night, a father and mother, which I think would have made them successful at school no matter what their income. ..."
    "... The US economy isn't competitive anymore. It started with the labor cost being too high, so factories moved out. Then the entire supply chain moved out. Now the main consumer market is also moving out. Once that is gone, we will have no more leverage. ..."
    "... The US education is good, but students are lazy, undisciplined, and incurious. In silicon valley, more than 75% of highly paid technical personnel are foreign born. Corporations making money with foreign workers here and abroad, on foreign markets. Taking these away and you will see the economy crash. ..."
    "... Labor costs were too high. Have some more kool-aid. The elite didn't want labor to have any bargaining power whatsoever . They wanted to dictate the terms to labor believing that they were the only ones who should have any say in matters. The elite wanted to maximize their profits at the expense of their own citizens. They wanted slave labor . They wanted powerless people to dance to their tune. How could an advanced nation's labor possibly compete with slave labor . ..."
    "... Sadly ..... thee isn't any hope for these people in the foreseeable future . Their economic decline has been happening for quite some time now and shows no sign of abating whatsoever . The economic foundations of their lives have been steadily pulled out from under them by the financial elite and their subservient political cultures , the Republican and Democratic Parties . The Republicans have never really given a damn about them and the Democrats have long abandoned them . These poor people of North Carolina are adrift on a sinking raft on easy ocean of indifference by the political cultures of America . To those in power , they don't exist . They don't count . They don't matter . ..."
    "... The trend in the U.S, along with almost every other major nation in the world over the past 35 years has been to exclusively serve the interests of the financial elite and only their needs . All sense of fairness , justice and decency have been totally discarded . ..."
    "... Tax breaks after tax breaks , tax shelters , free movement of capital , etc., etc. would sum up the experience of the financial elite over the past 35 years . They have become incredibly wealthy now and are still not satisfied . They want more . They want it all . They want what little you have and their political servants which help them get . ..."
    "... Political discourse pertaining to the plight of those like these folks in North Carolina is all window dressing . In the end , you can be certain that it will amount to nothing . Just like it has for decades now . The financial elite are in control and they are not going to give any of that control up . As a matter of fact , they are going to tighten their grip . They will invent crisis to have their agendas imposed upon an increasingly powerless and bewildered public . They will take advantage of every naturally occurring crisis to advance their agenda . ..."
    "... The problem is the job exporting American elite class. NAFTA was an economics, political, and social experiment with all the downside on the former, mostly lower middle class. Non-aligned examination of the available data shows how disastrous NAFTA has been to America's bubbas. Thanks to Bush 41 and Bill Clinton. WTO was all Bill. Of the mistakes Obama has made TPP would be the worst. The question is, really, do we favor global fairness (an even playing field for all earth's peoples) and a climate-killing consumerist world, or our own disadvantaged (courtesy of our financial and political elite) citizens. Not an easy choice. Death by poison or hanging. No treaty can benegotiated fairly in secret. ..."
    "... The tragic irony is that the anger against rule by the 1% manifests in things like support for Trump, a typical example of the greed and excess of the 1%. Americans need to question outside their desperately constrained paradigms more. It will help focus their anger more strategically, and possibly lead to solutions. Don't hold your breath, the inequality gap is accelerating the wrong way. ..."
    "... I think the US is heDing for trouble. It is the middle class that maintains civil society and gives a sense of hope. This is an interesting open letter by a zillionaire to his peers warning them what happens without a string middle class. A thought provoking read. http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014 ..."
    "... The elite of the USA have done exactly what the Romans did and what the Pre-Revolutionary French did.... drain the lower classes while enriching themselves. "Taxes are for little people" is not just a pithy quote, it has become the reality as the elite rig the system so they benefit and the lower classes pay. They need to wake up or they will get exactly what the Romans Got (collapsed empire) or the French got (Violent Revolution). Wake up America! It is time to choose your side in the class war the elite continue to execute while telling us there is no "Class War" - you can't pull yourself up by your boot straps while they are pulling the rug out from under you! ..."
    "... My wife used to employ recent graduates from Georgetown University with poli. sci., psychology, sociology degrees, to stack books for $10/hr. It took them on average 2-3 years, before finding work in their field. ..."
    "... Education is NOT about finding a job! It's about learning ways to seek wisdom and rationality, and to assimilate (not deny) new knowledge throughout your life--and that's exactly what's lacking in the US! Our schools are factories to turn out standard robots to be used by the owners of this country, whether they practice law or flip burgers. ..."
    Aug 24, 2016 | www.theguardian.com
    HopeWFaith, 9 Jul 2016 16:04

    I was stumped by the very idea that someone has the $money, the time, the energy to go out and study for 3 bachelor degrees. This woman doesn't look old enough to have had time to get 3 degrees.

    That said, what I believe is needed in the USA is a doubling down on Corporate Boards of Directors and CEOs to create a crisis, an American intervention, if you will, that demands companies bring back the idea that Profits alone are not all that matters. Serving the Nation you are born in, raised in, educated in, and then making a profitable income from certainly needs to be focused in on.

    Why on earth isn't Main Stream Media doing this, along with all of CONGRESS and the President? What is their excuse? Even if you brought back all the robotic jobs to US soil, you would also end up bringing a large number of administrative jobs back here, too, just to keep up with the business at hand. It is critical that we rebuild our infrastructure, yet we see NO immediate or Long-term plans to do so. How can we, without the support of the Business Class to support the whole nation through Paying their Taxes to the US Tax System? There is no excuse that will do, in my book. Profits to the top tier need to be STOPPED so long as businesses are going outside of the United States Borders. Period.

    SluethforTruth , 2016-07-07 12:39:08

    Typical of what's happening around the world. The trillions of dollars lurking in tax havens is the reason why economies are stagnating. Money makes the world go round, however detouring to the Cayman Islands, the flow stops and the poverty begins. Spend locally and reject multi national corporations. Give your local communities a chance to prosper,
    Snaggletooth718 , 2016-07-07 12:40:07
    An additional factor in the financial woes of the falling middle class is the changing demographics here in the US - the growing numbers of single mothers, who are far more likely to struggle financially than a two income household. I make no judgment regarding how people form their family units, but life is especially hard for single mothers.
    saladbowl , 2016-07-07 12:46:52
    "The 2016 presidential race has superficially been dominated by talk of this declining middle. First from Bernie Sanders, then Hillary Clinton and even Donald Trump's promise to Make America Great Again"

    "And even"??? What a laugh. Even if you hate Trump its clear The Guardian has written every article possible to prevent his rise and they have failed miserably. Hillary amd Sanders are dominating conversatiin. Trump is by far.

    One thing us for sure. 15 million illegals and thousands more every month is not making the middle class more secure.

    They are shrinking, and you expect them to tolerate "Make America Mexico Again"? In these times?

    Donor money is ruining the country. They hate Trump because he doesnt need these arrogant donors who have never heard "no" their whole lives.

    peonyrose , 2016-07-07 12:47:08
    If ordinary people have to work three jobs to make ends meet, then you need to say that wages in the US are too low.
    Slavenko Sucur -> peonyrose , 2016-07-07 14:29:52
    Its even more difficult for journalists in Guardian. They have to destroy chances of only candidate addressing inequality and climate change (Bernie), completely surrender their integrity to corporations, lament over those issues post factum, and yet be paid miserably only in hundreds of thousands for such colossal betrayal of humanity. Its worth at billions to actively participate in destroying future of your kids. Or is it?
    SusanPrice58 , 2016-07-07 12:53:59
    It isn't immigration that costing jobs - it's employers who know they can pay these people less for their work. We need a new Federal Minimum Wage, and the wealthiest need to start paying up. Trump claims that business in the US pay the highest tax rate. That's just not true. I'm not talking about putting the burden on small business, but the multi-nationals and Wall Street.
    RaceOfStalwarts -> SusanPrice58 , 2016-07-07 14:06:02
    You can see in western Europe at the moment that a minimum wage desn't work without a whole host of other protective legislation. A minimum wage doesn't reach to the self employed, and it doesn't prevent the use of flexible or non-guaranteed hours contracts making use of a larger than is required labour pool. Not to mention the black market / cash in hand trade.
    BritainFirst2016 , 2016-07-07 12:55:21
    And we can blame Billary and Hussein for it. Their "free-trade" decisions, along with their shameful endorsement of open-borders, have lowered wages for everyone, except for financiers. Interestingly, it was those who've suffered the brunt of the elites' decisions who voted for Britain to leave the EU. Ironically, those who professed to stand for the middle and lower classes, revealed their hypocrisy when they joined the Mandarins in opposing for Britain to leave the totalitarian EU.

    Like the Trojans fearing present-giving presents, so should the working man loath the elites who promised to have their best interests at heart. That is the same promise communism gave the workers, only to turn on and enslave them. Today the workers don't stand a chance: the Marxists and bankers are on the same side sneering at the working classes who are demeaned as being racist, jingoistic xenophobes.

    pawildcat -> BritainFirst2016 , 2016-07-07 13:51:28
    You realize most of the votes in favor of NAFTA were Republican and most against were Democratic, right? You know that "free trade" has been an item in the Republican platform (and increasingly the Democratic one) for years before Clinton and Obama were ever in office, right? Know some elementary facts about U.S, politics before posting nonsense.
    daWOID -> Ed Thurmann , 2016-07-07 13:47:41
    Ed Thurmann: it's not teacher-bashing, it's just the old recycled "black family values" spiel that was introduced into the poverty debate in the '60s by Daniel Patrick Moynihan. Moynihan, not so BTW, is Hillary Clinton's intellectual hero. So you can expect a hell of a lot more of these cliches after January of next year.
    Juillette , 2016-07-07 13:26:03
    An article in Forbes that explains why Obamacare is a scam. ObamaCare Enriches Only The Health Insurance Giants and Their Shareholders

    Robert Lenzner , CONTRIBUTOR
    I'm trying to wise up 300 million people about money & finance

    So far in 2013 the value of the S& P health insurance index has gained 43%. Thats more than double the gains made in the broad stock market index, the S & P 500. The shares of CIGNA are up 63%, Wellpoint 47% and United Healthcare 28%. And if you go back to the early 2010 passage of ObamaCare, you will find that Obama's sellout of the public interest has allowed the public companies the ability to raise their premiums, especially on small business, dramatically multiply their profits and send the value of their common stocks up by 200%-300%. This is bloody scandalous and should be a cause for concern even as the Republican opponents of the bill threaten the close-down of the government.

    We warned you back on December4, 2009 in my blog " The Horrendous Truth About Health Care Reform" that the Obama White House was handing a " free ride for the health insurance industry" that would allow premium hikes of 8%-10% a year by CIGNA, Humana HUM +1.56%, Aetna AET +0.45%, UnitedHealth Group UNH +0.58% and Wellpoint, and as well a $500 billion taxpayer subsidy, a half trillion dollars without any requirement that the health insurers had to spend the subsidy on medical care. Several US Senators including Jay Rockefeller of West Virginia spoke to me openly of the outrageous sellout being foisted on the nation's uninsured citizens.

    At the time I wrote, Goldman Sachs research operation estimated that the 5 giants would increase profits by 10% a year from 2010 to 2019, sending their shares up an average of 59%. In truth, the shares of CIGNA and some others are up a multiple of several times since the contest was resolved by a very tight vote in early 2010. One startling reason for this amazing performance was that Obama took off the table "proposals to significantly reduce health care costs" as the giveaway in getting the bill through, according to Ron Susskind's best-selling book ,"Confidence Men," which I wrote about in a blog on September 24, 2011. ( "Obama's Incoherent Policy-Making") Some 3 years later, UnitedHealthCare Group(UNH) was rewarded by being added to the elite list of the Dow 30 industrials.

    I understood belatedly that there would have been no Affordable Care Act of 2010 if the White House had not given into demands from the giant profit-making health insurance companies. Had he not done so, I am being assured that there would have been no bill passed, a priority goal that Obama promised in his 2008 Presidential campaign. How the profits have risen so impressively requires further investigation as the bill is meant to limit the profits earned to 20% of the revenues.

    One of the other downsides to the supposed reform bill was the surprisingly unfair treatment of small business owners who faced even larger potential premiums for their employees. It has been the fear of these higher health costs that has resulted in the overwhelming trend toward hiring part-time employees whom the employers need not offer healthcare insurance.

    So much for the reforms embedded in the mis-labeled Affordable Care Act of 2010. It may not die a bloody demise this month, but it is certain to be reformed itself, let's hope for the benefit of the 300 million, not just the millions of lucky shareholders who may have understood the ramification of ObamaCare, which was to multiply the profits of five giant insurance companies, just as the major bank oligopoly was rewarded by the federal bailouts and Fed monetary policy.

    Juillette -> Andrew Kac , 2016-07-07 14:16:34
    I agree with you that he never did. Obama is a corporatist and globalist. If you think Obamacare is bad wait until his trade deals are past. He sold Americans out for the profits of multinational corporations. Hillary will continue his work. I understand the true meaning of his words now.

    "We are a nation of immigrants" meaning he prefers cheap illegal labor when 46 million Americans live in poverty. Soon cheap foriegn will be unlimited and legal in the US with worker mobility. Even for professional jobs. Can you imagine competing with foreigners in the US who make 30 cents an hour? It's depressing really. Here are some of the highlights of the TPP that will throw Americans further into poverty.

    http://www.citizen.org/TPP

    Also research Tisa.

    barbkay , 2016-07-07 13:49:42
    My heart goes out to these beleaguered families. In the late 1970s/80s I held down a full-time job in DC and freelanced feverishly to make ends meet. I lived below the official poverty line in an expensive, yet thoroughly crappy, flat. That recession-riddled era of energy chaos, leading into Reagan's 'voodoo' economics regime (the risible idea of 'trickle-down', the US becoming the world's largest debtor), was another hot mess.

    The US middle class has been disintegrating for decades as inequity grows, thanks in large part to the poor governance of Republican presidents (Nixon's stagflation, the disastrous shifts under GW Bush).

    FugitiveColors , 2016-07-07 13:53:22
    Clinton is in hiding. I can't find her in the Guardian today. She is a habitual liar and the whole world has all the evidence it needs. All of her promises are bullshit. Bernie has been right the whole time and he is smart not to endorse. Bernie has always known what she is and Bernie's supporters have no reason to support her.

    Her disapproval ratings will top Trump now. The voters are now going to show her what the meaning of is, really is.

    It means she is corrupt, dishonest, and unqualified to be anything but an inmate.

    MasonInNY -> FugitiveColors , 2016-07-07 16:08:57
    Her disapproval ratings are high, but not up with Trump's and they never will be. You can vote for Jill Stein, the Green Party candidate, in November. Or Gary Johnson, the Libertarian. But Bernie will not be a candidate, and he will eventually endorse Clinton -- after he is sure he's won certain concessions in the Democratic platform. That's your reality in July 2016, not in February.
    brianBT , 2016-07-07 14:16:48
    the middle class has been decimated.. This financial category is only about 35% of was it was in the early 70's.. additionally the definition of middle class has changed drastically as well.. believe it or not your middle class if your earn more than 50k a year!.. this is part of the reason we are as a nation borrowing a trillion dollars a year.. when will the silenced majority wake up and start voting and stop spending on products that are vastly over priced..Turn off your phone, stop buying all but essentials.. we need to force prices down until we complain and start voting with our dollars little will change
    MtnClimber -> ojeemabalzitch , 2016-07-07 15:37:37
    What about the millions of married couples with kids..when the parents lose their jobs? That happens very frequently. Should we take the kids away? Are you suggesting that poor people not be allowed to have children?

    Then we have the religious nutcases that are against contraception and abortion, yet demonize poor women for having children.

    NYbill13 , 2016-07-07 14:34:59
    My kid had a persistent tummy ache. Doc said intestinal blockage; take him to the ER immediately. Seven hours and one inconclusive CAT scan later, he's home again with symptoms unchanged. Two days later the pain went away. Cost: $12,000 with about $10,000 covered by union health insurance. So that's at least $2,000 out of pocket to me for seven hours in hospital, zero diagnosis and zero relief from symptoms. Medicine as a criminal enterprise? So what? Who's gonna stop it? The press? The law?

    Hahahahahahahaha.

    ojeemabalzitch -> NYbill13 , 2016-07-07 14:58:00
    So? If your car breaks down it will cost a fortune to repair. Same if you have to replace the roof on your house. Life ain't fair, is it?
    MiltonWiltmellow -> NYbill13 , 2016-07-07 15:14:26

    Medicine as a criminal enterprise? So what? Who's gonna stop it? The press? The law?

    I sympathize. I also agree with you. The US medical system is criminal. It is cruel, discriminatory, ruthless, often ineffective, and often incompetent. The only reason the administrators ("health" maintenance corporations) aren't in jail is because they use some of their obscene profits to buy Congress -- which passes laws like Obama's ACA or Bush's big Pharma swindle. I have no idea what to do about it though -- maybe if everyone refused to pay their premiums and medical bills, the money managers would notice. A sort of strike.

    MtnClimber -> MiltonWiltmellow , 2016-07-07 15:35:28
    SIngle-payer is the answer. Of course, the insurance companies and big pharma use scare tactics to stop that from happening. They talk about government waste, completely ignoring their own waste. They ignore the billions of dollars that they skim off of the top each year before applying any money for actual medical care. Wake up, people. Medical care should be run by the government or non-profit organizations, not by for-profit corporations.

    Corporations have only one goal...to make as much money as possible for themselves. Health care is just a necessary nuisance.

    Ykuos1 , 2016-07-07 14:37:56
    Despite the financial situation in middle-and lower income families that has been steadily declining under the past 8 years of the Obama administration, most in that group will support Hillary and propagate the Same problems for 4 more years. They stand no hope unless they break from the knee-jerk support of the "Democratic" Party.
    Sam Ahmed -> Ykuos1 , 2016-07-07 14:45:51
    So they should support Donald Trump and the conservative party? Last time I checked raising taxes on the middle class while lowering taxes on the rich didn't really help anyone but the rich. The Republican party never gave two shits about middle and lower class, and there's no point believing they will start now.
    KMdude , 2016-07-07 14:43:46
    This article mentions Latonia Best and her three children. Is there a Mr Best around? It has always been tough to raise a family on the salary of a single parent.

    The breakdown of the American family is a probably the biggest reason for the supposed struggles of the middle class. People have to take responsibility for their lives.

    Elephantmoth -> KMdude , 2016-07-07 14:56:57
    Sure, because every misfortune can be blamed on the individual. You have no idea why Mr Best isn't around so please spare us your moralising.
    rebeccazg -> KMdude , 2016-07-07 14:57:51
    traditionally, the middle class had the guy going out to work, and his wife staying at home to look after the kids. Once children are in school and childcare is reduced, I don't see how a woman working and raising her kids alone, is any more expensive than a man supporting himself, his wife and their kids.

    It used to be possible. It used to be doable. wealth disparity ind income inequality mean that is no longer the case, at least certainly not for the average middle class. In the UK anyway, it's now a sign of wealth. This has nothing top do with the family and everything to do with income disparity.

    Liverpooljack1 , 2016-07-07 15:02:53
    Isn't choosing to have three children very selfish if you cannot support them financially. People always find someone else to blame.
    MtnClimber -> Liverpooljack1 , 2016-07-07 15:27:08
    Ah. I was waiting for some "bubba" to pull the race card. Congratulations. Maybe we should make everyone take a test to prove that they can afford children. No children for poor people. Nice.

    You are a horrible person.

    Liverpooljack1 -> MtnClimber , 2016-07-07 16:05:10
    "Race" card!!?? Where the hell did I mention anything about race or are you really as dumb as your reply suggests.
    Plus, you don't require a test to decide if you can afford children or not. It basic family planning. It's people like you in society that has the place in a mess with your "blame anyone but meself attitude" If I'm considered horrible, at least I'm not totally dumb and irrisponsible like you.
    Quesera -> Donald Inks , 2016-07-07 16:00:32
    $3,333.33 is actually not a lot of money to raise a family of four on. Let's do some math, shall we?!

    Taxes: $800 (rough estimate)
    Health Insurance: I'm going to estimate $300 because she probably has dependents on her coverage and that's what I paid one dependent a while back.
    Car: I'm going to estimate $150. My car payment is $300, but let's say she got a cheaper, used car.
    Rent: Let's say $1,000/month (I did a quick search and found that this seemed like a good price for a two bedroom)
    Bills: Let's round up to $150/month for gas, electricity, water, sewage
    Food: Let's say she spends $80/week, so roughly $320 a month (you know, she's a thrifty shopper)

    All of that leaves about $313 left for gas, phone, college tuition, maybe internet and cable at home. I don't know how she does it.

    MiltonWiltmellow , 2016-07-07 15:04:56

    Worst of all was the town of Goldsboro – one of three metropolitan areas in North Carolina at the bottom of the national league table.

    North Carolina, Michigan, Kansas, Louisiana, Oklahoma ... more ...

    Sad stories in states run by Republicans. Toxic rivers, shootings, poisoned tap water, bankruptcy, daily earthquakes ...

    Bill Maher recently (July 1, 2016; Overtime) editorialized about the state "laboratories" where new ideas are tested and evaluated. Maher compared the divergent fates of California and Kansas plus Louisiana.

    Kansas is going bankrupt under the Republican governor and legislature, the Louisiana economy is a basket case thanks to Republican Bobby Jindal while just a few years ago, under Republican Arnold Schwarzenegger, California was billions in debt.

    In California they threw out the Republicans, put Democrats in charge, raised taxes on the rich and voila -- now with a surplus, California is ranked as the sixth largest economy in the world:

    Only five countries produced more last year than California: the U.S., China, Japan, Germany and the United Kingdom.

    So -- North Carolina with fouled rivers, a collapsing middle class, discriminatory laws -- or a thriving California?

    Goldsboro remains far from the sort of economic catastrophe seen in parts of the rust belt, but these are signs of financial stress that are hard to ignore. The strain on the middle class across much of the country may not have gone unnoticed by politicians, but locals here fear there is little talk of the investment in skills, high-paying jobs and civic infrastructure needed to arrest the slide.

    Republican shills will have to admit -- finally that Republican policies ruin lives, ruin the economy and ruin the environment. Truth appears more powerful than slogans and slanders. Who knows? They might even acknowledge climate change.

    Profhambone -> MiltonWiltmellow , 2016-07-07 15:47:30
    I believe it is the wars and needs of the military-industrial-banking complex that sap far too much from the economy. Both parties are guilty of supporting them.
    ehmaybe -> MiltonWiltmellow , 2016-07-07 15:52:52
    North Carolina with fouled rivers, a collapsing middle class, discriminatory laws -- or a thriving California?

    Since 2013, North Carolina has the fastest GDP growth of any state. The NC economy is not in bad shape. This lady lives in one of the poorest areas in the state, she should move 45 minutes north to thriving Raleigh or Durham - the population in that area is booming, they need teachers.

    The dumping of coal ash into the Dan river was a corporate crime, not a policy decision. Neither party is responsible for criminal actions by individuals or corporations, that's just silly. (The republicans have been too lax in holding Duke Energy to account but the damage done is not a political issue)

    HB2 is a disgrace but the legislature is in the process of correcting it and the Governor is likely to lose the election in the fall which bodes well for anti-HB2 people. Don't forget that California voters voted to ban gay marriage not even 10 years ago. It's not a paradise of wealth and enlightenment, no place is.

    Voltaire21 , 2016-07-07 15:16:57
    Why should we feel sorry for the American middle class they have elected for all the misery that has befallen them!

    If America was a fascist state I could sympathise but it's not. Americans have let their social rights being eroded by a mendacious and cunning establishment.

    One good example of how Americans don't give a shit is the very expensive wars in Iraq and Afghanistan which have cost gazillions to the US taxpayer and not a whimper from the US population.

    If one can compare that to the Vietnam war which created its own critical cinema genre, protest songs, large demonstrations etc...you know that todays average Americans responsibility for the mess they find themselves in is non existent. They just bend over and take it and have little whine about it from time to time.

    Quesera -> Voltaire21 , 2016-07-07 15:48:37
    What about the people that didn't vote for the "misery" as you call it?

    What about the fact that whichever way you vote in the US you're screwed?

    And I don't know about you, but you must not know many Americans. The number of my friends who have been tear gassed during marches against the Iraq war flies in the face of your argument. Have you, yourself, even uttered a whimper against it?

    Bardolphe , 2016-07-07 15:20:20
    I will support proper child-support and healthcare and everything that can be done to make this woman's life easier and secure her kids' futures BUT

    Three kids is a LOT for two people to handle, let alone one.

    To paraphrase Lady Bracknell, to raise one child alone may be regarded as a misfortune; to attempt to raise three looks like carelessness. To try to raise three alone in the United States is MADNESS.

    I live in the USA. I'm in a stable long-term relationship. I don't make much money. I can't afford kids.

    2 + 2 = 4

    Poor me. I don't say I have a right to kids because I need them or I have so much love to give or blah, blah, blah. I just can't. Not here. This is a cruelly individualistic country. It is built to serve those who serve themselves. Namely, the young, healthy, smart, motivated and single. There is no political foundation or tradition of altruism here. Maybe back in Ireland where there's a system to support me and some healthcare and family. Not here. Madness.

    Happyduckling -> Bardolphe , 2016-07-07 15:36:41
    But she's got the kids now. What is she supposed to do? Hand them back to someone? If she and the childrens' father had them when life was looking more stable and she didn't have to work 4 jobs to make ends meet, she can hardly be blamed now for their existence.

    You are living in the now and choose not to have children because you feel you can't afford them. However, in the future, you may find that you can afford them, and therefore choose to conceive. If your circumstances change after that and you are no longer able to afford to care for them without working excessive hours and living in poverty, there's not a lot you can do other than get on with it. No point blaming her for something that is irreversible.

    Bardolphe -> OinkImSammy , 2016-07-07 15:41:05
    That is not my point and you absolutely know it is not my point.

    Stop pretending that birth control doesn't exist. It exists.

    Quesera , 2016-07-07 15:42:11
    It's interesting. According to my household income I'm in the "upper" tier for the DC-metro region. But it really doesn't feel that way. Even those of us who make a good income are more and more stretched. In comparison to most of the country, I am well off. I own a car, just bought a house, I can afford to go out to eat a couple times a week. But, I even get to the end of the month with only $100 in the bank. That's because other downward pressures on pay aren't taken into account, such as student debt. My expensive undergraduate and graduate education didn't come cheap, and while that education affords people higher pay, if you end up taking less of it home. It kinda equals out.

    Sometimes my husband and I think about having kids, and then we realise that even with our good paying jobs, we can't afford day care in our area. I get paid the most, so I can't quit my job but if my husband quit to care for a child, we would really be strapped. Can I really be considered an upper tier household if I can't afford to have kids? If I can't afford to go on vacation once a year? If I haven't bought new clothes in two years? If I have no savings and a freak medical bill might just tip me over the edge?

    There's something very, very wrong. How rich do you need to be before you don't feel like you're struggling?

    Scott Plantier -> Quesera , 2016-07-07 15:55:19
    Thanks for the great post, but whatever will be, will be, unless you get in front of it and plan.

    Suggest you give Andrew Tobias' book a read to think outside the box a good education often constructs for us: https://www.amazon.com/Only-Investment-Guide-Youll-Ever/dp/0544781937?ie=UTF8&ref_=asap_bc

    Spunky325 -> Quesera , 2016-07-07 20:31:21
    You can cut student debt in the U.S. by attending a good community college for two years and then transferring to a state university. Most kids are unwilling to do this--no frats or prestige in community colleges!
    Nash25 , 2016-07-07 15:48:56
    The huge middle class in the USA was created by the liberal economic polices of the 1930s, which were designed to help the lower class.

    Beginning in the 1970s, a majority of the middle class began to resent the taxation needed to continue support for these liberal policies, and they began to vote for conservative politicians who promised to remove them as they "only helped the undeserving poor." White racism played a role in this as the lower class was invariably portrayed in political speeches and advertising as group of lazy black people.

    What the middle class did not understand was that their continued existence depended on these liberal programs, as most of the benefits went to the middle class, not the lower class as they assumed. As the liberal programs began to disappear, so did the economic security of the middle class.

    One would think they would have figured all of this out by now, but they have not, and they continue to vote for conservatives.

    pbalrick -> DrSallyWinterton , 2016-07-07 17:21:27
    No, it was created in response to the Bolshevik revolution, in particular, to that genius who said "Let's just shoot the royal family and be done with this." When that happened, the ruling class got scared, and said "OK, minimum wage, vacation, sick pay, 40 hr work week, no child labor, great schooling, etc"

    All of these things have come under attack since the USSR fell apart, probably on that exact day. And who overthrew the USSR? Overeducated middle class, not the poor or the rich. Who was Occupy Wall Street, Arab Spring... the recent protests against the French labor law tightenings, ALL the middle class.

    The greatest threat to governments has, and always will be, from within. And this threat is from the middle class, almost exclusively. Therefore, we are to be crushed and controlled tightly.

    Scott Plantier , 2016-07-07 15:49:55
    " squeezed middle class tell tales of struggle " Too bad they voted for the big squeeze herself -- Bernie could have set them free from the path of exploitation she has planned for them immediately after her election by imposing the TPP upon the very fools who will elect her. Stop watching the Kartrashians and read about actual policy implications for your family and especially your children, if you had, none of you would have supported Clinton.
    pbalrick -> Scott Plantier , 2016-07-07 17:15:29
    funny how this media outlet didn't publish these types of reports while the primary was hot. It was all "Hilary is inevitable and supporting Bernie is supporting Trump" type garbage.
    biglio , 2016-07-07 15:58:38
    Education in the US...oh boy....

    I lived in Pittsburgh for 8 years, being European I sent them to public school...well, after a year in which my six years old son was suspended twice for running around at lunchtime when he shouldn't (six years old tend to do that), numerous recesses where they were put in front of a TV (we cannot send them outside, insurance doesn't cover if they get hurt and we got sued before), and notes from teachers full of spelling mistakes......I had to send them to private school perpetuating a cycle of poor people in public system and rich people (or middle class as i was at the time) to private schools....

    i don't know what needs to be done to fix the issue but it's the whole society that is really divided along money lines and race lines and inequality is getting worse. But money trumps everything, the US is the only place int he world where it's not considered unpolite to ask people :"what's your worth?" meaning how much you make, what are your assets, etc.....instilling in people a mentality of self worth based on money and consequentially a cutthroat environment where the more you have the more you are worth, so at the top they squeeze the lower end, to make more money but also because they think they are really not that worthy....its a perverse cycle that history taught us doesn't bring any good because at a certain point the poor reach a critical mass that will just revolt......I'm waiting for that, good luck...

    biglio -> ehmaybe , 2016-07-07 16:24:09
    I'm afraid my friend we disagree on that, excellent public schools are exceptions, there are some but they are a minority (International statistics on education quality validate that), I don't live in the US anymore but travel a lot there for business (at least 20 times a year). As for the worth question I had it asked to me quite a few times and kind of everywhere, maybe it's unpolite, I believe it's unpolite, but it happens regularly and only in the US (let me rephrase, in the rest of the world it wouldn't be considered unpolite, that's too mild of a term, it would be considered inconceivable). Said that I hope the US makes it and the "American Values" that you talk about prevail, but i am afraid those values have changed and being substituted by less noble ones...
    jsaralan -> ehmaybe , 2016-07-07 16:33:16
    Probably he means to say Americans habitually ask new acquaintances, "What do you do for a living?" That's absolutely a query about income and personal worth, though slightly disguised, and it's a question I have never widely encountered anywhere else in the world, nor while living overseas the last ten years. The question is so ingrained, though, that Americans who ask it don't think of it as a query about net worth. They do, however, react with overflowing respect toward those who answer in certain ways, and something akin to sympathy to those who answer in other ways. All my foreign friends have noticed it, and all think it's weird.
    DrSallyWinterton , 2016-07-07 16:45:46
    This article is extremely dishonest. First, it claims that she has 'three other jobs'. Second, she has children, for whom she presumably gets child support. So what's her *real* income?
    Michael Williams , 2016-07-07 17:50:39
    I do not know how things stand today, but I went to school in the UK and in the US in the 70s and 80s.

    The schools in the UK were so superior to the US that I thought I had been placed in a remedial class when I returned to the States.

    At the time, I would have bet that the average 16 year old in the UK was better educated than most American college graduates.

    I would like to hear what you all think.

    biglio -> Michael Williams , 2016-07-07 18:22:25
    Agree, I did my last year of high school in the US, in North Carolina of all places, in a top private school, i was a middling student in Europe with flashes of brilliance in some subjects but definitely far from the top of the class. When I arrived (it was in the 80s) I didn't speak English. Well, I graduated with high honors int he top 5% and got my high school diploma, honestly without having to study that much, school was not totally comparable but definitely way less challenging.
    eastbayradical -> biglio , 2016-07-07 18:33:35
    Contrary to conventional wisdom, a lot of private schools in the United States are severely lacking in the rigor department. This is even true for many--not all--private schools that cater to well-to-do families.
    LelouchVIBrittania , 2016-07-07 18:13:10
    When those in poverty or on the verge of it are single mothers, you tend to wonder if there are some other issues as well. I don't recall a time in American history where a single mother of several children could take care of herself when completely on her own.

    I know of single mothers who are doing fine, but they employed and are also being helped by siblings and parents who already have some wealth and free time to take care of the child. Maybe the issue is the fact that these people are having kids at the wrong time or without enough thought. Divorce rates are incredibly high in the US, and the percentage of children who have non-birth parents is very high as well. What this all means is that the USA isn't teaching its citizens about having kids and the responsibility.

    The USA is also not teaching men and women about birth control, or about being holding potential partners to higher standards (and I don't mean looks). A lot of people in the USA are too shallow and focus too much on aesthetics over reliability and now we have single mothers with fathers who refuse to pay child support at all costs. There are too many problems with the USA, but I feel that personal hygiene and responsibility with sexual partners should be on the top.

    PlatosNave , 2016-07-07 18:35:03
    I teach in inner city schools. There are so many problems, money is one of them but all the money won't solve the problem of poor learning attitudes, disaffection, poor discipline and nonexistent work ethic .

    A lot of the students get no discipline at home and their parents don't expect them to learn anything. They are resistant to the whole process of focus on new knowledge , absorb, drill, recall , deploy newly learned thing.

    Americans have a religious reverence for individualism and learning new things is a humbling experience and many people don't like it. Sure the adults bang on about education but they aren't serious about it. They think all you need is to spend more money , not do any actual work.

    Spunky325 -> PlatosNave , 2016-07-07 20:18:08
    The problems in the inner city are so intransigent that I doubt anything can fix it. I have three friends, all dedicated teachers, who taught in inner city schools in New Jersey and the stories they have told me make my mind reel: a mother who punched a teacher (and gave her a concussion) who "disrespected" her kid (by failing him, deservedly, in algebra), 15-year-olds who had pagers so their pimps could call them, children who had five brothers and sisters--all with different fathers. You couldn't make this stuff up.

    I don't know what solution there is to this. My nieces and nephews did well in school, studied hard, and went on to university. They didn't do drugs, rape or be raped, and stayed away from unsavory kids. BUT--they went home to two parents every night, a father and mother, which I think would have made them successful at school no matter what their income.

    thomasmccabe , 2016-07-07 18:49:47
    The Pew survey you cited noted that "...the share living in middle-income households fell from 55% in 2000 to 51% in 2014. Reflecting the accumulation of changes at the metropolitan level, the nationwide share of adults in lower-income households increased from 28% to 29% and the share in upper-income households rose from 17% to 20% during the period." In other words, most of the decline in the middle class was due to their moving into the upper class.

    The article was mostly about a declining rural area. The Guardian grinding its usual axes and reaching the conclusion it intended to reach?

    NoSerf , 2016-07-07 19:24:28
    Middle class job death inflicted by cronie capitalism entertained by the political establishment (examples): Private equity is not scrutinized by anti-trust legislation, buys any company and sends jobs overseas. Cronie supporters of politicians get help in that some industry gets indicted (e.g. more or less entire coal industry) or regulated into oblivion, for fake reasons, so that cronie (solar panel) company gets subsidies. Of course, the latter goes under, no company on IV survives without IV. Banks get bailed out, others not. GM gets bailed out, to maintain jobs, then outsources.

    The old members of middle class are not tolerated by our government and the cronies. Who is tolerated as middle class is any kind of civil servant, and new immigrants. Revenge from 2 sides. Or call it cultural revolution Mao style: Take their habitat.

    Curtis Gomez , 2016-07-07 19:49:24
    Growing up in the SF Bay Area during the 70's there was a large disparity in academics between schools even in the same district. At 11 years old the school district was rezoned and the new school that I attended had much lower standards. So much so, that I came home the very first day and complained to my mother that I had been assigned to a class for slow learners. Being so bored, my grades started to drop. At 13 years, I tested out of mathematics and eventually tested out of high school altogether and joined the military.

    There my intelligence was appreciated (believe it or not). The military provided a valuable work ethic and training in technology that have provided a decent career and lifestyle since. It's too bad that America can't seem to provide adequate learning to the vast majority.

    jacknbox , 2016-07-07 19:54:54
    The US economy isn't competitive anymore. It started with the labor cost being too high, so factories moved out. Then the entire supply chain moved out. Now the main consumer market is also moving out. Once that is gone, we will have no more leverage.

    The US education is good, but students are lazy, undisciplined, and incurious. In silicon valley, more than 75% of highly paid technical personnel are foreign born. Corporations making money with foreign workers here and abroad, on foreign markets. Taking these away and you will see the economy crash.

    Then you have Hillary wanting to sub divide a rapidly diminishing pie, and Trump wanting to return to 1946. Good luck to them both.

    enodesign -> jacknbox , 2016-07-08 01:25:43
    Get real .

    Labor costs were too high. Have some more kool-aid. The elite didn't want labor to have any bargaining power whatsoever . They wanted to dictate the terms to labor believing that they were the only ones who should have any say in matters. The elite wanted to maximize their profits at the expense of their own citizens. They wanted slave labor . They wanted powerless people to dance to their tune. How could an advanced nation's labor possibly compete with slave labor .

    This is the same argument that slave owning , southern plantation owners used to fight against the freeing of slaves . They to said that they would not longer be competitive and the overall economy would suffer .

    Are you telling us that an economy needs slave labor to exist ?

    enodesign , 2016-07-07 20:02:24
    Sadly ..... thee isn't any hope for these people in the foreseeable future . Their economic decline has been happening for quite some time now and shows no sign of abating whatsoever . The economic foundations of their lives have been steadily pulled out from under them by the financial elite and their subservient political cultures , the Republican and Democratic Parties . The Republicans have never really given a damn about them and the Democrats have long abandoned them . These poor people of North Carolina are adrift on a sinking raft on easy ocean of indifference by the political cultures of America . To those in power , they don't exist . They don't count . They don't matter .

    The trend in the U.S, along with almost every other major nation in the world over the past 35 years has been to exclusively serve the interests of the financial elite and only their needs . All sense of fairness , justice and decency have been totally discarded .

    Tax breaks after tax breaks , tax shelters , free movement of capital , etc., etc. would sum up the experience of the financial elite over the past 35 years . They have become incredibly wealthy now and are still not satisfied . They want more . They want it all . They want what little you have and their political servants which help them get .

    Political discourse pertaining to the plight of those like these folks in North Carolina is all window dressing . In the end , you can be certain that it will amount to nothing . Just like it has for decades now . The financial elite are in control and they are not going to give any of that control up . As a matter of fact , they are going to tighten their grip . They will invent crisis to have their agendas imposed upon an increasingly powerless and bewildered public . They will take advantage of every naturally occurring crisis to advance their agenda .

    There will be an end to their abuse , greed and domination until one day when everything changes . The day when people have had enough . When people can't take it any more . History has demonstrated this fact so often before . The mighty do fall . They always fall ..... but their fall is nowhere to be seen at this time .

    There is going to a great deal more pain for average folk before things get better .

    A Presidential election featuring Donald Trump and Hillary Clinton is clear evidence of this fact.

    Hopefully , these two bottom feeding , utter human failures represent the bottom of the barrel but I doubt if they do .

    Good luck to the good folks of North Carolina and countless others like them .... they / we / myself are going to need it .

    enodesign -> DrSallyWinterton , 2016-07-08 01:18:46
    On the contrary .... it's money that the elite have not paid out in wages .

    It's money that the elite have illegally hidden from the taxman . It's money the the elite need to pay for the infrastructure that makes it possible to do business in the first place . It's money that has been made from insider trading and backroom deals . It's money from the wealth that labour has basically created in the first place .

    It's money that contributes to the social maintenance on a safe , civil society . It's money that the wealthy do not need .... they have all they could ever need now .

    It is money that when distributed fairly keeps money in motion creating it's transfer into additional hands which further circulates that money creating even more spending by people and the consumption of goods and services which result in the creation of even more wealth .

    Static capital kills economies .

    I know that the elite like to think that they are the exclusive ones to create wealth but wealth creation is the marriage between capital and labour . You can have all of the capital in the world but without labour transforming it into greater wealth it can not possibly grow .

    If anyone is guilty of stealing money it is the elite who steal from the economy causing the economy's ill health .

    The last 35 years are more than testimony to this fact .

    Economies are dying wherever the elite have gotten their way .

    The elite are the real killers of wealth and economies . Just look at any economy in the world throughout history where the elite had all of the wealth to themselves . Their economies are highly dysfunctional and their societies are full of social problems and crime .

    This is an indisputable fact .

    Greed kills wealth development .

    Wealth development is directly tied to the well being of labour which allows for mass consumption of goods and services .

    You would have to be a complete idiot not to see this fact .

    So my good doctor .... the money in any given economy really belongs to everyone , not just the greedy elite .

    You need to get a real perspective instead of constantly eyeing you own pile of wealth .

    Matt C , 2016-07-07 20:32:07
    so the woman chose to have 3 daughters, is now choosing to foot the bill for their college education, and wants me to feel sorry because she has to work her ass off to do all these things? how about this.... don't have children you can't afford. a little personal responsibility in one's life goes a long, long way.
    Bajanova -> Matt C , 2016-07-07 21:03:04
    She is taking personal responsibility! She is working!
    DrSallyWinterton , 2016-07-07 20:35:37
    Everybody here is debating the life of a person who probably doesn't even exist.
    JudeUSA -> DrSallyWinterton , 2016-07-07 23:20:41
    Go to the website of the school she works for. Her picture is on the website and the NC pay for a 3 year teacher is about 40K. I think she exists.
    jecoz , 2016-07-07 20:59:28
    We need to redefine middle class. I grew up middle class. We had one TV. Not a lot of clothes. Took short, cheap vacations. Had no credit cards. Our lives were perfectly enjoyable. Many people here in the US live way beyond their means.
    Turrialba -> jecoz , 2016-07-07 21:36:59
    We piled into the station wagon and headed out on short trips in the region. We visited historic sites and were enriched by the experience. None of this $1000s on the trip to Disneyland. We didn't feel deprived or entitled.
    jacknbox -> jecoz , 2016-07-07 23:26:14
    The key is not money but optimism. America is still richer, cleaner, and better run than most other places. But the gap is rapidly closing. Scaling back the spending would not help here. It would only further reduce the drive.
    skwawshbug , 2016-07-07 22:08:36
    As a North Carolinian, there are two major issues. One, the right to bear arms and also, teacher tenure and working conditions. Republicans have already taken away tenure from my younger colleagues, but as an older teacher, I still have mine. Secondly, democrats want to take away gun rights on the federal level, but state dems are usually more pro-gun in the conservative state.

    SO for me, I will vote for a democratic state government and a republican federal government. I will be proudly putting a Roy Cooper bumper sticker on my car. But due to the peaceful liberals, I would be afraid to put a TRUMP sticker on my car because of recent violence against Trump supporters.

    DrSallyWinterton -> skwawshbug , 2016-07-07 22:30:35
    Teachers who can't be thrown out, no matter how incompetent they are, are a major reason why the US educational system is in such a mess.
    Shillingfarmer , 2016-07-07 22:15:18
    The problem is the job exporting American elite class. NAFTA was an economics, political, and social experiment with all the downside on the former, mostly lower middle class. Non-aligned examination of the available data shows how disastrous NAFTA has been to America's bubbas. Thanks to Bush 41 and Bill Clinton. WTO was all Bill. Of the mistakes Obama has made TPP would be the worst. The question is, really, do we favor global fairness (an even playing field for all earth's peoples) and a climate-killing consumerist world, or our own disadvantaged (courtesy of our financial and political elite) citizens. Not an easy choice. Death by poison or hanging. No treaty can benegotiated fairly in secret.
    SocratesP , 2016-07-07 22:30:13
    The tragic irony is that the anger against rule by the 1% manifests in things like support for Trump, a typical example of the greed and excess of the 1%. Americans need to question outside their desperately constrained paradigms more. It will help focus their anger more strategically, and possibly lead to solutions. Don't hold your breath, the inequality gap is accelerating the wrong way.
    DrSallyWinterton , 2016-07-07 22:40:20
    Fake, fake fake. A woman with $40k and three children would *not* be paying 1/3 of her income in tax. This woman does *not* live on $40k net or gross - she has three other jobs. And her name looks *very* made up.
    Bronwyn Holmberg , 2016-07-07 22:41:01
    I think the US is heDing for trouble. It is the middle class that maintains civil society and gives a sense of hope. This is an interesting open letter by a zillionaire to his peers warning them what happens without a string middle class. A thought provoking read. http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014
    Chris Westcott , 2016-07-07 22:41:01
    The elite of the USA have done exactly what the Romans did and what the Pre-Revolutionary French did.... drain the lower classes while enriching themselves. "Taxes are for little people" is not just a pithy quote, it has become the reality as the elite rig the system so they benefit and the lower classes pay. They need to wake up or they will get exactly what the Romans Got (collapsed empire) or the French got (Violent Revolution). Wake up America! It is time to choose your side in the class war the elite continue to execute while telling us there is no "Class War" - you can't pull yourself up by your boot straps while they are pulling the rug out from under you!
    veloboldie , 2016-07-07 22:41:01
    My wife used to employ recent graduates from Georgetown University with poli. sci., psychology, sociology degrees, to stack books for $10/hr. It took them on average 2-3 years, before finding work in their field. I keep telling my kids you need to earn a degree that has a skill for life and will always be in demand, i.e. doctor, dentist, vet, engineer, scientist. Additionally, include work oversees in your career.
    Ardnas1936 -> veloboldie , 2016-07-07 22:41:01
    Education is NOT about finding a job! It's about learning ways to seek wisdom and rationality, and to assimilate (not deny) new knowledge throughout your life--and that's exactly what's lacking in the US! Our schools are factories to turn out standard robots to be used by the owners of this country, whether they practice law or flip burgers.

    I was lucky that my parents were born and raised before that happened. They went to what used to be called "country schools"--my dad to a 1-room schoolhouse. Some of the so-called "knowledge" was patriotic trash, serving only the rich elites, but they learned to be sturdy and to think for themselves, so I was lucky and learned a lot at home. Without parents who practice the empathetic, rational morality needed in a democracy, all the jobs in the world--especially if most are for flipping burgers--won't save this dreary country.

    nataliesutler -> veloboldie , 2016-07-07 22:41:01
    You make an excellent point. Thinking about your life rather than just going for a crip major in college would be an excellent way NOT to wind up stacking books for $10 an hour with a degree. I can't count the number of my kids friends who select communications majors, or sociology or women's studies and then are completely surprised when there are no jobs demanding their educational background. What is it that they think they will be qualified to do after college?
    mikegood , 2016-07-07 22:41:01
    From the article.... "Some lucky families saw themselves promoted to the upper income bracket." Here in a nutshell we see the author's underlying worldview. Getting to the upper income bracket has nothing to do with effort. Rather it's the result of luck. It's something that is done to you by an outside force.

    [Aug 23, 2016] How Abusive Employers Combined With Job Insecurity Lead to Suicides

    Notable quotes:
    "... During the 15 months that I worked at Pitt, I felt the brunt of this lady's abuse. She'd call me into the office, launch into a blistering tirade, and I would sit there, stunned. And, to her, that was another cause for anger. Why was I just sitting there and not reacting? ..."
    "... The authors fail to get to the real fundamentals of this phenomenon. The two ends of the spectrum that they delineate can be housed under a single umbrella, that of neoliberalism. And it is obvious that neoliberalism can kill. And Durkheim would have agreed readily that ideas can kill, and not just via suicide. ..."
    "... Give yourself a break inode_buddha. Thirty years ago, you, and myself as well, made a rational decision as to what direction to take. At the time, construction and the associated trades were honourable and respectable. A decent living could be made, and a future was in sight. Neo-Liberalism has, since then, destroyed most things that benefited anyone other than the criminal management classes. Humanity has had to stand up and fight for decency and equality throughout history. ..."
    "... I have to tell you, as a small business owner myself, this "regulations are burdensome" argument is a crock. Lobbyists in DC learned decades ago that the best way to put a sympathetic face on their efforts to get waivers for big businesses is to have small business owners act as their mouthpieces. And there are enough extreme libertarians everywhere that it's not hard to find someone to screech that the regulations he is subject to are horrible irrespective of how much a burden they really are. ..."
    "... "Perhaps this world is another planet's hell." – Aldous Huxley. Yes, it is definitely. Perhaps pretty soon they will start strip search employees when they come to work. ..."
    "... Increasing numbers of suicides are one outcome of these environments. But as the writers point out, there are a number of other symptoms associated with these toxic workplaces, none good. They range from physical and mental health issues, to various forms of addiction, burnout, and secondary effects on employees' personal lives and those of their family members or partners. ..."
    "... I agree that neoliberal ideology, globalization, and the basic structures of our debt-based economy all play a key role in enabling the intentional development of these organizational environments. ..."
    "... I believe the roots of the problem lie in a broader and deeper systemic failure. ..."
    "... market failure ..."
    "... This article highlights suicide, but drug and alcohol abuse are just as much a result of poor employment outcomes as suicide and for the same reasons. ..."
    Aug 22, 2016 | naked capitalism

    Yves here. It's hardly a secret that employers have become more abusive towards employees because they can get away with it. The difficulty of finding new employment, particularly for mid and senior level jobs, combined with the fact that most workers (even comparatively well paid ones) are only a paycheck or two away from financial desperation, means bosses have tremendous leverage over workers. And more and more firms embrace coerciveness as a virtue. In the past, it's more often taken the form of cultishness, which is a very effective business model, as Goldman and Bain attest, but more recently, outright mistreatment is becoming common. For instance, Amazon has so successfully cultivated a "culture of fear" that t he overwhelming majority of employees cry at work .

    Note the claim in the article about elevated suicide rates at Apple supplier Foxconn is contested; some contend that statistically, its rate of suicides is no higher than for other employers. However, many of the dorms apparently had mesh canopies to prevent suicides, so one wonders if direct comparisons are apt.

    By Sarah Waters, a Senior Lecturer in French Studies, University of Leeds and Jenny Chan, a Departmental Lecturer in Sociology and China Studies, University of Oxford. Originally published at The Conversation

    A Paris prosecutor recently called for the former CEO and six senior managers of telecoms provider, France Télécom, to face criminal charges for workplace harassment. The recommendation followed a lengthy inquiry into the suicides of a number of employees at the company between 2005 and 2009. The prosecutor accused management of deliberately "destabilising" employees and creating a "stressful professional climate" through a company-wide strategy of "harcèlement moral" – psychological bullying.

    All deny any wrongdoing and it is now up to a judge to decide whether to follow the prosecutor's advice or dismiss the case. If it goes ahead, it would be a landmark criminal trial, with implications far beyond just one company.

    Workplace suicides are sharply on the rise internationally, with increasing numbers of employees choosing to take their own lives in the face of extreme pressures at work. Recent studies in the United States, Australia, Japan, South Korea, China, India and Taiwan all point to a steep rise in suicides in the context of a generalised deterioration in working conditions.

    Rising suicides are part of the profound transformations in the workplace that have taken place over the past 30 years. These transformations are arguably rooted in the political and economic shift to globalisation that has radically altered the way we work.

    In the post-war Fordist era of industry (pioneered by US car manufacturer Henry Ford), jobs generally provided stability and a clear career trajectory for many, allowing people to define their collective identity and their place in the world. Strong trade unions in major industrial sectors meant that employees could negotiate their working rights and conditions.

    But today's globalised workplace is characterised by job insecurity, intense work, forced redeployments, flexible contracts, worker surveillance, and limited social protection and representation . Zero-hour contracts are the new norm for many in the hospitality and healthcare industries , for example.

    Now, it is not enough simply to work hard. In the words of Marxist theorist Franco Berardi, "the soul is put to work" and workers must devote their whole selves to the needs of the company.

    For the economist Guy Standing, the precariat is the new social class of the 21st century, characterised by the lack of job security and even basic stability. Workers move in and out of jobs which give little meaning to their lives. This shift has had deleterious effects on many people's experience of work, with rising cases of acute stress, anxiety, sleep disorders, burnout, hopelessness and, in some cases, suicide .

    Holding Companies to Account

    Yet, company bosses are rarely held to account for inflicting such misery on their employees. The suicides at France Télécom preceded another well-publicised case in a large multinational company – Foxconn Technology Group in China – where 18 young migrant workers aged between 17 and 25 attempted suicide at one of Foxconn's main factories in 2010 (14 of whom died ).

    The victims all worked on the assembly line making electronic gadgets for some of the world's richest corporations, including Samsung, Sony and Dell. But it was Apple that received the most criticism, as Foxconn was its main supplier at the time.

    ... ... ...

    upstater , August 22, 2016 at 10:36 am

    One of our son's best friends from high school was a funny, bright kid that got a BS/MS in Computer Science from Rochester Institute of Technology (RIT) a few years ago. He did his first coop at a software firm in Boston that dealt with electricity demand management.

    Then he went to work for Apple, first as a coop then as an employee.

    Last April the poor kid killed himself in a conference room at Apple's HQ .

    By the time his name was announced to the media, everything about him on Facebook, LinkedIn, etc had disappeared. They scrubbed him off the internet. We don't know if he posted anything before his death, but our son said his pages were pretty generic for a 25 year old.

    Let it suffice to say something went terribly wrong in the libertarian paradise of Silicon Valley, really just a ritzier version of FoxConn. Having known him through high school and occasional visits thereafter, one never would have thought such an end would have been possible.

    RIP, Ed.

    Swendr , August 22, 2016 at 2:10 pm

    It's happening on the job, at school, and damn near any other social institution where the stakes can be ratcheted up in intensity. Suicide is one end of the spectrum of dysfunction. Going postal is another. Our elites don't like wet work much, so they find other ways to get rid of the undesirables. I doubt they planned it this way, but isn't it sweet that all you have to do is stop being fake-nice as a boss and the problem takes care of itself?

    nobody , August 22, 2016 at 11:40 am

    It's not only corporations, of course, that have problems with endemic abuse and need to be taking responsibility, nor is the issue restricted to institutions where profits take precedence über alles. Here is the link for the site "Academia Is Killing My Friends," which is described in the "About" section like this:

    I am a final year PhD student in the Social Sciences. Last year a fellow PhD student committed suicide after being harassed by a lecturer. I got angry and made this site. This site is a response to the cultures of violence, fear and silence I have witnessed and experienced in my academic community. Sexual harassment, mental illness and unpaid labor are the accepted and expected norms. Abusive academics are well known and yet remain in the community. We are powerless and afraid of backlash, unemployment and failure. All of this gets worse as public spending is cut and universities become increasingly neoliberal institutions. This site is a 'fuck you' to the silence and fear. It is, I hope, a space where we can share our stories of abuse, exploitation and suffering in academia.

    There are now 104 stories and counting. An excerpt from a recent post (#103):

    I started out an idealistic and hopeful student. Worked to pay for college, good grades, got into a good PhD program. Worked hard, had a good mentor, published, moved on to postdoc. I thought that I could keep working hard, publish and move into some reasonable career trajectory. Right?

    Well, we all know why we're here. I can't even go into the details. It's a familiar story – sexism, racism. Abuse by an advisor, with nowhere to turn. Rampant discrimination and harassment. When I looked for help (from the wrong people, apparently), I was told to suck it up, work harder. Constant financial worries. Every little setback used up my savings. I got sick and never really recovered… stress and overwork guaranteed that. I was good at living modestly, but that wasn't enough to sustain me. Now, I'm just trying to pick up the pieces. I feel floored by the lack of opportunities and support through most of my career. I had no idea how much a career in academia would rely on having money to begin with. I feel like this work has stolen my life away. And I'm not the only one – I know plenty of people who have had a similar experience. The best people leave early.

    Worst of all, I don't even feel that I can tell my story. Nobody wants to hear it. Nobody would lift a finger to protect me from retribution. Nobody wants to address problems like this. I feel so much grief for the good I might have done in another profession, the life I could have lived. I don't know what to do with this grief.

    nobody , August 22, 2016 at 12:06 pm

    Where did the link go? Well, here it is:

    http://academiaiskillingmyfriends.tumblr.com/

    Arizona Slim , August 22, 2016 at 12:47 pm

    Some of the worst abuse I ever experienced was in academia. Here's an example:

    During the mid-1980s, I was on the staff of a journal at the University of Pittsburgh. My boss, the departmental librarian, must have come from the Attila the Hun School of Management, because that's how she treated people. Shortly after I started my job, I got on her bad side. I have no idea why this happened. Thirty years late, I still can't figure it out.

    It may have had something to do with the introductory meeting we were supposed to have with the journal's publisher.

    Well, being the good little employee that I thought I was, I had my office clock set to the correct time. I didn't know it at the time, but the library clock was 10 minutes fast. Yep, the same trick that bars pull on their customers. Getting them out the door before the official closing time.

    So, I got to the library a few minutes before 9 a.m. Plenty of time to for the boss and me to walk over to the publisher's office. Bossola was SEETHING. I was LATE! Just look at that CLOCK! It was already after nine!

    Over to the publisher's office we walked, and guess what. They weren't even ready for us. So we sat in the waiting area for a while.

    The publisher and his staff couldn't have been nicer. The polar opposite of my boss.

    During the 15 months that I worked at Pitt, I felt the brunt of this lady's abuse. She'd call me into the office, launch into a blistering tirade, and I would sit there, stunned. And, to her, that was another cause for anger. Why was I just sitting there and not reacting?

    During her final tirade, when she told me to start looking for another job, I'd had enough. I told her that I was going to start looking for another city.

    Well, guess who sat there, stunned.

    She insisted that I didn't have to do anything THAT drastic. But my mind was made up. I was done with her, done with Pitt, and done with Pittsburgh.

    Three and a half months and several wonderful bicycling miles later, I landed in Tucson, and I'm still here. Without that nasty boss, I probably wouldn't be in this wonderful city.

    As for Ms. Nasty, she left Pitt and went on to become the head librarian at Chatham College, which was nearby. Small women's college. Known for its caring, friendly, and supportive environment. Ms. Nasty didn't last very long there.

    And she didn't last very long at St. Michael's College in northern Vermont. I think that she was fired from that institution, but I'm not sure. Let's just say that I hope she was, because she deserved a taste of her own medicine.

    Softie , August 22, 2016 at 2:55 pm

    Here is a story that scared shit of Academia's organized crime ring for a little while in the early 90s.

    "The University of Iowa shooting took place at the University of Iowa in Iowa City, Iowa on November 1, 1991. The gunman was Gang Lu, a 28-year-old former graduate student at the university. He killed four members of the university faculty and one student, and seriously wounded another student, before taking his own life."

    https://en.wikipedia.org/wiki/University_of_Iowa_shooting

    Nelson Lowhim , August 22, 2016 at 4:11 pm

    Damn. Thing is I've heard this from Actuarials and docs. It's everywhere the "well, just work harder". But some of it is on the employees. None have the frame of mind to kick back, to unionize, and hard (when was unionizing ever easy?). None. All have the neoliberal view that: work hard and you'll be fine. And so when that button is pushed, they go for broke until burned out. It's that or be labeled lazy. Well, being unemployed is also an issue, but there's also the matter of having the language to fight back, to not feel guilty for working less than 100 hours a week etc.

    PlutoniumKun , August 22, 2016 at 5:15 pm

    I think an important point about Unions which people forget is that they provide an opportunity for people to vent and let off frustration. I've been a Union rep at various places and many times I would have people come in to have a rant about a certain manager or policy. At the end I would say 'do you want to make a formal complaint?' and the answer would be no – the person just wanted to get it off their chest in a confidential manner.

    And to know that if they needed it, there was back up. Non-union places I've worked in, even good ones, lack that safety valve.

    FluffytheObeseCat , August 22, 2016 at 7:14 pm

    The last post on this tumblr is from February of 2016. It's been inactive for half a year. The links may be valuable however.

    inode_buddha , August 22, 2016 at 12:16 pm

    I'm in the process of paying a personal price for this BS as I type this, having walked off the job a few months ago. I'm not gonna drive 30 miles each way for 1/2 of what I should be making only to be treated like shit by management brown-nosers. Bad news is, I'm mid-career and not a spring chicken. Considering leaving the field altogether or doing my own startup. But if I had known then what I know now, I would have had the voice recorder app on my phone, recording everything….

    thump , August 22, 2016 at 12:36 pm

    Thanks for posting about the blog "Academia is Killing My Friends," but I couldn't find the link, so here it is:

    http://academiaiskillingmyfriends.tumblr.com/

    larry , August 22, 2016 at 12:36 pm

    The authors fail to get to the real fundamentals of this phenomenon. The two ends of the spectrum that they delineate can be housed under a single umbrella, that of neoliberalism. And it is obvious that neoliberalism can kill. And Durkheim would have agreed readily that ideas can kill, and not just via suicide.

    PQS , August 22, 2016 at 1:01 pm

    Ugh. After twenty years in commercial construction, I thought our industry was an outlier for abuse, psychotic management, and general HR mayhem. Apparently not. Arizona Slim, I could have profiled Mrs. Nasty at any number of firms I worked for…she's not unusual.

    I stay at smaller companies with good people for less money because I just can't handle the high pressure and abusive environment of Big Time Construction Firms. I also have zero interest in big projects anymore – too many psycho Owners who appear to delight in torturing the contractor as a hobby. The men I work with think I'm nuts to turn down some work. I tell them, there's no reward for it. No pot of gold at the end of the rainbow, no big promotion – just health problems and more commuting for the same old, same old.

    inode_buddha , August 22, 2016 at 1:59 pm

    You too? Abuse, and psycho management is why I'm considering leaving the trade altogether, too bad I've invested 30 years and a few schools into it…. but of course, nobody *made* me invest in myself and believe in the american dream /sarc

    ambrit , August 22, 2016 at 2:11 pm

    Give yourself a break inode_buddha. Thirty years ago, you, and myself as well, made a rational decision as to what direction to take. At the time, construction and the associated trades were honourable and respectable. A decent living could be made, and a future was in sight. Neo-Liberalism has, since then, destroyed most things that benefited anyone other than the criminal management classes. Humanity has had to stand up and fight for decency and equality throughout history.

    redleg , August 22, 2016 at 8:20 pm

    The decent living in the construction trades, for me anyways, has started and (so far) ended as a contract employee. I'm at the cusp of 50 and am looking at disaster if I can't find something permanent. My spouse has her dream job (that unfortunately comes with mediocre pay) so moving the fam for a job is our of the question. I'm one dropped contract away from my professional expiration date – too old for entry level, not experienced enough for management, unable to move to a better job market if such a thing existed.

    But at least I paid off my student loans, so that's not hanging over my head like the sword of Damocles.

    ambrit , August 22, 2016 at 2:01 pm

    Living on the road, out of town, at the jobsite, etc. etc. There's a reason why so many of the Superintendents and Foremen I've encountered on big jobs drink to excess.

    I've had my share of Mz/Mr Nasty bosses. The worst thing one can do to one of these persons, as I learned one afternoon, is to laugh at them when they "put you in your place." The program is going south anyway. If the wherewithall is available for a drive home, go ahead and let 'them' know you're not going to put up with abuse anymore. (Easier said than done, I'll agree, but, as long as you and yours aren't starving, why not? You'll sleep better at night. Take my word for it.)
    Smaller outfits are, from my experience, easier to get along with because the manager is often the owner or family and not divorced from the ground floor experience. Reason is used instead of formula.

    I used to hold the same belief about construction being the bilge of the work world. Then I worked for the USPS for almost three years. Then the dreaded Lowes Home Improvement set its avernal brand sizzling on my soul.

    Ah my, what a picaresque novel all this would make.

    PQS , August 22, 2016 at 3:01 pm

    Picaresque novel or hilarious TV show. I've written the scripts in my head a thousand times….clueless architects, raging Owners, ridiculous Inspectors, overfed upper management/sales staff, etc. etc.

    I agree that laughter is truly the best medicine in this business. As a friend once told me, "Sometimes you gotta let the crazy people be crazy."

    Jim Haygood , August 22, 2016 at 8:42 pm

    'what a picaresque novel all this would make"

    Charles Bukowski [lowbrow NC spell checker don't know him] has covered the USPS bit.

    Over to ambrit for the Lowe's sequel. :-)

    ambrit , August 22, 2016 at 10:09 pm

    Hmmm..

    Some titles: "Faking, Inc.," "Department of Imaginary Tools," "Bargain Employee of the Month," and the annual winner, "Going Out of Business Sale: Season Three."
    Since I'll need to go back to work for a few years, until my miniscule SS kicks in, I might do a Home Depot Equal Opportunity for Exploitation Edition.

    (When I grow up I want to be a Day Trader! Maybe I'll take a flutter in pork bellies on the Chicago Exchange.)

    Arizona Slim , August 22, 2016 at 3:51 pm

    In her own strange way, Ms. Nasty had quite a positive effect on my life. As our relationship deteriorated, I started piling up the savings. I was planning my escape, even before that final tirade.

    My last six weeks at Pitt were amazing. After I tended my resignation (on Friday, February 13, 1987), the whole department was impressed with how relaxed and happy I was. It was as if a different Slim had moved into my body.

    Yes, there was that farewell luncheon where Ms. Nasty refused to raise her glass in a toast, but you know what? I was going to be out the door in a few hours, so I no longer cared. In fact, I found her refusal rather amusing.

    What came next was even better. That pile of savings was deployed for something I really enjoyed. Long-distance bike touring! Rode thousands of miles in a little over three months! And then I settled here in Tucson!

    Where I found a job similar to my Pitt job, but with a nice boss. That was my last FT job. I've been a freelancer since 1994.

    So, Ms. Nasty, thanks for the motivation. And I do hope that you learned how to be nice to people who are, ahem, beneath you.

    Synoia , August 22, 2016 at 1:18 pm

    That's what Labor (or socialist) political parties used to do, and Corbyn's trying to re-institute in the UK.

    One cannot be pro-trade (as currently defined) and pro democratic not pro citizen, not pro-labor.

    The US has never permitted socialism, and prefers crony capitalism, which is actually close to fascism.

    The whole defense Military Industry Complex of Government and Industry is a definition of fascism in the US. I place no regard on Ike's warning about the MIC as he did noting until the end of his reign, and then made a speech.

    Roquentin , August 22, 2016 at 1:49 pm

    At long last I've finally managed to get out of a job I couldn't stand after working there for nearly a decade. The pay was ridiculously low, even relative to the industry standard. Management routinely promoted narcissistic, ignorant cronies who never told them the word "no." I couldn't be happier it's finally over. They've had so much turnover in the past couple of years entire departments are composed of entirely new people. The CEO cares about nothing except looking good to the shareholders and owners, and that's pretty much the attitude from the top on down. Look good to the people with power and to hell with the rest.

    I'd be surprised if the company still existed 5-10 years from now.

    DarkMatters , August 22, 2016 at 2:20 pm

    Soooo glad I'm retired. I was starting to see more and more of this over the last couple of decades, and it escalated as times worsened. I wish libertarians and free-marketers would contemplate the situations described here, and consider what kind of a world it would be if financial oligarchs held even more power. What hope would there be to counter this sort of abuse?

    Nelson Lowhim , August 22, 2016 at 4:19 pm

    This works perfectly into their view of "weaker" elements being discarded. Pretty fascist at the end of the day.

    kareninca , August 22, 2016 at 7:56 pm

    I wouldn't exactly call myself a libertarian (I'm not sure what I am), but I think that the libertarian response would be that if there were fewer pointless regulations people would be much more readily able to work for themselves, and not for an abusive boss. It is unbelievably hard to start a business now, even a solo one, due to regs. And I'm not talking about reasonable regs (don't dump toxins in waterways). I'm talking about regs that have been invented by big existing businesses to keep upstarts from starting.

    A number of years ago there was an article about someone who tried to start a storage company in the CT/RI area and how they eventually gave up because the regs made the process insane; there's not much that's simpler than a storage company. Most small business owners I know tell me they could not start now because it has all gotten too complicated; they have been able to cobble together responses to the new regs as they go, but starting at this point would be impossible for them.

    Picture what it would be like if you could look at your skill set, and go out and work for yourself without a huge amount of extremely complex taxes and paperwork. A strange thought, isn't it?

    I'm not saying this would be an option for most people ( not at all ), but it does not now even exist as an escape valve. Now you have to have millions in start-up funds to start some BS company (e.g. one more stupid company that delivers food to patron's homes) that isn't actually meant to make money (it just exists to get money from investors), and you need that much to deal with the paperwork.

    And, if someone wants to pop up and say "the paperwork is not so bad and complicated," please remember that you are a NC poster and are in the top ten percent of the population for ability to deal with paperwork.

    Yves Smith Post author , August 23, 2016 at 5:41 am

    I have to tell you, as a small business owner myself, this "regulations are burdensome" argument is a crock. Lobbyists in DC learned decades ago that the best way to put a sympathetic face on their efforts to get waivers for big businesses is to have small business owners act as their mouthpieces. And there are enough extreme libertarians everywhere that it's not hard to find someone to screech that the regulations he is subject to are horrible irrespective of how much a burden they really are.

    Specifically, regarding a storage business, I can't fathom your view that storage companies should not be regulated. If I am putting my valuable stuff in the hands of someone else, I sure as hell want protection that they won't cut all the locks and run off with everything, or find more legitimate ways of stealing, like create excuses to jack up my storage costs by 10X and hold my goods hostage. And what about requiring them to have adequate fire protection and security? Even if they aren't crooks, cheap and reckless will also result in my property being stolen or damaged.

    In general, entrepreneurship is way oversold in America to legitimate the bad treatment of workers: "If things are as bad as you say, why put up with it? Go start your own business!" That's ridiculous since staring your own business requires that you be both a good salesman and a good general manager, and good salesmen are almost without exception terrible managers, as anyone in Corporate America will tell you. And it's extremely hard to make partnerships work unless the principals worked together in the same company for years (ie, they grew up with the same training and rules, and so will default to the same assumptions as to how things are done). Even in consulting, I've seldom seen people who come of of different large firms work well together absent a strong organization around them.

    The proof that pretty much no one should go into business for themselves is 9 out of every 10 businesses fail within three years. The percentabe is no doubt higher if you extend the time frame to five years. I've started two successful businesses in the US and one that didn't work out in Oz, but an overseas launch is much harder and it seemed too dodgy to go beyond the two years I'd invested (as in I might have made it a go had I kept on, but I decided it was more prudent to cut my losses).

    And I don't know where you get your information about new business from. It's pretty clear you aren't in that world. You don't need millions in funds. The overwhelming majority of new ventures are funded from savings, credit cards, and loans from friends and family.

    And if you aren't able to handle regulatory filings (or find a lawyer or accountant who can help) you aren't competent to be in business for yourself. Running a business means you run into obstacles all the time and need to find ways around them. Do you not think that private firms also require paperwork, like vendor approval processes and documenting your invoices? If you can't handle paperwork, you need to stay on a payroll.

    cyclist , August 23, 2016 at 10:47 am

    While I agree with Yves that there is too much libertarian bitching about regulations, there are a lot of really stupid laws on the books that we could easily do without. As an example, I was recently looking at an RFP from a public agency in the state of MI. One of the requirements for bidders responding was to provide a notarized affidavit that the company was not controlled by the Republic of Iran! Apparently this is Michigan Public Act 517 of 2012. BTW, the winning bidder, a large US corporation, certified they are not secretly controlled by the evil Ayatollahs.

    jrs , August 22, 2016 at 8:39 pm

    yes but most people won't be able to work until they are dead, because they aren't able to or because noone is going to hire them (it's why people collect social security at 62, it's not because this is the smartest financial plan, it's clearly not) and I hope most don't take the "therefore middle aged or senior aged suicide" route.

    If you are able to work until you die a natural death good for you I guess (even better to be able to choose to retire of course), but it's not going to be an option for many people even if they want it to be, health or the job market WILL force them out.

    Softie , August 22, 2016 at 2:46 pm

    "Perhaps this world is another planet's hell." – Aldous Huxley. Yes, it is definitely. Perhaps pretty soon they will start strip search employees when they come to work.

    ambrit , August 22, 2016 at 10:13 pm

    "Out of the Silent Planet" by C. S. Lewis.

    Chauncey Gardiner , August 22, 2016 at 4:12 pm

    Excellent and timely article. As the writers observe, the problem is global in nature. If you work in or have worked in corporate America, you likely have personally experienced or seen the results of the deliberate creation of a stressful professional climate and workplace environment, abusive psychological bullying, and intentional destabilization of employees.

    Increasing numbers of suicides are one outcome of these environments. But as the writers point out, there are a number of other symptoms associated with these toxic workplaces, none good. They range from physical and mental health issues, to various forms of addiction, burnout, and secondary effects on employees' personal lives and those of their family members or partners.

    Although it seems that individuals with psychopathic characteristics often rise in management in many of these organizations, I believe the roots of the problem lie in a broader and deeper systemic failure. I agree that neoliberal ideology, globalization, and the basic structures of our debt-based economy all play a key role in enabling the intentional development of these organizational environments.

    nobody , August 22, 2016 at 6:13 pm

    It may be a global problem, but it seems particularly acute in the US. Ian Welsh's observations ring true to me:

    One of the most striking things about much of American culture is the simple meanness of it. The cruelty… There is also a culture of punching down… America has a high-violence, high-bullying society… [Y]ou can have a high-violence society in which it is considered unacceptable to attack the weak (doing so is viewed as cowardice), but that's not the case in America. In American culture, the weak are the preferred target. Failure is punishable by homelessness, suffering, and death… You'd better get down on your knees and do whatever your boss wants, because if you're fired or let go you may never work again, and if you do hang on at a bottom-wage job, well, your life will suck… Having learned that the right way to treat anyone who is weaker than them is with demands for acquiescence and dominance displays, to many Americans, to interpret any sign of weakness as requiring them, as a moral duty, to dominate and hurt the weak person. People become what is required of them. They learn from authority figures how to behave… The entire process makes America a far more unpleasant place to live or visit than is necessary. The structure of dominance, meanness and cruelty is palpable to the visitor, and distressing; even as it warps the best inhabitant.
    Tony Baloney , August 22, 2016 at 7:02 pm

    You nailed it "nobody".

    James Kroeger , August 22, 2016 at 10:01 pm

    I believe the roots of the problem lie in a broader and deeper systemic failure.

    Yes, a systemic failure, but to be more precise, it is ultimately a particular kind of market failure that gives employers an incentive to abuse their employees.

    The best way to understand what I mean is to imagine a labor market where there are always more jobs available than there are people to fill them. In an economy that is experiencing a chronic labor shortage, employers would have a market incentive to actually start treating their employees with respect.

    In markets where labor surpluses are carefully maintained (virtually every market you've ever known), business owners/managers feel free to express anger at any employee shehe feels a 'power advantage' over. They sense they have this advantage when/if they believe the employee fears losing hiser job more than the employer fears losing the employee.

    It really would force a profound change in employer-employee relations, generally. Employers would be compelled by the marketplace to not only find ways to motivate their employees to work hard, but also to find ways to make them feel content , psychologically.

    In an economy that is experiencing a sustained labor shortage, the crudest and least sympathetic methods of motivating employees would be gradually phased out.

    'Bottom feeders' in the competition for scarce labor would have a constant incentive to try to retain employees, and to 'go the extra mile' to work with people who are having problems. Individuals who are having personal problems would not be simply cast aside, as they are now.

    The national government could do something to help those businesses that are struggling within very [price-] competitive markets, providing counseling services, etc., to help those employees who are struggling with various problems outside of the job environment.

    In our current labor surplus economy, lawsuits may give some employers an incentive to treat their people with respect, but it won't get anywhere close to providing THE solution to the problem that we would experience if we were to create and indefinitely maintain a labor shortage in the economy.

    so , August 22, 2016 at 7:05 pm

    humans sure do have a long way to go.

    Jim Haygood , August 22, 2016 at 8:53 pm

    Low end, dead end, godsend, pretend
    it don't matter anyway

    Perfect chorus of a country song.

    perpetualWAR , August 22, 2016 at 10:06 pm

    Quiet desperation. Isn't that the life of most Americans?

    ambrit , August 22, 2016 at 10:17 pm

    And to think that Pink Floyd recorded the verse; "Hanging on in quiet desperation is the English way." Back in 1968.
    Quiet desperation is a characteristic of a declining society.

    redleg , August 23, 2016 at 12:08 am

    As far as I can tell quiet desperation is the life of most people.
    This article highlights suicide, but drug and alcohol abuse are just as much a result of poor employment outcomes as suicide and for the same reasons.
    When people stop being quietly desperate is when change happens.
    I refer to CCR's Effigy although as a Gen-X -er I Prefer the Uncle Tupelo version

    veganjules , August 22, 2016 at 10:17 pm

    Guys. You're also forgetting that if the U.S. took in the Nazi Scientists and Death Specialists and used them and their techniques to crush real democratic, fair, egalitarian societies in Latin America (Chomsky) and then learned to transmute overt war (+nazi techniques) and colonialism into Finance (Hudson)–then we are currently dealing with something 'worse than Nazi Germany' (my 90 year old neighbor).

    [Aug 20, 2016] It is a perplexing and sorry phenomenon that deserves the attention of a first rate pundit like Frank

    Amazon review of Thomas Frank's The Wrecking Crew... the word "conservative" was replaced by "neoliberal" as it more correctly reflect the concept behind this social process.
    Notable quotes:
    "... Neoliberal ideology is championed on behalf of corporate elites who have now secured total control, even ownership, of the federal government. ..."
    "... Elites need federal government revenue transferred to their realm via fat government contracts and juicy subsidies. They want government without regulation, and they want taxation imposed on the masses without real representation, but not on them. ..."
    "... Neoliberals drew up a long term strategy to sabotage and disrupt the liberal apparatus. There ensued a vast selling-off of government assets (and favors) to those willing to fund the neoliberal movement. The strategy was concocted as a long term plan - the master blueprint for a wholesale transfer of government responsibilities to private-sector contractors unaccountable to Congress or anyone else. An entire industry sprung up to support conservatism - the great god market (corporate globalism) replaced anti-communism as the new inspiration. (page 93) ..."
    "... But capitalism is not loyal to people or anything once having lost its usefulness, not even the nation state or the flag ..."
    "... According to Frank, what makes a place a free-market paradise is not the absence of governments; it is the capture of government by business interests. ..."
    "... Neoliberals don't want efficient government, they want less competition and more profits - especially for defense contractors. Under Reagan, civil servants were out, loyalists were in. ..."
    "... Contractors are now a fourth branch of government with more people working under contracts than are directly employed by government - making it difficult to determine where government stops and the contractors start in a system of privatized government where private contractors are shielded from oversight or accountability ..."
    "... The first general rule of neoliberal administration: cronies in, experts out. ..."
    "... Under Reagan, a philosophy of government blossomed that regarded business as its only constituent. ..."
    "... Watergate poisoned attitudes toward government - helping sweep in Ronald Reagan with his anti-government cynicism. Lobbying and influence peddling proliferated in a privatized government. Lobbying is how money casts its vote. It is the signature activity of neoliberal governance - the mechanism that translates market forces into political action. ..."
    "... Neoliberalism speaks of not compromise but of removing adversaries from the field altogether. ..."
    "... One should never forget that it was Roosevelt's New Deal that saved capitalism from itself. Also, one should not forget that capitalism came out of the classical liberal tradition. Capitalists had to wrest power away from the landowning nobility, the arch neoliberal tradition of its time. ..."
    www.amazon.com
    Russell Ferrell

    Format: Paperback

    Thomas Frank's The Wrecking Crew is another classic. This work, along with his more notable What's The Matter With Kansas?, is another ground breaking examination into a major phenomenon of American politics by one of America's foremost social analysts and critics. While What's The Matter With Kansas? looked more at cultural behavior in explaining why Red State Americans have embraced corporate elitist ideology and ballot casting that militates against their own economic self-interest, even their very survival, this title deals more with structural changes in the government, economy, and society that have come about as a result of a Republican right wing agenda. It is a perplexing and sorry phenomenon that deserves the attention of a first rate pundit like Frank.

    Neoliberal ideology is championed on behalf of corporate elites who have now secured total control, even ownership, of the federal government. The Wrecking Crew is about a Republican agenda to totally eliminate the last vestiges of the New Deal and Great Society, which have provided social safety nets for ordinary working class Americans through programs such as Social Security and Medicare. Corporate elites want to demolish only that part of government that doesn't benefit the corporation. Thus, a huge military budget and intrusive national security and police apparatus is revered, while education, health, welfare, infrastructure, etc. are of less utility for the corporate state. High taxes on the corporations and wealthy are abhorred, while the middle class is expected to shoulder a huge tax burden. Although Republicans rail against federal deficits, when in office they balloon the federal deficits in a plan for government-by-sabotage. (Page 261)

    Elites need federal government revenue transferred to their realm via fat government contracts and juicy subsidies. They want government without regulation, and they want taxation imposed on the masses without real representation, but not on them. The big government they rail at is the same government they own and benefit from. They certainly do not want the national security state (the largest part of government) or the national police system to go away, not even the IRS. How can they fight wars without a revenue collection system? The wellspring of conservatism in America today -- preserving connections between the present and past -- is a destroyer of tradition, not a preserver. (Page 267)

    Neoliberals drew up a long term strategy to sabotage and disrupt the liberal apparatus. There ensued a vast selling-off of government assets (and favors) to those willing to fund the neoliberal movement. The strategy was concocted as a long term plan - the master blueprint for a wholesale transfer of government responsibilities to private-sector contractors unaccountable to Congress or anyone else. An entire industry sprung up to support conservatism - the great god market (corporate globalism) replaced anti-communism as the new inspiration. (page 93)

    Market populism arose as business was supposed to empower the noble common people. But capitalism is not loyal to people or anything once having lost its usefulness, not even the nation state or the flag. (page 100) While the New Deal replaced rule by wealthy with its brain trust, conservatism, at war with intellectuals, fills the bureaucracy with cronies, hacks, partisans, and creationists. The democracy, or what existed of it, was to be gradually made over into a plutocracy - rule by the wealthy. (Page 252) Starting with Reagan and Thatcher, the program was to hack open the liberal state in order to reward business with the loot. (Page 258) The ultimate neoliberal goal is to marketize the nation's politics so that financial markets can be elevated over vague liberalisms like the common good and the public interest. (Page 260)

    According to Frank, what makes a place a free-market paradise is not the absence of governments; it is the capture of government by business interests. The game of corporatism is to see how much public resources the private interest can seize for itself before public government can stop them. A proper slogan for this mentality would be: more business in government, less government in business. And, there are market based solutions to every problem. Government should be market based. George W. Bush grabbed more power for the executive branch than anyone since Nixon. The ultra-rights' fortunes depend on public cynicism toward government. With the U.S. having been set up as a merchant state, the idea of small government is now a canard - mass privatization and outsourcing is preferred. Building cynicism toward government is the objective. Neoliberals don't want efficient government, they want less competition and more profits - especially for defense contractors. Under Reagan, civil servants were out, loyalists were in.

    While the Clinton team spoke of entrepreneurial government - of reinventing government - the wrecking crew under Republicans has made the state the tool of money as a market-based system replaced civil service by a government-by-contractor (outsourcing). Page 137 This has been an enduring trend, many of the great robber barons got their start as crooked contractors during the Civil War. Contractors are now a fourth branch of government with more people working under contracts than are directly employed by government - making it difficult to determine where government stops and the contractors start in a system of privatized government where private contractors are shielded from oversight or accountability. (Page 138)

    The first general rule of neoliberal administration: cronies in, experts out. The Bush team did away with EPA's office of enforcement - turning enforcement power over to the states. (Page 159) In an effort to demolish the regulatory state, Reagan, immediately after taking office, suspended hundreds of regulations that federal agencies had developed during the Carter Administration. Under Reagan, a philosophy of government blossomed that regarded business as its only constituent. In recent years, neoliberals have deliberately piled up debt to force government into crisis.

    Watergate poisoned attitudes toward government - helping sweep in Ronald Reagan with his anti-government cynicism. Lobbying and influence peddling proliferated in a privatized government. Lobbying is how money casts its vote. It is the signature activity of neoliberal governance - the mechanism that translates market forces into political action. (Page 175)

    It is the goal of the neoliberal agenda to smash the liberal state. Deficits are one means to accomplish that end.- to persuade voters to part with programs like Social Security and Medicare so these funds can be transferred to corporate contractors or used to finance wars or deficit reduction.. Uncle Sam can raise money by selling off public assets.

    Since liberalism depends on fair play by its sworn enemies, it is vulnerable to sabotage by those not playing by liberalism's rules/ (Page 265) The Liberal State, a vast machinery built for our protection has been reengineered into a device for our exploitation. (Page 8) Liberalism arose out of a long-ago compromise between left-wing social movements and business interests. (Page 266) Neoliberalism speaks of not compromise but of removing adversaries from the field altogether. (Page 266) No one dreams of eliminating the branches of state that protect Neoliberalism's constituents such as the military, police, or legal privileges granted to corporations, neoliberals openly scheme to do away with liberal bits of big government. (Page 266)

    Liberalism is a philosophy of compromise, without a force on the Left to neutralize the magneticism exerted by money, liberalism will be drawn to the right. (Page 274)

    Through corporate media and right wing talk show, liberalism has become a dirty word. However, liberalism may not be dead yet. It will have to be resurrected from the trash bin of history when the next capitalist crisis hits. One should never forget that it was Roosevelt's New Deal that saved capitalism from itself. Also, one should not forget that capitalism came out of the classical liberal tradition. Capitalists had to wrest power away from the landowning nobility, the arch neoliberal tradition of its time.

    [Aug 16, 2016] Thomas Frank One Market Under God-- Extreme Capitalism

    Notable quotes:
    "... This extreme form of market capitalism, also called neo-liberalism in economics and neo-conservatism in foreign policy, has worked its way into the mindset of the ruling elites of many of the developed nations, and has taken a place in the public consciousness through steady repetition. I has become the modern orthodoxy of the fortunate few, who have been initiated into its rites, and served and been blessed by their god. ..."
    "... The adherents become blind by their devotion to their gods. ..."
    "... This is not something new. It is a madness that has appeared again and again throughout history in the form of Mammon, the golden idol of the markets. It is a way of looking at people and the world that is as old as Babylon, and as evil as sin. ..."
    jessescrossroadscafe.blogspot.com
    There is a lack of critical assessment of the past. But you have to understand that the current ruling elite is actually the old ruling elite. So they are incapable of a self-critical approach to the past."

    Ryszard Kapuscinski

    But they maintain a firm grasp on information and power, for their own sake, and sidetrack and stifle any meaningful reform.

    In October 2000 Thomas Frank published a prescient critical social analysis titled, One Market Under God: Extreme Capitalism, Market Populism, and the End of Economic Democracy .

    In the video below from 2015, Thomas Frank looks back over the past 15 years to when he wrote this insightful book, and ends with this observation.

    "I want to end with the idea that the market is capable of resolving all of our social conflict, fairly and justly. That is the great idea of the 1990's. And we all know now what a crock that is. I think what we need in order to restore some kind of sense of fairness is not the final triumph of markets over the body and soul of humanity, but something that confronts markets, and that refuses to think of itself as a brand ."
    The book was not received well at the time in the waning days of the Clinton revolution and the birth of the era of the neo-cons in foreign policy and neo-liberals in economics.

    This religion of the markets had yet to suffer the serial failures and decimation of the real economy which it would see over the next sixteen years.

    This is an ideology, a mindset, and as Frank calls it a religion, of taking market capitalism to such an extreme that it dispenses with the notion of restraints by human or policy consideration. It comes to consider the market as a god, with its orthodoxy crafted in think tanks, its temples in the exchanges and the banks, and its oracles on their media and the academy.

    This extreme form of market capitalism, also called neo-liberalism in economics and neo-conservatism in foreign policy, has worked its way into the mindset of the ruling elites of many of the developed nations, and has taken a place in the public consciousness through steady repetition. I has become the modern orthodoxy of the fortunate few, who have been initiated into its rites, and served and been blessed by their god.

    It is the taking of an idea, of a way of looking at things, that may be substantially practical when used as a tool to help to achieve certain outcomes, and placing it in such an extreme and inappropriate place as an end in itself, as the very definition and arbiter of what is good and what is not, that it becomes a kind of anti-human force that is itself considered beyond all good and evil, like a natural law.

    It is born of and brings with it an extreme tendency that kills thought, and stifles the ability to make distinctions between things. If not unfettered capitalism then what, communism ? The adherents become blind by their devotion to their gods.

    This is not something new. It is a madness that has appeared again and again throughout history in the form of Mammon, the golden idol of the markets. It is a way of looking at people and the world that is as old as Babylon, and as evil as sin.

    youtube.com

    [Aug 14, 2016] How the Fed Promoted Financial Dominance and Shadow Banking by Promoting Repo

    Notable quotes:
    "... By Daniela Gabor is associate professor in economics at the University of the West of England, Bristol. Originally published at the Institute for New Economic Thinking website ..."
    "... For a detailed account see Gabor, D. (2016) The (impossible) repo trinity : the political economy of repo markets, Review of International Political Economy, doi 10.1080/09692290.2016.1207699 ..."
    www.nakedcapitalism.com

    ... ... ...

    By Daniela Gabor is associate professor in economics at the University of the West of England, Bristol. Originally published at the Institute for New Economic Thinking website

    Since the 1980s, central banks have been increasingly freed from fiscal dominance , the obligation to monetize government debt. The new regime of monetary dominance celebrated the (price) stability benefits of insulating scientific monetary policy from poorly theorized, highly politicized fiscal policy. Yet the growing dominance of the 'monetary science, fiscal alchemy' view in both academia and policy circles played a critical role in the rapid rise of shadow banking. The untold story of shadow banking is the story of (failed) attempts to separate monetary from fiscal policy, and of the bordeland that connects them, mapped onto the repo market .

    While the state withdrew from economic life, privatizing state-owned enterprises or state banks, and putting macroeconomic governance in the hands of independent central banks, its role in financial life grew bigger. Sovereign debt evolved into the cornerstone of modern financial systems, used as benchmark for pricing private assets, for hedging and as base asset for credit creation via shadow banking . The state's role as debt issuer, passive and systemic at once, has been reliant, beyond the arithmetic of budget deficits, on the intricate workings of the repo trinity.

    The repo trinity captures a consensus in central bank circles emerging after the 1998 Russian crisis, the first systemic crisis of collateral-intensive finance, that financial stability requires liquid government bond markets and liberalized repo markets (fig. 1).

    Figure 1 The repo trinity

    gabbor-f1

    The repo-government bond market nexus took shape in the 1980s. In the US, securities dealers preferred repos to secured lending against collateral because market convention treated repos as outright sales and repurchases of collateral that allowed dealers to re-use collateral for a wide range of activities (short-selling, hedging, selling to a third party). When bankruptcy courts decided that repos would be subjected to automatic stay rules, Paul Volcker, then the Federal Reserve chairperson, successfully lobbied Congress to exempt repos with US Treasuries (UST) and agency securities collateral. Then, Salomon Brothers short-squeezed the UST market in 1991 by becoming the only repo supplier of a two-year note. This allowed Salomon to fund securities through repo transactions at exceptionally low rates. The ensuing public enquiry into the Salomon scandal showed little appetite for regulating repos. Rather, the Fed and the Treasury introduced new practices to fix gaps in repo plumbing, celebrating repos as innovative, liquidity enhancing instruments that would support the state in the post fiscal-dominance era.

    The UST blueprint diffused rapidly to Europe. Pressured to adjust to a world of independent central banks, market-based financing and global competition for liquidity, European states embarked on a project of creating modern government bond markets, with modernity understood to mean the structural features of the US government bond market: regular auctions, market-making based on primary dealers and a liberalised repo market.

    Central banks were at first divided on the benefits of opening up repo markets. While Banque de France followed the US Fed in assuming a catalyst role for the repo-sovereign bond market nexus, Bundesbank and Bank of England worried that deregulated repo markets would unleash structural changes in finance that could undermine the conduct of monetary policy and financial stability. In the architecture of the US government bond market, the Bundesbank saw the conditions nurturing short-term , fragile finance. Seeking to keep banks captive on the uncollateralized segment of interbank markets, Bundesbank imposed reserve requirements on repo liabilities. In parallel, as government's fiscal agent, Bundesbank followed a conservative strategy, with irregular auctions, issuance concentrated at long maturities and repo rules that increased the costs of funding bunds via repos. German banks responded by moving (bund) repo activities to London and warned that France's open repo strategy would make it into the benchmark sovereign issuer for the Euroarea. For similar reasons, the Bank of England exercised strict control over the repo gilt market for 10 years after the 1986 Big Bang liberalisation of financial markets. Under intense pressure from the financial industry and Ministries of Finance, the two central banks liberalized repo markets by 1997.

    As the fragilities of the new, collateral-intensive world became apparent in the 1998 Russian crisis, central banks working together in the Committee on the Global Financial System subscribed to the policy goals of the repo trinity. The CGFS argued that financial stability in market-based finance required global safe assets, issued in government bond markets, in turn 'lubricated' by free repo markets with carefully designed (but not regulated) risk management regimes.

    In pursuing the objectives of the repo trinity, central banks helped consolidate the critical role that sovereign bonds play in modern financial markets. Throughout the 2000s, the shortage of US government bonds saw the trinity extended to include securitization markets, while the Euro project galvanized consensus for a European repo trinity, whereby central banks encouraged the European banks dominating the repo market to treat all Euro sovereign debt as high-quality collateral .

    After Lehman, central banks and the Financial Stability Board recognized the impossible nature of the repo trinity, attributing cyclical leverage, fire sales and elusive liquidity in collateral markets, including government bond markets, to free repo markets. Central banks, with the Bank of England leading the way, now accept that financial stability means supporting liquidity in collateral markets in times of stress rather than supporting banking institutions as in the traditional lender of last resort (LOLR) model. Paradoxically, LOLR support, implemented through repo loans, can destabilize (shadow) banks where central banks' collateral framework follows collateral market valuations (figure 2).

    Figure 2 The impossible repo trinity

    gabbor-f2

    The quiet revolution in crisis central banking that involves direct support for core markets may appear like, but does not entail a return to, fiscal dominance. Rather, it creates financial dominance , defined as asymmetric support for falling asset prices. While financial dominance should be addressed by direct regulatory interventions, the quest for biting repo rules has so far proved illusive. The precise impact of Basel III liquidity and leverage rules is yet to be determined, whereas the failed attempts to include repos in the European Financial Transactions Tax and the FSB's watered-down repo proposals suggest that (countercyclical) collateral rules are only possible once states design alternative models of organizing their sovereign debt markets. Paradoxically, new initiatives in Europe suggest that a return to the repo trinity is rather more likely: the Capital Market Union plans to create Simple, Transparent and Standardized ( STS ) securitisation again illustrate the catalyst role that central banks choose to play in market-driven solutions to safe asset shortages.

    For a detailed account see Gabor, D. (2016) The (impossible) repo trinity : the political economy of repo markets, Review of International Political Economy, doi 10.1080/09692290.2016.1207699

    ArkansasAngie , August 13, 2016 at 7:49 am

    Intrinsically, that is authoritative … fascism,

    Can't trust politicians or voters to make the right choices.

    That's not a slippery slope … it's a dad gum cliff

    Take decision making away from politicians and their constituents and place it in the hands of unelected yahoos.

    That's a bridge to far …IMHO

    Where have we seen these seeds? Why the European Union.

    A troika coming to your town?

    hemeantwell , August 13, 2016 at 7:59 am

    Uhhh. The article is one of the rare "too short, wish it was longer" breed.

    I'll hazard a remark: how can securitization be "transparent" if, as one of the articles yesterday discussed, central banks intervene to support banks so as to allow them to avoid having the market deliver a price verdict on asset value?

    beene , August 13, 2016 at 8:57 am

    Any time you let central banks like the Federal Bank of NY create money from debt; bankruptcy is on the horizon. This has only been proven true for around five thousand years.

    For a recent example have a look at the difference in government debt in Canada now verses when it had a public banking system.

    financial matters , August 13, 2016 at 8:37 am

    I think this is an important point:

    "Throughout the 2000s, the shortage of US government bonds saw the trinity extended to include securitization markets,"

    This started treating asset based securities similar to US Treasuries

    Also this:

    "fire sales and elusive liquidity in collateral markets, including government bond markets,"

    I don't think the European government bond market can be treated as sovereign government bonds as they don't have that guarantee of backing from a central bank.

    ----

    Quite simply, US Treasuries can be put to much better use than supporting asset prices and other financial products.

    The first target should be unemployment.

    Jesper , August 13, 2016 at 12:53 pm

    Repos hide risk and makes it possible to increase leverage. Why would anyone but financial institutions want that?
    But since financial institutions rule all then I suppose that repos will continue and as a gesture of goodwill (dressed up as something else) they'll just become more and more complex – those (high) fees for the professionals enabling the practice has to be justified somehow…

    sunny129 , August 13, 2016 at 5:21 pm

    More complex invites, less transparency, more instability and volatility!

    Until RESET or forced of gravity of reversion to the mean, over power the CBers, this charade will go on!

    nothing but the truth , August 13, 2016 at 5:01 pm

    the forced identity between credit and currency is the root of a lot problems.

    it should not be the taxpayer funded mandate of the the govt to enforce this identity.

    [Aug 13, 2016] The One of the largest power plant in the worldplant is on fire in Michigan and will likely be out of service for many months if not a few years

    marknesop.wordpress.com
    More major infrastructure woes:
    http://www.freep.com/story/news/local/michigan/2016/08/12/power-plant-fire-st-clair-river/88614804/

    With about 1900 megawatt output, this was once the largest power plant in the world according to a news story. The plant will likely be out of service for many months if not a few years assuming that there is sufficient economic justification to undertake the repairs.

    [Aug 12, 2016] More than a third of female students have mental health problems

    Stress kill. Stress combined with mental overload is even more dangerous.
    Notable quotes:
    "... One in three female students in the UK has a mental health problem, a survey suggests. This compared with about a fifth of male undergraduates, the YouGov survey of 1,061 students found. Overall, some 27% of the students said they had a mental health problem. ..."
    "... Of those surveyed, 30% of males and 27% of females said they would not feel comfortable in talking about their mental illness with friends or family. ..."
    Aug 12, 2016 | bbc.com

    One in three female students in the UK has a mental health problem, a survey suggests. This compared with about a fifth of male undergraduates, the YouGov survey of 1,061 students found. Overall, some 27% of the students said they had a mental health problem. This rose to 45% among lesbian, gay, bisexual and transgender students.

    Universities UK said institutions were working hard to develop good services that linked in with the NHS.

    Of those students who said they had a mental health problem:

    • In May, statistics published by the ONS showed student suicides had risen to their highest level since numbers were first recorded in 2007.
    • These figures - for 2014 - showed there were 130 suicides in England and Wales among full-time students aged 18 or above. Of those, 97 deaths were for male students and 33 were females.

    There has been concern about the level of mental health support services provided by universities. But the survey showed students were broadly aware of the mental health services offered by their universities.

    Seeking help

    Anyone affected by mental health issues can contact a number of organisations, such as:

    Some 18% of students had already made contact with university mental health services, and, of those who had, nearly nine out of 10 had seen a counsellor.

    Of those surveyed, 30% of males and 27% of females said they would not feel comfortable in talking about their mental illness with friends or family.

    Challenging stigmas

    Chief executive of Universities UK Nicola Dandridge said universities took student mental health "very seriously". "For some students, an unfamiliar higher education environment can be stressful, particularly for those who already have an underlying illness. "Some students are reluctant to disclose their difficulties, which can also present a challenge for universities seeking to support them."

    But she added that the development of policies and anti-stigma campaigns was beginning to address these issues. "The challenge for universities is to build on the support services and external links that exist already, enabling referral to the NHS where necessary," she said. "It is important to remember that university wellbeing services, however excellent, cannot replace the specialised care that the NHS provides for students with mental illnesses."

    Universities UK also said it had issued guidance to all universities last year with advice on dealing with students with mental health issues.

    See also

    [Aug 08, 2016] Globalization and its New Discontents

    economistsview.typepad.com
    JohnH :

    Globalization and its New Discontents

    Stiglitz: AUG 5, 2016 8
    Globalization and its New Discontents

    NEW YORK – Fifteen years ago, I wrote a little book, entitled Globalization and its Discontents, describing growing opposition in the developing world to globalizing reforms. It seemed a mystery: people in developing countries had been told that globalization would increase overall wellbeing. So why had so many people become so hostile to it?

    Now, globalization's opponents in the emerging markets and developing countries have been joined by tens of millions in the advanced countries. Opinion polls, including a careful study by Stanley Greenberg and his associates for the Roosevelt Institute, show that trade is among the major sources of discontent for a large share of Americans. Similar views are apparent in Europe.

    How can something that our political leaders – and many an economist – said would make everyone better off be so reviled?

    One answer occasionally heard from the neoliberal economists who advocated for these policies is that people are better off. They just don't know it. Their discontent is a matter for psychiatrists, not economists.

    But income data suggest that it is the neoliberals who may benefit from therapy. Large segments of the population in advanced countries have not been doing well: in the US, the bottom 90% has endured income stagnation for a third of a century. Median income for full-time male workers is actually lower in real (inflation-adjusted) terms than it was 42 years ago. At the bottom, real wages are comparable to their level 60 years ago.

    The effects of the economic pain and dislocation that many Americans are experiencing are even showing up in health statistics. For example, the economists Anne Case and Angus Deaton, this year's Nobel laureate, have shown that life expectancy among segments of white Americans is declining.

    Things are a little better in Europe – but only a little better.

    Branko Milanovic's new book Global Inequality: A New Approach for the Age of Globalization provides some vital insights, looking at the big winners and losers in terms of income over the two decades from 1988 to 2008. Among the big winners were the global 1%, the world's plutocrats, but also the middle class in newly emerging economies. Among the big losers – those who gained little or nothing – were those at the bottom and the middle and working classes in the advanced countries. Globalization is not the only reason, but it is one of the reasons.

    Under the assumption of perfect markets (which underlies most neoliberal economic analyses) free trade equalizes the wages of unskilled workers around the world. Trade in goods is a substitute for the movement of people. Importing goods from China – goods that require a lot of unskilled workers to produce – reduces the demand for unskilled workers in Europe and the US.

    This force is so strong that if there were no transportation costs, and if the US and Europe had no other source of competitive advantage, such as in technology, eventually it would be as if Chinese workers continued to migrate to the US and Europe until wage differences had been eliminated entirely. Not surprisingly, the neoliberals never advertised this consequence of trade liberalization, as they claimed – one could say lied – that all would benefit.

    The failure of globalization to deliver on the promises of mainstream politicians has surely undermined trust and confidence in the "establishment." And governments' offers of generous bailouts for the banks that had brought on the 2008 financial crisis, while leaving ordinary citizens largely to fend for themselves, reinforced the view that this failure was not merely a matter of economic misjudgments.

    In the US, Congressional Republicans even opposed assistance to those who were directly hurt by globalization. More generally, neoliberals, apparently worried about adverse incentive effects, have opposed welfare measures that would have protected the losers.

    But they can't have it both ways: if globalization is to benefit most members of society, strong social-protection measures must be in place. The Scandinavians figured this out long ago; it was part of the social contract that maintained an open society – open to globalization and changes in technology. Neoliberals elsewhere have not – and now, in elections in the US and Europe, they are having their comeuppance.

    Globalization is, of course, only one part of what is going on; technological innovation is another part. But all of this openness and disruption were supposed to make us richer, and the advanced countries could have introduced policies to ensure that the gains were widely shared.

    Instead, they pushed for policies that restructured markets in ways that increased inequality and undermined overall economic performance; growth actually slowed as the rules of the game were rewritten to advance the interests of banks and corporations – the rich and powerful – at the expense of everyone else. Workers' bargaining power was weakened; in the US, at least, competition laws didn't keep up with the times; and existing laws were inadequately enforced. Financialization continued apace and corporate governance worsened.

    Now, as I point out in my recent book Rewriting the Rules of the American Economy, the rules of the game need to be changed again – and this must include measures to tame globalization. The two new large agreements that President Barack Obama has been pushing – the Trans-Pacific Partnership between the US and 11 Pacific Rim countries, and the Transatlantic Trade and Investment Partnership between the EU and the US – are moves in the wrong direction.

    The main message of Globalization and its Discontents was that the problem was not globalization, but how the process was being managed. Unfortunately, the management didn't change. Fifteen years later, the new discontents have brought that message home to the advanced economies.

    https://www.project-syndicate.org/commentary/globalization-new-discontents-by-joseph-e--stiglitz-2016-08

    [Aug 07, 2016] Angry Bear " Taxes, government, and the good life

    angrybearblog.com
    1. Jim Hannan August 6, 2016 10:47 am

      It's surprising to me how little talk there is about the estate tax. When Bill Clinton was president, the estate tax rate was 55% on estates over $1.5 million. The Bush tax cuts eliminated the estate tax, but only in the last year of the ten years that the tax cuts were in effect. So, certain high asset taxpayers like George Steinbrenner of NY Yankees fame, paid no estate tax because they died that year.
      When the Democratic congress was unable to pass a new tax law in the fall of 2010, with all of the Bush tax cuts expiring, Obama was left to negotiate with Republicans on the new tax rates. The estate tax rate is now 40% on estates over $5 million.
      If Democrats ever regain control of Congress, I suggest that they consider a tiered estate tax, similar to the tiered income tax. Let the 40% rate stay for estates from $5 million to say $25 million. Then, move to a 50% rate for estates from $25 to $100 million. Finally, have a 60% rate for estates above $100 million.

    2. Zachary Smith August 6, 2016 11:12 am

      "We have starved the IRS while assigning it more and more functions, meaning it is much harder for the IRS to effectively enforce the laws, allowing wealthy people and big corporations with sophisticated lawyers a better chance to scam the system while ordinary people pay taxes due through withholding."

      I'd quibble with the "we" part of this statement, but this was a really good read overall.

      I don't see things getting any better. Both of the presidential candidates are quite wealthy. One was born with a silver spoon in his mouth, and has no idea at all what it's like to live in the "real world". The other is nouveau riche, and that mix of relative poverty and newly found wealth has warped her viewpoint of the world.

      I'm a hardliner on the estate tax. Anything exceeding some arbitrary point – say $100 million – would be taxed at 95%. Can't see THAT happening, either. The propagandists for the rich would use extreme examples – What If You Won The Power Ball? And Joe Sixpack would buy it. Just as he has been against his own interests for generations.

    3. EMichael August 6, 2016 11:25 am

      ZS,

      Nice to see your consistency. Amazing how you can come to an opinion about different topics(like the estate tax) and what Clinton believes without making any effort to find out the truth.

      Must be nice to know everything without reading anything.

    4. Joel August 6, 2016 1:42 pm

      Why not tax estates like income? The person who inherits the windfall didn't earn it, I know, but like every taxable transaction, money has changed hands.

      Tax inherited income as income. Tax dividend income as income. Why privilege some kinds of income over others?

    [Aug 03, 2016] Financialization and its Discontents

    Notable quotes:
    "... We are all "banks", but we don't have the capacity to socialise costs and privatise benefits. The problem is thereby, a problem of the power structure and accountability. Of institutional decay and corruption. ..."
    "... Capitalism has always favored the few at the expense of the many. Yet there have been places and moments, like in post-WWII U.S., where effort has gone into making the financial system at least appear somewhat transparent and predictable. Today we simply suffer the unrestrained looting of kleptocrats who laugh in our faces if we dare to complain. They violate "rules" that are already tilted in their favor with impunity. Meanwhile, if you are a poor person, unable to pay a traffic ticket in a timely fashion, you may well lose your liberty, or even your life. ..."
    "... The problem we have is that the system is rigged. Bad actors in the upper class can destroy their bank for fun and profit. Individuals father down the scale cannot discharge student loans under any circumstances. This is the largest source of discontent and a problem elites refuse to address. ..."
    "... And the elites won't address it until they are jailed or guillotined. Why should they? ..."
    "... The article starts off well enough, but then loses track of the critical standpoints it initially sets out. For example, within the above idea, the author can't talk about dimensions of life that are not monetizable because they are a capitalist prerogative. For instance, if someone is forced to work mandatory overtime because their employer doesn't want to hire enough workers to cover demand without overtime, you either do the overtime or you exit. You can't buy your time off. Etc. ..."
    "... I'm not sure what point this article is attempting to make. The distinction between money and debt becomes moot if money is a debt - which if I understand his arguments correctly is what Michael Hudson argues in "Killing the Host". I do like the reading list at the bottom. I'm behind many of the rest of the commenters in not having read any of these oft cited books. ..."
    "... I agree with other comments the formula "we are each of us banks" is lame. I think it matches nicely with the oft repeated analogy between government finance and a family business. ..."
    "... Financialization is about middlemen and looters skimming off money as it flows through; whether this is good or bad in a particular case depends upon whether those middlemen add value or simply act as rentiers. ..."
    "... money is the mental construct, the idea, by which we value human labor and transport that value across spacetime. ..."
    "... Other People's Money ..."
    naked capitalism
    TomDority , August 3, 2016 at 6:55 am

    Not sure the bank thing is a good analogy. Seams when a financial system raises the cost of an asset like land through speculation to the point where a debtor has not enough income to cover outflow to provide basics of survival….. food, water, shelter, community etc……..then does the crrditor/speculator thus owe society because, it was through speculation and Mal-investment that society was damaged.

    Thomas Jefferson….I think, said something along the lines…… if banks get a hold of credit creation then, by inflation and deflation the citizens of this country will be left homeless upon the land their fathers established.

    IDG , August 3, 2016 at 7:30 am

    We are all "banks", but we don't have the capacity to socialise costs and privatise benefits. The problem is thereby, a problem of the power structure and accountability. Of institutional decay and corruption.

    Ulysses , August 3, 2016 at 9:41 am

    Very well said!

    Capitalism has always favored the few at the expense of the many. Yet there have been places and moments, like in post-WWII U.S., where effort has gone into making the financial system at least appear somewhat transparent and predictable. Today we simply suffer the unrestrained looting of kleptocrats who laugh in our faces if we dare to complain. They violate "rules" that are already tilted in their favor with impunity. Meanwhile, if you are a poor person, unable to pay a traffic ticket in a timely fashion, you may well lose your liberty, or even your life.

    washunate , August 3, 2016 at 10:55 am

    Capitalism has always favored the few at the expense of the many.

    I'm curious what makes capitalism unique for you in that regard? I agree that there are problems with market-based economics, but you seem to be suggesting that other forms of political economy don't have problems of concentration of wealth and power?

    Capitalism without democracy and individual rights absolutely favors the few at the expense of the many. That's why our intellectual enablers have spent so much energy trying to separate economics from politics: to camouflage political choices as if they are natural economic outcomes.

    Left in Wisconsin , August 3, 2016 at 11:52 am

    I'm not sure what "other forms" you have in mind for comparison. But I would suggest it is a huge failure of imagination to suggest humans have exhausted all possible forms of economic organization and are stuck with contemporary global capitalism. Time for some innovation!

    readerOfTeaLeaves , August 3, 2016 at 11:04 am

    Agreed.

    And as Mehring points out: "Focusing on what money really is – whether gold or state fiat – shifts attention away from what credit really is, which is to say away from the center of discontent." It's the quality of that debt, what it is and why, that needs far more examination. At present, it is at the root of much discontent: why should I and mine be expected to salvage bank balance sheets that are essentially fraudulent in terms of crap mortgages?

    The institutional decay is really some kind of measure of the quality of crappy debt, which is making many of us seriously discontent at being expected to cover crap bets.

    Larry , August 3, 2016 at 7:36 am

    The problem we have is that the system is rigged. Bad actors in the upper class can destroy their bank for fun and profit. Individuals father down the scale cannot discharge student loans under any circumstances. This is the largest source of discontent and a problem elites refuse to address.

    Benedict@Large , August 3, 2016 at 8:22 am

    And the elites won't address it until they are jailed or guillotined. Why should they?

    hemeantwell , August 3, 2016 at 8:42 am

    From a money view perspective, the origin of discontent seems to lie in the fact that each of us, in our interface with the essentially financial system that is modern capitalism, operates essentially as a bank, meaning a cash inflow, cash outflow entity.

    The article starts off well enough, but then loses track of the critical standpoints it initially sets out. For example, within the above idea, the author can't talk about dimensions of life that are not monetizable because they are a capitalist prerogative. For instance, if someone is forced to work mandatory overtime because their employer doesn't want to hire enough workers to cover demand without overtime, you either do the overtime or you exit. You can't buy your time off. Etc.

    Jeremy Grimm , August 3, 2016 at 9:34 am

    I'm not sure what point this article is attempting to make. The distinction between money and debt becomes moot if money is a debt - which if I understand his arguments correctly is what Michael Hudson argues in "Killing the Host". I do like the reading list at the bottom. I'm behind many of the rest of the commenters in not having read any of these oft cited books.

    I agree with other comments the formula "we are each of us banks" is lame. I think it matches nicely with the oft repeated analogy between government finance and a family business.

    The close: "fundamental misunderstanding of the nature of the system" leaves me hanging. Where is the explanation which clarifies things and repairs my misunderstanding? I missed it in the presentation above and the concluding absurdity - "… we are each of us banks, managing our daily cash inflow and cash outflow relative to the larger system which is society." - hardly serves as clarification of anything. It just makes me annoyed that I bothered to read down that far.

    JEHR , August 3, 2016 at 11:38 am

    Bad analogy: If each of us were our own bank, then we would be able to create money like banks and loan out with interest and make billions each quarter because sometimes we could speculate or gamble and make billions more while our fellow citizens become poorer because of our efforts.

    washunate , August 3, 2016 at 10:25 am

    Unlike some commenters, I do happen to like the imagery of all of us being banks. That's what we all do: our labor flows out, other people's labor flows in. Imbalances can (and in fact, almost by definition have to) occur over arbitrarily short time frames, but over longer timeframes, these inflows and outflows do have to roughly balance. It also helps lay bare the fallacy of bailing out individual banks (TBTF) as some kind of means of saving the banking system rather than those specific banks bailed out. If the USFG gave Wash a trillion buck bailout, Wash Banking Inc would be very grateful and fix lots of things in Wash Town USA and make lots of jawbs and groaf and all dat. Does that make it good policy, either for the residents of Wash Town or the residents of Dry Town across the valley?

    Where I don't quite follow the author's point is in distinguishing money/credit/financialization/etc. The easiest way to understand money at a macro level is that money is labor. Or a bit more complexly, money is the mental construct, the idea, by which we value human labor and transport that value across spacetime.

    The issue of financialization isn't market vs. non-market or money vs. non-money or something like that. Financialization is about the subset of money called currency, particularly currency units issued by a sovereign government, being used to allocate resources in areas where currency units are poor allocators of resources. Financialization is about middlemen and looters skimming off money as it flows through; whether this is good or bad in a particular case depends upon whether those middlemen add value or simply act as rentiers.

    The biggest areas of financialization in contemporary western culture, especially in the heart of the free world in DC, are not markets at all. They are government sponsored enterprises carrying out that age old quest of the Will to Power. Remove USFG policy choices to run a global empire abroad and create massive inequality at home, and our supposedly market-based financial system would shrink to a much smaller size overnight.

    JEHR , August 3, 2016 at 11:39 am

    If money were true labour then bankers would be broke!

    Robert Dannin , August 3, 2016 at 11:51 am

    "Financialization is about middlemen and looters skimming off money as it flows through; whether this is good or bad in a particular case depends upon whether those middlemen add value or simply act as rentiers."

    You hit the nail on the head here. Profits from financial transactions differ from those derived in trading commodities and services. The former are occult whereas the latter originate in the value of labor power. The claim that financial profits track interest rates doesn't work because they remain linked to credit and ultimately commodity exchange. If you listen to the Blankfeins and Dimons, they will say they are compensated for some special managerial skills that add values to the financial transaction. This is only nonsense to justify their mega-salaries, themselves only a fraction of the huge profits in finance. According to Hilferding's Finance Capital, the source of profit in finance is "sui generis" and derives from what we now call transaction fees. Whether legitimate or not, we need to understand how those rates are determined relative to the other variables.

    Left in Wisconsin , August 3, 2016 at 11:58 am

    money is the mental construct, the idea, by which we value human labor and transport that value across spacetime.

    But even this has to be qualified by tradition, power relations, etc. as there are many, many forms of human labor (often those forms traditionally performed by women) that we value but do not compensate with money. Also, who is "we?" And when did "we" decide that 2 and 20 was appropriate compensation for the "value" provided by hedge funders?

    Alejandro , August 3, 2016 at 11:10 am

    This "economist" alludes to, but fails to make the connection of the "asymmetrical" AND disproportionate power between creditors and debtors, that has been legislated, ratified and codified into the creditor castle (institution) of banking, currently run by banksters and moated with pols, judges, story-tellers masquerading as "journos"/"economists" etc….e.g.-assuming it were possible to make a sharp distinction between speculating and investing, by what reasonable definition of creditor can vultures be classified as creditors?

    Also doesn't seem to challenge the presupposition of "self-regulation" in the abstract "logic"(and language) of "markets", which is innate in thinking of "money" as a commodity. This abstract "logic"(and language) has "supplied" the fodder for neoliberal zealots to rationalize de-regulation, which many have concluded has been a major driver of the "defining issue of our time" and the disdainful polarization between the "haves" and "have-nots".

    Also seems to fail to recognize the conflict when thinking about money as a commodity and the effects of compounding interest…

    Sluggeaux , August 3, 2016 at 12:23 pm

    Thanks for this. I followed the link and have started reading Louis Brandeis' Other People's Money , which I've never read before. We've learned little in the ensuing 100 years…

    [Aug 01, 2016] The top one tenth of percent couldnt have done so much damage to the world if millions supposedly good people hadnt fallen into their traps so easily...

    www.moonofalabama.org

    @84 PhilK

    Anything I got wrong? Anything I missed? There's an address you can reach me at the page if you have suggestions.

    Posted by: jfl | Jul 30, 2016 1:37:48 AM | 90

    @86 Thank you, Penelope. You make very good points, as always. :-)

    But let me repeat my conclusion - the world is evil because people are weak.

    The 0.1% couldn't have done so much damage to the world if millions supposedly "good people" hadn't fallen into their traps so easily...

    Posted by: ProPeace | Jul 30, 2016 2:57:04 AM | 91

    @72 Many good USians have been murdered (Phill Marshall, sen. Paul Wellstone, JFK junior - competing with Hitlary for the Senate seat), silenced, imprisoned, intimidated, disenfranchised for standing up to the criminal elite.

    They deserve our utmost respect.

    Do not use collective responsibility, Bolshevik style.

    Posted by: ProPeace | Jul 30, 2016 3:05:11 AM | 92

    [Jul 31, 2016] If you think that this picture seems to rhyme with the Internet Bubble of 1999 … youre right!

    www.nakedcapitalism.com
    Jim Haygood , July 29, 2016 at 3:41 pm

    ALL FIVE largest U.S. companies by market cap are now tech stocks: Apple, Google, Microsoft, Amazon and Facebook.

    http://www.usatoday.com/story/money/2016/07/29/amazon-facebook-top-exxon-mobil-market-cap/87700896/

    They are the top five holdings in the Nasdaq 100 index, which hit a record high yesterday.

    Technically, Amazon is classified in the Consumer Discretionary sector (and the internet retailing industry), whereas the other four are in the Technology sector. But Amazon's value derives from the technology of its internet platform, its cloud services, etc.

    If you think that this picture seems to rhyme with the Internet Bubble of 1999 … you're right!

    IDG , July 29, 2016 at 6:31 pm

    Also Google and Facebook income are just big advertising and marketing (data mining) companies disguised as tech companies. Their core business is not producing and selling any tech (specially Facebook).

    [Jul 20, 2016] Bill Black: Mankiws Mythical Ten Commandments of Theoclassical Economics

    Notable quotes:
    "... Democrats: Please Renounce Mankiw's Myths ..."
    "... Mankiw is a propagandist. ..."
    "... The values and ideology represented in the Economics textbook Bill Black analyzed didn't arise in a vacuum. The points Black lists reflect the ideology, values, ethics and interests of a narrow segment of our society who have accumulated enormous personal wealth through a variety of extra-legal and illegal mechanisms, and who use a small portion of that wealth to fund "Economics Chairs" in our public and private universities; economics "think tanks"; and speeches, books, consulting engagements, and board memberships for "prominent economists". ..."
    "... Mankiw is a shill/useful idiot for his oligarchs patrons. #11 explains the idiocy of the previous 10. ..."
    "... Did the banks which loaned billions to the gas frackers of North Dakota know that production would exceed demand and cause a crash? Perhaps the loan officer might have such concern, but would more likely be most concerned with his/her own bottom line – a meme Yves explores in Econned. ..."
    "... Newly-printed money CAN cause inflation, but WHERE the price rises happen depends greatly on the pockets in which the money lands. ..."
    "... stocks, real estate, luxury goods, premium educations, etc. ..."
    "... This kind of ignorant cluelessness is pretty prevalent among the oligarchy and its supporters like Mankiw. Just like that guy in Davos who simply couldn't understand why there's so much social unrest in the world today. They live in a completely different world. ..."
    "... My first exposure to Mankiw's principles was actually an early version of the talk by Yoram Bauman in this video. It hits several of the points Mr. Black makes and is also pretty funny. It definitely demonstrates how Mankiw attempts to cloak his biases in supposedly neutral terms. ..."
    "... I doubt Mankiw will accept 100% estate tax on the justification that the cost of bequests is zero to the recipient. (and thus a 100% estate tax doesn't incur large costs on the recipient) ..."
    "... My paper lists four principles claimed to be at the core of modern economics by Mankiw and then shows how all four principles are false: Amir-ud-Din, Rafi and Zaman, Asad, Failures of the 'Invisible Hand' (July 15, 2013). Forum for Social Economics, Vol. 45, Iss. 1, 2016. Available at SSRN: http://ssrn.com/abstract=2293940 or http://dx.doi.org/10.2139/ssrn.2293940 ..."
    May 17, 2016 | nakedcapitalism.com

    By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly published with New Economic Perspectives

    This is the second column in a series on the N. Gregory Mankiw's myths and dogmas that he spreads in his economic textbooks. The first column exposed the two (contradictory) meta-myths that begin his preface. This column de-mythologizes Mankiw's unprincipled " principles " of economics – the ten commandments of theoclassical economics' priestly caste. Some of these principles, correctly hedged, could be unobjectionable, but in each case Mankiw dogmatically insists on pushing them to such extremes that they become Mankiw myths.

    To understand Mankiw's mythical 10 commandments, one must understand "Mankiw morality" – a morality that remains hidden in each of his textbooks. Few people understand how radically theoclassical economics has moved in the last thirty years. Milton Friedman famously argued that CEOs should operate exclusively in the interest of shareholders. Mankiw, however, is a strong supporter of the view that CEOs will not only defraud customers, but also shareholders and creditors by looting the firm. "[I]t would be irrational for savings and loans [CEOs] not to loot." "Mankiw morality" decrees that if you have an incentive as CEO to loot, and fail to do so, you are not moral – you are insane. Mankiw morality was born in Mankiw's response as discussant to George Akerlof and Paul Romer's famous 1993 article "Looting: The Economic Underworld of Bankruptcy for Profit."

    Mankiw's textbooks preach the wonders of the indefensible a system he has helped design to allow elite CEOs to loot the shareholders with impunity – the antithesis of Friedman's stated goal. Mankiw morality helps create the "criminogenic environments" that produce the epidemics of "control fraud" that drive our recurrent, intensifying financial crises. It is essential to interpret Mankiw's ten myths in light of his unacknowledged immoral views about how CEOs will and should respond to incentives to rig the system against the firm's consumers, employees, creditors, and shareholders. His textbooks religiously avoid any disclosure of Mankiw morality or its implications for perverting his ten commandments into an unethical and criminogenic dogma that optimizes the design of a criminogenic environment.

    Mankiw's myths

    1. People Face Tradeoffs. To get one thing, you have to give up something else. Making decisions requires trading off one goal against another.

      This can be true, but Mankiw pushes his principle to the point that it becomes a myth. Life is filled with positive synergies and externalities. If you study logic or white-collar criminology you will make yourself a far better economist. You may trade off hours of study, but not "goals." If your "goal" is to become a great economist you will not be "trading off one goal against another" if you become a multidisciplinary scholar – you will strongly advance your goal. If you study diverse research methods you will be a far better economist than if you study only econometrics.

    2. The Cost of Something is What You Give Up to Get It. Decision-makers have to consider both the obvious and implicit costs of their actions.

      "Opportunity costs" are an important and useful economic concept, but Mankiw's definition sneaks ideological baggage into both sentences that turns his principle into multiple myths. Mankiw implicitly assumes fraud and other forms of theft out of existence in the first sentence. "Cost" is often not measured in economics by "what you give up to get it." If your inherit a home that lacks fire insurance and immediately burns down there is a cost to you (and society) even though you gave up nothing to inherit the home. If the CEO loots "his" firm he gave up nothing to get the millions, but if he loses those millions he will consider it to have a "cost." Theoclassical economists have a primitive tribal taboo against even using the "f" word (fraud).

      Decision-makers frequently ignore the "costs of their actions." There is nothing in economic theory or experience that supports the claim that the "decision-makers" "have" to consider costs. It is rare that decision-makers must do – or not do – anything.

      It is likely that Mankiw means that optimization requires decision-makers to "consider" all "costs of their actions," but that too is a myth. Theoclassical optimization requires perfect, cost-free information, pure "rationality," and no externalities. None of these conditions exist. Car buyers have no means of knowing the costs of buying a particular car. If they bought a GM car the ignition mechanism defect could cause the driver to lose the ability to control the car – turning it into an unguided missile hurtling down (or off) a highway at 70 mph. The car buyer does not know of the defect, does not know who will be driving when the defect becomes manifest, does not know who the passengers will be, and does not know who and what else could be injured or damaged as a result of the defect. The theoclassical view is that the buyer who "considers" the costs of buying his defective car to others (negative externalities) and pays more money to buy a car that minimizes those negative externalities is not acting ethically, but irrationally.

      It is typically cheaper (for the producer, not society) to produce goods of inferior (but difficult to observe) quality. The inability of the consumer to "consider" even the true costs to the consumer and the consumer's loved ones of these hidden defects means that economists began warning 46 years ago that "market forces" could become criminogenic. George Akerlof's 1970 article on markets for "lemons" even coined the term "Gresham's" dynamic to describe the process. A Gresham's dynamic is a leading form of a criminogenic environment.

      [D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.

      Akerlof was made a Nobel laureate in economics in 2001 for this body of work. Economics is the only field in which someone would write a textbook ignoring a Nobel laureate whose work has proven unusually accurate on such a critical point. There is only one reason to exclude this reality from Mankiw's myths – Akerlof's work falsifies Mankiw's myths, so Akerlof's work disappears from Mankiw's principles, as does the entire concept of fraud.

    3. Rational People Think at the Margin . A rational decision-maker takes action if and only if the marginal benefit of the action exceeds the marginal cost.

      The mythical nature of this principle flows from the multiple errors I have described. Mankiw is being deliberately disingenuous. Theoclassical economics does not claim, for example, that a firm produces a product "only if the marginal benefit of the action exceeds the marginal cost." Theoclassical economists claim that a firm sells a product "only if the marginal benefit of the action to the seller exceeds the marginal cost to the seller." The seller ignores social costs and benefits.

      For the sake of brevity, I will summarize that Mankiw's third principle is a myth for five reasons known to every economist. First, it implicitly assumes out of existence positive and negative externalities, which means that supposedly rational, self-interested decision-makers he postulates, even if they had perfect, cost-free information, would not contract to maximize social welfare.

      Second, as Mankiw morality implicitly admits, the actual optimization principle under theoclassical economics would be determined by the marginal benefits and costs of an action to the decision-maker – the CEO – not the firm, and certainly not society. Theoclassical economists, however, refuse to admit that explicitly, so it disappears from Mankiw's 10 commandments.

      Third, the information provided by CEOs is often not simply incomplete and costly, but deliberately deceptive. Where information is merely incomplete, consumers may pay far more for a product than they will benefit from the purchase. Where the seller provides deceptive information about quality, the buyer and members of the public may be harmed or even killed. The CEO may also be looting "his" firm as well as the customers. Mankiw has implicitly assumed perfect, cost-free information and implicitly assumed that fraud does not exist.

      Fourth, conflating rationality with optimization of personal costs and benefits is wrong on multiple grounds. It defines ethical behavior as "irrational" where the consumer or CEO takes into account social costs and benefits and protects the interests of others in an altruistic manner. Everything we know from behavioral economics also makes clear that humans are not "rational" in the manner predicted by theoclassical economics. Mankiw has implicitly assumed out of existence thirty years of economic research on how people actually behave and make decisions.

      Fifth, firms with monopoly power, according to theoclassical economics, maximize their profits by deliberately reducing production to a point that the social cost of producing the marginal unit is less than the marginal benefit to the consumer. Mankiw has implicitly assumed away monopolies.

    4. People Respond to Incentives. Behavior changes when costs or benefits change.

      I have responded to this myth in a prior article . The implications of his fourth principle in conjunction with Mankiw morality are devastating for theoclassical economics. CEOs create the incentives and understand how "behavior changes" among their agents, employees, and subordinate officers in response to those incentives. Under theoclassical principles this will unambiguously lead "rational" CEOs to set incentives to rig the system in favor of the CEO. Because fraud and abuse creates a "sure thing" that is certain to enrich the CEO, Mankiw's fourth commandment predicts that control frauds led by CEOs will be ubiquitous. Fortunately, many CEOs are ethical and remain ethical unless they are subjected to a severe Gresham's dynamic. As a result, Mankiw's commandments over-predict the incidence of fraud and abuse by CEOs. Similarly, experiments demonstrate that humans frequently act in altruistic manners despite financial incentives to act unfairly.

    5. Trade Can Make Everyone Better Off .
      Trade allows each person to specialize in the activities he or she does best. By trading with others, people can buy a greater variety of goods or services.

      See my article on faux "trade deals" that exposes this myth.

    6. Markets Are Usually a Good Way to Organize Economic Activity .
      Households and firms that interact in market economies act as if they are guided by an "invisible hand" that leads the market to allocate resources efficiently. The opposite of this is economic activity that is organized by a central planner within the government.

      Again, the key interaction under theoclassical theory is between CEO and consumers, employees, creditors, shareholders, and the general public. "Markets" are vague constructs and they work best when ethical and legal provisions reduce fraud to minor levels. When these ethical and legal institutions are not extremely effective against fraud, the incentives created by the market can be so perverse that they create a criminogenic environment that produces epidemic levels of fraud. Mankiw's myth is to describe only one possible incentive and treat it as the sole possibility other than what he falsely describes as "the opposite" – a government planner. The opposite incentive to the so-called "invisible hand" is the Gresham's dynamic. Mankiw mythically presents the government as the threat to an effective economy rather than an institution that is essential to producing and enforcing the rule of law that prevents a Gresham's dynamic.

    7. Governments Can Sometimes Improve Market Outcomes .
      When a market fails to allocate resources efficiently, the government can change the outcome through public policy. Examples are regulations against monopolies and pollution.

      The myth here is that government only has a desirable role where there is a "market fail[ure]." Mankiw treats "markets" as the norm and implicitly assumes that the government normally has nothing to do with making markets succeed. Even conservative classical economists admitted that the rule of law was essential to an effective economy and required an effective government. Well-functioning governments always improve "market outcomes." Indeed, they are typically essential to making possible well-functioning "markets."

      Mankiw also fails to explain that "markets" will be fictional and massively distort resource allocation (that is what a hyper-inflated bubble does) when there is an epidemic of control fraud. As I have explained, Mankiw's own principles predict (indeed, over-predict) that deregulated "markets" will frequently prove so criminogenic that they will produce epidemics of control fraud.

    8. A Country's Standard of Living Depends on Its Ability to Produce Goods and Services. Countries whose workers produce a large quantity of goods and services per unit of time enjoy a high standard of living. Similarly, as a nation's productivity grows, so does its average income.

      First, the CEOs of sectors such as finance that are immensely unproductive – so unproductive that they cause enormous losses rather than growth, and receive exceptional income because they loot. Income is often based not on productivity, but on the CEOs' wealth and economic and political power that allows them to rig the economy. A nation's standard of living also depends on its employment levels, which can be crushed by economic policies such as austerity.

      The issue is not what happens to "average income," but what happens to median income, wealth, the income and wealth of the lowest quartile or particular minorities, and to income and wealth inequality. A nation can have high average productivity, yet have poor performance for decades in these other critical measures.

      Consider what has happened to the folks who tried to do everything right to boost their productivity according to the theoclassical economic "experts'" advice. This is what has happened to Latino and black households where a head of the household has at least a college degree. The source is economists at the extremely conservative St. Louis Fed .

      Hispanic and black families headed by someone with a four-year college degree, on the other hand, typically fared significantly worse than Hispanic and black families without college degrees. This was true both during the recent turbulent period (2007-2013) as well as during a two-decade span ending in 2013 (the most recent data available).

      White and Asian college-headed families generally fared much better than their less-educated counterparts. The typical Hispanic and black college-headed family, on the other hand, lost much more wealth than its less-educated counterpart. Median wealth declined by about 72 percent among Hispanic college-grad families versus a decline of only 41 percent among Hispanic families without a college degree. Among blacks, the declines were 60 percent versus 37 percent.

      One of the reasons that college-educated Latino and black families lost so much wealth compared to their white and Asian-American counterparts is that they were more likely to get their degrees from the for-profit colleges that theoclassical economists touted – colleges that frequently provided a very expensive and very poor education, often involving defrauding the students. Another reason that college-educated Latino and black families lost so much wealth compared to their white and Asian-American counterparts is that they were far more likely to be the victims of predatory home lending – an activity for which theoclassical economists served as the primary apologists.

      Mankiw also ignores critical factors that determine "a country's standard of living." Yes, China reports higher growth, but it is also operating in an unsustainable fashion that has destroyed much of its environment and threatens to be a major contributor to the global suicide strategy of causing severe climate change.

    9. Prices Rise When the Government Prints Too Much Money . When a government creates large quantities of the nation's money, the value of the money falls. As a result, prices increase, requiring more of the same money to buy goods and services.

      No, and Mankiw knew this was a myth when he wrote it. First, "prices rise" for many reasons. Pharmaceutical prices rise because hedge fund managers take over pharma firms or encourage others to do so in order to increase prices on existing drugs by hundreds, sometimes thousands of percent. Prices rise because accounting control fraud recipes hyper-inflated the largest bubble in history in U.S. real estate. Prices rise because of cartels. Prices rise because oil cartels cause oil shocks. Prices rise due to real bottlenecks, e.g., shortages of a skill or material.

      Inflation has not risen, indeed general price levels have often fallen (deflation) despite record creation of money by central banks and private banks. Theoclassical economists have regularly predicted hyper-inflation. As Paul Krugman emphasizes, virtually none of them even admits their serial prediction failures.

    10. Society Faces a Short-Run Tradeoff Between Inflation and Unemployment . Reducing inflation often causes a temporary rise in unemployment. This tradeoff is crucial for understanding the short-run effects of changes in taxes, government spending and monetary policy.

      Mankiw ends his ten myths with a series of myths. Foolish, counterproductive austerity often causes inflation to fall to harmfully low – even negative (deflation) – levels that can lead to prolonged recessions that cause severe damage to people and economies. Stimulus provides a win-win that improves economic growth and reduces human suffering without causing harmful inflation.

      A nation is able to operate at extremely high levels of employment without producing harmful inflation. Mankiw is a partisan Republican. When Republican presidents in the modern era are faced with recessions they junk their theoclassical dogmas and adopt stimulus programs, though they generally do so largely through the economically inefficient and less effective means of slashing tax rates for the wealthy.

    Democrats: Please Renounce Mankiw's Myths

    Unlike the Republicans, who always rise above their theoclassical principles when their president is in office and faces a recession, the "New Democrats" are the ones who seem to have drunk the theoclassical Kool-Aid and strive endlessly to create the self-inflicted wound of austerity when they are in power. New Democrats also love to bash Republican presidents for running deficits even when those deficits produced no harmful inflation and helped produce recovery. It is sensible and honest to point out that tax cuts for the wealthy are a far less effective form of stimulus and to present and support superior alternatives such as job guarantee and infrastructure programs. It would be superb if Democrats were to point out that by far the most effective, prompt means of cutting taxes to stimulate the economy in response to a recession is to cease collecting the Social Security taxes for several years. It is not fine to praise Bill Clinton for taking the harmful step of running a budget surplus or to bash Republicans because they – correctly – increased fiscal stimulus (and therefore the short-term deficit) in response to a recession.

    Democrats also need to stop spreading the myth that Bill Clinton was an economic marvel. He was the luckiest president in history in terms of timing. His economic "success" was the product of two of the largest bubbles in history (the dot.com and real estate bubbles). The real estate bubble is the only thing that prevented his dot.com bubble from causing an economic collapse during his term. The real estate bubble was so enormous that it made it easy for the fraudulent CEOs to "roll" (refinance) the fraudulent loans they made, which helped cause the bubble to hyper-inflate. The saying in the trade is "a rolling loan gathers no loss." This meant that the bubble was Bill Clinton and George Bush's bubble, but it collapsed on George Bush's watch so Clinton gets the credit for the high employment produced by the twin bubbles and Bush gets the blame for the massive unemployment that a massive bubble will create when it collapses (if it is not replaced by an even larger bubble).

    Selected Skeptical Comments
    ke , May 17, 2016 at 1:10pm

    The pots are calling the kettles black; standard politics, redundancy easily replaced by automation.

    You do know that Bernie isn't going after Hillary because he has his skeletons, especially in the medical university complex, don't you. Ever live in Vermont. You did notice that Hillary just threatened him, to the core of his argument.

    Jef , May 17, 2016 at 11:2am

    Ke – Very insightful!

    This… "Energy is information, most of which humans ignore."…and this… "Public Education policies are disgusting to anyone who really wants to learn…" are the important elements although I would add that humans don't ignore so much as don't know/are not taught, and I would say Public education has been purposefully corroded to the point of disgusting.

    Left in Wisconsin , May 17, 2016 at 11:5am

    Democrats: Please Renounce Mankiw's Myths

    Good one.

    Jim Haygood , May 17, 2016 at 12:14pm

    "Prices rise" for many reasons.

    Pharmaceutical prices rise because hedge fund managers take over pharma firms or encourage others to do so in order to increase prices on existing drugs by hundreds, sometimes thousands of percent. Prices rise because accounting control fraud recipes hyper-inflated the largest bubble in history in U.S. real estate. Prices rise because of cartels. Prices rise because oil cartels cause oil shocks. Prices rise due to real bottlenecks, e.g., shortages of a skill or material.

    - Bill Black

    ----–

    All of these examples treat relative price rises in the affected sector, not the general inflation which saw the U.S. CPI increase by a factor of ten (10) since 1950. Hedge funds and cartels couldn't do that, no matter how successful they were in increasing their share of the pie.

    The same logic is used by union busters to claim that "greedy labor unions" cause inflation - an equally false notion. Labor can increase its share of national income at the expense of corporate profit, but it cannot cause a general inflation.

    This unprecedented secular inflation did, however, coincide with government bonds surpassing gold as the Federal Reserve's largest holding in 1945, and with the dollar's gold link being severed in 1971.

    Bill Black evidently hews to the scholarly tradition of the eminent Argentine economist and former central banker Mercedes Marcó del Pont:

    "It is totally false to say that the printing more money generates inflation; price increases are generated by other phenomena like supply and external sector's behaviour," said Marcó del Pont.

    http://tinyurl.com/jk5d64w

    This from a country that lopped thirteen (13) zeros off its currency in the past century.

    *takes another bong hit and blows a fat smoke ring*

    ChrisPacific , May 17, 2016 at 6:35pm

    I would argue that the real estate bubble caused genuine inflation because it was a credit bubble, but I agree on your other points. Intuitively I think of inflation as a rise in prices without a corresponding rise in (average) affordability. It's why a Big Mac today can cost multiple times what it did 30 years ago without being any less affordable for the average customer.

    Mankiw's definition isn't precisely wrong but it's oversimplified. He doesn't address the role of banks in money creation, he doesn't define money (what about credit?) he doesn't discuss the factors that might cause government to print more or less money, and he doesn't say how much is too much. Without more rigor than he provides, it's only useful as a plausibility argument after the fact.

    Regarding Black's comment:

    Inflation has not risen, indeed general price levels have often fallen (deflation) despite record creation of money by central banks and private banks.

    I would say this was because they were doing it during the deflation of a credit bubble on a large enough scale that money creation by the government was a drop in the bucket by comparison, and that was what caused deflation. Which again points to the importance of defining terms and operating constraints (why couldn't the government print money on a massive scale to compensate? What are the drawbacks and limitations on that approach?)

    Economists do love to make doomsday hyperinflation predictions that never seem to pan out. As far as I can tell, that's because they think that the economy is inherently unstable and will lapse naturally into massive inflation (see: wage-price spiral) or some other disastrous state without the wise guiding hand of a central banker to prevent it. There seems to be very little evidence of this actually happening in reality, and the few genuine examples of hyperinflation (Weimar, Zimbabwe) have typically resulted from a collapse in production coupled with debts denominated in other currencies that (a) considerably exceed the country's ability to pay and (b) require the attempt to be made anyway.

    Nathanael , May 21, 2016 at 8:0am

    Notice that Mankiw managed to say nothing about "Economic instability or deflation, and eventually economic depression, is caused when the government prints TOO LITTLE money", which is actually true and happens quite reliably.

    Mankiw is a propagandist.

    TG , May 17, 2016 at 12:59pm

    The true laws of economics:

    1. If it is physically impossible for something to occur, it won't, and finance be damned. Economics is first and foremost a branch of the physical sciences, though most economists have forgotten this.
    2. Supply and demand.
    3. Unintended consequences.
    4. High productivity does not create high wages. High wages create high productivity. If you spend a lot of money on water-conservation technology at the base of Niagara Falls, will it increase the economic value of water there?
    5. The physical utility of a commodity (including labor) is not related to its economic value. Adam Smith did get something right.
    6. Nothing in this universe can grow exponentially for very long. Societies with sustained high fertility rates will always be miserably poor, and only societies that have first reduced their fertility rate can hope to become rich.
    7. A (more-or-less) free market is indeed a powerful and essential optimization mechanism ("the invisible hand") but it is nonlinear. Like all such nonlinear optimization mechanisms, it can and does get stuck in local minima and require external directed efforts to move to a more optimal solution. This is basic math.
    8. Inflation occurs when prices go up. That's it.
    9. "Capitalism" guarantees neither poverty nor prosperity. The market is neutral. Even as the laws of physics are obeyed equally well by a building that stands tall as by one that collapses into a heap of rubble, the laws of the market are also obeyed in miserably poor Bangladesh as well as in prosperous Switzerland. With 100 desperate people competing for every job, wages for the many will be low and profits for the few will be high. And vice versa. Blaming "capitalism" for poverty is silly, as if I threw someone off a cliff and then blamed the law of gravity for their death. Trying to deny market forces is equally silly, like trying to legislate gravity out of existence. It simply must be worked with.
    10. "Free to choose to own or employ slaves", "Free trade includes the ability of big corporations to restrict trade to maximize their profits", "Free to buy politicians and have them loot the public treasury in your interest" … Strict libertarianism is logically incoherent and ethically vile.
    bdy , May 18, 2016 at 12:3am

    Nice.

    I quibble with 6 & 8. "A more or less free market" is a well regulated market. How much "more free" or "less free" a market needs to be to best distribute its product depends entirely on its particular conditions and vagaries. The insinuation that a market should be "stuck in a local minima" before oversight can improve its performance echoes Mankiw's 7th misconstruction, that (in Bill Black's words) "government only has a desirable role when there is a market failure."

    I especially disagree that markets are neutral. Markets exist at the pleasure of the Capitalists who create and smother them for profit. Capitalists are forever cajoling "market opportunities" out from under every rock they can turn over. They invent, shape, split, combine, dissect, analyze, produce, reproduce, abandon, corner and strangle markets in pursuit of lucre. There is no market for Ford electric cars in California beyond the handful required by statute, despite ample demand, because individuals at Ford have determined that creating that particular market will eat into the personal profit they might extract from other markets. "Efficient" markets, that only return a gazilionth of a point on investment because of optimal competition, cease to be because the margin is too low to justify the hassle or the capital risk. Switching gears, labor markets in Bangladesh & Switzerland exist when Capitalists decide to hire workers. Hirees agree to be paid what Capitalists choose to pay, whether "freely" or under the duress of the State.

    There is no market equivalent to gravity or the law of planetary motion. The model of supply and demand is a hypothetical post rationalization of a shifting negotiation – while it's helpful to a degree, supply/demand doesn't make "lawfull" (or useful) predictions until demand nears infinity (see health care: "how much will that be, doc?" – "how much have you got?", or housing: "how much can you borrow from a fractional reserve player who lends without risk and won't verify your income?")

    As the local monopolists of violence, States can engage markets as they see fit. They can supply (Volkswagon & the post office), demand (food stamps, R&D grants), regulate, open (ACA) or close them (pharmaceutical imports) to their hearts desire. Good or bad outcomes depend entirely on the wisdom of the policy.

    Whoa. Exhale. To be sure, I inhaled. Too many words when I should just say:

    Nice.

    Its good we agree that policy should be just and compassionate.

    Chauncey Gardiner , May 17, 2016 at 1:12pm

    The values and ideology represented in the Economics textbook Bill Black analyzed didn't arise in a vacuum. The points Black lists reflect the ideology, values, ethics and interests of a narrow segment of our society who have accumulated enormous personal wealth through a variety of extra-legal and illegal mechanisms, and who use a small portion of that wealth to fund "Economics Chairs" in our public and private universities; economics "think tanks"; and speeches, books, consulting engagements, and board memberships for "prominent economists".

    This matter is really about whose values will control government economic policy and law.

    Excellent analysis. Thank you, Bill Black, for all you do and have done.

    Lumpenproletariat , May 17, 2016 at 1:16pm

    #11

    Mankiw is a shill/useful idiot for his oligarchs patrons. #11 explains the idiocy of the previous 10.

    steelhead23 , May 17, 2016 at 2:45pm

    I see much of the underlying theory of classical economics as simplifications that make the math easier. One of my favorite examples of misallocation of resources was the market for Burbank Russet potatoes in 2001. Basically, producers wanted $6.50 per hundredweight for spuds. The big buyer, Simplot offered farmers $4.50 pre-season. Many farmers decided to wait until harvest, hoping the spot market would give them a better price. I should also mention that in Idaho, farmers not wishing to plant in a given year, could sell their water to other farmers, or to the federal government which uses the water to help salmon and to produce hydropower. Thus, producing potatoes carried the opportunity cost of water leasing. But leasing water leasing to the federal government is culturally taboo in the ag. community. 2001 was a dry year and most of the ag. water was consumed growing spuds.

    The outcome was a banner year in production, driving the spot market price to $0.50 per hundredweight, far less than the cost of production. Many acres of potatoes were plowed under – a total loss – to everyone.

    My point is – there is no way to know, in advance, what the price of a commodity will be in the future unless you know, or can limit, the rate of production and control demand.

    Did the banks which loaned billions to the gas frackers of North Dakota know that production would exceed demand and cause a crash? Perhaps the loan officer might have such concern, but would more likely be most concerned with his/her own bottom line – a meme Yves explores in Econned.

    I suppose I am a bit defensive of classical microeconomics because it is elegant. But I am also terribly suspicious of its answers because one never has either the information or the control to be anywhere near as certain as the calculus would suggest.

    Mike Thorne , May 17, 2016 at 4:01pm

    On point #9: "Prices Rise When the Government Prints Too Much Money". Recent inflation data suggests it's a myth. But if restated as "When government prints money, prices rise on the goods and services that the people who receive the money tend to buy", then it's NOT a myth.

    That was the whole problem with the Federal Reserve's damned QE efforts. They printed gobs of money, and it all landed in the pockets of the wealthy. The stuff they buy (stocks, real estate, luxury goods, premium educations, etc.) has seen prices rise MUCH faster than nominal inflation. And the people who didn't get any of the newly printed money (i.e., most of us)… Well, these sad folks couldn't afford to spend any more than before, so anybody who attempted to impose prices hikes on low-end consumer goods saw a loss of sales volume.

    Newly-printed money CAN cause inflation, but WHERE the price rises happen depends greatly on the pockets in which the money lands.

    Jeff Z , May 17, 2016 at 6:24pm

    Excellent Point!

    TK421 , May 17, 2016 at 6:32pm

    stocks, real estate, luxury goods, premium educations, etc.

    But it's hard to produce more of those, so with an increase in money chasing them their prices will rise. If the government handed money to poor people, they would buy food, clothes, cars, televisions, etc. In other words, things that society can produce more of. That's my read, anyway.

    Mike Thorne , May 18, 2016 at 8:2am

    Partially. Prices for good where quantities are truly fixed (like acres of land in San Francisco) can rise sharply when extra money pours in.

    But even when there is opportunity to increase production, manufacturers must purchase equipment (like farm equipment for more food) or hire more workers (thereby tightening the labor market and pushing wages up). These result in price hikes. More modest price hikes than San Francisco real estate, but still real hikes. It's the classic supply vs. demand curve from classic microeconomics.

    That said, "QE to the people" is certainly less objectionable than the "QE to the bankers and the 1%" that we've seen over the past five years. Prices would go up, but people would get to buy more things they want or need, and hiring would likely go up as well. [And at a minimum, there needs to be at least *some* growth in the money supply to keep up with population growth. Otherwise we see deflation and the ability to become wealthier by hoarding cash.]

    dao , May 17, 2016 at 5:07pm

    This was Mankiw's "response" to OWS back in 2011:

    "Here is a fact that you might not have heard from the Occupy Wall Street crowd: The incomes at the top of the income distribution have fallen substantially over the past few years.

    "According to the most recent IRS data, between 2007 and 2009, the 99th percentile income (AGI, not inflation-adjusted) fell from $410,096 to $343,927. The 99.9th percentile income fell from $2,155,365 to $1,432,890. During the same period, median income fell from $32,879 to $32,396."

    This kind of ignorant cluelessness is pretty prevalent among the oligarchy and its supporters like Mankiw. Just like that guy in Davos who simply couldn't understand why there's so much social unrest in the world today. They live in a completely different world.

    TK421 , May 17, 2016 at 6:33pm

    And since then, nearly every penny of income gains has gone to the 1%.

    Expat , May 18, 2016 at 2:3am

    The big difference being that $70k to the 99th percentile means the difference between a new Beemer this year or next while $500 for the median family means choosing which child goes hungry for the second half of December.

    And of course, Anonymous's excellent point. You are cherry picking old data based on a stock market and real estate bubble crash. Median income families don't "own" real estate and certainly don't own stocks.

    Mankiw is either psychotic or was gleefully obfuscating when he presenting that out-dated analysis.

    I say Kill the Rich and feed their bodies to the poor. It's not a solution at all (and I am rich myself) but it would be deeply, deeply satisfying!

    Jayinbmore , May 18, 2016 at 8:5am

    My first exposure to Mankiw's principles was actually an early version of the talk by Yoram Bauman in this video. It hits several of the points Mr. Black makes and is also pretty funny. It definitely demonstrates how Mankiw attempts to cloak his biases in supposedly neutral terms.

    Erwin Gordon , May 18, 2016 at 10:2am

    As for number 6, I couldn't disagree with you more. Organisational power is dependent on it being enforced BY THE GOVERNMENT. Without that coercion, individuals would find other solutions for the want provided for by that particular organisation. I would suggest that you look at the history of Pennsylvania circa 1681-1690 or Moresnet (in what is now Aachen) circa 1816 until the end of WWI to understand what is possible when the free market really operates.

    Nontraditional Student , May 19, 2016 at 6:2am

    I am actually a returning undergrad student and starting an econ course next week. I just looked at the text book… and its Mankiw. Should be a fun semester.

    Yves Smith , May 19, 2016 at 8:2am

    Don't argue with the PR. You need to be strategic. Regurgitate the BS but be sure to read enough corrective material that the toxins don't infect your brain.

    Patrick , May 20, 2016 at 5:19pm

    I doubt Mankiw will accept 100% estate tax on the justification that the cost of bequests is zero to the recipient. (and thus a 100% estate tax doesn't incur large costs on the recipient)

    Asad Zaman , July 13, 2016 at 10:1am

    My paper lists four principles claimed to be at the core of modern economics by Mankiw and then shows how all four principles are false: Amir-ud-Din, Rafi and Zaman, Asad, Failures of the 'Invisible Hand' (July 15, 2013). Forum for Social Economics, Vol. 45, Iss. 1, 2016. Available at SSRN: http://ssrn.com/abstract=2293940 or http://dx.doi.org/10.2139/ssrn.2293940

    [Jul 20, 2016] Global elites must heed the warning of populist rage by Martin Wolf

    Notable quotes:
    "... Real income stagnation over a far longer period than any since the second world war is a fundamental political fact. But it cannot be the only driver of discontent. For many of those in the middle of the income distribution, cultural changes also appear threatening. So, too, does immigration - globalisation made flesh. Citizenship of their nations is the most valuable asset owned by most people in wealthy countries. They will resent sharing this with outsiders. Britain's vote to leave the EU was a warning. ..."
    "... First, understand that we depend on one another for our prosperity. It is essential to balance assertions of sovereignty with the requirements of global co-operation. ..."
    "... Second, reform capitalism. The role of finance is excessive. The stability of the financial system has improved. But it remains riddled with perverse incentives. The interests of shareholders are given excessive weight over those of other stakeholders in corporations. ..."
    "... Above all, recognise the challenge. Prolonged stagnation, cultural upheavals and policy failures are combining to shake the balance between democratic legitimacy and global order. The candidacy of Mr Trump is a result. ..."
    July 19, 2016 | ft.com

    Real income stagnation over a longer period than any since the war is a fundamental political fact

    For every complex problem, there is an answer that is clear, simple and wrong." HL Mencken could have been thinking of today's politics. The western world undoubtedly confronts complex problems, notably, the dissatisfaction of so many citizens. Equally, aspirants to power, such as Donald Trump in the US and Marine Le Pen in France, offer clear, simple and wrong solutions - notably, nationalism, nativism and protectionism.

    The remedies they offer are bogus. But the illnesses are real. If governing elites continue to fail to offer convincing cures, they might soon be swept away and, with them, the effort to marry democratic self-government with an open and co-operative world order.

    What is the explanation for this backlash? A large part of the answer must be economic. Rising prosperity is a good in itself. But it also creates the possibility of positive-sum politics. This underpins democracy because it is then feasible for everybody to become better off at the same time. Rising prosperity reconciles people to economic and social disruption. Its absence foments rage.

    The McKinsey Global Institute sheds powerful light on what has been happening in a report entitled, tellingly, Poorer than their Parents?, which demonstrates how many households have been suffering from stagnant or falling real incomes. On average between 65 and 70 per cent of households in 25 high-income economies experienced this between 2005 and 2014. In the period between 1993 and 2005, however, only 2 per cent of households suffered stagnant or declining real incomes. This applies to market income. Because of fiscal redistribution, the proportion suffering from stagnant real disposable incomes was between 20 and 25 per cent. (See charts.)

    McKinsey has examined personal satisfaction through a survey of 6,000 French, British and Americans. The consultants found that satisfaction depended more on whether people were advancing relative to others like them in the past than whether they were improving relative to those better off than themselves today. Thus people preferred becoming better off, even if they were not catching up with contemporaries better off still. Stagnant incomes bother people more than rising inequality.

    The main explanation for the prolonged stagnation in real incomes is the financial crises and subsequent weak recovery. These experiences have destroyed popular confidence in the competence and probity of business, administrative and political elites. But other shifts have also been adverse. Among these are ageing (particularly important in Italy) and declining shares of wages in national income (particularly important in the US, UK and Netherlands).

    Real income stagnation over a far longer period than any since the second world war is a fundamental political fact. But it cannot be the only driver of discontent. For many of those in the middle of the income distribution, cultural changes also appear threatening. So, too, does immigration - globalisation made flesh. Citizenship of their nations is the most valuable asset owned by most people in wealthy countries. They will resent sharing this with outsiders. Britain's vote to leave the EU was a warning.

    So what is to be done? If Mr Trump were to become president of the US, it might already be too late. But suppose that this does not happen or, if it does, that the result is not as dire as I fear. What then might be done?

    1. First, understand that we depend on one another for our prosperity. It is essential to balance assertions of sovereignty with the requirements of global co-operation. Global governance, while essential, must be oriented towards doing things countries cannot do for themselves. It must focus on providing the essential global public goods. Today this means climate change is a higher priority than further opening of world trade or capital flows.
    2. Second, reform capitalism. The role of finance is excessive. The stability of the financial system has improved. But it remains riddled with perverse incentives. The interests of shareholders are given excessive weight over those of other stakeholders in corporations.
    3. Third, focus international co-operation where it will help governments achieve significant domestic objectives. Perhaps the most important is taxation. Wealth owners, who depend on the security created by legitimate democracies, should not escape taxation.
    4. Fourth, accelerate economic growth and improve opportunities. Part of the answer is stronger support for aggregate demand, particularly in the eurozone. But it is also essential to promote investment and innovation. It may be impossible to transform economic prospects. But higher minimum wages and generous tax credits for working people are effective tools for raising incomes at the bottom of the distribution.
    5. Fifth, fight the quacks. It is impossible to resist pressure to control flows of un­skilled workers into advanced economies. But this will not transform wages. Equally, protection against imports is costly and will also fail to raise the share of manufacturing in employment significantly. True, that share is far higher in Germany than in the US or UK. But Germany runs a huge trade surplus and has a strong comparative advantage in manufacturing. This is not a generalisable state of affairs. (See chart.)

    Above all, recognise the challenge. Prolonged stagnation, cultural upheavals and policy failures are combining to shake the balance between democratic legitimacy and global order. The candidacy of Mr Trump is a result. Those who reject the chauvinist response must come forward with imaginative and ambitious ideas aimed at re-establishing that balance. It is not going to be easy. But failure must not be accepted. Our civilisation itself is at stake.

    [email protected]

    More on this topic

    [Jul 16, 2016] Paul Krugman Bull Market Blues

    Economist's View

    High stock prices are "not evidence of a healthy economy":

    Bull Market Blues, by Paul Krugman, NY Times : Like most economists, I don't usually have much to say about stocks. Stocks ... have a lot less to do with the state of the economy or its future prospects than many people believe. ...
    Still, we shouldn't completely ignore stock prices. The fact that the major averages have lately been hitting new highs ... is newsworthy and noteworthy. What are those Wall Street indexes telling us?
    The answer, I'd suggest, isn't entirely positive..., in some ways the stock market's gains reflect economic weaknesses, not strengths. ...
    We measure the economy's success by the extent to which it generates rising incomes for the population. But stocks ... only reflect the part of income that shows up as profits.
    This wouldn't matter if the share of profits in overall income were stable; but it isn't. The share of profits ... has been a lot higher in recent years than it was during the great stock surge of the late 1990s ... making the relationship between profits and prosperity weak at best. ...
    When investors buy stocks, they're buying a share of future profits. What that's worth to them depends on what other options they have for converting money today into income tomorrow. And these days those options are pretty poor... So investors are willing to pay a lot for future income, hence high stock prices for any given level of profits. ...
    This may seem, however, to present a paradox. If the private sector doesn't see itself as having a lot of good investment opportunities, how can profits be so high? The answer, I'd suggest, is that these days profits often seem to bear little relationship to investment in new capacity. Instead, profits come from some kind of market power... And companies making profits from such power can simultaneously have high stock prices and little reason to spend.
    Consider the fact that the three most valuable companies in America are Apple, Google and Microsoft. None of the three spends large sums on bricks and mortar. ...
    In other words, while record stock prices do put the lie to claims that the Obama administration has been anti-business, they're not evidence of a healthy economy. If anything, they're a sign of an economy with too few opportunities for productive investment and too much monopoly power.
    So when you read headlines about stock prices, remember: What's good for the Dow isn't necessarily good for America, or vice versa.
    anne : , Friday, July 15, 2016 at 09:16 AM
    http://cepr.net/blogs/beat-the-press/paul-krugman-s-stock-market-advice

    July 15, 2016

    Paul Krugman's Stock Market Advice

    Paul Krugman actually did not make any predictions on the stock market, so those looking to get investment advice from everyone's favorite Nobel Prize winning economist will be disappointed. But he did make some interesting comments * on the market's new high. Some of these are on the mark, but some could use some further elaboration.

    I'll start with what is right. First, Krugman points out that the market is horrible as a predictor of the future of the economy. The market was also at a record high in the fall of 2007. This was more than a full year after the housing bubble's peak. At the time, house prices were falling at a rate of more than 1 percent a month, eliminating more than $200 billion of homeowner's equity every month. Somehow the wizards of Wall Street did not realize this would cause problems for the economy. The idea that the Wall Street gang has some unique insight into the economy is more than a bit far-fetched.

    The second point where Krugman is right on the money (yes, pun intended) is that the market is supposed to be giving us the value of future profits, not an assessment of the economy. This is the story if we think of the stock market acting in textbook form where all investors have perfect foresight. The news that the economy will boom over the next decade, but the profit share will plummet as workers get huge pay increases, would be expected to give us a plunging stock market. Conversely, weak growth coupled with a rising profit share should mean a rising market. Even in principle the stock market is not telling us about the future of the economy, it is telling us about the future of corporate profits.

    Okay, now for a few points where Krugman's comments could use a bit deeper analysis. Krugman notes the rise in profit shares in recent years and argues that this is a large part of the story of the market's record high, along with extremely low interest rates. Actually, the profit story is a bit different than Krugman suggests.

    The profit share had soared in the early days of the recovery. The before tax share of net corporate income went from a recession low of 16.9 percent of net income to 27.0 percent in the second quarter of 2014. The after-tax share peaked at 20.4 percent in the first quarter of 2012. However since then the profit share has trended downward. In the most recent quarter the before-tax profit share was 23.9 percent, while the after-tax share was 17.5 percent. This is most of the way back to the mid-1990s shares when before-tax profits were around 21.0 percent of net corporate income and after-tax shares were around 15.5 percent.

    So, while profits had soared, the current market high cannot be explained by a soaring profit share. We are substantially below the peak shares from earlier in the recovery. One caution here is that the quarterly data are erratic and subject to large revisions. It is possible that this picture will look very different when the Commerce Department releases revised data later in the month.

    The next issue is how we should think about a market high. If the stock market moves in step with corporate profits (i.e. the price to earnings ratio remains constant), and the profit share of GDP remains constant, then we should expect the stock market to continually reach new highs. In other words, market peaks are not like a new world record time in the mile, they are more like the tree in the backyard growing each year. They should not come as a surprise, nor be any cause for celebration.

    The third point is that the stock market highs of the late 1990s were definitely not cause for celebration. The stock market was in a gigantic bubble. This was serious bad news for the economy and millions of 401(k) holders who saw their savings plummet in the crash of 2000-2002. (Yes, they should have sat tight, but a lot of people didn't realize this and it's not their job to be professional investors.) From the standpoint of the economy it was bad news because the crash led to a serious downturn in the labor market.

    The strong wage growth of the late 1990s quickly dissipated as the labor market weakened. While the recession officially ended in December of 2001, we didn't begin to create jobs again until the fall of 2003. We didn't get back the jobs lost in the downturn until January of 2005. At the time, this was the longest period without net job growth since the Great Depression.

    For what it's worth, the Clinton crew was clueless on the bubble. They wanted to put Social Security money in the stock market assuming that the real returns would average 7.0 percent annually. The actual average has been about half of this rate.

    Finally, Krugman notes that the most highly valued companies in today's market are Apple, Google, and Microsoft. Krugman points out that none of these companies "spends large sums on bricks and mortar" and all three are sitting on large cash hoards.

    Both points are well taken. Investment in plant and equipment has actually been falling in recent quarters. This would be fine if the decline was offset by a boom in research and development spending, but it hasn't been. Our great idea companies don't have many good ideas about what to do with all of their money.

    But there is another point worth noting about the Big Three. All three are companies that depend to a large extent on government-granted monopolies in the form of patent and copyright protection. We have made these protections much stronger and longer over the last four decades through a variety of laws and trade agreements.

    Of course the point of these protections is to give an incentive for innovation and creative work. But in a period where we are supposedly troubled by an upward redistribution from people who work for a living to people who "own" the technology, perhaps we should not be giving those people ever stronger claims to ownership of technology. (Yes, this involves the Trans-Pacific Partnership, among other policies.)

    Anyhow, perhaps our leading economists will one day take note of this issue. It took a long time to notice that we had an $8 trillion housing bubble and that yes, it could be a problem. But let's hope our economists is learning.

    * http://www.nytimes.com/2016/07/15/opinion/bull-market-blues.html

    -- Dean Baker

    anne -> anne... , Friday, July 15, 2016 at 09:19 AM
    http://www.multpl.com/shiller-pe/

    Ten Year Cyclically Adjusted Price Earnings Ratio, 1881-2016

    (Standard and Poors Composite Stock Index)

    July 14, 2016 PE Ratio ( 26.92)

    Annual Mean ( 16.68)
    Annual Median ( 16.04)

    -- Robert Shiller

    anne -> anne... , Friday, July 15, 2016 at 09:20 AM
    http://www.multpl.com/s-p-500-dividend-yield/

    Dividend Yield, 1881-2016

    (Standard and Poors Composite Stock Index)

    July 14, 2016 Div Yield ( 2.03)

    Annual Mean ( 4.39)
    Annual Median ( 4.33)

    -- Robert Shiller

    RC AKA Darryl, Ron -> anne... , Friday, July 15, 2016 at 09:51 AM
    THANKS! Dean's the best - as usual.
    anne -> RC AKA Darryl, Ron... , Friday, July 15, 2016 at 04:16 PM
    Dean Baker's response to Paul Krugman is excellent, and we might consider arguing the matter further along both lines with the need for increased domestic investment the focus.
    anne -> RC AKA Darryl, Ron... , Friday, July 15, 2016 at 04:31 PM
    https://research.stlouisfed.org/fred2/graph/?g=4D9o

    January 15, 2016

    Shares of Gross Domestic Product for Private Fixed Nonresidential & Residential Investment Spending, Government Consumption & Gross Investment and Exports of Goods & Services, 2007-2016


    https://research.stlouisfed.org/fred2/graph/?g=4D9t

    January 15, 2016

    Shares of Gross Domestic Product for Private Fixed Nonresidential & Residential Investment Spending, Government Consumption & Gross Investment and Exports of Goods & Services, 2007-2016

    (Indexed to 2007)

    anne -> anne... , Friday, July 15, 2016 at 04:36 PM
    The problem in fostering growth comes to either increasing nonresidential investment or government spending (hopefully for infrastructure formation). There is no reason to think exports will increase significantly given the relatively strong dollar and weak international growth and slower population growth should not allow for significant residential investment increases for some time.

    Either nonresidential investment or government spending is the answer then.

    sanjait -> RC AKA Darryl, Ron... , Friday, July 15, 2016 at 04:
    Yeah, DB calls out Krugman for not mentioning monopoly rents right after Krugman explicitly mentions them, and the Bernista crowd trumpets how great Baker is.

    *rolls eyes heavily*

    JohnH -> anne... , Friday, July 15, 2016 at 11:27 AM
    It's not just Apple, Google and Microsoft. The whole economy is increasingly dominated by monopolies and oligopolies who can raise prices irrespective of demand.

    Think about phone companies (Verizon, AT&T), cable TV (Comcast, TimeWarner), Wall Street banks, soft drinks (Coke, Pepsi), consumer goods (Procter and Gamble, Unilever), airplanes (Boeing, Airbus), oil refineries, pharmaceuticals, etc. etc.

    Krugman is right that "profits come from some kind of market power... And companies making profits from such power can simultaneously have high stock prices and little reason to spend."

    For many of these companies, it is not about intellectual property monopoly. Rather, it is about lack of aggressive anti-trust enforcement over the last 30 years, the Obama years being about the worst on record.

    pgl -> JohnH... , Friday, July 15, 2016 at 01:26 PM
    Wow - liberal economist Paul Krugman got something right. As far as your last fact free claim, I'll leave this issue to those who actually know what they are talking about:


    http://www.natlawreview.com/article/has-antitrust-enforcement-been-reinvigorated-under-obama

    JohnH -> pgl... , Friday, July 15, 2016 at 02:09 PM
    The article takes a circuitous route to show that Obama has been more aggressive than Bush was...hardly a resounding endorsement of Obama, given Bush's lax enforcement.

    I stand corrected--Obama wasn't the worst...thanks only to Bush 43's dismal record.

    pgl -> JohnH... , Friday, July 15, 2016 at 03:17 PM
    Wow - a first for everything! You finally admit one of your fact free rants is not reality. Progress!
    JohnH -> pgl... , Friday, July 15, 2016 at 04:05 PM
    Classic 'lesser of two evils' thinking: Obama was not as bad as Bush, therefore Obama was great!

    Kind of like declaring that Franklin Pierce was better that Millard Fillmore, both lousy presidents...or that Miller is better than Budweiser.

    This is exactly the kind of logic you get from partisan hacks like pgl...a committed Obamabot and Wall Street Democrat.

    anne -> anne... , Friday, July 15, 2016 at 01:06 PM
    https://investor.vanguard.com/mutual-funds/list#/mutual-funds/asset-class/month-end-returns

    July 15, 2016

    The 3 month Treasury interest rate is at 0.27%, the 2 year Treasury rate is 0.70%, the 5 year rate is 1.14%, while the 10 year is 1.59%.

    The Vanguard Aa rated short-term investment grade bond fund, with a maturity of 3.3 years and a duration of 2.6 years, has a yield of 1.57%. The Vanguard Aa rated intermediate-term investment grade bond fund, with a maturity of 6.4 years and a duration of 5.4 years, is yielding 2.29%. The Vanguard Aa rated long-term investment grade bond fund, with a maturity of 22.0 years and a duration of 13.2 years, is yielding 3.35%. *

    The Vanguard Ba rated high yield corporate bond fund, with a maturity of 5.7 years and a duration of 4.5 years, is yielding 5.28%.

    The Vanguard unrated convertible corporate bond fund, with an indefinite maturity and a duration of 5.4 years, is yielding 2.07%.

    The Vanguard A rated high yield tax exempt bond fund, with a maturity of 17.0 years and a duration of 6.3 years, is yielding 2.13%.

    The Vanguard Aa rated intermediate-term tax exempt bond fund, with a maturity of 8.7 years and a duration of 4.8 years, is yielding 1.22%.

    The Vanguard Government National Mortgage Association bond fund, with a maturity of 5.7 years and a duration of 3.4 years, is yielding 1.89%.

    The Vanguard inflation protected Treasury bond fund, with a maturity of 8.7 years and a duration of 8.2 years, is yielding - 0.26%.

    * Vanguard yields are after cost. Federal Funds rates are no more than 0.50%.

    sanjait -> anne... , Friday, July 15, 2016 at 04:41 PM
    Nit picking Dean Baker, favorite of the disaffected Bernistas who still haven't forgiven Paul Krugman, sarcastically calls for Krugman to talk about monopolistic rents for the big three tech companies but doesn't seem to notice that Krugman explicitly mentioned monopolistic rents for the big three tech companies in his blog post.
    anne -> sanjait... , Friday, July 15, 2016 at 04:47 PM
    Nitpicking Dean Baker, favorite of the ----------- --------- ...

    [ Creepy language is where I immediately stop reading... ]

    anne : , Friday, July 15, 2016 at 01:22 PM
    Possibly an aside, though I would argue this is related and is surely important:

    There has long been a steady refrain from most Western economists that China is doomed. Lately the refrain has been that we will soon find Chinese growth if continuing still slowing dramatically. Today, it turns out that Chinese growth which was 6.7% on a yearly basis in the first quarter was 6.7% in the second quarter. For the New York Times and Wall Street Journal however...

    anne -> anne... , Friday, July 15, 2016 at 01:22 PM
    http://www.wsj.com/articles/massive-stimulus-keeps-china-gdp-steady-in-second-quarter-1468549521

    July 15, 2016

    China GDP Sends Troubling Signal on Economic Reform
    Slower growth rate would have indicated country was tackling excess industrial production, rising corporate debt
    By MARK MAGNIER - Wall Street Journal

    BEIJING-China maintained its growth pace of 6.7% in the second quarter-a bad sign to those who were looking for indications of economic restructuring.

    Economists say a slower growth rate in the second quarter over the first quarter's 6.7% pace would have sent a welcome signal that China was tackling excess industrial production, rising corporate debt and state-owned enterprise reform.

    Instead, by ramping up government spending and opening the credit taps, Beijing is likely to fuel overcapacity and see private companies crowded out by risk-averse state banks and bloated state companies.

    This comes despite repeated calls by Prime Minister Li Keqiang and other senior officials to foster innovation, entrepreneurship and structural reform in order to shift the economy from credit-fueled infrastructure to high-tech industry and services....

    pgl -> anne... , Friday, July 15, 2016 at 01:28 PM
    China is doomed? I don't think so. Talk to any multinational and China is the new future. Although they complain that the Chinese SAT is really tough on transfer pricing enforcement. Our tax authority should take lessons from their Chinese counterparts.
    anne -> pgl... , Friday, July 15, 2016 at 01:36 PM
    Talk to any multinational and China is the new future. Although they complain that the Chinese State Administration Of Taxation is really tough on transfer pricing enforcement....

    [ Really interesting. ]

    anne -> pgl... , Friday, July 15, 2016 at 03:06 PM
    Talk to any multinational and China is the new future. Although they complain that the Chinese State Administration Of Taxation is really tough on transfer pricing enforcement....

    [ Again, critical for China and just what Stephen Roach of Yale has noticed and several times argued when interviewed on Bloomberg. ]

    anne -> anne... , Friday, July 15, 2016 at 01:30 PM
    So Chinese growth less than 6.7% would mean China was nearing doom, while growth at 6.7% means China is doomed, because growth less than 6.7% would mean that even though China slowing growth means doom for China at least slowing growth would show that the advice to restructure the economy of so many Western economists was being listened to, but 6.7% growth shows China is not listening to the advice of so many Western economists and that means, well, you know...

    I think I understand.

    anne -> anne... , Friday, July 15, 2016 at 01:33 PM
    http://www.nytimes.com/2016/07/16/business/international/china-gdp-growth-stimulus.html

    July 15, 2016

    As China's Economy Slows, Beijing's Growth Push Loses Punch
    By NEIL GOUGH and OWEN GUO

    High debt and a glut of unneeded factories are hindering the government's usual method of using spending and lending to create more activity.

    sanjait -> anne... , Friday, July 15, 2016 at 04:52 PM
    Chinese growth is 6.7% with massive and unsustainable government interventions, and potentially some book cooking.

    Meanwhile, people like Anne self-righteously accuse anyone who points to China's poor econ fundamentals and trends as being Western Imperialists, or something.

    But if you feel so confident, go ahead and invest your money in China. The opportunity cost is low, given low rates in the devloped world, and they would certainly welcome the cash influx.

    JohnH : , Friday, July 15, 2016 at 01:33 PM
    IOW the real interest rate (CPI now @ 1.0%) is negative for 3 month and two year treasuries, 0.14% for 5 years, .57% for 10 years. If you invest in anything longer, a saver runs the risk of losing your shirt if a) rates unexpectedly go up or b) inflation rises forcing interest rates up.

    It seems that economists enamored with inflation are oblivious (willfully?) to the consequences of saddling peopling with as much poor yielding secure debt as possible. Sure it will cheapen the real value of government debt, their primary goal, but only by screwing savers.

    Unfortunately, higher inflation will make a lot of long term lenders bankrupt (think mortgage companies) as interest rates on borrowing short term exceed the interest rates on mortgages, which are currently at historical lows. To make matters worse, mark-to-market accounting will decimate the value of their holdings.

    IMO anyone who lends long term, institutions or individuals buying 30 year bonds, is completely nuts. Without long term lending to support economic growth, how can the economy possibly grow?

    anne -> JohnH... , Friday, July 15, 2016 at 03:14 PM
    Unfortunately, higher inflation will make a lot of long term lenders bankrupt (think mortgage companies) as interest rates on borrowing short term exceed the interest rates on mortgages, which are currently at historical lows. To make matters worse, mark-to-market accounting will decimate the value of their holdings....

    [ The question to ask is how can and will a mortgage company such as a Wells Fargo handle an increase in long term interest rates. There is a reason Warren Buffett has Well as a key Berkshire Hathaway holding and has recently been buying more of the company. Wells will be fine, but how?

    "How" is an important question. ]

    pgl -> JohnH... , Friday, July 15, 2016 at 03:19 PM
    "t seems that economists enamored with inflation are oblivious"

    More dishonest intellectual garbage. Economist are not for high inflation. We are for full employment. OK, OK - we know you are against full employment but hey!

    JohnH -> pgl... , Friday, July 15, 2016 at 03:53 PM
    Oh, puleez! If 'liberal' economists were for full employment, they would obsess about the Fed's employment target. But they don't...they obsess about not enough inflation, witout being very fussy about how to get more of it.

    Do 'liberal' economists have such difficulty with the English language that they constantly substitute the word ' inflation' for 'employment?' Reading economic papers or Yellen's statements, one might think so. it's easy to see how much they struggle expressing their ideas. But constantly substituting 'inflation' for 'employment' is a bit over the top, even for tongue tied economists.

    sanjait -> JohnH... , Friday, July 15, 2016 at 04:49 PM
    Raising rates creates jobs ... if it were opposite day.
    sanjait : , Friday, July 15, 2016 at 04:47 PM
    Technical but important point: it's not the *current* profit share that matters for stock prices but rather the way current share reflects on expectations of the future that really matter.

    So while Dean Baker, in his quest to nit pick everything Paul Krugman says in order to bring cheer to butt hurt Sandernistas everywhere (Who still haven't forgiven PK for daring to criticize their Beloved), does correctly note that profit share has declined, he fails to realize that a cyclical factor moving cyclically doesn't mean expectations of future profit share haven't also risen.

    kaleberg : , -1
    The real weakness in investment is the lack of wage growth which has limited consumer demand. Flat, or even shrinking, consumer demand means flat or shrinking demand for investment. When there is nothing to invest in, your best bet is the stock market.

    [Jul 16, 2016] Stats Watch

    Notable quotes:
    "... Game Players of Titan ..."
    www.nakedcapitalism.com

    naked capitalism

    Stats Watch

    Industrial Production, June 2016: "Vehicles held down industrial production in May but not in June, making for a big 0.6 percent gain that is just outside Econoday's high-end estimate" [ Econoday ]. "Looking at details deeper in the report, the output of business equipment rose a solid 0.7 percent but the year-on-year rate, in what is definitive evidence of weakness in business investment, is in the negative column at minus 0.6 percent. The output of consumer goods, up 1.6 percent on the year, rose 1.1 percent in the month in what is another good showing in this report." However: "The headlines say seasonally adjusted Industrial Production (IP) improved. The year-over-year data remains in contraction but the trend lines are now pointing towards improvement" [ Econintersect ]. "Economic downturns have been signaled by only watching the manufacturing portion of Industrial Production. Historically manufacturing year-over-year growth has been negative when a recession is imminent. This index is nearing the warning area for a recession."

    Empire State Mfg Survey, July 2016: "The first anecdotal report on the factory sector for the month of July is not very promising as the Empire State index barely held in the plus column" [ Econoday ]

    Business Inventories, May 2016: " Businesses are keeping their inventories in check amid slow sales. Inventories rose only 0.2 percent in May following April's even leaner 0.1 percent rise. Sales in May also rose 0.2 percent keeping the inventory-to-sales ratio unchanged at 1.40, which is a little less lean than this time last year when the ratio was at 1.37″ [ Econoday ]. "Retail inventories did rise an outsized 0.5 percent in May in a build, however, that looks to be drawn down by what proved to be very strong retail sales in June. Manufacturing inventories fell 0.1 percent in May with wholesalers up 0.1 percent." But: "Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) shows unadjusted sales improved compared to the previous month – but due to backward revisions the rolling averages declined. Inventory growth was moderate. The inventory-to-sales ratios remain at recessionary levels" [ Econintersect ].

    Retail Sales, June 2016: "June proved a fabulous month for the consumer though May, after revisions, proved only so so." Above consensus [ Econoday ]. "Ex-auto ex-gas offers a gauge on underlying trends in consumer spending, a dominant one of which is ecommerce as nonstore retailers popped a 1.1 percent surge in the month which follows even stronger gains in prior months. Department stores, up 0.9 percent, show a big comeback in the month with sporting goods & hobbies strong for a second month. An outsized gain, one that hints at adjustment issues and the risk of a downward revision, is a 3.9 percent surge in building materials & garden equipment, a component that had been lagging…. This report is a major plus for the second-half economic outlook not to mention coming data on the second quarter (sales for April, after the second revision, are at a standout plus 1.2 percent). The job market is healthy and the consumer is alive and spending." A little cold water: "Retail sales improved according to US Census headline data. Our view of this month's data is similar but there was a decline in the rolling averages – and downward revision to last month's data" [ Econintersect ]. This Maine bear sunk more money into shelter and did a lot of gardening. I hate to think I'm an ideal type.

    Consumer Price Index, June 2016: "Price pressures evident the last two months down the supply chain are not yet appearing in consumer prices" [ Econoday ]. Caveat: "[I]nflation does not correlate well to the economy – and cannot be used as a economic indicator" [ Econintersect ].

    Consumer Sentiment: "In perhaps an early indication of a U.S. Brexit effect, the consumer sentiment flash for July is down a sharp 4.0 points to 89.5. Weakness is centered in the expectations component which fell 5.3 points to 77.1 for one of the very weakest readings of the last two years. Weakness in expectations ultimately points to doubts over the jobs outlook" [ Econoday ]. But: ""Prior to the Brexit vote, virtually no consumer thought the issue would have the slightest impact on the U.S. economy. Following the Brexit vote, it was mentioned by record numbers of consumers, especially high income consumers," [Richard Curtin, the survey of consumers chief economist] said."

    Shipping: "[T]he National Retail Federation is forecasting only a modest pickup at U.S. ports, with container volume that would hardly amount to a peak at all" [ Wall Street Journal ].

    Shipping: "Transportation-sector analysts believe that rail volumes, which have declined over the past year, may be bottoming out. Things are looking brighter for the second half of the year, as natural gas and oil prices recover, driving more energy-related shipments. Seasonal grain exports should also provide a boost" [ Wall Street Journal , "Has U.S. Rail Traffic Found Its Rebound?"].

    Supply Chain: "By creating a permanent record that can't be altered, blockchain is well-suited for tracking diamonds and other goods where buyers want to know the origins and previous owners, said Bill Fearnley Jr., a research director at International Data Corp" [ Wall Street Journal ].

    Shipping: "UPS and FedEx expand pharmaceutical shipping channels to global market" [ DC Velocity ]. Seems to be optimized for clinical trials and testing, however. "The international drug market is swelling rapidly to accommodate the 20 to 30 million new Americans who have recently become insured under the Affordable Care Act and, more broadly, the "silvering" of an aging global population with growing medical needs." Because I don't get how the ACA spurs demands for international pharma shipments to patients.

    Housing: "Big Wall Street investors stopped buying real estate in large quantities back in late 2014. In many cases big investors had front row seats at banks and were able to buy in bulk and for incredibly low prices not offered to the public. This crowding out of course has caused two major things to unfold: inventory to dwindle and a push up in prices for regular families looking to buy. For the first time in history many things happened in the housing market including nationally falling prices but also a large interest from Wall Street in single family homes. Now with prices near previous peak levels many of these large investors are making the full exit by offering to sell the homes to current tenants, for of course a modest increase. Those bailouts that were geared to helping the public actually created a system that has slammed the homeownership rate lower and has now jacked home prices up once again. Large investors are now making their final play by cashing out" [ Dr Housing Bubble ]. I'd want Yve's views on this, but selling to the little guy at the peak of the market sure looks like a PE scam to me. Readers, do any of you have direct experience with this?

    Helicopter Money: "Monetary financing of public sector spending isn't a giant leap from where Japan is today – it could get there in a series of small steps. It would be more a case of 'drone money' than 'helicopter money' if the BOJ were to go from buying longer and longer-dated debt with lower and lower coupons to something indistinguishable from zero-coupon perpetuals. But away from such idle speculation, with monetary and fiscal policy working hand-in-hand to drive inflation expectations up, and to drive investors out of domestic assets, there's room for the yen to weaken (quite a lot) further; all the more so as the US economy stabilises" [SocGen, Across the Curve ]. You can borrow money for free and there's no government infrastructure program. Speaking of cashing out, is that what the elites are doing globally? Not that I'm foily. The best science fiction novel with autonomous vehicles that I can recall is Philip K. Dick's Game Players of Titan , and that was a depopulated world…

    The Bezzle: "[F]or Google, the ultimate outcome does not look bright. A new EU competition chief is overseeing this barrage of cases, as European corporate giants line up against the Silicon Valley behemoth. Meanwhile, as Google relies more on artificial intelligence to automate a range of tasks that run its services behind the scenes, it could face a whole new round of conflict with Europe. In the end, Google in Europe could wind up as a very different thing than Google at home" [ Wired ].

    The Bezzle: "BP announced on Thursday it believes the final pre-tax cost of its Deepwater Horizon spill will be $61.6bn or $44bn after tax" [ Splash247 ]. But no jail time for executives, since they have elite impunity, say for ecocide. I say let's look forward and not back.

    Political Risk: "[S]hipping companies fear the [Hague Tribunal's] ruling [on the "Nine-Dash Line"] could embolden the Philippines and other smaller nations to assert their rights to the waters more aggressively and that any conflict would disrupt ship-borne trade in the waters between Hong Kong and Indonesia. Thousands of ships transit those waters daily, and a third of the world's liquefied natural gas passes through the Straits of Malacca to the South China Sea" [ Wall Street Journal ]. " Even if shipping isn't disrupted, companies say they face higher costs if the standoff escalates since insurance companies are likely to drive up rates."

    [Jul 12, 2016] Workers deserve to be compensated fairly for their work, and have generous social support programs to rely upon when economic changes that are out of their control throw them out of work or force them to accept lower paying jobs.

    www.thefiscaltimes.com

    "That empowerment must be both economic and political. Workers deserve to be compensated fairly for their work, and have generous social support programs to rely upon when economic changes that are out of their control throw them out of work or force them to accept lower paying jobs.

    We should not hesitate to ask those who have gained so much from globalization and technological change to give something back to those who have paid the costs of their success."

    All this would have been especially great, say, forty or even thirty years ago.

    [Jul 03, 2016] Men Exiting Workforce as Low-Wage Jobs Vanish by Yves Smith

    Notable quotes:
    "... The report dismisses the myths that access to Social Security disability or that men are not choosing to work as culprits. More than a third were in poverty. Fewer that 25% of the men not working have a spouse supporting them and that percentage has dropped in the last 50 years. The CEA's analysis find that Social Security disability explains at most 0.5% of the reduction. ..."
    "... Similarly, the problem with European-style job training programs is that US employers do not want to hire people with general training, even in a particular skill area. Their strong preference is to hire someone who is doing the exact same job for a similar company, so as to minimize their effort (in theory; in practice, the extra time spent on the search probably offsets the theoretical savings). The cure for that is a much more robust job market, where employers realize they are not going to find the perfect candidate and take someone approximate and give them the training and other guidance they need to become productive. ..."
    "... Friends of mine visited Germany last year, noticed that for curb, pothole repair where in the US you see 2-3 guys and a bunch of equipment, there he would see 8 guys with shovels and little to no equipment. ..."
    "... Yes, when I was working at UT-Austin, they cut the janitorial staff so that offices were only vacuumed once a month. ..."
    "... The reality of what is happening is on the economic/political level. It involves a small number of people, living in a rich, opulent high tower, who for years acted and enacted without the slightest bit of empathy or selflessness. These same people have literally no depth to their thought and are ruled by the very gluttony/ego so valued in todays consumerist society. This type used to live in Rome during Diocletian's rule, in Egypt during the Hyskos invasion, in the Mayan Empire during the Postclassic period, etc ad infinitum. The overall picture has repeated itself, as an empire is a microcosm of any living organism; it gets old and becomes very susceptible to change, that is, the ruling class become so removed from reality that their decision making begins to deviate further and further from the actuality of the current situation. The Housing Crisis is a prime example. The banks saw fit to literally scam their own customers with no government intervention! Twice! This type of thinking quickly affects the entire nation. People begin to see a futility in living morally and truthfully, and start to wonder if the entire system is a scam. ..."
    "... I've visited enough towns in the Mid West where everyone is on some pharmaceutical, usually Percocet or valium, yet have no money for a proper house with heating and cooling. ..."
    "... So entire industries now eschew people older than 30 in favor of being staffed entirely by 20 something's. This will surely end well. ..."
    "... They are bring these workers from India where starting IT salaries are $10,000/year. Check early in the morning and late at night and you will see the buses delivering the workers who lived crammed in surrounding apartments. One told me his Indian outsourcers had eight of them living in a two-bedroom apartment with one bathroom - while working 80-100 hours per week. They are threatened with deportation if they complain, and in some cases, their families back home are physically threatened. ..."
    "... granting automatic work authorization to all H-1B spouses. ..."
    "... expanding Bush's "Optional Practical Training" now allowing stem graduates to work for three years ..."
    "... lowered qualifying requirements for L-1B visas. L-1b visas allow corporations to import their foreign employee to work in the US at the home nation salaries. And has lead to widespread abuse such as foreign employees being paid $1.73/hour. ..."
    "... modified the B-1 visa, used attended training and meetings, to incorporate the "B-1 in lieu of H-1B" which now allows some foreign workers to work in the US on the B-1 visa ..."
    "... There are now well over a million foreign guest workers in the US and the numbers are growing. Curiously (ha ha!), DHS does not even keep count of the above admissions. ..."
    "... Wow, didn't know they expanded the student work permission to three years. Used to be one year. Essentially if you go to college here you have bought yourself a ticket to live in America and take a job from an American. ..."
    "... I was replaced by a 20-something. Actually, at my last job (3 years ago) both the older employees, myself and another employee, were replaced. One employee who had worked there for 15 years and was 60, so TWO years away from retirement, was let go. (I hope he sued the pants off that horrible firm!) ..."
    "... Yes indeed, there's a reason big business doesn't want medicare for all – it would result in the ultimate 'flexible workforce'. Workers immediately bailing out of every shit show employment situation they manage to fall into at the drop of the hat with no COBRA or insurance dead zones. But on the other side of the coin, it would ramp up the Uber jitney economy of on-demand disposable workers lined up holding signs displaying their skill sets for a day's pay at the highway on-ramps at 6:30 AM (or, as the neo-liberal mindset would frame it – the entrepreneurs). ..."
    "... Thats pretty much how the movie/tv industry operates in Hollywood. ..."
    "... History of Work Comp as I remember it - speaking of how "the company" counts its beans: Johns Manville had a problem with people getting slowly sicker on the job (handling asbestos) starting late in the 1800s paid doctors to do studies that proved the asbestos-asbestosis-mesothelioma connection, and gave some rates of worsening of the diseases and hence points at which workers could no longer work. The researchers and doctors were paid for and threatened into silence on the findings, and required to ignore their Hippocratic obligations. Workers had to go to company doctors, who would nurse them along until they were fired for inability. ..."
    "... All labor reform policies put forth by Republicans and their policy activation arm (Dems) have been to make life easier and richer for CEO's, not to help workers. So now economists are surprised by the results? What a useful profession they are. ..."
    "... The 40 hour work week was established under Roosevelt. If you wish to reverse or stave off the declining Participation Rate, then decrease the required number of hours work to 32. We have agreed before that Labor is the lowest cost when compared to Overhead or Materials. In the end, the difference in cost would be made up by higher productivity. ..."
    June 21, 2016 | nakedcapitalism.com

    A new Council of Economic Advisers study released by the White House on the fall in labor force participation among men of prime working age (25 to 54) should be subtitled, "It's the Neoliberal Economy, Stupid."

    The report does a useful job in documenting where the level and nature of the decline in male workforce participation, which peaked at 98% in 1954 and is now at 88%, the third lowest among OECD countries. The decline is concentrated among less educated:

    Screen shot 2016-06-21 at 4.20.59 AM

    Blacks have been hit harder than other groups:

    Screen shot 2016-06-21 at 4.22.31 AM

    And the general outlook for employment has been deteriorating over time. However, bear in mind that this decay somewhat overlaps with the story that less educated groups have been harder hit. US educational attainment has fallen over time.

    Screen shot 2016-06-21 at 4.09.30 AM

    The report dismisses the myths that access to Social Security disability or that men are not choosing to work as culprits. More than a third were in poverty. Fewer that 25% of the men not working have a spouse supporting them and that percentage has dropped in the last 50 years. The CEA's analysis find that Social Security disability explains at most 0.5% of the reduction.

    The cause is the state of the job market:

    • Participation has fallen particularly steeply for less-educated men at the same time as their wages have dropped relative to more-educated men, consistent with a decline in demand.

    o In recent decades, less-educated Americans have suffered a reduction in their wages relative to other groups. From 1975 until 2014, relative wages for those with a high school degree fell from over 80 percent of the amount earned by workers with at least a college degree to less than 60 percent

    While doing a fine job dimensioning profile of the groups that have been hit the worst, the authors, after invoking hoary neoliberal defenses, as in these workers are the losers in a globalized market, the paper gives a coded acknowledgment that policies that are hostile to workers have produced the expected result:

    This reduction in demand, as reflected in lower wages, could reflect the broader evolution of technology, automation, and globalization in the U.S. economy.

    Conventional economic theory posits that more "flexible" labor markets-where it is easier to hire and fire workers-facilitate matches between employers and individuals who want to work. Yet despite having among the most flexible labor markets in the OECD-with low levels of labor market regulation and employment protections, a low minimum cost of labor, and low rates of collective bargaining coverage-the United States has one of the lowest prime-age male labor force participation rates of OECD member countries.

    It is remarkably cheeky to see the authors attempt to depict "flexible" labor markets, where workers can be tossed on the trash heap, as beneficial to laborers.

    The recommendations are tepid, and the authors assert "A number of policies proposed by the Administration would help to boost prime-age male labor force participation." In other words, we are to believe the problem is those Republican meanies in Congress, as opposed to Obama not pushing hard for these measures in his first term, when he had the opportunity to pass wide-ranging reforms.

    One proposal is the new conventional wisdom of more infrastructure spending to create more jobs for unskilled workers directly, improving community colleges and other training so workers will have skills that line up with hot job markets. The problem with the latter idea is that demand can shift quickly (look at how the oil patch was robust a few years back and is now just starting to get back on its feet). Moreover, employers are extremely prejudiced against both older people and people who've been out of the workforce, and the age which is deemed to be "older" has collapsed. Per Wolf Richter (emphasis original):

    Now I've come across a fascinating piece on MarketWatch, an article on what to do to get into the cross hairs of a recruiter whose algos are combing through millions of profiles on LinkedIn.

    No recruiter in his right might is personally clicking through LinkedIn profiles. They're all scanned by algos by the millions in nanoseconds. And so the trick is structuring your profile to get the algos to pay attention. This isn't a human-to-human scenario, but a human-to-algo scenario. You're trying to second-guess an algo that's going to decide your future….

    But apparently the lifespan of a degree has been shortened from 20 or 25 years to just 10 years! Then it rots, and it has to be swept under the rug. The article put it this way (emphasis added):

    Older job-seekers….

    I mean, I'm already seething.

    Older job-seekers need to walk a fine line. Unless you made the cover of "Time" or discovered a solar galaxy, experience has a shelf life on LinkedIn, says Scott Dobroski, career trends analyst at Glassdoor. There's no need to wax lyrical about a job that's more than 10 years old, he says. And those who g raduated from college a decade ago may want to exclude the date they graduated. "Your college graduation date will age you," he says, "and although ageism is illegal, it's happening all the time." On the other hand, if you're applying for a job as CEO of a Fortune 500 company and you graduated in 1986, it's okay to leave the date, Dobroski says.

    Note the word "older job seekers" in connection with a college degree from 10 years ago. Those older job seekers are early Millennials!

    Yves here. Admittedly, candidates on LinkedIn are more educated than the group this study is most concerned about, but consider the message: even among the educated, the shelf life of a degree has diminished greatly due to ageism. Why would it be less bad among the less well educated?

    Similarly, the problem with European-style job training programs is that US employers do not want to hire people with general training, even in a particular skill area. Their strong preference is to hire someone who is doing the exact same job for a similar company, so as to minimize their effort (in theory; in practice, the extra time spent on the search probably offsets the theoretical savings). The cure for that is a much more robust job market, where employers realize they are not going to find the perfect candidate and take someone approximate and give them the training and other guidance they need to become productive.

    And finally, the report claims that Obama has been pumping for one of the most needed remedies:

    Increasing wages for workers by raising the minimum wage, supporting collective bargaining, and ensuring that workers have a strong voice in the labor market.

    Help me.

    So I'm at a loss to understand the political purpose of this report. It's useless as a policy driver given that this is an election year when Obama is a lame duck. Perhaps it is a weak effort at legacy-bolstering by showing that even though the decline in labor force participation among men was marked in the Obama Administration, it started long before he took office. But it still ignores some elephants in the room, like the fact that employers stopped sharing the benefits of productivity gains with workers starting in the mid-1970s and lack of sufficient demand in the economy. What it does reveal is one of the many time-bombs that Obama has left for the next President.

    Marco , June 21, 2016 at 7:27 am

    Time to start blaming those darn "stay-at-home" dads!! (PEW via CalculatedRisk) How much more evidence will it take for orthodox economists to stop manufacturing silly excuses for a crappy job market.

    Benedict@Large , June 21, 2016 at 8:52 am

    Economists since the 1970s have been primarily involved with explaining away unemployment; that is, saying it doesn't exist. This is because their theory of inflation (printing money = inflation) breaks the rules of elementary algebra if unemployment does exist. To normal people (non-economists) confronted with such a situation, the theory would quickly be abandoned as nonsense, but to economists this is not an option, because this theory also says that big government is bad, a truism that in the economics profession needs no explanation.

    So you see, Marco, there is no crappy jobs market because there's no such thing as unemployment. Ask any economist. They'll tell you.

    Simon , June 22, 2016 at 9:08 am

    Here are some nice nuggets from the CEA study on the stay-at-home dad myth:

    "Participation rates have fallen for both parents and nonparents alike, but prime-age males without children saw a larger decline of 9.4 percentage points since 1968 compared to 4.9 percentage points among prime-age males with children. This suggests that men dropping out of the labor force to be stay-at-home fathers is likely not an important factor in the overall decline; moreover, only around a quarter of prime-age men who are not in the labor force are parents (down from around 40 percent in 1968)."

    and

    "Based on [American Time Use Survey] data, there is little evidence that men are staying home to care for children or to do house work. "

    Of course, I am preaching to the choir here!

    ambrit , June 21, 2016 at 7:34 am

    "Blame the victim."

    av av , June 21, 2016 at 10:20 am

    Blame technology. Low skilled workers are easiest to replace. Example, you used to have people sweeping and washing floors in shopping centers or subway stations.
    Now you have one person on a sweeper or washer.

    Pat , June 21, 2016 at 11:50 am

    And how well is that working out? I'm serious. Perhaps they need a couple of more people ALONG with the washers and sweepers. Sorry to use Disney, but part of the reason the parks are pristine is because they have a whole lot of people going along picking up the trash and sweeping up.

    It is not just technology, it is a management that doesn't understand how much labor they really need and ignore the signs they do not have enough, because then their numbers might be down. And this is even when their numbers are already down.

    jsn , June 21, 2016 at 3:06 pm

    It's really about how the priorities are set and by whom.

    In a sane society, the issuer of the currency would pay people to do things people like to do or benefit from doing themselves and pay for equipment/robots to do things people don't like.

    We live a long way from there.

    collins , June 21, 2016 at 4:26 pm

    Friends of mine visited Germany last year, noticed that for curb, pothole repair where in the US you see 2-3 guys and a bunch of equipment, there he would see 8 guys with shovels and little to no equipment.

    SpringTexan , June 21, 2016 at 4:27 pm

    Yes, when I was working at UT-Austin, they cut the janitorial staff so that offices were only vacuumed once a month.

    There is work to do. But not willingness to have people do it.

    Steve Gunderson , June 21, 2016 at 5:08 pm

    Maybe teaching people to pickup after themselves should be a Freshman level course?

    Michael , June 21, 2016 at 8:19 pm

    Carpets need to be vacuumed.

    inhibi , June 22, 2016 at 4:26 pm

    It is not as simple as "technology". I often find that those who say lines like "robots are going to take away all the jobs!" are those without actual degrees in those subjects. Technology simply moves the plane of thought, processing, manufacturing, etc to the next level. The invention of the computer spawned an entire multi-TRILLION dollar industry with millions of jobs. Robotics will be/is the same.

    The reality of what is happening is on the economic/political level. It involves a small number of people, living in a rich, opulent high tower, who for years acted and enacted without the slightest bit of empathy or selflessness. These same people have literally no depth to their thought and are ruled by the very gluttony/ego so valued in todays consumerist society. This type used to live in Rome during Diocletian's rule, in Egypt during the Hyskos invasion, in the Mayan Empire during the Postclassic period, etc ad infinitum. The overall picture has repeated itself, as an empire is a microcosm of any living organism; it gets old and becomes very susceptible to change, that is, the ruling class become so removed from reality that their decision making begins to deviate further and further from the actuality of the current situation. The Housing Crisis is a prime example. The banks saw fit to literally scam their own customers with no government intervention! Twice! This type of thinking quickly affects the entire nation. People begin to see a futility in living morally and truthfully, and start to wonder if the entire system is a scam.

    Now imagine the modern US economy as a sinking ship. The top level execs, elites, are busy pillaging as much as they can, because they all see that US supremacy isn't going to last. Manufacturing all moved to China, now Mexico, retail is dead in the water, the US consumer is getting weaker and weaker. Only healthcare is staying afloat, due more to political reasons than anything else.

    The easiest and most common method to increase your salary as a corporate exec is to get rid of overhead: sell off portions of the business, layoffs, etc. They are all doing it regularly with no impunity. US manufacturing is all but GONE. Its all been sold to PE firms that install a puppet as the CEO, who then begins the extraction process of selling off parts of the business, instating capital controls, and layoffs. Now it moved to retail. Eventually, America will be a literal husk. Every place will just have the same options of a few fast food and retail chains. The entire Midwest is already there, hence "Rust Belt". The only places that will be spared in America will be the bubble of wealth concentrated on the coasts, but even these will begin to whither as wealth starts to move to other, happier countries.

    So in this milieu, put yourself in the place of a average HS educated American. You have two options for your career: work your ass off and make next to nothing, or go to college and graduate a debt-slave, also making next to nothing. However, a third option presents itself, complements of the Welfare State: collect unemployment and have all the free time in the world. Then imagine what you see and hear everyday. Banks illegally foreclosing on homes, executives getting away with fraud in the hundreds of millions, a militarized police, potent pharmaceuticals given away like candy, a plant that causes mild decrease in heart pressure illegalized, politicians lying again and again, the wealthy talking on TV about how "easy" it is to open a business and selling books about it, etc. It all concentrates down to the worst of all emotions: depression, self-loathing, and envy.

    The depression comes from the hopelessness of most American's situation: poorly educated with no future career, not even a path to take which will ensure a brighter future. The self-loathing comes from the media, as most people get an HOURLY reminder of how shitty they look, how poor they are. Even shows like Shameless don't touch on the reality of being poor in America. It isn't a day to day struggle to pay bills. Its a day to day struggle to even feel worth something. To feel part of society.

    Then there's envy. You feel envious of the wealth, the attractiveness of others you see in the media, which you misplace as being the vast majority of people in America because you see them everyday and everywhere: online, on billboards, in movies, commercials, etc. You begin to feel like SOMETHING should be given to you. The Government, fearing rebellion, realized this during the last Great Depression when they began to expand the Welfare State. Welfare is a form of suppression. It keeps people on the lowest rung just happy enough to forget about rebelling. Big Pharma is a BIG factor in this as well. I've visited enough towns in the Mid West where everyone is on some pharmaceutical, usually Percocet or valium, yet have no money for a proper house with heating and cooling.

    So in summary, the extraction of wealth by the upper class, (through "global" trade agreements, stock market manipulation, tax evasion, offshoring, etc) along with lax regulation & prosecution by the political body (they are very much one and the same these days) caused immense physical (monetary) and mental depression/suppression of the masses, which are steadily moving toward Welfare as it becomes the only of options with a glimmer of stability & free time.

    FedUpPleb , June 21, 2016 at 8:10 am

    So entire industries now eschew people older than 30 in favor of being staffed entirely by 20 something's. This will surely end well.

    Arizona Slim , June 21, 2016 at 8:55 am

    I would like to see where all of these highly skilled and motivated 20-somethings are coming from. Because I am not seeing them around here.

    NoGig , June 21, 2016 at 11:06 am

    They are bring these workers from India where starting IT salaries are $10,000/year. Check early in the morning and late at night and you will see the buses delivering the workers who lived crammed in surrounding apartments. One told me his Indian outsourcers had eight of them living in a two-bedroom apartment with one bathroom - while working 80-100 hours per week. They are threatened with deportation if they complain, and in some cases, their families back home are physically threatened.

    With the defeat of H-1B expansion, Obama has now vastly increased foreign guest workers through executive actions that include:

    1. granting automatic work authorization to all H-1B spouses.
    2. expanding Bush's "Optional Practical Training" now allowing stem graduates to work for three years in the US on a student visa. The OPT has no caps, little labor protections, and no salary requirement.
    3. lowered qualifying requirements for L-1B visas. L-1b visas allow corporations to import their foreign employee to work in the US at the home nation salaries. And has lead to widespread abuse such as foreign employees being paid $1.73/hour.
    4. modified the B-1 visa, used attended training and meetings, to incorporate the "B-1 in lieu of H-1B" which now allows some foreign workers to work in the US on the B-1 visa

    There are now well over a million foreign guest workers in the US and the numbers are growing. Curiously (ha ha!), DHS does not even keep count of the above admissions.

    America, this is not YOUR government.

    John , June 21, 2016 at 11:00 pm

    Wow, didn't know they expanded the student work permission to three years. Used to be one year. Essentially if you go to college here you have bought yourself a ticket
    to live in America and take a job from an American.

    perpetualWAR , June 21, 2016 at 11:25 am

    I was replaced by a 20-something. Actually, at my last job (3 years ago) both the older employees, myself and another employee, were replaced. One employee who had worked there for 15 years and was 60, so TWO years away from retirement, was let go. (I hope he sued the pants off that horrible firm!)

    weinerdog43 , June 21, 2016 at 11:51 am

    Oh, they're all out beating down the door over in Philadelphia to work as substitute teachers for $75 per day. Just google 'substitute teacher shortage' and you'll see plenty of job opportunities.

    snark

    inhibi , June 22, 2016 at 4:36 pm

    Its called "turnover" and companies use it nowadays to suppress wages. Why pay a 30 yr old 85K when you can pay a 20 yr old 50k?

    Most of the work is simple anyways, unless you work in the STEM field. And unfortunately, in the STEM field, the largest industry (software) takes this approach to the next level.

    flora , June 21, 2016 at 8:14 am

    Great post. Thanks.

    mark , June 21, 2016 at 9:08 am

    Yes it is.

    "supporting collective bargaining"

    Guffaw.

    fresno dan , June 21, 2016 at 8:17 am

    Incentives matter – if the end all and be all is GDP, you get GDP. TPP is an "industrial" policy, or more accurately a re-distribution policy – yeah – re-distribution – the fact that it is re-distribution from the poorer to the richer is a novel use of the concept, but we should never under estimate the cleverness of Davos man.

    The fact that it is espoused by those who incessantly yammer about how government policy should be "neutral" exposes that these people are just making the rules for their own benefit. The fact that so many laws ("reforms") must be instituted to advance this agenda just exposes the intellectual dishonesty. Or would they have us believe that the advent of neoliberalism and the increase in inequality is just a happy (sarc) coincidence? The idea that this is some unstoppable force of nature just wants to make me puke.

    If you think that work matters, that participation in society is important, and that a nation is more than airbnb beds for Davos man conference attendees, you can have policies that punish outsourcing, decide that limiting H4B workers increases demand for workers here with commensurate increases in wages. There are a zillion ways the tax code as well as other laws are inimical to US workers. It STARTS with the idea that paying labor more does NOT harm society….

    These policies are not a function of physics or of God's will – they are made by men at the behest of the few to reward the few. It can be changed if we choose to change it – although I fear we are rapidly reaching a point, and may have already reached it, where we are a defacto plutocracy and any "reform" is mere window dressing.

    Linda , June 21, 2016 at 8:41 am

    I agree with you wholeheartedly. We are on a straight path to plutocracy and I too fear we have already passed the point of no return. I hear (read) daily the awful word, redistribution; always in the context of taking a small amount away from the rich and powerful to give to those not as fortunate; but never in the context of what is actually happening on a grand scale; the taking from the lower classes and giving it to the upper 1% and above. When will it stop? I don't know; I do know that unless we continue to try and make the masses actually understand what is happening to them and to get them off their apathetic arses and involved in the political process, thereby voting out of office the scrads of politicians devoted to and enamored of neoliberalism, we will continue down this prophetic road of self destruction. It is our choice. It will be hard. It may, in fact, already be too late. But, we have to try. We have to keep working; working to explain the awful policies of neoliberalism.

    templar555510 , June 21, 2016 at 9:20 am

    Agreed. So what MUST the demand be ? Let the capitalist go after FULL AUTOMATION and balance that with UNIVERSAL BASIC INCOME . Everything to do with money can be defined as a balance sheet so this should be the balance sheet for the 21st Century . The demand should come from all . And it's coming. I know the Swiss just rejected it , but the fact that they just called a referendum to decide it ( for now ) tells us it's there in the ether and the Swiss are not alone ; the Dutch, the Finns are all working on this . It's the genuine great leap forward.

    tegnost , June 21, 2016 at 9:52 am

    sorry but basic income guarantee is simply creating demand for the plutocrats, and is exactly why food stamps are in the agriculture budget. This is why the 13,000/yr BIG floated a week or two ago already, at it's inception, takes 3,000 and puts it towards medical care-oops, i mean insurance- you won't get care unless you pay extra, don't kid yourself. And this gravy train will have as many cars attached to it as it can carry, how much will your BIG be in the form of food stamps? rent subsidy? by the time it's implemented the person at the root of the issue won't get a thin dime, but the cronies will have a basic income guarantee, the true purpose of this terrible idea, I and others like me want things to do, not a snap card (more likely digital wallet brought generously to you by apple and jp morgan, which of course will charge a fee, and conveniently keep track of where you are at all times) that allows me to buy gmo food (yes, there will be foods that are for the poor and foods for the rich, want organic? what's your net worth?) The silicon valley parlors where these moronic ideas are hatched are filled with people who are trying to cement their presence in the upper class which is funny on the meritocrat side because many of my tech friends didn't go to college, they were good at video games and now it's robots robots robots because that's their gravy train and the BIG is their lame ass apology, while getting some demand into the economy to pay for their craptastic junk toys.

    TheCatSaid , June 21, 2016 at 11:59 am

    Great observations about BIG. I never thought of it that way, and you make it very obvious. Thank you.

    lightningclap , June 21, 2016 at 1:21 pm

    ++ I have long been in favor of BIG but you point to the obvious strings that would be attached if formulated by our Valley "disruptors".

    jrs , June 21, 2016 at 4:03 pm

    then instead provide the basics of life to people, like healthcare and shelter, rather than money? That completely solves that problem doesn't it?

    samhill , June 21, 2016 at 8:10 pm

    Excellent, my vote post of the week. The best answer is to pay people to actually work, the work would be to pay them to undo the damage of the last 300 years of industrial revolution. We had created a large middle middle class and secure working class destroying the planet, we can create the same wealth cleaning it up. Instill hope on a dying planet, and for the first time in its history give humanity a reason to get up in the morning other than just exploiting each other in a rat race.

    Norb , June 22, 2016 at 2:35 am

    One way of looking at how a BIG can be manipulated by owners is considering slavery. It seems we are entering a new phase in the never ending capitalist struggle to secure cheep labor. Cheep labor and resources are the driving force of the current system. The logical end result is to have a self-sustaining labor force. One that makes just enough to survive and work- with little room for anything else. That is where we are headed.

    Advancing technology and the desire to shed costs related to slave upkeep can be argued as important factors in slavery's demise in it's original social form as one individual owning another as property. Why bother taking on the responsibility for slave upkeep when you can rig the system in ways that require workers to enslave themselves to businesses and the system as a whole. You need the labor power, not the person.

    A BIG will be sold for all the typical humanitarian half-truths, but in reality is a natural development to maintain the capitalist system. The powers that be have demonstrated no interest in maintaining a middle class workforce. Debt bondage and BIG coercion are on the horizon.

    As Goethe observed: None are more hopelessly enslaved than those who falsely believe they are free.

    lin1 , June 22, 2016 at 1:47 pm

    Your using an abstract moral excuse to argue against fulfilling a real actual need.Until the revolution comes, BIG is a solution I will support.

    Fred Rucker , June 21, 2016 at 10:52 am

    How wonderfully well stated, thank you

    Bill Smith , June 21, 2016 at 8:34 am

    Why does there have to be a political purpose for the release of the report? I would guess that the end of a presidency works a little like late Friday afternoon when stuff get dumped to the public at their point of lowest interest.

    Raising the minimum wage works at cross purposes. It helps in the short run but in the longer run – other things held constant – it makes automation more likely.

    When the small company I worked for years ago was faced with replacing a piece of equipment, at some point after the minimum wage had been raised, the company replaced it with one that was more automated and took few people to operate. The cost of labor had moved up and cost of capital was lower due the interest rates. The numbers were close enough that it could have gone either way but the feeling was that the cost of labor would continue to go up. Going with the more automated equipment locked in more of our costs.

    a different chris , June 21, 2016 at 9:02 am

    It's weird how people can pretend to conflate technology assisting labor with replacing labor with cheaper labor, in order to derail the subject.

    As far as your "point", they invented the nail and hammer and now we don't have to drill holes and put pegs in. Fine. Nobody is talking about going technologically backwards, in fact just the opposite. We are talking about the race to the bottom in labor itself. I suspect a bit of looking around can find a lot of places where 1 American + 1 machine is slightly more expensive than 4 third-worlders + shipping + no machine. Sometimes the machines have progressed so fast that work has moved back onshore (and funny that all the moaning about "helping people that live on 2cents/day" isn't heard when that happens), which is cool but it still is the exception.

    But: how limited is the number of "capitalists" that are going to bother to invest in bringing down the cost of that machine when you can drive the cost of humans down in almost unlimited fashion? - there are actually limits, and we will eventually hit them but it will get a lot uglier if we do it that way.

    Cry Shop , June 21, 2016 at 9:32 am

    And the whole issue is treating fellow human beings as less deserving, less worthy of employment just because of their nationality.

    There will always be that other half of the working class that can be used to kill the other half when pushed hard enough, any definition will do for separating the class in to us vs them, so that the war can start. Unions blew it when in the 1970s when their leadership sold out, refused to go international with trade agreements, and focused on protecting an indefensible position, indefensible from both an economics view and from an ethics view.

    Jay M , June 21, 2016 at 3:48 pm

    During the cold war the American Labor union movement was thoroughly anti-communist and in bed with the CIA as far coordinating with international labor. See wiki on Jay Lovestone for a bit of the flavor of the times.

    Bill Smith , June 21, 2016 at 11:41 am

    My point was that we ended up with one less minimum wage job because the cost of labor made it better for the company to buy the more automated piece of equipment.

    That example had nothing to do with off-shoring – though I now work in a company of about two dozen people who has off-shored some work. I am going to guess about the equivalent of two full time jobs.

    I was quite surprised when that decision was made given our small size but it has worked as explained to us when it started.

    Steve Gunderson , June 21, 2016 at 5:12 pm

    How many things does the new machine buy?

    cnchal , June 21, 2016 at 11:40 pm

    Looked at that way, the machine buys it's consumables and raw material used in the process. It would have done that anyway, were Bill's company to decide to buy a simpler machine and employ one more person, but because of the automation, and as long as sales justify it, the more advanced machine will process more raw material and use more consumables because it has the potential to run 24 hours per day, whereas an employee would be seeing stars after an eight hour shift, due to repetitious boring work.

    Felix_47 , June 21, 2016 at 9:26 am

    Good point. Also consider litigation costs which to most employers in Ca at least is a huge financial and management burder. A couple of worker's comp sore backs or knees combined with chiropractor, "pain management doctors," surgeons, secondary psychic stress etc. makes a lot of employers including me realize that every employee is a ticking liability time bomb just waiting to call that 1-800-hurt at work number. No business can hire Americans in this legal environment unless they are very well paid well beyond their value so they have no option but to do the job. In fact, in my business litigation/medical/disability costs are far more significant than hourly wages. We just can't take the risk and we outsource everything and hire as few as possible and I am not alone.. We do everything possible to avoid hiring low level workers and when we do we want young recent immigrants who are not "Americanized" and lawyer prone. Even then we get burned more often than not with claims for age related conditions. Then it is simply 1-800-Lastimado en Trabajo and you can see the ads all over the busses in TJ before they come over….ads for Ca worker's comp attorneys!!!! Lawyers, since they control the democratic party are a huge part of our unemployment problem. No employer can take the worker's comp risk of an older employee. If they feel back ache or knee ache or neck ache on the job…it is "aggravated" and the employer is often out hundreds of thousands….thanks to the lawyers who write the laws. Don't count on this lawyer in chief or the next one to do anything about it. Age discrimination and automation and outsourcing are survival tactics for most of the businesses I work with, including my own.

    tegnost , June 21, 2016 at 9:58 am

    medicare for all

    JohnnySacks , June 21, 2016 at 10:41 am

    Yes indeed, there's a reason big business doesn't want medicare for all – it would result in the ultimate 'flexible workforce'. Workers immediately bailing out of every shit show employment situation they manage to fall into at the drop of the hat with no COBRA or insurance dead zones. But on the other side of the coin, it would ramp up the Uber jitney economy of on-demand disposable workers lined up holding signs displaying their skill sets for a day's pay at the highway on-ramps at 6:30 AM (or, as the neo-liberal mindset would frame it – the entrepreneurs).

    Steve Gunderson , June 21, 2016 at 5:13 pm

    Thats pretty much how the movie/tv industry operates in Hollywood.

    armchair , June 21, 2016 at 10:17 am

    Damn it, we could unleash potent forces if we just got rid of the lawyers. When a person's knee gets torn up on the job, give em' a couple grand, an aspirin and tell them to get over it. That's all you need to do.

    Think about this. If the states weren't so desperate for money, they wouldn't have to run the system on the cheap. If health costs were lowered, then the system wouldn't be so expensive. A worker's comp agency has to balance its objectives between not bankrupting the state and not screwing over hurt people. A hurt worker without an advocate is a sitting duck. One way to make lawyers go away is to abolish worker's rights. Alternatively the worker's comp system would be cheaper if health costs were cheaper, and realistic settlements without the assistance of a lawyer might be possible if states had more revenue to pay bills.

    JTMcPhee , June 21, 2016 at 12:41 pm

    History of Work Comp as I remember it - speaking of how "the company" counts its beans: Johns Manville had a problem with people getting slowly sicker on the job (handling asbestos) starting late in the 1800s paid doctors to do studies that proved the asbestos-asbestosis-mesothelioma connection, and gave some rates of worsening of the diseases and hence points at which workers could no longer work. The researchers and doctors were paid for and threatened into silence on the findings, and required to ignore their Hippocratic obligations. Workers had to go to company doctors, who would nurse them along until they were fired for inability.

    At first, the court system's tort law provided the persistent with some compensation and support commensurate with the harm. Many cases settled, but all contained non-disclosure mousetraps (tell anyone and you lose everything.) And of course the "experts" who testified for both sides were sworn to secrecy too, for money or from fear. But Manville and other corporate creatures got inspired, starting around the 1890s I think, to pitch and successfully write (lobby) into law that "workers comp" system that persists - places an administratively determined value on the "injury," percent of disability, and the rest, bars tort litigation for WC-"covered" injuries. Even with all that, a lawyer is often needed because the fokking corporate swine do everything in their considerable power and corrupting reach to avoid even paying out the pittance WC provides, especially long-term treatments and care for the many horrific injuries. Once again, the hope is that the injured worker will GO DIE. And yes, there are cheaters, but gee, how surprising that the profits from fokking over the workers so far outweigh the little bits that a few people scam from the other side. Many of the patients I tried to help when I worked as a nurse were WC, and the treatment they got from the insurers, and the "employee advocates" and "nurse case managers" and defense lawyers acting on screw-the-worker policies of long standing, was amazingly cruel.

    "Bankrupting the state?" WC is paid, far as I know, at least in FL, out of an insurance pool that is funded by employers. Subject to the same kinds of actuarial calculations that any other large-pool insurance game undertakes in underwriting. And yes, universal health care (not Obamacare) would, if it could be managed without the full usual apparently inescapable corruption by neoliberal interests and thinking, reduce EVERYONE's costs. And states are "desperate for money" largely because the Chamber of Commerce and other neoliberal fokkers like the Kochs have strangled the public general-welfare income stream and diverted most of what is left to various kinds of "white man's welfare" and corporate gifts.

    Here in FL, "worker's rights" are already largely abolished, and the mopping up continues. Just so's you know. There are still lawyers who will (for a cut of the limited amounts that WC will pay out if they finally prevail, to the worker's and family's detriment, "take cases." What I learned in law school, first week in Contracts and Torts and Constitutional Law, is that "There are no rights without effective remedies." What remedies do workers have?

    And for those who want to shoot at the VA, on "inefficiency" grounds and the other neoliberal overt and covert assaults, VA disability is a Workers Comp program too. Max payout for a GI who is 100% permanently and totally disabled is around $30,000 a year. There is no component as with other kinds of insurance structures for enhanced damages for "bad faith" on the part of the government and the privatized functions that make up the disability administration. "Thank you for your service, Sucker!!" And that "award" usually only comes after a decade or more of fighting with a well documented opposition from the people who administer the "system" and requires persistence, luck, and occasionally benefits (not so much any more) from intervention by the injured GI's elected representative…

    animalogic , June 21, 2016 at 8:57 pm

    All this talk of workplace injury, lawyers and workers comp misses the obvious point that some of these workplaces must be UNSAFE. (It's always the other workplace that's unsafe–"our" worker comp payouts are always rorts).

    The answer to all worker comp issues is the same: universal mandatory insurance run by the state and work that minimises physical/psychological injury.
    Naturally it won't occur as its a cost to business….

    reslez , June 21, 2016 at 1:03 pm

    Heaven forbid employers pay for the body parts they use up and destroy in their workers.

    I agree with Anon, universal health care would resolve a lot of these issues. When the cost is spread out employers whine less when their workers are hurt.

    allan , June 21, 2016 at 8:36 am

    Yet despite having among the most flexible labor markets in the OECD-with low levels of labor market regulation and employment protections, a low minimum cost of labor, and low rates of collective bargaining coverage-the United States has one of the lowest prime-age male labor force participation rates of OECD member countries.

    Francois Hollande to the white courtesy phone.

    Larry , June 21, 2016 at 9:56 am

    This song was made in 1983…and the same crap that Run-DMC mention in the lyrics still exists today:

    Unemployment at a record highs
    People coming, people going, people born to die
    Don't ask me, because I don't know why
    But it's like that, and that's the way it is
    People in the world tryin to make ends meet
    You try to ride car, train, bus, or feet
    I said you got to work hard, you want to compete
    It's like that, and that's the way it is
    Huh!
    Money is the key to end all your woes
    Your ups, your downs, your highs and your lows
    Won't you tell me the last time that love bought you clothes?
    It's like that, and that's the way it is
    Bills rise higher every day
    We receive much lower pay
    I'd rather stay young, go out and play
    It's like that, and that's the way it is
    Huh!
    Wars going on across the sea
    Street soldiers killing the elderly
    Whatever happened to unity?
    It's like that, and that's the way it is

    https://www.youtube.com/watch?v=_hN1SKVx31s

    tony , June 21, 2016 at 3:36 pm

    https://www.youtube.com/watch?v=yUoiFH6Aw7o

    I like old Ice-T.

    The thing about being a man near the bottom in a country with low social mobility means it is extremely hard to get girls. Jordan B Peterson said in The Age of Unequals discussion that the primary motivation for men to become criminals is because it is the only way to have a chance at attractive women. That has been my personal experience with crime too.

    Enquiring Mind , June 21, 2016 at 9:56 am

    Ageism takes many forms, some more subtle than others. When your friendly local HR department makes a few tweaks to benefits, the newer employees don't notice, but the wizened veterans take notice. They see the handwriting earlier, and brace themselves for the next steps.

    The HR folks are acting rationally in their supply-side worldview as they look out for shareholders first and consider employees well down the list, if not at the bottom. That treatment of personnel represents a policy of a very high effective discount rate on human capital in the aggregate. When parsed out, there are a few nuances that make the picture clearer. When the top handful get outsized payouts, they are incentivized to reinforce that high human capital discount rate, to the detriment of those down range.

    The graphics showed an acceleration in the ominous trends in the early and mid 1990s. That coincided with the great outsourcing, re-engineeing, re-euphemising of jobs and the economy. In that era, Fortune magazine published a series of articles about the changing nature of the social contract at work.

    One takeaway reflected the new bargain: companies needed to provide interesting work to retain employees, and the latter had to continue to make themselves employable. Those veteran employees referenced above discerned that there wasn't a bargain but a mandate to become more efficient, all presented with the window dressing of so-called interesting work.

    A more honest presentation would have said work that meets the interest or discount rate, as part of the increasing financialization of the world. The decline in trust also accelerated during that period, whether in companies or the media. We continue to reap the results of that widespread mistrust and discontent during the current election cycle.

    wobblie , June 21, 2016 at 10:08 am

    A result of blind Liberal/Conservative policies.

    https://therulingclassobserver.wordpress.com/2016/06/15/ruling-class-axioms/

    Winston , June 21, 2016 at 10:16 am

    a different Chris , please listen (see below) and read what Clayton Christensen has been saying. Big companies are mostly brands now. Have offshored main parts of company. Last stage in that development is decline of company, as in case of steel. IBM is presently also classic case as on road to failure as well for same reason. It started at IBM with Gerstner.

    http://www.forbes.com/sites/stevedenning/2011/11/18/clayton-christensen-how-pursuit-of-profits-kills-innovation-and-the-us-economy/#3e737b19992a

    Clayton Christensen: How Pursuit of Profits Kills Innovation and the U.S. Economy

    Christensen at Gartner Symposium:
    http://gartner.mediasite.com/mediasite/play/9cfe6bba5c7941e09bee95eb63f769421d?t=1320659595

    Gartner Symposium ITExpo

    Oh and state/local gopvts favor large companies over small companies!

    http://www.forbes.com/sites/stevedenning/2014/05/30/why-ibm-is-in-decline/#5aaa6e284c53

    Why IBM Is In Decline

    http://finance.yahoo.com/news/no-end-in-sight-for-ibm-decline-as-shares-near-six-year-low-141729837.html
    No end in sight for IBM decline as shares near six-year low

    http://www.goodjobsfirst.org/shortchanging
    Shortchanging Small Business: How Big Businesses Dominate State Economic Development Incentives

    Denis Drew , June 21, 2016 at 10:59 am

    In a labor market that contains for the sake of argument 50% rich country workers (e.g., American raised) and 50% poor country workers (anywhere else raised) - must be something like Chicago which is 40% white, 40% black, 20% Hispanic …

    … where pay is set by what I call "subsistence-plus"; meaning set STARTING at the absolute minimum pay workers will tolerate (e.g., $800/wk for American born taxi drivers, me; $400 for foreign born) and then PLUS some more for each additional level of skill (bottom for McDonald's, more for better English in Starbucks, more for college English and more competent organizing in Whole foods?) …
    instead of pay set by the highest price the consumer is willing to pay - by collective bargaining or a minimum wage …

    … a huge dropout of low skilled, rich country workers will occur as low skilled work pays much below what rich country workers look at as "minimum subsistence" (the labor market will not clear). E.g., American born taxi drivers (me again) and the Crips and the Bloods. How else explain that 100,000 out of my guesstimate 200,000 Chicago, gang-age males are in street gangs?

    To make the psychological point about "minimum subsistence", today's rich county labor would gladly work for half of today's poor country minimum - if it were 100 years ago and that's the best a much less productive economy could pay. It's psychological, but a lot of psychological if DNA immutable.

    Now here's the wind-up - that should implant permanently the unquestionable need for collective bargaining in all labor transactions: A what I call subsistence-plus labor market with 100% rich country workers will have lower pay levels than a collective bargaining labor market with 50% rich/50% poor country workers.

    That's the whole law and the profits about the need to make union busting a felony (starting in progressive states) as far as I'm concerned.

    PS. This is not an endorsement of Donald Trump's anti-immigration bender - that would kick down the pillars that our whole civilization is built on (sorry Native Americans) - that could mean 250 million Americans by 2050 instead of the anticipated 500 million. This IS an endorsement or rebuilding high labor union density - the missing balance-of-power pillars of our civilization. (Don't forget centralized bargaining - the "compleat" balance-of-power pillar of a unionized labor market.

    Charger01 , June 22, 2016 at 2:48 pm

    David Simon covered this in "The Wire" and "Show me a Hero", you have entire sections of the population that are forced to leave or participate in crime as a viable form of employment. We have a surplus population now- and going forward that are not supporter by their labor or any other resource other than transfer payments.
    Please pause a moment and consider that concept. We have a paucity of credible jobs that people can cobble together a living, let alone increase their opportunities going forward.

    nothing but the truth , June 21, 2016 at 11:33 am

    when everyone is trying to game the system no one has the right to cry morality.

    i have some small businesses that i am selling off. Too many overhead, insurance and legal costs. The line of business is becoming a slave to govt mandated costs and regulations. Customers more interested in injury lawsuits. IQ and attitude of younger employees noticeably poor.

    not looking good.

    Sandwichman , June 21, 2016 at 11:44 am

    "THE LONG-TERM DECLINE IN PRIME-AGE MALE LABOR FORCE PARTICIPATION" report states:

    "Conventional economic theory posits that more 'flexible' labor markets-where it is easier to hire and fire workers-facilitate matches between employers and individuals who want to work. Yet despite having among the most flexible labor markets in the OECD-with low levels of labor market regulation and employment protections, a low minimum cost of labor, and low rates of collective bargaining coverage-the United States has one of the lowest prime-age male labor force participation rates of OECD member countries."

    I have been following this so-called "conventional economic theory" closely for nearly 20 years now and can attest that it is not a theory but a hollow assertion. Empirical "evidence" for this assertion is based on "strong priors": models containing assumptions that generate outcomes consistent with the assertions. GIGO!

    At the core of the flexible labour markets dogma is obeisance to the great god NAIRU, which Jamie Galbraith exposed in all its Emperor's New Clothes nakedness 20 long years ago: "Time to Ditch the NAIRU"

    https://www.aeaweb.org/articles?id=10.1257/jep.11.1.93

    "The concept of a natural rate of unemployment, or non-accelerating inflation rate of unemployment (NAIRU), remains controversial after twenty-five years. This essay presents a brief for no-confidence, in four parts. First, the theoretical case for the natural rate is not compelling. Second, the evidence for a vertical Phillips curve and the associated accelerationist hypothesis that lowering unemployment past the NAIRU leads to unacceptable acceleration of inflation is weak. Third, economists have failed to reach professional consensus on estimating the NAIRU. Fourth, adherence to the concept as a guide to policy has major social costs but negligible benefits."

    In "Unemployment: Macroeconomic Performance and the Labour Market" Richard Layard, Stephen Nickell and Richard Jackman grafted the dubious NAIRU concept onto the anachronistic lump-of-labor fallacy claim to create the hybrid chimera "LUMP-OF-OUTPUT FALLACY" in which central banks enforcing NAIRU anti-inflation policy would ensure that you couldn't redistribute working time. You can't make this stuff up. But Layard, Nickell and Jackman did. Nonsense on stilts.

    "To many people, shorter working hours and early retirement appear to be common-sense solutions for unemployment. But they are not, because they are not based on any coherent theory of what determines unemployment. The only theory behind them is the lump-of-output theory: output is a given. In this section we have shown that output is unlikely to remain constant."

    This is simply not true. Shorter working hours is based on the same theory as the theory of full employment fiscal policy. Keynes's theory. But don't take my word for it. In an April 1945 letter to T.S. Eliot, Keynes wrote:

    "The full employment policy by means of investment is only one particular application of an intellectual theorem. You can produce the result just as well by consuming more or working less. Personally I regard the investment policy as first aid. In U.S. it almost certainly will not do the trick. Less work is the ultimate solution."

    Galbraith's "Time to Ditch NAIRU" has 293 citations on Google Scholar. Layard et al's "Unemployment" has 5824. Economists flock to dogma like flies to shit.

    Jefe , June 21, 2016 at 12:01 pm

    Old and in the way….

    dc , June 21, 2016 at 12:30 pm

    The Oxycontin Report

    Ishmael , June 21, 2016 at 2:00 pm

    Some strong starting points without requiring additional govt interference:

    Shut down both legal and illegal immigration. When you can not employ the ones who are here why let more in.

    Inforce the borders and deport people who are here illegally.

    Get rid of anchor babies

    Put tariffs on imports and I mean substantial tariffs. Worrying about Smoot Hawley is a canard. At that time the US was the biggest exporter now we are the biggest importer. I would also have a sliding scale depending upon labor rights. Some would scream we need to worry about the poor in these countries. How about worrying about the poor in this country. It has reached the point that you need to look around at your family and friends and say what would you do so that these people prosper. If you are not willing to say practically anything legally then you will probably not prosper.

    Cut back govt at all levels. This is a major misallocation of resources. This is especially true of the military industrial security area. Come up with new health care laws. Focus resources to generate more doctors in the US and less people with unproductive degrees.

    Close down overseas bases. Stop wars.

    Ishmael , June 21, 2016 at 2:10 pm

    One other thing, if you look at a lot of the jobs that men use to take and make a good living it was construction, plumbing, gardening, janitorial, cooks and etc. All of these jobs have been filled by illegal aliens who live 25 to a house, pay no taxes, get free health care and suppress wages.

    I know, I am a racist!

    tony , June 21, 2016 at 3:23 pm

    Assuming there are enough natural resources, it is quite possible to arrange an economy in a way that benefits the population of the recipient country. Think about it. The immigrants are healthy, hardworking adults. So you get their labour without investing in twenty years of raising them and then taking on the burden of those who are unhealthy or anti-social.

    The US is an immigrant country with a weak safety net so an intelligent policy could easily benefit both parties.

    hunkerdown , June 21, 2016 at 4:10 pm

    With respect, if your givens were in the least interesting or useful to the greater good, rather than articles of faith (which is just a polite term for self-delusion that benefits the power structure) designed to benefit your imaginary friends, satisfy your need to dominate and abuse others, and give your poor lonely misery some company, you might have something worth a detailed, thoughtful response. As it is, I think you need to explain yourself a bit better.

    Ishmael , June 21, 2016 at 4:52 pm

    Seems very clear to me. You must have a low IQ if you need someone to explain it to you.

    Illegal aliens generally do not pay taxes because they get paid with cash! Sorry, if they have to pay such taxes like sales tax that everyone else needs to pay.

    hunkerdown , June 21, 2016 at 5:52 pm

    "Stupid" is typical American conformist speak for "would offend my bosses".

    You had two points that sounded reasonable: "Shut down both legal and illegal immigration. When you can not employ the ones who are here why let more in." Because markets. Those who own a government that was designed to be bought want to drive down the price and increase the availability ("flexibility") of all labor, of course. Plenty of Americans would be happy to work off the books for a less demeaning wage under less demeaning conditions and less demeaning people. (As if Social Security isn't going to be looted by the oligarchs by the time I'm of age to retire) They wouldn't risk death and torture to come here if EMPLOYERS weren't withdrawing the benefits of employment from those already here and offering those benefits to others. While stopping the influx would be a fine idea, until you get control over those who are paying them to come here - making EMPLOYERS into felons for any support of immigration violations would be a far, far more effective use of enforcement power than beating down brown people at arm's length to satisfy your cultural conceits - supply and demand works both ways.

    And "Put tariffs on imports and I mean substantial tariffs" is in the right spirit, but fails to acknowledge, with the usual hostility to self-awareness and past actions that defines the USAmerican "mind", that other nations have just as much right to respond any way they feel like, and the "trade agreements" the USA has signed grant them contractual grounds (pacta sunt servandum, remember?) to respond disproportionately with their own tariffs, penalties against the USG, and other demerits in the international sphere which are not constrained by your triumphalism in any way. Those means would not be as effective as simply repudiating every multilateral "trade"-related agreement the USA has ever signed and not, quite literally, pawning the USA for a mess of bourgeois pottage.

    It's ridiculous that you should be depending on the US government to evaluate human rights conditions, when human authorities are never bound by evidence unless they want to be. Malaysia's admission into the TPP, and the politically-driven mulligan they received on their human rights conditions, shows the utter folly of letting ambitious bourgeois careerists hide behind corporate veils of any sort.

    If you only believe that people who pay taxes should have rights, you support the very definition of plutocracy, and that makes you a disease vector.

    ProNewerDeal , June 21, 2016 at 4:25 pm

    "illegal aliens…pay no taxes, get free health care"

    You have it back-a*ward. Undocumented workers pay taxes (FICA, SS, etc deductions), that they will not receive when they reach old/SS age, even if they are in the US at that future time. There is no "free health care" for undocumented workers, not eligible for Medicaid or ACA. Emergency room service does not qualify as health care.

    Even US citizens have to go through a bureaucratic nightmare to get & maintain Medicaid or ACA, which is CRAPPY INSURANCE, not ACTUAL HEALTH CARE. At the point of needing actual health care, USians are often denied the service or the insurance refuses to pay after the service is done & face another bureaucratic nightmare in fighting the payment refusal. Undocumented workers lack access to even this crapified level of "health coverage".

    I do agree that increasing supply (H1-B for STEM pros, undocumented for HS-degreed workers) lowers wages. Also, restricting supply (AMA restricting physician graduates such that US physicians per capita lower than OECD levels) increases wages. Econ101 supply & demand, perhaps neoliberal economists need "retraining" & should enroll in Econ101 at the local community college.

    If there was an actual desire to limit undocumented immigration, the solution is large fines on Illegal Employers. How about $100K per undocumented worker found. In addition, end the Drug War, which causes violence & refugees, especially in Mexico & Central America. Revoke or at least amend NAFTA to un-decimate the MEX agricultural industry.

    Ishmael , June 21, 2016 at 4:53 pm

    Generally I have no problem with large fines for companies which employ illegal aliens.

    marym , June 21, 2016 at 4:39 pm

    People who work "off the books" don't pay income taxes regardless of their immigration status. They do pay many other types of taxes, often regressive – sales tax, excise tax, property tax (or their landlord's property tax.

    DarkMatters , June 21, 2016 at 11:58 pm

    1. "When you can not employ the ones who are here why let more in."
    Cui bono? Because EMPLOYERS love it, from large corporations to my neighbors who hire low-paid gardeners. Maybe this class-ifies me, but that would have considered to be an extravagance when I was growing up. I wonder how many people who complain about illegal immigrants actually rely on their services?

    2. "Inforce the borders and deport people who are here illegally. Get rid of anchor babies"
    Bit late for that. I do agree we really have made a mess that needs attention and an intelligent cleanup. Even so, do you think we could competently amend the Constitution at this point, which is what it would take? Practically, I do think that better border security coupled with (really) improved labor conditions, both here and in Mexico (Imagine! An international labor effort!) could improve things. But TTIP and TTP are pushing the other way.

    3. "Put tariffs on imports and I mean substantial tariffs."
    I like the idea, but only sovereign nations can do this, and we're not. We're subject to international courts. In this case, specifically, expect corporate lawsuits against the USA, arguing that the US should compensate corporations for loss of profits caused by said tariffs. These will be arbitrated by Investor-State Dispute Resolution panels, courtesy of said TTIP and TTP, where the no-appeal panels are staffed by international trade lawyers, who otherwise work for international corporations. Yes, by all means, worry about the poor in this country, but don't leave out anyone else.

    4. "Cut back government at all levels."
    Down with traffic lights! (This statement of yours hooked me into writing this entire reply). Strict libertarians strike me as being more than a little Pollyann-ish. The only historical example that comes close are now called the dark ages. In those idyllic times, a bunch of French Norman good-ol' boys could hie themselves over to Italy and wreak havoc, I mean make their fortune. Governments are necessary to contain dispute resolution, and so require power superior to all other factions, but, for the sake of equal justice, should be accountable in some way to all. I could go on, but "no government" advocacy in our times leaves a power vacuum just at a time when corporations and financiers are doing their best to take over. As the Federalists argued, we do need a strong government, to ensure that the will of the people can be vigorously asserted. Not to say that it's working out so great right now, but it would be nice if we could in some way place competent people at the helm to right the ship. Speaking of Pollyanna….

    RD , June 21, 2016 at 4:33 pm

    All labor reform policies put forth by Republicans and their policy activation arm (Dems) have been to make life easier and richer for CEO's, not to help workers. So now economists are surprised by the results? What a useful profession they are.

    run75441 , June 21, 2016 at 7:59 pm

    Yves:

    You already have him on your thread. The 40 hour work week was established under Roosevelt. If you wish to reverse or stave off the declining Participation Rate, then decrease the required number of hours work to 32. We have agreed before that Labor is the lowest cost when compared to Overhead or Materials. In the end, the difference in cost would be made up by higher productivity.

    Sandwichman is a proponent of this and I agree with his analysis.

    [Jun 24, 2016] Reporting a well whose revenue stream is 75-80% gas, as oil or liquids, by gas to oil equivalents is absurd.

    Notable quotes:
    "... Shallow, when analyzing the economics of a well, or field, or entire "play," of course it matters how oil and or natural gas production is reported. You are 100 % correct for being perturbed by this SCOOP/STACK stuff. Reporting a well whose revenue stream is 75-80% gas, as oil or liquids, by gas to oil "equivalents" is absurd. ..."
    "... That stuff up there is no different that any other unconventional resource play. It declines like an anchor being dropped from VLCC in the open ocean and is hugely unprofitable. ..."
    "... The key strategy for long term survival has been and will be, during boom times set money aside: during frenzy's, go to the beach: during bust allocate reserved capital for future growth. ..."
    "... What on earth does the BTU content of gas have to do with reporting gas as though it were oil? This makes no sense to me whatsoever. ..."
    "... Personally, if I believed we would be in a $2.50mm/btu and $60/BBoil environment for the foreseeable future, I would not be drilling anywhere. ..."
    "... I believe that to keep production steady we need at least $4mm/btu and $70Bo, may be even higher. ..."
    peakoilbarrel.com
    Mike , 06/21/2016 at 11:50 am
    Shallow, when analyzing the economics of a well, or field, or entire "play," of course it matters how oil and or natural gas production is reported. You are 100 % correct for being perturbed by this SCOOP/STACK stuff. Reporting a well whose revenue stream is 75-80% gas, as oil or liquids, by gas to oil "equivalents" is absurd. It is a distortion of the facts and meant to be misleading. Until three years ago even the most prominent of distorters would report BOE as a percentage of liquids, now most of them have quit doing that. Wonder why? For one reason, to get 1.2 MBOE EUR's -- For another reason, 58 degree condensate prices take a big negative hit to actual oil prices.

    I don't know what the price of natgas is in OK. If it's like Texas, it sucks. Its discounted value at the moment is less than zilch. If at $ 1.50 net per MCF (and I am being very liberal) the gas to oil conversion should be 25-30:1, NOT 6:1. Therefore the notion that this OK stuff has some secret oil leg that has yet to be developed, awaiting higher oil prices, is a little wonky.

    With regard to RI and ORRI, I can sometimes be guilty of irrational exuberance myself. Then the operator in me takes over and reality sets in. That stuff up there is no different that any other unconventional resource play. It declines like an anchor being dropped from VLCC in the open ocean and is hugely unprofitable.

    Keep up the good work.

    Mike

    texas tea , 06/21/2016 at 1:21 pm
    Mike,
    goodness, I have been drilling wells with my own money for over 30 years. We made money in each of the last 3 quarters on our mix of properties across several states and our mix of product and our mix of interest, ORRI, WI,RI . I know first hand about some of the production in scoop. You may not be open to the facts and that is fine, leaves more room for those with opens mind to exploit. NO skin off my nose. By the way the Btu content of scoop gas is 135o. This is not investment advice but you have a couple of contributors to this blog that have been right with regard to the market fundamentals and exploiting the unrealistically low prices we have seen of late.

    They have made money, just satin one last quick point, based on interest in a couple of dozen wells in scoop, I can say at $4nat gas and $80oil, the roi will be as good or better, risk weighted, than most anything I have participated in, over the entirety of my career. I am not all wells in scoop, but in the core areas.

    shallow sand , 06/21/2016 at 5:23 pm
    You made money in Q1 2016 in North America onshore?

    That is pretty good considering how much the likes of XOM and CVX, etc lost in North American upstream in Q1, 2016.

    texas tea , 06/21/2016 at 7:05 pm
    All our production in onshore US, its the mix of assets. My only point SS is I do know how to run a business and economically evaluate an oil prospect. That is what keeps me between the lines so to speak, I can't constantly be wrong like climate change scientist and still make a living :-). The key strategy for long term survival has been and will be, during boom times set money aside: during frenzy's, go to the beach: during bust allocate reserved capital for future growth.
    Mike , 06/21/2016 at 6:29 pm
    What on earth does the BTU content of gas have to do with reporting gas as though it were oil? This makes no sense to me whatsoever. I am very open to facts, I deal with them every day. Production data does not lie. It takes time to sort the BS out but ultimately it can be done, as Shallow has proven. Tell your SCOOP/STACK boys to quit the BOE BS and start being transparent.

    Here is what is going on in the SCOOP, because the same thing is happening in the PB: The word is out on the Bakken, Eagle Ford and Niobrara. UR is not going to fall in line with the EUR bunk and the economics are bleak. Money is getting scarce. So now everyone is running to new territory where there is little data to support the same old shale oil propaganda machine. Accordingly, some shale oil companies are getting good mileage out of being the first in the new subdivision and even raising some more money, believe it or not. Lenders, for the most part, have ADD. Lets talk in three years when there is more data. That stuff will suck just as bad as any other shale play, betcha.

    texas tea , 06/21/2016 at 7:07 pm
    you ask about the price of gas in okla. I gave you the information to help determine what the price was/is
    we do not have WI in the Bakken, hayneseville, Barnett or Eagle ford. We do have WI in scoop, we do have RI in a number of those plays. All shale is not created equal, as an oil man you should know that.
    As for betting, i do that every time I drill a well and I'll let the drill bit keep score :-)
    Doodlebugger , 06/21/2016 at 9:00 pm
    texas tea: Can you educate me a bit about the Scoop Play. I haven't worked the area much since my Gulf Oil days working Hunton in the area. In your opinion, how many months would bring payout (at $2.50mm/BTU, and $60/BB oil, 75% NRI lease, to a WI owner in the top 20% of wells.
    texas tea , 06/22/2016 at 10:11 am
    Doodlebugger,

    It is really to big of question because of the number of variables. What I can say is that in the gas/condensate window, with the parameters you mentioned, most wells will provide a real rate of return based on the wells we have interests in. Personally, if I believed we would be in a $2.50mm/btu and $60/BBoil environment for the foreseeable future, I would not be drilling anywhere.

    I believe that to keep production steady we need at least $4mm/btu and $70Bo, may be even higher. I can add for SS that i have the updated production on the Good martin unit oil window Woodford Scoop (46 API) the production across the 8 wells in the unit over the last 4 months, and if the number are correct they are not impressive. As say said, i do not draw conclusion until i have all facts.

    Doodlebugger , 06/21/2016 at 1:38 pm
    Mike: Glad to see you still fighting the good fight of putting some real world oilfield sense in the discussions.
    Question: 1.
    We in US have we are told we have a huge stockpile hangover. If the oil in pipelines is counted as storage, how many long huge cross country pipelines have been built during the boom through your area? We have one through us that goes from west Texas through central to Houston. If those pipe volumes are counted as storage, they will probably never be drawn down after the initial volume is added.
    2. Do you believe that the promoters of LTO will have money shoved to them fast enough to bring about another price collapse as the market seems to believe.?

    Hope you are finding some good purchases to take some pain out of this downturn.

    Mike , 06/21/2016 at 4:12 pm
    Hi, Doodle; I hope this finds you well. I can make money at 45 dollars but I still get a burr under my saddle over the shale oil industry's bullshit. Which seems to be getting worse.

    Question 1 is a good point, sir. I side with our old friend Jeffrey Brown on this issue of supply overhang and the quality of the oil in storage and not in very good favor with end users. When Mexico stops being a net exporter, and Venezuela implodes, LTO is going to take some big price whacks simply because there won't be anything left to blend it with. I look for it to take a long time for Cushing to drain. I produce a lot of low gravity sweet stuff and its getting a premium price now for the first time in four years.

    Question 2: LTO reserve inventory is not being replaced and the discounted value of those PDP reserves is dropping like a rock. Some companies are now in a bind with the SEC over EUR's and the IRS is bearing down on PUD reserves. The bottom line is the debt to asset ratios of all but 2 to 3 public shale oil companies is abysmal and new OCC regulations imply most of those guys can't legally borrow more money; they have 2-3 mortgages on their homes already, and their MasterCards are maxed out. The shale oil industry is dead in the water if it cannot borrow more money and that gets harder every day, IMO. I think the shale boom is over, thankfully, and we should not worry too much about another 70% price collapse, no.

    So go find some grease, man!

    Mike

    Doodlebugger , 06/21/2016 at 6:56 pm
    Thanks man: We're shaking off the dust and starting to "think" of getting busy again.There's still good oil out there under the right rock and we are determined to find it! We had a good little discovery that has pulled us through this Depression, though it was a shame to give the oil away to hold on.
    Ves , 06/21/2016 at 5:44 pm
    Shallow,
    I think at this point it does not matter if they are oil or gas fields or how the fields are classified. With Fed announcing that would not have legal problem pursuing negative rates it is completely clear that main goal is to keep broke debtors alive and prevent the gigantic debt bubble from imploding. With negative rates being essentially tax on the savings Fed is basically saying to investors to keep sinking money in anything that resemblance of hard assets in some distant hope that prices will recover before they run out of oil or gas. Good luck with that in the case of high depleting shale. So with negative rates boxes of brass fixtures could be more attractive than cash tomorrow. Markets are broken.

    [Jun 21, 2016] Depressing Similarities Between 1938 And The Present

    www.benzinga.com

    Benzinga

    By the late 1930s, the worst of the Depression had passed after the U.S. President Franklin Roosevelt jolted the economy through the "New Deal," which focused on the "three Rs" - relief, recovery and reform.

    At the same time, private investment was at poor levels, as individuals chose to pay down their debts rather than spend. Inflation was also on the low side, and the government started to back off its fiscal stimulus programs and implement a tightening of financial policy.

    Sounds a bit like 2016 doesn't it?

    Business Insider, citing a research report by analysts at Morgan Stanley, made the case that 2016 is no different from 1938.

    "The critical similarity between the 1930s and the 2008 cycle is that the financial shock and the relatively high levels of indebtedness changed the risk attitudes of the private sector and triggered them to repair their balance sheets," Business Insider quoted the analysts as saying. "During the deleveraging process, the private sector becomes risk-averse and shifts its attention towards restoring health to its balance sheets."

    [Jun 19, 2016] This should be illegal but Goldman Sachs is above the law

    Notable quotes:
    "... as to GS public statements relating to oil and gold, the money has been by taking the other side of the trade, I have little doubt that what their trading desk does. ..."
    peakoilbarrel.com

    islandboy , 06/15/2016 at 2:34 pm

    Goldman Sachs declares end to oil price recovery

    Goldman Sachs has dismissed what's been described by some analysts as a recovery in the global oil markets.

    The uber bear said it expects a "modest" deficit in the coming months due to current prices, before the market returns to surplus early next year.

    Rising demand, falling US oil output as well as supply disruptions have helped the black stuff recover from below $28 per barrel in January to just under $50 today.

    Read more: North Sea to warn MPs subsea sector risks losing world-leading position

    But Damien Courvalin, an analyst at Goldman Sachs, said that this was, at best, the first signs of a turnaround.

    "Canadian production is finally restarting, production from other Organisation of Petroleum Exporting Countries' members continues to beat our expectations."

    Courvalin continued: "The recent recovery in prices risks that non-Opec production declines less than we expect, especially in the US."

    What is it they say? A sucker is born every day? This should be illegal!

    texas tea , 06/15/2016 at 3:16 pm
    as to GS public statements relating to oil and gold, the money has been by taking the other side of the trade, I have little doubt that what their trading desk does.

    [Jun 19, 2016] US economy just 'doesn't want to grow up' BofA's Contopoulos

    www.cnbc.com

    The United States, along with the European Central Bank and Bank of Japan , are stuck overseeing 'Peter Pan' economies that refuse to wean themselves off cheap money policies.

    ... ... ...

    "A Peter Pan economy is an economy that just doesn't want to grow up," Michael Contopoulos recently told " Futures Now ." The central bankers of the U.S., Japan and Europe "are like three nannies managing the economies. And, that's what they're supposed to be doing.

    [Jun 18, 2016] Whats Really Happening to the Humanities Under Neoliberalism? by Dan Falcone

    What's happening is the same what happed with them in the USSR. Only Party (in case of neoliberalism replace the Party with "financial oligarchy") sanctioned content can be taught and the stress is on neoclassical economics as this is one of the foundation of neoliberalism (along with liberalism, Ann Rand, and similar psudo theories).
    Notable quotes:
    "... Chipping away at the humanities in schools jeopardizes the issues of social justice in education. Arguably, it is safe to say that the humanities and any liberal arts program are undervalued specifically because they involve knowledges, practices and traditions that usually cannot adhere to immediate short-term use ..."
    www.truth-out.org

    The number of college students majoring in English, according to some contested reports, has plummeted. In general, the humanities are taking a back seat to more "pragmatic" majors in college. Students, apparently, are thinking more about jobs than about general learning. Given this trend, should schools be scaling back on the humanities?

    ... ... ...

    Some might say that since top universities like MIT have decided to focus on management, business analytics, finance and mathematical economics (or trading), secondary schools should follow suit. It would be a mistake, however, for secondary schools to cave to this argument and scale back on the humanities.

    ... ... ...

    The Chronicle of Higher Education has noted the reason for this prevailing wisdom about the myth regarding the humanities plummet: It's largely due to mainstream publications. For instance, in 2013, The New York Times featured an essay titled "The Decline and Fall of the English Major." In 2009, The American Scholar featured an essay, titled "The Decline of the English Department." Authors cited spirals in the humanities. Even The Chronicle's Mark Bauerlein wrote, "English has gone from a major unit in the university to a minor one."

    The piece goes on to explain how, back in 2010, MSNBC anchor Tamron Hall said, "Students wanting to take up majors like art history and literature are now making the jump to more-specialized fields like business and economics, and it's getting worse." This comment was juxtaposed with a chart that indicated a spiral. Prominent New York Times journalist David Brooks also jumped on the bandwagon when he remarked, "The humanities [have] turned from an inward to an outward focus." The "sky is falling" myth then led to serious underfunding, becoming a self-fulfilling prophecy.

    Bérubé argues that mainstream accounts of the decline of the humanities in undergraduate education are "factually, stubbornly, determinedly wrong." He says there was a plummet, but it was between 1970 and 1980.

    In reality, English isn't dying; it's just that at one time, it was unprecedentedly popular. English majors rose from 17,000 to 64,000 over a span of 30 years, from 1940 to 1970, and then declined to 34,000 by the 1990s. This does not mark a death to the humanities.

    Are fields like art history and literature really "elite, niche-market affairs that will render students unemployable," as Bérubé argues? Are students abandoning the humanities because they are "callow, market-driven careerists?" No, this is not true. Bérubé states that "undergraduate enrollment in the humanities have held steady since 1980 (in relation to all degree holders, and in relation to the larger age cohort), and undergraduate enrollments in the arts and humanities combined are almost precisely where they were in 1970."

    ... ... ...

    Chipping away at the humanities in schools jeopardizes the issues of social justice in education. Arguably, it is safe to say that the humanities and any liberal arts program are undervalued specifically because they involve knowledges, practices and traditions that usually cannot adhere to immediate short-term use by preservation seeking administrations and teachers.

    ... .,. ...

    Dan Falcone has a master's degree in modern US history from LaSalle University in Philadelphia and currently teaches secondary education. He has interviewed Noam Chomsky, Edward Herman, Richard Falk, William Blum, Medea Benjamin and Lawrence Davidson. He resides in Washington, DC.

    [Jun 18, 2016] Greenspan Shocked Disbelief by Robert Borosage

    Greenspan phony "Shocked disbelief" reminds classic "...I am shocked - shocked, there is gambling going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca. Compare with "... "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," he said. ..."
    Notable quotes:
    "... "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," ..."
    "... Greenspan spurned the Republican acolytes trying desperately to defend the faith and blame the crisis on the Community Reinvestment Act and the powerful lobby of poor people who forced powerless banks to do reckless things. ..."
    "... Private greed, not public good, caused this catastrophe: "The evidence now suggests, but only in retrospect, that this market evolved in a manner which if there were no securitization, it would have been a much smaller problem and, indeed, very unlikely to have taken on the dimensions that it did. It wasn't until the securitization became a significant factor, which doesn't occur until 2005, that you got this huge increase in demand for subprime loans, because remember that without securitization, there would not have been a single subprime mortgage held outside of the United States, that it's the opening up of this market which created a huge demand from abroad for subprime mortgages as embodied in mortgage-backed securities. ..."
    "... But having admitted the failure of his faith, Greenspan could not abandon it. Credit default swaps had to be "restrained," he admitted. Those who create mortgages should be mandated to retain a piece of them to insure responsible lending. Otherwise, the old faith still applied. No new regulations were needed, because the markets "for the indefinite future will be far more restrained than would any currently contemplated new regulatory regime." ..."
    "... The only Guantanamo that the United States has any business running is a concentration camp for the hundreds of wall street executives and their cronies in Bushland that conspired to defraud the American people from their hard earned dollar. ..."
    "... There are no free markets in America, any more than there is free lunch. ..."
    "... So it wasn't the military-industrial complex that did us in after all . . . ..."
    "... It's clear from comments on this contribution that few readers of Truthout believe Alan Greenspan's sorry testimony before Congress. What has faith in something to do with enforcing the policies of fiduciary responsibility already on the books? All these so-called "experts" on capitalism are now coming out to say "I'm sorry." Well, I won't be sorry for them until they are held monetarily and criminally responsible for their actions, inept or not. ..."
    "... If it looks like class warfare, as David Harvey, author of Neoliberalism, has stated, call it class warfare and act accordingly. ..."
    "... it doesn't take a genius to understand that when financial instruments are created based on crap (subprime mortgages), that eventually problems will occur with those instruments. In fact, Greenspan and his cronies knew that, which is why they resisted these instruments being regulated by the SEC or even the CFTC. ..."
    "... Sounds like the "maestro" hit a flat note in his orchestra of greed and deregulation. ..."
    "... Did anybody even bother to consult the Math PhDs who created these instruments to run possible scenarios -- just in case? why bother when you know you can scare congress, the president and the treasury and ultimately the people into bailing your ass out of worldwide collapse? ..."
    "... Shocked Disbelief is a ploy. When they were all riding high, they didn't give a crap. They were going to come out richer than hell anyway. ..."
    "... Where's Ayn Rand when you need her? Give me a break Mr Greenspan. Never let history and reality get in the way of the big unregulated celebration of greed like we have had since "Saint Ronald Wilson Reagan", and the other "Free Market" "government is the problem" ideologues ..."
    "... What about the 1994 Act of Congress that required the Fed to monitor and regulate derivatives? The Act Greenspan ignored? ..."
    "... "...I am shocked - shocked, there is gambling going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca ..."
    Oct 24, 2008 | truthout.org

    by: Robert Borosage, The Campaign for America's Future

    On October 23, former Federal Reserve Chairman Alan Greenspan testified before a House Oversight and Government Reform Committee hearing on the role of federal regulators in the current financial crisis.

    It marks the end of an era. Alan Greenspan, the maestro, defender of the market fundamentalist faith, champion of deregulation, celebrator of exotic banking inventions, admitted Thursday in a hearing before Rep. Henry Waxman's House Committee and Oversight and Government Reform that he got it wrong.

    "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," he said.

    As to the fantasy that banks could regulate themselves, that markets self-correct, that modern risk management enforced prudence: "The whole intellectual edifice, however, collapsed in the summer of last year."

    Greenspan spurned the Republican acolytes trying desperately to defend the faith and blame the crisis on the Community Reinvestment Act and the powerful lobby of poor people who forced powerless banks to do reckless things. Greenspan dismissed that goofiness in response to a question from one of its right-wing purveyors, Rep. Todd Platts, R-Pa., noting that subprime loans grew to a crisis only as the unregulated shadow financial system securitized mortgages, marketed them across the world, and pressured brokers to lower standards to generate a larger supply to meet the demand. Private greed, not public good, caused this catastrophe:

    "The evidence now suggests, but only in retrospect, that this market evolved in a manner which if there were no securitization, it would have been a much smaller problem and, indeed, very unlikely to have taken on the dimensions that it did. It wasn't until the securitization became a significant factor, which doesn't occur until 2005, that you got this huge increase in demand for subprime loans, because remember that without securitization, there would not have been a single subprime mortgage held outside of the United States, that it's the opening up of this market which created a huge demand from abroad for subprime mortgages as embodied in mortgage-backed securities.

    But having admitted the failure of his faith, Greenspan could not abandon it. Credit default swaps had to be "restrained," he admitted. Those who create mortgages should be mandated to retain a piece of them to insure responsible lending. Otherwise, the old faith still applied. No new regulations were needed, because the markets "for the indefinite future will be far more restrained than would any currently contemplated new regulatory regime."

    Now hung over from their bender, the banks could be depended upon to remain sober "for the indefinite future." Or until taxpayers' money relieves their headaches, and they are free to party once more.


    IN ACCORDANCE WITH TITLE 17 U.S.C. SECTION 107, THIS MATERIAL IS DISTRIBUTED WITHOUT PROFIT TO THOSE WHO HAVE EXPRESSED A PRIOR INTEREST IN RECEIVING THE INCLUDED INFORMATION FOR RESEARCH AND EDUCATIONAL PURPOSES. TRUTHOUT HAS NO AFFILIATION WHATSOEVER WITH THE ORIGINATOR OF THIS ARTICLE NOR IS TRUTHOUT ENDORSED OR SPONSORED BY THE ORIGINATOR.

    "VIEW SOURCE ARTICLE" LINKS ARE PROVIDED AS A CONVENIENCE TO OUR READERS AND ALLOW FOR VERIFICATION OF AUTHENTICITY. HOWEVER, AS ORIGINATING PAGES ARE OFTEN UPDATED BY THEIR ORIGINATING HOST SITES, THE VERSIONS POSTED ON TO MAY NOT MATCH THE VERSIONS OUR READERS VIEW WHEN CLICKING THE "VIEW SOURCE ARTICLE" LINKS.

    Comments

    This is a moderated forum. It may take a little while for comments to go live.

    The only Guantanamo that the

    Sun, 10/26/2008 - 23:37 - Captain America (not verified)

    The only Guantanamo that the United States has any business running is a concentration camp for the hundreds of wall street executives and their cronies in Bushland that conspired to defraud the American people from their hard earned dollar.

    What they did dwarfs the damage caused to this country by 911, (no disrespect for the many innocents who died). However, here, every single citizen is a victim of fraud and corruption on a scale that was heretofore inconceivable. Greenspan, Bush and now Paulson have done more than Bin Laden and his hordes could do in a 100 years.

    By the way, if you protest YOU wind up locked up for being un-American. What happened America ?

    There are no free markets in

    Sun, 10/26/2008 - 19:27 - pink elephant (not verified)

    There are no free markets in America, any more than there is free lunch. The game was always fixed and Greenspan was the ultimate shill for the fixers. The past thirty years have been an orgy of greed with common sense shoved aside for the sake of uncommon expediency. Americans became infatuated by arcane formulas and dense incomprehensible mathematics to the point that they forget simple arithmetic. America wake up it was only a dream, and a bad one at that.

    So it wasn't the

    Sun, 10/26/2008 - 19:07 - Anonymous (not verified)

    So it wasn't the military-industrial complex that did us in after all . . .

    It's clear from comments on

    Sun, 10/26/2008 - 15:40 - afrothethics (not verified)

    It's clear from comments on this contribution that few readers of Truthout believe Alan Greenspan's sorry testimony before Congress. What has faith in something to do with enforcing the policies of fiduciary responsibility already on the books? All these so-called "experts" on capitalism are now coming out to say "I'm sorry." Well, I won't be sorry for them until they are held monetarily and criminally responsible for their actions, inept or not. The truth is as plain as the nose on your face: Greenspan, the Federal Reserve, the investment banks, the Bush administration and several members of Congress unobtrusively acted to consciously and knowingly to rob the national treasury for the sake of capitalism's sacred cow: capital accumulation on behalf of the nation's political and economic elite. If it looks like class warfare, as David Harvey, author of Neoliberalism, has stated, call it class warfare and act accordingly.

    We have heard statements

    Sun, 10/26/2008 - 10:11 - DJK (not verified)

    We have heard statements like "the mathematical models used for knowing the behavior of derivatives based on subprime mortgages were too difficult to understand", etc. But it doesn't take a genius to understand that when financial instruments are created based on crap (subprime mortgages), that eventually problems will occur with those instruments. In fact, Greenspan and his cronies knew that, which is why they resisted these instruments being regulated by the SEC or even the CFTC. And this is why they turned a blind eye to many of the rating agencies giving many of these instruments AAA ratings. I am sure that a real investigation will reveal numerous instances of fraudulent activity in conjunction with this debacle. Those perpetrators must be identified and brought to justice. While this will not fix our current problem, it hopefully should serve as a deterrent to those who would in the future attempt to again engage in such activities.

    Well here you have it a

    Sun, 10/26/2008 - 08:13 - Robert Iserbyt (not verified)

    Well here you have it a confessional lie from the biggest fraud perpetrator in the history of American finance Why the markets ever listened to this criminal in the first place is evidence that our entire nation should be required to take a full year of real unfettered economics just in case they don't understand what is going on now. All the pundits on MSNBC and all the talking heads should be removed from the airwaves. The Bailout what will that do? the answer lies before you.

    Sounds like the "maestro"

    Sun, 10/26/2008 - 02:02 - Anonymous (not verified)

    Sounds like the "maestro" hit a flat note in his orchestra of greed and deregulation. Come on, do you really think we are all so stupid to buy into the story that you couldn't predict a melt down knowing that those writing the subprimes held no responsibility for their actions? That's like giving a "get out of jail card" to someone who just created a felony! Did anybody even bother to consult the Math PhDs who created these instruments to run possible scenarios -- just in case? why bother when you know you can scare congress, the president and the treasury and ultimately the people into bailing your ass out of worldwide collapse?

    I'm a former real estate

    Sun, 10/26/2008 - 00:24 - two7five7one (not verified)

    I'm a former real estate broker and my son is a mortgage broker. From about 2004 through the beginning of this "greatest financial crisis since '29", we frequently talked on the phone about the disaster which would ensue when the real estate value appreciation stopped, and people were no longer fueling the economy with money borrowed against their equity, and the sub-prime loan fiasco would end. We knew it would be disastrous, and both of us were astonished that neither the FED nor congress was willing to say or do anything about it. Anyone who has witnessed over the years the cycle of boom/bust/boom/bust in the real estate market knew that after eleven years of unprecedented "boom" -- '96 through '2007 -- the "bust" would be like an earthquake. Paulson and Greenspan and their ilk now denying that they suspected this is just is just their lying to protect the GOP which was benefitting from the booming economy. They should both end up in prison, with all of the GOP members of congress who have had their hands in the cash register.

    Dance clown, dance. First

    Sat, 10/25/2008 - 23:48 - mysterioso (not verified)

    Dance clown, dance. First you were against the FED until you became head of the FED. Then you were for trickle down economics and letting the "system" regulate itself until you saw the inevitable destruction it caused. Dance clown, dance. You should be the first one sent to prison under the "Un-American activities act". The arrogance of your testimony before the committee was appalling. You honestly couldn't believe you were wrong !!!

    Shocked disbelief, my foot.

    Sat, 10/25/2008 - 23:35 - slw (not verified)

    Shocked disbelief, my foot. Many of us predicted EXACTLY this outcome.

    This is like telling the Fox

    Sat, 10/25/2008 - 22:43 - topview (not verified)

    This is like telling the Fox to watch the Hens and then walking away and trusting him to do the right thing. Government has to return to regulation and see that there is no hanky, Banky going on anymore. Monopolies have to be busted up, like the Communication industry's, the Drug industries and any other Corporations that control to much of the way the Country operates. No more Outsourcing any Government duties.

    Shocked Disbelief is a ploy.

    Sat, 10/25/2008 - 22:00 - radline9 (not verified)

    Shocked Disbelief is a ploy. When they were all riding high, they didn't give a crap. They were going to come out richer than hell anyway.

    Where's Ayn Rand when you

    Sat, 10/25/2008 - 20:53 - anglohistorian (not verified)

    Where's Ayn Rand when you need her? Give me a break Mr Greenspan. Never let history and reality get in the way of the big unregulated celebration of greed like we have had since "Saint Ronald Wilson Reagan", and the other "Free Market" "government is the problem" ideologues. We can spend trillions on war and corporate bailouts, but we can't have a single payer health system? We can't rebuild our infrastructure? Say it again- give me a break!

    What about the 1994 Act of

    Sat, 10/25/2008 - 20:41 - Jtmonrow (not verified)

    What about the 1994 Act of Congress that required the Fed to monitor and regulate derivatives? The Act Greenspan ignored?

    "...I am shocked - shocked,

    Sat, 10/25/2008 - 20:29 - Anonymous (not verified)

    "...I am shocked - shocked, there is gambling going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca

    This would be the same

    Sat, 10/25/2008 - 19:50 - dtroutma (not verified)

    This would be the same "shocked disbelief" expressed by Willie Sutton's mother?

    shouldn't Greenspan give his

    Sat, 10/25/2008 - 18:06 - Anonymous (not verified)

    shouldn't Greenspan give his salary and bonus back to taxpayers?

    [Jun 18, 2016] Whats Really Happening to the Humanities Under Neoliberalism? by Dan Falcone

    What's happening is the same what happed with them in the USSR. Only Party (in case of neoliberalism replace the Party with "financial oligarchy") sanctioned content can be taught and the stress is on neoclassical economics as this is one of the foundation of neoliberalism (along with liberalism, Ann Rand, and similar psudo theories).
    Notable quotes:
    "... Chipping away at the humanities in schools jeopardizes the issues of social justice in education. Arguably, it is safe to say that the humanities and any liberal arts program are undervalued specifically because they involve knowledges, practices and traditions that usually cannot adhere to immediate short-term use ..."
    www.truth-out.org

    The number of college students majoring in English, according to some contested reports, has plummeted. In general, the humanities are taking a back seat to more "pragmatic" majors in college. Students, apparently, are thinking more about jobs than about general learning. Given this trend, should schools be scaling back on the humanities?

    ... ... ...

    Some might say that since top universities like MIT have decided to focus on management, business analytics, finance and mathematical economics (or trading), secondary schools should follow suit. It would be a mistake, however, for secondary schools to cave to this argument and scale back on the humanities.

    ... ... ...

    The Chronicle of Higher Education has noted the reason for this prevailing wisdom about the myth regarding the humanities plummet: It's largely due to mainstream publications. For instance, in 2013, The New York Times featured an essay titled "The Decline and Fall of the English Major." In 2009, The American Scholar featured an essay, titled "The Decline of the English Department." Authors cited spirals in the humanities. Even The Chronicle's Mark Bauerlein wrote, "English has gone from a major unit in the university to a minor one."

    The piece goes on to explain how, back in 2010, MSNBC anchor Tamron Hall said, "Students wanting to take up majors like art history and literature are now making the jump to more-specialized fields like business and economics, and it's getting worse." This comment was juxtaposed with a chart that indicated a spiral. Prominent New York Times journalist David Brooks also jumped on the bandwagon when he remarked, "The humanities [have] turned from an inward to an outward focus." The "sky is falling" myth then led to serious underfunding, becoming a self-fulfilling prophecy.

    Bérubé argues that mainstream accounts of the decline of the humanities in undergraduate education are "factually, stubbornly, determinedly wrong." He says there was a plummet, but it was between 1970 and 1980.

    In reality, English isn't dying; it's just that at one time, it was unprecedentedly popular. English majors rose from 17,000 to 64,000 over a span of 30 years, from 1940 to 1970, and then declined to 34,000 by the 1990s. This does not mark a death to the humanities.

    Are fields like art history and literature really "elite, niche-market affairs that will render students unemployable," as Bérubé argues? Are students abandoning the humanities because they are "callow, market-driven careerists?" No, this is not true. Bérubé states that "undergraduate enrollment in the humanities have held steady since 1980 (in relation to all degree holders, and in relation to the larger age cohort), and undergraduate enrollments in the arts and humanities combined are almost precisely where they were in 1970."

    ... ... ...

    Chipping away at the humanities in schools jeopardizes the issues of social justice in education. Arguably, it is safe to say that the humanities and any liberal arts program are undervalued specifically because they involve knowledges, practices and traditions that usually cannot adhere to immediate short-term use by preservation seeking administrations and teachers.

    ... .,. ...

    Dan Falcone has a master's degree in modern US history from LaSalle University in Philadelphia and currently teaches secondary education. He has interviewed Noam Chomsky, Edward Herman, Richard Falk, William Blum, Medea Benjamin and Lawrence Davidson. He resides in Washington, DC.

    [Jun 03, 2016] A 'tsunami' is about to overwhelm the debt market

    Notable quotes:
    "... Increased regulation, the holding of high-yield debt by "less stable" investors such as mutual funds, which are likely to unload the bonds quickly in the event of a drop, and the increased size of the low-quality leveraged loan market could all make the tidal wave even worse than in the past. ..."
    finance.yahoo.com

    Boys crouch behind a wall as they play in the massive surf at Sydney's Narrabeen Beach in February 2004.

    A tidal wave may be coming to the bond market, and it's not going to be pretty.

    At least that's the view of Matthew Mish, credit strategist at UBS. To Mish, the elevated rates of default in the commodity sector and high risk bonds are a harbinger of things to come for the broader debt market.

    "First, our quantitative framework is signaling a broader deterioration in the default outlook, with our model projecting default rates of 4.3% over the next 12 months (versus 2.6% one year prior)," Mish wrote in a note to clients on Thursday.

    Mish's research asks whether the recent uptick in default rates is simply a "rogue wave" that will dissipate or the "start of a tsunami" that will bring the rate of defaults much higher over the long term.

    Mish is in the latter camp. He cites three short-term reasons for a coming increase in the number of firms unable to pay back their debt. They are:

    1. Decreasing profits: Mish notes that corporate profits fell 7.6% in the first quarter against the same period a year ago. In order to pay back loans, companies need to continue to make more, and with less cash coming in, there will be less to allocate to debt.
    2. Lending standards are getting tighter: Firms also have the ability to pay down debt that is coming to maturity by issuing new debt, effectively kicking the can down the road. Lending conditions for new debt, however, are getting tighter as banks focus on higher quality borrowers. In turn, this makes it tougher for companies to pay for debt with more debt.
    3. Debt is getting more expensive: Loan spreads, or the difference between what banks have to pay to borrow money and what they charge companies in interest on loans they then give out, are starting to widen. In other words, new debt is getting more expensive.

    This trouble is not just limited to the commodity space. Mish estimates that the default rate for nonenergy firms will creep up to 3.5% in 2016, up from 1.5% currently.

    "Higher frequency data suggest default stress is rising specifically in the media/entertainment, consumer/service, retail and aerospace/industrial sectors (as well as the non-bank financials)," Mish wrote.

    As these defaults start to pile up, Mish said, long-term shifts in the credit markets could snowball and make the situation even worse.

    Increased regulation, the holding of high-yield debt by "less stable" investors such as mutual funds, which are likely to unload the bonds quickly in the event of a drop, and the increased size of the low-quality leveraged loan market could all make the tidal wave even worse than in the past.

    More


    Michael

    Soon the US government will start bailing out states like California and Illinois. The precedent has already been set with the bailing out of GM and others. Their excuse will be the States are too big to fail. Taxpayers and the heirs across the nation will be footing the bill for corruption, mismanagement and just plain stupidity of these states and others that will soon follow. Of course, eventually the financial strain will overpower the producers who fund the non producers and all hell will break loose. One just has to witness current events like Venezuela's economic collapse to see our future. Maybe not today or tomorrow, but someday.

    Kim

    No surprise, the economy has been creeping on borrowed money without interest. The Fed kept pumping money to keep the economy afloat while Obama borrowed $10 trillion to put into the economy and regulated into the economic collapse. That borrowed money will have to be paid. When the interest goes up, we will have to pay the interest and less money for anything else. Obama has been destroying our economy without consequences just like Bill Clinton did in 1996 with the expansion of the subprime lending rate, except it is gravely worse now with our massive debt.

    [Jun 03, 2016] US gains just 38K jobs, fewest in 5 years; rate at 4.7 pct.

    Notable quotes:
    "... Nearly a half-million jobless Americans stopped looking for work and so were no longer officially counted as unemployed. ..."
    finance.yahoo.com

    At the same time, the unemployment rate tumbled to 4.7 percent from 5 percent, the Labor Department said Friday, its lowest point since November 2007. The rate fell for a problematic reason: Nearly a half-million jobless Americans stopped looking for work and so were no longer officially counted as unemployed.

    Susan

    The unemployment rate is just a bunch of #$%$. The only jobs avail are low paying PT with no benefits. I spent so much time and money on my education and now finding it's worthless. I use to make $50k a year with benefits and another $20k freelancing from home. I've been unemployed now for a while and even went back and got my masters degree. Still no work. So now I'm suppose to work for min wage? This is my reality. This is the reality for many people. Do they really expect us to pretend everything is sunshine and smiles. Our economy is collapsing people. Don't be fooled.

    [Jun 03, 2016] Jamie Dimon just sounded the alarm on auto loans

    Notable quotes:
    "... At more than $30,000, the average auto loan for a new car is also at an all-time high, according to Experian. Also, at more than $500, the average monthly auto loan payment is at a record. ..."
    www.cnbc.com
    In May, the total amount of auto loans cracked the $1 trillion mark for the first time, marking a 10 percent increase. It comes as auto sales have hovered around record highs.

    At more than $30,000, the average auto loan for a new car is also at an all-time high, according to Experian. Also, at more than $500, the average monthly auto loan payment is at a record.

    The Experian research also noted that more subprime borrowers are borrowing for new auto purchases.

    "The continued rise in new vehicle costs have kept many consumers exploring options to keep their monthly payments affordable," said Melinda Zabritski, Experian's senior director of automotive finance, in a statement that accompanied Thursday's research. "As long as vehicle prices continue to rise, we can expect leasing rates to grow along with them. However, consumers need to understand the nuances of their lease agreements and make sure that leasing fits their lifestyle."

    Read More Auto loans roar to trillion-dollar level

    [Jun 03, 2016] Bill Gross Get ready for an entirely different market

    www.cnbc.com

    Bill Gross has some bad news for investors.

    In his June investment outlook released Thursday, the widely followed bond fund manager contended that bond and stock returns realized in the last 40 years are "a grey if not black swan event that cannot be repeated." Investors should not expect 7 percent returns on bonds or returns in the high single digits or double digits on stocks, Gross told CNBC on Thursday.

    "The markets are entirely different and it would pay to travel to Mars as opposed to stay on Earth, because the returns here are very, very low," the manager of the Janus Capital Unconstrained Bond Fund, said on CNBC's "Power Lunch".
    Gross said easy central bank policy could hold down bond returns. Central banks in Europe and Japan have adopted negative interest rates, while the U.S. Federal Reserve's target rate is at 0.25 to 0.50 percent.

    German and Japanese 10-year bonds currently have negative yields, while their 30-year bonds yield less than 1 percent. The U.S. 10-year Treasury note yield sat around 1.8 percent Thursday.

    Gross contended those rate trends can hurt not only savers but also the broader economy. He said Fed policymakers, who have signaled they could hike rates at least once this year, realize they need to normalize policy.

    "Ultimately, they have to move back up and I think a certain number of Fed governors realize that the normalization process is necessary in order to save business models and to save capitalism basically because capitalism doesn't work at 0 percent and it doesn't work at negative interest rates," he said.

    Gross added that investors should "basically go the other way" by holding liquid cash. He said they should not buy corporate bonds and resist buying high-yield bonds or riskier stocks.

    See also

    Here's why oil will move higher: Energy analyst

    'Sizable' stock market sell-off may lie ahead, warns oil bear

    Marc 'Dr. Doom' Faber: Why stocks are 'very vulnerable'

    Philips Lighting shares rise as CEO hails 'historic' market debut


    [Jun 02, 2016] Trump University playbooks offer glimpse of ruthless business practices

    Notable quotes:
    "... In the USA, those at the bottom collaborate based on the 'promise' that the American Dream offers them a shot at the top, if they hold the party line. ..."
    "... What they do not realize is that the "party" counts on the weight of their mass to hold that line for THEMSELVES ALONE. The people who back it all are thrown under the bus with great regularity. They never see it until the wheel roll over them and by that time they have sucked millions of others into the illusion that they are the "one" special one who will make it from the bottom and be welcomed as a peer into the 1%. ..."
    "... It is not so surprising. Hope is a hard thing to kill and an easy thing to exploit. ..."
    "... He is being sued for "deceptive business practices" which is to do with the content of his so-called University courses. You can be a snake oil salesman and pressure people into buying more expensive stuff, but you can't sell them lemons. There are consumer protection laws to prevent that, and that's what these lawsuits are doing. ..."
    "... 'Just following orders', which is basically what you are trying to justify, in a business context, has been discredited as a modus operandi and is not a legal defence (hence the lawsuit, with which I wish them the very best of luck). ..."
    "... Meanwhile, the more one learns about the judge and the more this judge is in conflict of interest (IMO). This judge is for open borders and illegal immigration, is a strong advocate for La Raza (yes, that anti-White and pro-illegal Mexican hate group), has links to the Clintons (Hillary) and appointed two prosecutors to the case who are extremely generous donators towards Hillary, including paying her significant $ for speeches. ..."
    "... Though, I think, not everybody who attends boarding school becomes a sociopath. But sociopathy runs in families. And sociopathic parents tend to put kids into boarding school or reformatory for that matter. Just to get rid off them. ..."
    "... In such a naked, dog-eat-dog society, there should also be no personal bankruptcy protection or ring-fencing for those who fail in business. All their assets siezed to pay off creditors. Not sure Trump would be so keen on that. ..."
    "... Shamelessness is not a crime in the USA, but crime (fraud) is still a crime. ..."
    "... Nothing will come out of this, that will effect the election. The practices documented in the papers released is a high pressure sales tactic which are used by many. The focus should be on what Trump stands for and bring the fight to him. Hillary Clinton is the wrong person in the wrong year to be able to take on Trump. She is flawed beyond repair, and is fighting not to lose, so careful with her words that they don't resonate. ..."
    "... He's being sued, so it's a civil case. Documents can be made public if it's in the public interest to know about them. And when it looks very much like a con man is on his way to the Whitehouse, I'd call that a big yes for public interest. ..."
    "... Killary attacks the MANY women who accuse her husband of rape, lies to the grand jury over White Water, to congress and the people about Benghazi, runs guns to ISIS, takes money from Saudi Arabia the worst women's rights violator, lies about being shot at landing in Bosnia, approves uranium mining deal to Russian concerns while SOS and receives millions to her foundation at the same time, starts an unregistered hedge find in Columbia of all places, takes millions from banks and you fault Trump for greed and making his own way without influence peddling while in public office. ..."
    "... A snake oil salesman, a 'boiler room' operator, a phishing scammer, that's all Trump is. Honestly, is there any lie this sociopath could not tell? Is there any con game too crooked and despicable for even him? ..."
    "... Sounds like a third world country with no social contract other than the "opportunity" to exploit one another. ..."
    "... HRC was paid $385,000 for 3 speeches given to Goldman Sachs, nearly 10 times what the Trump 3 day course costs per person. Based on the speeches we hear from HRC, what could have been in these speeches that made them so valuable? Afterward there may have been the same buyer's remorse felt by Trump-course attendees. The comments that say that the U.S. is full of scams like this are on target, starting with the $1 lottery ticket. It is the dream that brought and brings people to the U.S., and if it turns out to be an expensive nightmare, the answer is "caveat emptor." ..."
    www.theguardian.com

    More than 400 pages of released Trump University files describe how staff should target financial weaknesses to sell high-priced real estate courses

    A federal judge has given the world an unprecedented glimpse into the ruthless business practices Donald Trump used to build his business empire.


    US district court judge Gonzalo Curiel on Tuesday made public more than 400 pages of Trump University "playbooks" describing how Trump staff should target prospective students' weaknesses to encourage them to sign up for a $34,995 Gold Elite three-day package.

    Trump University staff were instructed to get people to pile on credit card debt and to target their financial weaknesses in an attempt to sell them the high-priced real estate courses.

    The documents contained an undated "personal message" from Trump to new enrollees at the school: "Only doers get rich. I know that in these three packed days, you will learn everything to make a million dollars within the next 12 months."

    The courses are now subject to legal proceedings from unhappy clients.

    This shows someone who was absolutely shameless in his willingness to lie to people - Eric Schneiderman

    Judge Curiel released the documents, which are central to a class-action lawsuit against Trump University in California, despite sustaining repeated public attacks from Trump, who had fought to keep the details secret.

    Curiel ruled that the documents were in the public interest now that Trump is "the front-runner in the Republican nomination in the 2016 presidential race, and has placed the integrity of these court proceedings at issue".

    ... ... ...

    The playbook contains long sections telling Trump U team members how to identify buyers and push them to sign up for the most expensive package, and to put the cost on their credit cards.

    "If they can afford the gold elite don't allow them to think about doing anything besides the gold elite," the document states.

    If potential students hesitate, teachers are told to read this script.

    As one of your mentors for the last three days, it's time for me to push you out of your comfort zone. It's time for you to be 100% honest with yourself. You've had your entire adult life to accomplish your financial goals. I'm looking at your profile and you're not even close to where you need to be, much less where you want to be. It's time you fix your broken plan, bring in Mr. Trump's top instructors and certified millionaire mentors and allow us to put you and keep you on the right track. Your plan is BROKEN and WE WILL help you fix it. Remember you have to be 100% honest with yourself!

    Trump University staff are instructed in how to persuade students to put the cost of the course on their credit cards, even if they have just battled to pay off debts.

    Do you like living paycheck to paycheck? ... Do you enjoy seeing everyone else but yourself in their dream houses and driving their dreams cars with huge checking accounts? Those people saw an opportunity, and didn't make excuses, like what you're doing now.

    Trump staff are told to spend lunch breaks in sign-up seminars "planting seeds" in potential students minds about how their lives won't improve unless they join the programme. They are also told to ask students personal questions to discover weaknesses that could be exploited to help seal the deal.

    Collect personalized information that you can utilize during closing time. (For example: are they a single parent of three children that may need money for food? Or are they a middle-aged commuter that is tired of traveling for 2 hours to work each day?)

    New York attorney general Eric Schneiderman, who has also sued Trump University , renewed his attacks on Trump on Tuesday. "You are not allowed to protect the trade secrets of a three-card Monte game," Schneiderman said ahead of the document's release. "If you look at the facts of this case, this shows someone who was absolutely shameless in his willingness to lie to people, to say whatever it took to induce them into his phony seminars," Schneiderman said.

    Urban2 -> Karlyn Isaak Lotney 1 Jun 2016 09:17

    This is no more of a fraud then lotion for baldness or pills for losing weight. Or anything else being sold for that matter. And it's district attorney that is using terms like shamelessness and lying. Those are defamatory terms, not legal.
    Jonathan Shearer -> Susan Victoria 1 Jun 2016 09:14
    Could you please name the prosecutors, giving dates and amounts of these donations? Can I have verified quote from Curiel where he expresses his STRONG support for La Raza? Exactly what are these "links" to Hillary?

    No judge is in favor of illegal immigration, though he may be in favor of changes to law to change the status of illegal immigrant and/or to make legal immigration easier. Judges are not in favor of illegal activity.

    Let's make America honest and verifiable (again).

    Urban2 -> CaptainRogers 1 Jun 2016 09:13
    If it were a civil case, they wouldn't have been in possession of Trump's internal documents. Besides nothing would stop the plaintiffs from disclosing documents themselves. Public interest would therefor not even be an issue. Now of course I'm not aware of all the intricacies, but it does look sinister. At least to me.
    Sanibel -> Paul Freeman 1 Jun 2016 09:10
    "And I think that they want a president who is not afraid of making tough, ruthless decisions (in America's interests)." The US already does that with poor defenseless countries. Problem is if Trump tries that with powerful countries( with nukes like China) it may not end so well...
    SakkiSelznick Susan Victoria 1 Jun 2016 09:10
    "Collect personalized information that you can utilize during closing time. (For example: are they a single parent of three children that may need money for food?" The judge didn't write that. Mr. Trump's university did.
    Debra Smith -> J Nagarya 1 Jun 2016 09:10
    In the USA, those at the bottom collaborate based on the 'promise' that the American Dream offers them a shot at the top, if they hold the party line.

    What they do not realize is that the "party" counts on the weight of their mass to hold that line for THEMSELVES ALONE. The people who back it all are thrown under the bus with great regularity. They never see it until the wheel roll over them and by that time they have sucked millions of others into the illusion that they are the "one" special one who will make it from the bottom and be welcomed as a peer into the 1%.

    It is not so surprising. Hope is a hard thing to kill and an easy thing to exploit.

    SakkiSelznick -> RogerColin 1 Jun 2016 09:07
    A sales playbook that teaches seeking out "a single parent with three kids who struggles to buy food" and targeting them for credit card debt" is not only cruel but illegal. And it's far from buying low and selling high.
    tonichicago -> Wordblind 1 Jun 2016 09:07
    He appeals to those who hate "big government". Ironically, they don't seem to realise that his threats to curtail the "nasty and dishonest" press simply mean that we will end up with unfettered government. There will be no accounting to anyone.
    tonichicago -> Aaron Rosier 1 Jun 2016 09:04
    He is being sued for "deceptive business practices" which is to do with the content of his so-called University courses. You can be a snake oil salesman and pressure people into buying more expensive stuff, but you can't sell them lemons. There are consumer protection laws to prevent that, and that's what these lawsuits are doing. He sold them all a bill of goods.
    Debra Smith -> downhillracer117 1 Jun 2016 09:01
    You have hit at the crux of the matter.

    This is TEAM BASED. Americans are indoctrinated to TEAM from very early in life. Every sport event, the high school team, the prom and everything in college life is TEAM BASED. You are "in" or you are "out" (meaning human or not human) by the colour of your jersey. Truth, justice, facts, are all dismissed based on what team you belong to.

    ID446302 1 Jun 2016 09:00
    An American success story? Exceptionalism to its core. Hidden in the shadows of our IRS and our exceptional judicial, until you threaten the political establishment by running for president.
    J Nagarya -> bobkolker 1 Jun 2016 09:00
    He is being sued NOW, and he is attacking the judge because he KNOWS he is being exposed for the crook he is.

    Stop defending criminality: he is being sued for his tactics because they are NOT legal.

    Pay attention to the news reports on his methods, as exposed in the Trump "University" materials he DIDN'T WANT released, but which now the court has released as result of his baseless slanders against the judge presiding over the case because HE KNOWS they expose his criminality.

    keepsmiling -> Echocell 1 Jun 2016 09:00
    Hate to tell you this, but what was written in the playbook is called "sales techniques." It's used by every company on the planet that has a product to sell. Don't hate the player, hate the game (capitalism).
    'Just following orders', which is basically what you are trying to justify, in a business context, has been discredited as a modus operandi and is not a legal defence (hence the lawsuit, with which I wish them the very best of luck).

    You have to fight the players - 'capitalism' is too nebulous a concept to 'fight', so you end up not seeing the wood for the trees. Exposing them one at a time is fine - it's all part of the big picture and is educational. There's a lot of educating to be done with regard to Trump's followers.

    Susan Victoria 1 Jun 2016 08:56
    Here we go again... the public will be fed a series of quotes, almost all taken out of context, designed to bash Trump and spread even more hate.

    Meanwhile, the more one learns about the judge and the more this judge is in conflict of interest (IMO). This judge is for open borders and illegal immigration, is a strong advocate for La Raza (yes, that anti-White and pro-illegal Mexican hate group), has links to the Clintons (Hillary) and appointed two prosecutors to the case who are extremely generous donators towards Hillary, including paying her significant $ for speeches.

    Very interesting testimony coming out of Clinton's deposed staff re her email server, including she didn't have a password... the mysterious fire... and more. But who cares? Trump-bashing is the order of the day.

    youssou -> Ortho 1 Jun 2016 08:53
    Lol interesting theory ... ;-)

    I had to google it ... and yes: http://www.businessinsider.com/new-york-military-academy-closes-2015-9?IR=T

    Though, I think, not everybody who attends boarding school becomes a sociopath. But sociopathy runs in families. And sociopathic parents tend to put kids into boarding school or reformatory for that matter. Just to get rid off them.

    Guthrum -> MartinMckay 1 Jun 2016 08:49
    In such a naked, dog-eat-dog society, there should also be no personal bankruptcy protection or ring-fencing for those who fail in business. All their assets siezed to pay off creditors. Not sure Trump would be so keen on that.

    To do otherwise would be rewarding failure, using the state to prop up losers.

    AntonZ1 -> BiggyZ 1 Jun 2016 08:49
    Donald Trump University is not a religion. Drumpf is more cult leader than religious scholar.
    Karlyn Isaak Lotney Urban2 1 Jun 2016 08:47
    Shamelessness is not a crime in the USA, but crime (fraud) is still a crime.
    ClearItUp 1 Jun 2016 08:45
    Nothing will come out of this, that will effect the election. The practices documented in the papers released is a high pressure sales tactic which are used by many. The focus should be on what Trump stands for and bring the fight to him. Hillary Clinton is the wrong person in the wrong year to be able to take on Trump. She is flawed beyond repair, and is fighting not to lose, so careful with her words that they don't resonate.
    CaptainRogers -> Urban2 1 Jun 2016 08:44
    He's being sued, so it's a civil case. Documents can be made public if it's in the public interest to know about them. And when it looks very much like a con man is on his way to the Whitehouse, I'd call that a big yes for public interest.
    Tom Voloshen 1 Jun 2016 08:42
    Killary attacks the MANY women who accuse her husband of rape, lies to the grand jury over White Water, to congress and the people about Benghazi, runs guns to ISIS, takes money from Saudi Arabia the worst women's rights violator, lies about being shot at landing in Bosnia, approves uranium mining deal to Russian concerns while SOS and receives millions to her foundation at the same time, starts an unregistered hedge find in Columbia of all places, takes millions from banks and you fault Trump for greed and making his own way without influence peddling while in public office.
    OpineOpiner 1 Jun 2016 08:40
    A snake oil salesman, a 'boiler room' operator, a phishing scammer, that's all Trump is. Honestly, is there any lie this sociopath could not tell? Is there any con game too crooked and despicable for even him?
    PostTrotskyite -> MartinMckay 1 Jun 2016 08:36
    Sounds like a third world country with no social contract other than the "opportunity" to exploit one another.

    Btw, supplanting content with the cheer leading, rhetoric, hate, and cheap one liners is the creed of the Trumpeteers.

    AntonZ1 -> Aaron Rosier 1 Jun 2016 08:34
    A 'predatory capitalist' is a thief, no matter how "biased" or "naive" you are.
    Aaron Rosier -> ElfenLied2 1 Jun 2016 08:28
    Clinton is already tirelessly working to drive voters away with her beams of blind arrogance, pretentiousness, divisiveness, unwillingness to accept/acknowledge consequence of her glaring failures of judgement, the naked pandering, the belligerent "campaign theme", and of course all of the old hits (Slick Billy and the Slimers, NAFTA, welfare reform, KXL, TPP, Fracking, Wall Street Transcripts, etc).

    Donald Trump will feast on Clinton's garbage, while slowly moderating his platform positions, and steering his rhetoric slowly back to professional (from simpleton).

    karmarama -> elemenohpee 1 Jun 2016 08:21
    You seem to misunderstand me. Like several other posters on this thread, I am suggesting that Trump's practices are part of the wider world of business, and not so far from normal (not, in my view the same as 'acceptable') practices. The use of the name 'University' was certainly fraud, but why was it not caught right away by whoever is in charge of that in the US? His sales pitch, while pretty sleazy, is not far away from normal practice in brokerage, real-estate, holiday sales and many other areas of business, including the bottom of the education industry - indeed, doesn't every university 'oversell' itself to students, hence the need for independent surveys, and aren't there a host of 'degree for sale' schools in the US?

    As a socialist I consider it all to be 'unacceptable', and I hope you don't take me for a Trump supporter, which I suspect you do. He is even more unacceptable than the Bush clan was! However those who are using this to smear Trump are walking a tightrope between 'normal' and 'fraud' when I think that the distinction is not at all clear.

    ID673139 -> Carl123 1 Jun 2016 08:18
    Clinton has a pretty shady past as well, like covering up potential rape allegations for Bill.

    I'm not saying it is a defence at all, but as soon as Trump becomes a presidential candidate suddenly its front page news. He not done anything illegal, and if your so upset over these business practices why not look at the industry as a whole and people who do skin people with these practices. I said it before with Clinton or Trump either of them is a bad choice for president.

    bbqtv -> ConnecticutNutmeg 1 Jun 2016 08:18
    Student loans are encouraged even for courses & "degrees" that have no future earning potential. Colleges & universities increase non teaching & non research "staff" using these funds because they have money to spend for which there is NO accounting. [Why do you need to hire two assistants? So I don't have to teach!"
    ConnecticutNutmeg 1 Jun 2016 08:10
    Trump U. apparently targeted adults-not teenagers.

    If only all the millions of students who were coerced by high school guidance counselors and campus administrators to sign contracts for government student loans, and are now on the hook for hundreds of thousands of dollars of debt without any good job prospects in this Obama economy, could sue the government for failing them as these students are suing Trump. Many of these students had no business going on to college and many drop out without getting the degree-but they still owe the money.

    By having the students sign these loan agreements (not their parents) , government considers college students adults . But when it comes time to repay these loans, all of a sudden all the Democrats whine about these poor kids and their debt. Make up your mind. Are they old enough to take on the responsibility of signing a contract or not? If not, perhaps they should not be given the ballot either.

    Muz Murray -> c0n0r 1 Jun 2016 08:03
    Just about everything, if past presidents and their cronies are anything to go by. They are in it for the business of making money and feathering their own nests, while blithely blabbering about doing it 'for America.'
    Martin Cohen 1 Jun 2016 07:55
    I just don't understand how the US has wound up with a Clinton or Trump choice. Can the electorate be so politically disengaged as to allow one of these two into the most powerful job in the Western world? If Trump is simply the anti-establishment protest vote, that is all very well but someone as divisive and offensive as him can never unite a country. There are already protests on the streets that thankfully haven't turned too violent yet but it won't take much for heavily armed riot police to trigger something unthinkable. Being President always seemed to be a unifying job that commanded loyalty and respect even from staunch opponents. I always admired that about the Presidency. I don't see much evidence of it these days. Has respect for politics and politicians reached at an all time low in The States too? Trump isn't the answer, nor is a shady Clinton. We need politics and our politicians to once again embrace the concept of public service, morality and the precise rule of law. It would have been tremendous if more principled candidates had emerged victorious and given a much needed shot of public confidence in such a maligned vocation. I fear for the future. We may have stopped the cycle of European wars but globally it's more dangerous than ever. A competent steady hand on the tiller is what's needed now, especially in America.
    Paul Freeman 1 Jun 2016 07:47
    Unfortunately, american's tend to believe that businesses should be ruthless - except, of course, if it is them who has been the victim of a ruthless scam. And I think that they want a president who is not afraid of making tough, ruthless decisions (in America's interests). So it would not surprise me if these revelation actually boost Trump's popularity.
    Tommo68 -> HardboiledChicken 1 Jun 2016 07:39
    anyone who can stump up 35 grand for a three day course doesn't need the course in the first place...


    HiramsMaxim -> garth25 1 Jun 2016 07:11

    I'm not going to analyse all 50 States. US elections come down to a very few swing States. Those three are the most important.

    The "Latino" vote in Florida is primarily not Mexican. Assuming legal immigrants will automatically support illegals from a different country is probably not wise. The real power in Florida is the retirees, although as Florida's population continues to grow, that is diminishing.

    I very much doubt bill Clinton can capture white rural voters from Trump.

    Clinton has nowhere near the support that Obama had among black voters. And, it doesn't do any good to win California with a bigger margin, the electoral votes remain the same.

    I have no idea what the outcome will be, but I can say that Mrs. Clinton's huge lead has evaporated in about a month.


    Tom Voloshen -> Maharaja Brovinda Singh 1 Jun 2016 07:09

    We came we saw he died...the human Killary.....


    Tom Voloshen 1 Jun 2016 07:09

    The US keeps the the piece around the world using 720 military bases in foreign countries under the direction of people like Killary and the result is 15 years of war, death, destruction, millions dead, countries dissolved, missile batteries ringing Russia, our economy debt/GDP equal to Greece with NO END INSIGHT.....and you speak about Trump's lack of success? Lets talk of Killary's, Obama's, Bush's, Billy's....vote for anyone but Killary.


    RussZimm 1 Jun 2016 07:07

    HRC was paid $385,000 for 3 speeches given to Goldman Sachs, nearly 10 times what the Trump 3 day course costs per person. Based on the speeches we hear from HRC, what could have been in these speeches that made them so valuable? Afterward there may have been the same buyer's remorse felt by Trump-course attendees. The comments that say that the U.S. is full of scams like this are on target, starting with the $1 lottery ticket. It is the dream that brought and brings people to the U.S., and if it turns out to be an expensive nightmare, the answer is "caveat emptor."


    Karen Poyser -> HardboiledChicken 1 Jun 2016 07:06

    What a horrible way to see the world! These are vulnerable people being prayed upon, desperation can make people do stupid things. Considering all the ''american dream'' capitalist propaganda thrust on people from the minute they are old enough to comprehend, its surprising more don't fall for this sort of thing.


    tempestteacup 1 Jun 2016 07:27

    Am I alone in finding the steady drip of tidbits regarding Trump's business practices interminable? It is not news and it is not even particularly illuminating. This is all known grown that merely lends him greater exposure and entrenches his supporters in their view that he is the victim of an establishment conspiracy to smear, discredit and misunderstand.

    Meanwhile, we have next to nothing on the devastating IG report on Clinton's e-mail server. We have almost no analysis on how the Republican Party is quietly, begrudgingly, rallying around Trump at exactly the moment that the Democrats are doing the opposite and degenerating into a fractious mess because they meretriciously anointing a terrible candidate 18 months ago.

    Trump has received millions of votes. He has decimated a crowded Republican field, most of them smooth political operators with huge financial backing. This did not happen because there are millions of racists in America. It is because we are entering a potentially bloody phase in America's Culture Wars, with an increasingly mindless adherence to identity politics pitted against the historic grievances of a working class that now feels abandoned by the left (Bernie notwithstanding).

    Anything about that, instead of fanning the flames of Trump's Plot Against America-style campaign?

    *tumbleweed*


    edithamy -> ljonesjr 1 Jun 2016 06:48

    Salesman uses corrupt and illegal sales techniques to generate sales would be even more of a shock headline.


    Kris Penny 1 Jun 2016 06:41

    Not as ruthless as other ventures he's been involved in....
    http://www.alternet.org/labor/donald-trumps-hiding-something-those-unreleased-tax-returns


    Rita Hoeffner -> SEADADDY 1 Jun 2016 06:38

    The real problem here is that Obama got elected, who had such a checkered past yet the media have him a pass. The media is still giving Hillary a pass.

    At least with Trump, by the time he gets in office, I have a feeling he will be thoroughly vetted. What a nice change from having no clue about the man in the White House for the last 8 years!

    Was he born in Kenya as a book jacket reported? Was he born in Hawaii as a dubious birth certificate stated? Who was his mom? Who was is dad? Who were his mentors? Where did he go to school? What were his grades? Lots of questions that we were told several answers to, but he was NEVER really vetted by the press, only anointed.

    I'd rather know for sure what I'm getting! I think I know how ruthless Trump is...even before this article....that's why I'm voting for him.

    [Jun 02, 2016] The shameful roles played by Americas torchbearing universities – Harvard, Yale, Stanford etc – in utterly abandoning their historic responsibility as educators to maintaining the health of the nations public school system

    Notable quotes:
    "... we are now feeding the growth of the "underclass" by lifting ever higher and out of reach the upward mobility ladder, once the banner of opportunity now fallen behind the supposedly sclerotic welfare states of Europe. ..."
    "... The reason Trump and Sanders are doing well in the US while fascists are doing well in Europe is the same reason: neoliberalism has gutted, or is in the process of gutting, societies. Workers and other formerly "safe" white collar workers are seeing their job security, income security, retirement security all go up in smoke. Neoliberals are trying to snip and cut labor protections, healthcare, environmental regulations all for corporate profit. In Europe this is all in addition to a massive refugee crisis itself brought on by neoliberalism (neocon foreign policy is required for neoliberal social policy, they go hand-in-hand). The US and NATO destabilize countries with the intent of stealing their resources and protecting their markets, cause massive refugee flows which strain social structures in Europe (which falls right into the hands of the gutters and cutters of neoliberalism). Of course the people will lean fascist. ..."
    "... Selected Skeptical Comments ..."
    "... seanseamour asks "What does that have to do with education?" and answers "Everything if one considers the elitist trend…" This question & answer all but brings tears to my eyes. It is so utterly on point. My own experience of it, if I may say so, comes from inside the belly of the beast. As a child and a product of America's elite universities (I have degrees from Harvard and Yale, and my dad, Richard B. Sewall, was a beloved English prof at Yale for 42 years), I could spend all morning detailing the shameful roles played by America's torchbearing universities – Harvard, Yale, Stanford etc – in utterly abandoning their historic responsibility as educators to maintaining the health of the nation's public school system.* ..."
    "... And as I suspect seanseymour would agree, when a nation loses public education, it loses everything. ..."
    "... accountable ..."
    "... And I hear a few others saying that Americans are too dumbed down, too busy, too polarized or too just plain stupid to make intelligent, constructive use of a non-partisan, problem-solving Civic Media. But I would not underestimate the intelligence of Americans when they can give their considered input – by vote, by comment or by active participation – in public forums that are as exciting and well managed as an NFL game or a Word Series final. ..."
    www.nakedcapitalism.com
    Posted on June 2, 2016 by Yves Smith Yves here. The first comment came in on a post that had gone cold, and I thought it was so revealing that it needed to be seen widely. The second is a synchronistic complement.

    As much as I carry on about the isolation of the Acela-riding classes from the acute distress in much of the US, I only have a very distant feel for it. For instance, I grew up moving through many small towns where a paper mill was a major, and in some cases, the biggest local employer. Those mill jobs were well paid and the workers could buy houses, cars, and had pensions. One of my brothers works for a paper mill that should have been world competitive through his retirement, but it's been wrecked by a series of private equity owners, starting with Cerberus, and in now in bankruptcy. The town in which he lives, Escanaba, Michigan, has lost over 20% of its population since the mid 1980s. Similarly, my uncle lived below the poverty line in Maine, lobstering until his knees gave out. But he had a fully paid for house he had inherited, and access to VA hospitals and doctors, so it could have been a lot worse. But Maine is a poor state, so even visiting there as a tourist in the summers, it's not hard to see the signs of struggle even in those who are getting by.

    The first comment gives a window into the hidden desperation in America that is showing up in statistics like increasing opioid addiction and suicides, rather than in accounts of how and why so many people are suffering. I hope readers will add their own observations in comments.

    seanseamour, June 1, 2016 at 3:26 am

    We recently took three months to travel the southern US from coast to coast. As an expat for the past twenty years, beyond the eye opening experience it left us in a state of shock. From a homeless man convulsing in the last throes of hypothermia (been there) behind a fuel station in Houston (the couldn't care less attendant's only preoccupation getting our RV off his premises), to the general squalor of near-homelessness such as the emergence of "American favelas" a block away from gated communities or affluent ran areas, to transformation of RV parks into permanent residencies for the foreclosed who have but their trailer or RV left, to social study one can engage while queuing at the cash registers of a Walmart before beneficiaries of SNAP.

    Stopping to take the time to talk and attempt to understand their predicament and their beliefs as to the cause of their plight is a dizzying experience in and of itself. For a moment I felt transposed to the times of the Cold War, when the Iron Curtain dialectics fuzzed the perception of that other world to the west with a structured set of beliefs designed to blacken that horizon as well as establish a righteous belief in their own existential paradigm.

    What does that have to do with education? Everything if one considers the elitist trend that is slowly setting the framework of tomorrow's society. For years I have felt there is a silent "un-avowed conspiracy", why the seeming redundancy, because it is empirically driven as a by-product of capitalism's surge and like a self-redeeming discount on a store shelf crystalizes a group identity of think-alike know-little or nothing frustrated citizens easily corralled by a Fox or Trump piper. We have re-rcreated the conditions or rather the reality of "Poverty In America" barely half a century after its first diagnostic with one major difference : we are now feeding the growth of the "underclass" by lifting ever higher and out of reach the upward mobility ladder, once the banner of opportunity now fallen behind the supposedly sclerotic welfare states of Europe.

    Praedor, June 1, 2016 at 5:37 pm

    So Richard Cohen now fears American voters because of Trump. Well, on Diane Reem today (NPR) was a discussion on why fascist parties are growing in Europe. Both Cohen and the clowns on NPR missed the forest for the trees. The reason Trump and Sanders are doing well in the US while fascists are doing well in Europe is the same reason: neoliberalism has gutted, or is in the process of gutting, societies. Workers and other formerly "safe" white collar workers are seeing their job security, income security, retirement security all go up in smoke. Neoliberals are trying to snip and cut labor protections, healthcare, environmental regulations all for corporate profit. In Europe this is all in addition to a massive refugee crisis itself brought on by neoliberalism (neocon foreign policy is required for neoliberal social policy, they go hand-in-hand). The US and NATO destabilize countries with the intent of stealing their resources and protecting their markets, cause massive refugee flows which strain social structures in Europe (which falls right into the hands of the gutters and cutters of neoliberalism). Of course the people will lean fascist.

    In the US we don't have the refugees, but the neoliberalism is further along and more damaging. There's no mystery here or in Europe, just the natural effects of governments failing to represent real people in favor of useless eater rich.

    Make the people into commodities, endanger their washes and job security, impose austerity, and tale in floods of refugees. Of COURSE Europeans stay leaning fascist.

    Selected Skeptical Comments
    Steve Sewall , June 2, 2016 at 12:07 pm

    What a comment from seanseamour. And the "hoisting" of it to high visibility at the site is a testament to the worth of Naked Capitalism.

    seanseamour asks "What does that have to do with education?" and answers "Everything if one considers the elitist trend…" This question & answer all but brings tears to my eyes. It is so utterly on point. My own experience of it, if I may say so, comes from inside the belly of the beast. As a child and a product of America's elite universities (I have degrees from Harvard and Yale, and my dad, Richard B. Sewall, was a beloved English prof at Yale for 42 years), I could spend all morning detailing the shameful roles played by America's torchbearing universities – Harvard, Yale, Stanford etc – in utterly abandoning their historic responsibility as educators to maintaining the health of the nation's public school system.*

    And as I suspect seanseymour would agree, when a nation loses public education, it loses everything.

    But I don't want to spend all morning doing that because I'm convinced that it's not too late for America to rescue itself from maelstrom in which it finds itself today. (Poe's "Maelstrom" story, cherished by Marshall McLuhan, is supremely relevant today.)

    To turn America around, I don't look to education – that system is too far gone to save itself, let alone the rest of the country – but rather to the nation's media: to the all-powerful public communication system that certainly has the interactive technical capabilities to put citizens and governments in touch with each other on the government decisions that shape the futures of communities large and small.

    For this to happen, however, people like the us – readers of Naked Capitalism – need to stop moaning and groaning about the damage done by the neoliberals and start building an issue-centered, citizen-participatory, non-partisan, prime-time Civic Media strong enough to give all Americans an informed voice in the government decisions that affect their lives. This Civic media would exist to make citizens and governments responsive and accountable to each other in shaping futures of all three communities – local, state and national – of which every one of us is a member.

    Pie in the sky? Not when you think hard about it. A huge majority of Americans would welcome this Civic Media. Many yearn for it. This means that a market exists for it: a Market of the Whole of all members of any community, local, state and national. This audience is large enough to rival those generated by media coverage of pro sports teams, and believe it or not much of the growth of this Civic media could be productively modeled on the growth of media coverage of pro sports teams. This Civic Media would attract the interest of major advertisers, especially those who see value in non-partisan programming dedicated to getting America moving forward again. Dynamic, issue-centered, problem-solving public forums, some modeled on voter-driven reality TV contests like The Voice or Dancing with the Stars, could be underwritten by a "rainbow" spectrum of funders, commercial, public, personal and even government sources.

    So people take hope! Be positive! Love is all we need, etc. The need for for a saving alternative to the money-driven personality contests into which our politics has descended this election year is literally staring us all in the face from our TV, cellphone and computer screens. This is no time to sit back and complain, it's a time to start working to build a new way of connecting ourselves so we can reverse America's rapid decline.

    OK, so I hear some of you saying, corporate America will never let this Civic Media get off the ground. My short answer to this is that corporations do what makes money for them, and in today's despairing political climate there's money to be made in sponsoring something truly positive, patriotic and constructive. And I hear a few others saying that Americans are too dumbed down, too busy, too polarized or too just plain stupid to make intelligent, constructive use of a non-partisan, problem-solving Civic Media. But I would not underestimate the intelligence of Americans when they can give their considered input – by vote, by comment or by active participation – in public forums that are as exciting and well managed as an NFL game or a Word Series final.

    seanseymour, thanks for your insights and thanks, Yves, for putting them where we can see them.

    * For any Yalies out there, I documented these roles in this 30-page historical memorial to my dad.

    [May 29, 2016] Goldman raised their price target (causing a rally in the stock) hours before underwriting a capital raise that cause a decline in Tesla's stock

    peakoilbarrel.com
    Brian Rose, 05/18/2016 at 6:34 pm
    Toolpush,

    I found it amusing that Goldman raised their price target (causing a rally in the stock) hours before underwriting a capital raise that cause a decline in Tesla's stock.

    Although, to be fair there are SEC rules that are very explicit, with severe consequences, if Goldman Sachs' underwriting dept talked or leaked anything to their analysts.

    Goldman Sachs does plenty of shady things to make a profit – like selling Mortgage Backed Securities as AAA investments, and simultaneously, knowing they're crap, betting on them going bad (covered in the critically acclaimed documentary "Inside Job"), or helping Greece hide their budget deficit with accounting magic… so they can sell them debt… that they know will go bad.

    However, as odd as it is, none of those actions were illegal. THIS would actually be illegal, and Goldman Sachs is smarter than that. I'd guess it is a genuine coincidence.

    On a separate note, I find it important to note that Tesla FIRST scouted out battery suppliers to supplement their battery supply 1 DAY before announcing the amount of their capital raise.

    My hypothesis, Tesla's accelerated Model 3 ramp-up meant that they will need a large supply of additional batteries as the Gigafactory will not be able to accelerate it's schedule enough to match the accelerated vehicle production ramp.

    This also tells me that Tesla is confident enough in their accelerated Model 3 production schedule that they needed to arrange a multi-million dollar contract with battery suppliers to supplement their capacity until the Gigafactory can meet demand.

    likbez, 05/18/2016 at 11:00 pm
    Although, to be fair there are SEC rules that are very explicit, with severe consequences, if Goldman Sachs' underwriting dept talked or leaked anything to their analysts.

    This is all about corruption of regulators and impunity of TBTF financial institutions under neoliberalism - which is an immanent feature of neoliberalism aka "casino capitalism"…

    Goldman's role in the growth of casino capitalism in the USA is similar to that of other players, except for one thing: Goldman didn't believe its own hype. The now famous Rolling Stone magazine article in 2009 by Matt Taibbi unforgettably referred to Goldman Sachs, the world's most powerful investment bank, as a "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." ( http://www.forbes.com/sites/jakezamansky/2013/08/08/the-great-vampire-squid-keeps-on-sucking/ )

    https://www.bostonglobe.com/opinion/2016/05/12/the-age-impunity/LHBxamqFENCs3W6lvWnCIJ/story.html

    Impunity is epidemic in America. The rich and powerful get away with their heists in broad daylight. When a politician like Bernie Sanders calls out the corruption, the New York Times and Wall Street Journal double down with their mockery over such a foolish "dreamer." The Journal recently opposed the corruption sentence of former Virginia governor Bob McDonnell for taking large gifts and bestowing official favors - because everybody does it. And one of its columnists praised Panama for facilitating the ability of wealthy individuals to hide their income from "predatory governments" trying to collect taxes. No kidding.

    Our major institutions, the ones that should know better, are often gross enablers of impunity. Consider my alma mater, Harvard University, and its recent nuptial with hedge-fund manager John Paulson. Paulson was the co-conspirator with Goldman Sachs of one of the most notorious scams of the recent financial bubble.

    http://www.softpanorama.org/Skeptics/Financial_skeptic/Casino_capitalism/Systemic_instability_of_financial_sector/TBTF/Goldman_Sachs/index.shtml

    Professional financial hackers have a lot of common with the organized crime. And not only in respect to common addictions to cocaine and prostitutes. But there is a subtle difference: financial hackers make it daily (and very lucrative) business to figure out ways to abide by the letter of the law while violating its spirit. Although the claim that they do not break the law has very little credibility. They do break the law, but at the same time their political influence is big enough to keep them out of jail. In 2012 Lanny Breuer, then the head of the Justice Department's criminal division openly admitted that. In a speech at the New York City Bar Association he said that he felt that it was his duty to consider the health of the company, the industry, and the markets in deciding whether or not to file charges. Which in case of Goldman represents insurmountable obstacle to criminal prosecution.
    In any case GS converted itself into a special type of TBTF company, the company that specialized in hacking financial system. And in a large company internal politic can turn really destructive both to the firm and society at large. In fact, in large companies there are people with very high IQ at the top with personal traits that makes them more dangerous in comparison with bosses of Mexican gangs. It also makes internal political battles more vicious. BTW, a lot of psychopaths have above average IQ.

    In a way the USA never had a subprime crisis. What we had was systemic, neoliberalism-induced crisis that involves FED, government, congress, banking, ratings, insurance, investment and financial industries (the banks were at the center of this crime syndicate and they were the largest beneficiaries of the crimes committed), one manifestation of which was 2008 subprime crisis. Large banks became huge, dominant political force and based on their political weight, they hacked the financial system in the same way computer hackers hack computers systems to suit their short term needs and first of all for enrichment of the brass (appetite for "make money fast" schemes was greatly raised during dot-com crisis).
    As Simon Johnson wrote in May 2009 the USA had a The Quiet Coup with banks becoming the most favored and the most protected industry of the Congress. Financial system is essentially a system of rules. If a rich and powerful organization is directed toward hacking the rules: finding weaknesses and exploiting them it is undistinguishable from mafia in a very precise meaning of the term (organize crime syndicate with strong ethnic component), only more sophisticated. Again they are not gangsters in traditional meaning of this word, they are of a hackers, and as such they are much more difficult to prosecute. As a comment to blog post at EconomistView by "Eric" (Paul Krugman The Unwisdom of Elites) aptly stated:
    Villains….who exactly? The principle reason that there have been few prosecutions of high level bankers is that not so much that got done was illegal. Reckless, maybe. But even here is it really reckless behavior if you have a belief - which turns out to be true - that public finances will bear the downside risks on your behalf?
    In hindsight it feels like these things should have been illegal, but the available serious punishments, such as not bailing out AIG, not allowing various investment firms to become bank holding entites, not backstopping the GSEs (read their debt issues and you'll see that nowhere is a claim made for public backing), not taking first loss positions on Bear Stearn assets, etc., etc., were foregone by voluntary actions by public officials.
    Make peace with the truth that there will be no sweeping prosecutions, least of all by the federal government of the USA.

    [May 24, 2016] The presentations and reports by CLR and other shalies have to be looked at very skeptically as their breakevens are much, much higher than the numbers they tout

    Notable quotes:
    "... The shalies will say anything to keep the money coming in. I would only trust the data you can see at the well level. In the Bakken, CLR has touted 800,000 EUR's. In their recent 10-K, they actually booked about 170,000 in reserves per completed well in the Bakken in 2015. Their problem nowis there are actual well histories. They can't book high PDP given what their past wells have produced. ..."
    peakoilbarrel.com

    John Keller, 05/22/2016 at 3:17 pm

    I think the presentations and reports by CLR and other shalies have to be looked at very skeptically as their breakevens are much, much higher than the numbers they tout. I have looked at loads of presentations by LTO players the last 5 years. Even with high oil prices, almost all their claims were disproven by the poor to mediocre financial results posted.

    The shalies will say anything to keep the money coming in. I would only trust the data you can see at the well level. In the Bakken, CLR has touted 800,000 EUR's. In their recent 10-K, they actually booked about 170,000 in reserves per completed well in the Bakken in 2015. Their problem nowis there are actual well histories. They can't book high PDP given what their past wells have produced.

    [May 24, 2016] The CEO of Goldman Sachs accidentally explained why everyone hates Wall Street

    Notable quotes:
    "... want to follow the rules ..."
    "... The only thing you can trust is that Goldman Sach's values don't include giving a damned about average Americans even if in Blankfein's delusional mind he is doing "Gods work. It would go a way toward restoring trust in the system if these rip off artists would consent to paying more taxes on their ill deserved gains in order to help bring down some of the nations debt and relieve the misery their unethical behavior created. But that will never happen voluntarily. Basically they are immoral creeps killing the golden goose that is our country. ..."
    "... Run corruption out of DC and there will be much more trust of big business. Do not buy the garbage that politicians are critical of the Wall Street crowd. Has Hillary released her speeches yet? NO. Don't expect she ever will. (aside: I do not find this article informative, and I'm dismayed by the comments I've read here.) ..."
    "... "I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. …corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed." ..."
    "... The mass of Americans are too powerless to fight back against the reign of the money powers. As Lincoln predicted, our Republic is destroyed. What awaits us now is dictatorship or even worse ... theocracy. ..."
    finance.yahoo.com

    Brilliance is often accidental, and so it was at Goldman Sachs' annual meeting on Friday.

    In an attempt to pinpoint exactly what's wrong with the global economy - why demand is weak, why growth is anemic, why jitters on one side of the planet can turn into panic all over - CEO Lloyd Blankfein happened upon why Wall Street is so hated.

    It was, as I said, an accident.

    Blankfein said that what the world needs now is confidence. In investment banking, when people are confident t here are "more financings, more equity raises, because people invest more money in their own businesses when they're confident," he said, according to Business Insider's Portia Crowe , who was on the scene.

    This explanation sounds right. When people think they can make money they put their money to work.

    The problem is that "confidence" doesn't go far enough. More than confidence, for people to invest in the world they have to trust in it - in the systems and people that make it work.

    The fact that Blankfein missed that mark, though, explains exactly why people hate Wall Street.

    The financial crisis, the scandals and the fraud and the dark headlines, have all helped erode that trust. And that lack of trust is what is holding the world back right now.

    This is not a drill

    Think of a simple trust-building exercise, the fall game. When you're the fall guy, you can be confident that everyone is going to catch you. That, after all, is how the game is completed. You have to believe that everyone understands the rules.

    What's better than knowing that everyone understands the rules, though? Trusting that everyone around you is going to catch you - believing beyond a shadow of a doubt that they want to follow the rules .

    That's the difference between trust and conviction. Trust is something you can rely on, beyond certainty.

    Now one can operate in markets without trust, with only conviction.

    Conviction doesn't demand that you, or anyone else, play by the rules, though. It just demands that you understand what's going on (and what motivates everyone around you) at all times. It's a daunting task that neither the common person nor Wall Street's all-seeing CEOs were able to accomplish before the financial crisis. It is, however, part of the latter's full-time job - mitigating risk, seeing the unforeseen.

    Of course, some of that burden would be lifted if we operated on more trust and less conviction.

    Your correspondent is hardly the only person thinking this way. This week, Andrew G. Haldane, chief economist of the Bank of England, gave an incredibly compelling speech on what's wrong with global economy. Unlike Blankfein, though, he got it right. The speech was called The Great Divide, and he argued that the only way to close that divide is with trust.

    "Evidence has emerged, both micro and macro, to suggest trust may play a crucial role in value creation. At the micro level, there is now ample evidence the degree of trust or social capital within a company contributes positively to its value creation capacity," said Haldane.

    "At the macro level, there is now a strong body of evidence, looking across a large range of countries and over long periods of time, that high levels of trust and co-operation are associated with higher economic growth. Put differently, a lack of trust jeopardizes one of finance's key societal functions - higher growth."

    Watchers on the wall

    Back in 2014, when the market was roaring and everyone thought we were on the road to recovery, Dylan Grice, a portfolio manager at Aeris Capital, put forth the same idea. He saw in declining relations between the US and China, between Russia and the world, and between citizens and corporations what could only be perceived as our descent into the trough of a cycle of trust.

    And, as he pointed out, credit - one of the main forces for moving money from place to place - comes from the Latin word for trust.

    Over at HSBC, economist Stephen King wrote a note called Unhappy Families: The Case for International Policy Coordination in which he argued that the global economy could actually be saved quite easily if we trusted each other. If the countries that could save us - the US, China, and Germany - acted unselfishly and in coordination and simply did.

    But they won't, because there is no trust.

    "Yet it would be easy, too easy, to point the finger at finance alone," Haldane said in his speech. "For this Great Divide exists not just between the financial elites, but between elites generally and wider society. It is not just bankers who have suffered a loss of public trust. In varying degrees, this is also true of big business, government and, yes, politicians and central banks."

    Man, see this mirror

    This brings us back to Goldman Sachs, which happened to have had a very embarrassing little incident last week when one of its analysts recommended buying Tesla just before the bank announced that it would be helping the automaker with an equity offering.

    Business Insider's Myles Udland described why that looks shady:

    The stock upgrade is a detailed argument for why you, the investors, should buy the shares. As a result, investors buy.

    This report is delivered just as Goldman's sales force is about to hit the phones to push $1.4 billion of those very shares for a nice fat fee for Goldman and a dilutive hit to the shareholders.

    So then there are investors who, based on Archambault's note, bought the shares in the morning only to learn by that afternoon that Goldman would have a hand in diluting their newly acquired ownership stake.

    And the popular view says Goldman knew this was going to happen the whole time.

    If you're thinking the worst, this snafu was a breach of Wall Street's famous Chinese Wall between research and investment banking. What's more, because of this trust deficit, most people were thinking the worst because that's what they do when they think of Goldman Sachs.

    View gallery

    . Goldman Vampire Squid
    Lloyd on a vampire squid. Sorry bro, too easy.

    And because of that some people don't trust, or put their money in, the market.

    And because of that the market doesn't move.

    Haldane sees this fear as a loss of social capital arising from the crisis.

    "Social capital is inextricably linked to trust," he said in his speech. "And banking is quintessentially a trust business. At root, it involves swapping promises to pay. These promises rely on trust."

    It's the belief that these promises will be kept that the market is lacking, not necessarily that they can be kept. This is the difference between trust and confidence. And with every scandal and fraud, every dark headline telling of financial ruin that comes from the financial sector, some of that trust is lost.

    Haldane thinks that recreating the local bank, a bank with the kind of accountability that comes from knowing someone by name and looking them in the eye, is part of the solution. But banking isn't moving that way. Every day we hear about how it's becoming more automated.

    He acknowledges this, recognizing that banking must "seek new ways to nurture generalized, or anonymous, trust on the part of the public. Technology may be a great enabler here."

    But in the end it doesn't matter how we fix this. We just have to fix it.

    "Whatever business model is adopted, success will hinge on whether the public have faith in banks pursuing a purpose aligned with their needs, that they are fulfilling their fiduciary function. There is a mountain to climb on this front, not just for banking but for business generally," he said.

    "If not at an all-time low, public trust in big business is plumbing the depths. And the chorus of criticism of business is not confined to the general public. It is shared by politicians, academics, investors and indeed sometimes by companies themselves."

    Everyone is holding on to their money. Everyone is trying to look someone the eye and finding their counterparties' gaze shifting to wherever self-interest guides them. The counterparties are confident they'll find money there, sure, but the trust that makes the market go around is being lost in the process.

    It takes so much more to build it up than to break it down.

    NOW WATCH: THE STORY OF GOLDMAN SACHS: From foot peddlers to a powerhouse

    rey Q 25 minutes ago
    GS, Chase ,BofA,Wells Fargo.....,and some others big banks created the crisis past 2008-09.

    Any one of the executives pass a day in prison, they pay cents on the dollars and happy cumballa until the next scam. Gov it's corrupt with a "revolving door" infiltrating the key position, every official working in White House or with the executive branch did work for a big bank first or going to work after!!!

    They want trust, trust they themselves self smash, hundreds of case in courts from US citizens right now vs Government Why?

    Because Gov. trying to steal ,expropriating private property without compensation and ignoring constitution. The rest of the population are worring about what wearing Kardashian!!! Our next election will be a show top level globally!!! Our founding fathers will be revolting in their tombs for now

    PhilOSophocle

    What the world needs now --- is love, sweet love. It's the only thing that there's just too little of, or so Burt Bacharach, Hal David & Jackie DeShannon said. But seriously folks . . . people hate Wall Street because of the unbridled greed everywhere. The Great Recession wasn't caused by real estate speculation --- it was caused by easy money from Wall Street when they packaged together risky mortgages & investment bankers sold them to banks as great investments, and then betting on them to fail on the side using Credit Default Swaps. It's very similar to what Joe Kennedy and his cronies did in the 1920's using market manipulation by cornering stocks & then doing a bear raid on it, which is illegal now. What the Wall Streeters did in 2000-2007 is still not illegal.

    ey02kdv98

    I agree. Trust needs to be restored. This requires Wall Street firms to be honest, and to weed out the greedy, psychopathic and sociopathic brokers, bankers, CEOs and chiefs, and assorted other criminals. By running firms honestly to a fault, investors would at first shy away because they'd think it was some kind of trick. Over a short period, good experiences will increase business to the point that it would exceed current sales many times over, even beyond your wildest imagination. There is a lot of $$$$$$$$$$$$ to be made in honestly run business. It's never to late to start.

    Mark14

    The only thing you can trust is that Goldman Sach's values don't include giving a damned about average Americans even if in Blankfein's delusional mind he is doing "Gods work. It would go a way toward restoring trust in the system if these rip off artists would consent to paying more taxes on their ill deserved gains in order to help bring down some of the nations debt and relieve the misery their unethical behavior created. But that will never happen voluntarily. Basically they are immoral creeps killing the golden goose that is our country.

    DavBG

    The repeal of Glass Stegal (which Roosevelt put in place after the last great depression) which prevented banks from investing depositors money in the stock market, is the root cause here. Banks were only allowed to make loans on real property, like businesses and mortgages. This put the money in savings back to work. Money placed in the house of cards, ponzi scheme, stock market, just sits there. Like a giant sponge sucking up the spare capital so that a 1% few can reap the benefit. Then insiders can cause booms and busts which slowly siphon the life out of a country and enslave it. The mortgage rate is now the lowest it has ever been in the US. Now with everyone's money in the stock market the next crash will bankrupt us since all the banks will have is worthless paper stock certificates.

    Rp

    Trust is not created through slick marketing and strategic press releases about speeches made by banking insiders, to other insiders, intended to convince those outside their cozy system, that they get it now, no more underhanded dealings, really this time, partners 50-50. We promise, no fingers crossed, everything above board from now on, you can trust us, really this time. That bs is played out, to ask for trust, is to confirm the fact that they should not, can not, be trusted. Trust, if it ever returns, to any degree, in any form, will be created by the numbers. The real numbers. The ones written under our names. The ones that stick. Trust is not a marketing concept, it can't be put where it doesn't belong, it can't grow where it isn't planted, protected, and nurtured.

    Pat

    Wall Street manipulators could not succeed without the complicity of Government. STOP REGULATING WALL STREET AND START DEMANDING THAT POLITICIANS CANNOT BE CONTROLLED BY LOBBYISTS. There should be a law that politicians bought by lobbyists WILL be prosecuted. It is Government that is guilty of capitulation. GOVERNMENT WRITES THE LAWS AND THE TAX CODES.

    Run corruption out of DC and there will be much more trust of big business. Do not buy the garbage that politicians are critical of the Wall Street crowd. Has Hillary released her speeches yet? NO. Don't expect she ever will. (aside: I do not find this article informative, and I'm dismayed by the comments I've read here.)

    Freethinker

    It's so simple: the bank robbers have been given (or have taken) the combination to the bank vault and looted it. Then they were given raises and bonuses for this heist.

    Doubt me? That canny corporate lawyer Abraham Lincoln anticipate our modern condition as far back as 1864, when he wrote:

    "I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. …corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed."

    The mass of Americans are too powerless to fight back against the reign of the money powers. As Lincoln predicted, our Republic is destroyed. What awaits us now is dictatorship or even worse ... theocracy.


    [May 20, 2016] Three-quarters of people in households making less than 50K a year and two-thirds of those making between 50K and 100K would have difficulty coming up with 1K to cover an unexpected bill

    Notable quotes:
    "... Three-quarters of people in households making less than $50,000 a year and two-thirds of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill. ..."
    "... I have known personally some of those types; they tend to be all about winning at all costs, and then act all surprised when the game is ruined for everyone else. Generally they call it "sour grapes" instead of considering their own behavior. ..."
    "... Class Warfare – http://www.reuters.com/article/us-pope-slavery-idUSKCN0YA1GQ ..."
    www.nakedcapitalism.com
    allan , May 19, 2016 at 3:24 pm

    Two-thirds of US would struggle to cover $1,000 crisis [AP]

    Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000 emergency, according to an exclusive poll released Thursday, a signal that despite years after the Great Recession, Americans' finances remain precarious as ever.

    These difficulties span all incomes, according to the poll conducted by The Associated Press-NORC Center for Public Affairs Research. Three-quarters of people in households making less than $50,000 a year and two-thirds of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill.

    Even for the country's wealthiest 20 percent - households making more than $100,000 a year - 38 percent say they would have at least some difficulty coming up with $1,000. …

    Surely there must be a fintech solution.

    inode_buddha , May 19, 2016 at 10:45 pm

    I think the real issue isn't so much about being able to come up with $1000 as it is the reasons why: the lower and working classes never had that much to begin with, any increase was swiped by the upper class. And the upper class is in a Death-race 2000 to out do each other, keeping up with the Joneses via corporate methods.

    I have known personally some of those types; they tend to be all about winning at all costs, and then act all surprised when the game is ruined for everyone else. Generally they call it "sour grapes" instead of considering their own behavior.

    Gretchen Outre , May 19, 2016 at 6:27 pm

    Class Warfare – http://www.reuters.com/article/us-pope-slavery-idUSKCN0YA1GQ

    [May 20, 2016] Worlds of Inequality

    Notable quotes:
    "... Also claims as such do a slight of hand and imply that the world economy is a zero sum. So for the people living on $2/day to improve their lot the people in the wealthy countries need to give up wealth. IE, the current system is working for everyone but you which means you're a loser who needs to STFU. ..."
    "... It really is a "zero sum game" to some extent, given that the economy, local or global, is finite at any point in time. However, the "winners" (can you really call bandits winners?) are the global plutocracy, who have sucked up almost all economic gains for more than 30 years. ..."
    economistsview.typepad.com
    Travel day -- will post more later if and when I can.

    This is a review of Branko Milanovic's "Global Inequality: A New Approach for the Age of Globalization" by Miles Corak:

    Worlds of Inequality, The American Prospect : This book begins by posing a question: "Who has gained from globalization?" Many thoughtful Americans have the confidence to answer in a sentence. The gains have been captured by the top 1 percent. And the book ends with another question: "Will inequality disappear as globalization continues?" Many might be just as quick to answer: Of course not, the rich will get richer! But life is not so simple. Between these two questions Branko Milanovic offers us not just a plethora of facts about income inequality that will surely make his readers think twice. More importantly, he shows us the power of bringing the facts into focus by putting a new lens over these pressing issues-a global perspective. ...
    The most striking fact that motivates his book is a graph that the Twittersphere has already termed "the elephant curve." This is the one-sentence, or rather one-picture, answer to the first question: "The gains from globalization are not evenly distributed." ...
    Clearly evident are the rise of a global middle class, in some important measure reflecting the great march out of poverty in China, and the equally amazing rise in the incomes of the top 1 percent globally. The winners of globalization were many people who three decades ago were dirt-poor, and though a big percentage increase in a very low income still amounts to a rather low income by the standards of the average person in the rich countries, it is a major movement in the right direction. But the great winners of globalization were also a relatively few people in the already-rich countries, a global plutocracy who also experienced income gains of over 50 percent, but from a much higher starting point. Both of these changes are without precedent in the history of humanity.

    But the elephant curve also shows that even though some have gained, others have not seen their prospects improve at all-indeed, probably leading lives of more insecurity and more worry, not just about their prospects but also the prospects of their children. The big losers in these global income sweepstakes have been middle- and lower-income people of the rich countries...

    DrDick : , Wednesday, May 18, 2016 at 06:27 AM

    That book is on my shelf for my summer reading. I would add, as implied in the review, that most of the decline in global inequality (between countries) has come from the decrease in the number of people living on $2/day or less, though their incomes remain very low. In contrast, within country inequality has increased globally.
    Gibbon -> DrDick... , Wednesday, May 18, 2016 at 09:56 PM
    That average poorness is decreasing while people in the first world lose ground reminds me of the Simpson's paradox.

    https://en.wikipedia.org/wiki/Simpson's_paradox

    Also claims as such do a slight of hand and imply that the world economy is a zero sum. So for the people living on $2/day to improve their lot the people in the wealthy countries need to give up wealth. IE, the current system is working for everyone but you which means you're a loser who needs to STFU.

    DrDick -> Gibbon ... , -1
    It really is a "zero sum game" to some extent, given that the economy, local or global, is finite at any point in time. However, the "winners" (can you really call bandits winners?) are the global plutocracy, who have sucked up almost all economic gains for more than 30 years.

    [May 20, 2016] Gerald Friedman: How the Dogmatic Despair of Mainstream Economists Brought You Donald Trump

    Notable quotes:
    "... By Gerald Friedman, Professor of Economics, University of Massachusetts, Amherst. A version of this post first appeared at the Institute for New Economic Thinking website ..."
    "... Lesser Depression ..."
    "... The reason why elite economists and politicians were so angry at my analysis of Sanders' proposals was that it disrupted a consensus that nothing can be done by government to improve the performance of the economy. After all, if things are already as good as they can be, it is irresponsible pie-in-the-sky to even suggest to the general public that we can do better. Instead, the task of economists and other policy elites becomes to explain to the general public why they should accept stagnant incomes and rising inequality, and applaud the anemic growth of recent years as the best possible outcome. But the real danger of such thinking is that it leaves liberals like Hillary Clinton with few policy options to offer in response to the siren song of demagogues like Donald Trump. The self-proclaimed "responsible" elite economists see their role as to persuade the public that nothing can be done, in the hope of heading off the challenge of those who would capitalize on the electorate's appetite for change. They have to slap down critics. "Responsible" elite economists have to keep the party of "good arithmetic" from overpromising at all costs. It should not surprise us, though, that those whose living standards have suffered most from stagnant growth are more inclined to believe politicians promising change. ..."
    "... John Maynard Keynes showed how active government policy can raise employment and output; his followers, including Joan Robinson and Nicholas Kaldor, showed how full employment encourages further investments and leads businesses to find ways to raise labor productivity to match increasing product demand. New Deal American economists, such as Rexford Tugwell and John Maurice Clark, showed how active government policy can raise growth rates with investments in infrastructure, in public services, in human capital development, and in research and development. By listening to these ideas, economists associated with liberal American politics helped produce 25 years of relatively rapid and egalitarian growth after World War II. Abandoning these ideas, we have suffered 30 years of relatively slow growth and rising inequality, culminating in the current Lesser Depression. ..."
    "... I had dinner last night with two excellent people who happen to be doing well at this time. They could not comprehend why anyone would be voting for Trump, whom they saw as a dangerous lunatic. They have supported Sanders and voted for him in the NY primary, but are absolutely going to vote for Clinton in the Fall. What I view as the credible case against Clinton has not reached them with any strength or registered at all. I was asked (because I had said nothing while they talked–I hate this kind of confrontation) what problem people could have with Hillary? I said: Libya, Ukraine, and Nicaragua. They really didn't know what I was talking about and although I spoke up for why I thought this made her a neocon like the ones that surrounded Dubya, they simply didn't know any of the details and we left it at that. ..."
    "... HRC's recap of Reaganite Latin America policy is her most vile achievement. If anything demonstrates a continuity of imperialist strategy across administrations, that's it. ..."
    "... " I said: Libya, Ukraine, and Nicaragua. They really didn't know what I was talking about and although I spoke up for why I thought this made her a neocon like the ones that surrounded Dubya, they simply didn't know any of the details and we left it at that." ..."
    "... I run into this all the time. Utter and complete foreign policy illiteracy, particularly from otherwise politically correct millennials who know so little that Hillary gets a complete pass. ..."
    "... This is a common story and illustrates that our current detachment from the world around us and our fellow citizens is coming to an end. We are being forced out of our individual bubbles. Modern corporations have supplied the populations of the world with abundance of goods, but in order to accomplish this feat, have destroyed and are destroying the cultural glue, if you will, that holds society together. ..."
    "... TINA will be maintained by propaganda and physical force. We see that the propaganda is starting to weaken because the contradictions of the message can no longer be hidden. The destruction is too widespread and the inequality can no longer be hidden. You can hollow out a social system only so much before it collapses. The collapses we are witnessing is the promise of democracy. A collapse of the ideals of moderation and compromise. ..."
    "... We are entering a phase of civil war. It is still carried out in a polite manner and intellectually, the discussion is still couched in Orwellian doublespeak. However, criticisms of the ruling elite are becoming more straightforward and more people are waking up to the fact that the system is rigged against them. ..."
    "... This civil war is a battle over leadership. It is a battle to demand good government instead of no government. It is a battle to demand a government for and by the people. A battle for the common good. Evaluated not in some abstract terms like "trickle down" economics, but direct support and action. The hearts and minds of the population was won over long ago to wholeheartedly support capitalism and private ownership of the world's resources. This is proving to be a disaster. ..."
    "... Supporters of unfettered capitalism know only one way. Privatization of ALL the worlds resources and potential. They showed their hand in 2008 with the bailouts and implementation of austerity policies. In their minds, there is no turning back. To compromise means failure. For them, TINA is real and logical. This is the perspective of owners of capital. They gain strength and advantage from seeming to compromise, but in the end know they can always reverse course and regain private control. Subterfuge and force allows the resilience of capitalism as the reigning social order. ..."
    "... Jonathan Haidt is a psychologist, sometimes featured in the New York Times, who apparently believes the capability of people to be convinced by reasoned argument is not strong. From my limited reading of his work, he suggests that humans are instinctive beings who, when they have strong beliefs, their reasoning powers are used to justify these beliefs, not to cast doubt about these beliefs. ..."
    "... For example, I believe HRC is little more than a well-connected and well traveled mediocrity, with a record of few positives and many egregious negatives that justifies this assessment. I view her as potentially more damaging to the USA, as President, than Trump. ..."
    "... Successful big ideas and big projects require cheap abundant energy, resources and intelligent design. It'll be mighty funny when the Keynesians finally implement their plan to overhaul the national highway infrastructure, creating tons of high paying jobs and speeding up the economy–right when our access to cheap oil collapses. That's dumb design at its finest, yet this sort of thing is almost certainly the best that the lobotomized Keynesian planners will be able to think up and do. ..."
    "... A truly innovative program to get the economy moving in a positive direction would be to outlaw personal vehicles and rebuild the nation's railway network. ..."
    "... I share your antipathy toward freeways. I remember the big Freeway they built in Fresno when I was a child, destroying hundreds, if not thousands of modest homes (we had to move from a grand rental to a dilapidated house that cost more – were the landlords behind getting rid of a surplus of houses????) – to save maybe – maybe at the most 3 minutes in transit time over driving an existing surface street. Jobs were part of the rationale. ..."
    "... "Sorry, nothing more can be done for you." TINA. ..."
    "... "How can I help you today?" ..."
    May 19, 2016 | nakedcapitalism.com

    By Gerald Friedman, Professor of Economics, University of Massachusetts, Amherst. A version of this post first appeared at the Institute for New Economic Thinking website

    The ferocious reaction to my assessment that Senator Bernie Sanders' economic and health care proposals could create long-term economic growth shows how mainstream economists who view themselves as politically liberal in America have abandoned progressive politics to embrace a political economy of despair. Rationalizing personal disappointment and embracing market-centric economic theories according to which government can do little more than fuss around the edges, their conclusions - and the political leadership that embraces them - have little to offer millions of angry ordinary people for whom the economy simply isn't working.

    It has certainly been a rough seven years for the economists in the Obama Administration. While avoiding a Great Depression, the Administration has presided over what Paul Krugman and Brad DeLong call a " Lesser Depression ." One might almost forgive them for a certain defeatism after seven years of painfully slow economic recovery, and the dismay of seeing urgently needed programs blocked by the Republican congressional majority. After so many compromises and let-downs, perhaps it is easier to tell those who expect more that it just can't happen. There is comfort in the Thatcherite phrase, "There Is No Alternative" (TINA).

    Combined with orthodox neoclassical microeconomics, however, rationalization has produced a toxic political economy that abandons progressive ideals and surrenders political space to xenophobes and the populist rightwing (see: Donald Trump). The mainstream economists who have attacked my embrace of Keynesian economics have abandoned, in practice, the notion that government can effectively intervene in the economy to raise levels of employment, and to promote economic growth and equity. Instead, they have returned to pre-Keynesian Classical thinking, where the very suggestion that government action can raise growth rates or wages is taken to be obviously wrong. Criticisms of the orthodox model and its conservative policies are deemed worthy of scorn, to be dismissed tout court because they are obviously at variance not only with textbook economics, but with what we need to believe in order to accept failure .

    The mechanism of economic policy paralysis among the liberals who espouse market-centric economics works like this: If we accept the (flawed) premise that the total supply of goods and services equals total demand, then we can agree with the Congressional Budget Office (CBO) that potential output is best measured by observing actual output. And, with that - presto! - unemployment magically disappears, and we no longer suffer from slow growth. Conveniently align growth projections with the otherwise-disappointing performance during the Lesser Depression, and, as the CBO has done, estimates of potential growth now equal actual growth: Instead of the 3 percent average annual growth of the 1959-2007 period, not to mention the 4 percent growth 1947-73, we are now told to accept 2 percent growth not as a disappointment, but as recognition of an unfortunate necessity. Such reevaluations say to policy elites, "Hey, we are doing as well as can be expected." To the general public, the message is: "Sorry, nothing more can be done for you." TINA.

    The reason why elite economists and politicians were so angry at my analysis of Sanders' proposals was that it disrupted a consensus that nothing can be done by government to improve the performance of the economy. After all, if things are already as good as they can be, it is irresponsible pie-in-the-sky to even suggest to the general public that we can do better. Instead, the task of economists and other policy elites becomes to explain to the general public why they should accept stagnant incomes and rising inequality, and applaud the anemic growth of recent years as the best possible outcome. But the real danger of such thinking is that it leaves liberals like Hillary Clinton with few policy options to offer in response to the siren song of demagogues like Donald Trump. The self-proclaimed "responsible" elite economists see their role as to persuade the public that nothing can be done, in the hope of heading off the challenge of those who would capitalize on the electorate's appetite for change. They have to slap down critics. "Responsible" elite economists have to keep the party of "good arithmetic" from overpromising at all costs. It should not surprise us, though, that those whose living standards have suffered most from stagnant growth are more inclined to believe politicians promising change.

    It was only by rejecting classical economics that Franklin Roosevelt was able to save the American economy and bring about a revolution in social policy. And only by rejecting the new classical economics and the policy of so-called responsible elite economists can Clinton meet our current economic crisis.

    John Maynard Keynes showed how active government policy can raise employment and output; his followers, including Joan Robinson and Nicholas Kaldor, showed how full employment encourages further investments and leads businesses to find ways to raise labor productivity to match increasing product demand. New Deal American economists, such as Rexford Tugwell and John Maurice Clark, showed how active government policy can raise growth rates with investments in infrastructure, in public services, in human capital development, and in research and development. By listening to these ideas, economists associated with liberal American politics helped produce 25 years of relatively rapid and egalitarian growth after World War II. Abandoning these ideas, we have suffered 30 years of relatively slow growth and rising inequality, culminating in the current Lesser Depression.

    The debate over my little report showed how mainstream economics has left us with a smugly certain macroeconomics lacking in imagination, and offering no effective policies to move beyond economic stagnation and escalating inequality. If these economists cannot do better, then we risk more than personal disappointment; we gamble our liberal political economy against the likes of Donald Trump and Ted Cruz. Hillary Clinton can do better. And Americans deserve better.

    James Levy , May 19, 2016 at 6:31 am

    A very bold thing for a man like this to say. I know he will be criticized (vilified?) for his misplaced belief that Clinton can "do better", but considering who this man is and where he is coming from, condemning him at this stage of the game would be churlish. He's taken on The Bigs and the stifling orthodoxy they embody and for that we owe him.

    I had dinner last night with two excellent people who happen to be doing well at this time. They could not comprehend why anyone would be voting for Trump, whom they saw as a dangerous lunatic. They have supported Sanders and voted for him in the NY primary, but are absolutely going to vote for Clinton in the Fall. What I view as the credible case against Clinton has not reached them with any strength or registered at all. I was asked (because I had said nothing while they talked–I hate this kind of confrontation) what problem people could have with Hillary? I said: Libya, Ukraine, and Nicaragua. They really didn't know what I was talking about and although I spoke up for why I thought this made her a neocon like the ones that surrounded Dubya, they simply didn't know any of the details and we left it at that.

    so , May 19, 2016 at 7:10 am

    Sad. There is them and there are us. Empathy. Hard to have when your busy all the time.

    jsn , May 19, 2016 at 7:16 am

    I've had many similar recent encounters. I find that if I ask for a positive reason to vote Clinton, the first three or four reasons they raise can be dismissed by single phrase references to past betrayals, Sister Solja, End of Welfare, Nafta etc. and the next few by scandals, Lewensky or what should be scandals as you mentioned. As a rule after four or five tries I get to watch them self censor before each subsequent try and don't have to make any negative claims myself.

    I doubt I've changed minds, but they no longer doubt mine.

    Torsten , May 19, 2016 at 7:54 am

    I would have first pointed to Honduras. And Haiti:

    https://www.washingtonpost.com/blogs/post-partisan/wp/2016/03/10/hillary-clinton-needs-to-answer-for-her-actions-in-honduras-and-haiti/

    What did she do in Nicaragua?

    hemeantwell , May 19, 2016 at 8:01 am

    I think that was a slip, but an historically correct one I can completely sympathize with.

    HRC's recap of Reaganite Latin America policy is her most vile achievement. If anything demonstrates a continuity of imperialist strategy across administrations, that's it.

    bowserhead , May 19, 2016 at 8:46 am

    " I said: Libya, Ukraine, and Nicaragua. They really didn't know what I was talking about and although I spoke up for why I thought this made her a neocon like the ones that surrounded Dubya, they simply didn't know any of the details and we left it at that."

    I run into this all the time. Utter and complete foreign policy illiteracy, particularly from otherwise politically correct millennials who know so little that Hillary gets a complete pass.

    Norb , May 19, 2016 at 9:01 am

    This is a common story and illustrates that our current detachment from the world around us and our fellow citizens is coming to an end. We are being forced out of our individual bubbles. Modern corporations have supplied the populations of the world with abundance of goods, but in order to accomplish this feat, have destroyed and are destroying the cultural glue, if you will, that holds society together.

    TINA will be maintained by propaganda and physical force. We see that the propaganda is starting to weaken because the contradictions of the message can no longer be hidden. The destruction is too widespread and the inequality can no longer be hidden. You can hollow out a social system only so much before it collapses. The collapses we are witnessing is the promise of democracy. A collapse of the ideals of moderation and compromise.

    We are entering a phase of civil war. It is still carried out in a polite manner and intellectually, the discussion is still couched in Orwellian doublespeak. However, criticisms of the ruling elite are becoming more straightforward and more people are waking up to the fact that the system is rigged against them.

    This civil war is a battle over leadership. It is a battle to demand good government instead of no government. It is a battle to demand a government for and by the people. A battle for the common good. Evaluated not in some abstract terms like "trickle down" economics, but direct support and action. The hearts and minds of the population was won over long ago to wholeheartedly support capitalism and private ownership of the world's resources. This is proving to be a disaster.

    Supporters of unfettered capitalism know only one way. Privatization of ALL the worlds resources and potential. They showed their hand in 2008 with the bailouts and implementation of austerity policies. In their minds, there is no turning back. To compromise means failure. For them, TINA is real and logical. This is the perspective of owners of capital. They gain strength and advantage from seeming to compromise, but in the end know they can always reverse course and regain private control. Subterfuge and force allows the resilience of capitalism as the reigning social order.

    I bring up the notion of a civil war because these ideas are too important to be left to chance. In America, the citizenry has been complacent with their lot in life and so have lost control over their fate. As the world changes around them, they desperately attempt to hold onto their position while not realizing they are supporting their own impoverishment. Speaking ideas of the common good -for ALL- and notions of public ownership of land, natural resources, citizens natural rights to jobs, basic income, and healthcare divide family and friends. Those who are comfortable don't want to cause trouble and those feeling the pressures brought down upon them by an unrelenting system are too weak and fearful to act.

    In a sense, the revolution has already begun. It is the revolution to convince people that there is a better and different way to live our lives.

    John Wright , May 19, 2016 at 10:11 am

    Jonathan Haidt is a psychologist, sometimes featured in the New York Times, who apparently believes the capability of people to be convinced by reasoned argument is not strong. From my limited reading of his work, he suggests that humans are instinctive beings who, when they have strong beliefs, their reasoning powers are used to justify these beliefs, not to cast doubt about these beliefs.

    This can explain why attempting to convince someone to change their political/religious beliefs is fated to be largely futile.

    For example, I believe HRC is little more than a well-connected and well traveled mediocrity, with a record of few positives and many egregious negatives that justifies this assessment. I view her as potentially more damaging to the USA, as President, than Trump.

    Per Haidt, maybe my beliefs are instinctive and I am willfully blind to all of Clinton's accomplishments over the last 40 years.

    human , May 19, 2016 at 10:48 am

    ROTFLMAO

    david s , May 19, 2016 at 6:51 am

    I think that if there are to be any Keynesian big ideas and projects that will help lift us out of this stagnation, they will much more likely come from a Trump Administration than a Clinton one.

    jgordon , May 19, 2016 at 7:47 am

    Successful big ideas and big projects require cheap abundant energy, resources and intelligent design. It'll be mighty funny when the Keynesians finally implement their plan to overhaul the national highway infrastructure, creating tons of high paying jobs and speeding up the economy–right when our access to cheap oil collapses. That's dumb design at its finest, yet this sort of thing is almost certainly the best that the lobotomized Keynesian planners will be able to think up and do.

    A truly innovative program to get the economy moving in a positive direction would be to outlaw personal vehicles and rebuild the nation's railway network. But this society isn't even anywhere close to having something so useful on its agenda. So we'll do some Keynesian program, funnel the few remaining resources we have left down into some stupid dead end rathole, and then in a couple of years we'll be envious here in America of the extravagant lifestyles that the Mexicans are leading. Hell Trump's wall will be a lot more useful keeping the Mexicans in who are trying to flee. That is the end result of Keynesian programs in a delusional society with bass-ackward priorities. Way more harm than good.

    fresno dan , May 19, 2016 at 10:11 am

    I share your antipathy toward freeways. I remember the big Freeway they built in Fresno when I was a child, destroying hundreds, if not thousands of modest homes (we had to move from a grand rental to a dilapidated house that cost more – were the landlords behind getting rid of a surplus of houses????) – to save maybe – maybe at the most 3 minutes in transit time over driving an existing surface street. Jobs were part of the rationale.

    I have been gone 20 years, and they had gone on a real freeway building tear while I was gone. The whole city crisscrossed with freeways laid out as if someone had thrown a bowl of spaghetti on a map – apparently so every neighborhood can enjoy the sound of traffic.

    Really, Fresno is just not that physically big to justify all these freeways. And with its high unemployment and no real "center" there aren't any places with traffic congestion anyway – but you get these dubious justifications that millions of dollars are wasted because an implausible auto trip is 4 minutes longer without the freeway….

    david s , May 19, 2016 at 6:55 am

    There seems to be a developing narrative that the Obama Administration has just been brimming with big ideas that have been thwarted by evil Republicans.

    I don't remember it this way. I do remember an Obama Administration that turned to austerity shortly after the 2009 stimulus, and one that has been patting itself on the back all along about what a great job it has done.

    "All across America, families are tightening their belts and making hard choices. Now, Washington must show that same sense of responsibility."
    President Obama, April 2009(!)

    Akronite , May 19, 2016 at 7:56 am

    Now that the pictures we snapped of Obama are finally beginning to develop, where we thought we had photographed his lush jungle, we're now seeing just a single thin sapling planted for "the future." And Clinton will soon have a picture of her snapped at this sad tree, with her big lying smile.

    hemeantwell , May 19, 2016 at 8:09 am

    I don't think Friedman is saying this, unless Rex Tugwell has been secretly disinterred and is serving under Obama. The capitalist ideological counteroffensive that got going in the 70s has been hegemonically successful. Friedman doesn't acknowledge that enough, he instead focuses on what sounds more like disciplinary politics.

    flora , May 19, 2016 at 8:22 am

    Great post. Thanks.

    JLCG , May 19, 2016 at 8:26 am

    This type of article or perhaps, all articles about the Economy, deal with the Economy as a substance to which people are appended as accidents. The economy is the sum total of the effort of the people and if the people think that enjoying this very present is preferable to an effort to build a future nothing can be done about it. It is the mind of the people that has to be changed. Wars are very good mechanisms for that.

    Carla , May 19, 2016 at 9:14 am

    I can't remember if I got this link from an NC comment, or elsewhere. In any case, it's a scary read: "The 14 Defining Characteristics of Facism," augmented by a selection from "They Thought They Were Free." http://rense.com/general37/fascism.htm

    Brings Obama and HRC to mind just as much as Trump, if not more.

    sinbad66 , May 19, 2016 at 10:05 am

    Read "Democracy, Incorporated" by Sheldon Wolin: http://www.amazon.com/Democracy-Incorporated-Managed-Inverted-Totalitarianism/dp/069114589X/ref=sr_1_1?ie=UTF8&qid=1463666525&sr=8-1&keywords=democracy+incorporated

    Explains it all….

    fresno dan , May 19, 2016 at 9:57 am

    "The ferocious reaction to my assessment that Senator Bernie Sanders' economic and health care proposals could create long-term economic growth shows how mainstream economists who view themselves as politically liberal in America have abandoned progressive politics to embrace a political economy of despair."
    ==========================

    Here is the problem: "a political economy of despair" – accepting that economists are a real objective academic discipline is a BIG mistake – the idea that these technocrats, who never seem to recognize how much fraud, rent seeking, and capture of the political system
    ((because the people paying them don't WANT THEM TO)),
    decides things like how much inequality there is, which than decides how much demand there is, and NOT knowing, and apparently NOT WANTING TO KNOW, that it is a POLITICAL economy, and politics decides how resources are often allocated.
    We can have single payer heath care if we choose it and free college education (it wasn't all that long ago that I went to a CA college essentially for free). HOW is it college used to be free when GDP was less than 1/6 of what it is now??????
    It just doesn't make sense that we used to be able to afford free college and we can't now. It is a POLITICAL decision – when Krugman says Sanders plan is "too expensive" Krugman is making a political decision – not some objective scientific assessment. And if he is not even smart enough to ponder why it used to be free and it is not free now – well, theres your problem right there!

    Punxsutawney , May 19, 2016 at 10:22 am

    Nice to see this article. When I talk about economics, most people who know anything, only know what someone on TV tells them, so they often question, well who agrees with you? Nice to have another name to list.

    And then…

    "Sorry, nothing more can be done for you." TINA.

    Of course for those at the tippy-top, "How can I help you today?"

    [May 20, 2016] Goldman Responds To Goldman's Stock Offering of A Goldman-Upgraded Tesla Zero Hedge

    www.zerohedge.com

    Goldman Responds To Goldman's Stock Offering of A Goldman-Upgraded Tesla

    Submitted by Tyler Durden on 05/19/2016 09:59 -0400

  • Chinese Wall
  • Investor Sentiment
  • Restricted Stock
  • Twitter
  • Twitter
  • In what many considered to be a flagrantly criminal abuse of investment bank "restricted lists", yesterday Goldman underwrote a $2 billion equity offering for Tesla (to find its amusing expansion strategy) just hours after Goldman upgraded the stock to a Buy.

    We have done our best to alert the regulators...

    Hey @SEC_News here it is in terms even you can understand pic.twitter.com/Yprw3GZDMm

    - zerohedge (@zerohedge) May 18, 2016

    Hey @GoldmanSachs do you use restricted lists and was Tesla on it?

    - zerohedge (@zerohedge) May 18, 2016

    ... however we are confident the regulators are paid far better to remain unalerted.

    So for those curious what Goldman's research analyst who upgraded Tesla, Patrick Archambault, had to say about this "odd, very odd coincidence", here it is straight from the mouth of the horse which obviously remains stabled safely on the other side of the Chinese wall located at 200 West.

    Commentary: Tesla announces equity offering and provides further details on Model 3 reservations

    News

    After the close on May 18, Tesla announced a 6.8mn primary share offering. The offering includes a greenshoe option which, if exercised, would increase the number of shares sold to approximately 8.2mn. Based on the May 18 closing price of $211.17, this would result in a total value of $1.4bn for the offering, or $1.7bn if the greenshoe option is exercised. In addition, Elon Musk, CEO, will sell 2.8mn shares to satisfy tax implications from exercising 5.5mn in stock options that expire at year-end. The company noted that Mr. Musk also plans to donate 1.2mn shares to charity and that the net result of these actions will be to increase his holdings to 31.1mn shares from 29.6mn. All said, based on the latest closing share price and including the primary offering, greenshoe, and Mr. Musk's sale, the total size of the transactions would be $2.3bn.

    In the preliminary prospectus, the company also provided an update on Model 3 reservations and announced that it had 373k deposits as of May 15, 2016. This is net of 8k (approx. 2% of total) in customer cancelations and 4.2k (approx. 1% of total) reservations deemed to be duplicates.

    Implications

    Adjusting for the announced transaction and the supplemental stock options outstanding, and for restricted stock units (RSU) information, our EPS estimates would be unchanged for 2016-2017. Including the greenshoe, our 2016-2017 EPS estimates would decline by less than 1% on average.

    Our take

    We maintain our Buy rating and EPS estimates following the announcement . Additionally, our 6-month price target of $250 remains unchanged, derived from five probability-weighted automotive scenarios plus stationary storage optionality , all of which embed a 20% cost of capital. While the announced capital raise of $1.4bn (or $1.7bn with the greenshoe) is ultimately higher than our $1bn estimate, after factoring in the updated supplemental RSU and option information, dilution to our estimates would be immaterial. Consistent with our previously published research (see Putting in our reservation for the Model 3; upgrading TSLA to Buy, May 18) we believe the funding level is adequate for the Tesla Model 3 roll-out. The reservations of 373k are in line with the company's recent comments of "approaching 400k", though they imply slowing growth (even adding back the cancellation and duplicates) as reservations had already hit 325k one week after the Model 3 unveil.

    Risks: Decline in overall investor sentiment impacting the appetite for concept stocks, further delays in the Model X production ramp which could force a guidance reduction as well as exacerbate FCF burn, and higher-than-forecast operating expenses and/or capex investments.

    Actually the biggest risk factor, and what is most hilarious about this whole incident is that in the Goldman upgrade, which was clearly rushed, and in which Goldman itself admitted there is a two-thirds likelihood the stock will plunge to $125 or lower and the only upside is due to a "key man provision" and a ridiculous thesis that Musk alone is worth tens of billions in market cap (somehow excluding tens of billions in taxpayer grants)...

    ... is that all those who bought TSLA on the Goldman report (and/or Goldman stock offering) will actually read it.

    A Pimp's love i...

    God's Work

    greenskeeper carl , Thu, 05/19/2016 - 10:04

    Would it really be that surprising if it did hit 250? I wouldn't be the least bit surprised. It makes no sense where it is now, another 20% up would be par for the course for this "market". It's probably just more muppet slaying by Goldman, but I could see them releasing those cars that will of course get stellar reviews and have a full retard price spike. Dumber shit has happened.

    ParkAveFlasher , Thu, 05/19/2016 - 10:04

    "It feels good, doesn't it Muppet? You want more, don't you?!"

    Stackers , Thu, 05/19/2016 - 10:11

    ZH is dead on. This is CFA Level 1 stuff.

    http://www.investopedia.com/exam-guide/cfa-level-1/ethics-standards/stan...

    How to Comply
    The Standards of Practice Handbook provides a number of operational suggestions that one should recommend for adoption by the compliance department.

    Establish a restricted list - This is to limit research on those firms that have a business relationship with that company. If an adverse opinion would hurt this business relationship, the company stock should be restricted from the research universe, and only factual information on the company should be disseminated.

    TradingIsLifeBrah , Thu, 05/19/2016 - 10:14

    I bet Goldman believes its valuation is "factual" lol

    OrangeJews , Thu, 05/19/2016 - 11:22

    The worst part in my opinion is that by keeping Musk going makes him look like a God to all of the sheeple when in reality he's just using other people's money and other people's ideas to become famous. Basically the definition of the current United States.

    JamaicaJim , Thu, 05/19/2016 - 10:23

    Ah yes...Pacino.....in one of his finest works....plus excellent writing....

    His God speech;

    https://www.youtube.com/watch?v=RGR4SFOimlk

    asteroids , Thu, 05/19/2016 - 10:23

    Obviously something is broken. It's up to the SEC to act. If it doesn't then the SEC is broken. If the SEC is broken then it's up to .....

    ShorTed , Thu, 05/19/2016 - 10:24

    Yes something is broken... must be the porn filters at the SEC again. Don't expect people who's future (once they pass thru the revolving door) depends on them not finding any malfeasance, to do the right thing.

    JamaicaJim , Thu, 05/19/2016 - 10:10

    Goldman Sucks Ass should be Lehman-nized

    Shut Down

    Arrests made

    Convictions

    Lengthy prison senten.....

    ...wha.....huh.....I was having a dream?

    FUCK!

    quadraspleen , Thu, 05/19/2016 - 11:09

    Yeah. Dreaming. I actually spat water at "arrests made"

    Dream on

    nibiru , Thu, 05/19/2016 - 10:10

    Everything i in order guys, don't worry it's temporary technical glitches... carry on, nothing to see here. Oh and sell gold! Listen to Gartman!

    TradingIsLifeBrah , Thu, 05/19/2016 - 10:11

    They should have added in a 1% chance that TSLA goes to $1,000,000,000 per share to pull the target price up a little higher.

    Farmer Joe in B... , Thu, 05/19/2016 - 10:24

    Having worked in a mid-sized IB, I can tell you there is no such thing as a fucking Chinese wall. Cheesecloth at best.

    This cocksucker absolutely knew that a deal was cooking...

    ptoemmes , Thu, 05/19/2016 - 10:24

    Who are these "many" you speak of? Clearly does not include the financial and regualtory elite.

    Similar to politicians and one D Trump claiming they could shoot someone on the Senate floor - or Times Square - and not get arrested I think that CNBC should have a reality hour where finanial elites and regulators carry out obvious fraud on live TV. You know, just to see what happens...

    The Daily Fraud

    Fraudish

    Spungo , Thu, 05/19/2016 - 10:25

    Should I even care about this? The people who own Tesla shares are functionally retarded. If it wasn't Tesla stealing their money for the sake raising capital, some other questionablle enterprise would get their money just as quickly. I'm thinking horse racing and lottery tickets.

    bamawatson , Thu, 05/19/2016 - 11:03

    oh man, please don't equate seasoned pari-mutual investors with the "functionally retarded" tesla shareholders

    Dadburnitpa , Thu, 05/19/2016 - 10:28

    Anyone can be "brilliant" if they're festooned with enough free government money. But once the tit dries up, you're no better than the rest.

    rosiescenario , Thu, 05/19/2016 - 10:33

    While Tesla's cars may be a rare sight for others in the U.S. if you drive around the SF Bay Area they are as common as anyother make of car. While the stock is at a nutty value, I'd bet you'd find that 80% of individual owners of it reside around Silicon Valley and are convinced this is the next Apple.

    Personally I see no appeal to a car which has such a limited driving range....you really cannot take a trip with it.

    [May 20, 2016] Economic Models Must Account for Power Relationships

    economistsview.typepad.com
    I have a new column:
    Economic Models Must Account for Who Has the Power'' : Nobel Prize winning economist Joseph Stiglitz recently highlighted two schools of thought on how income is distributed to different groups of people in the economy. Which school is correct has important implications for our understanding of the forces that have caused the rise in inequality, and for the policies needed to reverse this trend. It also relates to another controversy that has flamed up recently, how economics should be taught in principles of economics courses. ...

    Posted by Mark Thoma on Tuesday, May 17, 2016 at 06:09 AM in Economics , Market Failure | Permalink Comments (22)


    Comments

    Feed You can follow this conversation by subscribing to the comment feed for this post. anne : , Tuesday, May 17, 2016 at 06:27 AM
    Excellent approach, incisive writing.
    kthomas -> anne... , Tuesday, May 17, 2016 at 10:55 AM
    Im suprised you are so enamoured of Stiglitz. He does not put up with BS.

    Still, you are right. As usual.

    DrDick : , Tuesday, May 17, 2016 at 06:50 AM
    Awesome. Thanks for this.
    Adamski : , Tuesday, May 17, 2016 at 07:22 AM
    Good one from the Stig, also.

    And according to Sraffa's side in the Cambridge capital controversy labour and capital do not receive their marginal products, which leaves the distribution of income to some extent socially or politically determined.

    Now please make a donation to Project Syndicate, and check out Robert Skidelsky at the same site.

    New Deal democrat : , Tuesday, May 17, 2016 at 08:21 AM
    Excellent. It will be taught in graduate school, long after the little ones have been indoctrinated in reactionary thought be Econ 101.

    P.S. The school of thought that accepts inequality as a Teh Awesome result of merit cannot explain why inherited wealth should be allowed to accumulate - another aspect of how power writes the economic rules.

    pgl -> New Deal democrat... , Tuesday, May 17, 2016 at 09:33 AM
    "It will be taught in graduate school, long after the little ones have been indoctrinated in reactionary thought be Econ 101."

    Joan Robinson's writing on market power was required reading when I was in graduate school. My undergrad profs touched on this issue but not as much. I wonder if Greg Mankiw teaches market imperfections to his undergrad students at Harvard.

    two beers -> pgl... , Tuesday, May 17, 2016 at 09:42 AM
    "I wonder if Greg Mankiw teaches market imperfections to his "undergrad students at Harvard."

    According to theoclassical doctrine, all market imperfections are the result of gummint innerference. Left to themselves, markets hum with music of the perfect spheres.

    pgl -> two beers... , Tuesday, May 17, 2016 at 11:52 AM
    "theoclassical doctrine". My new favorite term. Excellent and thanks.
    RC AKA Darryl, Ron : , Tuesday, May 17, 2016 at 08:25 AM
    We are way past just one or the other of those explanations being true. Opportunities come in many forms, but just not for many people. Competition becomes limited in the womb and then they go from there. Better schools across all zip codes and public day care with universal pre-K would be a start. Even that is doomed to the catch-22 of making a better informed public requires a better informed public to demand being better informed. Down east they say "You can't get thar from here."

    I was fortunate enough to grow up in Prince William County VA in the late sixties just as it was beginning to boom from growth proximate to the DC Beltway. We had a new and progressive school system even relative to NoVA. Still by the 7th grade it was evident to me that the pedagogy related to reality in dogmatic POVs that were only relevant to the next generation of yuppie kids that had gotten a half step advantage in some various way from their parents.

    My half step came from an unusual source though. My dad was illiterate and my mom only finished the 8th grade, but they were stoics with exceedingly powerful work ethics transferred more by their example of excellence in every menial thing that they did rather than by belittling and cajoling me. My dad was the best hunter, the most successful fisherman, grew the most beautiful and bountiful garden, and was self-sufficient in caring for his car and home. His position with the state highway department was limited by his illiteracy to maintenance superintendent, but due to his ability he still got to supervise the construction of roads and bridges without the benefit of commensurate pay.

    My mom was the best cook, kept the cleanest house, and as at home day care for a few friends was the best a dealing with troubled children from potty training to outbursts of anger. It was a tough act to follow. Furthermore it did not fit the status quo mold that public schools were designed to reinforce. My half step freed me to reject the intellectual authority of my instructors even though their administrative authority was still sacrosanct in my home. I did well in school and even better on tests eking by to enter the Honor Society and passing the SAT test well enough to qualify for Mensa, but I dropped out of college first semester mostly just to relocate away from home to find a job in the city. So, I got drafted and went to Viet Name, but was lucky enough to survive and develop a successful career in IT systems management large systems capacity planning and performance management. The best break that I got was being laid off in June 2015 with a severance package good enough to afford me a retirement income equal after the change in expenses from leaving the professional world behind to what I had been making while working.

    The moral to my story is that one can despise our education system and still do very well by themselves with it. One can reject our higher education and still do very well by themselves without it. One can despise our corporate "meritocracy" system and still have a successful career and maybe even a comfortable retirement, but the ladder has been raised for the latter. How anyone can be successful in school and/or in career without recognizing their own half step advantage or recognizing the intellectually and morally vacant institutions that they traversed in their journey is deeply puzzling to me.

    RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , Tuesday, May 17, 2016 at 08:35 AM
    P.S. I had the good fortune to relocate from Prince William County to Orange County VA in summer 1966 before my senior year in high school when my dad cashed out his state retirement fund saving to start an electric motor/ john boat livery and concession stand at Lake Orange, a VA Game and Fisheries Commission state fishing lake.
    The high school teachers were probably just as intelligent as in Manassas Park, but far more socially challenged at least in the academic curriculum. Still, the kids with that half step from their successful parents did well enough to attend decent colleges, but academic performance overall was much lower than it had been in Manassas Park back in Prince William County. The kids in Orange with really successful parents all attended private prep schools.
    RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , Tuesday, May 17, 2016 at 08:47 AM
    P.P.S. Relative to the thread topic then we have a fairly rigid establishment that favors the haves and keeps the have-nots at bay. Monopoly rents are just one of the luxurious rent extracting tools of an aristocracy of social exclusion. Bankers, proto-industrialists, and slave owners established the meme of republicanism as the conservative power that protects us all from tyranny of the majority, but perhaps a little too well. More importantly they established the US Constitution as a nearly inviolable foundation for preserving their world view of well-deserved elite privilege. And they did it all in the name of democracy while showing Thomas Paine the door.
    anne -> RC AKA Darryl, Ron... , Tuesday, May 17, 2016 at 08:54 AM
    Interesting and really nicely described.
    RC AKA Darryl, Ron -> anne... , Tuesday, May 17, 2016 at 10:06 AM
    It's a cool rainy day in central VA. Being retired and primarily a person of outdoor interests then today I have an abundance of time to waste. And commenting on the EV blog sure beats a colonoscopy, which is what I will be getting this time next week :<)

    TMI? Yeah, tell me about it.

    BigBozat -> RC AKA Darryl, Ron... , Tuesday, May 17, 2016 at 12:00 PM
    "Down east they say "You can't get thar from here."

    Actually, they say "Ya cain't get thay-uh frum he-yah." And they usually pre-pend a big, fullsome "Ayuh".

    RC AKA Darryl, Ron -> BigBozat... , Thursday, May 19, 2016 at 05:09 AM
    THANKS! In any case, they are often correct :<)
    Dan Kervick : , Tuesday, May 17, 2016 at 08:50 AM
    Jonathan Nitzan and Shimshon Bichler have developed an account of capitalism over sever years summarized by the slogan "Capital as Power."

    http://www.capitalaspower.com/

    two beers : , Tuesday, May 17, 2016 at 09:58 AM
    There is no Nobel Prize in economics.
    JohnH : , Tuesday, May 17, 2016 at 10:16 AM
    John Kenneth Galbraith used to write about countervailing power. Unfortunately Galbraith has been pretty much consigned to the dustbin. Even when he was writing, economics courses did not talk about his ideas much...I guess he did not use enough math symbols.

    Business has long understood the concept of what I'll call leverage points...critical intellectual property, experience, and know how. Control of these critical factors is a key to pricing power and profitability. As one example, Symbol Technologies dominated the handheld bar code scanner market for years, not because they had superior technology or marketing, but because they held the patent on the trigger, which was critical to activating the scanner for reading. Their market power affected not only competitors but suppliers and customers as well.

    Leverage points like this are commonplace in business today. Yet I'm not aware that economics, with its orientation towards competitive markets, has ever tried to model this common behavior or even dealt with it.

    Likewise, businesses have also understood the importance of market and marketing channel domination to their long term survival and profitability. Firms who fail to dominate must specialize. These concepts are considered elementary in business schools. Yet I don't know that economists have ever managed (or even tried) to incorporate them into their models.

    It might help if more economists took business courses to understand how the game is played...

    Denis Drew : , Tuesday, May 17, 2016 at 11:16 AM
    Re-organize labor -- make union busting a MARKET WARPING (not job firing) felony ...

    ... re-make America into one big Costco.

    Longtooth : , Tuesday, May 17, 2016 at 12:36 PM
    I still say that until economists can reach consensus on the objective of an economy, they remain divided on the objective. Simply defining it as "for the general good" is a cop-out --- and economists and everybody else know this full well. Define what "general good means"....then see if consensus can be reached. I seriously conclude this cannot be done, since only by compromises can they reach consensus, and this means defining the objective in subjective, vague terms... just like "the general good" is vague and subjective.

    The cop-out used by economists is at the heart of what Thomas' blog subject is about: Policy makers .. i.e. gov't decides the objectives of an economy, which is to say that economic power defines it. And of course economic power will define it to maintain and extend their economic power.... and at the very least to minimize any erosion thereof.

    So one must wonder how, if gov't is controlled by economic power, that gov't will NOT insure the maintenance and extension of that economic power? Is it possible in a democracy defined by the U.S. constitution to significantly reduce the economic power of those who have it? The constitution in fact makes it impossible.

    Even when congress occasionally finds a large enough majority to make law to erode or reduce economic power in gov't, the constitution enables 5 people in robes to deem it unconstitutional OR the next congress, or the next will make law that erode or reduce the effect of prior congress's law(s) that reduced or eroded economic power.

    If this were not the case we'd long since have had universal single payer health care, strong labor unions, tax policies that don't give unearned income a huge break, and don't give offshore income an out by not taxing it until its "repatriated", welfare systems that don't keep people in poverty, and an educational system that provide free & equal education to all (not one that gives communities, county's, and States with the highest incomes & property values the best education and everybody else with a lesser one.

    Nor, will I add would it be possible to rape the nation's environment by contaminating the nation's rivers, soils, and the air with green-house gases .. not just "paying" fines after the fact for doing so or putting low cost "caps" on green-house gas emissions.

    So what does "the general good" actually mean? Economists can't agree on it, nor the means of achieving it of course nor can policy makers.... and this is the fundamental problem not being addressed.

    Denis Drew : , Tuesday, May 17, 2016 at 02:32 PM
    Make America one big Costco -- re-unionize.
    Chris G : , -1
    Nice column.

    One comment: You wrote "...individuals are rewarded according to their contributions to the economic well being of society. Those who contribute the most to the production of the goods and services we all enjoy receive the highest rewards and climb to the top of the income distribution." I would add that having power includes being able to dictate that rewards are allotted according to economic contributions as opposed to other contributions. Cue my go-to Chris Lasch quote: "... individuals cannot learn to speak for themselves at all, much less come to an intelligent understanding of their happiness and well-being, in a world in which there are no values except those of the market.... the market tends to universalize itself. It does not easily coexist with institutions that operate according to principles that are antithetical to itself: schools and universities, newspapers and magazines, charities, families. Sooner or later the market tends to absorb them all. It puts an almost irresistible pressure on every activity to justify itself in the only terms it recognizes: to become a business proposition, to pay its own way, to show black ink on the bottom line. It turns news into entertainment, scholarship into professional careerism, social work into the scientific management of poverty. Inexorably it remodels every institution in its own image."

    [May 18, 2016] Thomas Frank: What Happened To the Party of the People

    jessescrossroadscafe.blogspot.com
    17 May 2016
    "Inequality is a euphemism, a kind of shorthand, for all of the things that have gone to make the lives of the rich so much more delicious, year on year, for the last three decades. And also for the things that have made the lives of working people so wretched and so precarious in that same time.

    This word inequality. It's visible in the ever rising costs of healthcare and college, in the coronation of Wall Street, and the slow blighting of wherever it is that you happen to live. And you catch a glimpse of inequality every time you hear about someone that had to declare bankruptcy because a child got sick, or you read about the lobbying industry that drives Washington DC, or the new political requirement, the new constitutional requirement that every presidential candidate has to be a billionaire's favorite, or a billionaire themselves.

    Inequality is about the way in which speculators, and even criminals, get a helping hand from Uncle Sam, while the Vietnam Vet down the street from you loses his house. Inequality is the reason that some people find such incredible significance in the ceiling height of an entrance foyer, or the hop content of a beer, while other people will never believe in anything again."

    Thomas Frank

    Change is coming. It must come, because the status quo is unsustainable, and has been so for some time.

    How many times will our 'very serious people' with access to the public information channels continue to miss the obvious dissonance of the common reality from the official story that they tell each other about everything from the economy to politics?

    At the root of this inequality, hidden as it is in the fog of fine sounding theories and economic models, is simple injustice.

    The longer that change is delayed, the longer that the professional class continues to insulate itself, looking down on the broader public with smug contempt from privileged perches, blinding themselves with hypocritical arguments that deny what is happening all around them, the more disruptive that change will finally be.

    And, as always, 'no one,' or at least no one who matters in their world, will have ever been able to see it coming. Because by definition no one who is an insider can ever publicly admit that the insiders have blown it completely, once again.

    "People of privilege will always risk their complete destruction rather than surrender any material part of their advantage. Intellectual myopia, often called stupidity, is no doubt a reason. But the privileged also feel that their privileges, however egregious they may seem to others, are a solemn, basic, God-given right. The sensitivity of the poor to injustice is a trivial thing compared with that of the rich."

    John Kenneth Galbraith

    [May 18, 2016] Two-thirds of the directors at the New York Fed are hand-picked by the same bankers that the Fed is in charge of regulating

    jessescrossroadscafe.blogspot.com
    "Two-thirds of the directors at the New York Fed are hand-picked by the same bankers that the Fed is in charge of regulating.

    Today, the United States is No. 1 in corporate profits, No. 1 in CEO salaries, No. 1 in childhood poverty, and No. 1 in income and wealth inequality in the industrialized world.

    Today, the top one-tenth of 1% owns nearly as much wealth as the bottom 90%. The economic game is rigged, and this level of inequality is unsustainable. We need an economy that works for all, not just the powerful.

    I think what the American people are saying is enough is enough. This country, this great country, belongs to all of us. It cannot continue to be controlled by a handful of billionaires who apparently want it all."

    Bernie Sanders

    The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

    [May 06, 2016] Why Oil Prices Will Rise And Many Pundits Will Be Caught By Surprise

    Notable quotes:
    "... will not flood ..."
    "... Third parties like "Drilling Info", BTU Analytics, CERA, etc. provide their looks at the market for very high prices, and as such are much more granular than those from government data providers. As much as they try, they are still limited by the availability of international data and reporting time lags domestically, not to mention their own biases. ..."
    "... Inevitably, we will have another price shock – or at minimum an upside surprise. It's unavoidable at this point. Oil never transitions smoothly. Just like all the oil bulls had to be run out during the declining price stage, all the price bears, like Dennis Gartman, will be run out when fundamentals hit them over the head. Gartman, to his credit, will change his tune 180 degrees when he sees the actual data shaping up. That's how he has survived so long and profitably as a trader. ..."
    "... My prediction - $80/bbl in 18 months, but it won't last very long. I think $60 - $70/bbl is a healthy range. ..."
    OilPrice.com
    I follow oil pretty closely given our exposure. As such, I get frustrated with many press and news show accounts of the commodity. It gets worse when the pundits and writers should know better. Frequently inexact terminology leads to misconceptions and sometimes I see outright falsehoods that completely distort the truth.

    As a former oil analyst and professional energy investor, I feel compelled to take those to task. As a realist, I see that all markets require a difference of opinion and all investors talk their "book". For this reason, when Jeff Currie at Goldman Sachs Commodities Group gets on CNBC and opines about future price movements, I give little notice. Jeff is posturing for his customers' and GSs' positions. Jeff can spin the story either way and chooses his statistics accordingly...That's what he is paid very well to do.

    Last week (March 28, 2016), I heard Dennis Gartman of the Gartman Letter, a trader and investor that I respect and have learned much from, spout an outright falsehood on CNBC. Everyone can have a bad day, but I've been hearing various versions of this for months. Dennis said in essence that oil prices could not rise very much because of "all the capped wells that could be brought on line very rapidly". He predicted no more than $42/bbl this year. He estimated that at current strip pricing, you could lock in $45/bbl in 12 months, making large numbers of these "capped" wells profitable. The implication being that at current prices, the market would be rapidly flooded with new oil.

    I'll take the over on price, the under on production and bet all my capital that I'm right. (Oh, I already did that...). Dennis should know better. For fun though, I thought I'd like to take apart his thesis.

    First, there are no "capped" wells in the U.S. To my knowledge not one well has been capped due to low prices, especially relatively young horizontal shale wells. Older wells are capped all the time when production is no longer sufficient to pay operating expenses for the well. Generally, onshore wells may cost something in the order of only $2,000 per month to operate. At $40 dollar oil, 3 barrels per day of production (gross) should cover operating costs.

    What Dennis is likely referring to is the "Drilled Uncompleted" or DUC well inventory in the various shale plays. Some estimates have shown as many as 4,000 of these DUCs exist and the numbers are rising. Many pundits cite these DUCs as an effective ceiling on oil prices.

    However, a DUC is very different from Gartman's implied "capped" well. There are many reasons why a producer would drill and not complete a well. They may have had a rig under contract, they may want to beat competitors, retain their or their service companies' good employees, they may be able to hold expiring acreage, they may just want to see what the rocks look like in a particular area. However, the most likely reason is that the completion costs of these wells can amount to over 60 percent of well cost maybe – $3 to $4 million per well. As such, this investment is very difficult to recoup if a well's flush initial production is sold at low prices. This is compounded when whole well pads are completed at the same time to increase efficiency. If you don't like the price one well gets, six wells coming on line at the same time is worse.

    This also flows into the other reasons why this production will not flood the market, namely the intersection of costs, timing and decline rates.

    Costs – 4,000 wells at even $3 million per well is $12 billion dollars. Given the upheaval among producers, where does Dennis suppose the $12 billion will come from to "instantly" "uncap" these wells and increase production? Not from the banks, the high yield market is tight, equity investors have stepped up for some Permian and Eagle Ford producers, but $12 billion is a lot of money.

    Time – Let's say that oil prices above $40/bbl equals a green light for energy producers to attack their DUCs. (There appears to be no factual basis for this, but let's pretend.) A quick look at C&J energy services, which controls the country's third largest frac fleet as well as other completion services, tells part of the story. Today, just over 50 percent of the companies' fleet is working and the rest is "stacked" or to be retired. The people were laid off months ago. Clearly, when they get the signal that their customers want more completion services, they will begin to reactivate some of this idle iron – one frac fleet at a time. The problem is the C&Js stock price is $1.46 and they have close to $1.2 billion in debt. Where will the money come from to rehire people, and reactivate idle equipment? After that, will the people return? Yes, but slowly and at a high cost. What about Baker and Schlumberger? Both are in better financial shape but their fleets have been stacked also and at this time, investors are in no mood to hear a company talk about adding capacity. When these companies return fleets to active status, they will be competing to hire a smaller pool of laid off workers.

    Decline rates – Wells producing from tight rock or shale (wells that must be fracked) exhibit steep decline curves on the order of 75 percent during the first year of production. The implication is that producers are on a never ending treadmill in order to maintain or grow production volumes. That is, they must complete new wells in order replace the natural declines from existing wells. There are two critical points associated with these steep decline curves that pundits like Gartman don't appear to grasp. The first is that based on current data, the four key liquids rich shale plays have declined by over 600,000 bopd since their peak of production in March, 2015. This production is gone. These wells have depleted. They can't be turned back on. The only way to increase production again is new completions and new wells – in other words massive new reinvestment. This is very different from past cycles when OPEC dialed back production by idling a major field or two until demand rebounded. These OPEC giant and super giant fields are a totally different animal. It's all about the infrastructure, not the productivity of a single well. The entire complex can be shut down, reworked, maintenance performed, etc. then turned back on…more akin to a refinery than typical single or multiple well fields. But that's another story. Bottom line – that 600,000 bopd is not magically coming back. It took the onshore industry something like 12 months running flat out to add those volumes. Given oil prices, it will be quite a while and it will take higher prices before the industry even gets back to a steady walk, much less a flat run.

    Another key thing to understand about decline curves is that they are continuous and right now declines are accelerating. However for example purposes, let's look at the Eagle Ford. There are some 10,000 wells in the Eagle Ford producing today, and they are all in decline. The EIA estimates the average Eagle Ford well adds 800 bopd in its first month of production. Last month, Eagle Ford production is estimated to have declined by 60,000 bopd. That implies that 75 new wells per month must be drilled and completed to just replace this 60,000 bopd. Assuming it takes 15 days to drill a well, that implies around 38 rigs drilling and around 25 frac fleets running above what is running today! Today, there are 42 rigs drilling for oil and we estimate 10 – 15 frac fleets running in the Eagle Ford…so just to replace production, the industry would have to increase rigs running by nearly 100 percent and frac fleets by 150 – 200 percent. This would require a massive mobilization of capital and manpower. During this whole mobilization process, production from existing wells is declining, month after month. Don't get me wrong, I believe this will happen. However, I know this won't happen quickly and won't happen at $40/bbl oil, making Gartman's thesis and pricing argument completely false.

    Production data, or lack thereof, is a primary hindrance to clear and transparent oil fundamentals. The mechanics of the above discussion would be more obvious if we could measure field production in real time. In fact, production data in Texas takes some three months to even estimate, and these estimates are often revised. The same goes for well completion data. The EIA tries to model this through its "Drilling Productivity Report". However, there are no similar efforts for the rest of the global oil industry, in fact, OPEC publications use third party reporting not internal or "real" data from the companies themselves.

    In Saudi Arabia, production statistics are a state secret. Not surprisingly, many countries distort the data to suit their own needs. That's why the IEAs look at G7 storage data is an important industry statistic. It is widely recognized that both global demand and supply data is inaccurate, but changes in storage inventories should reflect supply and demand changes. The only problem with this approach is they only get data for around 2/3 of the global storage capacity. This is what led to the recent headlines "800,000 bopd of oil is missing". Supply estimates exceeded demand estimates by 800,000 bopd during the quarter, yet storage didn't build, leaving the question of where did the oil go? The answer is that there never was this extra oil…if it existed, it was burned. More than likely, both supply and demand estimates were off by that amount.

    Third parties like "Drilling Info", BTU Analytics, CERA, etc. provide their looks at the market for very high prices, and as such are much more granular than those from government data providers. As much as they try, they are still limited by the availability of international data and reporting time lags domestically, not to mention their own biases.

    Generally it takes 18 months before the world has a decent picture of supply and demand. This is little consolation to those trying to do real time analysis on the direction of prices. That is why I can say categorically "the fix is in". In other words, fields are declining, meaning investment is far below levels required just to replace production. The only thing that will change the vector of these declines is more spending, lots more spending, and the only thing will spur lots more spending is higher prices. Significantly higher than $40/bbl.

    In conclusion, we have a typical commodity price cycle. Prices have dropped to levels destroying capital, bankrupting businesses, idling massive amounts of equipment and manpower. The cycle is reversing now. The weekly EIA numbers are showing steady declines in production (this is a balancing item – not real production estimates) and also increasing demand – In the United States. The IEA is showing the same thing in their monthly report that has a decent look at the G7 countries and attempts to look at the G20. Between these two, there is a large world with little accurate measurement. China for instance jailed a Platts reporter for espionage when he tried to put together a fundamental energy statistics database.

    Inevitably, we will have another price shock – or at minimum an upside surprise. It's unavoidable at this point. Oil never transitions smoothly. Just like all the oil bulls had to be run out during the declining price stage, all the price bears, like Dennis Gartman, will be run out when fundamentals hit them over the head. Gartman, to his credit, will change his tune 180 degrees when he sees the actual data shaping up. That's how he has survived so long and profitably as a trader.

    But by then it will be too late, the world will want incremental supplies immediately – yet the industry cannot scale in real time. In order to motivate producers to get busy and provide incremental supplies, prices must increase sharply from current levels. My prediction - $80/bbl in 18 months, but it won't last very long. I think $60 - $70/bbl is a healthy range.

    By Brad Beago for Oilprice.com

    Related:$120 Oil As Soon As 2018?

    [May 05, 2016] How European Union Fiscal Rules Subverted Democracy and Institutionalized Neoliberalism

    Notable quotes:
    "... By John Weeks, a member of the Union for Radical Political Economics (URPE) in London, one of the founders of the UK-based Economists for Rational Economic Policies, and part of the European Research Network on Social and Economic Policy. Receive podcasts of his weekly radio program by Twitter, @johnweeks41. Originally published at Triple Crisis ..."
    "... I have dear friends from H to VI, but sleep walking through life, while natural resources are needlessly strip mined for the sake of maintaining artificial scarcity, is a good way to put it. ..."
    "... The dual mandate is a fiction. There's nothing the Fed can do to lower unemployment (though it can raise it by mistake.) The unemployment rate is set by the fiscal policies of Congress and the Executive. The unemployment rate, should they desire, can even be set to zero. That it is not should be sufficient cause for the guillotines. ..."
    "... primum non nocere ..."
    "... I think the process of corporate control of the EU was so slow and gradual plenty of left wingers in Europe still haven't really grasped what has happened. From the beginning, there was always a tension within Europe between pressure from corporations for more business friendly policies and the generally social democrat lite views of the original founders. I think though to call it 'neoliberal' is not quite correct – for me 'neoliberal' implies a specific set of policies associated with the Anglosphere – I think in Germany what we've seen is the takeover by a more German flavoured right of centre view – it is similar, but is more generally corporatist and mercantilist in nature with a strong dash of Austrian economics. ..."
    "... Well of course the 'competition' is a myth. As anyone who has witnessed what has happened in electricity markets can see, it has, if anything, raised prices of electricity for consumers. But various powerful interests have done very well indeed. you can see the same process in water and waste services and pretty much anything that has been directly regulated and privatised. The only areas where I think it can be shown that consumers have benefited from competition are in telecommunications and in air travel. And in the former, I suspect the consolidation of the telecom industry will reverse those gains. ..."
    "... "To render the rule Kafkaesque, after the EC bureaucracy calculates that a government will not meet the hypothetical target, it then mandates contractionary policies that guarantee that the target cannot be achieved. The problem is imaginary and the solution contradictory." ..."
    "... "The "independent institutions" include the European Commission itself, which adds a distinctly Orwellian character to the already Kafkaesque Treaty." ..."
    "... "Thus, not restricting surpluses carries an implicit mercantilist message." EU guidelines fix trade surplus at 6%, Germany is, I believe, in its seventh year of violation and should be fined. That it doesn't happen maybe shows that the elite ruling the EU is German. ..."
    naked capitalism
    Yves here. Anyone who has paid attention to how the various sovereign debt crises have played out in Europe can't help noticing that a bureaucratic elite is calling the shots and riding roughshod over popular will. But what are the mechanisms which allow these perverse outcomes to come to pass? This post describes the major steps that enabled neoliberalism to become the ruling doctrine.

    By John Weeks, a member of the Union for Radical Political Economics (URPE) in London, one of the founders of the UK-based Economists for Rational Economic Policies, and part of the European Research Network on Social and Economic Policy. Receive podcasts of his weekly radio program by Twitter, @johnweeks41. Originally published at Triple Crisis

    The EU: Hold Your Nose and Vote "Stay"

    Most Americans and many U.S. progressives hold a favorable view the European Union. This positive assessment persists despite the crushing of the Greek challenge to austerity conditionalities set by the European Commission and European Central Bank aided and abetted by the International Monetary Fund.

    The primary basis for pro-EU sentiments may be that Americans consider the European Union a bastion of social democracy in contrast to the neoliberal ideology of the Republican and Democratic parties, which Bernie Sanders has so eloquently attacked. However, the institutions of the European Union, especially its executive the European Commission practice a neoliberal ideology and pro-business policies as aggressive as counterparts in the United States.

    This is not a recent change, but a long-maturing trend going back at least to when Helmut Kohl of the right-wing Christian Democratic Union replaced the Social Democrat Helmut, Schmidt, as chancellor of Germany. The misplaced belief that Jacques Delors , EC president for ten years, was committed to social democracy perpetuated the illusion of a progressive EU. While no reactionary like Kohl, the French socialist politician supported market oriented "reform" of the European Union's economic policies.

    By the 2000s neoliberals had taken firm control of the European Commission, manifested most obviously in the 1992 Maastricht Treaty. The step-by-step legal codification of EU reactionary economic policies goes far beyond legislation enacted in the United States. As a result, it should surprise no one that in Britain and on the continent support for membership in the European Union splits progressives. In Britain the issues looms large, with a referendum on continued membership scheduled for 23 June.

    The progressive case of membership is a hard row to hoe.

    Loss of Democracy in the European Union

    History provides many examples of authoritarian rule achieved through formally democratic procedures. To these we should add the 2012 EU Treaty on Stability, Coordination and Governance ( TSCG ), adopted by 25 democratically elected EU governments (the Czech Republic and the United Kingdom took opt-outs ). On an EU website we find the overall purpose of the TSCG boldly highlighted :

    The European Union's economic governance framework aims to detect, prevent, and correct problematical economic trends such as excessive government deficits or public debt levels, which can stunt growth and put economies at risk.

    This bureaucratically bland sentence asserts the power of the unelected European Commission, as the executive of the European Union, to monitor ("detect") whether the public budget of an elected member government conforms to EU fiscal rules. If it does not, the Commission claims the power to prevent the implementation of that budget and to specify the changes ("corrections") required.

    No one can miss the ideological asymmetry of the "governance framework" – deficits can be excessive, but not surpluses. In practice a budget surplus usually goes along with a trade surplus, so that the contractionary effect of the former will be offset the expansionary impact of the latter. Thus, not restricting surpluses carries an implicit mercantilist message.

    The EU website goes on to explain "detection" or "monitoring" as follows ,
    Each year, the EU countries that share the euro as their currency submit draft budgetary plans to the European Commission. The Commission assesses the plans to ensure that economic policy among the countries sharing the euro is coordinated and that they all respect the EU's economic governance rules. The draft budgetary plans are graded as either compliant, partially compliant, or at risk of non-compliance.

    When the EC implements this paragraph literally as it did in Greece, the role national legislatures is to endorse what the Commission judges as "compliant." The TSCG de facto makes member governments formulate their budgets for the Commission not their legislatures, because there would be little point and considerable embarrassment by submitting to parliament a budget that the EC would reject. After the Commission judges the budget as satisfactory the national legislature goes through a pro forma approval process. It will be a small step to require, as in Greece , approval by the EC before revealing the budget to the public.

    The TSCG transfers sovereignty from democratic institutions to an unelected bureaucracy. Were it the case that the EU parliament possessed substantial control over the Commission (which it does not), the TSCG would still be profoundly authoritarian because of the power of the EC bureaucracy over what should be decided democratically.

    Treaty-Protected Mismanagement

    EU fiscal rules, from the Maastricht Treaty to the TSCG are anti-democratic, as well as inflexible to change. The Treaty specifically commits the adopting government to embed the fiscal rules in law in a manner ensuring their "permanent character, preferably constitutional." Embodied in treaties, they can only change through repeal or adoption of additional treaties. Both involve extremely cumbersome and time consuming processes.

    Were the fiscal rules theoretically and practically sound their anti-democratic and inflexible nature would still discredit them. Far from sound, they are technically flawed, mandating macroeconomic mismanagement. The Treaty mandates specific limits to fiscal policy.

    [The Treaty] requires contracting parties to respect/ensure convergence towards the country-specific medium-term…with a lower limit of a structural deficit (cyclical effects and one-off measures are not taken into account) of 0.5% of GDP; (1.0% of GDP for Member States with a debt ratio significantly below 60% of GDP).

    Before considering the wisdom of the 0.5% deficit target, two major technical mistakes standout, 1) the Treaty uses an unsound measure of the fiscal deficit; and 2) the key concept, "structural deficit," is theoretical nonsense.

    The TSCG adopts the Maastricht deficit specification, total revenue minus total expenditure, which is the overall deficit. As the IMF explains in its guidelines for fiscal management , the appropriate measure for sound fiscal management is the primary deficit, which excludes interest payments on the public debt (which if reduced would imply partial default).

    When the TSCG specifies the 0.5% as a "structural deficit" we go from the inappropriate to the absurd. The Commission as well as the usually competent OECD defines "structural deficit" as the deficit that would appear by eliminating cyclical effects; i.e., the deficit when an economy operates at normal capacity.

    Making this concept operational requires an analytically sound method of eliminating cyclical effects, then a clear and consistent measure of normal capacity. The EU structural deficit fails on both criteria. In practice the EC bean-counters make no attempt to eliminate cyclical effects. The method of calculation of normal capacity ignores the cycle altogether by defining normal capacity to the level of output at which the rate of unemployment implies stable inflation (the "non-accelerating inflation rate of unemployment," NAIRU ). Again, the EC bureaucrats reveal their ideology by taking inflation not output or unemployment as measure of economic health.

    The NAIRU would be sufficiently problematical were attempt made to adapt it to the specific institutional characteristics of each country at specific time periods. For example, if the concept has operational validity, it is extremely unlikely that it would assume the same value before and after the 2008-10 global recession. An inspection of the eurostat tables for the actual and "structural" deficits shows no evidence of estimations with country specific adjustments.

    The decidedly dubious nature of the NAIRU is indicated by its nom de guerre , "the natural rate of unemployment." This phrase betrays an underlying ideology that 1) unemployment is a natural phenomenon to which all economies automatically adjust; and 2) inflation always results from excess demand. If the first were true the global recession would not have occurred. The second ignores price pressures arising from traded goods and services, petroleum being the most obvious and price-volatile.

    The possibility of calculating country and time specific normal capacity would not save the 0.5% rule the realm of ideological nonsense. First and foremost, it represents static analysis applied to a dynamic process. The formal statement of the 0.5% would be as follows:

    Economy A operates below normal capacity with a fiscal deficit of 2.5% (for example). Other things unchanged, were economy A at normal capacity the deficit would be 1.5% (for example), above the 0.5% requirement. Therefore, the government of country A must now take steps to reduce expenditure or raise taxes, so if the economy were at full capacity the hypothetical deficit would be 0.5%.

    The 0.5% rule is a hypothetical outcome based on analytically unsound calculations. This "what if" calculation by statisticians is used by an undemocratic bureaucracy to force elected governments to implement contractionary economic policies. The technically unsound, hypothetical 0.5% target mandates a pro-cyclical macroeconomic policy. To render the rule Kafkaesque, after the EC bureaucracy calculates that a government will not meet the hypothetical target, it then mandates contractionary policies that guarantee that the target cannot be achieved. The problem is imaginary and the solution contradictory.

    The wording of the TSCG makes it clear that deviant fiscal behavior by a member country will not be tolerated,
    Correction mechanisms should ensure automatic action to be undertaken in case of deviation from the [structural deficit target] or the adjustment path towards it, with escape clauses for exceptional circumstances. Compliance with the rule should be monitored by independent institutions.

    The "independent institutions" include the European Commission itself, which adds a distinctly Orwellian character to the already Kafkaesque Treaty.

    Painted into a Recessionary Corner

    Market economies pass through cycles of recession and expansion. They suffer from fiscal deficits in recessions, because falling or slow-growing output results in falling or slow-growing revenue. Such circumstances typically result from a drop in private investment or exports. Economies most effectively overcome recessions by the public sector using its spending powers to compensate for the inadequate private demand.

    The TSCG legally prohibits the implementation of this effective countercyclical fiscal policy. It forces member governments to apply policies analogous to the practice 200 years ago of bloodletting to restore health to the ill. It is a Treaty designed to maintain perpetual stagnation across the European continent.

    The term "Six-Pack", the secondary legislation linked to the treaty, is frequently used as synonymous with the TSCG. This is a singularly appropriate nickname for the enabling legislation. The Six-Pack contains the economic equivalent of a pernicious snake oil, a witch's brew to turn minor fiscal problems into recessionary downturns. For those dedicated to a prosperous and harmonious European Union, repeal or replacement of the TSCG stands out as an urgent priority. Fiscal integration on the basis of the TSCG would be disastrous.

    ke , April 20, 2016 at 11:03 am

    What most Americans know about Europe is on a postcard, or the propaganda they were taught in school. The vast majority on this planet is dependent on a MAD money laundering scheme built by Wall Street, copied globally, and automated by WS of the West, silly valley, now strip mining the planet, on auto pilot, with a belief in political discourse, among completely insulated, puppet politicians.

    Back in the day, before joining, Robert R actually said some intelligent things about labor. The crashing actuarial ponzi has been in operation so long it is an assumption. On the one hand money enslaves future generations to the present, and on the other we are all supposed to seek a feudal pension. The casino wins in both directions.

    I have dear friends from H to VI, but sleep walking through life, while natural resources are needlessly strip mined for the sake of maintaining artificial scarcity, is a good way to put it.

    We don't even need oil, but the economy is leveraged on that contract price, to maintain subservient populations. We are choking on excess oil, storing it all over the ocean, and preventing iran/iraq from putting its product on the market, all to confirm a psychology of dependence, like an ant farm, assuming that individual humans can only wander randomly without the benefit of the collective, serving the sociopathic psychologist writing the scripts.

    Funny, there is a shortage of private demand for more incompetent government.

    RabidGandhi , April 20, 2016 at 11:53 am

    Another fundamental difference between the US and EU is the difference in central bank mandates, with the Fed having its dual inflation/employment mandate in its bylaws, but under Maastricht the ECB only has a mandate for low inflation.

    That said, the Fed has a dual way for getting around the dual mandate: playing fast and loose with what is defined as unemployment, and just straight out ignoring it (eg, raising interest rates at the first whiff of possibility that there might be a rumour that someone's uncle's cousin's best-friend's roommate thinks there could eventually be a slight uptick in the CPI). This means, yes there are differences in the founding documents, but is there anywhere in US economic governance that NAIRU is not assumed either?

    Benedict@Large , April 20, 2016 at 3:00 pm

    The dual mandate is a fiction. There's nothing the Fed can do to lower unemployment (though it can raise it by mistake.) The unemployment rate is set by the fiscal policies of Congress and the Executive. The unemployment rate, should they desire, can even be set to zero. That it is not should be sufficient cause for the guillotines.

    RabidGandhi , April 20, 2016 at 4:13 pm

    I definitely agree w/r/t fiscal policy, but I think the point is that at least in the US there is a nominal (but ignored) primum non nocere written into the Fed's by-laws. It is supposed to take actions that will "promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates." What this means is that raising interest rates at the mere rumour of inflation is going against the Fed's mandate– not that anyone in power cares. Meanwhile in Europe they just dispense with the whole fiction of not having a monetary policy that kills employment.

    PlutoniumKun , April 20, 2016 at 12:10 pm

    I think the process of corporate control of the EU was so slow and gradual plenty of left wingers in Europe still haven't really grasped what has happened. From the beginning, there was always a tension within Europe between pressure from corporations for more business friendly policies and the generally social democrat lite views of the original founders. I think though to call it 'neoliberal' is not quite correct – for me 'neoliberal' implies a specific set of policies associated with the Anglosphere – I think in Germany what we've seen is the takeover by a more German flavoured right of centre view – it is similar, but is more generally corporatist and mercantilist in nature with a strong dash of Austrian economics.

    I see the results every day when I step outside my apartment in Dublin. Thats to a focus on privatisation and 'competition', what was once a fully functioning waste collection service in my city has now become a chaotic privatised service, with competing companies driving down the quality. No more proper wheelie bins collected on the same day, instead there are plastic bin bags everywhere, there to be torn apart by seagulls and foxes, scattering rubbish everywhere. All in the name of 'competition', driven by EU Directives. The focus on 'internal competition' is gradually eroding sensible regulation in energy, waste and telecommunications. Supposedly in the interest of the consumer, but we all know who really benefits.

    Fajensen , April 20, 2016 at 5:09 pm

    I don't think all this "competition" really benefits anyone, I believe it's just there for the principle.

    PlutoniumKun , April 21, 2016 at 5:55 am

    Well of course the 'competition' is a myth. As anyone who has witnessed what has happened in electricity markets can see, it has, if anything, raised prices of electricity for consumers. But various powerful interests have done very well indeed. you can see the same process in water and waste services and pretty much anything that has been directly regulated and privatised. The only areas where I think it can be shown that consumers have benefited from competition are in telecommunications and in air travel. And in the former, I suspect the consolidation of the telecom industry will reverse those gains.

    Barry Fay , April 21, 2016 at 10:15 am

    The airlines are a terrible example – in fact, there was a great article treating the airlines as a classic example of "crapification". The seating has become ridiculously cramped (as a way to then "sell" seats that someone can actually sit in!), the service has been basically reduced to the bare minimum, luggage charges are outrageous and ticket prices continue to climb even though one of the major expenses (i.e. fuel!) has become cheaper by 50 per cent. No, the airlines were a bad example.

    financial matters , April 20, 2016 at 1:14 pm

    Nice to read such an excellent analysis. And with very appropriate metaphors.

    "To render the rule Kafkaesque, after the EC bureaucracy calculates that a government will not meet the hypothetical target, it then mandates contractionary policies that guarantee that the target cannot be achieved. The problem is imaginary and the solution contradictory."

    "The "independent institutions" include the European Commission itself, which adds a distinctly Orwellian character to the already Kafkaesque Treaty."

    JEHR , April 20, 2016 at 2:56 pm

    The World is really messed up!

    rfam , April 20, 2016 at 6:34 pm

    I would suggest that any country that doesn't like these rules failed to read the agreement and should exit the EU and start issuing worthless currency. In doing so they can feel free to devalue, run large deficits, borrow all they want and then leave the "neo-liberals" to it. When the banks and hedge funds that over-lend to fund these deficits fail or demand collateral ( http://www.npr.org/sections/money/2012/10/22/163384810/why-a-hedge-fund-seized-an-argentine-navy-ship-in-ghana ) you will discuss their predatory nature.

    Hansrudolf Suter , April 21, 2016 at 6:46 am

    "Thus, not restricting surpluses carries an implicit mercantilist message." EU guidelines fix trade surplus at 6%, Germany is, I believe, in its seventh year of violation and should be fined. That it doesn't happen maybe shows that the elite ruling the EU is German.

    Schofield , April 21, 2016 at 4:43 pm

    Given half a chance some human beings who never got much loving as a child will seek to correct the imbalance by "weaponizing" money and using it against the interests of the majority. For those who've read the psychoanalyst Alice Miller books they will recognize her argument that resentment builds up in the child and needs expression in the form of subconsciously motivated vengeance as an adult!

    [May 05, 2016] Robert Reich Why Is One of Sanders Most Important Proposals Being Ignored

    Notable quotes:
    "... By Robert Reich. Originally published at his website ..."
    "... "it would cost me $500-$1000 maybe more a year" ..."
    April 20, 2016 | naked capitalism
    Yves here. I want to clarify one key issue about a transaction tax. Its purpose is not to raise revenue. Its purpose is to discourage excessive trading, which is socially unproductive. Recently, many studies have found that an outsized financial sector is as drag on growth. The finer-grained ones have identified too many resources devoted to secondary market trading as the cause. "Secondary market trading" is all the buying and selling that happens after a company raises money, as in among investors, not sales of newly-issued securities from a company to investors to raise money. A certain level of secondary market trading is necessary and desirable so that an investor can sell if he wants to (as in he needs liquidity). But overly cheap liquidity makes it attractive to trade for purely speculative purposes, as the collapse in average holding times of NYSE stocks attests.

    Now a transaction tax may indeed raise a lot of revenue. But the intent is to discourage undesirable activity, and it's hard to estimate in advance how much trading volumes would fall with a well-designed transaction tax.

    By Robert Reich. Originally published at his website

    Why is there so little discussion about one of Bernie Sanders's most important proposals – to tax financial speculation?

    Buying and selling stocks and bonds in order to beat others who are buying and selling stocks and bonds is a giant zero-sum game that wastes countless resources, uses up the talents of some of the nation's best and brightest, and subjects financial market to unnecessary risk.

    High-speed traders who employ advanced technologies in order to get information a millisecond before other traders get it don't make financial markets more efficient. They make them more vulnerable to debacles like the "Flash Crash" of May 2010.

    Wall Street Insiders who trade on confidential information unavailable to small investors don't improve the productivity of financial markets. They just rig the game for themselves.

    Bankers who trade in ever more complex derivatives – making bets on bets – don't add real value. They only make the system more vulnerable to big losses, as occurred in the financial crisis of 2008.

    All of which makes Bernie Sanders's proposal for a speculation tax right on the mark.

    He wants to tax stock trades at a rate of 0.5 percent (a trade of $1,000 would cost of $5), and bond trades at 0.1 percent.

    The tax would reduce incentives for high-speed trading, insider deal-making, and short-term financial betting. (Hillary Clinton also favors a financial transactions tax but only on high-speed trading.)

    Another big plus: Given the gargantuan size of the financial market and the huge volume of trading occurring within it every day, this tiny tax would generate lots of revenue.

    Even a 0.01 percent transaction tax (a basis point is one-hundredth of a percentage point, or 0.01 percent) would raise $185 billion over 10 years, according to the nonpartisan Tax Policy Center.

    Sanders's 0.5 percent tax could thereby finance public investments that enlarge the economic pie rather than merely rearrange its slices – like tuition-free public education.

    After all, Americans pay sales taxes on all sorts of goods and services yet Wall Street traders pay no sales taxes on the stocks and bonds they buy.

    Which helps explain why the financial industry generates about 30 percent of America's corporate profits but pays only about 18 percent of corporate taxes .

    Naysayers led by the financial industry's lobbyists (the Financial Services Roundtable and Financial Markets Association) warn that even a small tax on financial transactions would drive trading overseas, since financial trades can easily be done anywhere.

    Baloney. The U.K. has had a tax on stock trades for decades yet remains one of the world's financial powerhouses. Incidentally, that tax raises about 3 billion pounds yearly (the equivalent of $30 billion in an economy the size of the U.S.), which is pure gravy for Britain's budget.

    At least 28 other countries also have such a tax, and the European Union is well on the way to implementing one.

    Industry lobbyists also claim the costs of the tax will burden small investors such as retirees, business owners, and average savers.

    Wrong again. The tax wouldn't be a burden if it reduces the volume and frequency of trading – which is the whole point.

    In fact, the tax is highly progressive. The Tax Policy Center estimates that 75 percent of it would be paid by the richest fifth of taxpayers, and 40 percent by the top 1 percent.

    It's hardly a radical idea.

    Between 1914 and 1966, the United States itself taxed financial transactions. During the Great Depression, John Maynard Keynes urged wider use of such a tax to reduce excessive speculation by financial traders. After the Wall Street crash of October 1987, even the first President George Bush endorsed the idea.

    Americans are fed up with Wall Street's financial games. Excessive speculation contributed to the near meltdown of 2008 – which cost millions of people their jobs, savings, and homes.

    So why is it only Bernie Sanders who's calling for a financial transactions tax? Why aren't politicians of all stripes supporting it? And why isn't it a major issue in the 2016 election?

    Because a financial transactions tax directly threatens a major source of Wall Street's revenue. And, if you hadn't noticed, the Street uses a portion of its vast revenues to gain political clout.

    So even though it's an excellent idea championed by a major candidate, a financial transactions tax isn't being discussed this election year because Wall Street won't abide it.

    Which maybe one of the best reasons for enacting it.

    vlade , April 20, 2016 at 5:58 am

    important point – UK has FTT on stocks, it's called stamp duty. despite that, footsie is considered one of the most important non us markets worldwide… so cries of how it would kill the sector are a bit overdone..

    mind you, the rise of cfds and similar to bypass sd led to issues of its own

    Anonymous , April 20, 2016 at 6:06 am

    Need a tax on the derivatives market.

    Yves Smith Post author , April 20, 2016 at 6:36 am

    I would think that would be part of the plan, particularly given the volumes. Sanders tends to do himself a disservice by staying at the 30,000 foot level, which is where execs generally are anyhow. But he doesn't have enough surrogates going into the weeds on his behalf.

    JeffC , April 21, 2016 at 12:13 pm

    Sanders' plan includes a smaller tax on bond trades-0.1%? unreliable memory here-and a smaller one yet on derivatives trades.

    Teddy , April 20, 2016 at 6:42 am

    I'm more of a right winger, but this is one Sanders proposal I can fully support. There's something seriously wrong with an economy that spends gigantic sums on building tunnels for optic cables so transactions can be processed two miliseconds faster. This automated flash trading is against everything financial markets are supposed to be about, it's even against everything that speculation is supposed to be about. I also agree with Yves's assessment that this isn't about revenue extraction, but about curtailing harmful activities. However, given high levels of corruption in US politics and huge profits this new industry enjoys, is such an idea even feasible?

    hemeantwell , April 20, 2016 at 10:49 am

    an idea even feasible?

    I believe I can appreciate why your statement took that discouraged turn. But the next move would be to say that, if such a good idea is made infeasible by a corrupt political order, doesn't that then contribute to its indictment? That's one reason why the current political situation is so changed from ten years ago.

    Paul Jurczak , April 20, 2016 at 7:25 am

    I would add underclocking the stock exchange to augment the effect of transaction tax. It is perfectly sufficient for healthy economic activity to settle the transactions only in equal discrete time intervals, say once every minute. This would starve all HFT parasites, reduce the size of financial sector and its rent extraction from productive economic activity.

    EndOfTheWorld , April 20, 2016 at 7:52 am

    Why is this important proposal being ignored? Bribery.

    RUKidding , April 20, 2016 at 11:25 am

    Possible.

    Sanders' campaign has been mostly kept dark by the M$M (which includes National Propaganda Radio). If one hears/reads much about Sanders in the usual sources, it's usually to patiently explain why he simply cannot win.

    It's exceedingly rare to hear/read much of what the substance of Sanders' campaign compromises, and mostly then, what you'll hear is fatuous twaddle about Sanders' proposal (which isn't fatuous but is presented that way) about free college.

    So one has to come to blogs, such as this one, to learn more. Too bad most citizens don't do that, but that's the way it is. And there's a reason for it. Clearly Sanders, at least, annoys the .01%. They don't want his message getting out. There's a reason for that, as well.

    HotFlash , April 20, 2016 at 8:07 am

    Hmm, I took this as another mark of Bernie's genius. I figure that the 'free public college education' was not only a demonstrable and desirable social good but also a nice carrot to sell the FTT.

    Agree w/Teddy and others about the unfairness of a market that permits nano-second trading for the suitably connected. Secondary market trading beyond basic liquidity does not benefit the real economy. The beneficiaries are speculators and managers whose remuneration is tied to share prices - that is, useless eaters.

    Melk39 , April 20, 2016 at 8:54 am

    The reason it is being ignored is because Bernie touted the tax as way to pay for college for all. The tax on financial transactions makes most people's eyes glaze over, but they are very interested in the idea of free college. So I get the hook, but this means the the tax debate never occurs, all the discussion is about free college. Now both ideas have merit, but each should have its own debate. It would be also a way to build a consensus around a broader policy of finally reigning in Wall Street, including bring back the best parts of Glass Stegall. That's how you get the discussion going. Decouple and debate.

    gadawson , April 20, 2016 at 9:09 am

    The benefits of free academic tuitions are so large they are inestimable due to the myriad of benefits that would cascade throughout the economy. Why would anyone oppose such and how is such a plan pushed aside? Only through the greatest imbalance of invisible intransigent power the world has ever known.

    Doctor Duck , April 20, 2016 at 9:33 am

    This is an important idea, but I don't think I've ever heard at what point such a tax would be imposed. If a large majority of high-speed automated trading results in cancelled trades, it would be of little use in curbing that if it were only applied to completed transactions.

    HotFlash , April 20, 2016 at 12:23 pm

    The point is not necessarily to raise revenue (please, MMT anyone?) but to control behaviour. Putting a drag on HST would in itself be a public good. As I have said before, free tuition is a way to sell a tax on financial transactions. Debate all you like, but decoupling will lose the tax.

    Doctor Duck , April 20, 2016 at 12:59 pm

    I concur that a drag on HFT would be a public good. But my question doesn't imply raising revenue, rather how such a tax would be a drag on HFT in particular. A tax on transactions would (by definition it seems) not apply to cancelled transactions. So how would it impact the behavior of HFT, which relies heavily on cancelled trades, any more than it would any trading?

    Probably "quantized" settling as proposed in another comment would have a greater effect.

    steelhead23 , April 20, 2016 at 1:59 pm

    You are right. If the purpose of the tax is to discourage HFT, the tax should be levied on each and every bid, not just completed transactions. According to Eric Hunsader HFT traders pay big bucks so they can have millisecond faster access to the market – which they use to place multiple bids they never intend to complete, thereby manipulating price, creating volume interest where little exists, etc. To end HFT you would have to tax each bid (at an very small rate, say .01%).

    JSR , April 20, 2016 at 9:52 am

    Are things like ETF's included in this? I understand the need to curb many of the dangerous games of all the value detracting speculation and trading etc,. What I'm struggling with is I may make a few trades a year simply to rebalance my portfolio (amount of trades depends on whether markets are volatile or steady) once certain levels of over/under are reached. My rough calculation of this .05% tax, is it would cost me $500-$1000 maybe more a year. Not outrageous but a sizable enough increase for an infrequent trader/investor and I'm pretty sure, not part of the problem that is trying to be solved here. Plus, as if I'm not angry enough at Wall Street (I used to work in the industry, left of my own volition) it makes me wonder if I'm not being financially penalized for their greed and criminality. I want to support this but I hope there will be a little nuance (not too much though to ruin the whole purpose) to not ensnare everyone who makes a trade once in awhile.

    FluffytheObeseCat , April 20, 2016 at 3:16 pm

    "it would cost me $500-$1000 maybe more a year"

    Unlikely. I suspect the 0.5% mark is an initial bargaining position. What everyone seems to be anxious to forget (or have forgotten) is that Sen. Bernie "amendment king" Sanders has been in Congress for a loonnng time. If he's floating 0.5% in position papers, policy proposals, etc., it's because he's aiming to get 0.1 – 0.2% enacted. 200 bucks a year won't injure anyone who can manage to maintain a brokerage account.

    If the guy were truly the absent-minded, flyaway-haired nutty old dodderer the MSM wants him to be, he'd never have made it this far in life.

    Pat , April 20, 2016 at 9:57 am

    I realize that probably most of the objection to this is being fueled by the large houses own high frequency trading. I mean when you finance your own algorithms to figure out how to micro trade at high volume…you are talking about a lot of money. But I would also bet that some of it is the mutual fund and individual trader sector of the market. It isn't really about hurting the small investor, it is about discouraging the small investor from trading as frequently. They are seeing their commissions get cut, because Mom and Pop don't like the tax and put the brakes on. The stability of our economy and of our markets be damned, not to mention customer service.

    Jim A. , April 20, 2016 at 10:23 am

    My worry is that the financial giants would put enough lawyers on this to try and try to create a way to avoid paying this financial tax in pretty much the same way that they figured out how to not pay title recording fees. They would create an exchange (no doubt called something different) that would own large numbers of shares and trade some sort of "future" or agreement to transfer amongst each other. Can you have a 1 second future contract? .01 second?

    RUKidding , April 20, 2016 at 11:19 am

    You echo a concern I have about this as well. These parasites and their shyster lawyers are very good at finding or creating loopholes that benefits them, alone.

    That said, it's worth investigating and attempting to implement. It's equally worth more wide-spread discussion about why it's needed and what's happening, but I won't hold my breath on that score.

    There have been one or two programs highlighting these high speed transactions on NPR, fwiw, albeit I don't believe – no surprise – that any solution was suggested.

    RN , April 20, 2016 at 10:24 am

    More practical solutions will be (1) to delink capital gains tax from income tax and (2) to collect capital gains tax at source.

    Benedict@Large , April 20, 2016 at 11:14 am

    Correct. No tax by the sovereign issuer of the currency has as it's purpose the raising of revenue, of which the sovereign issuer already has an infinite supply. Taxes by the sovereign issuer merely serve to regulate demand.

    Of course, try to explain to anyone inside the beltway how their currency actually works, and they'll think you are crazy. They've been told incorrectly for 40 years, and DAMMIT! That's enough to make it right.

    Beniaminio , April 20, 2016 at 11:21 am

    Forgive my ignorance, but I don't see why a blanket transaction tax of 0.5% or whatever would be preferable to a transaction tax of 5-10% applicable to the actual bad actors, i.e., the high-frequency traders. It seems like it would be easy enough to assess a genuinely punitive tax against the actual "speculators" who are flipping shares over the course of single trading session, i.e., to tax both HFT and day-trading out of existence. I also fail to see how a transaction tax of general application would significantly inhibit insider trading.

    I think Reich is being a bit tone-deaf here. In a ZIRP environment, conservative investors are effectively foisted into the stock market, and are then reviled as speculators. Is it no longer politically acceptable for the little people to invest accumulated capital? We can't all live off of political consulting and paid speeches like former Clinton-era cabinet ministers.

    FluffytheObeseCat , April 20, 2016 at 3:30 pm

    Oh, please. I've been "in the market" in mutual funds and lesser amounts of directly held stock for 20 years. If I traded enough to generate +$200 in transaction taxes, it would be a sign that I was getting bad advice, & was stupid enough to take it. If Bernie's transaction tax were enacted, it would eradicate most institutional HFT efforts in under a year. Over a decade, it's greatest benefit may be in slowing the erosion of middle class wealth by reducing excessive trading and associated fee skimming.

    The guys in dress shirts in your local MSSB office in flyover are not actually your friends, and their service fees are much, much larger than they need to be in this era of electronic trading.

    Beniamino , April 20, 2016 at 11:07 pm

    Guys in dress shirts in flyover country? Uh …. what? I'm not sure I'm following but you appear to be saying that you've conducted less than $40,000 in stock & mutual fund trades over the course of twenty years; in other words you don't care about the actual merits of this transaction-tax proposal because you don't have any money to invest anyway. Not a particularly compelling argument. At any rate, I thought the point of the proposal was to curb rank speculation, not to discourage old ladies from buying utility stocks. So why not target the actual speculators?

    Chauncey Gardiner , April 20, 2016 at 11:30 am

    Sanders' proposal of a securities transaction tax is being ignored for the same underlying reason proposals to tax accumulated wealth have been ignored.

    "Behind every great fortune there is a great crime." -Balzac

    Carly , April 20, 2016 at 2:11 pm

    The bottom line of why this tax is ignored is the majority of people who vote doesn't understand how the markets work. So they don't understand how this would work and help. They keep voting for people who won't make any significant changes to our society. Hillary won't be any different she is going to be the same old horse leading the way. Sheeple --

    F. Korning , April 20, 2016 at 2:31 pm

    Cancelled and no-op trades wielded with impunity are the root of the HFT problem. I'm not sure why many here are claiming a tax wouldn't affect cancellations. The tax should be punitive especially for order cancellations under a reasonable holding period. It should also be much higher for non-listed OTC derivatives, repos, and all manner of exotic structured products, special vehicles, and dark pool (un)liquidity. The point is to force skin in the game.

    The Infamous Oregon Lawhobbit , April 20, 2016 at 2:43 pm

    Our gentle host wrote, "I want to clarify one key issue about a transaction tax. Its purpose is not to raise revenue. Its purpose is to discourage excessive trading, which is socially unproductive."

    Makes perfect sense – it's the old adage, "If you tax something, you get less of it. The more you tax, the less you get."

    And if the revenue generated covers enforcement costs, that's weevils in the porridge!

    Angry Panda , April 20, 2016 at 3:25 pm

    The bond part puzzles me to some extent. At least as applied to below investment grade stuff, because obviously Treasuries and IG are different animals.

    First, the whole "high speed, high frequency" thing. Much of the time, it really isn't. I mean, these are instruments that still trade through humans (via the phone or Bloomberg chat), and many of even $500 million plus issues don't trade very often, period. In many bonds probably the most volume you see is immediately after issuance, and that's more a matter of people either flipping a small allocation or topping up to get to their target, with the dealer often pretty much setting up the trades with their allocation strategy. So that's a different animal than straight-up speculation (high frequency or otherwise).

    Second, ok, you're "taxing" bonds effectively 1/8 (0.1%, but I'm rounding as bonds are actually quoted in eighths, maybe sixteenths sometimes), presumably paid by one or both counterparties (split equally between buyer and seller?). I…don't see how that is going to alter much of the trading that goes on. The bid-ask is effectively a bit wider, your mark when you buy something is a little lower (if you use bid-side), people complain more than usual. But High Yield is generally not something where paying up 1/8 is going to make or break your trading strategy, unlike with equities (where the high frequency guys play on fractions of fractions). At most you're looking at trades in "on the margin" issues having a tougher time getting done in stable markets (because in a hot market everyone pays up anyway, while in a rout there is often no bid, period).

    All a long way of saying, bonds – fine. Define the word "bonds". Treasuries? IG? HY? Structured? And you want to realize how much in revenues from that?

    Equities, on the other hand – no brainer. Tax away. If anything, tax them more than is currently proposed, because the point – to me – is not to raise revenue, but to severely disincentivize speculation (of either the high frequency or the regular kinds). Imagine, for example, if the tax was at 10% of the pre-commission trade value (i.e. just shares times price), payable by both buyer and seller. "But Panda, you'll destroy secondary equity trading!" Precisely, children, because at the end of the day most of such contributes absolutely nothing productive to either the society or the economy. Now, maybe I'm much more extreme than the consensus, but my point is that what Sanders is currently proposing is well within what the industry can "eat" without changing its behaviour too much, in my opinion.

    Lyle , April 20, 2016 at 3:55 pm

    Of course before deregulation of commissions the US had a private version of the financial transaction tax in terms of the fixed commissions. One way to compare is to look at commissions compared to the modern commission+ ftt. If the commissions were greater than unless you believe the market 30 years ago was defective it won't make a lot of difference.

    [May 01, 2016] Why I (Belatedly) Blew the Whistle on the SECs Failure to Properly Investigate Goldman Sachs

    Notable quotes:
    "... By James A. Kidney, former SEC attorney. Originally published at Watch the Circus ..."
    "... Pro Publica ..."
    "... Pro Publica's ..."
    "... The New York Times ..."
    "... The New York Times ..."
    "... The New York Times ..."
    "... The New York Times ..."
    "... Dodd-Frank at best imposes generalized rules about bank size and other generic issues, rather than addressing the kinds of fraudulent actions that actually occurred. It is appropriate for the SEC or Federal Reserve to impose narrower changes in corporate practice to address specific kinds of fraud. They are called "undertakings" and are often imposed by civil settlements with the SEC or in litigated relief. It did not happen with the Big Bank frauds. ..."
    "... The only reason to keep the information secret is to prevent embarrassment to the SEC or to those people who made decisions for the agency. Most of them left the SEC years ago. For public consumption, I have tried to redact all names of the non-supervisory personnel in the Division of Enforcement who worked on Goldman. I also must add that, as the emails show, for a period of time those dedicated investigators were excited about the notion of bringing at least a slightly broader action than their supervisors wanted. As is the case with much of the Division of Enforcement, the worker bees try hard and usually are fearless. It is their bosses who frequently suppress their enthusiasm for policy, political, or personal reasons. ..."
    "... The author is trying very hard to be nice to the point of being delusional. This is criminality and corruption through and through, and it didn't end in '08. Don't be sad… get mad. ..."
    "... This man has risked a lot to do what he did. He's lost more than many of you will realize. If he can't just crap on the old life and the old profession, please, cut the man a little slack. You don't want to be him. ..."
    "... James A. Kidney, former trial attorney with the Securities and Exchange Commission, retired from the SEC in 2014 at the age of 66 after 24 years working there. Looks like he had a full career, although had to put up with a lot of bullshit, and possibly soured some relationships on his way out. ..."
    "... Very similar situation here. Going on 50, unemployed in my chosen field, etc. And yes, its hard to just walk away sometimes… I have to keep my mind focused ahead instead of looking back. ..."
    "... I know other whistleblowers and internal dissenters who wound up losing their jobs who initially blame themselves, than come to accept that the system in which they operated was fundamentally corrupt, that even if some people locally really were trying to do the right thing, it was bound to either 1. go nowhere, 2. be allowed to proceed to a more meaningful level if it was cosmetic or served some larger political purpose or 3. got elevated because the organization was suddenly in trouble and they needed to burnish their cred in a big way (a variant of 2, except with 3, you might have a something serious take place by happenstance of timing). ..."
    "... (other whistleblowers) ..."
    "... (other whistleblowers) ..."
    "... (other whistleblowers) ..."
    "... (other whistleblowers) ..."
    "... the system in which they operated ..."
    "... (some employees) ..."
    "... 'investigating fraud' ..."
    April 24, 2016

    Yves here. Two things struck me about Jim Kidney's article below. One is that he still wants to think well of his former SEC colleagues. I know other whistleblowers and internal dissenters who wound up losing their jobs who initially blame themselves, than come to accept that the system in which they operated was fundamentally corrupt, that even if some people locally really were trying to do the right thing, it was bound to either 1. go nowhere, 2. be allowed to proceed to a more meaningful level if it was cosmetic or served some larger political purpose or 3. got elevated because the organization was suddenly in trouble and they needed to burnish their cred in a big way (a variant of 2, except with 3, you might have a something serious take place by happenstance of timing). Kidney does criticize corrosive practices, particularly the SEC stopping developing its own lawyers and becoming dependent on the revolving door, but his criticisms seem muted relative to the severity of the problems.

    Number two, and related, are the class assumptions at work. The SEC does not want to see securities professionals at anything other than bucket shops as bad people. At SEC conferences, agency officials are virtually apologetic and regularly say, "We know you are honest people who want to do the right thing." Please tell me where else in law enforcement is that the underlying belief.

    By James A. Kidney, former SEC attorney. Originally published at Watch the Circus

    The New Yorker and Pro Publica websites today posted an article by Pro Publica's Jesse Eisinger about the de minimis investigation by the Securities and Exchange Commission into the conduct of Goldman Sachs in the sale of derivatives based on mortgage-backed securities during the run-up to the Great Recession of 2008. The details of the SEC's failure to aggressively pursue Goldman in the particular investigation, Abacus, and its refusal to investigate fully misconduct by Goldman and other "Too Big to Fail" banks, stands not only as a historic misstep by the SEC and its Division of Enforcement, but undermines the claim that the Obama Administration has been "tough on Wall Street." The Pro Publica version contains links to a few of the documents I provided.

    No one in authority who was involved in the Goldman investigation ever gave me an explanation for why the effort was so slight. Mr. Eisinger's article doesn't offer any explanation from the one investigation participant brave enough to comment. The details of the investigation into Abacus at my level as trial counsel, which I provided to Pro Publica earlier this year, compels the conclusion that the SEC, its chairman at the time, Mary Schapiro, and the leadership of the Division of Enforcement were more interested in a quick public relations hit than in pursuing a thorough investigation of Goldman, Bank of America, Citibank, JP Morgan and other large Wall Street firms.

    Although the emails and documents I produced to Pro Publica stemming from my role as the designated (later replaced) trial attorney for the Division of Enforcement are excruciatingly boring to all but the most dedicated securities lawyer, even a lay person can observe that the Division of Enforcement was more anxious to publicize a quick lawsuit than to follow the trail of clues as far up the chain-of-command at Goldman as the evidence warranted. Serious consideration also never was given to fraud theories in any of the Big Bank cases stemming from the Great Recession that would better tell the story of how investors were defrauded and who was responsible, due either to dereliction or design.

    Instead, the SEC restricted its investigation to the narrowest theory of liability, had to be pressed (by me) to go even one short rung above the lowest level Goldman supervisor in its investigation (which took months to push through, though investigative subpoenas are frequently issued on far less in far smaller cases) and finally dropped other investigations of Goldman in return for a $550 million settlement announced July 15, 2010. To my knowledge (I retired in March 2014), the SEC never again pursued Goldman for its mortgage securities fraud or other major fraud. There is no evidence on the SEC website that it did so.

    Nearly six years later, long after the statute of limitations for securities fraud expired and individuals, pension funds and corporate entities are no longer able to bring private actions against the Big Banks, the Department of Justice announced another settlement with Goldman for its deceptive conduct in the sale of mortgage-backed securities. In this one, Goldman agreed to pay more than $5 billion "in connection with its sale of residential mortgage-backed securities."

    At a minimum, it can be said that the SEC left 90 percent of the money on the table at a time when a more aggressive investigation of the company, as well as others, could have counted for something by disclosing, in a detailed court complaint, Wall Street wrongs that might have helped policy makers better address the subject and allow damaged individuals and entities to bring their own lawsuits.

    It is very important to emphasize emphatically several points. First, I have zero evidence, and would be very surprised, if any of the individuals at the Division of Enforcement, including senior supervisors or the SEC chairman or associate commissioners, acted unlawfully or were motivated principally to protect Goldman and other big banks. All of these people appeared well-intentioned from their point of view, even they never really explained, to me, or to many others at the Commission, their motives in limiting investigations. The most senior level supervisors left more lucrative jobs in the private sector to head the Division of Enforcement, taking plum jobs but at significant personal sacrifice. (They then returned to even more lucrative employment or even more high-profile public positions.) All of them were gentlemen. These factors make it all the more surprising that I never got a clear answer as to why the investigation was so constipated, as it obviously was. Its range was clearly limited from the outset: we will sue the bank and not look hard for evidence of individual participation beyond the lowest levels.

    By the same token, it is unfair to assume as a fact that any of the individuals at Goldman not sued, or anyone at Paulson & Co., violated the securities laws, civilly or criminally. Like any citizen, they are entitled to a day in court. Absent such opportunity, they are innocent of any wrongdoing. Arguments in my internal correspondence that evidence was sufficient to sue should be viewed only as that - arguments.

    So my point in releasing these documents to Pro Publica is not to chastise or hold up to public criticism those involved at the SEC, Paulson & Co. or Goldman, though criticism of the process and of the underlying financial conduct certainly is inevitable. All of these institutions have substantial influence in the investment industry. Rather, it is to bring to light the actual conduct of one of several SEC investigations into Big Bank fraud leading up to the 2008 financial crisis.

    As I told Mr. Eisinger when I met him, I hoped he would go to the individuals in charge of the SEC investigation at the time and find out why the investigation was so limited. I have spent six years wondering what is the true answer to that question. Perhaps there were sound reasons, other than the urge to get out a quick press release, which led experienced criminal prosecutors with histories in Wall Street to smother a major investigation by limiting it to the lowest level employee possible, to express total resistance to even investigating further up the chain of command, and ignoring without serious explanation and analysis what I and others, including my own immediate supervisors, viewed as the more appropriate theory for civil prosecution. I hope there are such reasons. As a trial attorney at the SEC for over 20 years, I bled SEC blue. I believed that the agency usually tried to do the best it could, using analog era procedures and processes to combat fraud in a digital age. I am saddened to release this information. But the notion that "the Administration was tough on Wall Street" must be addressed by facts, not press releases and self-serving interviews, else the system's problems cannot be adequately addressed and repaired to deal with the next financial crisis.

    Not only is the issue of how the financial sector enforcement agencies handled the wrongs of the Great Recession an important political issue, but it is important to history. It is important that the facts not be shielded from the public so that we can all learn for the future. And it is a melancholy thought that, presented with the opportunity for a rigorous investigation and airing of facts in civil or criminal proceedings gone, history will be denied a fairer story of both the financial crisis itself and how the government responded.

    As many news organizations have noted , the taxpayer and Goldman shareholders will pay the combination of penalties and repayments in the DOJ settlement. No individual was named as liable in the civil settlement with Goldman nor in any of the other similar, and even larger, financial settlements entered into with the Department of Justice, all of which are vastly greater than what the SEC obtained in its "quick hit, one and done" enforcement actions. DOJ must be credited with what appears to have been a far more thorough investigation of wrongdoing than the SEC performed, but the public is properly mystified that no individuals were charged, criminally or civilly, although the DOJ press releases contains the usual caveat that "the investigation continues."

    The settlements with Goldman and other Big Banks were resolved under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), which allows the Feds to ignore the normal five-year statute of limitations for fraud, but does not permit suit by private party victims. As has been the practice with DOJ when dealing with Wall Street, no criminal charge was brought. In fact, no complaint was filed in any of these cases. Instead, DOJ entered into contractual arrangements with the banks. Failing to fulfill their obligations under the contract would subject them to civil enforcement as a breach of contract matter, not a contempt charge in federal District Court.

    Contrary to claims by politicians, it is clear that the Obama Administration has not been hard-hitting on Wall Street fraudsters. The large fines obtained by the Department of Justice, while a short-term pinch, are simply a cost of doing business. Relying on fines to penalize rich Wall Street banks, which, after all, specialize in making money and do it well, if not always honestly, is like fining Campbell Soup in chicken broth. It costs something, but doesn't change anything in the way of operations or personnel.

    Despite billions in fines representing many more billions in fraud, the enforcement agencies of the United States have been unable to find anyone responsible criminally or civilly for this huge business misconduct other than a janitor or two at the lowest rung of the companies. Nor have they sought to impose systemic changes to these banks to prevent similar frauds from happening again.

    Yessir, according to the Obama administration, Goldman Sachs, JP Morgan, Bank of America, Citibank and other institutions made their contributions to tearing down the economy, but no one was responsible. They are ghost companies. And nothing needs to be done to prevent such intent or dereliction in the future.

    Law enforcement by contract? Clearly, the banks made it a condition of settlement that no complaint, civil or criminal, be filed. That might gum up the works by requiring state regulators to take action under their own rules, or cause other collateral consequences.

    Ah, say the defenders of the status quo, don't forget about Dodd-Frank, the unwieldy legislation passed by feckless Democrats influenced by big money contributors and their own fear of appearing too aggressive (a particular Democratic Party contagion). Dodd-Frank was and is a virtual chum pool for Wall Street lawyers and lobbyists, leaving most of the substance to regulatory agencies such as the SEC and the Federal Reserve, who for years have been significantly captured by those they are supposed to regulate. The private sector lawyers and lobbyists have open doors to these places to "help" write the rules and add complexity, which they later complain about in court, challenging those same rules as too complex.

    Dear citizen, just remember this: complexity favors fraud, and certainly favors Wall Street and corporate America. You can't understand the rules and neither can Congress or all but the most dedicated experts. That's a lot of room to disguise misdeeds. To take a current example, which came to my attention just before completing this post, Congress is trying to use sentencing reform, generally thought of as intending to remove inequities from the criminal justice system, to also make it even tougher to prosecute and punish white-collar crime. Is this why the Koch Brothers suddenly show such public attention to the poor and needy by favoring such legislation? See this discussion of adding the "mens rea" requirement to such legislation. Burying an important but legalistic issue in otherwise liberal leaning legislation is a current example of disguising lax enforcement of white-collar crime in a complicated package. As one Democratic congressman suggested, how can a liberal vote against sentencing reform? The explanation of the badger buried in the woodpile is too complicated for the average voter.

    Not coincidentally, adding a requirement to the law that it is a defense to either the crime itself or to sentencing that "I didn't know my acts were against the law" is a get out of jail free card as the complexity of laws addressed to ever more sophisticated business misconduct grows. Wall Street clearly has shown no shame in using the defense that "no one knew". Can't blame them. It has worked so far. Maybe they don't even need new legislation.

    I was told repeatedly when I entered the Goldman investigation that synthetic CDOs were just too complex for me to understand. Of course, it appeared to be plain vanilla fraud selling a product designed to fail but nicely packaged for chumps to buy. Claims of complexity hide many easily understood sins.

    At least for the major sins, we don't need even more complex regulations. Instead, put leadership in place who will aggressively enforce the laws we have already. That would raise plenty of eyebrows and put some bums in prison, or at least make them pay civil and criminal penalties personally. As many have noted, prison or, at least, personal financial liability, beats corporate concessions every time and pays back in future reluctance to break the law. The country should try it sometime.

    So back to little me, a small and ineffective cog in the larger system. Why is this release of documents so long after the investigation?

    My friends know that I have been upset since 2010 about the way the SEC handled the Goldman case and, in my view (confirmed by other trial lawyers), that it became a template for other SEC civil suits against the Big Banks. In 2011 I wrote an anonymous letter to The New York Times complaining about the lack of investigative effort by the Division of Enforcement and the impact of the "revolving door" bringing Wall Street defense lawyers into the highest reaches of the SEC. This is a practice that Obama has continued at most departments and agencies having to do with the financial system, following in Bill Clinton's footsteps. The New York Times letter was based entirely on publicly available information.

    I was dismayed to not find any follow-up to my letter in The New York Times . I gave up trying to bring attention to the investigative lassitude of the agency. Interest appeared to be over.

    A year after I retired, I sent a copy of the letter to The Times , under a cover letter identifying myself. One of the addressees on the original letter called and told me the original letter never was received. The caller suggested that was because I misaddressed it to the old location of The New York Times . I felt foolish, of course, but I guess that in 2014, when the letter was finally received, The Times didn't see fit to follow-up the information even knowing its source. This was another indication to me that the time for debate over the law enforcement treatment of wrong doers on Wall Street had passed.

    Once, years earlier and only for a brief time, the SEC was an agency that was at least sometimes fearless of Wall Street institutions. In those days, the directors of the Division of Enforcement were home-grown, not imported from Wall Street law firms. After 1996, that ended. Every director since has been nurtured as a Wall Street defense lawyer. The decline in performance has followed an expected arc. No one has seemed bothered by this. It seems the phrase "lawyers represent client interests" is sufficient explanation to insulate this practice from critics. In this view (pushed by lawyers), lawyers are the only people in America who are not influenced by their work experience, including friendships and defense of client practices. They are SO exceptional! So give it up, Jim, I finally told myself. It's the nature of Washington to put foxes in hen houses and claim they are protecting the fowl.

    But in April 2015, Sen. Bernie Sanders announced his presidential candidacy, based principally on anger over how Wall Street has escaped being held seriously responsible for its misdeeds. If you credit Sanders with nothing else, praise him for not letting go of the notion of justice for those who suffered and those who caused pain and anger for millions. Yes, the banks are not solely responsible for the Great Recession, but they contributed more than their fair share and leveraged immensely the damage initially caused by others.

    Sanders was not treated seriously. The publications I read made it clear that Sanders was, like Donald Trump, a flash in the pan. Jeb Bush and Hillary Clinton would be nominated. Anger against Wall Street and inequality were issues, but not worthy vehicles for a political campaign. Nothing here. Move on.

    It turns out that the ravages caused by Wall Street are the gift that keeps on giving. As Sanders campaigned with far more success than predicted, and Secretary of State Clinton defended President Obama as "tough on Wall Street," it was evident that my small contribution to correcting the record might be timely.

    So here it is.

    Do I think Obama is responsible for the ineffective and embarrassing lay downs at the SEC and DOJ? Yes, I do. I have no idea if the President communicated to his law enforcement appointees that they should "go easy on Wall Street." Rarely is such overt instruction necessary in Washington. But it is not hard to believe that in some fashion he did send such signals, since he came into office with a mantra of letting bygones be bygones, including in the far more important arena of the false narratives for invading Iraq.

    In any event, the chairman of the SEC and the attorney general are appointed by the President. At a minimum, we can say with certainty that Obama was satisfied with their performance. It is difficult to conceive that, as a Harvard educated lawyer who also taught law at the University of Chicago, it never crossed his mind how massive civil or criminal misconduct could go on without the supervision or knowledge of at least mid-level executives. Certainly, the public criticism was brought to his attention. His response was to create a joint task force on the subject of fraud in general. Its main visible public function is to collect all the press releases on fraud prosecutions, including small-time fraud, on one website . It also offers advice to "elders" on how to avoid fraudulent scams. The pro forma mention of the task force in DOJ's announcement of the Goldman settlement signals that the Task Force doesn't do much. Again, law enforcement by press release.

    The alternative possibility, never mentioned because it is preposterous, is that big Wall Street firms so lack supervision of their lower level employees that fraud on a huge scale can be conducted without the knowledge of even mid-level executives. At the SEC, at least, such a conclusion should call for application of its "regulatory" function to impose supervisory conditions on the banks. No such action was ever undertaken. Instead, it was "pay up some money and nevermind."

    Dodd-Frank at best imposes generalized rules about bank size and other generic issues, rather than addressing the kinds of fraudulent actions that actually occurred. It is appropriate for the SEC or Federal Reserve to impose narrower changes in corporate practice to address specific kinds of fraud. They are called "undertakings" and are often imposed by civil settlements with the SEC or in litigated relief. It did not happen with the Big Bank frauds.

    I believe that the American public is entitled to accurate information about how their government works, including the important regulatory agencies. One way to do this is to fully disclose how the sausage is made, especially when the process is defective. Self-promoting press releases swallowed by a fawning business press is not sufficient. I knew I would not disclose any non-public information about the Goldman investigation while the lawsuit against Fabrice Tourre was pending. He was the one guy at Goldman the SEC sued personally. In fact, I think he was the only guy employed by any of the big banks sued personally. (Another fellow who worked with the banks - not for the banks - was sued in another case. He was found not liable, with the jury asking how come higher-ups were not in the dock and urging the investigation to continue. It wasn't.) The Tourre case concluded a few years ago with a verdict against the defendant. All appeals are exhausted. The statute of limitations has expired for private actions. Disclosure of the information I had can do no harm to the public or to pending litigation.

    The only reason to keep the information secret is to prevent embarrassment to the SEC or to those people who made decisions for the agency. Most of them left the SEC years ago. For public consumption, I have tried to redact all names of the non-supervisory personnel in the Division of Enforcement who worked on Goldman. I also must add that, as the emails show, for a period of time those dedicated investigators were excited about the notion of bringing at least a slightly broader action than their supervisors wanted. As is the case with much of the Division of Enforcement, the worker bees try hard and usually are fearless. It is their bosses who frequently suppress their enthusiasm for policy, political, or personal reasons.

    As final egotistical end note, I must say that, despite all of my personal reservations about his dedication to effective law enforcement in the financial sector, I voted for the President twice. I will vote for whoever is the Democratic nominee. But I ask myself: Is this the best that two political parties given de facto monopoly over selection of presidential candidates can do?

    Whoever is nominated and elected, Republican or Democrat, I hope that he or she will recognize the need to end the practice of hiring Wall Street personnel to run our financial enforcement agencies. They should begin by looking to home-trained personnel to lead the major departments and agencies, such as Treasury, the SEC and the Department of Justice, including the chief of the Antitrust Division. These are the people who are responsible for these institutions on a daily basis and also understand the nature and importance of their mission. They have a career stake in doing an effective job. Outsiders are, in general, more interested in resume polishing for the next private job. Additionally, much great talent leaves these agencies for their own more lucrative private careers when they see their own chances for advancement blocked by outsiders or their energies trying to fairly but aggressively enforce the law sapped by timid leadership.

    One party has chastised our government on every occasion for nearly 40 years and shows no intention of reining in Big Business or Wall Street. Directly or by implication, these attacks tarnish government employees in general, making a public service career less attractive to our most talented citizens. The other party has been indifferent or ineffective in its defense of civil service and has addressed financial sector wrongs by adding to the complexity of the system rather than cutting through it. As a result, some of our businesses are above the law.

    Something has got to change. It will. The question is, will it be for the better?

    Gaylord , April 24, 2016 at 4:40 am

    The author is trying very hard to be nice to the point of being delusional. This is criminality and corruption through and through, and it didn't end in '08. Don't be sad… get mad.

    James Levy , April 24, 2016 at 6:24 am

    When it's your career, you get sad.

    A little history: I was hired, first as an adjunct, then a tenure-track professor, by the interdisciplinary Freshman teaching unit at my old university. Two years before I would have come up for tenure (and gotten it) they axed the program and switched me, against its will, to the History Department. And they reset my tenure clock to zero. Long story short, they were never going to tenure me. So I slogged on and earned my pay and got my two kids through high school. By then, my wife wanted out of the suburbs and said she was leaving, preferably with me, but leaving. So we moved to the country. This cut me off from the academic life (and nice $72,000 a year paycheck) that I had struggled for years to enter and excel in.

    So what? So, It's gone. I'm cut off. My intended life's work is ruined. At 51 I'm an unemployed naval historian with two books and seven refereed journal articles and I can't get an interview for a full-time job at a community college. How painful is this? It's murder. Hurts all the time. No more exciting lectures to give. No more university library at my beck and call. No more access to journals. No more conferences. It's an occasional one-off course and driving a delivery van.

    This man has risked a lot to do what he did. He's lost more than many of you will realize. If he can't just crap on the old life and the old profession, please, cut the man a little slack. You don't want to be him.

    H. Alexander Ivey , April 24, 2016 at 6:58 am

    Mr Levy, I am very sympathetic to your situation – long story short, I was in the forefront of the late 70s to the present, layoffs in various industries where I found myself game-fully employed. I too, no longer believe I will ever be employed full time at any job.

    But I argue that it is not that the gods do not favour us; it is that we are the outcome of bad gov't policies and unregulated (regulated for the consumer) businesses practices. Hence, my lack of sympathy or willingness to tolerate breast beating (see my April 24, 2016 at 6:44 am posting) by those who put us here.

    ahimsa , April 24, 2016 at 7:48 am

    @James Leavy

    Not sure I follow you?

    James A. Kidney, former trial attorney with the Securities and Exchange Commission, retired from the SEC in 2014 at the age of 66 after 24 years working there. Looks like he had a full career, although had to put up with a lot of bullshit, and possibly soured some relationships on his way out.

    From Bloomberg: SEC Goldman Lawyer Says Agency Too Timid on Wall Street Misdeeds

    inode_buddha , April 24, 2016 at 7:57 am

    Very similar situation here. Going on 50, unemployed in my chosen field, etc. And yes, its hard to just walk away sometimes… I have to keep my mind focused ahead instead of looking back.

    Are there any yacht clubs nearby you? There is like 4 of them within 10 minutes of me (I'm on the Great Lakes) You could teach sailing and rigging no doubt. Bonus: Union crane operators are required to know their rigging – they may need teachers too.

    Norb , April 24, 2016 at 10:54 am

    More than ever, I am convinced the capitalist system needs to be rejected as the means determining how goods and services are delivered. The injustice and inequality generated are too great. Finding a positive expressive outlet for this dissatisfaction will require leadership- and a new vision for the future.

    The amount of social damage being inflicted by the elite is almost beyond comprehension. Since they have successfully insulated themselves form the consequences of their actions, they remain aloof and uncaring for the plight of ordinary people, not to mention the health of the planet. This system will continue to cut more and more people off from the benefits of collective social action and effort. The work of the many, supporting the desires of the few cannot stand.

    We all have to decide the level of inequality we are willing to live with. How people answer this question will naturally sort them into common communities. Leave the isolated gated communities to the elite. Careerism, like capitalism, is a dead end if your position cannot be guaranteed. The amount of talent and passion for work wasted under the current system is another undercounted fact. Sustainability and democracy are not compatible with capitalism.

    Getting mad is only the beginning. The anger must be directed in some productive fashion. Any resistance to the current order must have broad social support and that support only has strength if self-reliant. Building these self-reliant structures is what the future will hold. If the plutocrats can build a world for themselves, why can't the common man. It only takes work,discipline, and control over the means of production.

    Workers without power, influence, and the means to obtain life necessities are slaves. Is the best the human mind can conceive a life of benevolent serfdom?

    By the way, I believe I would enjoy sitting in on one of your lectures. I'm sure I would learn much- and be a better man for it.

    local to oakland , April 24, 2016 at 11:43 am

    @James Levy … sorry to hear. I know a few who have been chewed up by the academic meat grinder. I hope you can find a productive outlet for your scholarship. Exile is hard.

    I have been helped by the stoics, and Dante.

    Ben , April 24, 2016 at 10:01 am

    And now GS is caught in the middle of 1MDB bond issue scandal using fraudulent and information.

    H. Alexander Ivey , April 24, 2016 at 6:44 am

    "The explanation of the badger buried in the woodpile is too complicated for the average voter."

    That's it! Stop right there! I will not let you (speaking to the author) BS your guilty conscience over my internet link. The average voter clearly knows they are getting screwed, that Wall Street and the voter's own bank is ripping the voter off, and most clearly, that the justice department, from state and local to federal, is enabling this injustice.

    You sir, are swimming with sharks. Your morality is "is it legal?", your justification is "for the shareholder". Therefore, you refuse to see the mendacity and instead excuse it for ignorance.

    JACK SKWAT , April 24, 2016 at 7:39 am

    I know other whistleblowers and internal dissenters who wound up losing their jobs who initially blame themselves, than come to accept that the system in which they operated was fundamentally corrupt, that even if some people locally really were trying to do the right thing, it was bound to either 1. go nowhere, 2. be allowed to proceed to a more meaningful level if it was cosmetic or served some larger political purpose or 3. got elevated because the organization was suddenly in trouble and they needed to burnish their cred in a big way (a variant of 2, except with 3, you might have a something serious take place by happenstance of timing).

    Wow, that's a mouthful – and it's only one sentence. Whilst I love your pieces, I've noticed that many of the articles – at least the run up summation to the articles – tend to be written in a stream-of-consciousness style that, frankly, is hard to digest. This seems to be the case more now than in the past. I don't know if you're harried or on an impossible schedule, but could you please make your syntax easier to read? Thanks from a long-time reader and donator.

    readerOfTeaLeaves , April 24, 2016 at 3:18 pm

    Because it's a Sunday and I have time to goof off, one potential revision - b/c I believe what Mr Kidney has to say is important enough for me to spend a few minutes on one potential suggestion. I've amended and added what I hope are accurate meanings:

    ----
    Focusing on these as the key subject /verb pairs:
    I know (other whistleblowers)
    (other whistleblowers) [lost their jobs]
    (other whistleblowers) [blamed themselves – initially]

    (other whistleblowers) [finally… accept]
    the system in which they operated … [was corrupt]
    … even if… (some employees) tried to [be competent]

    (It - there's a problem with 'it' as the subject, because we are unclear what 'it' refers back to - I'll interpret 'it' as 'investigating fraud' ) was bound to…
    -------------–

    I know other whistleblowers and internal dissenters. They wound up losing their jobs.
    Initially, they blamed themselves, until they finally came to accept that the system in which they operated was so fundamentally corrupt that they could not retain a sense of their own integrity while working within the organization.

    Despite the fact that some people really were trying to do the right thing, for reasons that I will explain, investigating fraud was bound to go in one of only three directions:
    1. fraud would not be investigated at all,
    2. fraud investigation would serve the agency's need for better public relations - in other words, the appearance of fraud investigation would be allowed to proceed, but only if it was merely cosmetic (or served some larger political purpose), or else
    3. fraud investigation became temporarily elevated, but only because the organization* was suddenly in trouble – and consequently, needed to burnish its credibility by actually investigating fraud.

    (Although 3 is a variant of 2, in the third option, credible fraud investigation could occur if, and only if, political necessity enabled competent SEC employees to actually investigate fraud in order to maintain the reputation of the SEC).

    [NOTE: *It's not entirely clear here whether 'the organization' is the target business, or whether it is the SEC (which would need to burnish it's cred in the face of bad publicity)]
    ------------

    Not sure how close I came to the author's intended meanings, but I thought that I'd give it a shot.

    Yves Smith Post author , April 24, 2016 at 4:25 pm

    The sentence parses correctly even though it is long. Stream of consciousness often does not parse correctly, plus another characteristic is the jumbling of ideas or observations. The point is to try to recreate the internal state of the character.

    For instance, from David Lodge's novel "The British Museum Is Falling Down":

    It partook, he thought, shifting his weight in the saddle, of metempsychosis, the way his humble life fell into moulds prepared by literature. Or was it, he wondered, picking his nose, the result of closely studying the sentence structure of the English novelists? One had resigned oneself to having no private language any more, but one had clung wistfully to the illusion of a personal property of events. A find and fruitless illusion, it seemed, for here, inevitably came the limousine, with its Very Important Personage, or Personages, dimly visible in the interior. The policeman saluted, and the crowd pressed forward, murmuring 'Philip', 'Tony', 'Margaret', 'Prince Andrew'.

    More generally:

    The Stream of Consciousness style of writing is marked by the sudden rise of thoughts and lack of punctuations.

    The sentence may be longer than you like but this is not stream of consciousness. A clear logical structure ("first, second, third") is the antithesis of stream of consciousness.

    fiscalliberal , April 24, 2016 at 8:13 am

    I fail to see why fraud is not prosecuted. We can get cute with fancy words but fraud is clear and simple. Also – Enron results in SARBOX which seems to be clearly ignored. Yves – do we know of any SARBOX prosecutions? Clinton started deregulation, Bush implemented deregulation and Obama maintains it. No wonder the kids are mad. The financial industry makes the Koch brothers look like pikers.

    Yves Smith Post author , April 24, 2016 at 4:30 pm

    There is actually a high legal bar to prosecuting fraud.

    I have written at length re Sarbox and the answer is no. And under Sarbox, you don't need to prosecute, you can start with a civil case and flip it to criminal if you get strong enough evidence in discovery. There was only one case (IIRC, with Angelo Mozilo) where the SEC filed Sarbox claims, one in which it also filed securities law claims. The judge threw out the Sarbox claims with no explanation. I assume it was because the judge regarded that as doubling up: you can do Sarbox or securities law (the claims to have some similarity) but not both. But the SEC as it so often does seems to have lost its nerve after that one.

    afisher , April 24, 2016 at 9:22 am

    Interestingly, the SEC has been warned about more of the same type of fraud: https://www.sec.gov/comments/s7-16-15/s71615-60.pdf

    I don't know if an election would have consequences and if a new administration headed by Sanders would make it the SEC more responsible to the taxpayers and not the investors / banks.

    It only took a decade for Markopolos to have his ponzi scheme information read by SEC.

    diptherio , April 24, 2016 at 9:48 am

    I want to like this guy, I really do. But then he goes and says stuff like this:

    The most senior level supervisors left more lucrative jobs in the private sector to head the Division of Enforcement, taking plum jobs but at significant personal sacrifice. (They then returned to even more lucrative employment or even more high-profile public positions.) All of them were gentlemen. These factors make it all the more surprising that I never got a clear answer as to why the investigation was so constipated, as it obviously was.

    So he doesn't understand how the revolving door works…or he does but he's being purposefully obtuse about it. Sacrifice my ass! Gentleman my heiny! And claiming that there's no proof of criminality when, as is pointed out above, Sarbanes-Oxley was obviously violated isn't helping things either.

    Listen dude, pick a side. It's either the American people or Wall Street crooks and their abettors in government. You don't get to have it both ways. This kind of minimization and wishy-washyness is only helping the crooks. More disappointing than I exepected.

    diptherio , April 24, 2016 at 9:59 am

    I mean, at least he lays blame at Obama's feet, and calls the fraud what it is: fraud. Good on him!

    …But then he pulls out the "vote for Dems no matter what they do!" line and I just shake my head….

    polecat , April 24, 2016 at 1:37 pm

    diptherio……. excuse me for a momen--BARFFFF!!!!!!-- Whew ……… that felt better !! ……….

    yes …I agree….these kinds of articles are nothing more than defensive measures against a growing public rage !!!

    bu…bu…but Just Us !!

    diptherio , April 24, 2016 at 5:18 pm

    these kinds of articles are nothing more than defensive measures against a growing public rage !!!

    I don't actually agree. I think the guy feels a little guilty for not doing more, now he's trying to salve his conscience. Still, he can't quite bring himself to admit that the people he was working for may well have been criminals. They were just so nice!

    Self-reflection is not comfortable, and most people don't have much tolerance for it. I think this guy's legitimately trying to do the right thing (not cover up for criminality) it's just that it's really psychologically difficult to admit certain aspects of reality. It's not like he's the only one.

    polecat , April 24, 2016 at 6:07 pm

    I find it telling that suddenly now (within the last year or so) that all these people ( people in high finance, their underlings, traders, hedge funders, and other assorted enablers of massive fraud upon the general public, are suddenly having a 'come to hayzeus' epiphany! I'm not buying whatever faux sincerity they're trying to project…….

    They've screwed millions of trusting people with their fraudulent grifting!

    reslez , April 24, 2016 at 7:09 pm

    > I find it telling that suddenly now (within the last year or so) that all these people […], are suddenly having a 'come to hayzeus' epiphany!

    Especially when it comes after a fat retirement and a lengthy career of going along. I have much more respect for people who really did put their daily bread on the line, and there are plenty of those people, a lot of whom Obama sent to jail. So, yeah, great, you finally told the truth… but where were you when the country needed you to speak out?

    perpetualWAR , April 24, 2016 at 11:32 am

    How about where the guy said "until proven guilty, they are innocent." Hahahahahahaha

    Crooks, the lot of them.

    diptherio , April 24, 2016 at 12:59 pm

    Couldn't we use civil forfeiture to go after them regardless of whether we can prove any actual crime? What's good for the average citizen is surely good for the elite banker…

    polecat , April 24, 2016 at 1:42 pm

    …but you just might need some of those 'Yehadis' to back you up ;-)

    reslez , April 24, 2016 at 7:06 pm

    It's a good thing they're gentlemen. I don't know if I could handle all the looting and self-dealing if it came from common ruffians. Truly we are fortunate to be in such hands, my fellow countrymen!

    ChrisPacific , April 26, 2016 at 12:36 am

    Yes, I had trouble getting past that line as well. Either he is being ironic or he has a massive blind spot on that point.

    Lars Jorgensen , April 24, 2016 at 10:00 am

    According to Bill Black in a ted talk 2014. After the Savings and loans debacle, where the regulators went after the worst of the worst criminals, they made 30.000 criminal referrals and 1000 procecutions with a 90% succes rate.

    Now after the 2008 crisis, which was 70 times bigger causing 10 million job losses and costing 11 trillion dolllars, the Obama administration has not made one single criminal referral. https://www.youtube.com/watch?v=-JBYPcgtnGE

    Today I fell over some information about the IMF, that the organization is exempt from legal prosecutions and taxes. Can this be true?

    From the article: "The employees who bare the IMF badge are pretty much exempt from all forms of government intervention. And, according to LisaHavenNews, the IMF "law book," the Articles of Agreement lists the reasons and requirements for exclusion from government mandate."

    http://www.truthandaction.org/revealed-imf-granted-complete-immunity-form-legal-prosecution-taxation/

    polecat , April 24, 2016 at 1:45 pm

    …..criminals are, as criminals do, as criminals take…..

    Steve in Dallas , April 24, 2016 at 2:35 pm

    Thank you, I was hoping someone would mention Bill Black.

    I'm a software/hardware product/business development engineer. In 2008, after 20 years of reading the WSJ and stunned by the sellout to Murdoch, I went to the internet independent media (IM) to follow the 'economic crisis'. Within a few months it was clear to me 1) I had learned nothing of substance reading the WSJ, 2) the U.S. MSM, education system, and government are thoroughly captured/corrupt.

    Being a 'reader' (note: I don't know anyone who reads non-fiction) for me this 'worldview transition' was quite natural, nothing really surprised me, and it was a big relief to discover such good information/analysis so easily available on the internet. However, eight years later, I have yet to meet a single person who has rejected the MSM or tuned in to what's happening, via the IM or otherwise. In fact, after leaving the university in 1990, I have yet to meet a single person with any basic understanding of (or the slightest interest in, or concern about) the extreme institutional criminality of the the Savings & Loan Crisis, Asian Economic Crisis, Technology Bubble, the 2008 crisis, or the many economic/military wars-of-aggression methodically destroying one government/economy/country after another.

    To me, nothing made the global/economic/organized/mafia criminality more clear than the 2008/2009 articles by Bill Black. Back then I again foolishly assumed people would rally behind Dr. Black to reestablish basic law enforcement against yet another obvious largest-ever "epidemic" of organized crime. Looking back, the highly organized (and very successful) criminality of the Paulson/Obama/Geithner/Bernanke/etc. cabal was truly an amazing operation to behold. Perhaps the most shocking news came in 2010 when numerous studies confirmed that the top 7% of Americans had already "profited" from the economic crisis, that the criminally organized upper class had not only increased their net wealth but, more importantly, had increased their rate of wealth accumulation relative to the bottom 93%. Still, to me, infinitely more amazing, the bottom 93% didn't, and still don't, seem to care, or if they do, they've done absolutely nothing to even start to fight back.

    Today, when reading these articles, I'm astounded how completely meek and 'unorganized' the bottom 93% are compared to the extremely vicious and organized top 7%. Year after year the wealthy elite, who's core organizing philosophy is "take or be taken, kill or be killed", increasingly wallow in dangerously high and unprecedented levels of wealth accumulated by blatant/purposeful/methodical/criminal/vicious looting while their victims, the bottom 93% 'working class', do absolutely nothing (what are they doing?…. other than playing with their phone-toys, facebook, video games, movies?). At this point, the main (only?) reason I continue to 'read' is to perhaps someday 'behold' the working class 93% attempting to educate themselves and consequently 'organize' to defend themselves.

    lightningclap , April 24, 2016 at 4:48 pm

    +1

    diptherio , April 24, 2016 at 5:21 pm

    Dude, you need to move to Austin, stat!

    lyman alpha blob , April 24, 2016 at 10:11 am

    I sympathize with Mr. Kidney and applaud him for doing what he can to try to rectify this abhorrent situation. I also applaud him for placing the blame squarely on Obama and his reasons for doing so are solid.

    What I find much harder to understand is why he would vote for Obama even in 2012 after it became apparent that Obama was ultimately responsible for stonewalling his investigation, and his complete willingness to vote for the corrupt Democrat party no matter what going forward.

    As long as enough people continue to have that attitude things will never change until the whole system comes crashing down. I'd much rather see an FDR-type overhaul of the system rather than a complete collapse as I'm rather fond of civilization. But I've come to expect the latter rather than the former so I'll be reading my weekly Archdruid report for the foreseeable future.

    Carolinian , April 24, 2016 at 10:25 am

    The most senior level supervisors left more lucrative jobs in the private sector to head the Division of Enforcement, taking plum jobs but at significant personal sacrifice. (They then returned to even more lucrative employment or even more high-profile public positions.) All of them were gentlemen. These factors make it all the more surprising that I never got a clear answer as to why the investigation was so constipated, as it obviously was.

    Yes poor babies for that "significant personal sacrifice" that resulted in "even more lucrative" private employment. The author explains the problem then scratches his head over what it might be.

    In a rational world there would be a strict separation between the regulated and the regulators. The government would hire professional experts at decent salaries and they never ever would be allowed to then move on to jobs with the regulated. Clearly the assumption underlying our current–irrational–system is that these high status technocrats are "gentlemen" with a code of honor. Welcome to the 19th century. Those long ago plutocrats in their stately English mansions were all gentlemen and therefore entitled to their privileges by their superior breeding. They were the better sort.

    Meanwhile for lesser mortals it seems totally unsurprising when laws are ignored because you hire your police from the ranks of the criminal gangs. No head scratching needed.

    Alex morfesis , April 24, 2016 at 12:31 pm

    Reid Muoio (boss of kidney @ $EC) has a brother at a major tall bldg law firm whose job is to help fortune 500 companies deal with D & O insurance issues…so when in the article Muoio says "He" did not go thru the revolving door…it was fraud by omission…his brother sits on the opposite side of these private settlement agreements…

    so is Kidney unaware…leaving us to maybe accept he was never much of an investigator…or just forgot to point it out for us…

    The world is full of govt types who tell us TINA…

    The wealthy Elliott Spitzer told us he would have loved to help "the little people" but the OCC and then scotus with waters v wachovia…except scotus ruled only direct subsidiaries get protection and the OCC specifically said the trustee operations of OCC regulated entities are also not covered/protected…

    A really big shoe
    as Ed used to remind us….

    susan the other , April 24, 2016 at 1:25 pm

    Does anyone else think this was insider demolition – not just the failure to prosecute, but the whole financial implosion in the first place? Who writes up nothing but "shitty deals" – all the while saying to each other: IBGYBG and survives to slink away? They must have had a heads up that the financial system as we had known it in the 20th c. was done. They had a heads up and then they got free passes. My only question is, Wasn't there a better way to bring down the system, an honest way that protected us all? By the end of the cold war money itself had become an inconvenience because of diminishing returns. And now the stuff is just plain dangerous because everyone who got screwed (99%) wants their fair share still. It is paralyzing our thinking. Obama maintains he personally "prevented another depression". I honestly think he might be insane. What we need is a recognition that the old system was completely irrational and it isn't coming back. And most of us are SOL. Somebody is going to figure out how to maintain both the value and usefulness of money very soon, because we've got work to do.

    cnchal , April 24, 2016 at 2:03 pm

    The GFC was the first great financial crime of this millenium, and Goldman Sachs was at the epicenter. A heist of gargantuan proportions, they didn't even need a safecracker after Bernanke spun the dials and opened the door wide.

    Imagine if the FBI and the Mafia exchanged their top leaders every few months. That's what we have here with the SEC and Wall Street.

    Bernie Sanders: The business of Wall Street is fraud and greed.
    We can add to that. The business of the SEC is to provide cover.

    polecat , April 24, 2016 at 2:10 pm

    It's all about 'their protection'….not ours!

    and Obama………..

    He's a f#cking psychopathic peacock!

    KYrocky , April 24, 2016 at 2:17 pm

    In Yves intro she shares her views, first, that Kidney still wants to think well of his former SEC colleagues and his criticisms seem muted relative to the severity of the problems, and second, that there are class assumptions at work.

    The first is obvious, as the SEC is an utter failure in its responsibility to investigate and prosecute financial criminals. While Mr. Kidney devotes a fair amount of his passages pondering how it can be that no individuals within these financial institutions bear personal responsibility, Mr. Kidney fails to see the SEC through that same lens. To say Kidney's criticism of his coworkers is muted is an understatement. The individuals at the SEC are corrupt. The individuals at the Justice Department are corrupt. Probably all nice people: husbands, wives, fathers, mothers, friends, etc. Just like those folks at the financial institutions. Mr. Kidney cuts them slack because of his personal relationships with them. Mr. Kidney chooses to give them the benefit of doubt when the totality of their professional performance at the SEC make clear this cannot be true.

    With respect to class assumptions at work, Yves illustrates with the deference shown by SEC officials and investigators toward these financial criminals and their presumption that these individuals are honest. Mr. Kidney does share some of his disappointment in President Obama and Obama's administration but fails to properly connect the dots. In short, the lack of financial crime prosecutions is the result of a deliberate, planned and orchestrated effort.

    Mr. Kindney's investigations were prevented in going forward by his superiors. He was never given an explanation for this despite his asking. But Kidney believes his superiors are all good people.

    No, they are not. They are compromised people who have placed their career employment above their sworn duty. The fact that their bosses have done the same, as have those in the Justice Department as well as President Obama, should not diminish this fact. The phrase "class assumptions" is too euphemistic when describing a system where there is no justice for the victims of financial crimes, a system where the Justice Department and Administration coordinate to shield financial criminals based on where they work.

    This is America. In today's America the fact is certain individuals are above the law because our elected officials at all levels accept that this is okay. Victims of these individuals will be prevented access to their legal recourse, and that these criminals are protected from the highest level of our government down. This goes way, way beyond class assumptions.

    readerOfTeaLeaves , April 24, 2016 at 3:31 pm

    Yves has written extensively about how corporate interests have funded academic sinecures, as well as continuing legal education seminars attended by attorneys and judges. This is part of the fallout; if you want more, check out her section of ECONned where she explains how legal thinking was perverted by business interests.

    flora , April 24, 2016 at 2:37 pm

    Thanks for this post. Glad to see the SEC story is still alive. I'm sure the SEC and Obama would prefer it quietly go away.

    dk , April 24, 2016 at 2:55 pm

    As someone who has fallen on their sword more than once (and again recently), I just want to say that "placed their career employment above their sworn duty" is accurate but also oversimplifies the situation.

    People with families tell themselves that they balance performance of most (some?) of those duties, while shirking the balance in order to protect their families (a "good" (as in, expensive) college for the kids)… this actually comes down to sustaining their social status, in a culture (political as well as corporate) where loyalty is valued equal to and above performance, and honorable action is diminished, trivialized, even ridiculed; and not just within the context of the financial industry.

    This is not at all a defense of the choice, but the choice is made in a very class-stratified social context, and arises in that general context. People take out loans to buy cars and houses, they squirrel earnings away into investments (to avoid taxes) which they are reluctant to draw from… they feel less ready to abandon their addictive income streams for honor, and fudge their responsibilities. It's not isolated to regulators, or government, or even finance. It occurs so constantly and on so many fronts that addressing specific cases doesn't make a dent in the compromise of the entire culture. And that compromise is fueled and maintained by a very twisted set of ideas about money, and career, and social status (not to mention compromises in journalism, education, science, you name it).

    Synoia , April 24, 2016 at 3:37 pm

    I read Mr kidney as being very sarcastic. I could not write this with a serious sarcastic (Lawsuit Avoiding) view:

    The most senior level supervisors left more lucrative jobs in the private sector to head the Division of Enforcement, taking plum jobs but at significant personal sacrifice. (They then returned to even more lucrative employment or even more high-profile public positions.)

    taking plum jobs but at significant personal sacrifice

    Oh really? Must have hurt. And from a legal point of view does not appear libelous.

    polecat , April 24, 2016 at 6:12 pm

    Yeah…stubbed toes only…….

    [Apr 29, 2016] A Conversation With Joseph Stiglitz

    Notable quotes:
    "... Alternative theories would have led to very different policies. For instance, the tax cut in 2001 and 2003 under President Bush. Economists that are very widely respected were cutting taxes at the top, increasing inequality in our society when what we needed was just the opposite. Most of the models used by economists ignored inequality. They pretended that macroeconomy was unaffected by inequality. I think that was totally wrong. The strange thing about the economics profession over the last 35 year is that there has been two strands: One very strongly focusing on the limitations of the market, and then another saying how wonderful markets were. Unfortunately too much attention was being paid to that second strand. ..."
    "... ditto...everyone from Tyler Cohen to Mark Perry of the AEI does daily posts about the markets working for everything...a daily "Market Failure in Everything" would provide a useful alternative to that point of view... ..."
    "... Nobel-prize winner Joseph Stiglitz said monetary policies have exacerbated inequality and need to be redirected to better target getting money flowing into economies and helping small and medium-size businesses. ..."
    "... policies such as quantitative easing were a "version of trickle-down economics" and the subsequent increase in asset prices only affected the wealthiest in society ..."
    "... "The key problem is the access of credit to small and medium-size enterprises, is getting that flow of money into the real economy," Stiglitz said. It's "nice to have a stock market bubble if you have a lot of stock. But if you are in the bottom 80 percent of America, you have a little stock and you can feel a little good about the stock going up. But let's face it, the overwhelming bulk of our stock market is owned by the 1 percent." ..."
    "... Oh my god. He lumps in Bernanke with Greenspan. What are the Fed worshippers going to do now? Their deity is under attack from Stiglitz. Of course it is nothing but fact that bernanke denied that bubbles in real estate were possible OR that a bubble could become s problem for the economy. Hats off to Stiglitz. ..."
    "... How much more evidence do we need that the current trickle down monetary policy has failed? "The weak growth for the quarter puts this recovery even further behind any prior recovery at the same stage. After eight and a quarter years, the economy is only 10.1 percent larger than its pre-recession level of output. A more typical recovery would have seen at least twice as much growth." ..."
    April 28, 2016 | economistsview.typepad.com
    From an interview of Joe Stiglitz :
    ...White: ... To what extent do you feel economist and economic theory is culpable for the crisis? What is the role of an economist going forward?
    Stiglitz: The prevalent ideology-when I say prevalent it's not all economists- held that markets were basically efficient, that they were stable. You had people like Greenspan and Bernanke saying things like "markets don't generate bubbles." They had precise models that were precisely wrong and gave them confidence in theories that led to the policies that were responsible for the crisis, and responsible for the growth in inequality. Alternative theories would have led to very different policies. For instance, the tax cut in 2001 and 2003 under President Bush. Economists that are very widely respected were cutting taxes at the top, increasing inequality in our society when what we needed was just the opposite. Most of the models used by economists ignored inequality. They pretended that macroeconomy was unaffected by inequality. I think that was totally wrong. The strange thing about the economics profession over the last 35 year is that there has been two strands: One very strongly focusing on the limitations of the market, and then another saying how wonderful markets were. Unfortunately too much attention was being paid to that second strand.
    What can we do about it? We've had this very strong strand that is focused on the limitations and market imperfections. A very large fraction of the younger people, this is what they want to work on. It's very hard to persuade a young person who has seen the Great Recession, who has seen all the problems with inequality, to tell them inequality is not important and that markets are always efficient. They'd think you're crazy. ...

    When I first started blogging, I used to do posts with the title "Market Failure in Everything." as a counter to "the prevalent ideology." Maybe I should revive something similar.

    teve Bannister : , Thursday, April 28, 2016 at 07:03 AM

    Agreed.
    rjs -> Steve Bannister... , Thursday, April 28, 2016 at 02:14 PM
    ditto...everyone from Tyler Cohen to Mark Perry of the AEI does daily posts about the markets working for everything...a daily "Market Failure in Everything" would provide a useful alternative to that point of view...
    Paul Mathis, Thursday, April 28, 2016 at 07:11 AM
    Nothing about Ricardian Equivalence or RBC fallacies.

    While inequality is certainly important for consumption demand, PCE has not been a significant problem in the recovery. OTOH, reduction of the federal budget deficit explains virtually all of the deficient demand we have experienced. Obama and the Dems bought into RE and are paying the price now.

    JohnH, Thursday, April 28, 2016 at 07:31 AM
    Another interview with Stiglitz:

    "Nobel-prize winner Joseph Stiglitz said monetary policies have exacerbated inequality and need to be redirected to better target getting money flowing into economies and helping small and medium-size businesses.

    In a Bloomberg Television interview Tuesday with Francine Lacqua and Michael McKee in New York, he said policies such as quantitative easing were a "version of trickle-down economics" and the subsequent increase in asset prices only affected the wealthiest in society.

    "The key problem is the access of credit to small and medium-size enterprises, is getting that flow of money into the real economy," Stiglitz said. It's "nice to have a stock market bubble if you have a lot of stock. But if you are in the bottom 80 percent of America, you have a little stock and you can feel a little good about the stock going up. But let's face it, the overwhelming bulk of our stock market is owned by the 1 percent."

    Stiglitz's comments come as some central banks around the world are being forced to delve deeper into their policy tools to help support their economies. As policy makers struggle to find a way out of the economic malaise, some have even raised the idea of helicopter money, which aims to direct cash straight to consumers.

    The Columbia University professor, who said the Federal Reserve can do more to "channel" money to small companies and the economy, was also critical of negative rates. This is partly because of their potential impact on lending.

    "The dangers of negative interest rates -- if you don't manage it extraordinarily well; some countries are doing it reasonably well, some are not -- is that it actually weakens the banking system," he said. "If it weakens the banking system, the banks are going to provide even less credit. While it might have some effect on financial markets, in terms of what we really should be concerned about, which is the flow of credit to businesses, that's not working."
    http://www.bloomberg.com/news/articles/2016-04-26/stiglitz-says-misdirected-monetary-policies-increased-inequality

    What's the point of low interest rates, if they only serve the interests of Wall Street banks and their wealthy clientele? Oh, right! That IS the point. And most economists are just fine with that.

    BenIsNotYoda, Thursday, April 28, 2016 at 07:59 AM
    Oh my god. He lumps in Bernanke with Greenspan. What are the Fed worshippers going to do now? Their deity is under attack from Stiglitz. Of course it is nothing but fact that bernanke denied that bubbles in real estate were possible OR that a bubble could become s problem for the economy. Hats off to Stiglitz.
    anne, Thursday, April 28, 2016 at 08:17 AM
    http://cepr.net/data-bytes/gdp-bytes/gdp-2016-04

    April 28, 2016

    Falling Investment and Rising Trade Deficit Lead to Weak First Quarter
    By Dean Baker

    Health care costs remain well-contained, barely growing as a share of GDP.

    GDP grew at just a 0.5 percent annual rate in the first quarter. This weak quarter, combined with the 1.4 percent growth rate in the 4th quarter, gave the weakest two quarter performance since the 3rd and 4th quarters of 2012 when the economy grew at just a 0.3 percent annual rate.

    Growth was held down by both a sharp drop in non-residential investment and a further rise in the trade deficit. Equipment investment fell at an 8.6 percent annual rate, while construction investment dropped at a 10.7 percent annual rate. The latter is not a surprise, given the overbuilding in many areas of the country. The drop in equipment investment was undoubtedly in part driven by the worsening trade situation, as many factories curtailed investment plans as U.S.-made products lost out to foreign competition, weakening demand growth. There was also a drop in information processing equipment, indicating that those who are expecting that robots will replace us all will have to wait a bit longer.

    The rise in the trade deficit was due to a 2.6 percent drop in exports, as imports were nearly flat for the quarter. Trade subtracted 0.34 percentage points from growth for the quarter.

    Consumption continued to grow at a modest 1.9 percent annual rate, adding 1.27 percentage points to growth. Consumption growth was held down in part by weaker demand for new cars, which subtracted 0.33 percentage points from growth for the quarter. This was the second consecutive decline in the sector. It is likely that car purchases will be up somewhat in future quarters.

    The savings rate for the quarter was 5.2 percent, which is up slightly from the 5.0 percent from the prior three quarters and the 4.8 percent rates from 2013 and 2014, before people started saving their oil dividends. But seriously, there may be some modest room for this rate to decline, but for the most part consumption growth will depend on income growth going forward.

    Health care services added 0.26 percentage points to growth, its smallest contribution since a reported decline in the first quarter of 2014. Spending in the sector remains well contained, growing at just a 3.8 percent annual rate over the last quarter and by 4.4 percent over the last year in nominal spending.

    Housing grew at a 14.8 percent annual rate, adding 0.49 percentage points to growth. Housing has being growing at a double digit rate since the fourth quarter of 2014. While the sector is likely to continue to grow in subsequent quarters, the pace is almost certain to slow.

    The government sector was a modest positive in the quarter, growing at a 1.2 percent rate. State and local spending increased at a 2.9 percent annual rate, more than offsetting a 1.6 percent drop in federal spending, all of it on the military side. Future quarters are likely to show comparable growth, although the composition may be somewhat different.

    A slower rate of inventory accumulation reduced growth by 0.33 percentage points, as final sales of domestic product grew at a 0.9 percent rate. This is the third consecutive quarter in which the pace of inventory accumulation slowed, although the current pace is not especially low. It is likely that inventories will grow somewhat more quickly in the rest of the year, being at least a small positive in the growth story.

    The weak growth for the quarter puts this recovery even further behind any prior recovery at the same stage. After eight and a quarter years, the economy is only 10.1 percent larger than its pre-recession level of output. A more typical recovery would have seen at least twice as much growth.

    [Graph]

    On the whole this is a weak report. The headline 0.5 percent figure probably overstates the weakness somewhat, but it is not a good sign when two consecutive quarters have an average growth rate of less than 1.0 percent. Inflation remains well under control, although there was a modest uptick in the rate of inflation shown by the core personal consumption expenditure deflator to 1.7 percent over the last year. Nonetheless, with an economy barely growing and an inflation rate that remains below target, it is difficult to envision the Federal Reserve raising interest rates further any time soon.

    JohnH, Thursday, April 28, 2016 at 08:48 AM
    How much more evidence do we need that the current trickle down monetary policy has failed? "The weak growth for the quarter puts this recovery even further behind any prior recovery at the same stage. After eight and a quarter years, the economy is only 10.1 percent larger than its pre-recession level of output. A more typical recovery would have seen at least twice as much growth."
    rayward, Thursday, April 28, 2016 at 09:11 AM
    Market failures aren't really market failures but market responses to market conditions. They are failures only in the sense that something deemed bad (e.g., falling home prices) is the market response. An extreme example is what's being called secular stagnation, which is just the market response to the shift of an enormous volume of production and income from the U.S. and Europe to China and other like places with much higher levels of inequality and savings. It's a market failure only in the sense that something bad (wage stagnation, slow economic growth) happened in the U.S. and Europe. Those responsible for the shift in production and income to China et al. (i.e., U.S. and European business executives) were either ignorant of the likely market response or didn't care as long as it increased profits (via lower costs). But that's not a market failure, it's an executive failure.
    Peter, -1
    "I think almost surely both Hillary and Bernie Sanders are very very committed to a pro-equality agenda, and the differences are more in details, more in one's confidence in their ability to execute this in a political context."

    Disappointing. I guess we'll find out if he's right. Also his suggestion that the economy would have done just as well with no QEs is very disappointing.

    "Stiglitz: I think they were right. They originally said, "When we hit 6 percent that's full employment." Now they know that 4.9 isn't full employment, there's weak labor market. They should have focused more on improving the channel of credit to make sure that money was going to small and medium-sized enterprises They should have said to the bank-like some other countries have done-if you want access to the Fed window you have to be lending to SMEs. "

    Which was Bernie's suggestion. Hillary has said nothing.

    [Apr 24, 2016] Theres a new parliamentary group in UK on Limits to Growth that had its first meeting this week

    Notable quotes:
    "... 'There's an interesting theory – called the 'green paradox' – that low oil prices are in part the reaction of an industry fearful of the impacts of climate change policy on its future revenues. ..."
    "... The German economist Hans-Werner Sinn has argued that "if suppliers feel threatened by a gradual greening of economic policies.. they will extract their stocks more rapidly" thus pushing their prices down' ..."
    peakoilbarrel.com
    George Kaplan , 04/22/2016 at 2:14 am
    There's a new parliamentary group in UK on Limits to Growth that had it's first meeting this week.

    'A 2015 analysis of the remaining fossil fuel resources in China, USA, Canada and Australia, which includes unconventional resources, suggests that overall oil production is in fact peaking already'

    I hadn't heard this before:

    'There's an interesting theory – called the 'green paradox' – that low oil prices are in part the reaction of an industry fearful of the impacts of climate change policy on its future revenues.

    The German economist Hans-Werner Sinn has argued that "if suppliers feel threatened by a gradual greening of economic policies.. they will extract their stocks more rapidly" thus pushing their prices down'

    http://limits2growth.org.uk/wp-content/uploads/2016/04/Jackson-and-Webster-2016-Limits-Revisited.pdf

    [Apr 23, 2016] Neoliberal Globalization Is There an Alternative to Plundering the Earth Global Research - Centre for Research on Globaliza

    Notable quotes:
    "... The following is a preview of a chapter by Claudia von Werlhof in "The Global Economic Crisis: The Great Depression of the XXI Century." (2009) ..."
    "... To read more, order the book online. Help us spread the word: "like" the book on Facebook and share with your friends -- ..."
    www.globalresearch.ca

    Excerpt from "The Global Economic Crisis: The Great Depression of the XXI Century"

    By Prof. Claudia von Werlhof Global Research, May 25, 2015 Global Research 19 April 2011 Theme: Global Economy , Poverty & Social Inequality

    Neoliberal Globalization: Is There an Alternative to Plundering the Earth?

    The following is a preview of a chapter by Claudia von Werlhof in "The Global Economic Crisis: The Great Depression of the XXI Century." (2009)

    To read more, order the book online. Help us spread the word: "like" the book on Facebook and share with your friends --

    Is there an alternative to plundering the earth?

    Is there an alternative to making war?

    Is there an alternative to destroying the planet?

    No one asks these questions because they seem absurd. Yet, no one can escape them either. Until the onslaught of the global economic crisis, the motto of so-called "neoliberalism" was TINA: "There Is No Alternative!"

    No alternative to "neoliberal globalization"?

    No alternative to the unfettered "free market" economy?

    What Is "Neoliberal Globalization"?

    Let us first clarify what globalization and neoliberalism are, where they come from, who they are directed by, what they claim, what they do, why their effects are so fatal, why they will fail and why people nonetheless cling to them. Then, let us look at the responses of those who are not – or will not – be able to live with the consequences they cause.

    This is where the difficulties begin. For a good twenty years now we have been told that there is no alternative to neoliberal globalization, and that, in fact, no such alternative is needed either. Over and over again, we have been confronted with the TINA-concept: "There Is No Alternative!" The "iron lady", Margaret Thatcher, was one of those who reiterated this belief without end.

    The TINA-concept prohibits all thought. It follows the rationale that there is no point in analyzing and discussing neoliberalism and so-called globalization because they are inevitable. Whether we condone what is happening or not does not matter, it is happening anyway. There is no point in trying to understand. Hence: Go with it! Kill or be killed!

    Some go as far as suggesting that globalization – meaning, an economic system which developed under specific social and historical conditions – is nothing less but a law of nature. In turn, "human nature" is supposedly reflected by the character of the system's economic subjects: egotistical, ruthless, greedy and cold. This, we are told, works towards everyone's benefit.

    The question remains: why has Adam Smith's "invisible hand" become a "visible fist"? While a tiny minority reaps enormous benefits from today's neoliberalism (none of which will remain, of course), the vast majority of the earth's population suffers hardship to the extent that their very survival is at stake. The damage done seems irreversible.

    All over the world media outlets – especially television stations – avoid addressing the problem. A common excuse is that it cannot be explained.[1] The true reason is, of course, the media's corporate control.

    What Is Neoliberalism?

    Neoliberalism as an economic policy agenda which began in Chile in 1973. Its inauguration consisted of a U.S.-organized coup against a democratically elected socialist president and the installment of a bloody military dictatorship notorious for systematic torture. This was the only way to turn the neoliberal model of the so-called "Chicago Boys" under the leadership of Milton Friedman – a student of Friedrich von Hayek – into reality.

    The predecessor of the neoliberal model is the economic liberalism of the 18th and 19th centuries and its notion of "free trade". Goethe's assessment at the time was: "Free trade, piracy, war – an inseparable three!"[2]

    At the center of both old and new economic liberalism lies:

    Self-interest and individualism; segregation of ethical principles and economic affairs, in other words: a process of 'de-bedding' economy from society; economic rationality as a mere cost-benefit calculation and profit maximization; competition as the essential driving force for growth and progress; specialization and the replacement of a subsistence economy with profit-oriented foreign trade ('comparative cost advantage'); and the proscription of public (state) interference with market forces.[3]

    Where the new economic liberalism outdoes the old is in its global claim. Today's economic liberalism functions as a model for each and everyone: all parts of the economy, all sectors of society, of life/nature itself. As a consequence, the once "de-bedded" economy now claims to "im-bed" everything, including political power. Furthermore, a new twisted "economic ethics" (and with it a certain idea of "human nature") emerges that mocks everything from so-called do-gooders to altruism to selfless help to care for others to a notion of responsibility.[4]

    This goes as far as claiming that the common good depends entirely on the uncontrolled egoism of the individual and, especially, on the prosperity of transnational corporations. The allegedly necessary "freedom" of the economy – which, paradoxically, only means the freedom of corporations – hence consists of a freedom from responsibility and commitment to society.

    The maximization of profit itself must occur within the shortest possible time; this means, preferably, through speculation and "shareholder value". It must meet as few obstacles as possible. Today, global economic interests outweigh not only extra-economic concerns but also national economic considerations since corporations today see themselves beyond both community and nation.[5] A "level playing field" is created that offers the global players the best possible conditions. This playing field knows of no legal, social, ecological, cultural or national "barriers".[6] As a result, economic competition plays out on a market that is free of all non-market, extra-economic or protectionist influences – unless they serve the interests of the big players (the corporations), of course. The corporations' interests – their maximal growth and progress – take on complete priority. This is rationalized by alleging that their well-being means the well-being of small enterprises and workshops as well.

    The difference between the new and the old economic liberalism can first be articulated in quantitative terms: after capitalism went through a series of ruptures and challenges – caused by the "competing economic system", the crisis of capitalism, post-war "Keynesianism" with its social and welfare state tendencies, internal mass consumer demand (so-called Fordism), and the objective of full employment in the North. The liberal economic goals of the past are now not only euphorically resurrected but they are also "globalized". The main reason is indeed that the competition between alternative economic systems is gone. However, to conclude that this confirms the victory of capitalism and the "golden West" over "dark socialism" is only one possible interpretation. Another – opposing – interpretation is to see the "modern world system" (which contains both capitalism and socialism) as having hit a general crisis which causes total and merciless competition over global resources while leveling the way for investment opportunities, i.e. the valorization of capital.[7]

    The ongoing globalization of neoliberalism demonstrates which interpretation is right. Not least, because the differences between the old and the new economic liberalism can not only be articulated in quantitative terms but in qualitative ones too. What we are witnessing are completely new phenomena: instead of a democratic "complete competition" between many small enterprises enjoying the freedom of the market, only the big corporations win. In turn, they create new market oligopolies and monopolies of previously unknown dimensions. The market hence only remains free for them, while it is rendered unfree for all others who are condemned to an existence of dependency (as enforced producers, workers and consumers) or excluded from the market altogether (if they have neither anything to sell or buy). About fifty percent of the world's population fall into this group today, and the percentage is rising.[8]

    Anti-trust laws have lost all power since the transnational corporations set the norms. It is the corporations – not "the market" as an anonymous mechanism or "invisible hand" – that determine today's rules of trade, for example prices and legal regulations. This happens outside any political control. Speculation with an average twenty percent profit margin edges out honest producers who become "unprofitable".[9] Money becomes too precious for comparatively non-profitable, long-term projects,

    or projects that only – how audacious! – serve a good life. Money instead "travels upwards" and disappears. Financial capital determines more and more what the markets are and do.[10] By delinking the dollar from the price of gold, money creation no longer bears a direct relationship to production".[11] Moreover, these days most of us are – exactly like all governments – in debt. It is financial capital that has all the money – we have none.[12]

    Small, medium, even some bigger enterprises are pushed out of the market, forced to fold or swallowed by transnational corporations because their performances are below average in comparison to speculation – rather: spookulation – wins. The public sector, which has historically been defined as a sector of not-for-profit economy and administration, is "slimmed" and its "profitable" parts ("gems") handed to corporations (privatized). As a consequence, social services that are necessary for our existence disappear. Small and medium private businesses – which, until recently, employed eighty percent of the workforce and provided normal working conditions – are affected by these developments as well. The alleged correlation between economic growth and secure employment is false. When economic growth is accompanied by the mergers of businesses, jobs are lost.[13]

    If there are any new jobs, most are precarious, meaning that they are only available temporarily and badly paid. One job is usually not enough to make a living.[14] This means that the working conditions in the North become akin to those in the South, and the working conditions of men akin to those of women – a trend diametrically opposed to what we have always been told. Corporations now leave for the South (or East) to use cheap – and particularly female – labor without union affiliation. This has already been happening since the 1970s in the "Export Processing Zones" (EPZs, "world market factories" or "maquiladoras"), where most of the world's computer chips, sneakers, clothes and electronic goods are produced.[15] The EPZs lie in areas where century-old colonial-capitalist and authoritarian-patriarchal conditions guarantee the availability of cheap labor.[16] The recent shift of business opportunities from consumer goods to armaments is a particularly troubling development.[17]

    It is not only commodity production that is "outsourced" and located in the EPZs, but service industries as well. This is a result of the so-called Third Industrial Revolution, meaning the development of new information and communication technologies. Many jobs have disappeared entirely due to computerization, also in administrative fields.[18] The combination of the principles of "high tech" and "low wage"/"no wage" (always denied by "progress" enthusiasts) guarantees a "comparative cost advantage" in foreign trade. This will eventually lead to "Chinese wages" in the West. A potential loss of Western consumers is not seen as a threat. A corporate economy does not care whether consumers are European, Chinese or Indian.

    The means of production become concentrated in fewer and fewer hands, especially since finance capital – rendered precarious itself – controls asset values ever more aggressively. New forms of private property are created, not least through the "clearance" of public property and the transformation of formerly public and small-scale private services and industries to a corporate business sector. This concerns primarily fields that have long been (at least partly) excluded from the logic of profit – e.g. education, health, energy or water supply/disposal. New forms of so-called enclosures emerge from today's total commercialization of formerly small-scale private or public industries and services, of the "commons", and of natural resources like oceans, rain forests, regions of genetic diversity or geopolitical interest (e.g. potential pipeline routes), etc.[19] As far as the new virtual spaces and communication networks go, we are witnessing frantic efforts to bring these under private control as well.[20]

    All these new forms of private property are essentially created by (more or less) predatory forms of appropriation. In this sense, they are a continuation of the history of so-called original accumulation which has expanded globally, in accordance with to the motto: "Growth through expropriation!"[21]

    Most people have less and less access to the means of production, and so the dependence on scarce and underpaid work increases. The destruction of the welfare state also destroys the notion that individuals can rely on the community to provide for them in times of need. Our existence relies exclusively on private, i.e. expensive, services that are often of much worse quality and much less reliable than public services. (It is a myth that the private always outdoes the public.) What we are experiencing is undersupply formerly only known by the colonial South. The old claim that the South will eventually develop into the North is proven wrong. It is the North that increasingly develops into the South. We are witnessing the latest form of "development", namely, a world system of underdevelopment.[22] Development and underdevelopment go hand in hand.[23] This might even dawn on "development aid" workers soon.

    It is usually women who are called upon to counterbalance underdevelopment through increased work ("service provisions") in the household. As a result, the workload and underpay of women takes on horrendous dimensions: they do unpaid work inside their homes and poorly paid "housewifized" work outside.[24] Yet, commercialization does not stop in front of the home's doors either. Even housework becomes commercially co-opted ("new maid question"), with hardly any financial benefits for the women who do the work.[25]

    Not least because of this, women are increasingly coerced into prostitution, one of today's biggest global industries.[26] This illustrates two things: a) how little the "emancipation" of women actually leads to "equal terms" with men; and b) that "capitalist development" does not imply increased "freedom" in wage labor relations, as the Left has claimed for a long time.[27] If the latter were the case, then neoliberalism would mean the voluntary end of capitalism once it reaches its furthest extension. This, however, does not appear likely.

    Today, hundreds of millions of quasi-slaves, more than ever before, exist in the "world system."[28] The authoritarian model of the "Export Processing Zones" is conquering the East and threatening the North. The redistribution of wealth runs ever more – and with ever accelerated speed – from the bottom to the top. The gap between the rich and the poor has never been wider. The middle classes disappear. This is the situation we are facing.

    It becomes obvious that neoliberalism marks not the end of colonialism but, to the contrary, the colonization of the North. This new "colonization of the world"[29] points back to the beginnings of the "modern world system" in the "long 16th century", when the conquering of the Americas, their exploitation and colonial transformation allowed for the rise and "development" of Europe.[30] The so-called "children's diseases" of modernity keep on haunting it, even in old age. They are, in fact, the main feature of modernity's latest stage. They are expanding instead of disappearing.

    Where there is no South, there is no North; where there is no periphery, there is no center; where there is no colony, there is no – in any case no "Western" – civilization.[31]

    Austria is part of the world system too. It is increasingly becoming a corporate colony (particularly of German corporations). This, however, does not keep it from being an active colonizer itself, especially in the East.[32]

    Social, cultural, traditional and ecological considerations are abandoned and give way to a mentality of plundering. All global resources that we still have – natural resources, forests, water, genetic pools – have turned into objects of utilization. Rapid ecological destruction through depletion is the consequence. If one makes more profit by cutting down trees than by planting them, then there is no reason not to cut them.[33] Neither the public nor the state interferes, despite global warming and the obvious fact that the clearing of the few remaining rain forests will irreversibly destroy the earth's climate – not to mention the many other negative effects of such actions.[34] Climate, animal, plants, human and general ecological rights are worth nothing compared to the interests of the corporations – no matter that the rain forest is not a renewable resource and that the entire earth's ecosystem depends on it. If greed, and the rationalism with which it is economically enforced, really was an inherent anthropological trait, we would have never even reached this day.

    The commander of the Space Shuttle that circled the earth in 2005 remarked that "the center of Africa was burning". She meant the Congo, in which the last great rain forest of the continent is located. Without it there will be no more rain clouds above the sources of the Nile. However, it needs to disappear in order for corporations to gain free access to the Congo's natural resources that are the reason for the wars that plague the region today. After all, one needs diamonds and coltan for mobile phones.

    Today, everything on earth is turned into commodities, i.e. everything becomes an object of "trade" and commercialization (which truly means liquidation, the transformation of all into liquid money). In its neoliberal stage it is not enough for capitalism to globally pursue less cost-intensive and preferably "wageless" commodity production. The objective is to transform everyone and everything into commodities, including life itself.[35] We are racing blindly towards the violent and absolute conclusion of this "mode of production", namely total capitalization/liquidation by "monetarization".[36]

    We are not only witnessing perpetual praise of the market – we are witnessing what can be described as "market fundamentalism". People believe in the market as if it was a god. There seems to be a sense that nothing could ever happen without it. Total global maximized accumulation of money/capital as abstract wealth becomes the sole purpose of economic activity. A "free" world market for everything has to be established – a world market that functions according to the interests of the corporations and capitalist money. The installment of such a market proceeds with dazzling speed. It creates new profit possibilities where they have not existed before, e.g. in Iraq, Eastern Europe or China.

    One thing remains generally overlooked: the abstract wealth created for accumulation implies the destruction of nature as concrete wealth. The result is a "hole in the ground" and next to it a garbage dump with used commodities, outdated machinery and money without value.[37] However, once all concrete wealth (which today consists mainly of the last natural resources) will be gone, abstract wealth will disappear as well. It will, in Marx's words, "evaporate". The fact that abstract wealth is not real wealth will become obvious, and so will the answer to the question of which wealth modern economic activity has really created. In the end it is nothing but monetary wealth (and even this mainly exists virtually or on accounts) that constitutes a monoculture controlled by a tiny minority. Diversity is suffocated and millions of people are left wondering how to survive. And really: how do you survive with neither resources nor means of production nor money?

    The nihilism of our economic system is evident. The whole world will be transformed into money – and then it will disappear. After all, money cannot be eaten. What no one seems to consider is the fact that it is impossible to re-transform commodities, money, capital and machinery into nature or concrete wealth. It seems that underlying all "economic development" is the assumption that "resources", the "sources of wealth",[38] are renewable and everlasting – just like the "growth" they create.[39]

    The notion that capitalism and democracy are one is proven a myth by neoliberalism and its "monetary totalitarianism".[40]

    The primacy of politics over economy has been lost. Politicians of all parties have abandoned it. It is the corporations that dictate politics. Where corporate interests are concerned, there is no place for democratic convention or community control. Public space disappears. The res publica turns into a res privata, or – as we could say today – a res privata transnationale (in its original Latin meaning, privare means "to deprive"). Only those in power still have rights. They give themselves the licenses they need, from the "license to plunder" to the "license to kill".[41] Those who get in their way or challenge their "rights" are vilified, criminalized and to an increasing degree defined as "terrorists" or, in the case of defiant governments, as "rogue states" – a label that usually implies threatened or actual military attack, as we can see in the cases of Yugoslavia, Afghanistan and Iraq, and maybe Syria and Iran in the near future. U.S. President Bush had even spoken of the possibility of "preemptive" nuclear strikes should the U.S. feel endangered by weapons of mass destruction.[42] The European Union did not object.[43]

    Neoliberalism and war are two sides of the same coin.[44] Free trade, piracy and war are still "an inseparable three" – today maybe more so than ever. War is not only "good for the economy" but is indeed its driving force and can be understood as the "continuation of economy with other means".[45] War and economy have become almost indistinguishable.[46] Wars about resources – especially oil and water – have already begun.[47] The Gulf Wars are the most obvious examples. Militarism once again appears as the "executor of capital accumulation" – potentially everywhere and enduringly.[48]

    Human rights and rights of sovereignty have been transferred from people, communities and governments to corporations.[49] The notion of the people as a sovereign body has practically been abolished. We have witnessed a coup of sorts. The political systems of the West and the nation state as guarantees for and expression of the international division of labor in the modern world system are increasingly dissolving.[50] Nation states are developing into "periphery states" according to the inferior role they play in the proto-despotic "New World Order".[51] Democracy appears outdated. After all, it "hinders business".[52]

    The "New World Order" implies a new division of labor that does no longer distinguish between North and South, East and West – today, everywhere is South. An according International Law is established which effectively functions from top to bottom ("top-down") and eliminates all local and regional communal rights. And not only that: many such rights are rendered invalid both retroactively and for the future.[53]

    The logic of neoliberalism as a sort of totalitarian neo-mercantilism is that all resources, all markets, all money, all profits, all means of production, all "investment opportunities", all rights and all power belong to the corporations only. To paraphrase Richard Sennett: "Everything to the Corporations!"[54] One might add: "Now!"

    The corporations are free to do whatever they please with what they get. Nobody is allowed to interfere. Ironically, we are expected to rely on them to find a way out of the crisis we are in. This puts the entire globe at risk since responsibility is something the corporations do not have or know. The times of social contracts are gone.[55] In fact, pointing out the crisis alone has become a crime and all critique will soon be defined as "terror" and persecuted as such.[56]

    IMF Economic Medicine

    Since the 1980s, it is mainly the Structural Adjustment Programs (SAPs) of the World Bank and the IMF that act as the enforcers of neoliberalism. These programs are levied against the countries of the South which can be extorted due to their debts. Meanwhile, numerous military interventions and wars help to take possession of the assets that still remain, secure resources, install neoliberalism as the global economic politics, crush resistance movements (which are cynically labeled as "IMF uprisings"), and facilitate the lucrative business of reconstruction.[57]

    In the 1980s, Ronald Reagan and Margaret Thatcher introduced neoliberalism in Anglo-America. In 1989, the so-called "Washington Consensus" was formulated. It claimed to lead to global freedom, prosperity and economic growth through "deregulation, liberalization and privatization". This has become the credo and promise of all neoliberals. Today we know that the promise has come true for the corporations only – not for anybody else.

    In the Middle East, the Western support for Saddam Hussein in the war between Iraq and Iran in the 1980s, and the Gulf War of the early 1990s, announced the permanent U.S. presence in the world's most contested oil region.

    In continental Europe, neoliberalism began with the crisis in Yugoslavia caused by the Structural Adjustment Programs (SAPs) of the World Bank and the IMF. The country was heavily exploited, fell apart and finally beset by a civil war over its last remaining resources.[58] Since the NATO war in 1999, the Balkans are fragmented, occupied and geopolitically under neoliberal control.[59] The region is of main strategic interest for future oil and gas transport from the Caucasus to the West (for example the "Nabucco" gas pipeline that is supposed to start operating from the Caspian Sea through Turkey and the Balkans by 2011.[60] The reconstruction of the Balkans is exclusively in the hands of Western corporations.

    All governments, whether left, right, liberal or green, accept this. There is no analysis of the connection between the politics of neoliberalism, its history, its background and its effects on Europe and other parts of the world. Likewise, there is no analysis of its connection to the new militarism.

    NOTES

    [1] Maria Mies and Claudia von Werlhof (Hg), Lizenz zum Plündern. Das Multilaterale Abkommen über Investitionen MAI. Globalisierung der Konzernherrschaft – und was wir dagegen tun können, Hamburg, EVA, 2003 (1998), p. 23, 36.

    [2] Johann Wolfgang von Goethe, Faust: Part Two, New York, Oxford University Press, 1999.

    [3] Maria Mies, Krieg ohne Grenzen. Die neue Kolonisierung der Welt, Köln, PapyRossa, 2005, p. 34.

    [4] Arno Gruen, Der Verlust des Mitgefühls. Über die Politik der Gleichgültigkeit, München, 1997, dtv.

    [5] Sassen Saskia, "Wohin führt die Globalisierung?," Machtbeben, 2000, Stuttgart-München, DVA.

    [6] Maria Mies and Claudia von Werlhof (Hg), Lizenz zum Plündern. Das Multilaterale Abkommen über Investitionen MAI. Globalisierung der Konzernherrschaft – und was wir dagegen tun können, Hamburg, EVA, 2003 (1998), p. 24.

    [7] Immanuel Wallerstein, Aufstieg und künftiger Niedergang des kapitalistischen Weltsystems, in Senghaas, Dieter: Kapitalistische Weltökonomie. Kontroversen über ihren Ursprung und ihre Entwicklungsdynamik, Frankfurt, 1979, Suhrkamp; Immanuel Wallerstein (Hg), The Modern World-System in the Longue Durée, Boulder/ London; Paradigm Publishers, 2004.

    [8] Susan George, im Vortrag, Treffen von Gegnern und Befürwortern der Globalisierung im Rahmen der Tagung des WEF (World Economic Forum), Salzburg, 2001.

    [9] Elmar Altvater, Das Ende des Kapitalismus, wie wir ihn kennen, Münster, Westfälisches Dampfboot, 2005.

    [10] Elmar Altvater and Birgit Mahnkopf, Grenzen der Globalisierung. Ökonomie, Ökologie und Politik in der Weltgesellschaft, Münster, Westfälisches Dampfboot, 1996.

    [11] Bernard Lietaer, Jenseits von Gier und Knappheit, Interview mit Sarah van Gelder, 2006, www.transaction.net/press/interviews/Lietaer 0497.html; Margrit Kennedy, Geld ohne Zinsen und Inflation, Steyerberg, Permakultur, 1990.

    [12] Helmut Creutz, Das Geldsyndrom. Wege zur krisenfreien Marktwirtschaft, Frankfurt, Ullstein, 1995.

    [13] Maria Mies and Claudia von Werlhof (Hg), Lizenz zum Plündern. Das Multilaterale Abkommen über Investitionen MAI. Globalisierung der Konzernherrschaft – und was wir dagegen tun können, Hamburg, EVA, 2003 (1998), p. 7.

    [14] Barbara Ehrenreich, Arbeit poor. Unterwegs in der Dienstleistungsgesellschaft, München, Kunstmann, 2001.

    [15] Folker Fröbel, Jürgen Heinrichs, and Otto Kreye, Die neue internationale Arbeitsteilung. Strukturelle Arbeitslosigkeit in den Industrieländern und die Industrialisierung der Entwicklungsländer, Reinbek, Rowohlt, 1977.

    [16] Veronika Bennholdt-Thomsen, Maria Mies, and Claudia von Werlhof, Women, The Last Colony, London/ New Delhi, Zed Books, 1988.

    [17] Michel Chossudovsky, War and Globalization. The Truth Behind September 11th, Oro, Ontario, Global Outlook, 2003.

    [18] Folker Fröbel, Jürgen Heinrichs, and Otto Kreye, Die neue internationale Arbeitsteilung. Strukturelle Arbeitslosigkeit in den Industrieländern und die Industrialisierung der Entwicklungsländer, Reinbek, Rowohlt, 1977.

    [19] Ana Isla, The Tragedy of the Enclosures: An Eco-Feminist Perspective on Selling Oxygen and Prostitution in Costa Rica, Man., Brock Univ., Sociology Dpt., St. Catherines, Ontario, Canada, 2005.

    [20] John Hepburn, Die Rückeroberung von Allmenden – von alten und von neuen, übers. Vortrag bei, Other Worlds Conference; Univ. of Pennsylvania; 28./29.4, 2005.

    [21] Claudia von Werlhof, Was haben die Hühner mit dem Dollar zu tun? Frauen und Ökonomie, München, Frauenoffensive, 1991; Claudia von Werlhof, MAInopoly: Aus Spiel wird Ernst, in Mies/Werlhof, 2003, p. 148-192.

    [22] Andre Gunder Frank, Die Entwicklung der Unterentwicklung, in ders. u.a., Kritik des bürgerlichen Antiimperialismus, Berlin, Wagenbach, 1969.

    [23] Maria Mies, Krieg ohne Grenzen, Die neue Kolonisierung der Welt, Köln, PapyRossa, 2005.

    [24] Veronika Bennholdt-Thomsen, Maria Mies, and Claudia von Werlhof, Women, the Last Colony, London/New Delhi, Zed Books, 1988.

    [25] Claudia von Werlhof, Frauen und Ökonomie. Reden, Vorträge 2002-2004, Themen GATS, Globalisierung, Mechernich, Gerda-Weiler-Stiftung, 2004.

    [26] Ana Isla, "Women and Biodiversity as Capital Accumulation: An Eco-Feminist View," Socialist Bulletin, Vol. 69, Winter, 2003, p. 21-34; Ana Isla, The Tragedy of the Enclosures: An Eco-Feminist Perspective on Selling Oxygen and Prostitution in Costa Rica, Man., Brock Univ., Sociology Department, St. Catherines, Ontario, Canada, 2005.

    [27] Immanuel Wallerstein, Aufstieg und künftiger Niedergang des kapitalistischen Weltsystems, in Senghaas, Dieter: Kapitalistische Weltökonomie. Kontroversen über ihren Ursprung und ihre Entwicklungsdynamik, Frankfurt, Suhrkamp, 1979.

    [28] Kevin Bales, Die neue Sklaverei, München, Kunstmann, 2001.

    [29] Maria Mies, Krieg ohne Grenzen, Die neue Kolonisierung der Welt, Köln, PapyRossa, 2005.

    [30] Immanuel Wallerstein, Aufstieg und künftiger Niedergang des kapitalistischen Weltsystems, in Senghaas, Dieter: Kapitalistische Weltökonomie. Kontroversen über ihren Ursprung und ihre Entwicklungsdynamik, Frankfurt, Suhrkamp, 1979; Andre Gunder Frank, Orientierung im Weltsystem, Von der Neuen Welt zum Reich der Mitte, Wien, Promedia, 2005; Maria Mies, Patriarchy and Accumulation on a World Scale, Women in the International Division of Labour, London, Zed Books, 1986.

    [31] Claudia von Werlhof, "Questions to Ramona," in Corinne Kumar (Ed.), Asking, We Walk. The South as New Political Imaginary, Vol. 2, Bangalore, Streelekha, 2007, p. 214-268

    [32] Hannes Hofbauer, Osterweiterung. Vom Drang nach Osten zur peripheren EU-Integration, Wien, Promedia, 2003; Andrea Salzburger, Zurück in die Zukunft des Kapitalismus, Kommerz und Verelendung in Polen, Frankfurt – New York, Peter Lang Verlag, 2006.

    [33] Bernard Lietaer, Jenseits von Gier und Knappheit, Interview mit Sarah van Gelder, 2006, www.transaction.net/press/interviews/Lietaer 0497.html.

    [34] August Raggam, Klimawandel, Biomasse als Chance gegen Klimakollaps und globale Erwärmung, Graz, Gerhard Erker, 2004.

    [35] Immanuel Wallerstein, Aufstieg und künftiger Niedergang des kapitalistischen Weltsystems, in Senghaas, Dieter: Kapitalistische Weltökonomie. Kontroversen über ihren Ursprung und ihre Entwicklungsdynamik, Frankfurt, Suhrkamp, 1979.

    [36] Renate Genth, Die Bedrohung der Demokratie durch die Ökonomisierung der Politik, feature für den Saarländischen Rundfunk am 4.3., 2006.

    [37] Johan Galtung, Eurotopia, Die Zukunft eines Kontinents, Wien, Promedia, 1993.

    [38] Karl Marx, Capital, New York, Vintage, 1976.

    [39] Claudia von Werlhof, Loosing Faith in Progress: Capitalist Patriarchy as an "Alchemical System," in Bennholdt-Thomsen et.al.(Eds.), There is an Alternative, 2001, p. 15-40.

    [40] Renate Genth, Die Bedrohung der Demokratie durch die Ökonomisierung der Politik, feature für den Saarländischen Rundfunk am 4.3., 2006.

    [41] Maria Mies and Claudia von Werlhof (Hg), Lizenz zum Plündern. Das Multilaterale Abkommen über Investitionen MAI. Globalisierung der Konzernherrschaft – und was wir dagegen tun können, Hamburg, EVA, 2003 (1998), p. 7; Maria Mies, Krieg ohne Grenzen, Die neue Kolonisierung der Welt, Köln, PapyRossa, 2005.

    [42] Michel Chossudovsky, America's "War on Terrorism," Montreal, Global Research, 2005.

    [43] Michel Chossudovsky, "Nuclear War Against Iran," Global Research, Center for Research on Globalization, Ottawa 13.1, 2006.

    [44] Altvater, Chossudovsky, Roy, Serfati, Globalisierung und Krieg, Sand im Getriebe 17, Internationaler deutschsprachiger Rundbrief der ATTAC – Bewegung, Sonderausgabe zu den Anti-Kriegs-Demonstrationen am 15.2., 2003; Maria Mies, Krieg ohne Grenzen, Die neue Kolonisierung der Welt, Köln, PapyRossa, 2005.

    [45] Hazel Hendersen, Building a Win-Win World. Life Beyond Global Economic Warfare, San Francisco, 1996.

    [46] Claudia von Werlhof, Vom Wirtschaftskrieg zur Kriegswirtschaft. Die Waffen der, Neuen-Welt-Ordnung, in Mies 2005, p. 40-48.

    [47] Michael T. Klare, Resource Wars. The New Landscape of Global Conflict, New York, Henry Holt and Company, 2001.

    [48] Rosa Luxemburg, Die Akkumulation des Kapitals, Frankfurt, 1970.

    [49] Tony Clarke, Der Angriff auf demokratische Rechte und Freiheiten, in Mies/Werlhof, 2003, p. 80-94.

    [50] Sassen Saskia, Machtbeben. Wohin führt die Globalisierung?, Stuttgart-München, DVA, 2000.

    [51] Michael Hardt and Antonio Negri, Empire, Cambridge, Harvard Univ. Press, 2001; Noam Chomsky, Hybris. Die endgültige Sicherstellung der globalen –Vormachtstellung der USA, Hamburg-Wien, Europaverlag, 2003.

    [52] Claudia von Werlhof, Speed Kills!, in Dimmel/Schmee, 2005, p. 284-292

    [53] See the "roll back" and "stand still" clauses in the WTO agreements in Maria Mies and Claudia von Werlhof (Hg), Lizenz zum Plündern. Das Multilaterale Abkommen über Investitionen MAI. Globalisierung der Konzernherrschaft – und was wir dagegen tun können, Hamburg, EVA, 2003.

    [54] Richard Sennett, zit. "In Einladung zu den Wiener Vorlesungen," 21.11.2005: Alternativen zur neoliberalen Globalisierung, 2005.

    [55] Claudia von Werlhof, MAInopoly: Aus Spiel wird Ernst, in Mies/Werlhof, 2003, p. 148-192.

    [56] Michel Chossudovsky, America's "War on Terrorism," Montreal, Global Research, 2005.

    [57] Michel Chossudovsky, Global Brutal. Der entfesselte Welthandel, die Armut, der Krieg, Frankfurt, Zweitausendeins, 2002; Maria Mies, Krieg ohne Grenzen. Die neue Kolonisierung der Welt, Köln, PapyRossa, 2005; Bennholdt-Thomsen/Faraclas/Werlhof 2001.

    [58] Michel Chossudovsky, Global Brutal. Der entfesselte Welthandel, die Armut, der Krieg, Frankfurt, Zweitausendeins, 2002.

    [59] Wolfgang Richter, Elmar Schmähling, and Eckart Spoo (Hg), Die Wahrheit über den NATO-Krieg gegen Jugoslawien, Schkeuditz, Schkeuditzer Buchverlag, 2000; Wolfgang Richter, Elmar Schmähling, and Eckart Spoo (Hg), Die deutsche Verantwortung für den NATO-Krieg gegen Jugoslawien, Schkeuditz, Schkeuditzer Buchverlag, 2000.

    [60] Bernard Lietaer, Jenseits von Gier und Knappheit, Interview with Sarah van Gelder, 2006, www.transaction.net/press/interviews/Lietaer 0497.html .

    The original source of this article is Global Research Copyright © Prof. Claudia von Werlhof , Global Research, 2015

    [Apr 19, 2016] Oil is headed to $30 after Doha-commentary

    Another "oil short" is trying to talk his book...
    Notable quotes:
    "... With respect to the longer term, however, capital expenditure cuts are slowly becoming visible. Non-OPEC supply growth (year-over-year) stood at 2.9 million barrels per day at the end of 2014. Supply did not grow in December and January and preliminary data indicate large year-on-year declines in February and March 2016. Low oil prices curbed capital spending worldwide by an estimated 24 percent last year and could trim another 20 percent from capex this year. ..."
    www.cnbc.com

    Giovanni Staunovo, commodities analyst at UBS Wealth Management

    Oil prices are under pressure following the failure of OPEC and major non-OPEC producers to agree on a production freeze at Sunday's meeting in Doha.

    We expect Brent crude prices to drop toward $30 a barrel during the current quarter but recover to $55 a barrel in 12 months as the oversupply of oil dissipates towards the end of this year.

    ... ... ...

    With respect to the longer term, however, capital expenditure cuts are slowly becoming visible. Non-OPEC supply growth (year-over-year) stood at 2.9 million barrels per day at the end of 2014. Supply did not grow in December and January and preliminary data indicate large year-on-year declines in February and March 2016. Low oil prices curbed capital spending worldwide by an estimated 24 percent last year and could trim another 20 percent from capex this year.

    [Apr 17, 2016] There was very little positive cash flow for the past three months

    Notable quotes:
    "... The severance and extraction tax takes 10% off the top. So call it $20. Then look at company 10K for LOE, gathering and transportation, G & A. Also, look at the interest expense. Keep in mind those figures are in BOE. ..."
    "... Bakken well produces 3,000 barrel of oil and 3,000 mcf of gas. Assume 20% royalty (in TX I'd say assume 25% royalty). Net is 2,400 barrel of oil and 2,400 mcf of gas. Divide the gas production by six and we get 2,800 BOE. Assume $22 oil price and $1.50 gas price at the well. So we sold $52,800 of oil and $3,600 of gas. So if my math is correct, the $ realized per BOE is $20.14. 10%, or $2.01 comes off the sales, in state severance and extraction taxes, so now down to $18.13. Then subtract the rest. There couldn't have been much, if any cash flow for CAPEX. I will say the larger companies likely received closer to $25-26 per barrel of oil in Q1. ..."
    "... Hedging will make a tremendous difference in Q1 2016. ..."
    "... http://www.theoildrum.com/node/9821 A good discussion from yesteryear worth reviewing. 10,898 wells at 6 million each is a major investment. The more than 64 billion dollar gamble. No different than launching a satellite into space, flying it by wire to Mars then it crashes into the Martian surface because you forgot to change from miles to kilometers. Everybody makes mistakes. ..."
    peakoilbarrel.com
    04/16/2016 at 8:38 am
    Of course, if you have any skin in the game, the most important statistic in the post is that the average posted price for oil in the Williston Basin for the last three months is $22.

    The severance and extraction tax takes 10% off the top. So call it $20. Then look at company 10K for LOE, gathering and transportation, G & A. Also, look at the interest expense. Keep in mind those figures are in BOE.

    A typical Bakken producer had $8 LOE, $3 of G & A, $2 of gathering and transport and $5 of interest expense, all on a BOE basis.

    I have looked at the earnings forecasts for Q1, WOW!! Reno Hightower , 04/16/2016 at 9:30 am

    So with a 20% royalty (I have no idea what their nets are) they are getting back $16 before you take out the $8 LOE, $3 G&A, $2 gathering and $5 interest for a loss of $2 per barrel produced. All before you factor in the Drilling and Completion and acreage costs.
    shallow sand , 04/16/2016 at 9:51 am
    Reno. US companies report BOE produced after payment of royalties.

    Example:

    Bakken well produces 3,000 barrel of oil and 3,000 mcf of gas. Assume 20% royalty (in TX I'd say assume 25% royalty). Net is 2,400 barrel of oil and 2,400 mcf of gas. Divide the gas production by six and we get 2,800 BOE. Assume $22 oil price and $1.50 gas price at the well. So we sold $52,800 of oil and $3,600 of gas. So if my math is correct, the $ realized per BOE is $20.14. 10%, or $2.01 comes off the sales, in state severance and extraction taxes, so now down to $18.13. Then subtract the rest. There couldn't have been much, if any cash flow for CAPEX. I will say the larger companies likely received closer to $25-26 per barrel of oil in Q1.

    Reno Hightower , 04/16/2016 at 10:04 am
    Thanks for the clarification
    shallow sand , 04/16/2016 at 10:06 am
    Hedging will make a tremendous difference in Q1 2016.
    R Walter , 04/16/2016 at 9:42 am
    http://www.theoildrum.com/node/9821 A good discussion from yesteryear worth reviewing. 10,898 wells at 6 million each is a major investment. The more than 64 billion dollar gamble. No different than launching a satellite into space, flying it by wire to Mars then it crashes into the Martian surface because you forgot to change from miles to kilometers. Everybody makes mistakes.

    [Apr 17, 2016] Dezo from BP on North American oil production, looks liek they are smoking something really strong

    peakoilbarrel.com
    AlexS , 04/16/2016 at 1:15 pm
    BP released its "2016 Energy Outlook – Focus on North America" this week.

    http://www.bp.com/content/dam/bp/pdf/energy-economics/energy-outlook-2016/bp-energy-outlook-2016-focus-on-north-america.pdf

    It forecasts that "After a brief retrenchment due to low prices and falling investment, US tight oil production is now expected to plateau in the 2030s at nearly 8 Mb/d, accounting for almost 40% of total US oil production."

    US shale gas is expected to grow by around 4% p.a. over the Outlook. This causes US shale gas to account for around three-quarters of total US gas production in 2035 and almost 20% of global output.

    An alternative scenario implies that tight oil and shale gas have even greater potential.
    "North American tight oil output increases to 16 Mb/d by 2035, nearly twice its level in the base case, with its share of global liquids output reaching 14%. "

    North American shale gas production is around 72 Bcf/d higher by 2035, with North American shale gas accounting for almost a third of global gas supplies in the 'stronger shale' case.
    ----------–

    What do they know about shale oil and gas that we don't know?
    And what has changed since BP's last year's forecast?

    Base case U.S. tight oil forecast vs. previous years' projections

    Dennis Coyne , 04/16/2016 at 2:23 pm
    HI Alex S

    Not sure what they're smoking at BP. Good stuff no doubt. :-)

    [Apr 17, 2016] Towards a Theory of Shadow Money by Daniela Gabor

    Notable quotes:
    "... Minsky famously quipped that everyone can create new money; the problem is to get it accepted as such by others. ..."
    "... But even money-proper is not the same for everyone. Central banks create the money in which banks pay each other, while private banks create money for households and firms. Money is hierarchical , and moneyness is a question of immediate convertibility without loss of value (at par exchange, on demand). ..."
    "... To convert shadow money into settlement money in case of default, repo lenders sell collateral. An intricate collateral valuation regime, consisting of haircuts, mark-to-market, and margin calls, maintains collateral's exchange rate into (central) bank money. ..."
    "... What makes repos money – at par exchange between "cash" and collateral – is what makes finance more fragile in a Minskyan sense. ..."
    "... Liquid markets become more fragile, he argued, by giving investors the "illusion" that they can exit before prices turn against them. This is a crucial insight for crises of shadow money. ..."
    "... Criminality and corruption is embedded at the top of the financial food chain, by law. ..."
    "... Motion seconded: Government sanctioned counterfeiting. ..."
    "... …and does anyone remember the triumph of the desk slaves of the Crimson Permanent Assurance? Monty Python understood something about political economies and how one might achieve more fairness in outcomes… https://vimeo.com/111458975 ..."
    "... Shadow money sounds to me like fictional capital by another name. And contractual based deposits sounds like counterfeiting. With the distinction that the man with counterfeit printing press robs the train, while the man who runs the Wall St Investment bank repo trading desk robs the whole railroad. ..."
    "... Therefore, Money becomes a victim of the ontological argument for God by St Anselm. If God does not exist, an all powerful, all knowing, all present infinitely great in all categories of Supreme Being could not be written or spoken about, lacking the quality of existence. The fact that we CAN speak about an Omnipotent Supreme Deity means that one in fact exists, due to existence is part and parcel of Omnipotence. But of course, because we can talk or write about something, does not make it real. ..."
    "... It can become socially acceptable as in the case of shadow money, but it is fictional capital, a shadow of the real thing. Time to get out of the cave of finance with its shadows dancing from the light of the fires and walk eyes wide open in the bright light of sunshine! ..."
    "... Money is actually the easiest thing to write about, because it's formless energy. It's not that the phenomenon is shadow money, it's shadow assets. ..."
    "... You have to be able to separate in your mind the ideas of 1) Quantity and 2) Form. That's why economics is a mental disorder, because it doesn't separate quantity and form. If you can't or don't, then yes, it's diabolically hard to write about because you're writing about two different things simultaneously without realizing it. Money is a quantity that is infinite and continuous, but form is an idea that is discontinuous and finite. People do what the forms tell them to do. The money is just like electricity that powers the animation of the forms. Repo is a form it's not money. It's existence results in a certain ordering of social relations, that's also a form. But money is just the energy that makes the forms potent. ..."
    "... I guess that's why they used to call it "political economy" before the mental disorder fully usurped the power of perception and reasoning. ..."
    "... Marx failed to acknowledge that supposedly hard-headed Capitalism is actually all about living beyond your means and mortgaging the future. ..."
    "... It was designed from the Fuggars' and the Medici's to be about debt and fractional reserves and interest. A system based on a finite supply of money is going to grow not much faster, at best, than the money available allows. ..."
    "... Capitalism allows explosive growth by supplying explosive amounts of credit. All this shadow banking activity is designed to get around reserve requirements; nothing else I can see calls all this complexity into existence. The banks always need more, because lending is how they make their money, so they want an infinite amount to lend in order to drive their profits towards the infinite. ..."
    "... This article I think defines shadow money alright as starting where bank deposits leave off but as the above comments suggest seems to miss some key points. I think a major problem with the article is seeing central banks as separate from the state rather than seeing the central bank along with the Treasury as the state itself. ..."
    "... The article gets Treasury debt wrong by seeing it as the central bank funding the state rather than as actually coming from the state. This leads to wrong policy choices such as this state money being used to bail out useless financial transactions and asset appreciation rather than the public purpose. I think crazyman has it right. We left behind the power of perception and reasoning by not realizing the importance of political economy . ..."
    "... This is reminscent of Gramsci's idea that the state and civil society are to be distinguished only for purposes of exposition. ..."
    April 16, 2016 | www.nakedcapitalism.com

    By Daniela Gabor, associate professor in economics at the University of the West of England, Bristol, and Jakob Vestergaard, senior researcher at the Danish Institute for International Studies. Originally published at the Institute for New Economic Thinking website

    Struggles over shadow money today echo 19th century struggles over bank deposits.

    Money, James Buchan once noted , "is diabolically hard to write about." It has been described as a promise to pay, a social relation, frozen desire , memory, and fiction. Less daunted, Hyman Minsky was interested by promises of unknown and changing properties . "Shadow" promises would have fascinated him. Indeed, Perry Mehrling, Zoltan Pozsar , and others argue that in shadow banking, money begins where bank deposits end. Their insights are the starting point for the first paper of our Institute for New Economic Thinking project on shadow money. The footprint of shadow money, we argue,* extends well beyond opaque shadow banking, reaching into government bond markets and regulated banks. It radically changes central banking and the state's relationship to money-issuing institutions.

    Minsky famously quipped that everyone can create new money; the problem is to get it accepted as such by others. General acceptability relies on the strength of promises to exchange for proper money, money that settles debts. Banks' special role in money creation, Victoria Chick reminds us, was sealed by states' commitment that bank deposits would convert into state money (cash) at par. This social contract of convertibility materialized in bank regulation, lender of last resort, and deposit guarantees.

    But even money-proper is not the same for everyone. Central banks create the money in which banks pay each other, while private banks create money for households and firms. Money is hierarchical , and moneyness is a question of immediate convertibility without loss of value (at par exchange, on demand).

    Using a money hierarchy lens, we define shadow money as repurchase agreements (repos), promises to pay backed by tradable collateral. It is the presence of collateral that confers shadow money its distinctiveness. Our approach advances the debate in several ways.

    First, it allows us to establish a clear picture of modern money hierarchies. Repos are nearest to money-proper, stronger in their moneyness claims than other short-term shadow liabilities . Repos rose in money hierarchies as finance sidestepped the state, developing its own convertibility rules over the past 20 years. To convert shadow money into settlement money in case of default, repo lenders sell collateral. An intricate collateral valuation regime, consisting of haircuts, mark-to-market, and margin calls, maintains collateral's exchange rate into (central) bank money.

    Second, we put banks at the center of shadow-money creation. The growing shadow-money literature, however original in its insights, downplays banks' activities in the shadows because its empirical terrain is U.S. shadow banking with its institutional peculiarities. There, hedge funds issue shadow money to institutional cash pools via the balance sheet of securities dealers. In Europe or China , it's also banks issuing shadow money to other banks to fund capital market activities. LCH Clearnet SA, a pure shadow bank, offers a glimpse into this world. Like a bank, it backs money issuance with central bank (Banque de France) money. Unlike a bank, LCH Clearnet only issues shadow money.

    Third, we explore the critical role of the state beyond simple guarantor of convertibility. Like bank money, shadow money relies on sovereign structures of authority and credit worthiness. Shadow money is mostly issued against government bond collateral, because liquid securities make repo convertibility easier and cheaper. The legal right to re-use (re-hypothecate) collateral allows various (shadow) banks to issue shadow money against the same government bond, which becomes akin to a base asset with "velocity." Limits to velocity place demands on the state to issue debt, not because it needs cash but because shadow money issuers need collateral.

    With finance ministries unresponsive to such demands, we note two points in the historical development of shadow money in the early 2000s. In the United States, persuasive lobbying exploited concerns that U.S. Treasury debt would fall to dangerously low levels to relax regulation on repos collateralized with asset and mortgage-backed securities . In Europe, the ECB used the mechanics of monetary policy implementation to the same end. When it lent reserves to banks via repos, the ECB used its collateral valuation practices to generate base-asset privileges for "periphery" government bonds, treating these as perfect substitutes for German government bonds, with the explicit intention of powering market liquidity.

    Fourth, we introduce fundamental uncertainty in modern money creation. What makes repos money – at par exchange between "cash" and collateral – is what makes finance more fragile in a Minskyan sense. Knightian uncertainty bites harder and faster because convertibility depends on collateral-market liquidity.

    The collateral valuation regime that makes repos increasingly acceptable ties securities-market liquidity into appetite for leverage. Here, Keynes' concerns with the social benefits of private liquidity become relevant. Keynes voiced strong doubts about the idea of "the more liquidity the better" in stock markets (concerns now routinely voiced by central banks for securities markets). Liquid markets become more fragile, he argued, by giving investors the "illusion" that they can exit before prices turn against them. This is a crucial insight for crises of shadow money.

    A promise backed by tradable collateral remains acceptable as long as lenders trust that collateral can be converted into settlement money at the agreed exchange rate. The need for liquidity may become systemic once collateral falls in market value, as repo issuers must provide additional collateral or cash to maintain at par. If forced to sell assets, collateral prices sink lower, creating a liquidity spiral . Converting shadow money is akin to climbing a ladder that is gradually sinking: The faster one climbs, the more it sinks.

    Note that sovereign collateral does not always stop the sinking, outside the liquid world of U.S. Treasuries. Rather, states can be dragged down with their shadow-money issuing institutions. As Bank of England showed , when LCH Clearnet tightened the terms on which it would hold shadow money backed with Irish and Portuguese sovereign collateral, it made the sovereign debt crisis worse. Europe had its crisis of shadow money, less visible than the Lehman Brothers demise, but no less painful. "Whatever it takes" was a promise to save the "shadow" euro with a credible commitment to support sovereign collateral values.

    Shadow money also constrains the macroeconomic policy options available to the state. That's because what makes shadow liabilities money also greatly complicates its stabilization: it requires a radical re-think of many powerful ideas about money and central banking. The first point, persuasively made by Perry Mehrling , and more recently by Bank of England , is that central banks need a (well-designed) framework to backstop markets , not only institutions . Collateralized debt relationships can withstand a systemic need for liquidity if holders of shadow money are confident that collateral values will not drop sharply, forcing margin calls and fire sales. Yet such overt interventions raise serious moral hazard issues.

    Less well understood is that central banks need to rethink lender of last resort. Their collateral framework can perversely destabilize shadow money. Central banks cannot mitigate convertibility risk for shadow money when they use the same fragile convertibility practices. Rather, central banks should lend unsecured or without seeking to preserve collateral parity.

    We suggest that the state, as base-asset issuer, becomes a de facto shadow central bank. Its fiscal policy stance and debt management matter for the pace of (shadow) credit expansion and for financial stability. Yet, unlike the central bank, the state has no means to stabilize shadow money or protect itself from its fragility. It has to rely on its central bank, caught in turn between independence and shadow money (in)stability, which may require direct interventions in government bond markets.

    The bigger task that follows from our analysis, is to define the social contract between the three key institutions involved in shadow money: the state as base collateral issuer, the central bank, and private finance. In the new FSB or Basel III provisions, we are witnessing a struggle over shadow money with many echoes from the long struggle over bank money. The more radical options, such as disentangling sovereign collateral from shadow money, were never contemplated in regulatory circles. Even a partial disentanglement has proven difficult because states depend on repo markets to support liquidity in government bond markets. Our next step, then, will be to map how the crisis has altered the contours of the state's relation to the shadow money supply, comparing the cases of the U.S., the Eurozone, and China.

    cnchal , April 16, 2016 at 4:10 am

    Financial anarchy is my interpretation of shadow banking.

    . . . The legal right to re-use (re-hypothecate) collateral allows various (shadow) banks to issue shadow money against the same government bond , which becomes akin to a base asset with "velocity." Limits to velocity place demands on the state to issue debt, not because it needs cash but because shadow money issuers need collateral .
    ----
    The bigger task that follows from our analysis, is to define the social contract between the three key institutions involved in shadow money: the state as base collateral issuer, the central bank, and private finance .

    Who does shadow banking serve? It is so far from capitalism, it should be illegal.

    Bernie Sanders: The business of Wall Street is fraud and greed.

    Robert Coutinho , April 16, 2016 at 7:32 am

    Well…yes and no. There is real "need" for some shadow banking services. However, the idea of having Central Banks (issuers of money, or whatever) loaning based on … nothing?

    Less well understood is that central banks need to rethink lender of last resort. Their collateral framework can perversely destabilize shadow money. Central banks cannot mitigate convertibility risk for shadow money when they use the same fragile convertibility practices. Rather, central banks should lend unsecured or without seeking to preserve collateral parity.

    "Europe had its crisis of shadow money, less visible than the Lehman Brothers demise, but no less painful. "Whatever it takes" was a promise to save the "shadow" euro with a credible commitment to support sovereign collateral values."

    Yes, but Lehman was not a taxing authority (although to be fair, Ireland et.al. were not money-issuing sources).

    I am having a hard time understanding all of this–but as far as I can tell, the authors are basically suggesting that sovereign governments should be backing up the shadow banking system. However, I have not seen them suggest any reason for it except that the entire house of cards could come falling down. Boo hoo for the banksters–tell them to do things out of the "shadows".

    Jujeb , April 16, 2016 at 4:20 am

    Why is there a need for 'shadow money' in the first place?
    Afaik, banks create money when they loan and central banks(especially the Fed) issues the most secure assets, their securities, which are used as collateral.

    abynormal , April 16, 2016 at 7:44 am

    Thanks Yves for sharing Gabor…what a Mess! towards the end of 2012 the US shadow banking was said to be around 67 Trillion …did something get baked-in? 2014 the IMF has a much smaller 'account'…(Japan being the worst laughing stock). the gaps are no small detail:

    The IMF's latest Global Financial Stability Report analyzes the growth in shadow banking in recent years in both advanced and emerging market economies and the risks involved.

    According to the report, shadow banking amounts to between 15 and 25 trillion dollars in the United States, between 13.5 and 22.5 trillion in the euro area, and between 2.5 and 6 trillion in Japan-depending on the measure- and around 7 trillion in emerging markets. In emerging markets, its growth is outpacing that of the traditional banking system. https://www.imf.org/external/pubs/ft/survey/so/2014/pol100114a.htm

    Stephen Verchinski , April 16, 2016 at 9:34 am

    That sure seems a Rx for destabilizing the world currencies to precipitate a collapse. Track and publicize the visits of Congressmen and Senators to the BIS and COL to start. Why are they making these visits under cover? Who are they meeting with? Are they being prepared as to what to expect a deliberate world currency crash? . Our political elite are so beholden to the bankers to allow for the theft of the wealth of nations for unattainable expanding growth and skimming of millions. Is it possible in regard the corporate banks to have the strings attached on the use of shadow money at time of chartering or in the case of the do over at time of bankruptcy?. How is this done? I'd also like to know a good proposal for the private investment boutique banks. Have any bills at state and federal levels been proposed and if not, why not? What would the main sections of such a bill look like. Thanks.

    ke, April 16, 2016 at 8:04 am

    A derivative promise made by a Wall Street prostitute, ultimately contingent upon the ability to liquidate the very users of the instrument, with currency debasement, and war to restock.

    Paying people to buy stuff from others being paid to buy stuff, with the full faith and credit of dependent seniors in a collapsing actuarial ponzi, with nothing more than made for TV mercenaries, isn't likely to end well.

    Craps, the bank moves to the next suckers, with nothing more than the promise of an exotic vacation, billed to someone else.

    Steve H. , April 16, 2016 at 9:27 am

    – Limits to velocity place demands on the state to issue debt, not because it needs cash but because shadow money issuers need collateral.

    There's a dirty linchpin. Even if the diabolical multiplier from cnchal's quote were removed, and the dollar was hard-pinned to a pound of silver to pay the sheriff with, infinite debt issuance can step in to the feed the hungry beast.

    Promises to pay kept mercenaries in line during the city-states. If you didn't win you didn't get paid. Unless you turned around and took your employers gold instead. Which is a bit like capturing the central banks.

    Still, debt can be put to good uses. Infrastructure, maybe. Basic necessities and health. 'When the people are strong, the nation is strong.' Instead, the gearing seem like the machine in Princess Bride, sucking time from peoples lives.

    Watt4Bob , April 16, 2016 at 10:06 am

    With regard to velocity;

    Ask any highway patrolman, the faster the speed limit, the worse the accidents.

    On the famed autobahns of Europe, the no speed limit means that when an accident occurs, the results are likely to be catastrophic.

    And I really love the observation that central banks need a mechanism to backstop the market.

    Reminds me of the main problem with the famous Vincent Black Shadow motorcycle, it could attain speeds close to 200 mph, but brake designs at the time didn't work at those speeds, so as Hunter S. Thompson remarked;

    "If you rode the Black Shadow at top speed for any length of time, you would almost certainly die."

    Wall $treet wants to go fast, the faster the better, but they haven't got any brakes, and worse than that, we're all along for the ride whether we like it or not.

    Jim Haygood , April 16, 2016 at 2:04 pm

    Richard Thompson got it too:

    Oh, says Red Molly to James, "That's a fine motorbike
    A girl could feel special on any such like"
    Says James to Red Molly, "My hat's off to you
    It's a Vincent Black Lightning, 1952"

    [James gets shot in a robbery]

    When she came to the hospital, there wasn't much left
    He was running out of road, he was running out of breath
    But he smiled to see her cry
    And said I'll give you my Vincent to ride

    Oh, he reached for her hand then he slipped her the keys
    He said, "I've got no further use for these
    I see angels on Ariels, in leather and chrome
    Swooping down from heaven to carry me home"

    And he gave her one last kiss and died
    And he gave her his Vincent to ride

    It was sorta like that when Bernanke handed J-Yel the keys to his QE penny farthing bike.

    Watt4Bob , April 17, 2016 at 9:09 am

    I'd flesh out that analogy a bit;

    The Bernanke and J-Yel witnessed the header that Greenspan took on that bike, and decided to leave it standing against the wall. When you consider the fact that neither of them could reach the pedals, let alone mount the thing and ride, that was probably a good idea.

    Chauncey Gardiner , April 16, 2016 at 10:53 am

    When did the central banks' framework to backstop markets morph into an organized effort to push the value of repo collateral relentlessly upward forever?…

    What about increasing the relentless decline in the Velocity of Money by gradually increasing interest rates? Yes, that might be a catalyst to trigger a "liquidity spiral". So what? We now have moral hazard in spades and at some point will have to cross the Rubicon, whether willingly or not.

    washunate , April 16, 2016 at 11:38 am

    Here's a simple theory: Shadow banking is government approved fraud.

    cnchal, April 16, 2016 at 12:07 pm

    i am reading one of the links from the post titled "Regulating money creation after the crisis", and it's even worse than government approved fraud. I am only part way through it, but here is a gem.

    On page 10

    . . . Instead, OLA was designed to preserve the value of the assets of failed financial firms until they are liquidated, a worthy aim, but a very different one. At the same time, the Dodd-Frank Act has imposed significant new limitations on the government's freestanding panic-fighting tools . These limitations, absent future congressional action, would render next to impossible the kind of aggressive government rescue operation that was staged during the recent crisis.

    Criminality and corruption is embedded at the top of the financial food chain, by law.

    Paul Tioxon , April 16, 2016 at 2:20 pm

    Motion seconded: Government sanctioned counterfeiting.

    Keith , April 16, 2016 at 11:54 am

    Before we complicate the issue, it is fairly obvious no one understands conventional money and it is one of the best kept secrets on the planet.

    Learn how normal money works and how its mismanagement has led to many of today's problems.

    Banks create money out of nothing to allow you to buy things with loans and mortgages (fractional reserve banking).

    After years of lobbying the reserve required is often as good as nothing. Mortgages can be obtained with the reserve contained in the fee.

    After the financial crisis there were found to be £1.25 in reserves for every £100 issued on credit in the UK.

    Having no reserve shouldn't be a problem with prudent lending.

    Creating money out of nothing is the service they really provide to let you spend your own future income now.

    They charge interest to cover their costs, for the risk involved and the service they provide.
    Your repayments in the future, pay back the money they created out of nothing.

    The asset bought covers them if you default, they will repossess it and sell it to recover the rest of the debt unpaid.

    At the end all is back to square one.

    The bank has received the interest for its service.

    You have paid for the asset you have bought plus the interest to the bank for its service of letting you use your own money from the future.

    Today's massive debt load is all money borrowed from the future for things already bought.

    It can also go wrong another way, when banks lend into asset bubbles that collapse very quickly. The repossessed asset doesn't cover the outstanding debt and money gets destroyed on the banks balance sheets.

    When banks lend in large amounts, on margin, into stock markets, the bust shreds their balance sheets (1929).

    When banks lend in large amounts on mortgages into housing markets, the bust shreds their balance sheets (2008).

    If banks don't lend prudently you are in trouble.

    Then they developed securitisation …… oh dear (no need to lend prudently now).

    Housing booms and busts around the world …… oh dear.

    All that money borrowed from the future and already spent …… oh dear.

    susan the other , April 16, 2016 at 12:16 pm

    This is so interesting. It seems to be approaching the subject that Wray speculated about a while back – that we should give central banks fiscal responsibility. Because otherwise a sovereign state has no control over its sovereign money? It seems to me that money itself becomes a rehypothecated asset by virtue of being invested over and over again – if it is well allocated and under good fiscal control all is well. If not we get the Great Recession.

    So let the state become the defacto shadow central bank so it had direct control of its own money. Instead of hanging on to the old gold standard mindset of top down management, why not think of people, not collateral, as the root of the system – the grass roots. How much money does a system – a sovereign country – need per person. And then establish a sovereign central bank to deal directly, bringing the shadows into the sunlight of fiscal control.

    JTHcPhee , April 16, 2016 at 12:35 pm

    …and does anyone remember the triumph of the desk slaves of the Crimson Permanent Assurance? Monty Python understood something about political economies and how one might achieve more fairness in outcomes… https://vimeo.com/111458975

    Paul Tioxon , April 16, 2016 at 12:38 pm

    Moneyness, like doggitas, you just can't scratch behind its ears. If shadow money is distinguished by its relationship to collateral, as opposed to money issued by the state, with the entire human enterprise of civilization as its basis, it still seems to me that at the top of the money hierarchy is fiat money, the real money by the real social order empowered by the social forms of power that sustain human life in all of its aspects, not just the financial conveniences. Shadow money sounds to me like fictional capital by another name. And contractual based deposits sounds like counterfeiting. With the distinction that the man with counterfeit printing press robs the train, while the man who runs the Wall St Investment bank repo trading desk robs the whole railroad. Am I right or Am I right. What a bunch of Losers!!!

    And if there is any doubt about the fictional quality of $Trillions and $ Trillions of dollars, physicists can not find anything naturally occurring in the universe beyond billions and billions. Money, simply a numbered record, a counting or cardinal number, transforms into money in name only, MINO, when it refers to fictional amount that can only appear contractually as words, and do not count how much economic activity or output has been produced.

    Therefore, Money becomes a victim of the ontological argument for God by St Anselm. If God does not exist, an all powerful, all knowing, all present infinitely great in all categories of Supreme Being could not be written or spoken about, lacking the quality of existence. The fact that we CAN speak about an Omnipotent Supreme Deity means that one in fact exists, due to existence is part and parcel of Omnipotence. But of course, because we can talk or write about something, does not make it real.

    It can become socially acceptable as in the case of shadow money, but it is fictional capital, a shadow of the real thing. Time to get out of the cave of finance with its shadows dancing from the light of the fires and walk eyes wide open in the bright light of sunshine!

    craazyman , April 16, 2016 at 12:43 pm

    I don't know about this one. It seems to me to be some pretty queasy thinking. It kind of wanders around in circles of confusion. "my existence led by confusion boats, mutiny from stern to bow".

    That's pretty funny somebody would say that money is diabolically hard to write about. That's pretty funny.

    Money is actually the easiest thing to write about, because it's formless energy. It's not that the phenomenon is shadow money, it's shadow assets.

    You have to be able to separate in your mind the ideas of 1) Quantity and 2) Form. That's why economics is a mental disorder, because it doesn't separate quantity and form. If you can't or don't, then yes, it's diabolically hard to write about because you're writing about two different things simultaneously without realizing it. Money is a quantity that is infinite and continuous, but form is an idea that is discontinuous and finite. People do what the forms tell them to do. The money is just like electricity that powers the animation of the forms. Repo is a form it's not money. It's existence results in a certain ordering of social relations, that's also a form. But money is just the energy that makes the forms potent.

    The primary challenge is to come up with an ordered way of thinking about the forms themselves. That's frankly not easy. The ideal would be to understand them in the manner in which Euclid understood geometrical ideas. If you can get the vision, then you can see all the possibilities for structure and ordered relationships. there's really no triangle in reality and there's no point and there's no line and there's no plane. They just made them up to approximate physical reality. Then they thought to themselves "Holy shit! These ideas interrelated in an astounding range of symmetries and causations." Then they became a lens or a framework through which physical reality was interpreted. But they didn't confuse the idea of "number" with the idea of "triangle" or "circle".

    Certainly in math the algebraic interpretation doesn't rely completely on the geometrical interpretation. But if there is no geometrical interpretation and it's only algebra, then so much is missing, so much is lost. I guess that's why they used to call it "political economy" before the mental disorder fully usurped the power of perception and reasoning.

    susan the other , April 16, 2016 at 2:18 pm

    lovely to read you

    Watt4Bob , April 17, 2016 at 8:58 am

    Certainly in math the algebraic interpretation doesn't rely completely on the geometrical interpretation. But if there is no geometrical interpretation and it's only algebra, then so much is missing, so much is lost.

    With that firmly in mind, I think it's necessary to mention the fact that the " study " of "economics" relies on calculus, wherein we are introduced to the notion of change over time, volume, motion, acceleration, rates of change, vectors, etc.

    Algebra and geometry are, as you point out, obvious abstractions, but once you add volume motion, and rates of change, the models become very seductive, and it's easy to see how one can be convinced that they are approaching an understanding of 'reality'.

    The trouble is of course, that the egg-heads busy trying to describe economic "reality" with calculus, are, for the most part in the employ of savages who will forever cling to a simple arithmetic where their only interest is in "having it all".

    Genius employed to make excuses for demented indifference.

    Jim Haygood , April 16, 2016 at 1:27 pm

    'Central banks should lend unsecured … we suggest that the state, as base-asset issuer, becomes a de facto shadow central bank.' - Daniela "Zsa Zsa" Gabor

    This statement desperately needs Walter Bagehot's qualifications: "to solvent institutions" and "at a penalty rate."

    Otherwise, we're just talking about another squalid round of "TARP for Jamie," as we peasants reach for our pitchforks.

    cnchal , April 16, 2016 at 2:07 pm

    Bagehot, eh.

    It should however be pointed out that the idea of shadow banking is not remotely new. The concept was presaged well over a century ago by Walter Bagehot, the legendary English banker, essayist, and theorist. In 1873, Bagehot wrote Lombard Street: A Description of the Money Market, his canonical work on the money market and central banking. In it, he observed that the great London banks were accompanied by a parallel set of financial firms, known as "bill brokers," which in many ways resembled modern-day securities dealers. Like today's dealers, these bill-brokers financed themselves with borrowings that, Bagehot informs us, were "repayable at demand, or at very short notice."

    Formally speaking these firms were not banks but to Bagehot they might as well be. "The London bill brokers," he observes, "do much the same [as banks]. Indeed, they are only a special sort of bankers who allow daily interest on deposits, and who for most of their money give security [i.e., collateral]. But we have no concern now with these differences of detail." At times, Bagehot is careful to note that the short-term obligations of bill-brokers were not technically deposits; he observes that the maturing of these liabilities "is not indeed a direct withdrawal of money on deposit," although "its principal effect is identical."

    Other times, however, Bagehot dispenses even with this distinction: "It was also most natural that the bill-brokers should become, more or less, bankers too, and should receive money on deposit without giving any security for it." Here we have an unambiguous identification of the shadow banking phenomenon about 140 years ago .

    Bas , April 16, 2016 at 1:30 pm

    it's all been reduced to gambling with no meaningful value in "The House" to back it up. Money will disappear, like in Star Trek.

    fresno dan , April 16, 2016 at 1:36 pm

    I would posit that there are two types of money
    A – money of the 0.001% – if they walk into a casino, real estate transaction, or any asset for that matter they can NOMINALLY lose money – in fact the 0.001% NEVER lose any of THEIR money, they just lose your money. All winnings, of anybody doing anything anywhere, belong to them.
    B – money of everybody else – this money nominally is yours to do with as you see fit, but it ALL belongs to the 0.001%. The collateral that backs it up is everything you earn and own and when necessary your, and your family's, internal organs…

    Jamie , April 16, 2016 at 4:46 pm

    "The nation [England] was not a penny poorer by the bursting of these soap bubbles of nominal money capital. All these securities actually represent nothing but accumulated claims, legal titles to future production. Their money or capital value either does not represent capital at all … or is determined independently of the real capital value they represent."

    – Marx
    Banking Capital's Component Parts
    Capital: Volume Three

    James Levy , April 17, 2016 at 6:07 am

    Marx failed to acknowledge that supposedly hard-headed Capitalism is actually all about living beyond your means and mortgaging the future.

    It was designed from the Fuggars' and the Medici's to be about debt and fractional reserves and interest. A system based on a finite supply of money is going to grow not much faster, at best, than the money available allows.

    Capitalism allows explosive growth by supplying explosive amounts of credit. All this shadow banking activity is designed to get around reserve requirements; nothing else I can see calls all this complexity into existence. The banks always need more, because lending is how they make their money, so they want an infinite amount to lend in order to drive their profits towards the infinite.

    Sy Krass , April 16, 2016 at 10:41 pm

    A sovereign can create its own currency, but theoretically couldn't it create any currency? Couldn't Greece for example click a few key boards put some ones and zeros in and say, "oh our account with $1,000,000 US is actually $10,000,000,000 US?

    HAHAHAHAHA!!!!!!!

    financial matters , April 17, 2016 at 5:49 am

    This article I think defines shadow money alright as starting where bank deposits leave off but as the above comments suggest seems to miss some key points. I think a major problem with the article is seeing central banks as separate from the state rather than seeing the central bank along with the Treasury as the state itself.

    The article gets Treasury debt wrong by seeing it as the central bank funding the state rather than as actually coming from the state. This leads to wrong policy choices such as this state money being used to bail out useless financial transactions and asset appreciation rather than the public purpose. I think crazyman has it right. We left behind the power of perception and reasoning by not realizing the importance of political economy.

    Lambert Strether, April 17, 2016 at 7:22 am

    This is reminscent of Gramsci's idea that the state and civil society are to be distinguished only for purposes of exposition.

    ewmayer, April 17, 2016 at 4:45 pm

    Some issues with the piece and questions for the authors (and fellow NCers):

    I really wish such analyses would use the more-precise term "credit-money" in reference to money creation by banks, to distinguish it from government money creation, which similarly may have repayment requirements attached (bonds), but need not be so. The "need not be so" may occur via outright fiat emission, but more commonly appears in form of a public debt stock which continually increases with time, at least in nominal terms.

    The legal right to re-use (re-hypothecate) collateral allows various (shadow) banks to issue shadow money against the same government bond, which becomes akin to a base asset with "velocity."

    Fine, but what about that other crucial element of modern bank credit-money creation, leverage? Are there any practical limits on shadow banks' issuance of multiple units of shadow money against the same government-bond money unit? If so, how are they enforced (if at all)? Note also the key concept of "implied leverage" inherent in such schemes, where the leverage ratio may fluctuate drastically with the mark-to-market valuation of the collateral. Banks play endless games with "fictional reserves"; it would be naive to imagine that non-bank shadow lenders don't do similarly with their alleged collateral.

    The first point, persuasively made by Perry Mehrling, and more recently by Bank of England, is that central banks need a (well-designed) framework to backstop markets, not only institutions.

    Erm, markets are the *only* thing the government should be committed to ensuring functioning of - we have overwhelming evidences from multiple boom-bust-crisis episodes over the last 3 decades of the toxic results of governments backstopping hyperleveraged fraud-riddled institutions and the crooks running same.

    [Apr 13, 2016] The dead end of neoliberal transformation of the USA society

    economistsview.typepad.com

    Economist's View

    New Deal democrat : , Monday, April 11, 2016 at 03:07 PM
    "consensus in support of global economic integration as a force for peace and prosperity "

    "The Great Illusion" ( https://en.m.wikipedia.org/wiki/The_Great_Illusion )
    That increased trade is a bulwark against war rears its ugly head again.

    The above book which so ironically delivered the message was published in 1910.

    Alas, the Kaiser, the Tsar, and the Emperor did not act in accord with its tenets. Either increased global trade is irrelevant to war and peace, or World War I didn't happen. Your pick which to believe.

    RC AKA Darryl, Ron -> New Deal democrat... , Tuesday, April 12, 2016 at 03:06 AM
    Awesome, Dude!
    George H. Blackford : , Monday, April 11, 2016 at 03:20 PM
    Our problems began back in the 1970s when we abandoned the Bretton Woods international capital controls and then broke the unions, cut taxes on corporations and upper income groups, and deregulated the financial system. This eventually led a stagnation of wages in the US and an increase in the concentration of income at the top of the income distribution throughout the world: http://www.rwEconomics.com/Ch_1.htm

    The export-led growth model that began in the 1990s seriously exacerbated this problem as it proved to be unsustainable: http://www.rwEconomics.com/htm/WDCh_2.htm

    When combined with tax cuts and financial deregulation it led to increasing debt relative to income in the importing countries that caused the financial catastrophe we went through in 2008, the economic stagnation that followed, and the social unrest we see throughout the world today. This, in turn, created a situation in which the full utilization of our economic resources can only be maintained through an unsustainable increase in debt relative to income: http://www.rwEconomics.com/htm/WDCh3e.htm

    This is what has to be overcome if we are to get out of the mess the world is in today, and it's not going to be overcome by pretending that it's just going to go away if people can just become educated about the benefits of trade. At least that's not the way it worked out in the 1930s: http://www.rwEconomics.com/LTLGAD.htm

    RC AKA Darryl, Ron -> George H. Blackford ... , Tuesday, April 12, 2016 at 03:13 AM
    Totally excellent, Dude!
    Dan Kervick : , Monday, April 11, 2016 at 06:26 PM
    Global integration and the liberalization of capital flows outside of national boundaries, and outside of the constraints of national solidarity, has pushed Americans further into a ruthless capitalist struggle for strictly individual measures of "success", and intensified economic insecurity and the gaps between winners and losers. Economists find the resistance to these trends mysterious; others not so much.
    RC AKA Darryl, Ron -> Dan Kervick... , Tuesday, April 12, 2016 at 03:14 AM
    Priceless!
    Adamski : , Tuesday, April 12, 2016 at 07:10 AM
    The prospect of an international recession has me feeling down but then I read this sniping timewasting comments section and it doesn't seem so bad
    Ashok Hegde : , Tuesday, April 12, 2016 at 02:07 PM
    Economic leaders after WW2 had a Colonialist attitude entrenched within. They made a plan for global economic integration, which only considered the economic needs and realities of developed western nations. China/India/Indonesia/etc...were never at the conceptual table.

    Now, the tides have turned. The China-India nexus historically accounted for roughly 40% of the global economy. That 'normal' state was eclipsed for 1.5 centuries, and we may regress to that norm. If so, a ton of jobs, and economic activity, may shift from the West, to Asia. If so, the western middle classes are screwed.

    BILL ELLIS -> Ashok Hegde ... , Tuesday, April 12, 2016 at 03:02 PM
    It's not a zero sum problem
    BILL ELLIS : , Tuesday, April 12, 2016 at 02:56 PM
    Up till now globalism has mostly been conducted by laissez faire neo liberal elite...for the needs of the elite.
    That's not entirely a bad thing. Wars are started over the needs and desires of our elites. Common folks left to their own, won't find reason to go off and kill their counterparts... it only after "the other" has been dehumanized and demonized by the elite that common people will allow themselves to be organized to kill one another.

    By allowing and encouraging the world's elite to operate within a system of mutual dependence, we decrease the incentive for the elite to marshal and deploy their captive populations against one another.

    But once that international system has been solidified...as it has now... The objective should be to tear it down...it should be to make it democratized, unionised, and transparent .

    We need to move from laissez faire neo liberalism to social democratic neo liberalism.

    BILL ELLIS -> BILL ELLIS... , -1
    Should " not" be torn down...

    [Apr 11, 2016] Paul Krugman: Snoopy the Destroyer

    Notable quotes:
    "... "Judge Collyer repeatedly complained that the regulators had failed to do a cost-benefit analysis." What Professor Krugman omits here is that so-called "cost-benefit analysis" has been corrupted by the fallacious Kaldor-Hicks compensation principle. The house cleaning has a lot further to go than "Republicans." ..."
    economistsview.typepad.com
    Systemically important presidential elections:
    Snoopy the Destroyer, by Paul Krugman, NY Times : Has Snoopy just doomed us to another severe financial crisis? Unfortunately, that's a real possibility, thanks to a bad judicial ruling that threatens a key part of financial reform. ...
    At the end of 2014 the regulators designated MetLife , whose business extends far beyond individual life insurance, a systemically important financial institution. Other firms faced with this designation have tried to get out by changing their business models. For example, General Electric ... sold off much of its finance business. But MetLife went to court. And it has won a favorable ruling from Rosemary Collyer , a Federal District Court judge.
    It was a peculiar ruling. Judge Collyer repeatedly complained that the regulators had failed to do a cost-benefit analysis, which the law doesn't say they should do, and for good reason. Financial crises are, after all, rare but drastic events; it's unreasonable to expect regulators to game out in advance just how likely the next crisis is, or how it might play out, before imposing prudential standards. To demand that officials quantify the unquantifiable would, in effect, establish a strong presumption against any kind of protective measures.
    Of course, that's what financial firms want. Conservatives like to pretend that the "systemically important" designation is actually a privilege, a guarantee that firms will be bailed out. Back in 2012 Mitt Romney described this part of reform as "a kiss that's been given to New York banks"..., an "enormous boon for them." Strange to say, however, firms are doing all they can to dodge this "boon" - and MetLife's stock rose sharply when the ruling came down.
    The federal government will appeal..., but even if it wins the ruling may open the floodgates to a wave of challenges to financial reform. And that's the sense in which Snoopy may be setting us up for future disaster.
    It doesn't have to happen. As with so much else, this year's election is crucial. A Democrat in the White House would enforce the spirit as well as the letter of reform - and would also appoint judges sympathetic to that endeavor. A Republican, any Republican, would make every effort to undermine reform, even if he didn't manage an explicit repeal.
    Just to be clear, I'm not saying that the 2010 financial reform was enough. The next crisis might come even if it remains intact. But the odds of crisis will be a lot higher if it falls apart.

    jonny bakho : Monday, April 11, 2016 at 06:54 AM

    The free market needs government intervention to save the market from itself.
    pgl said in reply to jonny bakho... , Monday, April 11, 2016 at 07:25 AM
    Yes - and we need to get the corporate lawyers out of the way.
    Sandwichman -> pgl... , Monday, April 11, 2016 at 07:47 AM
    10,000 at the bottom of the ocean would be a good start.
    DrDick -> jonny bakho... , Monday, April 11, 2016 at 07:36 AM
    Markets cannot even exist without government regulation.
    anne : , Monday, April 11, 2016 at 07:02 AM
    http://krugman.blogs.nytimes.com/2015/04/11/a-victory-against-the-shadows/

    April 11, 2015

    A Victory Against the Shadows
    By Paul Krugman

    There are two big lessons from GE's announcement * that it is planning to get out of the finance business. First, the much maligned Dodd-Frank financial reform is doing some real good. Second, Republicans have been talking nonsense on the subject. OK, maybe point #2 isn't really news, but it's important to understand just what kind of nonsense they've been talking.

    GE Capital was a quintessential example of the rise of shadow banking. In most important respects it acted like a bank; it created systemic risks very much like a bank; but it was effectively unregulated, and had to be bailed out through ad hoc arrangements that understandably had many people furious about putting taxpayers on the hook for private irresponsibility.

    Most economists, I think, believe that the rise of shadow banking had less to do with real advantages of such nonbank banks than it did with regulatory arbitrage - that is, institutions like GE Capital were all about exploiting the lack of adequate oversight. And the general view is that the 2008 crisis came about largely because regulatory evasion had reached the point where an old-fashioned wave of bank runs, albeit wearing somewhat different clothes, was once again possible.

    So Dodd-Frank tries to fix the bad incentives by subjecting systemically important financial institutions - SIFIs - to greater oversight, higher capital and liquidity requirements, etc. And sure enough, what GE is in effect saying is that if we have to compete on a level playing field, if we can't play the moral hazard game, it's not worth being in this business. That's a clear demonstration that reform is having a real effect.

    Now, the more or less official GOP line is that the crisis had nothing to do with runaway banks - it was all about Barney Frank somehow forcing poor innocent bankers to make loans to Those People. And the line on the right also asserts that the SIFI designation is actually an invitation to behave badly, that institutions so designated know that they are too big to fail and can start living high on the moral hazard hog.

    But as Mike Konczal notes, ** GE - following in the footsteps of others, notably MetLife *** - is clearly desperate to get out from under the SIFI designation. It sure looks as if being named a SIFI is indeed what it's supposed to be, a burden rather than a bonus.

    A good day for the reformers.

    * http://www.nytimes.com/2015/04/11/business/dealbook/the-lessons-for-finance-in-the-ge-capital-retreat.html

    ** http://www.nextnewdeal.net/rortybomb/how-end-ge-capital-also-kills-core-conservative-talking-point-about-dodd-frank

    *** http://dealbook.nytimes.com/2015/01/13/metlife-to-fight-too-big-to-fail-status-in-court/

    Sandwichman : , Monday, April 11, 2016 at 07:14 AM
    "Judge Collyer repeatedly complained that the regulators had failed to do a cost-benefit analysis." What Professor Krugman omits here is that so-called "cost-benefit analysis" has been corrupted by the fallacious Kaldor-Hicks compensation principle. The house cleaning has a lot further to go than "Republicans."
    anne said in reply to Sandwichman ... , Monday, April 11, 2016 at 07:23 AM
    https://en.wikipedia.org/wiki/Kaldor%E2%80%93Hicks_efficiency

    A Kaldor–Hicks improvement, named for Nicholas Kaldor and John Hicks, also known as the Kaldor–Hicks criterion, is a way of judging economic re-allocations of resources among people that captures some of the intuitive appeal of Pareto improvements, but has less stringent criteria and is hence applicable to more circumstances.

    A re-allocation is a Kaldor–Hicks improvement if those that are made better off could hypothetically compensate those that are made worse off and lead to a Pareto-improving outcome. The compensation does not actually have to occur (there is no presumption in favor of status-quo) and thus, a Kaldor–Hicks improvement can in fact leave some people worse off.

    Sandwichman -> anne... , Monday, April 11, 2016 at 07:31 AM
    There are no stable "units" in which compensation could be paid.

    http://econospeak.blogspot.ca/2014/11/numeraire-shmoo-meraire-nature-doesnt.html

    David Ellerman:

    "Consider a transfer of an apple from Mary to John and a transfer of $0.75 from John to Mary. Use Kaldor-Hicks to evaluate each part as a "project" with the other part as the "compensation". Using money as the numeraire and the apple transfer as the "project", we see under the assumptions that the transfer of the apple increases social wealth measured in dollars so that is the recommendation based on "efficiency", and the payment of the "compensation" of $0.75 is a matter of "equity" of concern to politician, theologians, and philosophers but not to the professional economist. Now reverse the numeraire taking apples as the numeraire and the transfer of the $0.75 as the "project". Then the transfer of the apple (= "compensation") does not change social wealth = size of the apple pie, but the transfer of the $0.75 increases the size of the social apple pie by 3/4 of an apple so it is the transfer of the $0.75 that is recommended on efficiency grounds by hard-nosed economists while the transfer of the apple is left to politicians, theologians, and the like as a matter of "equity." Thus the outcome of the KH analysis is reversed by a change in the numeraire used to describe the exact same pair of transfers."

    anne said in reply to Sandwichman ... , Monday, April 11, 2016 at 07:50 AM
    November 22, 2014

    #NUM!éraire, Shmoo-méraire: Nature doesn't truck and barter

    The commodity in terms of which the prices of all the others are expressed is the numéraire. -- Leon Walras, Elements of Pure Economics.

    But the numéraire is a purely technical device, introduced simply for the purpose of making exchange values explicit. In no way does the introduction of a standard of value alter the fundamental nature of the economy in question. It remains a barter economy, since goods are exchanged solely for other goods. -- André Orléan, The Empire of Value.

    -- Sandwichman

    anne said in reply to Sandwichman ... , Monday, April 11, 2016 at 07:26 AM
    http://en.wikiquote.org/wiki/Catch-22

    1961

    Yossarian looked at him soberly and tried another approach. 'Is Orr crazy?'

    'He sure is,' Doc Daneeka said.

    'Can you ground him?'

    'I sure can. But first he has to ask me to. That's part of the rule.'

    'Then why doesn't he ask you to?'

    'Because he's crazy,' Doc Daneeka said. 'He has to be crazy to keep flying combat missions after all the close calls he's had. Sure, I can ground Orr. But first he has to ask me to.'

    'That's all he has to do to be grounded?'

    'That's all. Let him ask me.'

    'And then you can ground him?' Yossarian asked.

    'No. Then I can't ground him.'

    'You mean there's a catch?'

    'Sure there's a catch,' Doc Daneeka replied. 'Catch-22. Anyone who wants to get out of combat duty isn't really crazy.'

    There was only one catch and that was Catch-22, which specified that a concern for one's own safety in the face of dangers that were real and immediate was the process of a rational mind. Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions and sane if he didn't, but if he was sane, he had to fly them. If he flew them, he was crazy and didn't have to; but if he didn't want to, he was sane and had to. Yossarian was moved very deeply by the absolute simplicity of this clause of Catch-22 and let out a respectful whistle.

    'That's some catch, that Catch-22,' he observed.

    'It's the best there is,' Doc Daneeka agreed.

    -- Joseph Heller

    Sandwichman -> anne... , Monday, April 11, 2016 at 07:42 AM
    Also known as the double-bind in Gregory Bateson's analysis.

    And why the big fuss about the Panama Papers? Doesn't the Laffer Curve tell us that if the 1% evade taxes by hiding their money in off-shore accounts, it will cause so much economic growth that government tax revenues will actually increase?

    Laffer curves, Kaldor-Hicks cost-benefit swindles and lump-of-labor fantasies are not "incidentals" of an otherwise sound economic discipline. They are symptoms of an ideology that is rotten to the core.

    William said in reply to Sandwichman ... , Monday, April 11, 2016 at 08:54 AM
    Yes, those supply-siders must love it when companies hide their income offshores. Just think how many more jobs they must be creating with their lower tax rate!
    ilsm said in reply to Sandwichman ... , Monday, April 11, 2016 at 09:59 AM
    BCA's or CBA's start with assumptions and ground rules.

    Neither do anything but give "foundation" to preferences.

    pgl : , Monday, April 11, 2016 at 07:24 AM
    "The federal government will appeal the MetLife ruling, but even if it wins the ruling may open the floodgates to a wave of challenges to financial reform. And that's the sense in which Snoopy may be setting us up for future disaster."

    As soon as Dodd-Frank was passed the large financial institutions got their legal teams busy trying to undermine it. One would think all progressives would rally behind enforcing Dodd-Frank. Of course Rusty wants us to believe enforcing Dodd-Frank is just too complicated. It is complicated only because the lawyers for the financial sector get paid big bucks to obscure what is sensible regulation.

    DrDick -> pgl... , Monday, April 11, 2016 at 07:39 AM
    Rusty is well paid not to understand that it is people like him and his employers who are responsible for the complexity of federal regulations.
    pgl said in reply to DrDick ... , Monday, April 11, 2016 at 09:02 AM
    I bet Rusty will protest this by saying he is not being paid that much. Which would be cool but the notion that we should just trash Dodd-Frank strikes me as bad financial economics. Now if we can improve on Dodd-Frank, that would be awesome if it makes Jamie Dimon really mad.
    Peter said in reply to pgl... , Monday, April 11, 2016 at 10:36 AM
    "One would think all progressives would rally behind enforcing Dodd-Frank."

    What is that supposed to mean?

    JohnH : , Monday, April 11, 2016 at 08:05 AM
    LOL!!! "A Democrat in the White House would enforce the spirit as well as the letter of reform"...just like the incumbent Democrat sent bankers to jail for rampant mortgage fraud.

    Oh, right! Obama and Holder actually made the investigation of mortgage fraud JOD's lowest priority and brought no criminal indictments...undermining the rule of law, giving bankers a 'get out of jail free' card, and encouraging them to commit yet more fraud.

    Krugman is becoming just ridiculous, a partisan hack on steroids.

    Peter said in reply to JohnH... , Monday, April 11, 2016 at 08:51 AM
    "The episode showed that traditional financial regulation, which focuses on deposit-taking banks, is inadequate in the modern world."

    What Krugman fails to inform his reader - one can only say so much in a column is that Bill Clinton repeatedly reappointed Alan Greenspan as regulator in chief.

    The shadow-banking system was created during Greenspan's tenure and he saw no need to regulate it b/c free markets are awesome! And so the shadow-banking system promptly had a bank run.

    Eric Blair -> Peter... , Monday, April 11, 2016 at 09:02 AM
    Not "promptly"--it took fifteen years. That was Clinton's biggest weakness--he was good at dealing with urgent obvious problems, but he would sometimes let longer-term issues fester. This is why Obama will be remembered as a better president than Clinton--he plays the long game.
    Peter said in reply to Eric Blair ... , Monday, April 11, 2016 at 09:10 AM
    15 years? No. Clinton ended in 2000 with a tech stock bubble. Less than a decade later we had the mother of all bank runs.

    "he was good at dealing with urgent obvious problems, "

    Like what? Balancing the budget?

    Eric Blair -> Peter... , Monday, April 11, 2016 at 09:29 AM
    Notable examples of urgent problems that Clinton addressed effectively included the Mexico crisis of 1994, the East Asian crisis of 1997, and the collapse of Long Term Capital Management in 1998. Any one of these crises could have turned into a broader meltdown and spawned a depression similar to the 2008 one, but Clinton and his appointees (including Greenspan) did a good job of containing the damage. Unfortunately they did nothing to address the underlying problems that had made it necessary for them to act in the first place.
    ilsm said in reply to Eric Blair ... , Monday, April 11, 2016 at 10:11 AM
    Clinton pandered to the Sunnis sending USAF to do their work sundering Serbia. Bombing the Chinese embassy was par for the military industry complex.

    Permanently stationed US funded mechanized brigade to keep the Sunnis happy with NATO over Serbia.

    Peter said in reply to Eric Blair ... , Monday, April 11, 2016 at 10:13 AM
    Dean Baker has a good critique of their handling of the East Asian Crisis, if you aren't familiar with it.
    Peter said in reply to JohnH... , Monday, April 11, 2016 at 08:52 AM
    "Oh, and yes, the episode also showed that making the breakup of big banks the be-all and end-all of reform misses the point."

    *sends more money to Sanders campaign*

    Peter said in reply to Peter... , Monday, April 11, 2016 at 09:12 AM
    http://readersupportednews.org/opinion2/277-75/36222-focus-why-the-banks-should-be-broken-up

    Why the Banks Should Be Broken Up

    By Matt Taibbi, Rolling Stone

    09 April 16

    Bernie or no Bernie, 'Times' columnist Paul Krugman is wrong about the banks

    Paul Krugman wrote an op-ed in the New York Times today called "Sanders Over the Edge." He's been doing a lot of shovel work for the Hillary Clinton campaign lately, which is his right of course. The piece eventually devolves into a criticism of the character of Bernie Sanders, but it's his take on the causes of the '08 crash that really raises an eyebrow.

    ...

    Peter said in reply to JohnH... , Monday, April 11, 2016 at 08:56 AM
    "It doesn't have to happen. As with so much else, this year's election is crucial. A Democrat in the White House would enforce the spirit as well as the letter of reform - and would also appoint judges sympathetic to that endeavor. A Republican, any Republican, would make every effort to undermine reform, even if he didn't manage an explicit repeal.

    Just to be clear, I'm not saying that the 2010 financial reform was enough."

    The Republicans are going to lose so Krugman's lesser evil argument doesn't really work.

    Does Krugman discuss Hillary's reforms? No of course not.

    Eric Blair -> JohnH... , Monday, April 11, 2016 at 08:59 AM
    Your comment only makes sense if you believe that either
    (1) designating a financial institution "systemically important" is trivial or totally meaningless compared to criminal indictments for previous actions, or (2) a Republican would enforce this designation just as much as Obama has. Which is it?
    pgl said in reply to Eric Blair ... , Monday, April 11, 2016 at 09:04 AM
    Uh oh - a tough question for JohnH. Careful as he might say you are "not qualified" or something like that.

    Republicans want a laissez faire financial system. After all - 2008 was such a great year (not).

    Peter said in reply to pgl... , Monday, April 11, 2016 at 09:11 AM
    Hey buddy! Getting feisty again?
    JohnH said in reply to Eric Blair ... , Monday, April 11, 2016 at 09:20 AM
    LOL!!! Eric Blair asserts that it is "totally meaningless" to sending bankers to prison for fraud that threatened systemically threatened the economy!

    And he assumes that Obama would behave less deferentially to Wall Street banks when it comes to enforcing any regulation that bankers don't approve of.
    Republicans have no monopoly on servility to the interests of Wall Street and their wealthy clientele, but Krugman obviously prefers Democratic corruption to its Republican cousin...

    Eric Blair -> JohnH... , Monday, April 11, 2016 at 09:36 AM
    No, I did not say what you claim that I said. And whether Obama is being deferential to someone is at most a side issue. The important questions are first, does the rule help make the financial system more stable, and second, would it be enforced less by Republicans. I believe the answer to both questions is yes.
    pgl said in reply to Eric Blair ... , Monday, April 11, 2016 at 10:43 AM
    JohnH does this a lot. Cross his serial nonsense and you become Jamie Dimon's enabler.
    JohnH said in reply to Eric Blair ... , Monday, April 11, 2016 at 03:21 PM
    "would it be enforced less by Republicans?"

    LOL!!! How can it get less than zero...which is the number of bank fraud indictments Obama issued against prominent Wall Street bankers?

    It's hilarious how Wall Street Democrats try to claim that the Democratic Party is less corrupt than Republicans, when both parties feed from the same trough.

    MIB said in reply to JohnH... , Monday, April 11, 2016 at 10:43 AM
    Sandwichman says:

    "The house cleaning has a lot further to go than "Republicans."

    How about the leader of the Democrats, President Obama?

    Real Democrats can hardly wait for good ol authentic, honest Bernie Sanders to start attacking President Obama – he's certainly not qualified to be president, taking all that Wall Street cash and letting the big banks off scot-free, like he and Holder did back 2009 -- unqualified.

    But good ol straight shootin Bernie aint gona do that, is he? Nope, because even Bernie understands that Democrats actually like, maybe even love President Obama.

    Bernie probably even understands that most Democrats like their democratic representatives, senators, governors, mayors, city councilors, etc as well. So railing against the establishment is not nearly as effective for Bernie as it is for Trump, Cruz and the tea party railing against the Republican establishment. You see this in most Sanders surrogates carefully leaving "democratic" off when criticizing the establishment, heck they might be confused with Republicans or Independents. Even the more excitable online Berniacs rarely use the term democratic establishment, instead invoking the generically ominous and evil "establishment."

    It would have been much better (and honest) if Bernie had not turned his back on 28 years as a proud Independent and run for president as a proud Independent instead of his gimmick to garner more media attention by running as a Democrat.

    His ego trip would have been much shorter, and Bernie certainly wouldn't be able to raise as much cash running as an independent, he'd likely struggle to exceed Nader's 3% general election vote in 2000, but he could have honestly taken on the real leader of the (democratic) establishment, President Obama.

    JohnH said in reply to MIB... , Monday, April 11, 2016 at 03:25 PM
    Nonetheless, Bernie is bringing critical economic issues into public discourse, issues that Wall Street Democrats have long tried to suppress or occasionally pay lip service to...issue such as minimum wages, trade policy, etc.

    Even better, Bernie is showing socialist Democrats how to campaign and win against corrupt, incumbent Wall Street Democrats.

    Antoni Jaume : , Monday, April 11, 2016 at 10:36 AM
    That looks suspiciously just what Charles Murray proposed in his book "By the People: Rebuilding Liberty Without Permission", to litigate against norms that regulate corporations.

    http://americablog.com/2015/05/by-the-ruling-class-charles-murrays-anti-democratic-revolution.html

    dd : , -1
    Well not all SI's are equal. The drubbing AIG took even as it was used to launder cash to more favored institutions is no doubt seen as the template. There's that nowhere to be found independent insurance guy with no clout on FSOC that's another message. Woodall,a former insurance regulator from Kentucky is the definition of outsider.
    Last there's Jack Lew lecturing everyone on financial stability,truly a nice irony given Citi's illegal Traveler's deal and the horrific consequences.
    No doubt the lawsuit is about positioning and they'll be more by other players who worry about being sacrificed to save the clout-heavy.
    This is totally predictable given the power structure of FSOC.

    [Apr 11, 2016] #panamapapers Offshore Funds: On the Run With (Almost) Nowhere to Go?

    Notable quotes:
    "... NY banking rules ..."
    "... Nicholas Shaxson's Treasure Islands: Tax Havens and the Men Who Stole the World ..."
    www.nakedcapitalism.com
    Posted on April 11, 2016 by Yves Smith As strange as it may seem, a confluence of developments in the banking industry means the Panama Papers revelations looks likely make it a lot more difficult for offshore money, as tax evasions and tax secrecy are often politely called, to stay hidden. This would serve as a marked contrast to the last international-headlines-gripping leaks, the Snowden revelations. Even though Snowden gave a big window into the reach of the surveillance state, not all that much has changed, save the Chinese making more active efforts to avoid cloud computing and US technology vendors, and the Europeans bashing US concerns over violations of their privacy laws.

    By contrast, the massive Mossack Fonseca records haul feeds into trends in banking that mean that a lot of these funds are going to find it hard remain secret. We'll summarize them below.

    Tax base expansion initiatives . The US and European Union have been working on a program to expand the base of income that is subject to tax. Budget-starved European member states have been moving the plan forward ahead of schedule. This is one of the few positive developments to come of of governments failing to understand the implications of having a fiat currency (you can and typically need to run deficits, since the private sector sets unduly high return targets and chronically underinvests; the constraint on deficit spending is creating too much inflation).

    Increasingly tough "know your customer" rules . The US going aggressively after foreign banks that have falsified records as a part of money-laundering has led to increased compliance. Even Standard Chartered, which thought the US had no business telling it not to do business with Iran, was brought to heel and its CEO forced to resign for his continued intransigence.

    Now the US can throw its weight around only as far as dollar-based transactions are concerned, since those ultimately clear through US facilities. But the UK has also adopted stringent "know your customer" rules. It now takes weeks to open a new account that is not a personal account, say for your rugby club.

    As John Dizard in the Financial Times reports :

    There is a new urgency in the tone of the lawyers and advisers for offshore asset holders. The essential message is that you are the Shah of Iran, this is 1979, and you and your money will find yourselves hopscotching from one unwelcoming landing place to another…

    If you or your clients think this is about tax cheats or the merely middle rich, they should think again…

    As this column and others have noted, by next year Switzerland, along with Luxembourg, the Channel Islands and other European offshore investment management centres, will start exchanging tax information with their counterparts.

    There are a very large number of beneficiaries, ie globalised rich people, who have until the end of this year to get their money safely onshore. The one Western country that does not have a deadline for complying with the Common Reporting Standard is the US.

    Almost everyone who has non-criminally sourced capital would like to have at least some of it accessible within the dollar-based clearing system. But the clerical and legal checklists to set up accounts for legitimate money have become so long that it will take months to accomplish this even for those willing to pay the transaction costs.

    And before you think the US banks are therefore the answer…. US banks are shunning money from the rich these days. . Dizard again:

    The largest US banks do not really want to take more deposits, or even do the cursory know-your-customer due diligence work to open new special purpose accounts for old customers. Americans I know with legitimately acquired nine- or ten-figure investment portfolios now have to scrounge around to open accounts in midsize US banks.

    Those rich Americans do not have the logistical or legal problems that Panama Papers-related flight capital will have in "onshoring" their money.

    Moreover, US legislators are calling for the US tax havens like Delaware corporations and Wyoming limited liability companies, to report on who their ultimate beneficiaries are. Given the tone of his Guardian op-ed, Carl Levin sound like he is warming up for hearings:

    Global revulsion against shell company abuses, offshore tax havens, and the lawyers that promote them has generated new public pressure to tackle these problems. Here are three steps to consider.

    Outlaw corporations with hidden owners

    ….G20 world leaders have made a start with a joint commitment to increase corporate transparency. The United Kingdom is leading the way, mandating public disclosure of the true owners – the "beneficial owners" – of UK companies. The European Union has followed…

    The United States is far behind. We now require more information to get a library card than to form a US corporation. ….The biggest impediment is opposition from the secretaries of state of our 50 states, who financially benefit from forming new corporations and don't want to ask questions that might jeopardize their revenue. Our states need to wake up to the damage they are doing and stop forming corporations with hidden owners.

    Get tough on offshore tax abuse

    Tax authorities should use existing tax information exchange agreements, including the US-Panama agreement, to go after tax cheats and determine whether Mossack Fonseca facilitated illegal conduct.

    Offshore tax abuse goes beyond individuals. Some multinational corporations use tax havens to arrange secret tax deals or declare earnings offshore. The international community is finally demanding that large multinationals file reports disclosing the profits they make and the taxes they pay on a country-by-country basis. The United States has proposed regulations requiring those reports; the next step is to finalize them. A bigger issue: making those reports public.

    Get tough on lawyers promoting misconduct

    ….Lawyers should be subject to the "know your client" requirements of anti-money laundering laws. In addition, banks should scrutinize suspicious accounts of law firms and require them to certify that they will not use those accounts to help clients circumvent the bank's own anti-money laundering controls.

    Note that Levin doesn't seem to have a good answer about what to do about states that find it attractive to act as secrecy jurisdictions, but in the past, the Feds have used cutting off various Federal funds as a stick to force cooperation, Moreover, if Congress were to pass laws with "know your client" requirements with criminal sanctions and tough fines, that in and of itself would choke off a lot of domestic activity.

    Information technology risk . Mossack Fonseca exposed in a very dramatic way that secrecy isn't just a function of the design of legal arrangements and the choice of jurisdiction and bank, but also of the integrity of the registered agent's IT security. There's no way to do due diligence on that. Those with offshore accounts must already be nervous that they could be exposed by a similar hack. Dizard's fallback remedy for the rich who want to keep their money hidden, "…you and your money will find yourselves hopscotching from one unwelcoming landing place to another," might work for the relatively small and fleet of foot to stay ahead of the taxman and the bank transparency moves, but it won't reduce IT risk.

    Dizard's article, despite being informative, weirdly rails against crackdown on large-scale international capital transactions" as populist and ill-informed, due to limiting the mobility of international capital. Someone needs to clue him on the research by Ken Rogoff and Carmen Reihart, who are hardly of the pinko persuasion, who found that high levels of international capital movements are powerfully correlated with more severe and frequent financial crises. Dizard also tries to depict reducing capital movements as being Smoot-Hawley revisited. First, the notion that Smoot-Hawley caused the Depression had been well debunked. Second and more important, international capital flows these days are at such high levels (over 60 times trade flows) that the Bank of International Settlement has said that large international transactions are not about facilitating trade, and that excessive financial "elasticity" was the cause of the crisis.

    He also depicts banks as winding up being beneficiaries, which contradicts his message that they regard onshored money as more hassle (which means cost) that its worth:

    This will, within the next two years or so, lead to a one-time transfer from the global rich to the staff and owners of US financial institutions. But that will be followed by a long drought for new business, as the global wealth that did not move quickly enough gets slotted into endless holding patterns in the mid-Atlantic or mid-Pacific.

    It's hard to see what good it will do someone to have money moving around the few finessable locations and banks that remain. Pray tell, how does it spent? Money you can't readily touch, or get into a jurisdiction where you'd like to spend it, does not seem terribly useful.

    And the big point that Dizard misses is that onshoring these funds will make the future investment income on them subject to tax. Hidden untaxed wealth has contributed to rising inequality; Gabriel Zucman of UC Berkeley has estimated that 6% to 8% of global wealth is offshore, and most of that not reported to tax authorities. So the more the rich are discomfited by their overly-clever machinations, the better.

    Northeaster , April 11, 2016 at 7:34 am

    Well, if you live in a state where you can name an LLC for your nominee trust, it doesn't get any better. File the off shore LLC in Nevada where they don't ask any questions, and use it for your real estate vehicle to launder your monies. Any question to why high end real estate is on fire? The opaqueness in some states is intentional, as it took me about 10 minutes of random searching of properties (over $2 million) to find the off shore LLC owner, with people and entities that did not exists in the SoS filings. The activity index for RE sales over $750K is almost equal to the index under $400K and below combined. If you add the $500K and above sales, it crushes the entire index below $500K.

    https://research.stlouisfed.org/fred2/graph/?g=47×5

    Alex morfesis , April 11, 2016 at 10:30 am

    Owning an entity does not open a bank account…a party almost always has to be vetted for a new enterprise…wired in funds for the benefit of an entity helps break the corporate veil…govt officials rambling to the public that this corporate charade is just "impossible" to deal with or stop are just laughing at the public (or need to hand back their law license to the bar)…money can Always be traced…a real estate closing will have closing instructions and in those instructions will be to whom to send back the funds and to what name if the transaction is not concluded….since title companies are state regulated enterprises….and there are basically only four major title insurance umbrella companies….this myth that a state title insurance investigator could not walk in and obtain the beneficiary of the source of funds is one big second city improv skit

    Northeaster , April 11, 2016 at 11:33 am

    All they have to do is have real estate fall under FinCen Suspicious Activity Reporting (SAR) requirements, but the NAR is simply too powerful and well funded with a more than accepting sold out CONgress,

    Alex morfesis , April 11, 2016 at 12:52 pm

    Not defending nar but state title insurance investigators have the absolute right to walk in unannounced and spot audit files…a new corp will not have all these closing funds in hand and for a proper corp veil to stand and hold, the funds had to be in a bank account in the name of corp…might I suggest that the funds do not arrive from a source matching the corporate name…thus revealing the actual party in interest….

    susan the other , April 11, 2016 at 2:25 pm

    After this amazing seminar from Yves MERS is making much more sense… and as always Utah stands squarely behind the banks by ruling in appeals court that you can make a ham sandwich your agent.

    JTMcPhee , April 11, 2016 at 8:36 am

    Another piece of the problem is the difficulty of "piercing the corporate veil" in so many legal domains (almost said "states and nations," but those are mostly convenient fictions themselves). There's been a long tail of effort by the Few and the Corrupt and the Criminal to make it very difficult, ever increasingly difficult, to hang liability for what little remains of proscriptions and penalties for vicious and renter-driven personal (from "behind the veil") actions that offend what are supposed to be police-powers (health, safety, welfare, nuisance and environmental destruction, etc.), hang it where it belongs, with penalties that actually matter to the sociopath, if behaviors are going to change - around the necks of the individual rotten humans that plot and plan and operate all the stuff that is killing ordinary people and the planet.

    Corporate "beneficial owners" get to hide behind the screen of opacity and deflection that comes from the perversion of the notion that "business" needs require immunity of individuals from the consequences of "corporate" behavior. "Piercing the veil" requires meeting an extreme burden of proof that the corporation is a fraudulent shell, or merely an alter ego of the individual officer/owner. And if course the Wealthy and their advisers and facilitators and wholly owned political actors are still in the game, with huge resources even if currently under some increasing and likely temporary constraints, and they will be doing their damndest to preserve existing moats and walls and veils and find new ways to pervert the legitimacy-granting functions of law-making to protect their pleasure palaces and "specialness."

    Eat the Rich, reads the old bumper sticker from Hippier days… With a plate of fava beans, and a nice sauce of Retribution and a side of Restitution…

    inode_buddha , April 11, 2016 at 12:00 pm

    I have seen one case in particular, where the CEO made one set of sworn statements to the SEC in the 10k, and said the exact opposite in Federal court in the same month. Neither legal team picked up on this or mentioned it, and neither did the judge. It was incredibly aggravating to watch. In this case he rode the company into the ground while pumping and dumping like mad, and got away with it. The lawsuit was simply another vehicle to pump the stock, it didn't matter if it even had any merit - which it didn't. Years later, the company imploded ithe only a few employees left, the execs walked away with millions, etc. and they made a lot of enemies along the way.

    divadab , April 11, 2016 at 8:36 am

    Hopefully greater regulation and international cooperation will surface the tax evaders and capture their previously unpaid taxes. But it will also drive many of them deeper into organized crime-style hiding schemes. For example, using squeaky-clean nominees acting as beards: here's how it works in many communities – one guy "owns" many rental properties for which there are long-term tenants, and the rent equals exactly the carrying cost of the property. The tenants happen to be businessmen and their families who run pretty close to the wind and whose assets are thereby continually at risk – effectively, they protect their houses from creditors by holding them in a trustworthy nominee name – the "legal owner" is a hidden agent for the actual owners. Totally undetectable. But enforcement of this type of contract is extra-legal – organized crime-style – and communal.

    This type of setup is also a classic money-laundering vehicle – involving property flips between ostensibly unrelated parties but in reality coordinated. Hence distorted real estate markets as noted by Northeaster above. First $500,000 of profit on a principle residence sale is non taxable. I'd suggest the IRS focus on auditing house sales for which the principle residence exemption has been claimed, especially when people make close to the limit several times over (say) a ten-year period.

    Synoia , April 11, 2016 at 10:26 am

    $250,000 exemption for each individual on title every 2 years.

    weinerdog43 , April 11, 2016 at 9:01 am

    Way back when dinosaurs roamed the Earth, and I was taking Income Tax in law school, I couldn't shake the feeling that the whole point of the class was to assist people (corporations are people, my friend) to scam the government. While no one likes to pay taxes, these taxes provide services that people do, in fact like. It's all I can do to resist slapping folks who complain about the condition of the roads, and then in the next breath, whine about their tax burden.

    Anyway, cheating the government out of one's fair share of the tax burden means 2 things:
    1.) The remaining burden falls more heavily on those who DO pay; and
    2.) Unpunished cheating encourages more people (and corporations) to cheat. "If they're not paying, why should I pay?"

    After that class, I couldn't run fast enough away from tax law as it seemed to attract classmates I rather loathed. I couldn't agree more that tax lawyers who encourage cheating should face disbarment and fines. Apologies to my tax law brethren who try to do the right thing. I know some fine CPAs and tax guys. It just wasn't my calling.

    Whine Country , April 11, 2016 at 10:03 am

    I began my career as a CPA in the early '70s in the SF Bay area and virtually all of the lawyers I came in contact with had the same thoughts about taxes as you did. One of my accounting professors used to go on about how it was incredible that an attorney could pass the bar and practice law without ever having taken one tax course.

    Particularly when you consider that there is very little that a lawyer does that does not in some way involve taxes. So for us CPAs this was just an opening for us to specialize in an area where lawyers had little or no interest.

    In those days I recall that when you actually needed a tax attorney he was usually – I won't say loathsome – but kind of an odd sort. Recently I spoke to my ex-partner who took over our practice and the subject of tax attorneys came up. He reported to me that in the Bay Area tax attorneys are now billing $900 to $1,000 per hour. I guess you can call this supply side economics at work. As the number of mega zillionaires grows in the SF/Silicon Valley area, demand has apparently been created for a new category of super lawyer. The Free Market really can do some wonderful things when manipulated properly.

    Yves Smith Post author , April 11, 2016 at 5:40 pm

    You have to have your brain turned inside out to understand tax well enough to be a tax lawyer. Most regular lawyers have some antipathy for tax lawyers (I've sensed this and confirmed it). The logic of tax is extremely arcane, non-intuitive, and pedantic. Plus it does not have commercial value added.

    perpetualWAR , April 11, 2016 at 10:46 am

    Too bad the bar associations protect the scheming, lying cheats. Most bar associations have been infiltrated and are run by the bank lawyer scum.

    polecat , April 11, 2016 at 1:47 pm

    this is thing…..nearly every establishment related profession seems, in my mind at least, to be corrupted by fraud and graft……be it Pharma, Financials, Medical, MIC, Education, Agriculture, Law & Judicature, Transportation & Energy, National social policy, Foreign & National & Security policy……..

    ….hence… all phony & all illegitimate !!!

    Alex V , April 11, 2016 at 9:04 am

    I'm an American citizen living overseas. For me an "offshore account" is not an option, it's a fact of life. Creating fair laws to control tax evasion are therefore of interest to me.

    One example of the opposite of fair law is FATCA. This is quite a terrifying bit of poorly conceived legislation; intended to go after blatant tax evaders and sanction evaders, but instead creating penalties that can be life ruining for a middle class expat that makes an honest mistake in their reporting. The penalties on banks (and by extension foreign countries) that did not want to subject themselves to US law are also overly aggressive. So aggressive that many financial institutions refused to deal with any Americans, even for things as simple as a savings account. "Knowing your customer" became discrimination based on citizenship.

    I'm just hoping that any changes to enforcement or regulation that come about from the PPs take this into account.

    Regarding Standard Chartered, I'm not quite sure it's absolutely clear cut that they were in the wrong:

    http://www.exportlawblog.com/archives/4584
    http://www.exportlawblog.com/archives/4266

    They may have settled just to make the problem go away, and to maintain access to the US financial system. The US has a habit of imposing it's laws on the rest of the world, or ignoring international law it doesn't like. In my opinion, the sanctions on Iran were in many ways outright bullying, very much like with those on Cuba.

    Yves Smith Post author , April 11, 2016 at 5:45 pm

    Buh? Standard Chartered defied the advice of its US outside counsel and falsified wire transfer documents in a systematic manner after having been previously sanctioned for handling the transfer of funds to Iran for its oil sales, and to Sudan and other prohibited jurisdictions. You clearly have not read Benjamin Lawsky's order against the bank. Standard Chartered had a branch in New York to do dollar operations, and all dollar transactions ultimately clear (have to clear) through that branch.

    These were clear-cut violations of NY banking rules and Lawsky could have yanked Standard Chartered's NY banking license, which would have been a cataclysmic event for the bank. And after Federal regulators initially acting offended that Lawsky had end run and embarrassed them, they stepped up and issued big fines against Standard Chartered of their own.

    You also omit that Standard Chartered got yet another round of fines for failing to comply with the changes required! That led to the ouster of CEO Peter Sands, who had been defiant all along. From the New York Times in 2014, Caught Backsliding, Standard Chartered Is Fined $300 Million :

    It took $667 million in fines and a promise to behave for the British bank Standard Chartered to emerge from the regulatory spotlight. All it took to return there was its failure to fully keep that promise.

    In a settlement announced on Tuesday by New York State's financial regulator, Standard Chartered will pay a $300 million fine and suspend an important business activity because of its failure to weed out transactions prone to money-laundering, a punishing reminder of settlements in 2012. Those settlements with state and federal authorities resolved accusations that Standard Chartered, in part through its New York branch, processed transactions for Iran and other countries blacklisted by the United States.

    The New York regulator, Benjamin M. Lawsky, has now penalized Standard Chartered for running afoul of the 2012 settlement, which he said required the bank to "remediate anti-money-laundering compliance problems."

    An independent monitor, hired as part of Mr. Lawsky's 2012 settlement, recently detected that the bank's computer systems failed to flag wire transfers flowing from areas of the world considered vulnerable to money-laundering, according to Mr. Lawsky's order. The order did not specify the number of transactions that the bank's filters failed to identify, but a person briefed on the matter said that it was "in the millions."

    Please stop defending crooked bank behavior. Plus this is agnotology, which is against our house rules.

    DJG , April 11, 2016 at 9:08 am

    Thanks for this. The problem with the Panama Papers for those of us outside economics and finance is that we don't understand the mechanisms and regulations that ease all of this movement of money. Even though I have stocks in my IRA, it isn't as if the companies report their financial messes in the proxy statements. Au contraire, it's all the glory of Jeffrey Immelt all the time.

    "Finessable": I kind-a like it. Your coinage?

    readerOfTeaLeaves , April 11, 2016 at 4:22 pm

    You may want to check McClatchy's website as they have some explanatory videos and terrific reporting.
    I got started on all the tax haven skullduggery by reading Yves, so it's wonderful to see this getting a far wider, fully documented exposition.

    http://www.mcclatchydc.com

    Also, Nicholas Shaxson's Treasure Islands: Tax Havens and the Men Who Stole the World is one of the best books that I've ever read. His blog is here: http://treasureislands.org

    Earlier this week, a friend said, "Is it a good day?" I said, "It's an AWESOME day! All the sleaze is finally coming out into the sunlight."

    Yves Smith Post author , April 11, 2016 at 8:01 pm

    Yes, Treasure Islands is a terrific book. Highly readable but still covers many of the important technical issues.

    Jim Haygood , April 11, 2016 at 1:46 pm

    'It now takes weeks to open a new account that is not a personal account, say for your rugby club.'

    … which is why workarounds, both old school (gold) and new (anonymous digital currencies), will be found to sidestep the politicization of government currencies, which now come bundled with odious surveillance that makes their use increasingly unattractive.

    Yves Smith Post author , April 11, 2016 at 8:04 pm

    These are both property, not money, and not at all workable for anyone who needs them for transactions. Both are volatile and bitcoin with its blockchain makes its entire history of past holders accessible. That's not a desirable feature for someone hiding from the taxman.

    Micky9finger , April 11, 2016 at 1:56 pm

    the constraint on deficit spending is creating too much inflation).

    Huh?

    Yves Smith Post author , April 11, 2016 at 5:32 pm

    That is correct for fiat currency issuers. This is not any secret if you've been reading about how monetary operations work.

    RBHoughton , April 11, 2016 at 8:25 pm

    Good grief. What's the world coming to? Are we now expected to visit our offshore paradise and suitcase money home? The gentlemen in Customs will be checking every flight from the Caymans.

    "The one Western country that does not have a deadline for complying with the Common Reporting Standard is the US." – Ahh ha – is this part of the solution to falling inwards investment?

    [Apr 10, 2016] Follow the money

    Notable quotes:
    "... Perhaps that's the problem with economics: the economists are so wrapped up in politics they can't tell where one starts and the other ends. Economics becomes nothing more than politics with math thrown in to lend authority to "very serious" agendas. ..."
    "... Much like theology, it's a matter of culture and clique. Fitting they break up the field into Orthodox and Heterodox. Perhaps they should have economic cardinals that elect an economic pope. ..."
    "... "When economic power became concentrated in a few hands, then political power flowed to those possessors and away from the citizens, ultimately resulting in an oligarchy or tyranny." John Adams ..."
    "... Politics and economic matters cannot be separated. Most politics are an expression of economic interests; in fact almost all - things that appear to be about "power", social dominance, and social mores are also mostly motivated by arranging or sustaining an environment where certain groups get to decide matters of the economy at the expense of others. ..."
    "... Have you heard the phrase "follow the money", and even older "cui bono"? It's the same principle. Most motivations are based in economic affairs and conflicts. ..."
    economistsview.typepad.com

    Ron Waller -> Alain Sherter...

    ...Krugman may be an economist, but this politicking op-ed has nothing to do with economics.

    Perhaps that's the problem with economics: the economists are so wrapped up in politics they can't tell where one starts and the other ends. Economics becomes nothing more than politics with math thrown in to lend authority to "very serious" agendas.

    BTW, how are economic ideas established, in any case? We know with science, falsifiable hypotheses are put forward and put to the test. Economists know enough about statistics to hide behind the ethics problem of running economic experiments. Even though they ARE running economic experiments with their Aristotelian notions that almost always get it wrong: from "efficient" taxation nonsense that gives the rich big tax breaks, to investor-protecting inflation targeting that ran the economy into the ground -- which they call the Great Moderation; etc.

    Much like theology, it's a matter of culture and clique. Fitting they break up the field into Orthodox and Heterodox. Perhaps they should have economic cardinals that elect an economic pope.

    likbez -> Ron Waller ...
    Politics is deeply connected to economics. Especially under neoliberalism. It is actually difficult to distinguish two and many economic issues are highly political ("role of the market in the society").

    Moreover:

    "When economic power became concentrated in a few hands, then political power flowed to those possessors and away from the citizens, ultimately resulting in an oligarchy or tyranny." John Adams

    cm -> Ron Waller ...
    Politics and economic matters cannot be separated. Most politics are an expression of economic interests; in fact almost all - things that appear to be about "power", social dominance, and social mores are also mostly motivated by arranging or sustaining an environment where certain groups get to decide matters of the economy at the expense of others.

    Have you heard the phrase "follow the money", and even older "cui bono"? It's the same principle. Most motivations are based in economic affairs and conflicts.

    [Apr 10, 2016] The Repercussions of Financial Booms and Crises by Joseph Joyce

    March 29, 2016 | Angry Bear

    Financial booms have become a chronic feature of the global financial system. When these booms end in crises, the impact on economic conditions can be severe. Carmen M. Reinhart and Kenneth S. Rogoff of Harvard pointed out that banking crises have been associated with deep downturns in output and employment, which is certainly consistent with the experience of the advanced economies in the aftermath of the global crisis. But the after effects of the booms may be even deeper and more long-lasting than thought.

    Gary Gorton of Yale and Guillermo Ordoñez of the University of Pennsylvania have released a study of "good booms" and "bad booms," where the latter end in a crisis and the former do not. In their model, all credit booms start with an increase in productivity that allows firms to finance projects using collateralized debt. During this initial period, lenders can assess the quality of the collateral, but are not likely to do so as the projects are productive. Over time, however, as more and more projects are financed, productivity falls as does the quality of the investment projects. Once the incentive to acquire information about the projects rises, lenders begin to examine the collateral that has been posted. Firms with inadequate collateral can no longer obtain financing, and the result is a crisis. But if new technology continues to improve, then there need not be a cutoff of credit, and the boom will end without a crisis. Their empirical analysis shows that credit booms are not uncommon, last ten years on average, and are less likely to end in a crisis when there is larger productivity growth during the boom.

    Claudio Borio, Enisse Kharroubi, Christian Upper and Fabrizio Zampolli of the Bank for International Settlements also look at the dynamics of credit booms and productivity, with data from advanced economies over the period of 1979-2009. They find that credit booms induce a reallocation of labor towards sectors with lower productivity growth, particularly the construction sector. A financial crisis amplifies the negative impact of the previous misallocation on productivity. They conclude that the slow recovery from the global crisis may be due to the misallocation of resources that occurred before the crisis.

    How do international capital flows fit into these accounts? Gianluca Benigno of the London School of Economics, Nathan Converse of the Federal Reserve Board and Luca Forno of Universitat Pompeu Fabra write about capital inflows and economic performance. They identify 155 episodes of exceptionally large capital inflows in middle- and high-income countries over the last 35 years. They report that larger inflows are associated with economic booms. The expansions are accompanied by rises in total factor productivity (TFP) and an increase in employment, which end when the inflows cease.

    Moreover, during the boom there is also a reallocation of resources. The sectoral share of tradable goods in advanced economies, particularly manufacturing, falls during the periods of capital inflows. A reallocation of investment out of manufacturing occurs, including a reallocation of employment if a government refrains from accumulating foreign assets during the episodes of large capital inflows, as well as during periods of abundant international liquidity. The capital inflows also raise the probability of a sudden stop. Economic performance after the crisis is adversely affected by the pre-crisis capital inflows, as well as the reallocation of employment away from manufacturing that took place in the earlier period.

    Alessandra Bonfiglioli of Universitat Pompeu Fabra looked at the issue of financial integration and productivity (working paper here). In a sample of 70 countries between 1975 and 1999, she found that de jure measures of financial integration, such as that provided by the IMF, have a positive relationship with total factor productivity (TFP). This occurred despite the post-financial liberalization increase in the probability of banking crises in developed countries that adversely affects productivity. De facto liberalization, as measured by the sum of external assets and liabilities scaled by GDP, was productivity enhancing in developed countries but not in developing countries.

    Ayhan Kose of the World Bank, Eswar S. Prasad of Cornell and Marco E. Terrones of the IMF also investigated this issue (working paper here) using data from the period of 1966-2005 for 67industrial and developing countries. Like Bonfiglioli, they reported that de jure capital openness has a positive effect on growth in total factor productivity (TFP). But when they looked at the composition of the actual flows and stocks, they found that while equity liabilities (foreign direct investment and portfolio equity) boost TFP growth, debt liabilities have the opposite impact.

    The relationship of capital flows on economic activity, therefore, is complex. Capital inflows contribute to economic booms and may increase TFP, but can end in crises that include "sudden stops" and banking failures. They can also distort the allocation of resources, which affects performance after the crisis. These effects can depend on the types of external liabilities that countries incur. Debt, which exacerbates a crisis, may also adversely divert resources away from sectors with high productivity. Policymakers in emerging markets who think about the long-term consequences of current activities need to look carefully at the debt that private firms in their countries have been incurring.

    cross posted with Capital Ebbs and Flows<

    Warren March 31, 2016 11:14 am
    And therein lies the half of Keynesian Economics that is ignored - running surpluses during the booms to tamp them down, and to have a reserve to pump into the economy during the busts.

    [Apr 02, 2016] Forget The Tough Talk – Saudi Arabia Is Desperate For a Production Freeze

    oilprice.com
    By Rakesh Upadhyay

    \Blatant lies are in blue. Libya can't rump up production as civil war is still ongoing and there is no signs ofreconsiliation betwtnn two major pforces with ISIS as a third force, a spoler.

    OilPrice.com

    By the end of 2015, Saudi Arabia supplied 8.1 percent of the global oil demand, which is higher than the 2014 figure of 7.9 percent, but still well below its 8.5 percent global market share in 2013.

    Saudi Arabia realized that the price war was not helping it to increase its market share, instead, the price was taking a toll on revenue due to plummeting crude oil prices. Ballooning budget deficits, depleting foreign reserves, and the necessity of introducing unpopular measures brought about memories of the Arab Spring.

    Similarly, Russia, which is pumping at close to its peak capacity, is worried about losing its market share in Europe to Saudi Arabia.

    The other nations participating in the meeting are also pumping near maximum limits. With a production freeze, most nations will retain their existing clients without worrying about losing them to the competitors.

    This excludes Iran and Libya, which will not take part in the production freeze talks, as both are in the process of ramping up production.

    Initially, this all started out as a price war with U.S. shale oil drillers as the Saudi's feared they would lose their dominant hold over the oil markets. But the outcome was not what the Saudi's expected. The Saudi's found themselves isolated with no support from the U.S., fearing alienation if they continued to oppose the majority demand of the OPEC nations to cut production.

    [Apr 02, 2016] Unemployment Rate Edges Higher as Prime-Age Workers Reenter Labor Market

    Notable quotes:
    "... Self-employment has risen substantially since the ACA took effect. ..."
    "... One of the desired outcomes from the ACA was that it would free people from dependence on their employer for health care insurance, allowing them to work part-time or start a business if they so choose and get insurance through the exchanges. ..."
    "... Yes labor force participation has increased but it still is only 63%. Yes the employment to population ratio is now 59.9% but it should be 62%. Slow progress with a long way to go. ..."
    "... But the negatives, especially among the series that lead, are beginning to outweigh the positives. Revisions were mixed. The manufacturing workweek declined, and manufacturing jobs are now down YoY. Although temporary jobs rose this month, they have failed to top their December peak for the last 3 months. Short term unemployment has continued to rise slightly. A coincident indicator, aggregate hours, also failed to exceed its January high. ..."
    April 01, 2016 | Economist's View
    Dean Baker:
    Unemployment Rate Edges Higher as Prime-Age Workers Re-enter Labor Market : Self-employment has risen substantially since the ACA took effect.

    The economy added 215,000 jobs in March, with the unemployment rate rounding up to 5.0 percent from February's 4.9 percent. However, the modest increase in unemployment was largely good news, since it was the result of another 396,000 people entering the labor force. There has been a large increase in the labor force over the last six months, especially among prime-age workers. Since September, the labor force participation rate for prime-age workers has increased by 0.8 percentage points. This seems to support the view that the people who left the labor market during the downturn will come back if they see jobs available. However, even with this recent rise, the employment-to-population ratio for prime-age workers is still down by more than two full percentage points from its pre-recession peak. Another positive item in the household survey was a large jump in the percentage of unemployment due to voluntary quits. This sign of confidence in the labor market rose to 10.5 percent, the highest level in the recovery to date, although it's still more than a percentage point below the pre-recession peaks and almost five percentage points below the peak reached in 2000.

    Other items in the household survey were mixed. The number of people involuntarily working part-time rose by 135,000, reversing several months of declines. However, involuntary part-time work is still down by 550,000 from year-ago levels. The number of people voluntarily working part-time fell in March, but it is still 654,000 above its year-ago level.

    One of the desired outcomes from the ACA was that it would free people from dependence on their employer for health care insurance, allowing them to work part-time or start a business if they so choose and get insurance through the exchanges. There has been a substantial rise in self-employment since the exchanges began operating in 2014. In the first quarter of 2016, incorporated self-employment was up by more than 400,000 (7.8 percent) from the same quarter of 2013. Unincorporated self-employment was also up by almost 360,000 (3.9 percent).

    While the employment growth in the establishment survey was in line with expectations, average weekly hours remained at 34.4, down from 34.6 in January. This indicates that February's drop in hours was not just a result of bad weather. As a result, the index of aggregate hours worked is down by 0.2 percent from the January level. This could be a sign of slower job growth in future months. ...

    The average hourly wage rose modestly in March after a reported decline in February. There is zero evidence of any acceleration in wage growth. The average for the last three months increased at an annualized rate of 2.3 percent compared with the average of the prior three months. This is virtually identical to the increase over the last year.

    On the whole this is a positive report, both because the economy continues to create jobs at a healthy pace and even more importantly because it indicates that people are returning to the labor market. The continuing weakness in wage growth is discouraging, but also should signal to the Fed that there is little reason to raise interest rates.

    PPaine :

    The job markets are coming alive

    But is the punch bowl headed for the kitchen sink ?


    We need to set much higher target ratios for E to P

    We need 15 million more jobs in short order
    To get near vickrey zone conditions on job markets


    Obviously we won't go there
    But just how far will we go
    Before the bastards turkey wire the system ?

    PPaine -> PPaine ...
    We need the quit rate to go up another 30% at least
    PPaine -> PPaine ...
    I mean on top of the 50% rise to match the high water mark of the Clinton miracle
    anne -> PPaine ...
    https://research.stlouisfed.org/fred2/graph/?g=3Ppz

    January 30, 2016

    Total nonfarm quits, 2000-2016

    [ The quits rate only needs to climb 15% to get back to the Clinton level. ]

    anne -> PPaine ...
    Never ever explain what "Vickrey zone conditions" are, as long as there is no concern with being understood.
    RC AKA Darryl, Ron -> anne...
    [Google William Vickrey. Highlights of Wikipedia:]

    ...Vickrey's economic philosophy was influenced by John Maynard Keynes and Henry George. He was sharply critical of the Chicago school of economics and was vocal in opposing the political focus on achieving balanced budgets and fighting inflation, especially in times of high unemployment...
    Selected works[edit]

    "Counterspeculation, Auctions, and Competitive Sealed Tenders", Journal of Finance, 1961. The paper originated auction theory, a subfield of game theory.
    "Fifteen Fatal Fallacies of Financial Fundamentalism: A Disquisition on Demand Side Economics". October 5, 1996.

    Arrow, Kenneth Joseph; Arnott, Richard J.; Atkinson, Anthony A.; Drèze, Jacques (editors) (1997). Public Economics: Selected Papers by William Vickrey. Cambridge, UK: Cambridge University Press. ISBN 0-521-59763-3.

    Warner, Aaron W.; Forstater, Mathew; Rosen, Sumner M. (editors) (2000). Commitment to Full Employment: The Economics and Social Policy of William S. Vickrey. Armonk, N.Y: M.E. Sharpe. ISBN 0-7656-0633-X.

    Pavlina R. Tcherneva; Forstater, Mathew (2004). Full Employment and Price Stability: The Macroeconomic Vision of William S. Vickrey. Edward Elgar Publishing. ISBN 1-84376-409-1.

    [Paine repeatedly references William Vickrey because of his substantial commitment to full employment policy as sound economics (as if human well being for the masses actually mattered).]

    RC AKA Darryl, Ron -> RC AKA Darryl, Ron...
    And Anne repeatedly asks "What does this reference to Vickrey mean?" Maybe Anne's battery is almost dead and working memory gets reset each time the solar generator powers down. The programming still functions because it is stored in non-volatile memory on the hard drive, but volatile RAM is wiped each time that the sunsets after the battery storage is exhausted.
    anne -> PPaine ...
    We need 15 million more jobs in short order. To get near Vickrey zone conditions on job markets

    [ Where did the 15 million number come from, and I still have no idea what Vickrey zone conditions are? ]

    pgl :
    Yes labor force participation has increased but it still is only 63%. Yes the employment to population ratio is now 59.9% but it should be 62%. Slow progress with a long way to go.
    pgl -> pgl...
    I may be setting the bar too low with my call for a 62% employment to population ratio. Brad DeLong puts it north of 62.5%:

    http://www.bradford-delong.com/2016/04/must-read-the-federal-reserve-is-looking-at-the-past-six-months-and-seeing-significant-improvement-in-the-labor-market.html

    New Deal democrat :
    But the negatives, especially among the series that lead, are beginning to outweigh the positives. Revisions were mixed. The manufacturing workweek declined, and manufacturing jobs are now down YoY. Although temporary jobs rose this month, they have failed to top their December peak for the last 3 months. Short term unemployment has continued to rise slightly. A coincident indicator, aggregate hours, also failed to exceed its January high.

    So while we can cheer yet another month of jobs added to the economy, and the jump in participation, this report just adds to my concern about next year.

    pgl -> New Deal democrat...
    I won't cheer until the employment to population ratio reaches 62% and real wages actually rise on a consistent basis.
    sanjait -> New Deal democrat...
    Don't look at peaks in monthly data, look at rolling average trends.

    Also, while manufacturing specific data can be meaningful ... these days the dynamics in those data are largely dominated by swings in O&G, which is in a historic funk.

    sanjait :
    In general, the trends look good. The working age E/P number is, to me, the most meaningful single indicator we have, and it appears to be continuing to rise and at an accelerating rate. That's a very good sign. It's very arguable that things could and should be improving at a faster rate, but when this stat is rising things are indeed improving.

    Baker's note about ACA and self-employment is also an important one. One important aspect of ACA is that it is GREAT for entrepreneurship. People are more free to leave jobs and start companies when their ability to get health insurance isn't predicated on their working for a large company with a group plan.

    The GOP makes a lot of noise about how ACA supposedly kills jobs and stifles industry, but the reality is that tomorrow's tech leaders, and major employers, are getting a boost today from ACA.

    Ben Groves :
    It is not sustainable and will reverse in April imo. Driving unemployment down.

    [Apr 02, 2016] U.S. Light Vehicle Sales decline to 16.45 million annual rate in March

    www.calculatedriskblog.com

    Calculated Risk

    Based on an estimate from WardsAuto, light vehicle sales were at a 16.45 million SAAR in March.

    That is down about 4% from March 2015, and down about 6% from the 17.43 million annual sales rate last month.

    gdd9000 4h cant spend what you dont have unless you borrow, and that noose is starting to tighten for the vehicle market. And leasing is the next victim, as the flood of off leases are now rolling in and killing residuals. uh, buhbye
    resuscitate 4h

    People want decent paying jobs instead of getting more debts/credits while deleverage from past profligate. Banks sitting on trillions of reserves because of lack of demand for fund as well as risk averse behavior in debt markets. Pushing string.

    [Apr 02, 2016] How Much Has Global Economic Power Really Shifted?

    Notable quotes:
    "... By C.P. Chandrasekhar, Professor of Economics, Jawaharlal Nehru University, New Delhi and Jayati Ghosh, Professor of Economics and Chairperson at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. Cross posted from Triple Crisis ..."
    www.nakedcapitalism.com
    Posted on April 1, 2016 by Yves Smith By C.P. Chandrasekhar, Professor of Economics, Jawaharlal Nehru University, New Delhi and Jayati Ghosh, Professor of Economics and Chairperson at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. Cross posted from Triple Crisis

    Much has been made of how there has been a substantial shift in the balance of economic power between the advanced capitalist economies (or the "North") and some economies of the global South. It is true that very recently the hype surrounding "emerging markets" has died down, as international capital flows have swung away from them and many of them have shown decelerating growth or even declines in income as global exports fall. Nevertheless, the feeling persists that – in spite of a supposedly resurgent US economy – the advanced economies are generally in a process of relative decline, while the developing world in general and certain economies in particular have much better chances of future economic dynamism. And this process is generally seen to be the result of the forces of globalisation, which have enabled developing countries, especially some in Asia, to take advantage of newer and larger export markets and improved access to internationally mobile capital to increase their rates of economic expansion.

    Chart 1

    Chandrasekhar-Ghosh-Advanced-economies-GDP-share-e1459434143778

    But how significant has this process actually been?

    In fact, there has definitely been some change over the past three and a half decades, but it has been more limited in time than is generally presumed. Chart 1 plots the share of the advanced economies in global GDP in current US dollar prices, calculated at market exchange rates. (Data for all the charts have been taken from the IMF World Economic Outlook October 2015 database.) This shows that the share of advanced economies declined from around 83 per cent in the late 1980s to around 60 per cent now, which is really quite a substantial decline. However, the bulk of this change occurred in a relatively short period: the decade 2002 to 2012, when the share dropped from 80 per cent to 62 per cent. The periods before and after have shown much less variation, and indeed, the share seems to have stabilised at around 61 per cent thereafter.

    Chart 2 looks at the obverse of this process – the change in the shares in global GDP of the major developing regions, with China treated as a separate category on its own. This shows a somewhat more surprising pattern, because it indicates that the dominant part of this shift is due to the increase in China's share, which rose from around 3 per cent to more than 15 per cent. Once again, this happened essentially during the decade after 2005, when the share of China in global GDP at market exchange rates jumped by more than ten percentage points. Indeed, the change in China's share alone explains 87 per cent of the entire decline in the share of the advanced economies in the period 1980 to 2015. Considering only the last decade, that is after 2005, the relative increase in China's GDP accounts for a slightly lower proportion of the change, at 67 per cent – which is still hugely significant.

    Chart 2

    Chandrasekhar-Ghosh-Developing-regions-GDP-share-e1459434198585

    The change in shares of other regions provides some interesting insights. The Latin American region experienced a medium term decline in relative income share over the 1980s (the "lost decade"), recovered somewhat in the 1990s before declining once again in the late 1990s and early 2000s. The global commodity boom of 2003 onwards was associated with a revival in the region's economic fortunes and the share of the region increased from 5 per cent in 2003 to more than 8 per cent in 2011, but thereafter it has stagnated and fallen with the unwinding of that boom.

    The income share of the MENA region (Middle East and North Africa) appears to be very strongly driven by global oil prices, with sharp peaks in period of high oil prices and stagnation or decline otherwise, and over the entire period there has been a stagnation in income share rather than any increase. An even more depressing story emerges for Sub Saharan Africa, which showed decline in income share for a prolonged period between 1980 and 2002, and subsequently a slight recovery (from 1.1 per cent in 2002 to around 2 per cent in 2012 and thereafter) that was still well below the share of more than 3 per cent in 1980.

    The only developing region that shows a clear increase is developing Asia, which in this chart excludes China to clarify the respective significance of both. But the increase in the income share of this region (minus China) has been much less marked than that for China, and most of it occurred after 2002, as the income share rose from 3.5 per cent in 2002 to 6.4 per cent in 2015.

    Chart 3

    Chandrasekhar-Ghosh-Non-China-Asian-economies-GDP-share-e1459434252272

    Chart 3 indicates the changes in shares of the largest Asian developing countries other than China. It is evident that in terms of increasing share of global GDP, India has been the most impressive performer over the past decade in particular, with its share increasing from 1.8 per cent in 2005 to 3 per cent in 2015. Note, however, that this is still tiny in comparison to China, and indeed, just the increase in China's share over that decade has been more than three times of India's aggregate share. South Korea's share has also increased, mostly over the 1980s and early 1990s, while Indonesia's share increase occurred mostly during the commodity boom of the 2000s.

    In terms of per capita GDP, however, the Indian performance looks much less impressive than those of the major Asian counterparts. Interestingly, even the Chinese experience appears not as sharply remarkable, although still hugely better than that of India. Chart 4 tracks the movements of per capita GDP, measured now in Purchasing Power Parity (PPP) exchange rates rather than market rates. There are numerous problems with the use of the PPP measure, but for current comparative purposes it does provide some kind of indicator. This shows that by far the most impressive performance in terms of increasing per capita GDP has been in South Korea, followed by Malaysia. India shows the least improvement among these five economies, despite its apparently more rapid increase in terms of share of world GDP in the last decade.

    Chart 4

    Chandrasekhar-Ghosh-Per-capita-GDP-PPP-e1459434299741

    Overall, therefore, while the world economy has changed over the past three decades, this change should not be exaggerated for most developing regions, or even for most countries in what is apparently the most dynamic region of Asia.

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    Subscribe to Post Comments 10 comments

    SKL , April 1, 2016 at 10:19 am

    That China accounts for almost all of the shift isn't so much new news, as repeatedly memory-holed news. It's not surprising that it keeps going down the memory hole, as it completely destroys the case for the neoliberal policy consensus that China flouted over that period.

    Every talking head who extolls the Washington Consensus for "lifting the poor of the world out of poverty" is a stone cold liar. The real goal of "globalization" isn't general prosperity, it's the continued domination of "us" over the "lesser breeds".

    paul , April 1, 2016 at 11:58 am

    It is the bringing the advantages of the third world to the others.
    Why should we get paid more than them?
    Look at all the billionaires that were lifted out of poverty in these countries.

    cnchal , April 1, 2016 at 2:11 pm

    Why should we get paid more than them?

    Our useless eaters get much more than their useless eaters,

    PPP is a scam. To someone displaced here, it matters zero that the worker in Mexico, for example, can get by on one tenth the wage that used to be payed to someone here.

    Look at all the billionaires that were lifted out of poverty in these countries.

    Look at the billions that did all the lifting. They still make as close to zero as you can get.

    Imagine for a moment, Tim Cook does the underground boss thing and sneaks himself into the Foxconn factory for a spot on the assembly line for a month. If he could get by the first few days and not scrap too many phones, and become proficient and last the whole month at 60 hours a week, what do you think his pay for this work would be? Would you like your monthly pay to match it?

    paul , April 1, 2016 at 3:04 pm

    I wasn't being entirely serious, but my point was.

    Other people work for sweet FA and so why shouldn't you?

    This is the question technocrats have been tearing other peoples hair out for the last 40 years

    Because…free markets have been the historical engine of common wealth…who cares if all the evidence points to the contrary.

    I recognise the inversion of the pyramid of life in my little comment.

    I do not believe the overclass are struggling manfully to support the rest of us through their own, thankless philanthropy.

    Ranger Rick , April 1, 2016 at 10:20 am

    Thanks to multinationals being effectively stateless due to tax arbitrage games, who actually has global economic power but the corporations themselves?

    James Levy , April 1, 2016 at 3:45 pm

    In the end, the States do, because the corporations need the military and other coercive power of States to enforce contracts and extract their pounds of flesh. The USA has the world largest GNP (or GDP, I can never keep the two straight although when I was a kid in the 1970s, it was GNP) and the world's most destructively powerful military (it may not be able to "defeat" you, but it can make you wish you had never screwed with Uncle Sam). GNP backstops military power and other nasty forms of coercion. Poor countries simply can't throw their weight around effectively in what is still an international jungle. Rich ones can.

    Dr. Roberts , April 1, 2016 at 12:50 pm

    It'd be interesting to see what Chart 2 looks like if measured in PPP rather than at market rates. It might demonstrate how much the structure of global markets effects the valuation of production, and how not-flat the globalized economy is. I'd like to see measures other than GDP as well, especially industrial commodities, capital goods, automobile, and shipping production. When it comes down to it where does the industrial capacity actually reside, and how has this shifted over the years?

    Jim Haygood , April 1, 2016 at 1:47 pm

    Since April 2011 - nearly five years ago - commodity prices have fallen a harrowing 48%, measured by the CCI-TR index. Over the same period, the US dollar index (DXY) rose almost 30%.

    These two trends contributed to the recent flattening out of developing economy gains in GDP share, measured in USD.

    Commodities are sufficiently depressed that on a valuation basis, a turnaround might be expected, and indeed may already have commenced in the CCI's 5.7% rise from its 15 Jan 2016 low.

    In a more favorable global macro environment, developing economies likely will gain more relative GDP share over the next five years than they did in the headwinds of the past five.

    susan the other , April 1, 2016 at 4:19 pm

    That's a logical premise and it implies that developing countries, with a sparse and elitist infrastructure, will be the ones to do big new infra that promotes equality and stability, but do not waste their opportunity to balance their economies by using old ideas about investing in all the mistakes and boondoggles of neoliberalism… etc. This opportunity is part of a global power shift which demands environmental cooperation. Just personally hoping all the carpet baggers go directly to jail.

    ke , April 2, 2016 at 12:09 am

    The obamacare mandate will go down as the straw that broke the camel's back, and Chinas printing will reverse, with scant more to show for itself than Japan's push behind the internet.

    Pushing government religion is one thing; mandating participation is another.

    [Mar 30, 2016] Investors see shale production falling and demand continuing to rise

    The collapse in oil prices has demolished investment in new projects, the results of which will be felt in the 2018 to 2021 timeframe, due to multiyear lead times
    www.yahoo.com
    Oil prices have hovered at $40 per barrel for much of the last week, as the markets try to avoid falling back after the strong rally since February.

    Investors see shale production falling and demand continuing to rise, which point to the ongoing oil market balancing.

    But it is unclear at this point if the rally from $27 per barrel in February to today's price just below $40 per barrel is here to stay. Fundamentals, while trending in the right direction, are still weak.

    [Mar 29, 2016] Unfortunately we have to allow some people to become millionaires.

    peakoilbarrel.com

    Heinrich Leopold, 03/29/2016 at 3:09 am

    Paulo,

    As the witch hunt on the rich still goes on feverishly, people forget that an economical successful society needs trailblazers like McClendon. A society must be open to extreme characters for good and bad as these people stir up the pond and keep the wheels running. The current process in society of reverting to the mean, when only incompetent bureaucrats can earn big money combined with a top down centralized decision making process will make society much poorer over time.

    Society must allow concepts and new ideas through a bottom up process managed by exceptional individuals like McClendon. The European Union -which becomes more and more a top down society similar to the Sowjet Union – and especially France are already good examples how fast a society can vanish through a centralized approach holding down individual activity.

    This has been even recognized by China when Deng Xiao Ping famously said: 'Unfortunately we have to allow some people to become millionaires.' Should centrists get its grip to power, millionaires will be poorer and the poor will not be richer. It is not that Cuba becomes the new USA, it will turn the US into the new Cuba.

    [Mar 29, 2016] Robert Shiller We're not in a housing bubble yet

    Notable quotes:
    "... Shiller said that he's concerned about recent volatility and "spectacular drops" in U.S. stocks and overseas markets, warning that further weakness could lead to a loss of confidence and cause investors to develop a "wait-and-see attitude." ..."
    finance.yahoo.com

    "It's not bubble territory yet, but bubbles are always a possibility," said Shiller. "Right now we're sitting where we were in 2003, and that developed over the next three years into quite a bubble." In 2006, there were more than 1.2 million foreclosure filings, a rate of one foreclosure filing for every 92 U.S. households nationwide.

    Taking a look at the broader picture, Shiller said that he's concerned about recent volatility and "spectacular drops" in U.S. stocks and overseas markets, warning that further weakness could lead to a loss of confidence and cause investors to develop a "wait-and-see attitude." He's also keeping an eye on the recent plunge in oil prices, saying it would be "worrisome if these fears return."

    [Mar 27, 2016] U.S. Lifted The Crude Oil Export Ban, And Exports Went Down by Charles Kennedy

    Mar 26, 2016 | oilprice.com

    Just over three months after the authorities lifted the four-decade ban on crude oil exports, the U.S. has actually exported less this year than it did over the same period the year before, when the ban was still in place.

    According to Clipper Data market intelligence cited by the Financial Times , we've seen a 5 percent decline in U.S. crude oil export volumes since the beginning of this year. The data suggests that on average we are exporting (waterborne) 325,000 barrels per day now, compared to 342,000 barrels per day during the first months of 2015.

    And there's no official data yet-not since the beginning of this year, when the U.S. Energy Information Administration (EIA) noted that during the week ending 22 January , the U.S. had exported just shy of 400,000 barrels of oil, which again was 25 percent less than what was exported for the same week in 2014.

    An oil tanker that reached a French port in January was the first post-ban delivery of U.S. crude oil, but things haven't really picked up pace since then.

    January's cargoes, totaling about 11.3 million barrels, marked a 7 percent decline from U.S. crude exports in December, according to data by the U.S. Census Bureau . Shipments during January went to Curacao and France, in addition to Canada, the primary destination. The total number of tankers that have set sail with U.S. crude oil will not be known until comprehensive data on February's shipments is released by the U.S. Census Bureau.

    The immediate beneficiaries of the ban suspension are gas and oil companies such as Chevron and Exxon Mobil-among the most tireless lobbyers against the ban-and oil trading giants such as Vitol Group BV and Trafigura Ltd Pet.

    Europe and Asia are flooded with oil from Russia and the Middle East, though the first two shipments to leave the U.S. post-export ban went to Europe: one to Germany and the other to France, to be used in a refinery in Switzerland . Dutch media outlets reported in January that a tanker from Houston had reached Rotterdam port, but this remains just a drop in the global export bucket.

    In Asia, even China's state-run Sinopec-the world's second-largest refiner-has imported a consignment of U.S. oil, according to a Reuters source . Japan's Cosmo Oil was the first Asian buyer of U.S. oil, purchasing some 300,000 barrels of U.S. crude in mid-January, which will be delivered to its refineries in mid-April.

    The current market turmoil has created a once in a generation opportunity for savvy energy investors.
    Whilst the mainstream media prints scare stories of oil prices falling through the floor smart investors are setting up their next winning oil plays.

    The very first South American country that will import U.S. crude oil is Venezuela. In early February, Venezuela's state-run oil company PDVSA imported a 550,000-barrel cargo of West Texas Intermediate (WTI) through its U.S.-based Citgo Petroleum affiliate . Venezuela started importing foreign crudes in 2014 amid a fall in its own production - buying mostly Angolan and Nigerian light grades.

    WTI is also expected to be exported to Israel, where Swiss commodities house Trafigura will ship some 700,000 barrels. Atlantic Trading & Marketing, the U.S. trading unit of French Total SA, has been planning an export cargo of U.S. crude from Cushing.

    Also, earlier this month, Exxon became the first U.S. oil company to export U.S. crude, sending a tanker from Texas to a refinery it owns in Italy.

    However, storage is now at the highest level in at least a decade. U.S., crude storage levels hit 487 million barrels in early November, closing in on the 80-year high of 518 million barrels in the last week of February. According to the EIA , about 60 percent of the U.S. working storage capacity is filled.

    Globally, the picture isn't much better, with the International Energy Agency (IEA) saying that 1 billion barrels were added to storage in 2015 alone. OPEC has reported that crude oil stockpiles in OECD countries currently exceed the running five-year average by 210 million barrels.

    By Charles Kennedy of Oilprice.com

    [Mar 24, 2016] Totally wrong reporting by Australian public broadcaster in March 2016

    Matt Mushalik , 03/24/2016 at 3:37 pm

    Totally wrong reporting by Australian public broadcaster in March 2016

    18/3/2016
    Oil output rises even as US rig count falls to historic lows
    http://www.abc.net.au/news/2016-03-18/oil-output-rises-even-as-us-rig-count-falls/7259566?section=business

    [Mar 24, 2016] Saudi Arabia Will Join April Oil Producer Meeting in Doha

    Bloomberg still promotes oil glut myth. There are paranoidal about rising oil prices and for a good reason: the US economy might well be toast if proces return to $100 level.
    Notable quotes:
    "... Iran boosted output by 187,800 barrels a day to 3.13 million a day in February, the biggest monthly gain since 1997, OPEC said in a report on Monday. Brazil will also add more than 100,000 barrels of supply this year and has shown little interest in taking part. ..."
    Bloomberg Business
    There are reasons to be doubtful that the planned freeze can radically alter an oil market that's fallen victim to a global fight for market share, causing stockpiles to rise to a record. Most significantly, Iran is seeking to increase production after the end of economic sanctions and has said it won't participate in any accord until its output has recovered.

    Iran boosted output by 187,800 barrels a day to 3.13 million a day in February, the biggest monthly gain since 1997, OPEC said in a report on Monday. Brazil will also add more than 100,000 barrels of supply this year and has shown little interest in taking part.

    Saudi Arabia boosted oil exports to a 10-month high of 7.84 million barrels a day in January, just weeks before the initial freeze agreement, according to the Joint Organisations Data Initiative, an oil industry group overseen by the International Energy Forum.

    "We will now see if OPEC and Russia are able to freeze the bears in the oil market," said Olivier Jakob, managing director at consultants Petromatrix GmbH. "The significance of the agreement is that it could remove the perception that OPEC is fighting for market share."

    Other forces have driven prices higher in recent weeks. Outages from Iraq and Nigeria have disrupted more than 800,000 barrels a day of supply and tightened the Brent market, according to Citigroup Inc. And falling drilling activity in the U.S. shale industry has seen analysts raise forecasts for declines in North American production.

    One key question is how fast shale production could come back if OPEC and some non-OPEC producers succeed in driving prices higher.

    Oil ministers for Argentina, Venezuela and Colombia didn't immediately respond to questions on whether they would attend. Ecuador's oil minister said he still plans to gather Latin American producers before April 17, after a planned meeting earlier this month was postponed.

    "It's not surprising they'd be willing to agree to this because the outlook for a further production increase was quite limited," Jeff Currie, global head of commodities research at Goldman Sachs Group Inc., said in an interview on Bloomberg Television. "You can't operate a cartel the way you used to."

    [Mar 23, 2016] Cruz Seeks Economic Wisdom in the Wrong Place

    Notable quotes:
    "... Gramm seems pretty firmly in free market ideologue territory. Cruz deciding to bring him in as an economic advisor is certainly noteworthy. ..."
    "... The short version: the Glass Steagall repeal allowed the banks to become "Too Big To Fail" and gave them enormous political leverage. It's the political leverage - the ability to count on Uncle Sam to come to the rescue, and provide easy terms for rent-seeking - that GLB provided. If they were separated, and only the investment banks could make risky investments, we would let the investment banks fail while protecting the boring old payments system. You won't get an argument on CFMA, however: it was worse. And that has Gramm's fingerprints all over it. And it might not have passed if the SIFIs were smaller. ..."
    "... When I think of the villains of the Great Recession, Phil Gramm is always Public Enemy #1. ..."
    "... The Glass Steagall repeal was not my biggest problem with Phil Gramm. My big problem is he wanted to have a completely deregulated financial sector. Sort of like when Newt Gingrich talked about "rational regulation" which was code for no regulation. But anyone who understands financial economics and our financial system knows that no regulations whatsoever is a recipe for a complete melt down. Which is what happened. ..."
    economistsview.typepad.com
    Barry Ritholtz:

    Cruz Seeks Economic Wisdom in the Wrong Place :

    Some people look at subprime lending and see evil. I look at subprime lending and I see the American dream in action. -- former U.S. Senator Phil Gramm, Nov. 16, 2008

    ...Gramm has been brought on as a senior economic adviser to Republican presidential candidate Ted Cruz. This isn't a promising development for Cruz... Not to put too fine a point on it, but I believe -- as do many others -- that Gramm was one of the major figures who helped set the stage for the crisis. ...

    Gramm was a key sponsor of the ... Gramm-Leach-Bliley Act , which effectively repealed the piece of the Glass-Steagall Act... The damage caused by rolling back Glass-Steagall pales compared with ... the Commodity Futures Modernization Act of 2000 . Gramm was a co-sponsor of the legislation, which exempted many derivatives and swaps from regulation. Not only was the law problematic, but it veered into potential conflict-of-interest territory. ...

    We got a chance to see those consequences a few years later when American International Group failed, thanks in part to swaps ... on $441 billion of securities that turned out to be junk. AIG wasn't required to put up much in the way of collateral, set aside capital or hedge its risk on the swaps. Why would it, when the law said it didn't have to? The taxpayers were then called upon to bailout AIG to the tune of more than $180 billion.

    Maybe it isn't too surprising that Cruz would seek advice from Gramm. Cruz, after all, seems to want to hobble modern economic policy by returning to the gold standard. ... We have seen these movies before, and they end in tragedy and tears.

    He also talks about Gramm's sad performance in his brief appearance as one of McCain's advisors in 2008.

    pgl :

    Phil Gramm says he got his economic degree from the University of Georgia. Well - it was from the Terry College of Business which is a business school. Not the graduate program of economics of the University of Georgia. I guess this makes Gramm one notch above Stephen Moore, Donald Luskin, and Lawrence Kudlow (aka the three stooges).

    pgl :

    The LA Times on Gramm's record on economics:

    http://www.latimes.com/business/hiltzik/la-fi-hiltzik-cruz-gramm-20160321-snap-htmlstory.html

    "Gramm's most notable moment in that position came on July 10, 2008, when he dismissed the developing economic crisis as "a mental recession" in an interview -- and video -- released by the conservative Washington Times. "We've never been more dominant," he said. "We've never had more natural advantages than we have today. We've sort of become a nation of whiners." McCain immediately disavowed the remarks, and a few days later Gramm stepped down as his campaign co-chairman."

    OK that was July. Menzie Chinn always notes that Luskin was saying the same thing as late as September 2008.

    sanjait :
    Gramm seems pretty firmly in free market ideologue territory. Cruz deciding to bring him in as an economic advisor is certainly noteworthy.

    Though I'm still struck by how determined some people seem to lump Graham Leach Bliley in as a cause/major contributor to the crisis.

    The CFMA very plausibly serves that purpose. If we want to mark Gramm as a villain, his sponsorship of that bill should be sufficient, as well as his abject refusal to acknowledge the crisis in real time.

    But for whatever reason people have picked up Glass Steagall as a Very Important rule, and seem to be pushing to rationalize that by claiming it is a big part of the crisis story.

    Ritholtz, to his credit, is qualified and nuanced about this. He notes that CFMA is the big story, and says GLB wasn't didn't "cause" the crisis.

    But following through the links to his WaPo piece, he still looks like he is reaching for a reason to label it a major contributor to the crisis.

    He claims that removing G-S restrictions caused the major banks to in turn cause the shadow banking entities like AIG, Bear, etc. to "bulk up" their holdings of subprime, based on ... nothing that I can see.

    Sure, the major banks were customers and counterparties for those shadow banks, but Ritholtz seems to assume that if G-S weren't in place that demand would somehow have been less. Why?

    Take a major bank with mixed commercial and investment banking activity and split the parts. Would that have changed their activities? Not much. The commercial banking side still would have held MBS (and purchase insurance on them) and the I-banks would still make speculative investments of various types.

    No one, as far as I've seen, ever bothers to tell a complete story where the structural incentives in the financial sector changed as a result of Glass Steagall in a way that materially impacted the depth or serverity of the housing crisis. How would splitting megabanks into separate big C- and I-banks have changed anything? Bueller?

    Instead I see a great many people, including well credentialed economists, just assume or hand waive the claim that it made a big impact without bothering to model or specify it. I'm not saying such an explanation couldn't exist that I'm not aware of ... but at this point I do see the absence of explanation as evidence of absence.

    pgl -> sanjait...
    Gramm dismissing the concern over a recession in the summer of 2008 is the kicker for me!
    Charlie Baker -> sanjait...
    sanjait:

    "But for whatever reason people have picked up Glass Steagall..."

    No need to speculate: Simon Johnson and James Kwak wrote a whole book about it. It's called 13 Bankers:

    https://13bankers.com/

    The short version: the Glass Steagall repeal allowed the banks to become "Too Big To Fail" and gave them enormous political leverage. It's the political leverage - the ability to count on Uncle Sam to come to the rescue, and provide easy terms for rent-seeking - that GLB provided. If they were separated, and only the investment banks could make risky investments, we would let the investment banks fail while protecting the boring old payments system. You won't get an argument on CFMA, however: it was worse. And that has Gramm's fingerprints all over it. And it might not have passed if the SIFIs were smaller.

    When I think of the villains of the Great Recession, Phil Gramm is always Public Enemy #1.

    pgl -> Charlie Baker ...
    The Glass Steagall repeal was not my biggest problem with Phil Gramm. My big problem is he wanted to have a completely deregulated financial sector. Sort of like when Newt Gingrich talked about "rational regulation" which was code for no regulation. But anyone who understands financial economics and our financial system knows that no regulations whatsoever is a recipe for a complete melt down. Which is what happened.
    The Rage :
    Cruz just wants to make money for his buddies while waving the bible. JDR was there 100+ years before that "Ted".

    [Mar 23, 2016] It's not a bull or a bear market, it's a bunny

    finance.yahoo.com

    "Unlike an enthusiastic bull or a scary bear, a bunny market hops about a bit but really doesn't go anywhere, and bunnies have often dominated the stock market during the latter stages of past economic recoveries," Paulsen said in a report this week for clients.

    [Mar 22, 2016] Share Buybacks Turn Toxic

    Notable quotes:
    "... During the November-January period, 378 of the S&P 500 companies bought back their own shares, according to FactSet . Total buybacks in the quarter rose 5.2% from a year ago, to $136.6 billion. Over the trailing 12 months (TTM), buybacks totaled $568.9 billion. That's an enormous amount of corporate cash that was dumped on the market! ..."
    "... Apple alone blew $6 billion in the quarter, even as its stock was tanking. Relative to its average share price over the period, it paid a 13% premium, the second highest premium paid by S&P 500 companies, after Symantec! Over the trailing 12 months, Apple blew nearly $40 billion on buybacks, and yet its stock dropped 15.5%. ..."
    "... And yet, despite the current heroic efforts to prop up their shares, companies have seen their shares get hammered. ..."
    "... Clearly, financial engineering is kaput! Buybacks no longer function reliably in inflating stock prices. The opposite seems to be happening. Perhaps investors are finally starting to see through these shenanigans, and perhaps they're now beginning to fret about all the debt these companies take on in order to fund buybacks! ..."
    "... The bull market from early 2009 into May 2015 looks just like every bubble in history, and there's one sign after the next that we did indeed peak last May. The dominant pattern in the stock market is the "rounded top" pattern. ..."
    "... what is missing here is stock options sales, stock being sold right about now. my guess is that stock option sales are rising and peaking soon. they know wtf is coming down and are basically cashing out. ..."
    "... fucking corporations. and the majority get what 15/hr-30. they get millions. not saying some of these fucks aren't very intelligent people well deserving of their rewards, but really, millions while the serfs make squat... ..."
    www.zerohedge.com
    Submitted by testosteronepit on 03/21/2016 10:14 -0400 By Wolf Richter, WOLF STREET

    Companies are still borrowing and spending billions on buying back their own shares – one of the big drivers behind the blistering stock market rally of the past few years. It worked wonderfully and without fail. But suddenly, it's doing the opposite, and now the shares of the biggest buyback queens are getting hammered. Something broke in the gears of this financially engineered market!

    During the November-January period, 378 of the S&P 500 companies bought back their own shares, according to FactSet . Total buybacks in the quarter rose 5.2% from a year ago, to $136.6 billion. Over the trailing 12 months (TTM), buybacks totaled $568.9 billion. That's an enormous amount of corporate cash that was dumped on the market!

    The sector that blew – "blew" because that's how it turned out – the most money on this type of financial engineering project was Information Technology, with $33.2 billion in buybacks last quarter. Four of the top 10 buyback queens were Information Technology: Apple, Microsoft, Oracle, and Visa.

    Apple alone blew $6 billion in the quarter, even as its stock was tanking. Relative to its average share price over the period, it paid a 13% premium, the second highest premium paid by S&P 500 companies, after Symantec! Over the trailing 12 months, Apple blew nearly $40 billion on buybacks, and yet its stock dropped 15.5%.

    This table shows the top 10 buyback queens in order of the amount spent on a TTM basis, and the mostly dismal performance of their shares over the same period.

    GE didn't quite make this list (though it bought back $3.1 billion in Q4), but it was very active in different ways, following through on its $50-billion buyback program announced in April last year. FactSet:

    In addition to the repurchase program, GE completed a stock swap with the former GE Capital retail finance division, Synchrony Financial, which had an effect on shares outstanding that was equivalent to a $20.4 billion buyback. As a result, the shares outstanding for GE were reduced by 6.7% in the last twelve months.

    Total buybacks are ballooning in proportion to net income, which declined over the TTM period for the first time since 2009. So buybacks as a percent of income rose from 64.9% a year ago to 68.1% at the end of the quarter. In terms of free cash flow after dividends, share buybacks have now ballooned to 101.7%. This was, as FactSet put it, "a huge jump from the year ago quarter when the ratio was 81.6%."

    The culprit? With income down over the TTM period, aggregate free cash flow has dropped 9.5% year-over-year.

    FactSet's chart shows the declining net income (green bars), the nearly flat share-buybacks (blue bars), and the rising buyback-to-income ratio (red line, right scale). Note what happened last time income began to decline (2007) and share buybacks followed in 2008: the stock market crashed.

    And yet, despite the current heroic efforts to prop up their shares, companies have seen their shares get hammered.

    As FactSet's chart below shows, over the past 12 months, the S&P 500 total return index, which included dividends, rose 1.3% (green line). But the total return of SPDR S&P 500 Buyback ETF, which tracks the 100 companies in the S&P 500 with the highest buyback ratio, dropped 7.6% (blue line):

    Clearly, financial engineering is kaput! Buybacks no longer function reliably in inflating stock prices. The opposite seems to be happening. Perhaps investors are finally starting to see through these shenanigans, and perhaps they're now beginning to fret about all the debt these companies take on in order to fund buybacks!

    When companies borrow billions to then blow that moolah on buying their own shares that then promptly decline in value, it doesn't create a loss on the income statement. Instead, those billions quietly go up in smoke. What's left behind? Fewer shares outstanding, piles of additional debt, mauled cash balances, and much higher financial risk.

    But once companies see that share buybacks are becoming toxic as their shares decline despite buybacks, they curtail them. And last time this happened – in 2008 – it pulled the rug out from under the already teetering markets.

    The bull market from early 2009 into May 2015 looks just like every bubble in history, and there's one sign after the next that we did indeed peak last May. The dominant pattern in the stock market is the "rounded top" pattern.

    Read… This Chart Shows the First Big Crash Is Likely Just Ahead

    Pretty Vacant

    Math is hard. Stock buybacks are supposedly driving the market higher. Yet, this article indicates corporations which engage in buyback activity instead underperform the market. Therefore, logically, buyback queens are impeding the market by slowing the advance of the subject firm's equity prices. HUH?

    PlayMoney

    Wondered why Jamie Dimon spent so much on personal stock purchases....until a month or so later JPM announces a big buyback. Thus inflating his recent purchase....should be a law against that. Criminals.

    new game

    what is missing here is stock options sales, stock being sold right about now. my guess is that stock option sales are rising and peaking soon. they know wtf is coming down and are basically cashing out. 10 million, 50 million, 2 million. yea, all legal, but that is the game, do the time, grind to the top, cash out the options and live the life.

    fucking corporations. and the majority get what 15/hr-30. they get millions. not saying some of these fucks aren't very intelligent people well deserving of their rewards, but really, millions while the serfs make squat...

    [Mar 21, 2016] A Dreaded Scenario For Oil Bulls Is Becoming A Reality Reuters Warns U.S. Production Is Coming Back On Line

    www.zerohedge.com

    One month ago, as we pounded the table on the biggest threat to the fundamental case for oil, namely that even a modest rebound in oil prices could unleash another round of production by the "marginal", US shale oil producers, we warned that a rebound in the price of oil as modest as $40 per barrel, could be sufficient to get drillers to resume production.

    As noted in late February , among the companies prepared to flip the on switch at a moment's notice are Continental Resources led by billionaire wildcatter Harold Hamm, which said it is prepared to increase capital spending if U.S. crude reaches the low- to mid-$40s range, allowing it to boost 2017 production by more than 10 percent, chief financial official John Hart said last week. Then there is rival Whiting Petroleum which may have stopped fracking new wells, but added it would "consider completing some of these wells" if oil reached $40 to $45 a barrel, Chairman and CEO Jim Volker told analysts. Then there was EOG Chairman Bill Thomas who did not say what price would spur EOG to boost output this year, but said it had a "premium inventory" of 3,200 well locations that can yield returns of 30 percent or more with oil at $40, and so on, and so on.

    The reason for the plunging breakeven price? The same one we suggested on February 3: surging, rapid efficiency improvement which "have turned U.S. shale, initially seen by rivals as a marginal, high cost sector, into a major player - and a thorn in the side of big OPEC producers."

    To be sure, while many had expected low oil prices to curb output, virtually nobody had predicted that even a modest jump in oil (when we wrote our article on February 29 oil was at $33, just $7 from the $40 threshold) would lead to a major portion of US shale going back on line. The threat of a shale rebound is "putting a cap on oil prices," said John Kilduff, partner at Again Capital LLC. "If there's some bullish outlook for demand or the economy, they will try to get ahead of the curve and increase production even sooner."

    However, the cap was not big enough, because late last week driven by the relentless short squeeze and the sliding dollar, WTI soared well over $40 hitting a fresh 2016 high.

    And, as warned, with oil surging above the critical $40 new "floor" price, as Reuters put it moments ago , " a dreaded scenario for U.S. oil bulls might just be becoming a reality."

    What exactly is this scenario?

    According to Reuters, some U.S. shale oil producers, including Oasis Petroleum and Pioneer Natural Resources Co, are activating drilled but uncompleted wells (DUCs) in a reversal in strategy that threatens to bring more crude to a saturated market and dampen any sustained rebound in prices.

    When oil prices started their long slide in mid-2014, many producers kept drilling wells, but halted expensive fracking work that brings them online, waiting for prices to bounce back.

    But now, with crude futures hovering near multi-year lows and many doubting recent modest gains that brought oil prices near $40 a barrel can hold, the backlog of DUCs is already shrinking in some areas. In key shale areas such as Eagle Ford or Wolfcamp and Bone Spring in Texas such backlog has fallen by as much as a third over the past six months, according to data compiled by Alex Beeker, a researcher at Wood Mackenzie.

    "If the number of DUCs brought online is surprising to the upside, that means U.S. production won't decline as quickly as people expect," said Michael Wittner, global head of oil research at Societe Generale. " More output is bearish."

    In the Wolfcamp, Bone Spring and Eagle Ford, the combined backlog of excessive wells remains around 600, Beeker estimates. About 660 wells could be the equivalent of between 100,000 and 300,000 barrels per day of potential new supply, according to Ed Longanecker, president of Texas Independent Producers and Royalty Owners Association (TIPRO)

    This goes to what we warned about in the start of February when we said that " Another Leg Lower In Oil Coming After Many Producers Found To Have Far Lower Breakevens ."

    And with its usual 2-4 month delay, the market is finally starting to realize just this.

    As expected, Reuters writes that for now, most of the wells are activated in Texas, where proximity to refiners allows producers to sell their crude closer to benchmark prices, and by well-hedged companies that have locked in higher prices.

    Still, the pace of fracking of the uncompleted wells may quicken if cash-strapped producers facing debt repayments can no longer afford to store their oil in the ground.

    While the potential additional supply is a fraction of total U.S. production of around 9 million bpd, the fresh flow would reinforce concerns about a growing global glut just as Iran ramps up output and inventories in domestic storage tanks from the Gulf to Cushing, Oklahoma, test new highs on a weekly basis.

    But back to the DUCs, which are a new development for many of the algos which have been trading oil on nothing but momentum:

    Wood Mackenzie reckons that the backlog of excess DUCs will decline over the next two years, and return to normal levels by the end of 2017. It is expected to fall 35 percent from current levels in the Bakken and 85 percent in the Eagle Ford by the end of 2016. With service costs down, now is a good time to bring a well online if a company has hedged its production and covered its costs, said Jonathan Garrett, an analyst with Wood Mackenzie. The U.S. crude breakeven for such wells is one-third lower than for new ones, according to Wood Mackenzie.

    Typically, average DUC inventory is around 550 in the Wolfcamp/Bone Spring formations and around 300 in the Eagle Ford, Beeker estimates. Rival Oasis is also focusing on drawing down its backlog this year, executives said during the company's last earnings call.

    In each of those formations, the excess has fallen by about 150-175 over the past six months, bringing the surplus to around 300 wells in each. " We're just going to be continuously completing the wells there (in the Permian) with our fleets and so you will not see any DUCs in Midland basin," Pioneer Chief Operating Officer, Tim Dove, told a recent earnings conference.

    And then the story verges off to something else we have warned about, namely soaring hedging as oil has rebounded, allowing producers to lock in profits even in case oil should once again resume sliding from this price. Both Pioneer and rival Oasis have locked in future sales at prices well above current levels. Oasis has 70 percent of its oil production for 2016 hedged above $50 a barrel and roughly 20 percent of its 2017 production hedged at about $47 a barrel. Similarly, Pioneer has locked in a minimum price for 85 percent of this year's production.

    To be sure, not everyone will be able to ramp up production: in North Dakota, the second-largest oil-producing state where producers like Whiting Petroleum Corp sell their oil at steep discounts, it might not be economic Reuters calculates. There, the number of DUCs climbed above 1,000 in September before falling to 945 in December, according to the latest data from the state's energy regulator.

    Bakken producer Continental Resources Inc which made waves when it unwound its hedges in late 2014, has said it would continue to defer completions until prices rise. Bakken discounts were just too steep, said Garrison Allen, a research associate at Raymond James. "It doesn't make sense to do anything up there."

    But not everyone is needed to ramp up production: even if shale output rises by just a few hundred thousand barrels in the short term, that will be enough to push the US storage situation, already at critical point, into beyond operation capacity levels, and lead to dumping of oil in the open market, resulting in the next major leg lower in oil prices, which in turn will spillover into energy stocks and the broader market, and force central banks to consider what until recently was merely a joke, namely monetizing crude in the open market. After all, at this point when central banks have lost all credibility, why not?

    OutaTime43

    Rapid swings in supply/demand and prices is actually one of the predictions of what would happen when we hit peak (or long plateau if you prefer). World peak oil was expected somewhere between 2008 and 2020 by the majority of estimates. Remember, peak oil isn't about running out of crude . It's about falling extraction rates in the face of higher costs to extract. Tar sands and shale, for example, is very expensive oil as evidenced by the drop off of the industry in Canada and North Dakota when prices fell below $50 . Once the easy oil peaks, and capital no longer is able to respond to the rapid feast and famine , THEN you'll start to notice the reality that was always there with peak oil.... $5 gas, gas lines, etc. It will be the Jimmy Carter days all over again.

    HowdyDoody , Mon, 03/21/2016 - 09:24

    If amount of the energy needed to extract and process a unit of gas/oil is greater or equal to the amount of energy from a unit of gas/oil, then oil/gas stays in the ground irresspective of the volume.

    Loucleve , Mon, 03/21/2016 - 09:24

    REUTERS is the establishment propaganda mouthpiece. production may be increasing, but i DOUBT its gonna hurt the price. they just want you to think that.

    [Mar 16, 2016] The Fed caused 93% of the entire stock market's move since 2008 Analysis

    finance.yahoo.com

    The bull market just celebrated its seventh anniversary. But the gains in recent years – as well as its recent sputter – may be explained by just one thing: monetary policy.

    The factors behind that and previous bubbles can be illuminated using simple visual analysis of a chart.

    The S&P 500 (^GSPC) doubled in value from November 2008 to October 2014, coinciding with the Federal Reserve Bank's "quantitative easing" asset purchasing program. After three rounds of "QE," where the Fed poured billions of dollars into the bond market monthly, the Fed's balance sheet went from $2.1 trillion to $4.5 trillion.

    This isn't just a spurious correlation, according to economist Brian Barnier, principal at ValueBridge Advisors and founder of FedDashboard.com. What's more, he says previous bull runs in the market lasting several years can also be explained by single factors each time.

    Barnier first compiled data on the total value of publicly-traded U.S. stocks since 1950. He then divided it by another economic factor, graphing the ratio for each one. If the chart showed horizontal lines stretching over long periods of time, that meant both the numerator (stock values) and the denominator (the other factor) were moving at the same rate.

    "That's the beauty of the visual analysis," he said. "All we have to do is find straight, stable lines and we know we've got something good."

    ... ... ...

    As the financial crisis reached a fevered pitch in 2008, the Federal Reserve took to flooding the financial market with dollars by buying up bonds. Simultaneously, interest rates fell dramatically, as bond yields move in the opposite direction of bond prices. Barnier sees the Fed as responsible for over 93% of the market from the start of QE until today. During the first half of 2013, the Fed caused the entire market's growth, he said.

    Since the Fed stopped buying bonds in late 2014, the S&P 500 has been batted around in a 16% range and is more or less where it was when the QE came to a close. Investors need to anticipate the next driver, said Barnier.

    [Mar 14, 2016] Theres Only One Buyer Keeping S P 500s Bull Market Alive

    Bloomberg Business
    Demand for U.S. shares among companies and individuals is diverging at a rate that may be without precedent, another sign of how crucial buybacks are in propping up the bull market as it enters its eighth year.

    Standard & Poor's 500 Index constituents are poised to repurchase as much as $165 billion of stock this quarter, approaching a record reached in 2007. The buying contrasts with rampant selling by clients of mutual and exchange-traded funds, who after pulling $40 billion since January are on pace for one of the biggest quarterly withdrawals ever.

    [Mar 10, 2016] Bloomberg as a GS propaganda arm

    peakoilbarrel.com

    jed , 03/09/2016 at 10:10 pm

    I'm always interested in the stuff you have to hunt around to find reported. Someone on a web board earlier mentioned a pipeline bombed in Nigeria. Didn't see it anywhere, very sporadically reported, apparently 300kbpd there, in reading that I found the pipeline from Kurdistan to Turkey has been out for three weeks, apparently up to 600kbpd there.

    If it was something about the glut, bloomberg would be all over it. This, zip. I used to wonder about conspiracies, but I started following a few bloomberg reporters late last year and they are some of the laziest SOBs I'd ever encountered. The amount of copy/paste and rehash the prevailing sentiment without checking a few facts was astonishing. Talk about slobs, it really was about getting all the current keywords and search descriptions into the article and particularly the first paragraph and not much else.

    likbez , 03/09/2016 at 11:59 pm
    Jed,

    Thanks. My feelings, exactly. But at the same time, what to expect from them? Is not Bloomberg to a certain extent a GS propaganda arm ? May we need to lower our expectations.

    Some grains of truth with additional effort still can be extracted from the piles of lies and lazy, incompetent reporting (aka rehashing somebody else talking points).

    Funny, but this is a kind of "Back in the USSR" situation. Our feelings are probably 1:1 correspond to the feelings of Soviet citizens about the USSR government economic reporting :-).

    [Mar 10, 2016] Dramatic forty percent drop of wellhead breakeven prices is a wild excageration

    There are no facts that can support this assertion. Some modest improving are in place, but 40% is a wild exaggeration
    Fuel Fix

    7) Finally, the graphic below from Rystad energy shows how it sees shale costs showing substantial improvements, and across various shale plays. It projects that wellhead breakeven prices have dropped by more than 40% between 2013 and 2015:

    [Mar 10, 2016] This Is Jeff Gundlachs Favorite ( Scariest) Chart Zero Hedge

    www.zerohedge.com
    According to DoubleLine's Jeff Gundlach, this is his favorite chart - backing his perspective that equity markets have "2% upside and 20% downside) from here .

    In his words: "These lines will converge..."

    http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/03/09/20160309_gundlach.jpg

    Chart: Bloomberg

    It should be pretty clear what drove the divergence...

    [Mar 08, 2016] Kuwait Will Not Wait For Iran To Join Oil Freeze

    This article has all signs "a am short on oil" bias. As such this can serve as an example of fine art of disinformation. Previously the same deso as now about Kuwait was promoted about Azerbaijan. i could well be that Zerohedge traders are hurt by this "short covering" oil rally. They never disclose their positions.
    Notable quotes:
    "... According to Reuters, Kuwait's oil minister said on Tuesday that his country's participation in an output freeze would require all major oil producers, including Iran, to be on board. ..."
    "... Kuwait's announcement followed a report by Goldman overnight in which, as we reported, Jeff Currie said that the "commodity rally is not sustainable" and it is time to sell crude. "While these dynamics (rising prices) could run further, they simply are not sustainable in the current environment," the analysts wrote. "Energy needs lower prices to maintain financial stress to finish the rebalancing process; otherwise, an oil price rally will prove self-defeating, as it did last spring." ..."
    "... China's February vehicle sales, a key driver for gasoline demand, were down 3.7 percent year on year, data from the country's Passenger Car Association showed. ..."
    OilPrice.com

    March 08, 2016 | ZeroHedge

    Back in late February, when crude prices had just hit a 13 year low, one catalyst unleashed a furious short-covering rally: a WSJ report which cited a delayed SkyNews interview with the UAE energy minister, according to which OPEC would freeze, if not cut production. Since then we learned, courtesy of the Saudi oil minister Al-Naimi himself, that the Saudis will never reduce output, however, in a utterly meaningless gesture, Saudi Arabia and Russia agreed to "freeze" production at levels which are already at maximum capacity and under one condition: that all other OPEC members join the freeze, with the possible exception of Iran which may be allowed to produce until it hits its pre-embargo export levels.

    Of course, even the said "freeze" is nothing but a stalling tactic employed by an OPEC member (Saudi Arabia), to give the impression that OPEC still exists as a production-throttling cartel when OPEC ceased to exist in that capacity in November 2014. Everything since then has been one surreal redux of "Weekend at Bernies" where everyone pretends not to notice the corpse in the room.

    However, while many had pretended to at least play along with the charade, today a core OPEC member effectively broke ranks when Kuwait said it would only agree to an output freeze if all major producers take part including Iran.

    According to Reuters, Kuwait's oil minister said on Tuesday that his country's participation in an output freeze would require all major oil producers, including Iran, to be on board.

    "I'll go full power if there's no agreement. Every barrel I produce I'll sell," Anas al-Saleh told reporters in Kuwait City. And since Iran has made it very, very clear that it will not join the production freeze at its current mothballed output, and will need at least 9-12 months before it regains its pre-embargo capacity levels, one can forget about a production freeze well into 2017, if not forever, since by then at least one if not more OPEC members will be bankrupt (they know who they are: they are the source of those "ALL CAPS" flashing read headlines every day).

    Putting Kuwait's production in context, Kuwait - the small Gulf state Saddam invaded 25 years ago - is currently producing 3 million barrels of oil per day. Incidentally, this is precisely how much the oil market is oversupplied each and every day, and why in addition to PADD1, 2 and 3 being almost full, and excess oil now being stored in ships, pipelines and trains, and re-exported to Europe, quite soon empty swimming pools will be full with the "black gold" as the algos continue to refuse to pay any attention to the constantly deteriorating fundamentals.

    Kuwait's announcement followed a report by Goldman overnight in which, as we reported, Jeff Currie said that the "commodity rally is not sustainable" and it is time to sell crude. "While these dynamics (rising prices) could run further, they simply are not sustainable in the current environment," the analysts wrote. "Energy needs lower prices to maintain financial stress to finish the rebalancing process; otherwise, an oil price rally will prove self-defeating, as it did last spring."

    Perhaps, but not just yet: in addition to China's abysmal exports, we also learned that in February its crude imports soared 19.1% to 31.80 million tons, or about 8 million barrels per day, an all-time high, suggesting China - like the US - is filling every available container including its SPR at a time when prices are relatively low even if organic demand continues to deteriorate.

    As Reuters writes, "despite strong oil demand, questions about the sustainability of growing consumption weighed on markets after China's overall exports tumbled by a quarter in February."

    China's February vehicle sales, a key driver for gasoline demand, were down 3.7 percent year on year, data from the country's Passenger Car Association showed. "This is really a poor start for trade this year," said Zhang Yongjun, senior economist at the China Centre for International Economic Exchanges.

    However, judging by the latest bounce in crude in the last hour of trading, the only thing that still matters is who the daily "short squeeze" will rip higher. By the looks of things, at least one major trader already got the tap on the shoulder.

    By Zerohedge

    See also

    [Mar 07, 2016] Oil rout over, OPEC aims for $50 anchor, says PIRA's Ross

    Notable quotes:
    "... In an interview with Reuters, Ross said oil should recover to $50 a barrel by the end of the year, potentially aided by eventual supply cuts from leading producers among the Organization of the Petroleum Exporting Countries (OPEC). ..."
    "... Instead, they would keep pumping and allow prices to fall. While they did not anticipate the longest and deepest oil price rout since the mid-1980s, the effort has at last begun to curb the rise of rival higher-cost producers such as U.S. shale drillers, another sign that prices may have found a bottom. ..."
    "... In his note to clients, Ross also pointed to the recent agreement between major OPEC members and leading non-OPEC producer Russia to "freeze" production at January levels as a factor boosting market sentiment after a brutal period when the only safe trade seemed to be sell. ..."
    "... Officials from less influential members such as Venezuela or Angola have occasionally referenced specific prices, generally in the vicinity of $70 to $80, ..."
    finance.yahoo.com

    Major OPEC producers are privately starting to talk about a new oil price equilibrium of $50 a barrel, adding to signs that the market's long, deep rout is officially over, says one of the industry's leading prognosticators.

    Gary Ross, the founder, executive chairman and chief oil soothsayer at New York-based consultancy PIRA, told clients 2-1/2 weeks ago that he reckoned the "lows are in" for crude, which was then about $30 a barrel. U.S. futures <CLc1> have rallied since then to close at nearly $36 on Friday, with a handful of analysts also cautiously calling a bottom.

    In an interview with Reuters, Ross said oil should recover to $50 a barrel by the end of the year, potentially aided by eventual supply cuts from leading producers among the Organization of the Petroleum Exporting Countries (OPEC).

    "They want $50 oil, this is going to become the new anchor for global oil prices," said Ross, one of the industry's most respected forecasters for his bold price predictions and decades-long history of consulting with OPEC members.

    "While it may not be an official target price, you'll hear them saying it. They're trying to give the market an anchor."

    If Saudi Arabia and other powerful Gulf OPEC members begin invoking $50 as "fair price for producers and consumers" - a once-favored phrase that has been absent for several years - it may could signal the end of an unusual and extended period in which the group abandoned efforts to manage the market.

    After years of signaling satisfaction with prices hovering at around $100 a barrel, top exporter Saudi Arabia in late 2014 led OPEC in its most dramatic policy shift in decades. No longer would the world's top oil exporter, or its OPEC allies, agree to cut their own production to support such high prices, which they feared would erode their share of the world market.

    Instead, they would keep pumping and allow prices to fall. While they did not anticipate the longest and deepest oil price rout since the mid-1980s, the effort has at last begun to curb the rise of rival higher-cost producers such as U.S. shale drillers, another sign that prices may have found a bottom.

    In his note to clients, Ross also pointed to the recent agreement between major OPEC members and leading non-OPEC producer Russia to "freeze" production at January levels as a factor boosting market sentiment after a brutal period when the only safe trade seemed to be sell.

    The pact will do little to curb immediate oversupply, especially with Iran exports still swelling after the end of sanctions. Still, working together on "verbal intervention" was a positive start that "could lead to eventual cuts" after a period in which Saudi Arabia and Russia made little effort toward any kind of cooperation, he said.

    "Russian production is going down anyway, why not agree to a freeze and then cuts?" Ross told Reuters.

    The $50 figure was in line with analysts' consensus for 2017 U.S. prices, according to the last Reuters poll, although much higher than the $38 a barrel median for this year.
    Ross, whose forecasts are not normally made public, was among the few analysts to anticipate OPEC's decision to let prices fall in 2014.

    While he was wrong-footed in the first part of last year, when crude's rebound to around $60 a barrel proved temporary, he joined others such as Goldman Sachs in taking a much more bearish view in more recent months, predicting in December that U.S. crude would drop below $30 a barrel in February.

    Ever since the market detached from the $100 a barrel figure that anchored it from 2010 to 2014, analysts, traders and executives have struggled to pinpoint where it might ultimately settle, agreeing only that it would be a period of extraordinary volatility in the absence of any overt OPEC guidance.

    Officials from less influential members such as Venezuela or Angola have occasionally referenced specific prices, generally in the vicinity of $70 to $80, but the bigger Gulf producers have largely avoided any public mention of a new reference point, leaving the market adrift.

    [Mar 04, 2016] Ultra-Bearish Headlines As A Contrarian Signal For Oil by Henry Hewitt

    OilPrice.com

    One way to tell that a bear market move has run its course, or is getting close at least, is when front page stories on major news outlets declare that all hope is lost, and none of the experts think things will get better for a long time, if ever.

    Well, forever is a very long time, and even if it weren't, the bell has tolled, since Bloomberg, on Feb. 12, declared the following: The Oil Industry Got Together and Agreed Things May Never Get Better.

    "Thousands of industry participants gathered in London for their annual get-together, only to find a world awash in crude and hardly a life jacket in sight."

    The head of commodity research at mighty Goldman even said: "I wouldn't be surprised if this market goes into the teens."

    Whether or not Jan. 20 was the bottom for Brent (an ominous day being exactly one year from the next Presidential inauguration), closing under $30, is yet to be determined. But if nothing else, the extreme pessimism on offer at the London gathering make it likely that a rally, if not a turning of the tide, is in order. And, if that is the case, now that the oil price seems to be a symptom rather than a cause of global growth, or lack thereof, there is reason to believe that the S&P is also due for a rally.

    The following dynamic Bloomberg graphic shows the utter collapse in U.S. drilling rigs. The most recent figure for rigs is getting close to the record low set in 1999, when Brent was trading in the teens.

    ...The IEA predicts that China will need to import another 2.6 million barrels per day five years from now.

    [Mar 04, 2016] Legendary billionaire investor Jim Rogers is certain that the U.S. economy will be in recession in the next 12 months

    www.zerohedge.com

    Legendary billionaire investor Jim Rogers is certain that the U.S. economy will be in recession in the next 12 months. During an interview on BloombergTV, he explained why he had covered his position in the Japanese yen, saying that the nation is "printing a lot" of the currency .

    Rogers also warned that there is a "100 percent" probability of a recession in the U.S. within a year, and with debt levels very high across the nation, this is a grave concern.

    Jim Rogers sums up the carnage that is coming...

    http://www.bloomberg.com/api/embed/iframe?id=xjQqFCwDThO7KMsEXp9NZw

    Even The Fed tends to agree with him...

    The latest reading of St.Louis Fed's recession probability is higher than all but 3 months (in the last 50 years) when a recession did not immediately proceed.

    [Mar 04, 2016] Naïve Siegelism

    www.nakedcapitalism.com

    Jim Haygood , March 3, 2016 at 9:55 am

    'a retirement plan ultimately depends on the future earning power of the economy'

    That's why all modern pension plans hold some equities.

    An individual's cost to own one diversified equity fund and one diversified bond fund is about 0.1% per year. Whereas the expected benefit (compared to SocSec's all Treasury portfolio) is about 3.0% annually.

    The seminal research pointing to an equity premium was done in the U.S. in the early 1960s, resulting in Nobel prizes for several participants. A half century on, their work has had zero effect on the politically petrified SocSec system - 20% funded, headed for zero in 2033.

    Jim Haygood , March 3, 2016 at 11:55 am

    Total bond market fund, 0.07% annual expense ratio (not a reco; just one example):

    https://personal.vanguard.com/us/funds/snapshot?FundId=0928&FundIntExt=INT

    Large cap index fund, 0.05% expense ratio (again not a reco, just an example):

    https://personal.vanguard.com/us/funds/snapshot?FundId=0968&FundIntExt=INT

    Equity premium of 6% gives 3% net benefit (vs. 100% Treasuries) in a 50/50 mix with bonds:

    "The equity premium, which is defined as equity returns less bond returns, has been about 6% on average for the past century."

    http://www.investopedia.com/terms/e/epp.asp#ixzz41rIVV14V

    Seminal research - Fisher/Lorie paper of 1964, establishing the equity premium and founding CRSP which serves as the database for nearly all U.S. equities research:

    http://www.crsp.com/50/images/rates%20of%20return%20paper.pdf

    Nobel Prizes 1990 - Harry Markowitz, Merton Miller, William Sharpe - for Modern Portfolio Theory, which implies in conjunction with the equity premium that the optimal risk-reward portfolio should include equities:

    http://www.britannica.com/topic/Winners-of-the-Nobel-Prize-for-Economics-1856936

    Zero effect: "Since the beginning of the Social Security program [in 1935], all securities held by the trust funds have been issued by the Federal Government."

    https://www.ssa.gov/oact/progdata/investheld.html

    Headed for zero: "The dollar level of the theoretical combined trust fund reserves declines beginning in 2020 until reserves become depleted in 2034." - SocSec Trustees Report 2015, page 3.

    https://www.ssa.gov/oact/tr/2015/tr2015.pdf

    (The 2033 depletion date was from last year's trustees report; sorry.)

    likbez , March 3, 2016 at 6:39 pm
    This all is "water under the bridge." Called Naïve Siegelism

    http://softpanorama.biz/Skeptics/Financial_skeptic/Protecting_your_401K/Protecting_401K_from_yourself/naive_siegelism.shtml

    Can you spell "secular stagnation" ? And can you explain to us what returns are expected for stocks in the "secular stagnation" regime in comparison with bonds?

    And what will you do if S&P500 drops to 660 like it did in 2008. And stays at this level for a couple of years like oil prices recently did.

    BTW LTM was also founded by Nobel price winners: (https://en.wikipedia.org/wiki/Long-Term_Capital_Management ):

    LTCM was founded in 1994 by John W. Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers. Members of LTCM's board of directors included Myron S. Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economic Sciences for a "new method to determine the value of derivatives".[3]

    [Mar 03, 2016] Barriers to Productivity Growth

    economistsview.typepad.com
    Chris Dillow:
    Barriers to productivity growth : "The limits to productivity growth are set only by the limits to human inventiveness" says John Kay. This understates the problem. There are other limits. I'd mention two which I think are under-rated.
    One is competition. Of course, this tends to increase productivity in many ways. But it has a downside. The fear of competition from future new technologies can inhibit investment today: no firm will spend £10m on robots if they fear a rival will buy better ones for £5m soon afterwards. ...
    The second is that, as Brynjolfsson and MacAfee say , "significant organizational innovation is required to capture the full benefit of…technologies."
    For example, Paul David has described (pdf) how the introduction of electricity into American factories did not immediately raise productivity much, simply because it merely replaced steam engines. It was only when bosses realized that electric motors allowed factories to be reorganized – dispensing with the need for machines to be close to a central power source – that productivity soared, as workflow improved and new cheaper buildings could be used. This took many years.
    It's not just organizational change that's needed, though..., I suspect that if IT is to have (further?) productivity-enhancing effects, they require socio-organizational change. ...
    However, there are always obstacles to the social and organizational change necessary for technical change to lead to productivity gains. These might be cognitive – such as the Frankenstein syndrome or "not invented here " mentality. Or they can be material. Socio-technical change is a process of creative destruction, the losers from which kick up a stink; think of taxi-drivers protesting against Uber.
    Worse still, these losers aren't always politically weak Ludditites. They can be well-connected bosses of incumbent firms, or managers seeking to maintain their power base. ...
    The big question facing us is, therefore: do we have the right set of institutions to foster the socio-organizational change that beget productivity growth? These require a mix of healthy markets, to maximize ecological diversity; a financial system which backs risky new-comers; property rights which incentivise innovation; and state intervention that facilitates all these whilst not being captured by Luddites. If our politics weren't so imbecilic, this question would be getting a lot more attention than it is.

    Related: How concerned should we be about business investment and productivity growth? - Nick Bunker .

    Posted by Mark Thoma on Thursday, March 3, 2016 at 10:51 AM in Economics , Productivity | Permalink Comments (97)

    [Mar 02, 2016] Nearly Half of American Children Living Near Poverty Line

    economistsview.typepad.com
    "Millions of children are living in families still struggling to make ends meet in our low-growth, low-wage economy":
    Nearly half of American children living near poverty line, Eurekalert! : Nearly half of children in the United States live dangerously close to the poverty line, according to new research from the National Center for Children in Poverty (NCCP) at Columbia University's Mailman School of Public Health. Basic Facts about Low-Income Children, the center's annual series of profiles on child poverty in America, illustrates the severity of economic instability and poverty conditions faced by more than 31 million children throughout the United States. Using the latest data from the American Community Survey, NCCP researchers found that while the total number of children in the U.S. has remained about the same since 2008, more children today are likely to live in families barely able to afford their most basic needs.
    "These data challenge the prevailing beliefs that many still hold about what poverty looks like and which children in this country are most likely to be at risk," said Renée Wilson-Simmons, DrPH, NCCP director. "The fact is, despite the significant gains we've made in expanding nutrition and health insurance programs to reach the children most in need, millions of children are living in families still struggling to make ends meet in our low-growth, low-wage economy."
    According to NCCP researchers, the number of poor children in the U.S. grew by 18 percent from 2008 to 2014 (the latest available data), and the number of children living in low-income households grew by 10 percent. ...

    Posted by Mark Thoma on Wednesday, March 2, 2016 at 10:08 AM in Economics , Income Distribution , Social Insurance | Permalink Comments (54)

    [Mar 02, 2016] The funniest things about Oil Glut is the US imports increased during it

    peakoilbarrel.com

    Longtimber , 12/24/2014 at 11:09 pm

    The Oil Weapon – will it work?
    http://oilprice.com/Energy/Oil-Prices/Did-The-Saudis-And-The-US-Collude-In-Dropping-Oil-Prices.html toolpush , 12/24/2014 at 7:58 pm
    It looks like the the US oil refiners like a bargain when they see one.

    http://www.eia.gov/petroleum/supply/weekly/pdf/highlights.pdf
    "U.S. crude oil imports averaged 8.3 million barrels per day last week,
    up by 1.2 million barrels per day from the previous week. Over the last
    four weeks, crude oil imports averaged 7.6 million barrels per day"

    They don't seem to worried about the so called glut of US oil production with an increase of oil imports like that?

    toolpush , 12/24/2014 at 9:50 pm
    OFM,

    That was always one of the funniest things about this "Oil Glut". The US stocks though they were in the upper range, were certainly not overfull. Now I know the US is not the world, but they do use 25% of the words oil, and do put out some of the best number on a timely manner, and therefore a good guide to what is going on in the market, but maybe there were keeping their powder dry, and are now racing to fill their boots, while the 50% discount sign is still on display.

    Ron Patterson , 12/24/2014 at 8:56 am
    CNBC's Kiernan Demonstrates He Does Not Understand Peak Oil In Conversation With Boone Pickens

    What Kiernan fails to understand is that peak oil does not happen overnight. We have hit the peak of conventional low cost oil production and demand exceeding that conventional oil production has pushed prices up to a level where higher cost oil is now possible to develop.

    If we had an option, we wouldn't be spending money to produce shale oil, because it is high cost. But at the current level of demand we need shale production. That is why the drop in oil prices is not going to be permanent. The price of oil needs to be at a level that allows shale production to continue.

    [Mar 02, 2016] Shale revolution may never fully recover from the price collapse.

    Notable quotes:
    "... I think the "shale revolution" may never really recover from the price collapse. Investors will think twice before putting any money there again. Unless the oil price goes alot higher than 100 $/barrel and stays there for a while. ..."
    "... Hard to how a business can keep running on negative cash flow, falling price of its only commodity, and interest rates continuing to rise, if a lender can be found, that is? ..."
    "... "What is clear is that the world has become addicted to central bank stimulus. Bank of America said 56pc of global GDP is currently supported by zero interest rates, and so are 83pc of the free-floating equities on global bourses. Half of all government bonds in the world yield less that 1pc. Roughly 1.4bn people are experiencing negative rates in one form or another. ..."
    peakoilbarrel.com
    If you have not already seen this:
    http://seekingalpha.com/article/2772465-with-oil-under-60-barrel-shale-oil-revolution-may-be-over-permanently

    I completely agree with his key points:

    • Current oil price collapse is exposing many false claims about shale profitability.
    • Oil price will recover, but investors will forever become more cautious.
    • Drilling pace in shale oil mainly determined by credit availability and cost. With investors being more cautious, drilling activity will become less aggressive .

    I think the "shale revolution" may never really recover from the price collapse. Investors will think twice before putting any money there again. Unless the oil price goes alot higher than 100 $/barrel and stays there for a while.

    toolpush , 12/25/2014 at 8:01 pm
    Freddy,

    Down in the comments, I thought this was very interesting,

    "A quick check indicates that both Whiting and EOG, two of the better shale plays, continue to show negative free cash flow"

    Hard to how a business can keep running on negative cash flow, falling price of its only commodity, and interest rates continuing to rise, if a lender can be found, that is?

    shallow sand , 12/26/2014 at 7:51 am
    Freddy. Thanks for the link. Very good article IMO.
    FreddyW , 12/25/2014 at 2:19 pm
    Here is another article with interesting information:
    http://www.telegraph.co.uk/finance/oilprices/11283875/Bank-of-America-sees-50-oil-as-Opec-dies.html

    "What is clear is that the world has become addicted to central bank stimulus. Bank of America said 56pc of global GDP is currently supported by zero interest rates, and so are 83pc of the free-floating equities on global bourses. Half of all government bonds in the world yield less that 1pc. Roughly 1.4bn people are experiencing negative rates in one form or another.

    These are astonishing figures, evidence of a 1930s-style depression, albeit one that is still contained. Nobody knows what will happen as the Fed tries to break out of the stimulus trap, including Fed officials themselves."

    Old farmer mac , 12/25/2014 at 6:33 pm
    http://www.chicagotribune.com/sns-wp-blm-news-bc-saudi-oil25-20141225-story.html
    Andy Hamilton , 12/25/2014 at 7:35 pm
    Jeremy Grantham on shale oils red herrings and flying pigs:
    http://www.businessinsider.com.au/jeremy-grantham-fracking-boom-red-herring-2014-12
    http://www.businessinsider.com.au/jeremy-grantham-on-oil-economic-growth-2014-11

    and November source article (which may be old hat to some):
    http://www.gmo.com/websitecontent/GMO_QtlyLetter_3Q14_full.pdf

    [Mar 02, 2016] The Long Term Impact Of The Oil Rig Crash

    Notable quotes:
    "... The momentum of the shale boom can be seen in the large overhang of drilled but uncompleted wells (DUCs) sitting out in the field today, looming over the market and weighing on any potential oil price recovery… ..."
    finance.yahoo.com

    Raymond James analysts shared a similar viewpoint, noting a certain dynamic on the oilservice industry. "Lower returns and crimped cash flow lead operators to slow activity and conserve cash in any way possible," the note said. "Since many of the land rigs had longer-term contracts and the frack crews didn't, the quickest way to conserve cash is to drill but not complete."

    But wells are obviously being completed. In fact more wells are being completed than being drilled but we obviously don't know just how many. And…

    DUCs to Prolong Shale Boom Hangover

    Many prognosticators of oil and gas markets have found themselves on the wrong side of U.S. production calls throughout the shale era after failing to understand and model the risks associated with operational momentum. Increases in well productivity brought higher potential returns, and every company in the oil patch scrambled to gain the assets, people, and infrastructure to grow production (and hopefully cash) in the future. As supply growth outpaced demand, prices sank, but production hasn't responded with an equal intensity. Why doesn't production respond accordingly? The same reason you can't turn around an aircraft carrier on a dime, momentum.

    The momentum of the shale boom can be seen in the large overhang of drilled but uncompleted wells (DUCs) sitting out in the field today, looming over the market and weighing on any potential oil price recovery…

    Until the number of DUCs returns to levels more aligned with historical working inventory levels (3-6 months of drilling), we expect their threat to loom large over the market and have a dampening effect on any near-term price recovery. But their longer term impact could loom just as large. If producers steer too much capital away from drilling, and instead harvest DUCs to maintain production and cash flow in 2016, the human capital behind the rig fleet could be lost to other industries, making service cost inflation all but guaranteed when U.S. supply growth is again needed. It looks like this hangover will be felt for years to come.

    Conclusion

    The decline in the oil rig count cannot, in the near term, be directly linked to a decline in oil production due to so many DUCs. But eventually it must. Steep declines in oil production must eventually follow steep declines in the rig count. And as we see a drop in production we will see a corresponding rise in prices. This, in turn, will cause an increase in well completions, knocking the price back down again.

    So don't expect any quick recovery of either oil prices or production. Yes, it looks like the hangover will be felt for years to come. And in the meantime peak oil will be in the rear view mirror. But no one will notice for years to come.

    [Mar 02, 2016] Pushback On EOGs Shale Works At $30 Oil Hypothesis

    Notable quotes:
    "... This ship has some big holes in it and is taking on water; what else is the captain going to say to it's passengers? Abandon ship? Some folks are getting ahead of themselves; EOG had a plus 40 dollar hedge and lost money last quarter. Now it says it can make money at 30. If anybody thinks EOG has been "saving" its good locations for high grading, or super high grading, whatever they want to call it, that is ridiculous. Oil companies don't drill the worse stuff first and save the best for last. I drive thru the guts of EOG's operations all the time; they have been hammering that stuff down there for years. There are stinkin' shale wells everywhere. Look at a TRRC GIS map for Karnes County. ..."
    "... Shale oil that declines at the rate of 73% the first 3 years of production cannot compete with the rest of the world's conventional fields. Haven't we just learned that? ..."
    "... The horse is gone and over the hill; closing the barn door now by slashing CAPEX costs is a day late. And several hundred billion dollars short. And when these shale companies have to come off the drilling hamster wheel, and those steep declines on exiting wells really kick in, hold on to your knickers, boys. ..."
    Oilpro

    These guys are getting desperate. I think because no shale oil company can qualify for additional lending based on the 65% yardstick of PV10, it is back to trying to raise money again by promoting stock to grandmas and grandpas. I think there is evidence this might even be working?

    EOG stated it could reduce costs, maintain production (essentially) and even deleverage. Right. It's important to recognize that this latest round of rhetoric, and bluster, fails to address the issue of existing debt. I think these shale guys want a do over.

    I like EOG and hope they succeed, but at a development pace that is conducive to price stability, not production spikes. Oil price volatility will be the death of the American oil industry and it is up to companies like EOG to control production spikes and help keep oil prices stable. EOG led the way in LTO oversupply and that is the primary reason we are in a nine line bind now, all of us; LTO oversupply. I don't believe a vowel of what the shale oil industry says anymore and so myself and several much smarter friends try and stick to the numbers, and not the hype. EOG states it is going to slow development and not bleed as much cash in 2016. That's a necessity, not a plan. My smart buddy up hole thinks they are still going to gush cash this year (and by the way, his numbers do not even include G&A or interest expense!). EOG has been drilling in the lower EF and geo steering in 10 ft. windows for years. It's sweet spots are pretty well delineated. Go to Cheapside, Texas (now called Richside) here: http://wwwgisp.rrc.state.tx.us/GISViewer2/ and decide how much saturation drilling it can still do. It is already drilling wells 18H and higher on their 1000 plus/minus acre units. Again, we don't "save" our best locations for last in the oil industry so we can drill them when oil prices decline 70%, I assure you. CAPEX costs can't come down too much more, I don't think. OPEX costs have come down very little.

    Mega frac's cost mega bucks. They make for bigger IP's so shale companies can create bigger EUR's to make themselves look healthier than they are and to meet lender covenants. Higher IP's appear to be resulting in steeper declines and not much more UR, not enough to pay for the mega frac's. The funky EUR stuff is going to come out, big time, pretty quick.

    These shale guys are NOT making money and the interest meter on their massive debt never stops. The PV10 value of their reserves are now vastly insufficient to be able to still borrow money; many of the best shale companies barely have assets equal to total debt. They owe lots of money and by 2018 that is all come to head, big time.

    This ship has some big holes in it and is taking on water; what else is the captain going to say to it's passengers? Abandon ship? Some folks are getting ahead of themselves; EOG had a plus 40 dollar hedge and lost money last quarter. Now it says it can make money at 30. If anybody thinks EOG has been "saving" its good locations for high grading, or super high grading, whatever they want to call it, that is ridiculous. Oil companies don't drill the worse stuff first and save the best for last. I drive thru the guts of EOG's operations all the time; they have been hammering that stuff down there for years. There are stinkin' shale wells everywhere. Look at a TRRC GIS map for Karnes County.

    Shale oil that declines at the rate of 73% the first 3 years of production cannot compete with the rest of the world's conventional fields. Haven't we just learned that?

    The horse is gone and over the hill; closing the barn door now by slashing CAPEX costs is a day late. And several hundred billion dollars short. And when these shale companies have to come off the drilling hamster wheel, and those steep declines on exiting wells really kick in, hold on to your knickers, boys.

    [Mar 02, 2016] The myth that EOG making money at 30 per bbl oil challenged

    peakoilbarrel.com
    Toolpush, 03/02/2016 at 1:40 am
    EOG's making money at $30 oil article challenged.

    A large contribution by someone you will all recognize.

    http://oilpro.com/post/22791/understanding-pushback-to-eog-shale-works-30-oil-hypothesis?utm_source=DailyNewsletter&utm_medium=email&utm_campaign=newsletter&utm_term=2016-03-01&utm_content=Article_2_txt

    [Mar 02, 2016] The level of cheerleading of low oil prices is really deafening

    peakoilbarrel.com
    shallow sand , 03/01/2016 at 11:53 am
    I read that CLR will return to activity if prices reach $45. At least that is the headline.

    Assuming 200K gross barrels of oil from a CLR Bakken well in 60 months, 160K net with 20% royalty, with a $7 discount to WTI, per CLR recent 10K, such a well will only gross $6 million dollars in 60 months.

    So after 60 months CLR will still be over $1 million short of reaching the cost of the well, BEFORE, considering 10% severance tax, OPEX, G & A and interest. Also, none of the land acquisition, permitting , seismic, etc is considered.

    Why do the MSM ignore this. It seems so elementary to me.

    Bakken LTO needs $80 WTI, minimum, to be a good investment. Just do my 5th grade math. Don't need any exotic presentations to figure this out.

    Ves , 03/01/2016 at 1:09 pm
    SS,
    Don't pay attention to headline. They are just part of deception game. Shale production is adjusting, US on shore is adjusting. Today I have briefly scanned that Russian paper is stating that Russian big oil have a meeting today where among the topics are "freeze" (previously discussed with Saudis, Qataris) and even some possible cuts. Pieces are coming together although it looks like at snail pace from the perspective of someone like you that is caught in this bullshit politics. But it is coming.
    likbez , 03/02/2016 at 12:47 am
    Ves,
    Don't pay attention to headline. They are just part of deception game.

    This is not typical business as usual and a regular level of MSM deception with corrupt jornos bought by powerful interests. This is something more then that. The level of cheerleading of low oil prices is really deafening. Elementary logic is ignored in most such articles. Which makes them pure propaganda. which looks a lot like war propaganda to me. Guided by the same principles:

    1. Obscure one's economic interests;

    2. Appear humanitarian in work and motivations;

    3. Obscure history;

    4. Demonize the enemy; and

    5. Monopolize the flow of information.

    and

    These principles are abstracted from Jowett & O'Donnell.
    •Avoid abstract ideas – appeal to the emotions.
    •Constantly repeat just a few ideas. Use stereotyped phrases.
    •Give only one side of the argument.
    •Continuously criticize your opponents.
    •Pick out one special "enemy" for special vilification.

    Pieces are coming together although it looks like at snail pace from the perspective of someone like you that is caught in this bullshit politics. But it is coming.

    I also hope so. But it looks like there are powerful forces behind the current drop. And they will not give up easily.

    likbez , 03/01/2016 at 3:10 pm
    ShallowS,

    Bakken LTO needs $80 WTI, minimum, to be a good investment. Just do my 5th grade math. Don't need any exotic presentations to figure this out.

    Exactly!

    Bakken oil production is more like mining coal than it is drilling for oil ("Red Queen effect"). All company operating in this areas have crushing debt levels. Obtaining revolving credit line when prices are below $80 might become very difficult as Bakken has the highest marginal cost of production. So this slump will last longer for Bakken then for other plays.

    Also "carpet bombing" drilling is new and might have some additional effects that we now can't predict. I would give three years on restoring investor confidence.

    [Mar 01, 2016] The Oil Price Ceiling Has Been Set Above $40 And We Start Pumping Again Zero Hedge

    www.zerohedge.com
    Submitted by Tyler Durden on 02/29/2016 14:05 -0500

  • Crude
  • Crude Oil
  • default
  • OPEC
  • Reuters
  • Saudi Arabia
  • Whiting Petroleum
  • Last week we reported that in what has been Saudi Arabia's biggest victory to date in its war against U.S. oil and gas producers, both Whiting Petroleum, which is North Dakota's largest oil producer, and Continental Resources would indefinitely suspend fracking operations for the foreseeable future. The reason was simple: oil prices are too low to make incremental drilling and pumping profitable, and instead most shale companies are now entering hibernation, limiting cash outlays in the form of dividends and capex spending, in hopes of weathering the crude oil storm, which has already gone on far longer than even the most pessimistic mainstream pundits expected it would.

    Which, of course, is the right response: as the saying goes the cure for low oil prices is low oil prices, and as more shale companies halt drilling, exploring and production, the 3 mmb/d oversupplied oil market will slowly return to equilibrium.

    There is logically a flipside to that as well: as those companies which have recently mothballed operations either voluntarily or because they had to when they went bankrupt when oil was at $30, return to market the previously oversupplied market condition will promptly return as well, thereby pressuring oil lower yet again.

    The question is at what "breakeven" price does it make sense for US shale companies to return. As Reuters reports , less than a year ago major shale firms were saying they needed oil above $60 a barrel to produce more ; however in just one year this number has changed and quite drastically at that.

    We hinted at this three weeks ago in an article which many readers had a hostile reaction to: specifically we warned of " Another Leg Lower In Oil Coming After Many Producers Found To Have Far Lower Breakevens ." As we reported then, "what many thought would be the "breaking" price point for virtually every shale play has just been lowered, and quite dramatically at that. It also means that algos and traders who had reflexively bought any dip below $30 on expectations this is close to the "sweet spot" and where the Saudis would relent, will have to drop their support levels by as much as a third."

    Today Reuters confirms that this assessment was stpo on with a report that some shale companies say they will settle for far less in deciding whether to crank up output after the worst oil price crash in a generation.

    Among the companies which are prepared to flip the on switch at a moment's notice are Continental Resources led by billionaire wildcatter Harold Hamm, which said it is prepared to increase capital spending if U.S. crude reaches the low- to mid-$40s range, allowing it to boost 2017 production by more than 10 percent, chief financial official John Hart said last week .

    Then there is rival Whiting Petroleum which may have stopped fracking new wells, added it but would " consider completing some of these wells" if oil reached $40 to $45 a barrel, Chairman and CEO Jim Volker told analysts. Less than a year ago, when the company was still in spending mode, Volker said it might deploy more rigs if U.S. crude hit $70 ."

    EOG Chairman Bill Thomas did not say what price would spur EOG to boost output this year, but said it had a "premium inventory" of 3,200 well locations that can yield returns of 30 percent or more with oil at $40.

    Apache Corp , forecasts its output will drop by as much as 11 percent this year, but said it would probably manage to match 2015 North American production if oil averaged $45 this year.

    The reason for the plunging breakeven price? The same one we suggested on February 3: surging, rapid efficiency improvement which "have turned U.S. shale, initially seen by rivals as a marginal, high cost sector, into a major player - and a thorn in the side of big OPEC producers."

    To be sure, while many had expected low oil prices to curb output, virtually nobody had predicted that even a modest jump in oil ($40 is just $7 from here) would lead to a major portion of US shale going back on line.

    The threat of a shale rebound is "putting a cap on oil prices," said John Kilduff, partner at Again Capital LLC. " If there's some bullish outlook for demand or the economy, they will try to get ahead of the curve and increase production even sooner."

    Which in turn will force the Saudis to immediately retaliate, breach all amusing "production freezes", and double down their efforts to crush shale.

    In fact, some producers have already began hedging future production, with prices for 2017 oil trading at near $45 a barrel, which could put a floor under any future production cuts.

    Another risk factor for all those hoping the modest rebound in oil will persist is the record backlog of wells that have already been drilled but wait to get fractured to keep oil trapped in shale rocks flowing. There were 945 such wells in North Dakota compared to 585 in mid-2014, when prices peaked, according to the latest available data from the Department of Mineral Resources. Their numbers are growing as firms like Whiting keep drilling, but hold off with fracking.

    Reuters' summary:

    Their latest comments highlight the industry's remarkable resilience, but also serve as a warning to rivals and traders: a retreat in U.S. oil production that would help ease global oversupply and let prices recover may prove shorter than some may have expected.

    Our observation three weeks ago was practically identical : since Saudi Arabia had expected that its FX reserve outflow would last only temporarily using $40-50 breakevens, it will have to sell many more US reserves (either TSYs or stocks) to fund the cash shortfall which will persist for far longer until oil catches down to the lowest cost US producers.

    What this means is that for the Saudis to declare victory they will have to unleash a sharp downward oil spike that lasts long to put as many marginal producers out of business as possible.

    As we said: "In short: the oil price war is about to enter its far more vicious, and far more lethal phase, and while it is unclear who ultimately wins, whether it is Shale or the Saudis, the loser is clear: anyone who bought into bets of an imminent oil bounce."

    But the real punchline has nothing to do with breakeven prices and efficiency and everything to do with balance sheets, because if and when the mass default wave finally hits and hundreds of U.S. corporations undergo debt-for-equity exchanges in which the bondholders end up with the equity keys, then the all-in production costs (AIPCs) will be drastically cut even lower as there will be no interest expense left to cover with operational cash flow proceeds.

    As such, the stunning outcome may well be one in which U.S. shale turns Saudi's "marginal producer" war on its head, and unleashes a massive oversupply spike, one which slowly at first then very fast, leads to the Saudi exhaustion of its FX reserves, until it is Saudi Arabia which itself is pushed out of the low-cost production bracket and is instead forced to deal with far less palatable outcomes such as social insurrection and revolution, as its already precarious welfare state fights for survival in a world in which government oil revenues have trickled to a halt.

    What happens to the price of oil then is unclear, but what will need to happen before we get to that point is very clear: oil will have to trade far, far lower from its current price.

    And even if it doesn't, we now have the oil price ceiling bogey: any time a barrel of crude approaches $40, watch as the "marginal" producers do just that, and resume production on very short notice.

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    Mon, 02/29/2016 - 14:09 | 7252229 Bangin7GramRocks

    Peak oil

    Mon, 02/29/2016 - 14:18 | 7252296 0b1knob

    I hate to break this to you geniuses at Zero Hedge, but:

    The minimum price of oil if $0 for a company struggling to avoid bankruptcy.

    The minimum wage is $0 and a LOT of people are earning that right now.

    The idea that there is some magical equilibrium level for oil is the idee fix of Zero Hedge. The deflationary maestrom of the Minsky moment is on us.

    Mon, 02/29/2016 - 14:24 | 7252339 TradingIsLifeBrah

    Once a well is dug, they just keep pumping it. It costs money to shut it down, better off to keep running until you can't breakeven at the daily cost level which my guess is somewhere in the single digits for oil companies. These "costs of production" also don't factor in that all of the O&G suppliers cut their prices as oil prices decline so while it may have cost "$50" to pump oil 2 years ago the cost is much lower because all the equipment suppliers are struggling and cutting prices as well.

    Mon, 02/29/2016 - 14:36 | 7252428 RogerMud

    all well and good until Cushing is full ... long swimming pools

    Mon, 02/29/2016 - 14:42 | 7252469 MalteseFalcon

    Now they can pump at $40 instead of $70?

    I thought USA oil was gone in 1975?

    Holy Hubbard!

    Mon, 02/29/2016 - 15:15 | 7252634 TradingIsLifeBrah

    All through 2015 we've heard about how the storage was going to be gone "soon". The reality if you look into it is that no one really knows how much storage is available. Seems really stupid, I know, but no one ever kept track of it in any single or consolidated database so everything is run off of "estimates" and we all know how reliable those are. My guess is that storage is likely a lot higher than these estimates make it because there was so much money flowing in oil during the run up years that people probably built a ton of it. It was covered on ZH once that no one knows what the actual global (or even US) storage capacity is I think in like 2014 but then the stories converted over to just that we are running out.

    Mon, 02/29/2016 - 14:20 | 7252315 cornflakesdisease

    Gig em.

    Mon, 02/29/2016 - 14:21 | 7252325 bbq on whitehou...

    Moving product from a large tank to a smaller one doesn't make the product grow.

    Mon, 02/29/2016 - 15:18 | 7252649 GoldBullionEU

    We are selling 1oz Silver American Eagles for just €13.50!!

    http://www.bulliondeals.eu/silver/silver-coins/american-eagle-1oz-silver...

    And 500 x 1oz Silver Canadian Maple Leaf Monster Box is just €7775.52 while stocks last!

    http://www.bulliondeals.eu/silver/silver-coins/500-x-1oz-silver-canadian...

    Mon, 02/29/2016 - 14:10 | 7252241 KnuckleDragger-X

    We're still running on rumor from the Saudi's. I don't think it will matter in a few months when the economic numbers can no longer be 'adjusted' into a smiley face......

    Mon, 02/29/2016 - 14:41 | 7252254 cowdiddly

    Oh goody, then they get to borrow even more money and get into even deeper in debt in the oil drilling ponzi scheme called shale fracking

    Mon, 02/29/2016 - 14:13 | 7252266 RawPawg

    pennies,steamrollers....

    just random thoughts i had popping inside my head.

    Mon, 02/29/2016 - 14:14 | 7252275 Dr. Engali

    They must have gone to the Sarah Palin school of eCONomics. Drill baby drill!.

    Mon, 02/29/2016 - 14:56 | 7252548 Tyrone Shoelaces

    I remember that, way back in the 'peak oil' days.

    Mon, 02/29/2016 - 14:15 | 7252279 BlueStreet

    Their equipment might be rusty beyond repair by the time we get back to $40. S&P 1400 isn't going to get oil to $40.

    Mon, 02/29/2016 - 14:16 | 7252286 lawton2

    I dont believe any are truly viable long term below like 55 dollars no matter what spin they put out there to try to make Saudi change their tune.

    Mon, 02/29/2016 - 14:17 | 7252291 bbq on whitehou...

    Now i see why Goldman forcast $20 as their target. Brakes them all.

    Mon, 02/29/2016 - 14:20 | 7252310 TradingIsLifeBrah

    Investors are so starved for yield that even at $20 oil most of these companies will be able to either issue equity and/or issue debt to rollover any upcoming debt repayment obligations. Until the market freeze up this party will keep going.

    Mon, 02/29/2016 - 14:25 | 7252359 bbq on whitehou...

    Goldman helps with both the selling of equities and debt. More selling is good for Goldmen. Brakeing the companies in the process and rewarding themselves, dont forget the bankruptcy management teams.

    Mon, 02/29/2016 - 14:18 | 7252300 TradingIsLifeBrah

    Only $7 to go (Crude at $33) until we can reach a recovery. Yes We Can!

    Mon, 02/29/2016 - 14:20 | 7252312 ghostzapper

    Wow, thank god. This is great news. Since the financial media cheerleaders are always accurate and correct once this baby gets back above $40 I can get out there again peddling High Yield Shale Bonds yielding a massive 4.99% at par. The assumptions built in are quite reaosnable oil just needs to hold above $40 in 2016 and then rocket above $100 in 2017 holding at least at that level for twenty years to cap total capital losses at only 30%. I'm really anticipating strong interest in these debt instruments.

    Mon, 02/29/2016 - 14:24 | 7252351 Hohum

    Bluff. Huge (yuge) bluff.

    Mon, 02/29/2016 - 14:28 | 7252382 Lemmings For All

    I try to pump only when her price is below 40 bucks.

    Mon, 02/29/2016 - 14:36 | 7252432 Winston Churchill

    Don't you get a drip when its so cheap ?

    Mon, 02/29/2016 - 14:53 | 7252533 freakscene

    Here in Western PA, I've noticed no slow down at all this winter at Shale sites.

    Actually, they continue to expand. I watched two new pads get built on my way to work, and the pads that are already built are crazy busy with trucks.

    Mon, 02/29/2016 - 15:28 | 7252684 shortonoil

    "The price of oil depends on the strength of the economy, and the strength of the economy depends on oil's ability to power it."

    The Hill's Group

    Mon, 02/29/2016 - 17:39 | 7253416 MSimon

    These guys:

    http://www.manhattan-institute.org/pdf/eper_16.pdf

    Say shale production costs could go to $5 to $20 a bbl. Equivalent to Saudi production costs.

    [Feb 29, 2016] Art Berman argues in Forbes that the price of oil is controlled by the level of storage at Cushing

    Filling up of oil storage early in the cycle is an indicator of oversupply. But in the current late cycle of low oil prices [1.5 yrs already] it is a useless indicator of future oil price movement, oil demand or supply. It just indicates the level of contango that exists in oil futures market. See Gaurav comment on Mar 06, 2016
    Notable quotes:
    "... One interesting take from Art Berman presentation is that he ignores "Great condensate Con" (and grossly overplays Cushing "storage glut" MSM meme). He also thinks that without OPEC cut $30 oil price range will last for the whole 2016 ..."
    "... And why are we still importing oil: lack of sufficient domestic AVAILABILITY…not production. The vast majority of oil going into Cushing IS NOT do to a lack of buyers as the import numbers indicate. It's largely do to speculators hoping to take advantage of f increases in future oil prices. The net effect is that these speculation OIL BUYERS are competing with the refiners for domestic production. ..."
    "... And now compare the 88 mm bbl capacity to the PADD 3 (essentially Texas and LA. where the bulk of the refineries are) capacity of 260 mm bbls. Between the speculator purchases and the smaller number of refineries combined with the large volume of Canadian imports seeing Cushing filling up is no surprise. ..."
    "... So again compare the 88 mm bbl capacity at Cushing to the total storage capacity at US refineries: 179 mm bbls. No: the volume of oil held at refineries is not part of the total TANK FARM capacity. So how much is the Cushing storage capacity compared to tank farms + refinery storage: 13%. ..."
    peakoilbarrel.com

    oldfarmermac , 02/29/2016 at 6:01 pm

    http://www.forbes.com/sites/arthurberman/2016/02/29/what-really-controls-oil-prices/#3aca881b71e4

    Here is a short excerpt from this article, in which Berman basically argues that the price of oil is controlled by the level of storage at Cushing. I agree at least to the extent than the price correlates closely with storage at Cushing.

    For oil prices to increase, Cushing inventories must fall. That means that both U.S. tight oil production, chiefly from the Bakken play, and Canadian light oil production brought by pipeline to Cushing must decline.

    Bakken production was consistent in 2015 at about 1.2 million barrels per day. Canadian oil imports to the U.S. decreased from April through July 2015 and may have contributed to the fall in Cushing inventories that lead to a $15 per barrel increase in WTI prices. At the same time, decreased production from the Eagle Ford and Permian basin tight oil plays would free up storage in the Gulf Coast that might allow more oil to flow out of Cushing.

    ... ... ...

    likbez , 02/29/2016 at 7:51 pm
    OFM,

    From the previous Ron's post discussion:

    http://peakoilbarrel.com/oil-price-and-its-effect-on-production/#comment-561326

    See also a more valuable Art Berman presentation (PDF)

    http://www.macrovoices.com/publications/guest-publications/1-the-origins-of-the-global-oil-price-collapse-and-potential-investment-opportunities/file

    IMHO this presentation is more valuable then his interview.

    http://peakoilbarrel.com/oil-price-and-its-effect-on-production/#comment-561368

    One interesting take from Art Berman presentation is that he ignores "Great condensate Con" (and grossly overplays Cushing "storage glut" MSM meme). He also thinks that without OPEC cut $30 oil price range will last for the whole 2016:

    • Energy markets have been characterized by low oil prices and over-supply since mid-2014.
    • Supply deficit before Jan 2014, supply surplus after
    • Prices fell from 2011-2013 average of $111 per barrel to average of $52 in 2015.
    Without an OPEC cut, 2016 prices will probably be in the $30 per barrel range.
    … … …
    U.S. crude oil produc4on has declined about 570,000 bopd since the peak in April 2014,
    about 60,000 bopd per month.
    • EIA forecast is for a total decline of 1.4 mmbpd by September 2016 ( ~100,000 bopd per month) before increasing again based on $43 per barrel WTI by year-end 2016 and $58 by year-end 2017.
    • Price deck has WTI at $43 per barrel by December 2016 & $58 by December 2017.
    • Forecast suggests that the oil market is sufficiently in balance now for prices to increase but that production will not respond to price signals until later in 2016-very optimistic.
    … … …
    Little chance that oil prices will increase beyond the head-fakes and sentiment-driven price cycles of 2015 and early 2016 until U.S. crude oil storage begins to decrease.
    • Oil stocks are currently 152 million barrels above the 5-year average and 128 million barrels above the 5-year maximum.
    … … …
    • Cushing and Gulf Coast storage make up almost 70% of U.S. working storage.
    • These areas are currently at 84% of capacity. Cushing at 89%.
    • As long as storage volumes remain above 80% of capacity, oil prices will be crushed.
    • Until U.S. oil production declines substantially, storage will remain near capacity.

    oldfarmermac , 02/29/2016 at 6:21 pm
    This article is a little on the long side, for those of us who are into sound bites, but folks with more patience will find it illuminating, and maybe even find a little something in it to improve their personal morale, if they are feeling really down about the future.

    http://www.scientificamerican.com/article/world-s-richest-man-picks-energy-miracles/

    likbez , 02/29/2016 at 8:08 pm
    A note on "OMG Cushing is filling up hysteria" or negative correlation of oil price with Cushing recently discovered by Art Berman:

    http://www.forbes.com/sites/arthurberman/2016/02/29/what-really-controls-oil-prices/#3aca881b71e4

    Here is a short excerpt from this article, in which Berman basically argues that the price of oil is controlled by the level of storage at Cushing. I agree at least to the extent than the price correlates closely with storage at Cushing.

    … … …

    That's what happens when good people get into bad company due to lack of employment opportunities caused by shale oil price crush :-)

    I wonder whether this is Erik "know everything" Townsend (a retired software entrepreneur turned hedge fund manager; see http://www.macrovoices.com/podcasts/MacroVoices-2016-02-25-Art-Berman.mp3 ) or somebody else ;-)

    Compare with
    http://peakoil.com/consumption/httpwww-zerohedge-comnews2016-02-26theres-feeling-bits-ice-cracking-all-once-big-new-threat-oil-prices

    rockman on Sat, 27th Feb 2016 7:56 am

    And to add to some of the good points made: Cushing contains only 20% of total US oil storage capacity. Notice they don't mention the fill level of that total: last time I looked it was about 65%. That means 35% of the 450+ MILLION BBL CAPACITY is still empty.

    And why are we still importing oil: lack of sufficient domestic AVAILABILITY…not production. The vast majority of oil going into Cushing IS NOT do to a lack of buyers as the import numbers indicate. It's largely do to speculators hoping to take advantage of f increases in future oil prices. The net effect is that these speculation OIL BUYERS are competing with the refiners for domestic production.

    Which, again, explains why we still import a huge volume of oil despite the constant and foolish use of the word "glut". IOW if we are still importing oil how can there be a glut of domestic oil: the US lacks sufficient oil production to satisfy the demand from the refineries AND speculators.

    rockman on Sat, 27th Feb 2016 9:39 am

    A few more FACTS to offset the "OMG Cushing is filling up" hysteria. First, Cushing is in PADD 2 as they point out. But it isn't the only tank farm in that midwest district: it only holds 60% of that total capacity.

    And now compare the 88 mm bbl capacity to the PADD 3 (essentially Texas and LA. where the bulk of the refineries are) capacity of 260 mm bbls. Between the speculator purchases and the smaller number of refineries combined with the large volume of Canadian imports seeing Cushing filling up is no surprise.

    And we're just talking about tank farm storage.

    So again compare the 88 mm bbl capacity at Cushing to the total storage capacity at US refineries: 179 mm bbls. No: the volume of oil held at refineries is not part of the total TANK FARM capacity. So how much is the Cushing storage capacity compared to tank farms + refinery storage: 13%.

    [Feb 29, 2016] Texas goes from 399 million barrels of annual production in 2009 all the way to 1161 million barrels in 2015 and back

    Nice mocking of US energy independence propaganda.
    Notable quotes:
    "... Had Texas maintained production at 400,000,000 barrels per year, the price would have stabilized to a higher low. A 700,000,000 barrel per year drop in production would be steep. ..."
    "... 400,000,000 barrels per year at 75 usd per barrel is 30,000,000,000 dollars. ..."
    "... 1.161,024,209 times 25 dollars per barrel is 29,025,600,000 dollars. ..."
    "... Just too much oil production in Texas by two times. Texas at a 1.3 million barrel per day production level might bring back 75 dollar oil. ..."
    peakoilbarrel.com
    R Walter, 02/29/2016 at 9:10 pm
    http://www.rrc.state.tx.us/oil-gas/research-and-statistics/production-data/texas-monthly-oil-gas-production/

    Texas goes from 399,315,095 barrels in one year of production in 2009 all the way to 1,161,024,209 barrels in 2015.

    Looks close to a tripling of production from 2009 to 2015. Gotta go for the gusto.

    Must be contributing to the 'glut', in other words, 'we have to refine this oil into all of the diesel fuel we can and get it shipped to Europe as fast as we can, that's where the money is'. Gotta follow the money, that's where the money is. It's a no brainer.

    Or some such verbiage.

    Or, refinery 'glut'. The gasoline can be sold at a bargain price, those crazy Europeans buy diesel at any price, they could care less about that gasoline. har

    Europeans pay through the nose for diesel fuel only to subsidize low gasoline prices for US consumers! double har, so har again.

    Had Texas maintained production at 400,000,000 barrels per year, the price would have stabilized to a higher low. A 700,000,000 barrel per year drop in production would be steep.

    400,000,000 barrels per year at 75 usd per barrel is 30,000,000,000 dollars.

    1.161,024,209 times 25 dollars per barrel is 29,025,600,000 dollars.

    Just too much oil production in Texas by two times. Texas at a 1.3 million barrel per day production level might bring back 75 dollar oil.

    [Feb 29, 2016] The same disinformation about 30 percent cost cuts for shale providers now is repeated by Reuter

    peakoilbarrel.com

    AlexS , 02/29/2016 at 12:01 pm

    From Reuters:

    U.S. shale's message for OPEC: above $40, we are coming back

    Mon Feb 29, 2016
    http://www.reuters.com/article/us-usa-oil-shale-idUSKCN0W20JH

    For leading U.S. shale oil producers, $40 is the new $70.
    Less than a year ago major shale firms were saying they needed oil above $60 a barrel to produce more; now some say they will settle for far less in deciding whether to crank up output after the worst oil price crash in a generation.
    Their latest comments highlight the industry's remarkable resilience, but also serve as a warning to rivals and traders: a retreat in U.S. oil production that would help ease global oversupply and let prices recover may prove shorter than some may have expected.

    Continental Resources is prepared to increase capital spending if U.S. crude reaches the low- to mid-$40s range, allowing it to boost 2017 production by more than 10 percent, chief financial official John Hart said last week.

    Rival Whiting Petroleum, the biggest producer in North Dakota's Bakken formation, will stop fracking new wells by the end of March, but would "consider completing some of these wells" if oil reached $40 to $45 a barrel, Chairman and CEO Jim Volker told analysts. Less than a year ago, when the company was still in spending mode, Volker said it might deploy more rigs if U.S. crude hit $70.

    While the comments were couched with caution, they serve as a reminder of how a dramatic decline in costs and rapid efficiency gains have turned U.S. shale, initially seen by rivals as a marginal, high cost sector, into a major player – and a thorn in the side of big OPEC producers.
    Nimble shale drillers are now helping mitigate the nearly 70-percent slide crude price rout by cutting back output, but may also limit any rally by quickly turning up the spigots once prices start recovering from current levels just above $30.

    The threat of a shale rebound is "putting a cap on oil prices," said John Kilduff, partner at Again Capital LLC. "If there's some bullish outlook for demand or the economy, they will try to get ahead of the curve and increase production even sooner."
    Some producers have already began hedging future production, with prices for 2017 oil trading at near $45 a barrel, which could put a floor under any future production cuts.

    While the worst oil downturn since the 1980s sounds the death knell for scores of debt-laden shale producers, it has also hastened the decline in costs of hydraulic fracturing and improvements of the still-developing technology.
    For example, Hess Corp., which pumps one of every 15 barrels of North Dakota crude, cut the cost of a new Bakken oil well by 28 percent last year.

    What once helped fatten margins is now key to survival in what Saudi Oil Minister Ali al-Naimi described last week as the "harsh" reality of a global market in which the Organization of Oil Exporting Countries is no longer willing to curb its supplies to bolster prices.

    While Deloitte auditing and consulting warns that a third of U.S. oil producers may face bankruptcy, leading shale producers say their ambitions go beyond just outrunning domestic rivals.
    "It's no longer enough to be the low cost producer in U.S. horizontal shale," Bill Thomas, chairman of EOG Resources Inc, said on Friday. "EOG's goal is to be competitive, low-cost oil producer in the global market."
    Thomas did not say what price would spur EOG to boost output this year, but said it had a "premium inventory" of 3,200 well locations that can yield returns of 30 percent or more with oil at $40.

    Apache Corp, forecasts its output will drop by as much as 11 percent this year, but said it would probably manage to match 2015 North American production if oil averaged $45 this year.

    One reason shale producers can be so fleet-footed is the record backlog of wells that have already been drilled but wait to get fractured to keep oil trapped in shale rocks flowing.
    There were 945 such wells in North Dakota, birthplace of the U.S. shale boom in December, compared to 585 in mid-2014, when prices peaked, according to the latest available data from the Department of Mineral Resources. Their numbers are growing as firms like Whiting keep drilling, but hold off with fracking.

    Some warn that fracking the uncompleted wells can offer only a short-term supply boost and a sustained increase would require costly drilling of new wells and therefore higher prices.
    "It's going to take a move up to $55 before we see anyone plan new production," says Carl Larry, director of business development for oil and gas at Frost & Sullivan.

    To be sure, it is far from certain whether oil prices will even reach $40 any time soon. Morgan Stanley and ANZ expect average prices in the low $30s for the full year.
    Some analysts also warn resuming drilling quickly may prove hard after firms laid off thousands of workers and idled more than three-quarters of their rigs since late 2014.
    In fact, John Hess, chief executive of Hess Corp last week took issue with labeling U.S. shale oil as a "swing producer." Hess told Reuters in an interview that U.S. shale firms should be rather considered as "short-cycle" producers, which might need up to a year to stop or restart production.

    And even scarred veterans of past boom-bust oil cycles are not sure what will happen once prices start to recover – during the last big upswing a decade ago, shale oil did not even exist.
    "We are a little concerned that this time there is one dynamic we've never had previously," said Darrell Hollek, vice president of U.S. onshore at Anadarko Petroleum Corp.
    --------------

    Some analysts also believe that drilling/completion activity in the U.S. will rebound in the second half of the year, as oil prices reach $40-45. See, for example, US rig count forecast by Raymond James (chart below). BTW, their energy analyst expect WTI to reach $50 by the end of 2016.

    shallow sand , 02/29/2016 at 1:11 pm

    AlexS. This talk is pure desparate talk, and nothing more.

    A group of us have been analyzing the Statements of Future Cash Flows in the 10K's recently released by some of the large shale players, including EOG, CLR, WLL, PXD and CHK.

    The assumptions made in the reduction of future production costs are questionable. Here are the revisions from 12/31/14 to 12/31/15 for these companies:

    EOG
    2014 $51.533 billion
    2015 $32.061 billion

    CLR
    2014 $25.799 billion
    2015 $10.869 billion

    WLL
    2014 $20.772 billion
    2015 $12.344 billion

    PXD
    2014 $18.223 billion
    2015 $11.475 billion

    CHK
    2014 $17.036 billion
    2015 $7.391 billion

    The only thing I have been unable to determine is whether any drilling and completion costs are included by these companies in "future production costs"

    I would note all break out "future development costs" and all have greatly reduced numbers from 2014 to 2015, which makes sense given large budget cuts.

    In any event, it is worth noting the future estimates of these companies in the 10K and how radically they have changed from 12/31/14 to 12/31/15.

    Further, it is noteworthy that if current oil and gas prices are plugged into the 12/31/15 future cash inflows, there is little positive to negative future net cash flows.

    In summary, the claims are not backed up by the company SEC filings, IMO. Also, the large long term debt incurred in prior years cannot be ignored either, IMO.

    John Keller , 02/29/2016 at 1:29 pm
    Here is a repost of CLR's snake oil sale press release and calculations for PDP reserve adds for CLR and what that implies about EUR's in the Bakken. If correct, breakevens for the Bakken is much higher than $55.

    Sorry, 850K. From CLR's Q4 press release:

    "Given its plans to defer most Bakken completions in 2016, Continental expects to increase its Bakken DUC inventory to approximately 195 gross operated DUCs at year-end 2016. The year-end 2016 DUC inventory represents a high-graded inventory with an average EUR per well of approximately 850,000 Boe. At year-end 2015, the Company's Bakken DUC inventory was approximately 135 gross operated DUCs."

    From an analyst named Frank, who posts on Yahoo. His calcs look right to me.

    "Look at the 10-k reserve and production data – proved developed only of course.

    In the Bakken
    They added 180 net wells in 2015
    They produced 38 mm BO and 47 mmcf ng or 46 mm boe
    Reserves declined 15.5 mm BO and ng reserves increased by 16.2 mmcf or 2.7 boe
    Therefore reserves declined by 13 mm boe
    So adds from new wells was 46-13 = 33 boe from 180 wells. That is 185k boe per well. A little shy of 800k."

    AlexS , 02/29/2016 at 1:50 pm
    EUR is total expected production from a well during its lyfe cycle, not annual production, especially as these wells were producing less than a year in 2015.

    But 850,000 boe EUR still looks overoptimistic

    shallow sand , 02/29/2016 at 2:11 pm
    AlexS. Shaleprofile.com is a good place to test the EUR claims, IMO.
    John Keller , 02/29/2016 at 2:24 pm
    I know. The EUR sabove are calculated from the change of PDP reserves adjusted by a year's production, divided by wells completed. That should give you the amount of reserves added per completed well.
    AlexS , 02/29/2016 at 1:44 pm
    shallow sand,

    Thanks for your analysis. I read all your posts.

    I totally agree with you that shale companies' financials do not justify a rebound in activity even if oil prices rise to $40, $45 or $50. Reply

    [Feb 28, 2016] Trump defends Trump University from Rubio, Cruz attacks

    That's a pretty typical education sharks tactics. This was (and still is) an epidemic that started in late 90th with the peak around 2007 (coincided with the subprime mortgages peak). May be slightly longer. Not all students were innocent in this case. Most knew what they are buying. That includes some Obama staffers and several Department of homeland security employees.
    http://www.geteducated.com/life-experience-college-degree/290-online-college-diploma-mill-cases
    Diploma mills under Bush II were really like yet another sub-prime mortgage boom. Trump was a very small fish in this business but probably the desire to milk his name prevailed over caution. the most notorious hunted for people who can get government grant and then loaded them with additional debt up to the neck. Now Trump is in the spotlight and will pay the damages althouth it is unlcear to me if the students were engaged in "career enhancing" move or were defrauded. One strong point in defense of Trump is that his university offered no degree. That can get him off the hook.
    https://jhupbooks.press.jhu.edu/content/diploma-mills?platform=hootsuite
    The most significant shift in higher education over the past two decades has been the emergence of for-profit colleges and universities. These online and storefront institutions lure students with promises of fast degrees and "guaranteed" job placement, but what they deliver is often something quite different. In this provocative history of for-profit higher education, historian and educational researcher A. J. Angulo tells the remarkable and often sordid story of these "diploma mills," which target low-income and nontraditional students while scooping up a disproportionate amount of federal student aid.
    Tapping into a little-known history with big implications, Angulo takes readers on a lively journey that begins with the apprenticeship system of colonial America and ends with today's politically savvy $35 billion multinational for-profit industry. He traces the transformation of nineteenth-century reading and writing schools into "commercial" and "business" colleges, explores the early twentieth century's move toward professionalization and progressivism, and explains why the GI Bill prompted a surge of new for-profit institutions. He also shows how well-founded concerns about profit-seeking in higher education have evolved over the centuries and argues that financial gaming and maneuvering by these institutions threatens to destabilize the entire federal student aid program.
    This is the first sweeping narrative history to explain why for-profits have mattered to students, taxpayers, lawmakers, and the many others who have viewed higher education as part of the American dream. Diploma Mills speaks to today's concerns by shedding light on unmistakable conflicts of interest long associated with this scandal-plagued class of colleges and universities.
    Notable quotes:
    "... I would think that Trump gave all of those students a lesson that they should never forget, a fool and his money are soon parted. Who pays 36 grand to go to an unacredited school, to learn what they could get for free at the local library? ..."
    "... "The receptivity of the masses is very limited, their intelligence is small, but their power of forgetting is enormous. In consequence of these facts, all effective propaganda must be limited to a very few points and must harp on these in slogans until the last member of the public understands what you want him to understand by your slogan." ..."
    "... "There is a cult of ignorance in the United States. and there always has been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured through the false notion that democracy means that 'my ignorance is just as good as your knowledge. ..."
    finance.yahoo.com

    Republican presidential front-runner Donald Trump is playing defense on at least one issue these days: his role in a now-defunct real estate seminar business called Trump University.

    At a rally in Arkansas on Saturday, Trump took a break from his stump speech to downplay a class-action civil lawsuit pending against the business, which was founded by Trump and offered students instruction on real estate investments.

    "It's a small deal, very small," Trump said of the suit, which could force him to take the stand this summer.

    Trump specifically railed against the judge in the case, and at one point noted the judge's Hispanic ethnicity.

    Trump claimed the case should have been thrown out years ago, "but because it was me and because there's a hostility toward me by the judge - tremendous hostility - beyond belief." He then noted, as an aside: "I believe he happens to be Spanish, which is fine. He's Hispanic - which is fine."

    A message left for the judge, U.S. District Judge Gonzalo Curiel, was not immediately returned. Curiel is a judge in the Southern District of California and based in San Diego.

    New York Attorney General Eric Schneiderman, whose office has filed a separate civil $40 million complaint against Trump University in state court, accused Trump of "racial demagoguery." Schneiderman sued Trump University in 2013 alleging it committed fraud and fleeced 5,000 people out of millions of dollars.

    "I will not engage in a debate about ongoing litigation," Schneiderman said in a statement issued after Trump made his comments. "But there is no place in this process for racial demagoguery directed at respected members of the judiciary."

    Schneiderman noted that New York's state Supreme Court ruled that Trump University operated illegally in New York as an unlicensed educational institution.

    Trump University emerged as a campaign issue at Thursday's GOP debate, raised by Florida Sen. Marco Rubio.

    "There are people who borrowed $36,000 to go to Trump University, and they're suing now - $36,000 to go to a university that's a fake school," Rubio said. "And you know what they got? They got to take a picture with a cardboard cutout of Donald Trump."

    Texas Sen. Ted Cruz jumped in, adding: "It's a fraud case. ... I want you to think about, if this man is the nominee, having the Republican nominee on the stand in court, being cross-examined about whether he committed fraud."

    Schneiderman's suit alleges that Trump University falsely promoted itself as an educational institution even after the state education department warned it to stop. The complaint accuses Trump of falsely promising that Trump University students would receive intense training from experts hand-picked by Trump himself.

    During breaks in the seminars, Schneiderman's complaint alleges, participants were urged to call their credit card companies and ask to increase their credit limits. Once the credit lines were secured, Trump University staff tried to persuade students to pay for additional services.

    Separate from Schneiderman's complaint, Trump University students have sued. According to the California class-action complaint in front of Curiel, a one-year apprenticeship that Trump University students were promised ended after students paid for a three-day seminar. Attendees who were promised a personal photo with Trump received only the chance to take a photo with a cardboard cutout. And many instructors were bankrupt real estate investors.

    Trump, at the rally, dismissed the cases as the work of "a sleazebag law firm" and suggested that Schneiderman's intervention was politically motivated.

    "I could've settled this suit numerous times. Could settle it now. But I don't like settling suits," Trump said.

    Chris

    I would think that Trump gave all of those students a lesson that they should never forget, a fool and his money are soon parted. Who pays 36 grand to go to an unacredited school, to learn what they could get for free at the local library?

    Do you really need someone to say, For next week, read chapters 5-9" ? And now that you have your lesson in "real life" go forth and prosper. And you should quicky recoup your tuition because you will run into people that lack you knowledge.

    Commenter

    The broad masses of a population are more amenable to the appeal of rhetoric than to any other force.- Adolf Hitler
    I'm a bit of a P. T. Barnum. I make stars out of everyone. - Trump
    There's a sucker born every minute. - P.T. Barnum

    Commenter

    "The receptivity of the masses is very limited, their intelligence is small, but their power of forgetting is enormous. In consequence of these facts, all effective propaganda must be limited to a very few points and must harp on these in slogans until the last member of the public understands what you want him to understand by your slogan." Adolf dead, enter the Trump. Make American great again!

    Margy

    "There is a cult of ignorance in the United States. and there always has been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured through the false notion that democracy means that 'my ignorance is just as good as your knowledge." - Isaac Asimov

    J

    Trump university proved there is a sucker born every minute.

    Joe

    Trump univ sounds like it was a school that taught real estate investing as an off shoot of trumps tv show. Nothing said it was an accredited degree college. No real estate license school is and they all have 3 day courses to learn real estate then you have to take a state test to get your license. You can go to a regular school that costs $100 or spend $36k at trump univ. it's the same class. It all sounds like a PR stunt .

    factChecker

    Cheating thousands of people, just trying to better themselves, out of millions of $ might be unimportant to Trump. That is the problem. He has no conscience.

    Big Al

    Ignorance is investing your money in a non certified educational institution because it is pitched by a so called "celebrity". If you do something foolish, dumb or stupid own up to it and use it as a learning experience. Don't expect others to pay for your mistakes.

    [Feb 28, 2016] In no way shale producers could cut expenses 40 or even 60 percent like MSM claim

    Break even cost remain slightly north of 60 dollars per bbl
    Notable quotes:
    "... We have decided to that we too need to reduce our future production costs by 60%. The electric cooperative said no problem. So did the chemical company, our workers comp carrier, liability insurance carrier. The steel manufacturers did too, so our tubing and rods dropped 60%. The down hole and injection pump service providers were ok with that. Hey Clueless, even our accountant said, "No problem! Since you need to compete with OPEC and Russia, we are knocking 60% off our bill! Now go beat those Saudi's and Russians in this oil price war! Show em who is boss!" ..."
    peakoilbarrel.com
    clueless, 02/28/2016 at 1:53 pm
    I wonder what ShallowS thinks of EOG's new strategy? That is, to choose their very best of the best projects, cut costs to the bone and hope that they can make a profit.

    Good analogies are hard to come by, but I will throw one out. In 2009, at the depths of the housing collapse, what if the CEO of Toll Brothers proposed: "We are going to select our very best lots – the Crown Jewels in our inventory.

    Then we are going to build some of our more modest houses on them, cutting costs to the bone. We hope that we can then sell them for at least break even." Personally, if I owned the stock, I would have sold immediately.

    shallow sand , 02/28/2016 at 7:00 pm
    Clueless. You know what I think. And I do really like your Toll Brothers example.

    What I think is more impressive than their current meme on $30 oil is how they cut their estimate of future production costs from $52 billion at the end of 2014 to $32 billion at the end of 2015, without a major proved reserve reduction.

    But hey, Continental cut theirs from $26 billion to $11 billion. So no big deal.

    We have decided to that we too need to reduce our future production costs by 60%. The electric cooperative said no problem. So did the chemical company, our workers comp carrier, liability insurance carrier. The steel manufacturers did too, so our tubing and rods dropped 60%. The down hole and injection pump service providers were ok with that.

    Hey Clueless, even our accountant said, "No problem! Since you need to compete with OPEC and Russia, we are knocking 60% off our bill! Now go beat those Saudi's and Russians in this oil price war! Show em who is boss!"

    Seriously, we have seen some cost reductions, but nothing remotely near 40-60%. And, of course, although we pay the most to the electric coop of anyone, they just don't seem too keen on lowering rates for us.

    [Feb 28, 2016] Trump defends Trump University from Rubio, Cruz attacks

    That's a pretty typical education sharks tactics. This was (and still is) an epidemic that started in late 90th with the peak around 2007 (coincided with the subprime mortgages peak). May be slightly longer. Not all students were innocent in this case. Most knew what they are buying. That includes some Obama staffers and several Department of homeland security employees.
    http://www.geteducated.com/life-experience-college-degree/290-online-college-diploma-mill-cases
    Diploma mills under Bush II were really like yet another sub-prime mortgage boom. Trump was a very small fish in this business but probably the desire to milk his name prevailed over caution. the most notorious hunted for people who can get government grant and then loaded them with additional debt up to the neck. Now Trump is in the spotlight and will pay the damages althouth it is unlcear to me if the students were engaged in "career enhancing" move or were defrauded. One strong point in defense of Trump is that his university offered no degree. That can get him off the hook.
    https://jhupbooks.press.jhu.edu/content/diploma-mills?platform=hootsuite
    The most significant shift in higher education over the past two decades has been the emergence of for-profit colleges and universities. These online and storefront institutions lure students with promises of fast degrees and "guaranteed" job placement, but what they deliver is often something quite different. In this provocative history of for-profit higher education, historian and educational researcher A. J. Angulo tells the remarkable and often sordid story of these "diploma mills," which target low-income and nontraditional students while scooping up a disproportionate amount of federal student aid.
    Tapping into a little-known history with big implications, Angulo takes readers on a lively journey that begins with the apprenticeship system of colonial America and ends with today's politically savvy $35 billion multinational for-profit industry. He traces the transformation of nineteenth-century reading and writing schools into "commercial" and "business" colleges, explores the early twentieth century's move toward professionalization and progressivism, and explains why the GI Bill prompted a surge of new for-profit institutions. He also shows how well-founded concerns about profit-seeking in higher education have evolved over the centuries and argues that financial gaming and maneuvering by these institutions threatens to destabilize the entire federal student aid program.
    This is the first sweeping narrative history to explain why for-profits have mattered to students, taxpayers, lawmakers, and the many others who have viewed higher education as part of the American dream. Diploma Mills speaks to today's concerns by shedding light on unmistakable conflicts of interest long associated with this scandal-plagued class of colleges and universities.
    Notable quotes:
    "... I would think that Trump gave all of those students a lesson that they should never forget, a fool and his money are soon parted. Who pays 36 grand to go to an unacredited school, to learn what they could get for free at the local library? ..."
    "... "The receptivity of the masses is very limited, their intelligence is small, but their power of forgetting is enormous. In consequence of these facts, all effective propaganda must be limited to a very few points and must harp on these in slogans until the last member of the public understands what you want him to understand by your slogan." ..."
    "... "There is a cult of ignorance in the United States. and there always has been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured through the false notion that democracy means that 'my ignorance is just as good as your knowledge. ..."
    finance.yahoo.com

    Republican presidential front-runner Donald Trump is playing defense on at least one issue these days: his role in a now-defunct real estate seminar business called Trump University.

    At a rally in Arkansas on Saturday, Trump took a break from his stump speech to downplay a class-action civil lawsuit pending against the business, which was founded by Trump and offered students instruction on real estate investments.

    "It's a small deal, very small," Trump said of the suit, which could force him to take the stand this summer.

    Trump specifically railed against the judge in the case, and at one point noted the judge's Hispanic ethnicity.

    Trump claimed the case should have been thrown out years ago, "but because it was me and because there's a hostility toward me by the judge - tremendous hostility - beyond belief." He then noted, as an aside: "I believe he happens to be Spanish, which is fine. He's Hispanic - which is fine."

    A message left for the judge, U.S. District Judge Gonzalo Curiel, was not immediately returned. Curiel is a judge in the Southern District of California and based in San Diego.

    New York Attorney General Eric Schneiderman, whose office has filed a separate civil $40 million complaint against Trump University in state court, accused Trump of "racial demagoguery." Schneiderman sued Trump University in 2013 alleging it committed fraud and fleeced 5,000 people out of millions of dollars.

    "I will not engage in a debate about ongoing litigation," Schneiderman said in a statement issued after Trump made his comments. "But there is no place in this process for racial demagoguery directed at respected members of the judiciary."

    Schneiderman noted that New York's state Supreme Court ruled that Trump University operated illegally in New York as an unlicensed educational institution.

    Trump University emerged as a campaign issue at Thursday's GOP debate, raised by Florida Sen. Marco Rubio.

    "There are people who borrowed $36,000 to go to Trump University, and they're suing now - $36,000 to go to a university that's a fake school," Rubio said. "And you know what they got? They got to take a picture with a cardboard cutout of Donald Trump."

    Texas Sen. Ted Cruz jumped in, adding: "It's a fraud case. ... I want you to think about, if this man is the nominee, having the Republican nominee on the stand in court, being cross-examined about whether he committed fraud."

    Schneiderman's suit alleges that Trump University falsely promoted itself as an educational institution even after the state education department warned it to stop. The complaint accuses Trump of falsely promising that Trump University students would receive intense training from experts hand-picked by Trump himself.

    During breaks in the seminars, Schneiderman's complaint alleges, participants were urged to call their credit card companies and ask to increase their credit limits. Once the credit lines were secured, Trump University staff tried to persuade students to pay for additional services.

    Separate from Schneiderman's complaint, Trump University students have sued. According to the California class-action complaint in front of Curiel, a one-year apprenticeship that Trump University students were promised ended after students paid for a three-day seminar. Attendees who were promised a personal photo with Trump received only the chance to take a photo with a cardboard cutout. And many instructors were bankrupt real estate investors.

    Trump, at the rally, dismissed the cases as the work of "a sleazebag law firm" and suggested that Schneiderman's intervention was politically motivated.

    "I could've settled this suit numerous times. Could settle it now. But I don't like settling suits," Trump said.

    Chris

    I would think that Trump gave all of those students a lesson that they should never forget, a fool and his money are soon parted. Who pays 36 grand to go to an unacredited school, to learn what they could get for free at the local library?

    Do you really need someone to say, For next week, read chapters 5-9" ? And now that you have your lesson in "real life" go forth and prosper. And you should quicky recoup your tuition because you will run into people that lack you knowledge.

    Commenter

    The broad masses of a population are more amenable to the appeal of rhetoric than to any other force.- Adolf Hitler
    I'm a bit of a P. T. Barnum. I make stars out of everyone. - Trump
    There's a sucker born every minute. - P.T. Barnum

    Commenter

    "The receptivity of the masses is very limited, their intelligence is small, but their power of forgetting is enormous. In consequence of these facts, all effective propaganda must be limited to a very few points and must harp on these in slogans until the last member of the public understands what you want him to understand by your slogan." Adolf dead, enter the Trump. Make American great again!

    Margy

    "There is a cult of ignorance in the United States. and there always has been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured through the false notion that democracy means that 'my ignorance is just as good as your knowledge." - Isaac Asimov

    J

    Trump university proved there is a sucker born every minute.

    Joe

    Trump univ sounds like it was a school that taught real estate investing as an off shoot of trumps tv show. Nothing said it was an accredited degree college. No real estate license school is and they all have 3 day courses to learn real estate then you have to take a state test to get your license. You can go to a regular school that costs $100 or spend $36k at trump univ. it's the same class. It all sounds like a PR stunt .

    factChecker

    Cheating thousands of people, just trying to better themselves, out of millions of $ might be unimportant to Trump. That is the problem. He has no conscience.

    Big Al

    Ignorance is investing your money in a non certified educational institution because it is pitched by a so called "celebrity". If you do something foolish, dumb or stupid own up to it and use it as a learning experience. Don't expect others to pay for your mistakes.

    [Feb 28, 2016] Is An Un-Great America Headed For The Abyss Warren Buffett Says No The Two-Way

    NPR
    ...on Saturday, billionaire Warren Buffett used his annual letter to Berkshire Hathaway Inc. shareholders to say, in effect, relax.

    The country may have challenges, but the doom-and-gloom predictions are "dead wrong," Buffett wrote.

    Instead, "babies being born in America today are the luckiest crop in history," he wrote.

    ... ... ...

    Buffett's annual letter to Berkshire investors is so closely followed because he so often makes the right calls about the economy. And in this year's letter, he makes it clear that he considers the "negative drumbeat" about America to be very misleading.

    [Feb 27, 2016] OMG Cushing is filling up hysteria

    Notable quotes:
    "... And to add to some of the good points made: Cushing contains only 20% of total US oil storage capacity. Notice they don't mention the fill level of that total: last time I looked it was about 65%. That means 35% of the 450+ MILLION BBL CAPACITY is still empty. ..."
    "... The vast majority of oil going into Cushing IS NOT do to a lack of buyers as the import numbers indicate. It's largely do to speculators hoping to take advantage of f increases in future oil prices. The net effect is that these speculation OIL BUYERS are competing with the refiners for domestic production. ..."
    "... IOW if we are still importing oil how can there be a glut of domestic oil: the US lacks sufficient oil production to satisfy the demand from the refineries AND speculators. ..."
    "... A few more FACTS to offset the "OMG Cushing is filling up" hysteria. First, Cushing is in PADD 2 as they point out. But it isn't the only tank farm in that midwest district: it only holds 60% of that total capacity. ..."
    "... OMG: almost 13% of the capacity of storing oil in the US is getting close to being full…what are we going to do??? ..."
    "... Maybe they'll just build more storage: since 2011 about 25 million bbl of new storage was added to Cushing and 57 mm bbls added in the Gulf Coast. IOW Cushing would have been completely filled years ago had not SPECULATING INVESTORS not paid for new storage. ..."
    "... Agreed, the Cushing stuff is overplayed. It's the tail, not the dog anyways. ..."
    "... From all evidences Cushing is flooded with light oils and condensate, waiting for more heavy oils to be blended with, or more orders from the plastics manufacturers. ..."
    "... That is probably true because very light crude is only minimally useful to the refineries: ..."
    "... It produces almost none of the more profitable end products, like diesel. It also only has a minimal impact on the economy because its energy content is much lower. ..."
    "... Its lower energy content also impacts crude prices. The price of oil depends on the strength of the economy, and the strength of the economy depends on oil's ability to power it. Lower energy content oil does less powering, which results in less demand. ..."
    "... The specific gravity of a fuel oil is a reflection of its heating value. The heating value is determined primarily by the carbon/hydrogen ratio; as the carbon/hydrogen ratio increases, the specific gravity will increase and the heating value will decrease. Section 3, Figure 3 will give some idea of the effect of the carbon/hydrogen ratio and the various hydrocarbon components on the heating value. The heating value is also decreased by the presence of sulfur. ..."
    Peak Oil News and Message Boards
    rockman on Sat, 27th Feb 2016 7:56 am

    And to add to some of the good points made: Cushing contains only 20% of total US oil storage capacity. Notice they don't mention the fill level of that total: last time I looked it was about 65%. That means 35% of the 450+ MILLION BBL CAPACITY is still empty.

    And why are we still importing oil: lack of sufficient domestic AVAILABILITY…not production. The vast majority of oil going into Cushing IS NOT do to a lack of buyers as the import numbers indicate. It's largely do to speculators hoping to take advantage of f increases in future oil prices. The net effect is that these speculation OIL BUYERS are competing with the refiners for domestic production.

    Which, again, explains why we still import a huge volume of oil despite the constant and foolish use of the word "glut". IOW if we are still importing oil how can there be a glut of domestic oil: the US lacks sufficient oil production to satisfy the demand from the refineries AND speculators.

    rockman on Sat, 27th Feb 2016 9:39 am

    A few more FACTS to offset the "OMG Cushing is filling up" hysteria. First, Cushing is in PADD 2 as they point out. But it isn't the only tank farm in that midwest district: it only holds 60% of that total capacity.

    And now compare the 88 mm bbl capacity to the PADD 3 (essentially Texas and LA. where the bulk of the refineries are) capacity of 260 mm bbls. Between the speculator purchases and the smaller number of refineries combined with the large volume of Canadian imports seeing Cushing filling up is no surprise.

    And we're just talking about tank farm storage. So again compare the 88 mm bbl capacity at Cushing to the total storage capacity at US refineries: 179 mm bbls. No: the volume of oil held at refineries is not part of the total TANK FARM capacity. So how much is the Cushing storage capacity compared to tank farms + refinery storage: 13%.

    OMG: almost 13% of the capacity of storing oil in the US is getting close to being full…what are we going to do???

    Maybe they'll just build more storage: since 2011 about 25 million bbl of new storage was added to Cushing and 57 mm bbls added in the Gulf Coast. IOW Cushing would have been completely filled years ago had not SPECULATING INVESTORS not paid for new storage.

    Nony on Sat, 27th Feb 2016 12:41 pm

    Agreed, the Cushing stuff is overplayed. It's the tail, not the dog anyways.

    Oil us up several dollars over the last couple weeks (26 to 33). And the contango has shrunk (prompt/spot up more than 1 year out). Both of these are factors that argue we are not in a storage crisis, that the glut is easing.

    Note: 33 is still WAY less than 100. And the long term strip has dropped significantly also So we have had a radical change in the market since JUL2014. But current indications (even just the contango itself) argue that future oil prices will be higher than current, rather than lower.

    Of course there is a probability spread of outcomes and the US EIA STEO price funnel diagram shows that prices could be higher or lower over next few years. So future price drops are still reasonably possible (above 5% likelihood), although not likely (below 50% chance).

    farmlad on Sat, 27th Feb 2016 2:02 pm

    From all evidences Cushing is flooded with light oils and condensate, waiting for more heavy oils to be blended with, or more orders from the plastics manufacturers.

    Apneaman on Sat, 27th Feb 2016 4:02 pm

    Short sellers hitting energy at near-crisis levels

    http://www.cnbc.com/2016/02/26/short-sellers-hitting-energy-at-near-crisis-levels.html

    shortonoil on Sat, 27th Feb 2016 4:16 pm

    "From all evidences Cushing is flooded with light oils and condensate,"

    That is probably true because very light crude is only minimally useful to the refineries:

    http://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/images/eneene/sources/petpet/images/refraf1-lrgr-eng.png

    It produces almost none of the more profitable end products, like diesel. It also only has a minimal impact on the economy because its energy content is much lower.

    http://www.thehillsgroup.org/depletion2_011.htm

    Its lower energy content also impacts crude prices. The price of oil depends on the strength of the economy, and the strength of the economy depends on oil's ability to power it. Lower energy content oil does less powering, which results in less demand.

    IFuckYouOver on Sat, 27th Feb 2016 4:59 pm

    Short of a chemical analysis of what is in there, we cannot interpret these data properly

    The specific gravity of a fuel oil is a reflection of its heating value. The heating value is determined primarily by the carbon/hydrogen ratio; as the carbon/hydrogen ratio increases, the specific gravity will increase and the heating value will decrease. Section 3, Figure 3 will give some idea of the effect of the carbon/hydrogen ratio and the various hydrocarbon components on the heating value. The heating value is also decreased by the presence of sulfur.

    The heat contained in a fuel, or its heating value (BTU/lb), is primarily affected by changes in a specific (or API) gravity and its sulfur content in percent by weight.

    As the gravity of the oil increases, the ratio of carbon to hydrogen increases, as well as the sulfur content. The result is that there is less hydrogen with its high heating value available per pound, and a consequent decrease in heat released during combustion. From a performance viewpoint, this change in heat content is indicated by an increased brake specific fuel rate in pounds per brake horsepower-hour and, to a very slight degree, by a decrease in overall engine efficiency, as more fuel with a lower heat content must be burned for a fixed power output.

    Taken for this source below.

    https://www.eagle.org/eagleExternalPortalWEB/ShowProperty/BEA%20Repository/Rules&Guides/Current/31_HeavyFuelOil/Pub31_HeavyFuelOil

    [Feb 27, 2016] The real measure of survivability of any business is positive cash flows; for shale producer that means 80 dollar a barrel oil

    Notable quotes:
    "... Despite all the talk of technology, etc, the real measure of any business is an accurate measure of its future cash flows, and then application of an appropriate discount rate to those future cash flows, minus the debt. ..."
    "... EOG reported long term debt of $6.654 billion. Production fell from 2014 to 2015. Go to shale profile.com and look at their Bakken and Niobrara production drops. Soon Enno will have the Eagle Ford shale up, we can look at that to. ..."
    "... In my opinion, EOG released this presser because at current oil and gas prices, their assets have no value, absent even more cuts to production and development costs, which to me seem improbable. Even more cuts probably don't get them to the ability to pay back debt, especially as the above cash flow calculations DO NOT include general and administrative expenses, nor debt interest expense. ..."
    "... I really hope readers will take the time to read this post. EOG is about the best shale company out there IMO. Yet, their assets cannot produce future net cash flows over their expected lives, in aggregate, at current oil and gas prices, without even further cost cutting. Even another 25% of cost cuts doesn't get them close to servicing debt. ..."
    "... Also, for the oil traders out there, knowing that EOG is likely a more effective cost producer out there than over half of worldwide production, why don't you explain to me the current futures strip? ..."
    peakoilbarrel.com

    Toolpush, 02/26/2016 at 11:56 pm

    More spin at $30 oil

    For EOG, $40 is becoming the new $70. This morning, the company discussed a new strategy to make unconventional oil development in US plays like the Eagle Ford and the Permian Basin competitive on a global scale at current oil prices. Specifically, EOG has identified a decade of premium unconventional oil drilling inventory that will generate double digit returns at $30 oil.

    Backed into a corner by lower cost producers in a global price war, EOG essentially just yelled a battle cry at OPEC on behalf of US shale, implying they will make unconventional oil just as cost effective as OPEC barrels.

    EOG Resources is light years ahead of its peers in shale science and acreage quality, and its ambitions may not be repeatable industry-wide, although others will certainly try. EOG is to shale what Saudi is to OPEC - uniquely advantaged relative to other peers/members.

    Friday morning, EOG Resources CEO Bill Thomas launched a new "premium location" concept, which is essentially next level high-grading (focusing on the core of the core). Thomas's plan aspires to make shale work in the new oil price paradigm, and competitive in the new world oil market.

    I have not had time to read it all, but have fun. I am sure the comments will be worth a read.

    http://oilpro.com/post/22706/shale-2016-eog-resources-making-work-30-oil?utm_source=DailyNewsletter&utm_medium=email&utm_campaign=newsletter&utm_term=2016-02-26&utm_content=Feature_1_txt

    shallow sand, 02/27/2016 at 10:13 am
    Toolpush. I read that on Oilpro. It is a head scratcher, as I thought I read Bill Thomas had earlier said they need $80 oil to have a good business. He is EOG's CEO.

    Despite all the talk of technology, etc, the real measure of any business is an accurate measure of its future cash flows, and then application of an appropriate discount rate to those future cash flows, minus the debt.

    EOG, like all other oil and gas producers, is required to disclose estimates of future cash flows in their annual 10K reports. They employ an independent engineering firm for this purpose.

    Here is what they disclosed effective 12/31/14

    Future cash inflows:$146.950 billion.
    Future production costs:$51.633 billion
    Future development costs$20.495 billion
    Future income taxes: $20.495 billion
    Future net cash flows:$51.636 billion
    Future net cash flows discounted to PV10:$27.923 billion

    Here is what they disclosed effective 12/31/15

    Future cash inflows:$68.720 billion
    Future production costs:$32.061 billion
    Future development costs:$15.786 billion
    Future income taxes $4.616 billion
    Future net cash flows $16.258 billion
    Future net cash flows discounted to PV10: $9.621 billion

    Now, here is what happens to EOG reported numbers as of 12/31/15 if we drop their cash inflows by another 1/3, which is where prices are today:

    Future cash inflows:$45.814 billion
    Future production costs:$32.061 billion
    Future development costs:$15.786 billion
    Future net cash flows:-$2.032 billion.

    EOG reported long term debt of $6.654 billion. Production fell from 2014 to 2015. Go to shale profile.com and look at their Bakken and Niobrara production drops. Soon Enno will have the Eagle Ford shale up, we can look at that to.

    In my opinion, EOG released this presser because at current oil and gas prices, their assets have no value, absent even more cuts to production and development costs, which to me seem improbable. Even more cuts probably don't get them to the ability to pay back debt, especially as the above cash flow calculations DO NOT include general and administrative expenses, nor debt interest expense.

    I really hope readers will take the time to read this post. EOG is about the best shale company out there IMO. Yet, their assets cannot produce future net cash flows over their expected lives, in aggregate, at current oil and gas prices, without even further cost cutting. Even another 25% of cost cuts doesn't get them close to servicing debt.

    I ask anyone to tell me what I am missing. If there are any business media out there, please look this over and then report on it. Look at other major independents such as ConocoPhillips, Anadarko, Marathon, Chesapeake, Occidental, etc. I am sure that, with the possible exception of OXY, they are worse.

    Also, for the oil traders out there, knowing that EOG is likely a more effective cost producer out there than over half of worldwide production, why don't you explain to me the current futures strip?

    Also, is anyone at the EIA looking at this?

    [Feb 25, 2016] A Letter to Tony Blair

    Notable quotes:
    "... But if the alternative is to try and elect leaders from the centre who will do nothing to confront these great issues, and will instead cut spending, accept stagnation and wait for the next financial crisis, is it any wonder that many people would rather take their chance with someone different? ... ..."
    "... Rather than celebrating the enthusiasm and interest of the many young people that have recently joined (even if they regard some of their aspirations as naive), and who will be vital in future election campaigns, this overtly anti-Corbyn group seem to regard them as a threat. ... ..."
    economistsview.typepad.com
    From Simon Wren-Lewis:
    A letter to Tony Blair : Dear Mr. Blair

    We have not met, but I have talked to your former colleague Gordon a few times and I did some academic work on his 5 tests for Euro entry. I saw a report that you were mystified by the popularity of Jeremy Corbyn and Bernie Sanders. I have an article today in The Independent that might help you understand your puzzle.

    I know you find it strange that people that appear to you like those your predecessor Neil Kinnock did battle with over the future of the Labour Party in the 1980s are now running the party. It must also seem strange that in the US where socialism once seemed to be regarded as a perversion, large numbers should be supporting a socialist candidate. You suggest some explanations, but you do not mention the power of finance, inequality and the senselessness of austerity. You say that these new leaders will not be electable. But if the alternative is to try and elect leaders from the centre who will do nothing to confront these great issues, and will instead cut spending, accept stagnation and wait for the next financial crisis, is it any wonder that many people would rather take their chance with someone different? ...

    There are many Labour MPs and left leaning journalists who seem to share your puzzlement, and have decided that they have to fight again the battles of the 1980s by doing everything to undermine their new Labour leadership. ...

    Rather than celebrating the enthusiasm and interest of the many young people that have recently joined (even if they regard some of their aspirations as naive), and who will be vital in future election campaigns, this overtly anti-Corbyn group seem to regard them as a threat. ...

    Please tell them to stop. I fear they need someone they respect like you to point out the foolishness of their actions.

    Yours

    Simon Wren-Lewis

    [Feb 25, 2016] The balance sheets of shale producers are in disrepair

    peakoilbarrel.com
    Loz 02/23/2016 at 10:07 pm

    "The balance sheets of shale producers are in disrepair," said Mr Hess"

    and

    "Opec launched a price war against US shale and other high-cost producers, including Canadian oil sands and Brazilian deep-water oilfields, in November 2014 by not reducing output despite a global oversupply. Since then, oil prices have plunged by more than half, hitting a 12-year low of about $26 on February 11.

    In a rare admission that the policy hasn't worked out as planned, Mr El-Badri said that Opec didn't expect oil prices to drop this much when it decided to keep pumping near flat-out.

    Opec's strategy began to shift last week, when the oil ministers of Saudi Arabia and Russia agreed to freeze their output at the January level, provided other oil-rich countries joined. Mr El-Badri said the new policy will be evaluated in three to four months before deciding whether to take other steps.

    "This is the first step to see what we can achieve," he said. "If this is successful, we will take other steps in the future." He refused to explain what steps Opec could take."

    http://www.thenational.ae/business/energy/opec-head-el-badri-doesnt-know-how-it-can-live-together-with-shale-oil

    Watcher , 02/24/2016 at 2:38 am
    The link has a .ae on it but it's from Bloomberg

    Opec launched a price war against US shale and other high-cost producers, including Canadian oil sands and Brazilian deep-water oilfields, in November 2014 by not reducing output despite a global oversupply. Since then, oil prices have plunged by more than half, hitting a 12-year low of about $26 on February 11.

    This para is in the article, but is apparently not a quote of anyone but the reporter. It's not attributed in the article.

    The rest is much like it. Exact quotes scarce. Interpretation-without-portfolio not scarce.

    Not surprising. It's IHS/CERA week. They pour it onto the reporters.

    Oh, this must not be spam.

    [Feb 23, 2016] Reuter disinformation: veterans of 1980s oil glut say this price slump, too, will last

    With US shale balancing of the verge of financial collapse this is a pure propaganda. This time it is the US shale companies that are the weakest link and they will not last 2016 is oil prices stay low. Wells can be reopened but shale well deteriorate so fast that it does not make much sense. And you need money for drilling new wells. Who will finance this new shale boom after so many players were burnt ?
    Notable quotes:
    "... Kuwait's struggles in the 1980s are instructive for anyone wondering whether producing countries can tinker their way out of trouble now. In the face of weak prices in the early years of the decade the OPEC production group introduced output cuts in an attempt to mop up oversupply. Kuwait slashed production from nearly 2 million barrels per day to about 600,000 bpd. The top producer Saudi Arabia made even costlier cuts. ..."
    Reuters
    When Sheikh Ali Khalifa al-Sabah of Kuwait thinks about today's plunging oil prices, his mind drifts back to the mid-1980s, when he was forced to sell some of his country's crude for as little as $5 a barrel.

    As Kuwait's oil minister at the time, Sheikh Ali had to sell a cargo or two at that price just to keep up cash flow to a country that depended upon oil revenues. "It wasn't because I wanted to; it was because it was the market price," he recalls.

    "We really had no alternative."

    For oil industry players active during the 1980s bust, the current drop in prices carries echoes of those desperate days. Interviews with some of those involved in that period reveal that while there is little consensus on how long prices will stay depressed, experience suggests the current market glut will not evaporate soon.

    Representatives from all aspects of the energy industry will be mulling current low oil prices and the supply glut this week during the IHS CERAWeek gathering in Houston.

    Kuwait's struggles in the 1980s are instructive for anyone wondering whether producing countries can tinker their way out of trouble now. In the face of weak prices in the early years of the decade the OPEC production group introduced output cuts in an attempt to mop up oversupply. Kuwait slashed production from nearly 2 million barrels per day to about 600,000 bpd. The top producer Saudi Arabia made even costlier cuts.

    Three factors dashed the plan: fellow OPEC members cheated on their own cuts; global thirst for oil had dried up after price spikes in the 1970s pushed consumers to buy efficient cars; and new supplies, particularly from non-OPEC Mexico, Norway, and Alaska threatened to squash gains from any cuts.

    By late 1986, Saudi Arabia and other OPEC members opened the taps again to regain market share, and prices did not recover for 20 years.

    The memory leaves Sheikh Ali, now 71, feeling grim about a price recovery this time.

    "Tomorrow if the price of oil goes down to $20 I would not be surprised," he said. "You don't take excess oil away very quickly. It was true in the 1980s, now it's even worse."

    ... ... ...

    Sheikh Ali estimated it will take seven to 10 years to emerge from the current slump. "The idea that U.S. companies are going to collapse and therefore their production is going to zero is daydreaming," he said. "Even the wells that have closed can easily re-open."

    Saudi Arabia may no longer be the swing producer of global markets, but the United States is now the world's "spring producer," Sheikh Ali said. Shale stands to put a long term damper on global markets, because when oil prices rise even a little, North Dakota and Texas output can pop back to market far easier than expensive deepwater or Alaskan production did decades ago, he said.

    Technology innovations keep pushing the cost of shale production lower. And the return of Iran's oil exports after the lifting of sanctions also threatens to moderate prices.

    [Feb 23, 2016] Disinformation specialists from Bloomberg try to revive the game changer myth again despite all the evidence

    The only problem with US exports is that the USA is net importer of oil. The USA definitely can export condensate, as it does not has processing facilities for it, but that's about it. As for "A prolonged period of low gas and oil prices will put heavy pressure on Russia" the USA shale producers will go belly up first. Probably this year.
    The same is true for natural gas. The USA remains a net exporter and shale production is dwindling down quickly. Individual shipments does not change this picture.
    Notable quotes:
    "... The U.S. remains a net importer, but its demand for foreign oil has fallen by 32 percent since peaking in 2005. West Texas Intermediate crude traded at $33.34 a barrel at 8:51 a.m. on the New York Mercantile Exchange Tuesday, down 33 percent from a year earlier. ..."
    "... "A prolonged period of low gas and oil prices will put heavy pressure on Russia in its relations with the West and of course low energy prices put tremendous strain on all exporters of hydrocarbons worldwide, on their government budgets," said Ted Michael, an analyst at Genscape Inc., an energy-market data and intelligence firm. ..."
    "... Trafigura Group Pte Ltd. also sold West Texas Intermediate oil to a refinery in Israel, Ben Luckock, global head of crude oil at the commodity trader, said on Monday by e-mail. The 700,000-barrel cargo of U.S. benchmark crude will be delivered in March. ..."
    "... Bloomberg has an article up by somebody saying that it is a "game changer" now that the US can ship oil all over the world to compete with OPEC. I would guess that the guy has never read anything by Jeffrey Brown. I think that he thinks that we are an Export Land in the model. ..."
    "... There is so much ignorance out there that it is going to be a rude awakening when it happens. All these guys advising investors to sell everything related to fossil fuels because they are not making any money, but they think that they will make huge profits at $50 bbl. Except that when it does get to $50, it will plunge again because the huge flood of oil that will hit the market. What a joke. ..."
    "... I think Bloomberg is mixing the export of condensate which is overproduced in the USA and does not fit the refineries tune up with the export of oil which might be a more challenging idea. ..."
    "... It is unclear whether this is a "real" WTI or "artificial" WTI that the US refineries do not want. I think it is the latter. ..."
    peakoilbarrel.com
    The Trickle of U.S. Oil Exports Is Already Shifting Global Power - Bloomberg Business

    For the Saudis and their OPEC cohorts, who collectively control 40 percent of the globe's oil supply, the specter of U.S. crude landing at European and Asian refineries further weakens their grip on world petroleum prices at a time they are already suffering from lower prices and stiffened competition. With Russia also seeing its influence over European energy buyers lessened, the two crude superpowers last week tentatively agreed to freeze oil output at near-record levels, the first such coordination in a decade and a half.

    ... ... ...

    Beyond corporations, the Dec. 18 lifting of the export ban by Congress and President Barack Obama created geopolitical winners and losers, too. The U.S., awash in shale oil, has gained while powerful exporters like Russia and Saudi Arabia, for whom oil represents not just profits but also power, find themselves on the downswing.

    The U.S. remains a net importer, but its demand for foreign oil has fallen by 32 percent since peaking in 2005. West Texas Intermediate crude traded at $33.34 a barrel at 8:51 a.m. on the New York Mercantile Exchange Tuesday, down 33 percent from a year earlier.

    ... ... ...

    "A prolonged period of low gas and oil prices will put heavy pressure on Russia in its relations with the West and of course low energy prices put tremendous strain on all exporters of hydrocarbons worldwide, on their government budgets," said Ted Michael, an analyst at Genscape Inc., an energy-market data and intelligence firm.

    ... ... ...

    The Theo T was joined shortly after its trailblazing journey by a second ship out of Houston destined for the Netherlands. How many tankers have sailed since won't be known until comprehensive data on January's shipments is released by the U.S. Census Bureau in the coming weeks.

    Trafigura Group Pte Ltd. also sold West Texas Intermediate oil to a refinery in Israel, Ben Luckock, global head of crude oil at the commodity trader, said on Monday by e-mail. The 700,000-barrel cargo of U.S. benchmark crude will be delivered in March.

    What's already clear is that even with crude losing about 70 percent of its value since the middle of 2014 amid a worldwide production glut and a slowdown in Chinese demand growth, buyers are happy for the chance to diversify their sources of supply.

    ... ... ...

    U.S. companies, led by Cheniere, have been spending billions of dollars on LNG export complexes where the fuel is cooled to minus 256 degrees Fahrenheit (minus 160 Celsius) to shrink it to 1/600th its volume so it can be shipped aboard ocean-going tankers. As a result, an international gas market is emerging akin to the long-established one for the more readily transportable crude oil.

    LNG Exports

    Houston-based Cheniere plans to begin LNG exports within weeks, after missing a January target because of faulty wiring. The first tanker that will carry LNG from Cheniere's Sabine Pass terminal in Louisiana has arrived. Asia Vision has moored at Sabine Pass, according to ship-tracking data compiled by Bloomberg.

    U.S. LNG cargoes, in combination with a bevy of new gas projects in Australia, will probably add 15 billion cubic feet of daily supply to global markets in the next few years, Genscape's Michael said. That would be a 43 percent addition to the 35 billion currently bought and sold internationally.

    clueless, 02/22/2016 at 11:36 pm

    Bloomberg has an article up by somebody saying that it is a "game changer" now that the US can ship oil all over the world to compete with OPEC. I would guess that the guy has never read anything by Jeffrey Brown. I think that he thinks that we are an Export Land in the model. How can they not know that, in effect, except for quality differences, we are just exporting oil that we imported from Canada or some other place.

    There is so much ignorance out there that it is going to be a rude awakening when it happens. All these guys advising investors to sell everything related to fossil fuels because they are not making any money, but they think that they will make huge profits at $50 bbl. Except that when it does get to $50, it will plunge again because the huge flood of oil that will hit the market. What a joke.

    Jeffrey J. Brown, 02/23/2016 at 7:30 am

    Bloomberg has an article up by somebody saying that it is a "game changer" now that the US can ship oil all over the world to compete with OPEC.

    Bloomberg had a similar column in 2010, where they discussed the outlook for Brazil (a net oil importer) "Taking market share away from OPEC."

    likbez , 02/23/2016 at 10:19 am
    I think Bloomberg is mixing the export of condensate which is overproduced in the USA and does not fit the refineries tune up with the export of oil which might be a more challenging idea.

    But a few parts of this disinformation sound almost realistic:
    http://www.bloomberg.com/news/articles/2016-02-22/oil-sands-growth-seen-slowing-or-halting-after-current-work

    Beyond corporations, the Dec. 18 lifting of the export ban by Congress and President Barack Obama created geopolitical winners and losers, too. The U.S., awash in shale oil, has gained while powerful exporters like Russia and Saudi Arabia, for whom oil represents not just profits but also power, find themselves on the downswing.

    The U.S. remains a net importer, but its demand for foreign oil has fallen by 32 percent since peaking in 2005. West Texas Intermediate crude traded at $33.34 a barrel at 8:51 a.m. on the New York Mercantile Exchange Tuesday, down 33 percent from a year earlier.
    … … …
    Trafigura Group Pte Ltd. also sold West Texas Intermediate oil to a refinery in Israel, Ben Luckock, global head of crude oil at the commodity trader, said on Monday by e-mail. The 700,000-barrel cargo of U.S. benchmark crude will be delivered in March.

    What's already clear is that even with crude losing about 70 percent of its value since the middle of 2014 amid a worldwide production glut and a slowdown in Chinese demand growth, buyers are happy for the chance to diversify their sources of supply.

    It is unclear whether this is a "real" WTI or "artificial" WTI that the US refineries do not want. I think it is the latter.

    [Feb 21, 2016] The Oracle of Oil A Maverick Geologist's Quest for a Sustainable Future by Mason Inman

    Amazon.com

    Print Length: 416 pages
    Publisher: W. W. Norton & Company; 1 edition (April 11, 2016)
    Publication Date: April 1, 2016
    Sold by: Amazon Digital Services LLC

    A complete biography of Marion King Hubbert, one of the twentieth century's most influential energy experts, who was dubbed the "father of peak oil."

    In 1956, geophysicist and Shell Oil researcher Marion King Hubbert forecast that American oil production would peak surprisingly soon and decline steadily thereafter. Hubbert's prediction outraged the architects of the U.S. oil industry at the time, but it was largely correct. Even amid a twenty-first century shale boom, Hubbert's logic remains a source of debate and controversy.

    In a richly researched narrative that surveys Hubbert's papers and correspondence for the first time, award-winning journalist Mason Inman rescues the history of a man who shocked the scientific community with his brilliance, eccentricity, and controversy. The Oracle of Oil shows Hubbert as a man of his era: a time of great intellectual ferment and discovery tinged by dark undercurrents of intellectual witch hunts.

    In its portrait of a man whose prescient ideas about sustainability still resonate today, The Oracle of Oil looks to the past to find a guiding philosophy for our energy future.

    About the Author

    Mason Inman is an award-winning journalist who focuses on energy and climate issues. He has written for National Geographic News, Science, Nature, and The Economist. He lives in Oakland, California.

    [Feb 17, 2016] Zerohedge is a really crooked site when it comes to oil

    peakoilbarrel.com
    jed, 02/16/2016 at 7:01 am

    Zero hedge is a really crooked site when it comes to oil.

    I had an account banned there for continually pointing out the inconsistencies of their narrative on production and supply. You'll notice they'll only use graphs when there's been an uptick in production. All the time last year when production was falling they never once used a graph.

    When production was still increasing they always used a combined rig count/production graph, the moment production started to fall they pulled the production line from the graph. The moment production plateaued and slightly increased, the production line reappeared.

    There's some skilled propagandists there because most of the commenters lap it up, I doubt many of them would realise production actually fell in the US in 2015, they probably still think it's increasing. None of them would realise Saudi production has fallen either.

    [Feb 16, 2016] Plato cave and oil statistics

    Notable quotes:
    "... My comment: Anyway, Russia and Saudi Arabia were not expected to increase oil production this year ..."
    "... Yes, but the markets don't know that Russia and Saudi Arabia cannot increase output. With this agreement they are trying to sustain oil prices or even increase them, one of the few things Saudi Arabia and Russia can agree on. ..."
    "... As you can see this fake narrative of 1-2 Mb/d of "glut" is still in place. If this is not taking the price down I do not know what is. In this "fog of war" we should not blindly believe Western agencies reporting. It is even unclear what this agreement is about. ..."
    "... In any case please understand the Western game to talk down oil prices down until recently included Saudis. Now they are out of this game. ..."
    "... The fact output from Saudi Arabia and Russia – the world's two top producers and exporters – is near record highs also makes an agreement tricky since Iran is producing at least 1 million barrels per day below its capacity and pre-sanctions levels. ..."
    "... Within the next 3 months all these trends will reverse. Seasonal demand will rise while production declines rise, and Iran's production stabilizes eliminating the new production bidding war. ..."
    "... Why the hell do some people always believe that the media or agencies that track and sell data are always lying? ..."
    "... A good point. Really, why some people distrust Western MSM and agencies ? Can it be for the same reasons they distrust bankers, IMF and World Bank ? ..."
    "... If Congress and government are owned by banks according to senator Durbin ( "And the banks - hard to believe in a time when we're facing a banking crisis that many of the banks created - are still the most powerful lobby on Capitol Hill. And they frankly own the place." ) why do you think government agencies and major MSM are different ? ..."
    "... The key point is that whenever possible we should try to compare different sources of data. That's the only way to reveal the real picture as none of us can verify the data provided by agencies and MSM. ..."
    "... Plato has Socrates describe a gathering of people who have lived chained to the wall of a cave all of their lives, facing a blank wall. The people watch shadows projected on the wall from things passing in front of a fire behind them… The shadows are as close as the prisoners get to viewing reality. ..."
    "... Still we can for major oil-related data to estimate the error margin and the direction of bias. Like I tried to estimate error margin for EIA data. Much depends whether you assume it to be 1% or 10%. If, for example, you think about particular source as 100% reliable that's fine, but 100% rating should be rare in this world and should never be awarded uncritically. Actually your posts for me are close. ..."
    "... So non-US media, discussion forums that attract professionals like your blog, posts of professionals who try to present unbiased views like your posts, Jeffrey Brown posts, Art Berman posts (to name a few) and remnants of media still loyal to oil industry (your example of The Oil and Gas Journal ), not to Wall Street traders interests (Bloomberg) are especially important islands of sanity in this distorted, crazy, financial speculation dominated world. ..."
    "... Did you ever hear about the "Great Condensate Con" hypothesis? This is an alternative to the "oil glut" hypothesis and I think it is more plausible. ..."
    peakoilbarrel.com
    AlexS, 02/16/2016 at 4:58 am
    Much ado about nothing:

    Saudi Arabia and Russia Agree Oil-Output Freeze in Qatar

    http://www.bloomberg.com/news/articles/2016-02-16/saudi-arabia-and-russia-agree-oil-output-freeze-in-qatar-talks

    Nations agree to maintain output at Jan. 11 level, Naimi says
    Ministers from Qatar, Venezuela also agreed to freeze"

    Saudi Arabia and Russia, the world's two largest crude producers, agreed to freeze output after talks in Qatar.

    Freezing output at January levels will be "adequate" and the nation still wants to meet the demand of its customers, Saudi Oil Minister Ali Al-Naimi said in Doha after talks with Russian Energy Minster Alexander Novak. Qatar and Venezuela also agreed to participated in the freeze, Al-Naimi said.
    "A freeze would not create an immediate U-turn but it creates a better foundation for the price recovery in the second half," Olivier Jakob, head of oil consultants Petromatrix GmBh, said in a note to clients before the meeting concluded.

    According the International Energy Agency, Saudi Arabia produced 10.2 million barrels a day in January, below the most recent peak of 10.5 million barrels a day set in June 2015. Russia produced nearly 10.9 million barrels a day in the same month, a post-Soviet record, according to official data.

    Qatar will lead monitoring of output freeze agreement, the nation's Energy Minister Mohammad bin Saleh al-Sada said at a press briefing.

    My comment: Anyway, Russia and Saudi Arabia were not expected to increase oil production this year

    Javier , 02/16/2016 at 5:14 am
    Yes, but the markets don't know that Russia and Saudi Arabia cannot increase output. With this agreement they are trying to sustain oil prices or even increase them, one of the few things Saudi Arabia and Russia can agree on.
    AlexS , 02/16/2016 at 5:25 am
    Yes, and they are successfully "talking up" oil prices over the past 2 or 3 weeks
    likbez , 02/16/2016 at 8:00 am
    Alex,

    "Yes, and they are successfully "talking up" oil prices over the past 2 or 3 weeks"

    What do you mean by "talking up"? Funny, but you sound like ZeroHedge. The current prices are unsustainable and will go up talking or no talking. Now the effect will be amplified by a short squeeze.

    Those presstitutes from Reuters already proudly reported that Azerbaijan will not join. As if it matters.

    Look at the example of the current Western propaganda drivel:

    https://finance.yahoo.com/news/four-oil-producers-agree-freeze-091449519.html

    Reuters reported that the meeting had echoes of a 2001 encounter between OPEC and non-OPEC producers when Saudi Arabia pushed through a global deal to curb output in which Russia agreed to participate. But Moscow never properly followed through on its pledge to curb exports.

    After 19 months of declines in oil prices, analyst are cautious, however, of another short-lived bump higher based on jawboning from producers. This is despite the fact that the impetus to agree on price-boosting production cuts has been heightened by budgetary pain in both Russia and Saudi Arabia.

    "The noise around potential production cuts is hugely elevated; if we don't see a cohesive response in a month or so, the speculators will no doubt start to ramp up short positions again," IG's chief market strategist, Chris Weston, said in a note.

    And Phillips Futures cautioned, "if they allow prices move up in the immediate term, prices would likely be remaining lower for longer. This is because producers of oil at higher breakevens could hedge off their exposure, resulting in strong production moving forward. Thus, would mean that it would still be in the best interest for oil producers, especially those who could still get by to continue and wait it out, no matter how painful it may be."

    The Tuesday price spike also masked complications in the oil industry that have clouded the market.

    One major issue is how much oil producers were actually pumping out, UBS Wealth Management's commodities and FX strategist Wayne Gordon told CNBC's "Street Signs."

    "Some people believe that Saudi Arabia et al have been over-reporting production and exports just so that when they go to the OPEC meeting they can say 'Oh yeah, we cut around here and here'," he said.

    The world was still swimming in 1-2 million extra barrels of oil a day, he added.

    UBS forecasts oil in the $20-$40-a-barrel range this year.

    Also in focus is the fallout and snowball effect of the oil crash, with banks now faced with decisions on what of their commodities assets to write down, at a time when lenders are already under pressure from the Bank of Japan's move into negative interest rates.

    "On the Japanese banks side, clearly they've had to take a lot of impairments…(over) commodities assets in the last five years… [then] as you go into negative rates, all you're really doing is forcing banks to take loans or lend money to higher risk propositions," Gordon warned.

    As you can see this fake narrative of 1-2 Mb/d of "glut" is still in place. If this is not taking the price down I do not know what is. In this "fog of war" we should not blindly believe Western agencies reporting. It is even unclear what this agreement is about.

    In view of this event it looks like the recent visit of Qatar minister to Moscow was crucial. I expect Iraq joining this agreement immediately.

    In any case please understand the Western game to talk down oil prices down until recently included Saudis. Now they are out of this game.

    But Reuters still tries to play Iran card.

    The fact output from Saudi Arabia and Russia – the world's two top producers and exporters – is near record highs also makes an agreement tricky since Iran is producing at least 1 million barrels per day below its capacity and pre-sanctions levels.

    https://finance.yahoo.com/news/oil-powers-fly-doha-private-003013958.html

    Ron Patterson , 02/16/2016 at 8:39 am
    In this "fog of war" we should not blindly believe Western agencies reporting. It is even unclear what this agreement is about.

    I can understand some political bias in what national oil companies are reporting, or in some cases what government agencies themselves are reporting. But I just flat do not believe that agencies like Platts, and other such sources, are deliberately lying about what they believe a nation's oil production really is. What reason would they have to lie? Fog of war? Shit, they are not at war with anyone.

    I do not believe that the news agencies, and agencies that track oil production, around the world are engaged in some kind of giant conspiracy to deceive the world into believing that either more or less oil is being produced than it really is.

    Why the hell do some people always believe that the media or agencies that track and sell data are always lying? They don't have a dog in that fight. Their first priority is to find out and accurately report what is actually happening. It is in their interest to tell the truth, as near as they can determine what the truth actually is. Because if they are caught lying it could severely damage their reputation and deeply hurt their company profits in the long run.

    Daniel , 02/16/2016 at 8:59 am
    I don't believe they have an agenda, but follow normal human behavior in following the crowd. The media coverage seems to be very one-sided at the moment and at times poorly researched. It appears though as if the game of the moment is to talk to "oil-price down". Headlines and world-events that would have caused an immediate oil-spike in the last years is suddenly seen as good opportunity to short oil. As a person working in the oil industry this is extremely frustrating at times.
    Brian Rose , 02/16/2016 at 1:16 pm
    Daniel,
    • There is no spin or bias in the fact that refined product inventories are at record highs leading to large discounts to remove winter blend gasoline stocks.
    • There is no spin or bias in the fact that inventories are at record highs. This data is tracked from multiple independent sources AND in several different ways. There are data analytic companies that have used satellite data to estimate storage tank usage by means of the shadow they cast. Even this unique and statistically accurate way of measuring changes in storage agrees that storage is well above historical highs.
    • There is no spin or bias in the fact that oversupply and price competition between major producers has led the UAE to offer India free oil so long as it stores it.
    • There is no spin or bias in the fact that oversupply is causing bidding wars between major producers forcing the Saudis and others to continuously lower prices to keep contracts.

    It is glaringly obvious, from every single angle, that the world is oversupplied at the moment. Current production declines aren't yet having an impact because this time of year is a period of seasonally low demand. Add in Iran's need to win contracts, and you get a temporary bidding war where every exporter is desperately lowering prices to keep contracts. Once it gets really bad you get things like the UAE deal with India.

    Within the next 3 months all these trends will reverse. Seasonal demand will rise while production declines rise, and Iran's production stabilizes eliminating the new production bidding war.

    Just because the market will re-balance strongly in 2016 does not mean that it is currently in the process of re-balancing. Due to the confluence of Iran competing for contracts, record high storage, and the seasonal lull in demand canceling out any nascent production declines we're in the most acute phase of oversupply relative to demand.

    It doesn't matter where the market will be in 3 months. Oil produced today needs to be bought by SOMEONE NOW. This is causing a massive bidding war because there aren't enough buyers now that Iran entered and needed to win contracts immediately.

    likbez , 02/16/2016 at 9:10 am
    Why the hell do some people always believe that the media or agencies that track and sell data are always lying?

    A good point. Really, why some people distrust Western MSM and agencies ? Can it be for the same reasons they distrust bankers, IMF and World Bank ?

    http://www.globalexchange.org/resources/wbimf/oppose

    Ron Patterson , 02/16/2016 at 9:28 am
    No, it absolutely cannot be the same reason. Banks deal in money, news agencies deal in news. Banks have a vested interest in secrecy, news agencies have a vested interest in telling everything they know.

    News agencies desperately want a reputation for telling the truth. Banks desperately want a reputation for making money for their clients, investors and stockholders. These people don't give a damn if banks lie or not as long as they make money. Money is the only thing they care about.

    Likbez, the fact that you see the same motives behind what news agencies report and what banks do, tells me you really don't understand either.

    likbez , 02/16/2016 at 10:03 am
    Ron,

    If Congress and government are owned by banks according to senator Durbin ( "And the banks - hard to believe in a time when we're facing a banking crisis that many of the banks created - are still the most powerful lobby on Capitol Hill. And they frankly own the place." ) why do you think government agencies and major MSM are different ?

    Ron Patterson , 02/16/2016 at 10:52 am
    Oh for God's sake! Platts can create a banking crisis? Petroleum Intelligence Weekly has a lobby? The Oil and Gas Journal has the same agenda as CitiBank?

    Good gravy man, get real!

    likbez , 02/16/2016 at 4:07 pm
    The Oil and Gas Journal has the same agenda as CitiBank?

    Thank you for attacking my viewpoint. That actually clarified my thinking.

    Looks like our viewpoints are not that different. In my view we can (and should) mentally rate each source information as for objectivity and bias (for example your blog and posts vs ZeroHedge ).

    The sources of information that have bias of opposite sign in comparison with MSM are especially valuable. Even in MSM comment sections are much more valuable then the articles published. Right now for me the most valuable sources of information that help to reveal the bias are sources that question the mainstream hypothesis of oil glut (and related spin about Saudis desire to preserve market share), as well as those who were critical of shale oil boom and are questioning EIA, IEA and friends statistics. Your mileage may vary.

    The key point is that whenever possible we should try to compare different sources of data. That's the only way to reveal the real picture as none of us can verify the data provided by agencies and MSM.

    This is a classic situation called "Plato cave" "https://en.wikipedia.org/wiki/Allegory_of_the_Cave"

    Plato has Socrates describe a gathering of people who have lived chained to the wall of a cave all of their lives, facing a blank wall. The people watch shadows projected on the wall from things passing in front of a fire behind them… The shadows are as close as the prisoners get to viewing reality.

    Still we can for major oil-related data to estimate the error margin and the direction of bias. Like I tried to estimate error margin for EIA data. Much depends whether you assume it to be 1% or 10%. If, for example, you think about particular source as 100% reliable that's fine, but 100% rating should be rare in this world and should never be awarded uncritically. Actually your posts for me are close.

    So non-US media, discussion forums that attract professionals like your blog, posts of professionals who try to present unbiased views like your posts, Jeffrey Brown posts, Art Berman posts (to name a few) and remnants of media still loyal to oil industry (your example of The Oil and Gas Journal ), not to Wall Street traders interests (Bloomberg) are especially important islands of sanity in this distorted, crazy, financial speculation dominated world.

    AlexS, 02/16/2016 at 4:17 pm
    "sources that question the mainstream hypothesis of oil glut "

    No one serious source (IEA, EIA, OPEC, Platts, Woodmac, Rystad, IHS, energy ministries of exporting countries, oil companies, large oil traders, etc.) questions the oversupply in the global oil market.

    Oil glut is not a hypothesis, it's a fact.

    Ron Patterson, 02/16/2016 at 4:31 pm
    Right now for me the most valuable sources of information that help to reveal the bias are sources that question the mainstream hypothesis of oil glut

    I think this is hilarious. The sources that you believe are those who think there is no oil glut at all. The sources that believe the price of oil has been driven from over $100 a barrel to $30 a barrel by…. some kind of giant conspiracy.

    Yeah right! Rolling in the floor laughing my ass off.

    Perhaps you believe Watcher's theory. That it was all because some exporter, Saudi I think, just kept selling at a slightly lower price until after many months they had gotten the price down to thirty bucks a barrel.

    Yeah… that's the ticket.

    likbez, 02/16/2016 at 8:49 pm
    Alex & Ron,

    Did you ever hear about the "Great Condensate Con" hypothesis? This is an alternative to the "oil glut" hypothesis and I think it is more plausible.

    Ron Patterson, 02/16/2016 at 9:47 pm
    Did you ever hear about "Great Condensate Con" hypothesis? This is an alternative to "oil glut" hypothesis and I think it is more plausible.

    Well no, it is not. While the Great Condensate Con is very real, it is not an alternative to the oil glut. The oil glut simply deals with supply and demand. If the supply of oil is greater than the demand for oil then the price falls. It is as simple as that.

    The increase in production by Iran and Saudi Arabia, that began in March of 2015, was not condensate, it was crude oil. Much of the increase before that date was condensate. But the decline in demand had nothing to do with the Great Condensate Con. It was a decline in demand due to very high prices and a definite decline in the world economy.

    Bottom line, there is a definite oversupply of crude oil in the world today. That is the reason we are seeing oil in the range of $30 a barrel, and not any kind of conspiracy by anyone.

    Hey! I am a peak oil advocate. I would love to say that there is a shortage of oil in the world today as a result of crude oil peaking. But the very obvious facts do not allow me to make such a claim. There is a glut of oil today. That cannot be denied.

    For Christ's sake, don't try to spin reality into some kind of conspiracy. Accept reality as it is and go from there.

    I have said all along that peak oil will be a time when more oil is produced than any time in history of the world or ever will be produced in the future of the world. And such a time will be far more likely to be perceived as a time of an oil glut than as a time of an oil scarcity.

    Oldfarmermac, 02/16/2016 at 10:16 am
    As usual I agree with Ron in terms of broad outlines. News agencies and organizations as a whole or a group are more interested in the truth than in spinning the truth, or ignoring it.

    But there is no doubt at all in my mind that a lot of news organizations spin the truth for some particular reason, emphasizing the news in such a way as to support an agenda OTHER than getting the truth out.

    WHY?

    Because in this day and time, the OWNERSHIP of news organizations is in the hands of people who have HUGE stakes in spinning the news to suit themselves, in a lot of cases.

    Business interests have bought control of news organizations as much for the power gained thereby, as for legitimate investment purposes.

    AND the organizations themselves, after a while, tend to become hotbeds of partisan employment.

    It's not that the truth doesn't matter, in terms of getting caught out wholly in the wrong, but rather that the truth is judged expendable in terms of certain events and issues, or at least , just something to be IGNORED.

    I have no problem AT ALL with FOX NEWS when it comes to reporting earthquakes, airplane crashes, and day to day local news. But I would be laughed out of this forum if I said that Fox does a great job of reporting on environmental issues. Fox does not, of course.

    OTOH, FOX has actually started reporting in an even handed manner, at least some of the time, about electrified personal automobiles.

    I listen to NPR almost exclusively, whenever I turn on a radio, or else a folk and bluegrass music station, if NPR is playing organ music.

    But so far as I am personally concerned, I cannot ever REMEMBER hearing anybody on NPR on a regular basis who sounds like a R partisan.

    OTOH, I am confident I can identify the political orientation of everybody talking on NPR, with ninety nine percent accuracy, just by reading an hour or less of randomly selected black and white transcript of what they have to say, word for word.

    The OVERWHELMING majority are conventional stereotypical liberals, with a few token conservative voices popping up once in a long while.

    Tone of voice and choice of words can convey the message , quite as effectively as the actual words spoken.

    Note that I continue to listen to NPR.

    I might listen to some other outfits, but there isn't any other programming WORTH listening to. There is no comparable right wing radio. So called talk radio is all about the lowest common denominator, and that denominator is ignorance.

    So if you want to hear anything that is based on knowledge and reason, coming from the conservative pov, you are reduced to a few magazines, for all intents and purposes.

    Ron Patterson, 02/16/2016 at 10:43 am
    Mac, of course news agencies like Fox News spin political news. Neither they, nor any other news agencies would need to lie about Azerbaijan's oil production numbers. Or China's oil production numbers. Or… well, I hope you understand that.

    To accuse Fox, or Platts, or whomever, of lying about some Asian countries oil production, just smacks of stupid conspiracy theories.

    robert wilson , 02/16/2016 at 7:19 pm
    Juan Williams was at NPR for years. He is now one of the popular liberals at Fox.

    [Feb 16, 2016] ZeroHedge reports that India will get free oil from UAE in return for offering storage.

    peakoilbarrel.com

    Suyog, 02/15/2016 at 1:50 pm

    Here we talk about peak oil and measure every uptick and downtick in production. On the other hand oil is so abundant that they are now giving it away for free. India will get free oil from UAE in return for offering storage.

    http://www.zerohedge.com/news/2016-02-15/uae-offers-india-free-oil-ease-storage-woes

    Fernando Leanme , 02/15/2016 at 1:58 pm
    No kidding. I offer you a free ton of beef if you allow me to store 10,000 tons in your freezers for six months.
    Caelan MacIntyre, 02/15/2016 at 2:46 pm
    Energy is free as long as it takes less of it to get it. –> Fernanado's frog here <–
    Fernando, where do you get your frog? I can't find it.
    Suyog, 02/15/2016 at 8:03 pm
    Did you even read the article? For every 3 tons of UAE oil stored by India, it gets 2 tons for free. That is not 1/10000, more like two thirds.
    Synapsid, 02/15/2016 at 4:18 pm
    Suyog,

    UAE paying for storage with oil?

    Suyog, 02/15/2016 at 8:04 pm
    Yes. India gets two thirds of the oil it stores for free.

    [Feb 16, 2016] How Right-Wing Billionaires Infiltrated Higher Education by Jane Mayer

    February 12, 2016 | The Chronicle of Higher Education
    If there was a single event that galvanized conservative donors to try to wrest control of higher education in America, it might have been the uprising at Cornell University on April 20, 1969. That afternoon, during parents' weekend at the Ithaca...

    [Feb 15, 2016] Looks like ZH is short on oil for some ti

    Watcher, 02/15/2016 at 7:38 pm

    Signif blurbs from ZH

    As Russia's oil minister meets his Saudi Arabian counterpart in Doha on Tuesday, the world's second-largest crude producer faces numerous obstacles in cooperating on such a deal even if Putin decides it's in the national interest. Reducing the flow of crude might damage Russia's fields and pipelines, require expensive new storage tanks or simply take too long.

    In Siberia, Russia's main oil province, winter temperatures can go below minus 40 degrees Celsius (minus 40 Fahrenheit). That's a challenge for anyone thinking of turning off the taps.

    The oil and gas that flows from wells always contains water, so once pumping stops, pipes may freeze, Mikhail Pshenitsyn, who has worked for more than 10 years in the Russian oil industry, said by e-mail. The problem goes away in summer, but there's still the risk of a long-term reduction in output because a halted reservoir can become polluted with salts and residues, he said. Production from a shut-in well might never be restored in full, Maxim Nechaev, director for Russia at consulting firm IHS Inc., said by phone.

    Blink. Someone from IHS says oil wells can be permanently damaged?

    Might want to go thru the article. It's loaded with frown inducers.

    Why would anyone "produce oil" aka extract it from the ground if they don't have an order for it. There is verbage about Russia pumping it to store it. Hell, it's already stored. Underground. Russia isn't going to get tax revenue from oil flow that isn't sold. The sales revs are what pay the taxes.

    People are so desperate to sprint to the oversupply narrative that they don't think it through.

    likbez, 02/15/2016 at 8:35 pm
    Watcher,

    Thanks for your debunking of ZH drivel.

    Looks like ZH is short on oil for some time. And narrative of his site instantly changed accordingly. Before that he was kind of a "peak oiler".

    Ves, 02/15/2016 at 9:12 pm
    Watcher,
    That part of the text that was quoted from ZH is totally wrong (like most of the MSM garbage) in way that it looks at the tomorrow's meeting. Russia is not negotiating any cuts at all with SA in Doha or vice versa. The whole meeting is about a possible attempt of negotiation only of oil production freeze of additional production in retrospect of Iran return to the oil market.
    AlexS, 02/15/2016 at 9:20 pm
    Ves,

    I agree. There will be no output cuts.

    Jimmy, 02/15/2016 at 9:44 pm
    KSA has 'cut' production in 6 out of the last seven months. Cut might not be the right word though as I suspect it was not a choice. It was thrust upon them by geology. KSA will IMO face month after month of decreasing production. They managed a production surge for a short while but that's all they had in them. They've shot their bolt. Iran probably has some good increases coming but that's about it, and not all of that Iranian increase will be exported.
    AlexS, 02/15/2016 at 10:17 pm
    This has nothing to do with geology.

    The increase in Saudi oil production in the summer season was due to peak demand from the domestic power generation for air conditioning.
    As demand moderated in the past several months, KSA slightly reduced output levels, while crude exports have actually increased.

    KSA oil production and exports in 2015 – Jan. 2016
    sources: JODI, OPEC

    Jimmy, 02/15/2016 at 10:35 pm
    Thanks AlexS,

    Do you believe that the slightly reduced production level of the last 6 of 7 months was optional? I tend not to. I feel they are producing every single barrel that they possibly can. They've got the peddle to that floor. No holding back.

    likbez , 02/15/2016 at 11:01 pm
    Alex,

    "There will be no output cuts."

    And here is GS analysis conveniently voiced by Bloomberg:
    http://www.bloomberg.com/news/articles/2016-02-15/putin-s-reward-for-doing-a-deal-with-opec-overshadowed-by-risks-ikogu2ez

    Looks like some negotiations are happening behind closed doors between Saudis and Russians (probably discussion over Iran return to the world oil market) despite thick smoke of disinformation from Bloomberg presstitutes.

    With French, Italian and Greek deals (and Spain deal in pipeline) it might well be that accommodation of Iran is already started in full force. The question is whether they are able to produce additional volumes of oil above 0.3 Mb/d that is expected (and actually already contracted) and if yes, when.

    Iraq and a couple Persian Gulf monarchies are on board for the cuts. Saudis need to pander to growing Wahhabi sentiments of its population. So they probably are not in order to "punish" Iran and Russia. Also hardliners are now in power. But as money evaporate from their coffers even hardliners might soften their position. Eventually.

    Still here is Bloomberg disinformation in full glory:

    As Russia's oil minister meets his Saudi Arabian counterpart in Doha on Tuesday, the world's second-largest crude producer faces numerous obstacles in cooperating on such a deal even if Putin decides it's in the national interest. Reducing the flow of crude might damage Russia's fields and pipelines, require expensive new storage tanks or simply take too long.

    So far Russia's top oil official have offered mixed signals. Energy Minister Alexander Novak has said he could consider reductions if other producers joined in. Igor Sechin, chief executive officer of the country's largest oil company Rosneft OJSC and a close Putin ally, said last week in London that coordination would be difficult because no major producer seems willing to pare output.

    BTW looks like Bloomberg intentionally distorted the position of Sechin. IMHO he is onboard about a one time cut around 1 Mb/d if it is implemented as a proportional cut by all major oil producers. As Russians most probably have a reasonably good intelligence about Persian Gulf countries they should understand the situation with new projects and natural decline of wells in Gulf which now will drive the world oil production dynamics.

    Saudi oil minister is now more like figurehead. Real power is in the hands of deputy crown prince Mohammed bin Salman. Here is French analyses:
    http://www.atlantico.fr/decryptage/et-homme-plus-dangereux-moyen-orient-est-indice-avez-probablement-jamais-entendu-parler-lui-2555562.html

    "… the strategy of the prince Mohammed Bin Salman is to push Iran to the fault in causing the tensions that can go up to a risk of open warfare that would force the west to choose Saudi Arabia against Iran …"

    "… The Prince Mohammed bin Salman is now the most powerful man in Saudi Arabia. It has exclusive access to his father, King Salman, and effectivly he can rule the coutries inread of him. He is head of his office, which means that nobody can contact or be received by the King without going through the son …"

    "… Saudi Arabia is extremely disturbed by the detente with Iran on the international scene. We are witnessing more or less a reversal of alliances, and of countries images in the eyes of the West. A short time ago, Iran was demonized in the West. Today, it is accepted as a normal partner. Iran, therefore, benefits from a relatively favorable treatment, while at the same time when the Arab monarchies, particularly Saudi Arabia, are seen as retrograde, unable to provide for reforms and creating the flow of Islamic radicals… The nature of Hezbollah, interference military and terrorists of Iran is currently forgotten. …"

    "… I think it will be very difficult to see any reapprochement with Iran in the coming months as Saudi Arabia has two hardliners in the young rising generation of leaders. The heir and the vice-inherit the Kingdom share the same radical line toward Iran. …"

    "… Moreover, Saudi Arabia pays very dear to his strategy of crushing oil prices, which makes it less able to buy social peace than before. Therefore, there is an internal demand of radicalism, because the discontent rumbles in the parts of the Saudi population fueled by the effects of the falling oil prices. …"

    "… If one wanted to summaries, we could say that to buy a peace with Islamist Wahhabi radicals, it is necessary to kill shia… besides, the Saudis have a genuine complex of encirclement by the Shiite states. They try to counter it by creating an opposite ark of Sunni radicals. …"

    "… even if this does not lead to open warfare, the tension between Saudi Arabia and Iran is sustainable, if only because this new generation of Saudis leaders is more combative. They differ from the former kings who belonged to a generation that was distinguished rather by its search for a compromise and some consensus. This is absolutely not the case for those two heirs of the throne. …"

    [Feb 12, 2016] An Interview with Larry Summers

    Notable quotes:
    "... Theres another aspect of the connection between secular stagnation and inequality that bears emphasis. Experience suggests that in an economy where there are more workers seeking jobs than there are jobs seeking workers, the power is on the employer side, and workers do much less well. A tight economy, where employers are seeking workers, shifts the balance of power toward workers and leads to higher pay and better benefits. That, in turn, leads to more spending being injected into the economy, which supports further economic growth. ..."
    "... But I also believe there are many areas in which its possible to reform policy to promote both economic efficiency and equality. One such area is policy to mitigate secular stagnation by promoting demand at times when there is slack in the use of resources. ..."
    "... Right, in a democracy, the elected leaders must view the voters as idiots and execute to the total opposite of the expressed policies of the candidates who won. ..."
    "... Paul Krugman and Larry Summers both have very good columns this morning noting the economys continuing weakness and warning against excessive rate hikes by the Fed. While I fully agree with their assessment of the state of the economy and the dangers of Fed rate hikes, I think they are overly pessimistic about the Feds scope for action if the economy weakens. ..."
    "... While the Fed did adopt unorthodox monetary policy in this recession in the form of quantitative easing, the buying of long-term debt, it has another tool at its disposal that it chose not to use. Specifically, instead of just targeting the overnight interest rate (now zero), the Fed could have targeted a longer term interest rate. ..."
    "... For example, it could set a target of 1.0 percent as the interest rate for the 5-year Treasury note, committing itself to buy more notes to push up the price, and push down the interest rate to keep it at 1.0 percent. It could even do the same with 10-year Treasury notes. ..."
    "... This is an idea that Joe Gagnon at the Peterson Institute for International Economics put forward at the depth of the recession, but for some reason there was little interest in policy circles. The only obvious risk of going the interest rate targeting route is that it could be inflationary if it led to too rapid an expansion, but excessively high inflation will not be our problem if the economy were to again weaken. Furthermore, if it turned out that targeting was prompting too much growth, the Fed could quickly reverse course and let the interest rate rise back to the market level. ..."
    "... Amazing how unconventional monetary is always the go-to option. Pessimism about the effectiveness of the Feds policy options is well warranted. You only need to look at the results of the last seven years. ..."
    economistsview.typepad.com

    Part of an interview of Larry Summers at Equitable Growth :

    ... When I went to graduate school in the 1970s, the prevailing view among economists, captured by Art Okun's book "Equality Versus Efficiency: The Big Tradeoff," was that equality and efficiency were both desirable, but they were likely to trade off-that more progressive taxation would achieve more equality but would inevitably in some way distort economic choices and, so, reduce efficiency, for example.

    I believe there are still many areas in which one does have to trade off equality versus efficiency. But I also believe there are many areas in which it's possible to reform policy to promote both economic efficiency and equality. One such area is policy to mitigate secular stagnation by promoting demand at times when there is slack in the use of resources.

    Recall that I defined secular stagnation as having at its essence an excess of savings over investment, desired saving over desired investment. There are many reasons for that. Some of them have to do, for example, with reduced investment demand because so much more capital can be purchased with fewer dollars. I think of the fact that my iPad has more computing power than a Cray supercomputer did when Bill Clinton came into office in 1993.

    One aspect of that excess in saving over investments is that rising inequality has operated to reduce spending. We are fairly confident that what economists call the "marginal propensity to consume" of those with high incomes is less than the marginal propensity to consume of those with middle incomes.

    And so the combination of rising inequality in the distribution of income across income levels and a shift in inequality toward the higher profit share slows economic growth. In normal times, such a change might be offset by easier monetary policy. But in the current environment, where interest rates are very close to the zero lower bound, the capacity for that kind of offset is greatly attenuated.

    There's another aspect of the connection between secular stagnation and inequality that bears emphasis. Experience suggests that in an economy where there are more workers seeking jobs than there are jobs seeking workers, the power is on the employer side, and workers do much less well. A tight economy, where employers are seeking workers, shifts the balance of power toward workers and leads to higher pay and better benefits. That, in turn, leads to more spending being injected into the economy, which supports further economic growth.

    And so, as Keynes recognized when he wrote to FDR in the late 1930s urging the importance of wage increases, measures that strengthen workers' capacity to earn income by increasing spending power can promote both equality and strengthen the economic performance of the country. ...

    pgl :

    Excellent interview with this as a key sentence:

    "But I also believe there are many areas in which it's possible to reform policy to promote both economic efficiency and equality. One such area is policy to mitigate secular stagnation by promoting demand at times when there is slack in the use of resources."

    Summers makes two arguments with respect to promoting aggregate demand:

    (1) his case for more infrastructure investment; and
    (2) his defense of the expansionary monetary measures taken by the FED from 2008 until recently.

    He does note that Obama started talking about "belt tightening" after Summers left the White House and to Summers regret.

    mulp -> pgl...
    Right, in a democracy, the elected leaders must view the voters as idiots and execute to the total opposite of the expressed policies of the candidates who won.

    Or do you think the voters were calling for massive explosions of debt and massive increases in jobs forced by government policies to force exploding labor costs which would necessarily result in exploding consumer prices when they voted Democrats out and Republicans in?

    Perhaps you think Bernie Sanders got far more leftist laws passed by being a radical leftist socialist in Congress able to lead a revolution in Congress to redistribute wealth?

    The Republican Party is divided by Obama highly divisive politeral tactics which played Republicans against Republicans, doing a far better job dealing with Republicans than Clinton's "triangulation" which implemented massive austerity tempered by government dictates that were highly profitable to crony capitalists in the computer industry. Bush-Cheney served a different set of crony capitalists leading to an implosion in the tech sector dragging down pretty much everything good for the American people. Obama has since created incentives with rewards to both sets of crony capitalists, that has now imploded for the Bush-Cheney crony capitalists (fossil fuels) but still reward the Elon Musk, Bezos, google, hollywood, Ellison, Apple sector.

    Neither Clinton nor Obama were allowed to help the bottom 50% of workers because voters demanded austerity by voting for Republican control of Congress in 1994, 1996, 1998, 2000, 2002, 2004, 2010, 2012, 2014, and if Sanders is the Democratic nominee in 2016, then Republican control of Congress in 2016, 2018, and probably 2020 and 2022. And only a Republican president will end the austerity, but it will lead to slower growth, high unemployment, likely severe recession, but wars. Just like the end of austerity of Bush-Cheney.

    pgl said in reply to mulp ...
    WTF this has to do with what Summers wrote??? Never mind. So much babbling, so little time.
    JohnH :
    "One aspect of that excess in saving over investments is that rising inequality has operated to reduce spending. We are fairly confident that what economists call the "marginal propensity to consume" of those with high incomes is less than the marginal propensity to consume of those with middle incomes.

    And so the combination of rising inequality in the distribution of income across income levels and a shift in inequality toward the higher profit share slows economic growth."

    Hate to say this, but Summers is making a lot of sense.

    The way to address the problem of slow economic growth is to tax the wealthy, who have a low propensity to consume, and use the funds for government programs (infrastructure, education, healthcare) and redistribution to the poor...exactly as I have been arguing.

    JohnH said in reply to JohnH...
    pgl should take up his fight with Larry Summers, not me.

    But Summers is fairly confident...as pgl just can't accept that a) increasing inequality reduces consumption and economic growth and that b) addressing inequality by taxing high incomes and wealth would lead to increased consumption and economic growth if it was spent on social programs and redistribution to those with a high propensity to consume (the poor).

    It appears the we now have two pgls here--one that support high top tax brackets and another who opposes taxing the wealthy.

    Or maybe we just have a single, very confused dude!

    BenIsNotYoda -> JohnH...
    pgl's solution is - give them a rate cut. always. grandmother is ill - give her a rate cut
    pgl said in reply to JohnH...
    You do know BINY is cheating on you. Good luck getting back with granny.
    BenIsNotYoda -> JohnH...
    he is not happy because his cheap stocks are getting cheaper.
    JohnH said in reply to BenIsNotYoda...
    I already called him on demanding QE4, which he advocated as soon as stocks went into correction territory back in August.

    It was the same lousy economy. But as soon as stocks started to correct, and pgl's portfolio was getting hurt, he jumped right into action!

    lower middle class -> pgl...
    I'm trying to avoid being confused.

    We hold the folowing as true, correct?

    MPC is less than one.

    "Income" refers to "disposable income"

    As wealth and income rise, consumption also rises.

    Falls in income do not lead to reductions in consumption because people reduce savings to stabilize consumption. (the poor get poorer by consuming wealth; wealth inequality accelerates?)

    Increases in income do not lead to increases in consumption because people add to savings to stabilize consumption.
    (high income people increase wealth faster the low income people while consumption increases; wealth inequality decelerates?)

    JohnH said in reply to lower middle class...
    General propensity to consume depends on income. Wealthy people tend to save a good chunk of their incomes...and become wealthier. Most people save a very small part of their incomes (middle class) or nothing at all (poor). Obviously there are exceptions to this generalization, as pgl is quick to point out with his tearful evocations of the plight of the 'hand to mouth' rich. But the general pattern is as I have described.

    Marginal propensity to spend is a little more complicated, and a lot depends on whether the additional money is seen as a windfall or not. For people who do not generally save much, windfalls may be saved for a while or go to pay off debt, or be spend on durable goods or just spent.

    Peter K. :
    "In normal times, such a change might be offset by easier monetary policy. But in the current environment, where interest rates are very close to the zero lower bound, the capacity for that kind of offset is greatly attenuated."

    Larry Summers agrees with the obnoxious trolls like JohnH and BINY. Monetary policy doesn't help.

    I agree with Dean Baker and Bernie Sanders. (This is not to say fiscal policy doesn't work better. Funny how the trolls always toss out red herrings.)

    http://cepr.net/blogs/beat-the-press/paul-krugman-larry-summers-and-the-fed-s-unused-ammunition

    Paul Krugman, Larry Summers, and the Fed's Unused Ammunition by Dean Baker

    Paul Krugman and Larry Summers both have very good columns this morning noting the economy's continuing weakness and warning against excessive rate hikes by the Fed. While I fully agree with their assessment of the state of the economy and the dangers of Fed rate hikes, I think they are overly pessimistic about the Fed's scope for action if the economy weakens.

    While the Fed did adopt unorthodox monetary policy in this recession in the form of quantitative easing, the buying of long-term debt, it has another tool at its disposal that it chose not to use. Specifically, instead of just targeting the overnight interest rate (now zero), the Fed could have targeted a longer term interest rate.

    For example, it could set a target of 1.0 percent as the interest rate for the 5-year Treasury note, committing itself to buy more notes to push up the price, and push down the interest rate to keep it at 1.0 percent. It could even do the same with 10-year Treasury notes.

    This is an idea that Joe Gagnon at the Peterson Institute for International Economics put forward at the depth of the recession, but for some reason there was little interest in policy circles. The only obvious risk of going the interest rate targeting route is that it could be inflationary if it led to too rapid an expansion, but excessively high inflation will not be our problem if the economy were to again weaken. Furthermore, if it turned out that targeting was prompting too much growth, the Fed could quickly reverse course and let the interest rate rise back to the market level.

    Of course, it would be best if we could count on fiscal policy to play a role in getting us back to full employment (lowering supply through reduced workweeks and work years should also be on the agenda), but the Fed does have more ammunition buried away in the basement and we should be pressing them to use it if the need arises.

    Paine said in reply to Peter K....
    Excellent

    Despite a finessed genuflex to inflation

    JohnH said in reply to Peter K....
    "Larry Summers agrees with the obnoxious trolls like JohnH and BINY. Monetary policy doesn't help."

    Amazing, isn't it?

    Agreed: "Of course, it would be best if we could count on fiscal policy to play a role in getting us back to full employment." And the best course is higher taxes on the wealthy, who have more than what they know with to do with.

    Taxes on the wealthy directly tackles inequality, increased debt doesn't.

    JohnH said in reply to Peter K....
    Amazing how unconventional monetary is always the go-to option. Pessimism about the effectiveness of the Fed's policy options is well warranted. You only need to look at the results of the last seven years.

    So why not advocate unconventional fiscal policy...which at this point would include taxing the wealthy to fund stimulus? Why constantly flog the debt option, which does nothing to directly tackle inequality?

    pgl said in reply to JohnH...
    You need to shut up and go read that Ando-Modigliani paper on consumption. Once again you got everything exactly backwards. But then you are the dumbest troll ever.
    JohnH said in reply to BenIsNotYoda...
    pgl was against tax increases on the wealthy... before he was for tax increases on the wealthy...before he was against tax increases on the wealthy...

    but he has always been for lots more debt...

    PPaine :
    " one persons rent may be another persons incentive "

    That relies on a muddled use of the term rent

    Which by construction
    Means
    non supply regulating revenue or income

    But still a point lies under that mud dimness of articulation

    Separating rents from incentives ain't easy

    But in the last analysis
    Very often it's very doable

    Take my specialty
    Ground rent
    There are clever ways to tease out the rent

    [Feb 09, 2016] Stability breeds instability

    Economist's View

    New Deal democrat :

    On the specific point of the artilce, this strikes me as a similar theory to Minsky's "stability breeds instability" theory. Also I seem to recall Prof. Thoma posted an article showing that the tightness or looseness of credit conditions were a good long leading indicator of conditions about 2 years later.

    As an expansion goes on, both businesses and consumers take increasing risks, having been previously rewarded for risks taken. Thus they leave less and less of a margin of safety. This makes it easier for any given shock to overcome that margin, causing both businesses and consumers to retrench. Thus a recession begins.

    I'm not sure about businesses, but consumers have been playing it safe throughout most of this recovery, with the personal savings rate increasing over the last few years. So, relatively speaking, for now consumers have a decent margin of safety.

    Ben Groves -> New Deal democrat...
    Right, but the personal savings rate fell well out of line in the 00's and actually contracted in 2007-8. More like restocking than playing it safe.
    likbez -> New Deal democrat...
    In addition gas prices are still low.
    likbez -> New Deal democrat...
    On the specific point of the article, this strikes me as a similar theory to Minsky's "stability breeds instability" theory.


    And that is deeply true. Minsky (actually this is Hegel) was and still is right.

    Hyman Minsky simply stressed that people's response to stability in financial markets always engenders instability as it encourages more risky behavior. Such behavior is not necessarily irrational, as there are profits to be earned and bonuses to collect as long as the good times last.

    In fact, the cycle may extend as long as credit flows and people are hungry for risk. Yet according to Minsky's casino capitalism credit cycle always heads inexorably toward a bust.

    At some point risk and reward became out of whack and people start reposition their portfolios defensively, increasing cash allocations. At this point house of cards folds.

    [Feb 09, 2016] All this obsession with miniscule rate changes has obscured the need for the Fed and politicians to make significant changes

    February 08, 2016 | economistsview.typepad.com

    JohnH said...

    It is certainly appropriate to question the condition and longevity of this 'recovery,' which was never experienced by most Americans, whose incomes are mired back where they were two decades ago.

    Can we infer by all this that liberal economists are finally becoming reflective about the Fed's failure to ignite growth? Old nostrums die hard.

    Unfortunately, all this obsession with miniscule rate changes has obscured the need for the Fed and politicians to make significant changes, so that the benefits of low rates are felt throughout society, not just by Wall Street, the wealthy, and affluent homeowners with mortgages.

    And, instead of constantly arguing against austerity, why not aggressively tout high taxes on the wealthy to pay for stimulus, which would generate economic growth and address inequality in one fell swoop!

    JohnH said in reply to djb...

    djb is obsessed with "the rate."

    Why not get obsessed with the fact that the Fed could not stimulate new rental housing, despite historically low mortgage rates? As a result of the housing shortage, rents are skyrocketing, sucking up incomes, already hit hard by the unending recession. Result: less money available for consumption, more money into the pockets of real estate moguls.

    Why not obsess about real credit card rates, which are higher than they were in 2007? Result: less money available for consumption, more money to VISA and its share holders.

    But no, 'liberal' economists obsess only about "the rate," which affects almost nobody but Wall Street banks, their wealthy clientele, and affluent mortgagees.

    Let's face it, the Fed has failed in part because low rates and their effects failed to trickle down much. But 'liberal' economists could care less about this. All they care about is "the rate!"

    If 'liberal' economists cared half as much about why low rates are not diffusing throughout the economy as they care about "the rate" for Wall Street, then we could believe that they care about the general welfare, not the interests of the 1%.

    [Feb 08, 2016] Tech stock collapse sure looks like bubble popping

    finance.yahoo.com

    Almost all technology stocks are getting hammered yet again on Monday. Salesforce.com (CRM) was down 6% while Facebook (FB) and Microsoft (MSFT) had lost 3%, for example, in morning trading.

    And while many see it as a continuation of Friday's rout sparked by LinkedIn's (LNKD) weak outlook for the rest of the year, the damage has been piling up for weeks. Investors are fleeing almost all tech names over concerns about the slowing global economy in general and a reassessment of the potential growth of online and "cloud" markets more specifically.

    LinkedIn, pummeled by an unprecedented 44% one-day loss Friday, was one of the few tech stocks rising on Monday, as bargain hunters pushed its shares up 3% in early trading. Still, the shares have lost more than half of their value since the end of 2015.

    The widespread tech crash is all the more surprising because almost everyone thought there was no bubble in the tech sector. Last year's market for initial public offerings of tech companies was the slowest since 2009 (and performed poorly throughout the year), slightly more seasoned public tech companies appeared to have already crashed last spring and most of the big tech companies, such as Apple (AAPL), IBM (IBM) and Cisco Systems (CSCO), trailed the market and appeared undervalued by historical measures. Only the so-called FANG stocks -- Facebook, Amazon (AMZN), Netflix (NFLX) and Google's Alphabet (GOOGL) -- did well, with an average return of 83% each in 2015.

    But, it turns out, there was still plenty more downside risk to go around. LinkedIn is still off by more than 40% since it reported earnings after the market closed on Feb 4. Although fourth quarter adjusted earnings per share of 94 cents and revenue of $862 million beat the average Wall Street analyst estimate, the professional social networking company said it would earn only 55 cents on revenue of $820 million in the next quarter. And for the full year of 2016, revenue of $3.6 billion to $3.65 billion was less than the $3.9 billion Wall Street had been expecting.

    Such a modest disappointment has sparked a massive reassessment of the potential for many Internet stocks. With investors in a panicky mood, the carnage has spread across much of the tech sector but stocks with online business strategies similar to LinkedIn's have been hit especially hard. Workday (WDAY), which provides online software for human resources, was down 7% midmorning on Monday and 37% for the year. Twitter (TWTR) lost 4% and was down 35% for the year. And Adobe Systems (ADBE) was off 5% on Monday and 20% for the year. A daily index compiled by venture capital firm Bessemer Venture Partners of 47 publicly traded cloud software stocks lost 17% just on Friday.

    And those famous FANG stocks? They're all down in 2016, as well. After its 3% Monday drop, Facebook was still best of the bunch, showing a modest 4% loss for the year. Amazon was also down 3% on Monday but carries a crushing 28% loss for the year. Netflix was a rare gainer, up 1%, but still off 27% for the year. And Google was down 1% on Monday and 11% for the year.

    [Feb 08, 2016] Momo Bad News JPMs Quant Guru Kolanovic Confirms Tech Bubble Has Burst... Again

    Zero Hedge
    Just over two weeks ago, JPM's Marko Kolanovic, whose unprecedented ability to predict short-term market moves is starting to seem a little bizarre, warned that the next "significant risk for the S&P500" was the bursting of the "macro momentum bubble." Specifically, he said that there is an emerging negative feedback loop that is "becoming a significant risk for the S&P 500" adding that "as some assets are near the top and others near the bottom of their historical ranges, we are obviously not experiencing an asset bubble of all risky assets, but rather a bubble in relative performance: we call it a Macro-Momentum bubble ."

    In retrospect, following tremendous valuation repricings of several tech stocks, last week's LinkedIn devastation being the most notable, he was once again right. And over the weekend, he did what he has every right to do: take another well-deserved victory lap.

    This is what he said in his February Market Commentary: " Tech Bubble Burst ?"

    In our 2016 outlook and recent reports, we identified a macro momentum bubble that developed over the past years. We explained its drivers (central banks, passive assets/momentum strategies, etc.) and called for value to outperform momentum assets. We also highlighted the risk of a bear market and recommended increasing exposure to gold and cash as well as increasing exposure to nondollar assets relative to the S&P 500 (EM Equities, Commodities, Value Stocks, etc.). Our view was that a likely catalyst would be the Fed converging toward ECB/BOJ (rather than proceed with planned ~12 rate hikes by end of 2018). In line with these published forecasts, the best performing assets YTD have been Gold (+9%) and VIX (+20%) while S&P 500 and DXY are down (-7%, and -2%, respectively). Momentum stocks are down more than 10% with an acceleration of the selloff in last days. Emerging Market and Energy stocks are starting to outperform the S&P 500 (MSCI Latin America by +5% and Energy by +1% vs. S&P 500 YTD). This specific pattern of asset moves is consistent with a Value-Momentum convergence. We think the outperformance of value assets over momentum assets is likely to continue .

    Investors often ask us how significant are distortions and risks in equity sectors that are related to a "macro momentum bubble." Specifically, the question is that of valuations in the Technology sector, i.e., "is there a Tech bubble"? Before we share our views, let's first review how passive investing and momentum strategies may have impacted performance of various equity sectors.

    Imagine a world in which most of the assets are passively managed and investors are focused on liquidity and short-term risk/reward. Companies that increased in size recently would keep on increasing, and those that got smaller would see further outflows. Past winners would also be considered low-risk holdings compared to past losers. The most successful managers would be those that replace fundamental valuation with a simple rule: buy what went up yesterday and sell what went down. Passive funds would do the same. It is hard to imagine this makes economic sense long term, but it is close to what equity markets experienced over the past several years. In 2013, the Sharpe ratio of the S&P 500 was ~2.7. Assuming a normal distribution of active asset returns, one could (incorrectly) conclude that being just an average (passive) investor one will outperform ~95% of all active investors. In 2014 and 2015, various momentum strategies delivered Sharpe ratios >2. The winning strategy was not just to go with the crowd, but to do what the crowd did yesterday. This type of trend following does not only apply to extrapolating price trends, but also extrapolating trends in fundamental stock data such as growth and earnings. Beyond a certain point, passive investing and trend following are bound to result in distorted equity valuations and misallocation of capital.

    While some parts of the Technology sector certainly have reasonable and even low valuations (see our US equity strategy outlook), segments of the Tech sector disproportionally benefited from momentum investing as well as investing based on extrapolation of past growth rates . For instance, a popular group of stocks held by investors is known by the abbreviation "FANG" (Facebook, Amazon, Netflix, Google). We use these stocks as an illustration for a broader group of similar stocks that have the highest rankings according to momentum and growth metrics (and surprisingly in some cases even low volatility metrics). Given that traditional value metrics look expensive when applied to this group, one can compare these momentum/growth companies on a new set of metrics. For instance, one can look at the ratio of current price to earnings that the company delivered over all of its lifetime (instead of just the past year). Another metric could be a ratio of CEO or founder's net worth to total company earnings delivered during its lifetime (see below):

    Aggregating all FANG earnings since these companies were listed, one arrives at a ratio of current price to all earnings since inception of ~16x. This can be contrasted to a ratio of price to last years' earnings for all other S&P 500 companies also at ~16x. We think this is extraordinary given that FANGs are neither small nor new companies. In fact, these are some of the largest companies in the S&P 500 and among the largest holdings of US retirees. Given that the three largest FANG stocks are now twice more valuable than the entire US S&P small-cap universe (600 companies), a legitimate question to ask would be " is such a high allocation by long-term investors to these stocks prudent?" Statistically, over a long period of time smaller companies outperform mega-caps ~75% of times. Note also that the current size ratio of mega-cap stocks to small-cap stocks is at highest level since the tech bubble of 2000. Furthermore, such allocation is also questionable from a risk angle . For example, the idiosyncratic risk of holding three stocks in one sector is certainly much higher than the risk of owning, e.g., ~1,000 medium- or small-cap companies diversified across all sectors and industries.

    Investors in high-growth stocks expect innovations to drive growth and sustain high valuation. They may even put their hopes in moonshot projects such as cars built by electronics makers, car makers building spaceships, or internet companies building drones. While many of these could result in important technological breakthroughs, they may also be signs of excess and destruction of shareholders' capital in the future. Recent examples of capital impairment in the tech sector are illustrated here and here, and more peculiar examples of past excess can be found here and here. In addition to extrapolated and often optimistic growth forecasts, some of the tech sub-industries have high idiosyncratic risks that are likely underappreciated by the market. Standard valuations models incorporate revenue, growth, and profit forecasts but often do not discount for the lifecycle risk of a business. To illustrate: while we are still traveling in aircraft designed over 40 years ago, social network users' preferences have changed drastically over the past decade (e.g., Friendster and Myspace). A shorter lifecycle is related to low barriers to entry and rapid changes in what is deemed fashionable by young generations (e.g., one cannot build a jetliner in a dorm room, and they don't go out of fashion as apps do).

    In summary, we think that the biases of momentum investing and passive indexation have resulted in valuation distortions across assets as well as equity segments including Technology . Over the past years this trend has picked winning assets, sectors, and stocks often with less regard to fundamental valuation and more regard to momentum and extrapolated growth. We believe that 2016 may result in a reversion of this trend that will give an opportunity to active and value investors to outperform passive indices and momentum investors . Even if this rebalancing comes as a result of market volatility and broader equity declines, long term it will benefit capital markets and the efficient allocation of capital .

    * * *

    Only problem is that this capital reallocation will means countless momentum chasers 'smart money managers' will be out of a job in very short notice.

    Then again, judging by some initial reactions, even formerly steadfast believers in the FANGs are starting to bail: moments ago CNBC reported that Mark Cuban announced that he purchased options to sell against his entire stake in Netflix, to wit: "For those of following my stock moves, I just bought puts against my entire Netflix position. "

    Cuban posted comments on Cyber Dust social media platform on Friday. Result: NFLX already down -4%, with FB and other tech momos hot on its heels.

    [Feb 08, 2016] GRANTHAM The stock market sell-off makes me nervous, but I fear the big crash is coming later

    finance.yahoo.com

    In his latest quarterly outlook, Grantham, cofounder and chief investment officer at GMO, outlines his views on the markets and the economy.

    And in somewhat of a contrast to his recent commentary, sees the oil crash as a big tailwind for the economy and doesn't think the stock market, though it is expensive and potentially heading into a bear market, is going to crash.

    "Looking to 2016, we can agree that uncertainties are above average," Grantham writes.

    "But I think the global economy and the U.S. in particular will do better than the bears believe it will because they appear to underestimate the slow-burning but huge positive of much-reduced resource prices in the U.S. and the availability of capacity both in labor and machinery."

    Grantham adds (emphasis ours):

    As always, though, prudent investors should ignore historical niceties like these and invest according to GMO's rather depressing 7-year forecast. The U.S. equity market, although not in bubble territory, is very overpriced (+50% to 60%) and the outlook for fixed income is dismal.

    At current asset prices no pension fund requirements can be met. Thus, we should welcome a major market break that will leave us with more reasonable investment growth potential for the longer term, but I suspect that we will have to wait patiently for such a major decline.

    The ability of the market to hurt eager bears some more is probably not exhausted. I still believe that, with the help of the Fed and its allies, the U.S. market will rally once again to become a fully-fledged bubble before it breaks. That is, after all, the logical outcome of a Fed policy that stimulates and overestimates some more until, finally, some strut in the complicated economic structure snaps. Good luck in 2016.

    OK, so maybe not bullish, per se, but Grantham is definitely sounding the alarm on not sounding the alarm on a stock market bubble and resulting crash.

    Stocks

    Over the last 18 months, stocks are basically flat in what has been by far the most difficult period for investors since the financial crisis.

    And this period has really been defined by three things: a crash in oil prices, a continued and relentless slowing of the Chinese economy, and a change in Federal Reserve policy.

    On top of all this is the decline in profit margins, which Grantham has called the "most mean-reverting series in finance," implying that the long period of elevated margins we've seen from American corporations is most certainly going to come an end. And soon.

    Profit margins are near record highs, and Grantham expects them to fall.

    In Grantham's view the Fed holding off on raising rates all the way until December 2015 staved off what could have been a really disastrous year for stocks given the weakness in oil prices and anxiety over China's economy.

    And continued assistance from the Fed is likely to send stocks higher, or at least stabilize them somewhat.

    The question, then, is whether this sends stocks into a "blow-off-top" where, as Grantham outlines, you'd expect to see a two-standard-deviation event with stocks rocketing higher and the S&P 500 heading to 2,300 before the big crash.

    "I must admit to feeling nervous for this year's equity outlook in the U.S," Grantham writes. "But I am not entirely convinced. Sure, we can have a regular bear market. That is always the case. But the BIG ONE? I doubt it."

    Oil

    In addition to not being (overly) concerned with the prospects of a new stock market crash, Grantham also thinks we're about to see the good side of the oil crash that has been a long-awaited part of the US economic narrative in the last year.

    "The largest hits from the major oil company responses are behind us, although at $30/barrel (and maybe less) there will be some further retrenchment," Grantham writes.

    The oil crash, charted.

    He adds: "And now comes the matching response from us, the consumers. Everything we buy has cheaper input costs. The major item of gasoline purchases is a steady jolt of encouragement. Heating bills are also much lower. Could there be a better financial input than this to the group that has been hurting for 30 years - the median wage earner? Not easily."

    This is good!

    Everything, it seems, is getting cheaper, and according to the latest data out of the BLS released Friday, our paychecks are getting bigger as average hourly wages grew 2.5% over last year in January, roughly matching the largest increase of the current economic cycle (December's gains were revised higher to show annual growth of 2.7%.)

    But Grantham goes a step beyond the standard, "Low oil means more spending for consumers" line of thinking (which is why he's one our favorite market thinkers to track).

    Grantham further argues that increasing commodity prices, as much as anything else, have been and will be factors ahead of recessions.

    Because while 2008 was all about the crash in housing and the stress at major banks, the rapid rise in oil prices and other commodities stressed consumers as much as anything else, in Grantham's view.

    And just as this rise was overlooked eight years ago, the crash in prices and the delayed - but positive - feedback to consumers and the economy has been forgotten by the market.

    But the benefits are coming. Now.

    "Market opinion now, though, impressed with the early negatives that it should have expected and because the offsetting stimulus effect is delayed and weakened initially by some understandable increases in savings, is doing the opposite," Grantham writes.

    "[The market] is underrating what will very likely become an important economic tailwind for the next several quarters. Reflecting current opinion, Luke Kawa, a writer for Bloomberg reviewing the oil situation claims, 'One of the biggest surprises in economics has been how the world responded to a period of lower energy prices.' Well, the economic world is easily surprised."

    Read Grantham 's full note here " gmo.com

    [Feb 04, 2016] Pitchfork Time Elites Have Lost Their Healthy Fear Of The Masses

    An interesting, but not a deep, discussion about the possibility of uprising against the neoliberal elite in the current circumstances...
    Notable quotes:
    "... Is it time for pitchforks to restore the natural orders of fear yet? ..."
    "... With the collapse of the Soviet Union and the spread of global capitalism, today's elites have lost the sense of fear that inspired a healthy respect for the masses among their predecessors . Now they can despise them as losers, as the aristocracy of ancien régime France despised the peasants who would soon be burning their châteaux. Surely today's elites are going to learn how to fear before we see any reversal of the recent concentration of wealth and power. ..."
    "... will goldman sucks n shitty bank loan me money to purchase a pitchfork? http://theconservativetreehouse.com/2016/02/03/update-fec-informs-ted-cr... ..."
    "... It really doesn't matter what *ism society embraces. What matters more is is the power elite greedy enough to sell out their own kind? ..."
    www.zerohedge.com

    Zero Hedge

    The following reader comment, posted originally in the FT is a must read, both for the world's lower and endangered middle classes but especially the members of the 1% elite because what may be coming next could be very unpleasant for them.

    Elites have lost their healthy fear of the masses

    Sir, Martin Wolf (" The losers are in revolt against the elite ", Comment, January 27) and Andrew Cichocki ("Elites are listening to the wrong people ", Letters, January 29) skirt the key issue: global elites have lost a healthy sense of fear.

    From the time of the French Revolution until the collapse of communism, what successive generations of elites had in common was a sense of fear of what the aggrieved masses might do . In the first half of the 19th century they worried about a new Jacobin Terror, then they worried about socialist revolution on the model of the Paris Commune of 1871. One reason for the first world war was a growing sense of complacency among European elites. Afterwards they had plenty to worry about in the form of international communism, which remained a bogey until the 1980s.

    With the collapse of the Soviet Union and the spread of global capitalism, today's elites have lost the sense of fear that inspired a healthy respect for the masses among their predecessors . Now they can despise them as losers, as the aristocracy of ancien régime France despised the peasants who would soon be burning their châteaux. Surely today's elites are going to learn how to fear before we see any reversal of the recent concentration of wealth and power.

    Is it time for pitchforks to restore the natural orders of fear yet?

    h/t @ WallStCynic

    Looney

    Is it time for pitchforks to restore the natural orders of fear yet?

    Oh, honey, I thought you'd never ask… ;-)

    Goliath Slayer

    How they turned us into Pavlov Dogs >> http://wp.me/p4OZ4v-1zD

    Stuck on Zero

    It's hard to get rid of most of the elites because they have tenure.

    tarabel

    And most people wouldn't have the faintest idea of where to buy, or more probably rent, a pitchfork anyhow. As for torches? What, are you crazy? Those things are dangerous and would void our insurance policy.

    bamawatson

    will goldman sucks n shitty bank loan me money to purchase a pitchfork? http://theconservativetreehouse.com/2016/02/03/update-fec-informs-ted-cr...

    AldousHuxley

    It really doesn't matter what *ism society embraces. What matters more is is the power elite greedy enough to sell out their own kind?

    Future Jim

    If you think that freedom is just another ism, then you have been played.

    It is not about greed. It is about power and control. Money is just a means to that end.

    Their own kind? You mean their own race ... their own nation ... their own religion ... ?

    Cadavre

    And a roasting spit and rope to tie em by the ankle to the cherry trees lining the national mall, Musollini style. Urinals hanging from cherry trees. Only in America.

    One does wonder how inbreds surrounded by expensive advisors so easily lost any shred of fight-o-flight survival skills. Guess the extra bling allows them to dream false dreams.

    eforc

    The ones who think they are 'top dog' are about to find out the hard way, there is something much bigger at work...

    "6. The people, under our guidance, have annihilated the aristocracy, who were their one and only defense and foster-mother for the sake of their own advantage which is inseparably bound up with the well-being of the people. Nowadays, with the destruction of the aristocracy, the people have fallen into the grips of merciless money-grinding scoundrels who have laid a pitiless and cruel yoke upon the necks of the workers.

    7. We appear on the scene as alleged saviours of the worker from this oppression when we propose to him to enter the ranks of our fighting forces - socialists, anarchists, communists - to whom we always give support in accordance with an alleged brotherly rule (of the solidarity of all humanity) of our social masonry. The aristocracy, which enjoyed by law the labor of the workers, was interested in seeing that the workers were well fed, healthy, and strong. We are interested in just the opposite - in the diminution, the killing out of the goyim. Our power is in the chronic shortness of food and physical weakness of the worker because by all that this implies he is made the slave of our will, and he will not find in his own authorities either strength or energy to set against our will. Hunger creates the right of capital to rule the worker more surely than it was given to the aristocracy by the legal authority of kings.

    8. By want and the envy and hatred which it engenders we shall move the mobs and with their hands we shall wipe out all those who hinder us on our way."

    --The Protocols

    freak of nature

    Fear might be masked, but it's still there.

    http://www.washingtontimes.com/news/2015/sep/30/angela-merkel-caught-on-...

    Memedada

    http://www.rense.com/general45/proto.htm - they're fake.

    Mr. Universe

    The thing is that there are going to be a LOT of folks who thought they were elites. Instead they will be thrown under the bus of the approaching hoards to slow them down while the real elites make sure no one escapes that shouldn't be.

    They no longer fear the masses as they control the cops and the narrative. What will really work and is almost unstoppable is the ghost in the machine. Seemingly random acts of sabotage, just think if the internet went down for even 2 or 3 days. Who would it hurt most, average folk or ? I have a dream...

    wildbad

    https://www.youtube.com/watch?v=USk-ECjYEhI

    Lorca's Novena

    Lol those guys are so blackwater.... It is illegal to have a standing "army" on 'murrican soil. Private for hire jagoffs arent. And no, it wasnt the national guard.

    Chris Dakota

    60% of the people who live in Burns work for the BLM.

    Looney

    Oops! ;-)

    alexcojones

    I think Pitchforks are way too tame. If this patriot lived today he would be decalared a TERRORIST

    The First Hero of the American Revolution

    Mark Mywords

    " Surely today's elites are going to learn how to fear before we see any reversal of the recent concentration of wealth and power."

    Surely, you jest. The proles won't attack the elites. They won't be able to find them, or get to where they live.

    Tyler(s), you need to stop posting such meaningless tripe. When the serfs rise up, they will attack what is around them. As always.

    bbq on whitehou...

    The internet doesnt forget or forgive transgressions. Sins of the father shall be paid for by their sons.
    "Where are you going to run, where are you going to hide; no where because there is no where left to run to." - Body snatchers

    tarabel

    I think you are correct so far as you take your argument. Yes, they will START on their own neighborhoods. The depth of the fall can be graphed against how far they will go afterwards.

    El Vaquero

    Then we just cut their supply lines.

    knotjammin2

    It is our son's and daughter's who protect the elitist assholes. We know where they built their bugouts and landing strips. We built them. We know where the air vents are for their underground bunkers. We built them. We know where the diesel tanks are to power their generators and you can't hide solar panels. No, we know where there going and how to get to them. Soon!!

    Mr. Universe

    Now you know why the hawaiian's, when they sent a worker down the side of a cliff to bury the chiefs bones in that space reserved for the Ali'i, they "accidently" let go of the rope while he was climbing back up...oopppps, sorry bout 'dat brah.

    indygo55

    "The proles won't attack the elites. They won't be able to find them, or get to where they live."

    Oh you mean like the French Revolution or the Chinese Revolution? Like that?

    HardAssets

    No, the proles do little of substance. But, the time is reached when even their paid off guard dogs will be tired of the insanity that destroys their own extended families. (The psychopaths can't help but push it to the extremes. That is their egotistical nature. Theyve been indulged since they were infants.) When that day of reckoning comes, the criminals will be very afraid.

    The EU 'leadership' bringing in massive outside foreign populations to destroy the existing culture and nation-state is a potential match for the fuse of anger. We see police carrying out orders, but what do they really think ? How bad will they let it get ? Even the Red Army troops refused to go along with it all when the grandmas scolded them for taking part in rolling the tanks toward their own people. And those troops said "Nyet, no more of this." And the USSR was no more.

    conraddobler

    Maybe they haven't played a lot of sims?

    I used to love the old sims of feudal japan where you could set your tax rate at whatever you wanted but the higher you set it the more likely you would get a peasant revolt.

    What's going on is precisely this:.....

    They have learned how to set the tax rate at whatever percentage won't cause utter chaos and then absolve themselves from said taxes through loopholes AND THEN add on top stealth taxes in the form of currency debasement AND THEN on top of all this they've built a ponzi scheme debt based fiasco that is entirely unsustainable.

    I gotta hand it to them they have managed so far to avoid the ire of the peasant class, however methinks that once this shit show rolls into town and starts playing nightly as in reality comes a callin then these same folks are going to need to hide off planet.

    Seriously I'd advise them to look into space travel.

    DipshitMiddleCl...

    The elites today were related to the elites of yesterdays revolutions. They have learned and are keeping track of everything and with the advent of big data and lots of computing power, they know how much time they have before SHTF. They have quants assessing risk daily, and not just market risk..geopolitical and other stuff.

    They dont fear us because they know they can keep ramping up poisoning of our food and other stupid social media gimmicks.

    If all else fails, the jackboots will come out in full force.

    They've been testing and training these detention methods for close to 100 years. From the gulags of Russia to the West Bank / Gaza strip today of Israel.....its being tried and trued.

    And we're next!

    ~DipshitMiddleClassWhiteKId

    carlnpa

    The past nine months have set record monthly background checks. I believe we as a "group" know and feel our existence is in danger, and are responding accordingly.

    alexcojones

    Certainly a patriot CANNOT do it through the ballot box,

    Iowa: Days before the Iowa caucuses in 2012, Ron Paul held a commanding lead in the polls and all the momentum, with every other candidate having peaked from favorable media coverage and then collapsed under the ensuing scrutiny. Establishment Republicans, like Iowa's Representative Steve King (R), attempted to sabotage Paul's campaign by spreading rumors he would lose to Obama if nominated. . . Iowa Governor Terry Barnstad told Politico , "[If Paul wins] people are going to look at who comes in second and who comes in third. If Romney comes in a strong second, it definitely helps him going into New Hampshire". The message from the Iowa Governor to voters of his state was: a vote for Ron Paul was a wasted vote.

    How t he Republican Party Stole the Nomination from Ron

    August

    The RNC and their minions would have prevented a Ron Paul presidential nomination, by any means necessary - up to and including a terrible, just terrible, plane crash. All those lives lost....

    pipes

    They DID prevent the nomination by any means necessary...and did so, short of crashing a plane. The underhanded shit they pulled in '12 sealed their fate.

    Kirk2NCC1701

    In that case, the Libertarian Party needs to go "full Zio-mode": Take no BS and no prisoners.

    Problem is, they are too "individualistic" (divided, heterogenous), and too 'Christian' (raised in "Religion of Serfs") to create another American or French Revolution, or bring about real change.

    Note that in the American Revolution, its Founders realized that the influence of Clerics needed to be curtailed, and so they invented the "Seperation of Church and State". The French, OTOH, called a spade a spade, and got rid of the Church completely.

    Amerika: Where kids are taught by their parents to believe in the Tooth Fairy, Easter Bunny and Santa Claus -- all the while they believe in "Santa for Grownups", i.e. Winged Nordic Humans (Angels) and a Sky God.

    I have ZERO faith that Libertarians will do anyting, other than talk, blog, hold meetings, conventions, have weekend warrior games, or buy any number of Doomsday Products and Services. IOW.. they'll do anything and everything, but March or Protest en mass. They won't even do TV program, much less do a leveraged buyout of a TV channel.

    Like I said: "Too individualistic, to truly matter to TPTB". I WISH it were not to, but I'm just calling it as I see it. Alas. If I'm wrong, I'll jump for joy and click my heels.

    alexcojones

    BTW - Fuck Iowa

    And thank you Stanford for Stomping them in the Rose Bowl

    Pitchfork Voting Machines

    all-priced-in

    Do they have to get off the sofa or can they just send it in on Instagram?

    [Feb 01, 2016] Faber Cant see another bull market in my lifetime

    www.cnbc.com

    Faber: Can't see another bull market in my lifetime

    Jacob Pramuk | @jacobpramuk
    Wednesday, 27 Jan 2016 | 10:12 AM ET
    CNBC.com

    The world according to Faber</p> <p>Marc Faber, The Gloom, Boom &amp; Doom report, joins Fast Money to give his take on the current market conditions.

    Emerging market stocks will outperform U.S. equities when another bull market comes, noted bear Marc Faber contended Tuesday. But Faber sees one problem - he believes markets will not enjoy another bull run in his lifetime.

    Still, the Gloom, Boom & Doom Report publisher sees a potential recovery for some emerging market economies, particularly Russia and Brazil, which have endured a recent slowdown.

    "There are some that are extremely depressed that could have large rebound potential," Faber said during a Tuesday evening panel discussion at the ETF.com Inside ETFs conference in Hollywood, Florida.

    Stock prices have broadly fallen worldwide this year, with lower commodities prices and fears of a global slowdown contributing to investor concerns. Economies dependent on natural resources have been hit particularly hard. Brazil and Russia, once stars of the emerging world, have been damaged by oil as well as political issues.

    While Faber has made a name on pessimism, he contended that bright spots for potential growth still exist in emerging markets. He pointed to Cambodia and Vietnam, among other Asian economies.

    Mark Yusko, chief executive officer of Morgan Creek Capital Management LLC.
    Guy who called $30 oil year ago has more bad news

    "I wouldn't take an across-the-board negative view about emerging economies," Faber said.

    Another investor on the panel Tuesday stressed that market watchers should not package all emerging economies into one basket. Marten Hoekstra, CEO of Emerging Global Advisors, is particularly optimistic about growth prospects for India, the world's second-most populous country.

    His funds have attempted to benefit from consumer demand there through consumer discretionary and staple stocks, as well as health care, telecom and utilities companies. While Emerging Global's India Consumer ETF (INCO) has fallen this year, Hoekstra touted its prospects for long-term investors as consumer spending power grows in India.

    Bill McNabb, chairman, president and CEO of Vanguard Group
    Vanguard CEO: Expect less from stocks for a decade


    He stressed that the Indian economy does not rely on oil or natural resources, which reduces its downside risk if the commodities crunch persists.

    "If you're generally negative on oil, you're probably bullish on India," Hoekstra said.

    Mark Yusko, founder and CEO of Morgan Creek Capital Management, said during his annual "bold predictions" talk on Monday that India had attracted his attention and would perform better than most emerging economies.


    Despite Hoekstra's optimism, widely followed commodities commentator Dennis Gartman, who was also on the panel Tuesday, said that he had no immediate plans to invest in emerging market economies.

    "It is the continued reliance upon commodity prices that causes me a great deal of concern," he said.

    Gartman contended that corruption in some emerging market governments reduces the safety of investing in those locales.

    [Jan 30, 2016] How Central Banks (and Even Keynes) Misled the Public About Banking and Money

    Notable quotes:
    "... By Perry Mehrling, a professor of economics at Barnard College. Originally published at his website . ..."
    "... Yes, the money creation process has been a big lie for a long time. In any case the Bank of England came clean a couple of years ago and admitted that standard story of money creation was false. They even acknowledge that it is not properly explained in most money and banking textbooks, which is a staggering admission. ..."
    "... Paul Krugman wrote a column a couple of months ago where he claimed that banks take in savings from depositors and lend them out to borrowers which tells you either: 1) he doesnt know how banking works or 2) he is part of the conspiracy to keep the public in the dark. ..."
    "... The truth right from the mouth of the worldss oldest central bank. http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf ..."
    "... Yeah, I saw that. It is amazing that a supposedly foremost Princeton Nobel winning economist apparently doesnt understand where money comes from… ..."
    "... There is evidence that Krugman seems to have great difficulty admitting he was wrong. ..."
    "... And what he writes makes me think he doesnt know how banking works. I find it difficult to believe he is part of any conspiracy. But I may be wrong. ..."
    "... My take is that the fractional reserve and intermediation models are just ways of obfuscating the way banking actually works and the credit creation model is the accurate one. I have some advice for anyone who is struggling with the concepts which is as follows: always merge all the banks in the banking system into one bank in your mind. Assuming multiple banks as the author above does is irrelevant to the analysis and only serves to add confusion. ..."
    "... I enjoyed the article very much. And it does seem to me that money creation is made to seem very, very, complex. Now maybe Im just too stupid, but it always strikes me that when people simply describe something, they either really dont know, or they are trying to bamboozle you… ..."
    www.nakedcapitalism.com

    By Perry Mehrling, a professor of economics at Barnard College. Originally published at his website .

    In his recent paper, "A Lost Century in Economics: Three Theories of banking and the conclusive evidence" , Richard Werner argues that the old "credit creation theory" of money is true (empirically "accurate"), while both the newer "fractional reserve theory" and the presently dominant "debt intermediation theory" are false. For him, this matters mainly because the false theories are guiding current bank regulation and development policy, leading down a blind alley.

    But it matters also simply because we need correct understanding of how the economy actually works, "we" meaning not just economists but also the general public. "Today, the vast majority of the public is not aware that the money supply is created by banks, that banks do not lend money, and that each bank creates new money."

    Why is the public ignorant of the truth? Much of Werner's paper is devoted to an account of how the correct theory was pushed out of the conversation, first in the 1930s by the fractional reserve theory, and then after WWII by the debt intermediation theory. One culprit was a shift toward deductive and away from inductive methods. Another culprit, he suggests, was the self-interested "information management" by central banks, i.e. direct suppression of truth in their own publications. And in this suppression, he further suggests, Keynesian academics were at the very least complicit: "attempts were made to obfuscate, as if authors were at times wilfully trying to confuse their audience and lead them away from the important insight that each individual bank creates new money when it extends credit."

    In this history, Werner gives special attention to Keynes himself since Keynes seems to have held each of the three theories in succession throughout his life. Keynes' own intellectual trajectory thus foreshadows the subsequent evolution of monetary thought, and so probably is partly responsible for leading successive generations astray. Just so, one apparent legacy of Keynes is that the Bank of England is currently holding all three theories at the same time! "Since each theory implies very different approaches to banking policy, monetary policy and bank regulation, the Bank of England's credibility is at stake." BoE credibility is thus a third reason that all of this matters.

    But is it really true, as Werner claims, that these three theories are "mutually exclusive"?

    He is at considerable pains to show that they are mutually exclusive, by using a succession of stylized balance sheet examples. The credit creation theory says that banks make loans by creating deposits, essentially expanding their balance sheets on both sides by the same amount. (The borrower of course also expands his own balance sheet, the loan being his liability and the deposits being his asset. In my own "money view", I call this a swap of IOUs.) In this way, money (bank deposits) is created that was not there before.

    By contrast, the debt intermediation view says that banks make loans by lending reserves that they are already holding, essentially swapping one asset for another, these reserves having previously been obtained by someone's deposit. The balance sheet expands when the deposit is made, not when the loan is made. Banks merely intermediate between savers and borrowers, and do not create money.

    In between these two views, the fractional reserve view says that individual banks make loans by lending reserves, but that the banking system as a whole can and does create money, up to a multiple of reserve holdings. The banking system does create money, but only after and as a consequence of the central bank increasing reserves–this is the famous "money multiplier".

    So the difference between the theories seems clear, and it also seems like that difference should be testable empirically simply by watching actual bank balance sheets and seeing what happens when a loan is made. Does the balance sheet expand or does it not? With the cooperation of an actual bank, Werner books a dummy loan and finds that the balance sheet of the bank does in fact expand. This he takes to be scientific proof that the credit creation theory is correct and the others are false.

    Not so fast. Let's look a bit closer.

    Let me begin by admitting my sympathy for Werner (as I have already hinted by mentioning my own "money view" as a version of the credit creation view). In fact, Werner's heroes–H.D. McLeod and Joseph Schumpeter–are my own heroes as well, and I suspect that graduate school exposure to these authors sent him off on his own intellectual journey just as it did me. Even more, thirty years after that initial exposure, I find Werner's (co-authored) money and banking textbook "Where Does Money Come From?" one of the best introductions to the subject. Last fall I assigned Chapters 2 and 4 in the first two weeks of "Economics of Money and Banking" which I teach at Barnard College, Columbia University. I'm sympathetic.

    But I don't think these three theories are quite as mutually exclusive as he makes them out to be.

    For me, the central analytical issue is the distinction between "payment" and "funding" .

    Let us suppose, with Werner, that Citibank makes a mortgage loan to me of $200,000, simply by swapping IOUs. I then transfer my new asset (the new Citibank deposit) to you, and you transfer your house to me. As my payment clears, you have a new deposit in your own bank (let's say Chase, to make it interesting), Citibank has a "due to" at the clearinghouse, and Chase has a "due from". Again, to make it interesting, let's suppose that Citibank has no reserves, so it enters the interbank market to borrow some, from Chase. At the end of the day, what we see is that the Citibank balance sheet is still expanded, so is Chase's, and so is mine. Only your balance sheet stays the same size, since you have swapped one asset (your house) for another (money). That's the payments perspective.

    What about the funding perspective? If we follow the balance sheets through, it is clear that your money holding is the ultimate source of funds for my borrowing. (You lend to Chase, which lends to Citi, which lends to me.) In this sense, we can think of both Chase and Citibank as intermediaries, channeling funds from one place in the economy to another. But, in this example, there is no saving and there is no investment. The sale of the house adds nothing to GDP, it is just a transfer of ownership. The expansion of the banking system has facilitated that transfer of ownership by creating a liability (the deposit) that you apparently prefer to your house, at the same time acquiring an equivalent asset of its own (the loan). Citibank collects the spread between the mortgage rate and the interbank rate; Chase collects the spread between the interbank rate and the deposit rate.

    But all of that is only what happens right at the moment of payment. What happens afterwards depends on the further adjustment of all of these balance sheets. One way this could all work out is that Citibank packages my mortgage with others to create a mortgage backed security, and that you spend your Chase deposit to acquire a mortgage backed security (perhaps indirectly through a mutual fund that stands in the middle). In this scenario, the newly created money is newly destroyed, the balance sheets of both Citi and Chase contract back to their original size, and the end result is that you are funding my loan directly. But again, no saving and no investment, just a change in your asset allocation, away from money toward fixed income investment.

    Obviously this final scenario is a limiting case on one side. The limiting case on the other side is that you (or whoever you transfer your money to) are willing to hold the newly created money balances as an asset, so you continue to fund my loan indirectly. Now when Citibank securitizes and sells, it is able to repay its interbank liability to Chase, and for simplicity let's say that Chase uses that payment to acquire a different money market asset. One way this could all work out is that a shadow bank–money market funding of capital market lending–acquires the security and uses it as collateral for wholesale money market borrowing from Chase. Again, no saving and no investment, but the new money stays in circulation and is not destroyed.

    These are the limiting cases, and obviously anything in between is also possible, depending on the portfolio decisions of Citibank, Chase, and you. But in all the cases, the debt intermediation view of banking is perfectly consistent with the credit creation view of banking. One focuses on the ultimate funding, while the other focuses on the initial payment.

    That said, I have to agree with Werner that the credit creation process is all too commonly left out of the story–most modern courses never even mention the payments system–and it is a real (and important) question how this came to be so. It is a further real (and important) question why the intellectual memory of how the process actually works was left to marginalized sections of academia–Werner mentions specifically the Austrians and post-Keynesians. I'm not so sure that it was a central bank plot, though I do think that the shift in academic fashion toward studying equilibrium of a system of simultaneous equations played a role in obscuring the kind of dynamic balance sheet interactions that are the essence of the story.

    What I would emphasize however is not the negative but the positive. The fact of the matter is that today the credit creation view is out of the shadows, and no longer the exclusive property of the marginalized . In evidence of this, I would direct your attention to the two Bank of England papers that Werner himself cites: here and here . But I would add to that also the most recent report coming out of the Group of 30 "Fundamentals of Central Banking, Lessons from the Crisis" . On page 3 you will find the following:

    "In a barter economy, there can rarely be investment without prior saving. However, in a world where a private bank's liabilities are widely accepted as a medium of exchange, banks can and do create both credit and money. They do this by making loans, or purchasing some other asset, and simply writing up both sides of their balance sheet."

    That's the truth that Werner wants central banks to admit, and now it appears that they have admitted it. The next question is what difference it makes, and that's a question for next time. Already it should be clear that progress toward answering that question will require us to be more careful about issues of payment versus funding.

    P.S. BTW, the title of this post [at Merhling's site, which is "Great and mighty things which thou knowest not" [?]] is taken from Jeremiah 33:3 which Werner references in a footnote to his title: "should grains of wisdom be found in this article, the author wishes to attribute them to the source of all wisdom." Werner is apparently listening to powers higher than just McLeod and Schumpeter!

    tricky rick , January 29, 2016 at 10:11 am

    Chris Martenson and other "tin foil" folks have been laying this out in well documented studies for over a decade.

    welcome too late to the party.

    John Merryman , January 29, 2016 at 10:59 am

    I think another aspect that should be considered is the preservation of surplus money through government debt.

    For example, Volcker is credited with curing inflation through higher interest rates, but that slowed the economy as well and so reduced the need for money. It wasn't until Reagan had increased the deficit to 200 billion in 82 that inflation seemed to come under control enough that they could lower rates.

    Now one way to create higher rates is for the Fed to sell debt it bought to create the money in the first place. So what is the difference between the Fed selling debt it is holding and the Treasury issuing fresh debt, other than the Fed destroys its money and the Treasury spends it on public works, thus Keynsian pump priming.

    So who buys this debt, but those wealthy enough to have surplus money. Which suggests that if there is a surplus of money in the system, causing inflation, the easiest place to remove it is from those with a surplus of money.

    Now money really does function as an enormous, glorified voucher system and what is more destructive of such a system, than enormous amounts of surplus vouchers?

    So given that those with lots of such excess vouchers consequently have leverage over the rest of the system, what way to better preserve this wealth, than to have the public borrow it back and pay interest, even if much of what it gets spent on doesn't produce sufficient income to pay that interest, if not actually lost?

    Eventually though even the public can't afford to keep this up, so what is the alternative?

    Now most people save for predictable reasons, from raising children, housing, healthcare, to retirement and funerals. So what if the government, i.e., the public, were to threaten to tax excess money back out of the system, rather than just borrow it? Necessarily people would quickly find means to invest into these future needs directly, rather than trying to save up notational value. The problem is that we don't know exactly what we will need for what, which would mean we would have to invest into community and public projects, rather than save for our own specific needs.

    While this might seem onerous, consider that we currently live in a highly atomized society, that is largely mediated by that failing financial mechanism. So if we had to start functioning as a more holistic group, with more organic interactions and public spaces and commons, people might have to come out of their shells a little more and deal with lots of other social and personal issues, which might not be a bad thing.

    Basically we treat money as both medium of exchange and store of value, but these are different functions, as a medium is dynamic and a store is static. For instance, in the body, blood is the medium and fat is the store. Try storing fat in the arteries and you get clogged arteries, poor circulation and high blood pressure to compensate, which is analogous to our financial issues, with a clogged banking system, poor circulation to the rest of the economy and quantitive easing to compensate.

    While the brain might need more blood than the feet, it does neither any good for the feet to rot and die from lack of circulation, nor does it do the brain any good to have excess blood. Similarly we need a stronger social structure and a leaner, more efficient economic medium, in which the excess is stored as the muscle of a stronger society and a healthier environment, rather than just treating them as stores of wealth to be monetized and siphoned away.

    Helmholtz Watson , January 29, 2016 at 11:06 am

    Yes, the money creation process has been a big lie for a long time. In any case the Bank of England came clean a couple of years ago and admitted that standard story of money creation was false. They even acknowledge that it is not properly explained in most money and banking textbooks, which is a staggering admission.

    Paul Krugman wrote a column a couple of months ago where he claimed that banks take in savings from depositors and lend them out to borrowers which tells you either: 1) he doesn't' know how banking works or 2) he is part of the conspiracy to keep the public in the dark.

    The truth right from the mouth of the worlds's oldest central bank. http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf

    fresno dan , January 29, 2016 at 11:20 am

    Yeah, I saw that. It is amazing that a supposedly foremost Princeton Nobel winning economist apparently doesn't understand where money comes from…

    jsn , January 29, 2016 at 11:46 am

    In the mainstream world money is just a "veil" that obscures your view of how the divine markets work. They deliberately leave it out because it just confuses things…

    No wonder no one in that world saw the GFC coming, they still all claim whocuddaknowed?

    larry , January 29, 2016 at 1:37 pm

    There is evidence that Krugman seems to have great difficulty admitting he was wrong. He even contends that using IS-LM is a good too for introducing students to the macroeconomy, even when they must unlearn it when they delve deeper in to the workings of the macroeconomy, and this is after Hicks himself rejected it as being an inaccurate depiction of the macroeconomy later in his life. I can't say what Krugman is thinking, but then I don't have to. I can go just by what he writes. And what he writes makes me think he doesn't know how banking works. I find it difficult to believe he is part of any conspiracy. But I may be wrong.

    helmholtz watson , January 29, 2016 at 2:51 pm

    Yes it's hard to believe that Krugman might not know how money/banking works but he is a very ideological guy. I happen to be sympathetic to many of his ideological views but any one who is intensely ideological is rarely a critical and independent minded thinker. Ideology is way of simplifying complex things and making your self more comfortable, and doesn't lead to knowledge. I am no expert on money and banking but I have read ten books on the subject over the last four years and numerous papers. I am pretty sure I understand it now. I think this guy Werner is right. It seems probable that there was an orchestrated campaign to obfuscate how banking and money creation work and one can imagine why that might have happened. Banking is quite literally a pyramid scheme under even the most conservative circumstances! Such a system can work and makes sense if it is prudently managed, regulated and limited in scope.

    My take is that the fractional reserve and intermediation models are just ways of obfuscating the way banking actually works and the credit creation model is the accurate one. I have some advice for anyone who is struggling with the concepts which is as follows: always merge all the banks in the banking system into one bank in your mind. Assuming multiple banks as the author above does is irrelevant to the analysis and only serves to add confusion.

    Christer Kamb , January 29, 2016 at 7:10 pm

    Sorry Mr Watson but the swedish Riksbank is the world´s oldest central bank

    fresno dan , January 29, 2016 at 11:18 am

    I enjoyed the article very much. And it does seem to me that money creation is made to seem very, very, complex. Now maybe I'm just too stupid, but it always strikes me that when people simply describe something, they either really don't know, or they are trying to bamboozle you…

    I think the article would have been more enlightening though if the example had been for a house that was TO BE BUILT.
    Using that as an example, it seems to me that money is LOANED into existence – the person who wants the home loan has a good reputation, but the whole point of the loan is that they don't have nearly enough money to buy the house.

    The carpenters and other workers don't get paid until they have done work (they loan their work to their employer), i.e., produced a house (or some portion of it). The money in the loan becomes real because a house that didn't exist now exists. There is more stuff in the world, and there is more money. And I think it explains something important – not any loan is useful. A house worth 100K that is sold for 1000K but than is foreclosed upon – somebody has to take a real loss – either the person who got the home loan, and to the extent that they can't pay the loan back, a builder or the bank takes the loss (if the foreclosed value is less than the original loan value)
    So, is that correct?

    Again, thanks for the article and I am looking forward to the next one!

    paulmeli , January 29, 2016 at 11:23 am

    Pick any year post WWII (because the data is readily accessible).

    Compare the levels of federal spending and credit expansion.

    Federal spending created more money every year except for the years 1998 thru 2007, where it was about even, and for 2006 and 2007 credit expansion was some 50% higher.

    Then we got the mother of all credit crises.

    Over that post WWII period federal spending created ~$78T while credit created ~$46T.

    The common refrain is that federal taxes subtract from federal spending so it ends up being less.

    Except in what universe do income taxes accrue only against income resulting from federal spending? It's nonsense and should be derided as such. It's an accounting convenience that does not reflect what is actually happening.

    It may make sense for National Accounting (and to keep banksters in the drivers seat) but it makes zero sense in a rational analysis of a real-world system. That is the only way banks could be touted as the source of most of our money.

    Despite an otherwise sound argument this article perpetuates the myth.

    The banksters apparently have a hold on everyone, including the so-called 'good guys'.

    Some justification based on the level of bank reserves or some other convoluted argument in 5,4,3,2,1 …

    financial matters , January 29, 2016 at 11:31 am

    Very interesting and I'm looking forward to your next installment.

    I'm especially interested in the transfer of reserves from Chase to Citi and as you further point out 'Chase possibly using its reserves to acquire a different money market asset. One way this could all work out is that a shadow bank–money market funding of capital market lending–acquires the security and uses it as collateral for wholesale money market borrowing from Chase.'

    This seems to be a transmission mechanism for asset appreciation as Eric Tymoigne is getting into is his excellent series:

    "post 7 will start the private-bank posts) on monetary policy and the QE -asset price channel will be explained. But here is a short answer:
    No bank's don't use cash to buy assets. If they deal with non-bank agents they just credit bank accounts, if banks deal with a fed account holder they debit their reserve balances to make payments.

    The link works through interest rate, arbitrage, search for yield, and the fact that QE reduces the quantity of securities available in the market."

    "the issue is how they would transfer the funds to make the purchase? They could buy securities if they find a fed account holder willing to sell them securities: Treasury is one, GSE is another one. Non-financial institutions no."

    craazyman , January 29, 2016 at 11:31 am

    All they do is talk about how the parts of the machine move - which is itself an amazing problem of conceptual collinearity - but not the phenomenon of the machine itself.

    More and more you just say "Why not go to Youtube and check out a Rhianna video, rather than read another one of these essays."

    Eventually maybe they'll get it. But when they study economics their whole adult life - and nothing else - it makes it hard. It's not like they're dumb or that they lack mental ability. In fact, they're all intelligent individuals who are quite capable in most areas of thinking. It's just that the conceptual language they need to use in order to perceive the phenomenon itself is a language they do not know. And so they look at reality and they try to make sense of it using the language they do know, and because words themselves and the ideas in the words catalyze perception, their limited language is not fully adequate, and they don't see or know that. What can you do? Everybody has to see it for themselves.

    At any rate, you'd think by now it wouldn't be so hard. But most people aren't interested in this sort of thing so progress is really slow. Most people just go right to Youtube.

    susan the other , January 29, 2016 at 12:28 pm

    Adenosine triphosphate. The example several years ago in the comments, by a biologist, that it would be an extinction event for a colony of amoeba if a few of them decided to short amoeba futures and just hoard all the adenosine triphosphate – the one chemical every amoeba must have to transfer energy. Wish it had been an analogy to symbolic ADP which had usurped the real stuff and was being hoarded to make sure it maintained its value.

    susan the other , January 29, 2016 at 12:32 pm

    ATP

    craazyman , January 29, 2016 at 1:10 pm

    very nice! you have always impressed me with your thoughtful and penetrating intelligence.

    (even though you go off the wacko, foo-foo, hug-the-trees cliff sometimes.)

    Clive , January 29, 2016 at 2:16 pm

    You assured me susan was a bona ride adjunct professor of theosophical studies at the University of Magonia. I want, nay, I demand my tuition fee, which apparently I had to pay in advance because otherwise 42 other Chinese applicants would be in line for my place, back.

    craazyman , January 29, 2016 at 2:45 pm

    she's a full profeser of creative analysis. she hugs trees as an adjunct profeser of foo foo philosophy

    craazyboy , January 29, 2016 at 4:16 pm

    Dunno why they have all these theories. It's simple. The Fed lowers interest rates, the mark to market value of bank assets go up, which greatly improves cap ratios, then banks don't need liabilities anymore. They just can make endogenous money and give it out to borrowers' banks.(it's all done electronically and fast so no one notices) All the Big Guy econ types know that.

    All the rest of it is just details banks go thru just for show. Plus they can securitize and sell any assets they think may drop in value. They're smart people.

    Now, the other thing all the Big Guy econ dudes always say is once us little folk figure it out, something wonderful is supposed to happen. Maybe I missed it, but what thing is that???

    Maude , January 29, 2016 at 11:33 am

    You forgot one piece…

    Let us suppose, with Werner, that Citibank makes a mortgage loan to me of $200,000, simply by swapping IOUs. I then transfer my new asset (the new Citibank deposit) to you, and you transfer your house to me. As my payment clears, you have a new deposit in your own bank (let's say Chase, to make it interesting), Citibank has a "due to" at the clearinghouse, and Chase has a "due from". Again, to make it interesting, let's suppose that Citibank has no reserves, so it enters the interbank market to borrow some, from Chase. At the end of the day, what we see is that the Citibank balance sheet is still expanded, so is Chase's, and so is mine. Only your balance sheet stays the same size, since you have swapped one asset (your house) for another (money). That's the payments perspective.

    Is the house owned free and clear? If not, the exchange eliminates that original liability/asset on someone else's balance sheet so everything is now at a net zero as far as new money circulating in the economy. Banks did not create anything new. They only exchanged one Asset/Liability for another Asset/Liability. Even if the house was paid off 20 years ago, there is no new money created from this transaction. The only way "new money" is created would be through interest paid on Treasuries, and direct deficit spending by federal government.

    Mustsign topost , January 29, 2016 at 12:08 pm

    debt intermediation theory is this: consumer loans -> salary -> pension funds
    kleptocracy is this: privatization -> state spending -> profit

    Anon , January 29, 2016 at 12:09 pm

    As the commenters on the post at Prof. Mehrling's site have observed, his argument is logically flawed. He concludes: "But in all the cases, the debt intermediation view of banking is perfectly consistent with the credit creation view of banking."

    The intermediation view of banking "says that banks make loans by lending reserves that they are already holding," as he explains at the beginning of his piece. In his example, the deposit that is created by the banking system funds the loan. Of course, in both case intermediation takes place but the nature of the intermediation is not comparable.

    In the first case, banks have no special status in the economy. After all any of us who has a balance of $100 can lend out that balance of $100. In the second case, the only reason the bank can make the loan is because of a social norm in which the public trusts the banking system and is willing to keep its money in banks. This fact has always been a fundamental component of the credit creation theory of money - it is founded on the public's trust in the banking system. This trust allows banks to expand the money supply - at the potential expense of the public.

    While I have great respect for Prof. Mehrling, it is far from clear that he has a good understanding of the credit creation view of money.

    diptherio , January 29, 2016 at 12:29 pm

    When I looked into the data about 5 years ago, it appeared that only a few large banks were actually operating on a credit-creation basis. Most banks (meaning your local, independent banks and credit unions) appeared to be operating on an intermediation model. Deposits are always the cheapest way to fund a loan, and for small banks, that looks like pretty much the only way they do it – iirc, loans were 60-80% of deposits in most banks. However, at JPM, BofA, etc, their loans were well over 100% of their deposits…like waaaay over. So it looked to me like just a few big players were driving endogenous money creation, while most banks actually were doing, essentially, what fractional-reserve theory says they do.

    That's my understanding, but I don't claim to be an expert.

    Anon , January 29, 2016 at 12:36 pm

    diptherio:

    Banks no longer keep their loans on balance sheet, so a simple static analysis of their balance sheet doesn't tell us much about how much credit creation they are doing. To study the degree to which banks create money you have to look at the role they play in the shadow banking system as well.

    Skippy , January 29, 2016 at 6:28 pm

    Too some degree… my concerns about the shadow sector vastly out weigh the traditional sector e.g. has the traditional sector become [increasingly] just a front house op to generate velocity for the shadow sector, and the latter just needs a – store of – when the economy gets a black eye.

    Skippy , January 29, 2016 at 7:17 pm

    Therein lies the rub e.g. some fixate on one component of a veritable galaxy of operational scope, so at this juncture on can surmise that new universes of credit are created and inserted into the multiverse to survive on their own [inhabitants luck of the draw]. Maybe theoretical physics would be a better methodology of describing credit activity's at this juncture than thermodynamics, ideology, or socio-economic-political optics…

    JeffC , January 29, 2016 at 9:29 pm

    There's a confusion here. Suppose a bank with reserves R and corresponding deposits X, in addition to other balance-sheet items, has

    R X.

    at the top of its balance sheet. It makes loan L, which creates new deposit D to obtain balance sheet

    L D *
    R X.

    The borrower/deposit-holder transfers her deposit to another bank, so the original bank's balance sheet drops down to

    L X,

    while the new bank gains this on its balance sheet:

    R D.

    So the sequence is (1) create new deposit D and (2) transfer the deposit to the new bank. This is the money-creation model in action. It is correct.

    When we imagine that reserves are being loaned instead, we are actually skipping the balance sheet marked * above. Comparing the balance sheet before and after the skipped one, we come to believe that reserves have been turned into a loan. This is incorrect. The newly created deposit is simply in a different bank. To see what is really going on, we have to consider the loan and transfer separately.

    JTMcPhee , January 29, 2016 at 4:57 pm

    Can anyone tell me where that $100 came from? Or the $200,000 to buy that archetypical house? We got lots of "blind philosophers feeling their part of the elephant and pronouncing its essence" but where does "wealth" originate, as opposed to money and "assets?"

    cnchal , January 29, 2016 at 10:50 pm

    . . . but where does "wealth" originate

    (MMT – Material Meets Tool X sales) – expenses = profit or loss. If it's profit, that is wealth. If it's loss that is hell.

    nothing but the truth , January 29, 2016 at 7:59 pm

    "In the first case, banks have no special status in the economy. After all any of us who has a balance of $100 can lend out that balance of $100"

    yes you can lend it out, but the bank is 1) at the top of collectors line 2) has backing from the FDIC. When you loan 100$ to someone, you dont have that money anymore. When you lend 100$ to the bank, you still have that money, and about 10 other people have it as well.

    JTMcPhee , January 29, 2016 at 8:33 pm

    I'm sure it must be obvious to brighter and more subtle folks than me, but where does that $100 that's referenced here come from?

    I have an antique wood-bodied block plane (the woodworking kind) made by my great-grandfather ( except for the perfect cast iron blade and two nails). He used tools he made or bought to carve the body and chisel out the throat and make the wedge. I was offered $100 for it recently. Where does the wealth or value that my ancestor's plane, now mine by inheritance and survival, come from? Or all the other $100s that make up " the economy" that the MorgulBankers are conjuring derivatives out of?

    cnchal , January 29, 2016 at 11:32 pm

    . . .I was offered $100 for it recently. Where does the wealth or value that my ancestor's plane, now mine by inheritance and survival, come from?

    From your ancestor's labor in creating the plane and an ongoing demand from people interested in acquiring the plane.

    Where the $100 offer comes from is the perceived value of the plane compared to other planes on offer, such as for example the Chinese made crap in Home Depot.

    Since it sounds like you didn't sell it for $100, you value it at a higher price. Wondrous market eh.

    Helmholtz Watson , January 29, 2016 at 1:46 pm

    What is truly amazing about this is that in year 2016 there is still massive confusion and ambiguity about how money and banking work. How can that be? Bizarre!

    MaroonBulldog , January 29, 2016 at 6:25 pm

    Q. How can that be?

    A. Easily: "the false theories are guiding current bank regulation and development policy, leading down a blind alley." If correct understanding would lead to a correct regulation, then those whose interests would no be served by correct regulation will obfuscate correct understanding.

    Blurtman , January 29, 2016 at 3:21 pm

    Banks lend what they do not have.

    MED , January 29, 2016 at 3:25 pm

    For the TBTF banks, change the famous "money multiplier". up 10% per Billion

    kevinearick , January 29, 2016 at 4:08 pm

    Psychograpic Marketing, LSD & Mind Control

    Baby yoga for kids living in the forest, who never go outside alone; the highest real mortality rate in the US; and the prototype for Family Law feeding Obamacare in the big city – does it get any dumber than that?

    The psychologists are just smart enough to get the majority killed. The markets are an exercise in control, a game, and nothing more, until Little Johnny jumps off Science Building and shorts the insanity all together. Did you see that last impulse, transferring wealth to the Soros clan, now demanding another bailout?

    The assumption of emotion-based decisions, lest one be a robot, is ludicrous, but that is the basis of empire marketing. The majority short-circuits itself, with the false assumptions presented by empire media broad band, the frequency it chooses to occupy, to mirror itself, and obsessive-compulsive behavior begets itself. The brain stem is a geared Archimedes Screw.

    Because the body is grounded to earth, the dc side of the brain is self-obsessed, and LSD offsets the signal into the noise of the clutch, is no reason to hand your life over to a psychologist printing money. Because the predicitive subconscious exists in a feedback loop with adaptation doesn't mean that everyone is sick, stuck on an empire frequency, and mentally ill if they don't seek diagnosis. Money is not reality, except for those who choose it.

    Wall Street sells mortgages with increasing duration, Madison Avenue produces crap for compliance at increasing cost, and the majority indentures future generations with bonds, until they can't. Global finance simply liquidates natural resources and moves, in planetary rotation. Relative to unincorporated farming, the land is largely fallow, but the participants have TV, cardboard and gadgets, dependent upon empire for a battery.

    Net, populations vacillate between denial and depression, with growing impulses of anger, in a market for psychologists who see others as a reflection of themselves. Married people raising independent children cannot afford to be quite so stupid. And without such children, the economy can only implode, reflecting the psychologists' own self-obsession.

    Do you remember that story about the natives not seeing Christopher's ship, until the shaman pointed it out, when the natives were slaughtered by war, disease and poverty?

    Females can breed on equal rights for a thousand years, with males providing the technology, but they will just end up a thousand years behind the curve. Women are bred to think in linear time, and men to think in frequency, because that is what children need. One is the counterweight and the other is the cab.

    The majority, focused on self, rides the counterweight to floors on one side, all dead ends, and is jealous of children exiting on the other side. The choice at the crossroad is always the same, investment or consumption. The majority is not experiencing falling living standards and increasing income inequality because some banker provided the money, an excuse, for multicultural unicorn dreaming.

    Retired people generally prefer a Fred and Wilma economy, city kids generally prefer a rat race, and once separated for the purpose, the police are generally dispatched to slice and dice families into sausage to feed the former, by authorities always pleading ignorance, majority vote. Once you see those cops, promoting gang awareness, it's time to go. At empire cycle begin, you have plenty of time; now you have none.

    When I began writing this, I had no idea where the focus would be, but I do have a pattern database and a linear time translator, such as it is. My wife can tell you the weather 25 years, 3 months and 10 days ago. Choose a wife that enjoys living in the moment, and a husband that enjoys an independent frequency, compliments capable of trust in an untrustworthy world.

    My mind is a steel trap, my wife's is Disneyland, and we live in the feminist capital of the world, as you might suspect with an ac mind. Your perspective is your own, if you choose to have one, and we all go through phases, climbing and descending the ladder of consciousness. I am simply sharing, after decades of listening and saying not a damn word, in the empire, on the eve of WWIII.

    From the perspective of legacy, which has no clue what is in those libraries, the Internet was designed to extend linear thinking, to nowhere. From the perspective of labor, the Internet was designed to demonstrate the fallacy of limiting yourself to linear thinking. Contrary to popular mythology, choice is not about the color of your tennis shoes made in China.

    If it's not anonymous cash, it cannot store value, because independent children are reared beyond empire's grasp, the physical manifestation of intellectual self-obsession, which Sweden is now learning, way to late, a slave to Germany, and Austria in particular. Knowing what needs to be done and doing it are two different things. The psychologists in New Hampshire produce drug addiction, their solution is drug rehab, and Iowa is supposed to be nuts.

    You didn't think Keynes sprang from nothing did you?

    Skippy , January 29, 2016 at 6:30 pm

    From opti to me and from me to you….

    http://nautil.us/issue/7/waste/blissed_out-fish-on-prozac

    ke , January 29, 2016 at 8:52 pm

    Thanks. The wife likes to keep track of water. She's like a human testing machine. Best water I had was up at bay of fungi, big moose. That document on Ford's car made of hemp and plastic was pretty cool, before he was told he would be making cars out of steel, finance.

    Always thought I would end up in Australia, but like the doctor thing, the critters have to destroy everything they touch.

    Thank again

    nothing but the truth , January 29, 2016 at 8:05 pm

    keynes is describing a dollar based on gold standard.

    your problem is that you refuse to see meaning in the real. you see meaning only in money. and money, now, is nothing. it is a fiction.

    all these articles are symptoms of your cognitive dissonance. all your meaning is eventually money and money is eventually nothing.

    and from this seems to come the idea that since money is nothing, reality can be created from nothing.

    not so easy.

    animalogic , January 29, 2016 at 9:35 pm

    Fiat money is not a "nothing". But it can certainly become a nothing…if everyone loses belief it it.

    Skippy , January 29, 2016 at 10:10 pm

    How can one lose belief in each other – ?????

    Darthbobber , January 30, 2016 at 12:15 am

    "Contradictions, of which money is merely the palpable manifestation, are then to
    be transcended by means of all kinds of artificial monetary
    manipulations. It is no less clear that many revolutionary
    operations with money can be carried out, in so far as an attack on
    it appears only to rectify it while leaving everything else
    unchanged. We then beat the sack on the donkey's back, while
    aiming at the donkey. But so long as the donkey does not feel the
    blows, one actually beats only the sack, not the donkey;
    contrariwise, if he does feel the blows, we are beating him and not
    the sack."

    At the end of the day, what ultimately needs to be impacted is not the pieces of paper.
    All we can ever do with those is hand people claims against future production.

    And when the theory of "managing" an economy stops at the control of aggregate numbers as its only allowable tool to influence the process, it can never accomplish the objective of avoiding major crises.

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    [Jan 26, 2016] Saving the Banks and Fabulously Enriching a Few On the Back of the Real Economy

    Notable quotes:
    "... It has become a machine for transferring income, wealth, ownership, and power to the very top. This is not the new normal. This is financial corruption and the erosion of systemic integrity. Are there any markets that have not been shown to have been systematically manipulated, for years? This is just institutionalized looting. ..."
    Jesse's Café Américain
    "Give a small number of people the power to enrich themselves beyond everyone's wildest dreams, a philosophical rationale to explain all the damage they're causing, and they will not stop until they've run the world economy off a cliff."

    Philipp Meyer

    "Wall Street is not being made a scapegoat for this crisis: they really did this."

    Michael Lewis

    "My daughter asked me when she came home from school, "What's the financial crisis?" and I said, it's something that happens every five to seven years."

    Jamie Dimon

    "The greatest tragedy would be to accept the refrain that no one could have seen this coming, and thus nothing could have been done. If we accept this notion, it will happen again."

    Financial Crisis Inquiry Commission (2009–2011)

    The US has been in a cycle of bubbles, busts, and crashes since at least 1995, and more likely since Alan Greenspan became the Chairman of the Federal Reserve in August, 1987.

    The cycle is the same, only the depth and duration seems to change in a continuing 'wash and rinse' of the public money and the real economy.

    It has become a machine for transferring income, wealth, ownership, and power to the very top. This is not 'the new normal.' This is financial corruption and the erosion of systemic integrity. Are there any markets that have not been shown to have been systematically manipulated, for years? This is just institutionalized looting.

    [Jan 26, 2016] Public Investment: has George Started listening to Economists?

    Notable quotes:
    "... The case for additional public investment is as strong in the UK (and Germany ) as it is in the US. Yet since 2010 it appeared the government thought otherwise. ..."
    "... However since the election George Osborne seems to have had a change of heart. ... ..."
    economistsview.typepad.com

    Simon Wren-Lewis:

    Public investment: has George started listening to economists?: I have in the past wondered just how large the majority among academic economists would be for additional public investment right now.

    The economic case for investing when the cost of borrowing is so cheap (particularly when the government can issue 30 year fixed interest debt) is overwhelming. I had guessed the majority would be pretty large just by personal observation. Economists who are not known for their anti-austerity views, like Ken Rogoff, tend to support additional public investment.

    Thanks to a piece by Mark Thoma I now have some evidence. His article is actually about ideological bias in economics, and is well worth reading on that account, but it uses results from the ChicagoBooth survey of leading US economists. I have used this survey's results on the impact of fiscal policy before, but they have asked a similar question about public investment. It is
    "Because the US has underspent on new projects, maintenance, or both, the federal government has an opportunity to increase average incomes by spending more on roads, railways, bridges and airports."
    Not one of the nearly 50 economists surveyed disagreed with this statement. What was interesting was that the economists were under no illusions that the political process in the US would be such that some bad projects would be undertaken as a result (see the follow-up question). Despite this, they still thought increasing investment would raise incomes.
    The case for additional public investment is as strong in the UK (and Germany) as it is in the US. Yet since 2010 it appeared the government thought otherwise. ...
    However since the election George Osborne seems to have had a change of heart. ...

    [Jan 23, 2016] Watch out for this $1 trillion stock bubble

    Notable quotes:
    "... A structural problem may arise when the liquidity demanded by the ETF exceeds the liquidity availability of some of the underlying holdings ..."
    "... Basically, if an investor wants to sell an index fund as the market declines, the managers of the fund might have trouble selling some of the stocks in the fund. ..."
    "... But there are some steps investors could take to manage the risks posed by an index fund-dominated market. In addition to investing some of their stock portfolios in actively managed funds, McCarthy suggests investors take a hard look at how diversified they are. ..."
    "... First, he said, an investor could make sure he or she isnt double-exposed to the same stocks. ..."
    "... Sometimes its better to be vaguely right than exactly wrong ..."
    www.cnbc.com

    As volatility in the stock market grows, a handful of experts are raising an alarm about the rise of index ETFs and mutual funds, which has never accounted for this much of the market before.

    They warn that the unprecedented amount of index ETFs trading in the market - index ETFs accounted for nearly 30 percent of the trading in the U.S. equities market last summer - could magnify, or even cause, flash crashes.

    In turn, that may put individual investors, who are increasingly invested in index funds, more at risk. And many may not realize how exposed they are to the risks of a relatively small group of stocks held in the major indexes, said experts.

    Tim McCarthy, a former president of San Francisco-based Charles Schwab and Japan's Nikko Asset Management, has been a longtime proponent of index investing. But he now advises that investors diversify their investment styles as well as their asset classes.

    He suggested investors move 25 percent to 50 percent of their equity portfolios into actively managed absolute return funds, preferably those with a 10-year track record and a relatively small amount of assets of between $1 billion to $2 billion. (Research has shown over the years that active managers stand their best chance of success before their assets under management grows too high.)

    As always, he said, investors should look for low fees.

    A stock bubble in index funds

    He said he has grown increasingly uneasy about the risks based on the hypergrowth of index funds, and the price difference between stocks outside and inside index funds.

    From 2007 through 2014, index domestic equity mutual funds and ETFs received $1 trillion in net new cash and reinvested dividends, according to the Washington, D.C.-based Investment Company Institute. In contrast, actively managed domestic equity mutual funds experienced a net outflow of $659 billion, including reinvested dividends, from 2007 to 2014.

    Meanwhile, the price of the underlying equities in index funds is rising, though no one is sure exactly why. Research by S&P Capital IQ, as of Dec. 31, found stocks that were in the Russell 2000 were trading at a 50 percent premium to stocks that were not, up from 12 percent in 2006. The statistics are based on median price-to-book ratio.

    That kind of price difference is seen by some as a kind of canary in the coal mine, indicating that there is a bubble in the stocks of companies held in index funds - and that their prices could come down further and faster than other stocks in a downturn. In turn, that could put pressure on the share prices of the index mutual funds and ETFs themselves.

    "It's complicated, but it could be a very big problem," said David Pope, managing director of quantamental research at S&P Capital IQ. He and colleague Frank Zhao studied the liquidity in the market for the S&P 500 last summer and identified the 10 stocks that had the biggest difference in liquidity at that time, compared with the index. They included ExxonMobil, Berkshire Hathaway, Johnson & Johnson, Microsoft, General Electric, Wells Fargo, Procter & Gamble, JPMorgan Chase, Pfizer and PepsiCo.

    "A structural problem may arise when the liquidity demanded by the ETF exceeds the liquidity availability of some of the underlying holdings," they wrote.

    Basically, if an investor wants to sell an index fund as the market declines, the managers of the fund might have trouble selling some of the stocks in the fund. An active manager could choose to sell any stock in her fund and thus potentially navigate a downturn better. But an index fund manager has to sell exactly the shares held in the index in the same proportion as demanded by the index. If the fund manager doesn't find a buyer for, say, shares of ExxonMobil, the price of ExxonMobil will fall until a buyer is found.

    Assessing the risks

    While market theorists have always recognized this as a potential problem for index investing, no one has been sure exactly how it would play out or when problems might arise. As long as there are enough buyers and sellers actively setting prices and trading, index funds and stocks should pose no extra risk. It's just that no one is sure exactly how many is enough.

    Indeed, not everyone thinks McCarthy is right, and others point to different risks as bigger causes for concern, including the unknown impact of the way that high-frequency traders place orders.

    "So we have two new factors when it comes to a potential market situation," said John Rekenthaler, vice president of research for Chicago-based Morningstar. "There are always new factors. Most of the time, new factors don't play out according to expectations."

    He pointed out that two decades ago, people worried about what the impact of 401(k)s would be in the market and whether non-professional investors would be apt to sell more quickly in a downturn. The opposite turned out to be the case.

    Even if the risk posed by index investing is rising, the growth in index funds doesn't necessarily pose a huge system risk, pointed out Sean Collins, senior director of industry and financial analysis for the Washington, D.C.-based Investment Company Institute. "The share of assets going into index funds is rising. Does that necessarily cause markets to be dysfunctional? The answer is no," he said.

    He pointed out how much more diversity there is now in index investing. Much of the money flowing into index funds has been going into markets in which there hasn't been much indexing before, including emerging markets equities and bond markets.

    McCarthy said investors would be wise to look at their portfolios with the emerging risk of index funds in mind. There's not much an individual investor can do to guard against the risks posed by high-frequency trading, short of bowing out of the market entirely.

    What investors should do

    But there are some steps investors could take to manage the risks posed by an index fund-dominated market. In addition to investing some of their stock portfolios in actively managed funds, McCarthy suggests investors take a hard look at how diversified they are.

    First, he said, an investor could make sure he or she isn't double-exposed to the same stocks. He cited the case of a friend of his, a doctor, who had invested in blue-chip stocks, some mutual funds and in an S&P 500 fund that turned out to hold - guess what - many of the same blue chips and tech stocks. In the downturn in 2000–2001, he lost 50 percent of his portfolio.

    Every market is different, McCarthy said. But in part because of the flow of money into index funds, the U.S. equities market has become more dominated by a handful of big technology stocks. That's something that index fund investors, like his doctor friend, may not easily recognize now.

    As someone who has managed the back end of trading systems, McCarthy said he is increasingly uneasy about the level of index investing and has begun to give speeches about the potential dangers of a market in which a growing number of managers are hamstrung by the requirement that they match their indexes.

    But he knows that he's at the leading edge of people talking about it -- and that many think he is warning too hard and too fast. "This is unfamiliar territory for me," he acknowledged. "But index investing has so much power, and it's derivative-priced.

    "Sometimes it's better to be vaguely right than exactly wrong," he said.

    - By Elizabeth MacBride, special to CNBC.com

    Read More › Most absurd ETF trade of all - paying 100 basis pts for it

    [Jan 18, 2016] Texas Oil and Gas Production Declining - Peak Oil BarrelPeak Oil Barrel

    peakoilbarrel.com

    Watcher , 01/17/2016 at 6:58 pm

    Well, not really reverse QE, or . . . maybe.

    If you're an oil funded Sovereign Wealth Fund and oil is flowing money into you, you gotta put that money to work somewhere and that's likely stock markets. Up bias on them. If oil revs stop being big and govt spending exceeds govt revenue then the SWF will be tapped (along with borrowing to fund that deficit). Neither would extract money from the system (the system being uber macro) so it's not reverse QE.

    But . . . it is a down bias on equities. Now THAT can be reverse QE via HFT momentum. Money disappears when equity prices fall.

    likbez , 01/17/2016 at 7:33 pm

    "Neither would extract money from the system (the system being uber macro) so it's not reverse QE."

    But stock market drop is in itself a kind of reverse QE.

    " Now THAT can be reverse QE via HFT momentum. Money disappears when equity prices fall."

    [Jan 18, 2016] When successful investors warn of a global market crash, we should all be nervous

    www.newstatesman.com

    newstatesman.com

    When successful investors warn of a global market crash, we should all be nervous

    Profits are so thin that the slightest pothole could cause a crash.
    By
    Felix Martin

    Print HTML

    This year's January sales seem to have extended to the world's stock markets. A week in to 2016, you could buy the FTSE for 6 per cent less than on New Year's Eve. It is the worst start to the year in at least two decades.

    What is behind these New Year blues? As ever, when it comes to the markets, there is an embarrassment of plausible culprits and a cacophony of self-styled experts willing to tell you what they are. This time, however, you can also turn to someone whose hard-earned credibility is not in doubt.

    Martin Taylor is probably the best-known investor you have never heard of. A legend among the trading cognoscenti, he has returned over 20 per cent a year to his investors for more than two decades. On 4 January, he announced that he was closing his Nevsky Fund, arguing that we are heading for a combination of catastrophes that even the most skilful investor will be unable to avoid. His assessment makes fascinating reading. The root of the challenge that Taylor sees facing the world economy is simple. In December 2015, the US Federal Reserve raised its policy rate from near zero for the first time since December 2008. It is likely to be the start of a cycle. The direct effect is that the cost of borrowing dollars is rising. The indirect effect is that the dollar is strengthening on the foreign exchanges. After seven years in the bargain basement, the greenback is becoming expensive again.

    Interest-rate hikes are always a shock to the system but they have happened numerous times before over the past few decades: so why should they be such a problem now? The answer is that, this time, the situation is different in three crucial respects. First, interest rates have been stuck at unusually low levels for an unusually long period of time. (In Britain, the Bank of England's rate has been 0.5 per cent since 2009.) Borrowers throughout the economy have got used to easy money; a generation of homeowners and investors has never seen anything else. After more than seven years of cheap debt, the shock of the old will be all the worse.

    Second, a terrible irony is at work in the corporate sector. Companies have responded to the lacklustre recovery from the global financial crisis with Protestant virtue, cutting costs and sweating assets, to make do now in the hope of better times ahead. Yet the perverse result is that even those companies that have not gorged themselves on free money are ill-prepared for the end of the cheap dollar era. Profit margins are so thin and balance sheets so stretched that the slightest pothole may cause a crash.

    If we are lucky, that possibility will not materialise. Taylor's third fear already has. In today's financially globalised world, the US dollar is the currency not just of America but of half the countries on the map. Borrowing in US dollars by companies in emerging markets stood at a staggering $4trn as of June 2015. Rising US interest rates will put the squeeze on them, too.

    By far the most important participant in this global dollar economy is China. Its companies have borrowed over $1trn. Now, just when the Chinese economy is slowing, its debts are becoming more onerous as the dollar becomes more expensive.

    If that all adds up to a dismal outlook for the world economy, Taylor's verdict on the state of the financial markets is perhaps even more worrying. Whereas many of us find William Goldman's verdict on the movie business – "Nobody knows anything" – remarkably apt when it comes to economic predictions, few would bet against an assessment of the financial markets from a man with Taylor's experience.

    The successful co-ordination of modern capitalist economies rests on three critical supports. The first is reliable data – about company performance and macroeconomic activity – on which people can base their decisions. The second is the transparency and logical coherence of the frameworks used by powerful non-market actors: central bankers, politicians and regulators. The third is well-functioning stock, bond and currency markets, which generate prices that provide true signals to investors, businesses and governments.

    Today, Taylor argues, all three supports seem ramshackle. China is the world's second-largest economy and the decisive market for most emerging economies, yet its own leaders deride its macroeconomic statistics as unreliable. The old theories of monetary policy were discredited by the crash and nothing has yet replaced them, and so no one fully understands what central bankers are doing. The financial markets, meanwhile, are dominated by computer-driven trading. They have become a postmodern parody of themselves, in which prices are determined not by economic fundamentals but by the behaviour of other prices.

    With an economic and financial-market outlook such as this, the New Year hangover for stocks hardly comes as a surprise. Yet there is a germ of optimism amid this well-founded gloom. In Taylor's analysis, there is barely a mention of any of the structural economic challenges that have been exercising policymakers recently: the secular stagnation, the slowdown in productivity, the threat of technological unemployment, and so on. The problems that he foresees are, almost without exception, financial.

    If this diagnosis is correct (and, in large part, I think it is), it is a reason for hope. We are not condemned to crisis or stagnation by epochal forces outside our control. It is the financial system – rules and institutions of our making – that has gone awry. The hardware of the global economy is in reasonable shape. It is only the software that has become corrupt. As such, it can be debugged. The alternative is a crash.

    [Jan 17, 2016] Wells Fargos Problem Emerges $17 Billion In Junk Energy Exposure

    Notable quotes:
    "... I would use $17 billion as outstandings for energy loans. And for securities, I would use, call it, $2.5 billion which is the sum of AFS securities and non-marketable securities. ..."
    "... We're focused on the whole thing. Half of those customers - half of those balances represent E&P companies, upstream companies. A quarter of them represent oilfield services companies, and a quarter of them represent pipelines and storage and other midstream activity. And it excludes what I would describe as investment grade sort of diversified larger cap companies where we don't view the credit exposure as quite the same. ..."
    "... <Q - Mike L. Mayo> ..."
    "... To summarize: $17 billion in oil and energy exposure, which has a $1.2 billion, or 7%, loss reserve assigned to it already, and which is made up "mostly" of junk bonds. ..."
    Zero Hedge
    First: how big is Wells' loan loss allowance for energy:

    We've considered the challenges within the energy sector and our allowance process throughout 2015 and approximately $1.2 billion of the allowance was allocated to our oil and gas portfolio. It's important to note that the entire allowance is available to absorb credit losses inherent in the total loan portfolio.

    Then, from the Q&A, how much is Wells' total loan exposure, its fixed income and equity exposure toward energy:

    I would use $17 billion as outstandings for energy loans. And for securities, I would use, call it, $2.5 billion which is the sum of AFS securities and non-marketable securities.

    In other words, a 7% loan loss reserve toward energy, perhaps the highest on all of Wall Street.

    Then, here is the breakdown by services:

    We're focused on the whole thing. Half of those customers - half of those balances represent E&P companies, upstream companies. A quarter of them represent oilfield services companies, and a quarter of them represent pipelines and storage and other midstream activity. And it excludes what I would describe as investment grade sort of diversified larger cap companies where we don't view the credit exposure as quite the same.

    But the punchline in the problem category was the following exchange with Mike Mayo:

    <Q - Mike L. Mayo>: What percent of the $17 billion is not investment grade?

    <A - John R. Shrewsberry>: I would say most of it. Most of it.

    <Q - Mike L. Mayo>: So most of the $17 billion is non-investment grade.

    <A - John R. Shrewsberry>: Correct.

    To summarize: $17 billion in oil and energy exposure, which has a $1.2 billion, or 7%, loss reserve assigned to it already, and which is made up "mostly" of junk bonds.

    [Jan 17, 2016] $200 bn in debt looms over American oil and gas

    Notable quotes:
    "... Tempted by big returns, shale companies have borrowed more than $200 billion in bonds and loans, from Wall Street and London, to cover development and projects that may not even come to fruition. Oil producers' debt since 2010 has increased more than 55 percent, and revenues have slowed, rising only 36 percent from September 2014, compared to 2010, according to the Wall Street Journal. ..."
    "... On Sunday, the first shale company filed for bankruptcy. WBH Energy LP, a private Texas-based drilling group, filed for bankruptcy after saying that their lender was no longer willing to advance money. The company estimates their debt between $10-50 million. There are hundreds more in the US alone. ..."
    "... Analysts believe North American shale needs to sell at $60-100 per barrel to break even on the billions of debt accrued by the energy companies. Indebted companies, fearing bankruptcy, may therefore be forced to keep selling oil, even at a loss. ..."
    "... Energy companies that can afford it will cut production, but this will prove more difficult for smaller companies with larger debt hanging over their balance sheets. ..."
    "... "It begins in one place like fracking in North Dakota or Texas, but it very quickly engulfs the rest of the world. In that way, its very similar to what happened in 2008… when billions of dollars were lent to people to buy homes they couldn't pay off," economist Richard Wolff told RT. ..."
    "... The industry expanded rapidly, as the method proved capable of extracting oil and gas faster and easier than before, albeit with a certain environmental cost. Fracking can increase seismic activity, as well as penetrate water systems. Many states in the US have followed European nations in banning the oil extraction method. ..."
    Jan 07, 2015 | www.rt.com
    Plummeting Brent oil prices are putting pressure on North American shale, which has sunk hundreds of billions of dollars into investment, and could soon come crashing down.

    Tempted by big returns, shale companies have borrowed more than $200 billion in bonds and loans, from Wall Street and London, to cover development and projects that may not even come to fruition. Oil producers' debt since 2010 has increased more than 55 percent, and revenues have slowed, rising only 36 percent from September 2014, compared to 2010, according to the Wall Street Journal.

    Fracking, the process of hydraulic fracturing and horizontal drilling on land is much more expensive than the average water-based oilrig. However, over the past years, it has become relatively cheap and fast. Energy companies, eager to get in on the riches of the American oil boom, have been borrowing money faster than they have been earning it.

    On Sunday, the first shale company filed for bankruptcy. WBH Energy LP, a private Texas-based drilling group, filed for bankruptcy after saying that their lender was no longer willing to advance money. The company estimates their debt between $10-50 million. There are hundreds more in the US alone.

    Analysts believe North American shale needs to sell at $60-100 per barrel to break even on the billions of debt accrued by the energy companies. Indebted companies, fearing bankruptcy, may therefore be forced to keep selling oil, even at a loss.

    One way to avoid going bust is to merge, which is what many companies already have on the negotiation bloc.

    "We've already seen Baker Hughes and Halliburton agree to merger, and these were two titans that used to compete head to head," Ed Hirs, managing director independent oil and gas company Hillhouse Resources, told RT. "They've decided they can't survive separately, they need to combine," Hirs said.

    The Texas-based driller believes that lower prices and major mergers will hinder progress in the industry.

    "We will see a loss of tech. innovation and a loss of competition in the oil service business," Hirs said.

    Energy companies that can afford it will cut production, but this will prove more difficult for smaller companies with larger debt hanging over their balance sheets.

    Oil prices lost more than 50 percent in 2014, and have already dropped 10 percent in 2015. Futures dramatically dipped when the Organization of Petroleum Exporting Countries decided not to curb production at their November meeting.

    Some experts believe the decision not to cut production, which would have alleviated oil prices, was a direct strategic move by the cartel to reduce the profitability of North American oil fields, from Alberta to Oklahoma. In the past five years, the US has moved from being one of the world's biggest oil customers to the largest producer, even overtaking Saudi Arabia.

    Bubble burst?

    This 'bubble' of debt could come crashing down on oil companies, as the housing bubble did on the sub-prime mortgage industry in 2008, which sparked a crisis in global financial markets.

    "It begins in one place like fracking in North Dakota or Texas, but it very quickly engulfs the rest of the world. In that way, its very similar to what happened in 2008… when billions of dollars were lent to people to buy homes they couldn't pay off," economist Richard Wolff told RT.

    The industry expanded rapidly, as the method proved capable of extracting oil and gas faster and easier than before, albeit with a certain environmental cost. Fracking can increase seismic activity, as well as penetrate water systems. Many states in the US have followed European nations in banning the oil extraction method.

    [Jan 17, 2016] The Price of Oil, China, and Stock Market Herding

    Notable quotes:
    "... Maybe we should not believe the market commentaries. Maybe it was neither oil nor China. Maybe what we are seeing is a delayed reaction to the slowdown in the world economy, a slowdown that has now gone on for a few years. While there has been no significant news in the last two weeks, maybe markets are only realizing that growth in emerging markets will be lower for a long time, that growth in advanced economies will be unexciting. Maybe… ..."
    "... I think the explanation is largely elsewhere. I believe that to a large extent, herding is at play. If other investors sell, it must be because they know something you do not know. Thus, you should sell, and you do, and so down go stock prices. Why now? Perhaps because we have entered a period of higher uncertainty. ... ..."
    "... Skidelsky, always good, at New Statesman. http://www.newstatesman.com/politics/economy/2016/01/optimism-error ..."
    "... So like in subprime bubble investment banks were happy to give money to anybody with breath , again. There are also other connection to subprime bubble here, but of course on much lesser scale. In any case it was a kind of subprime oil . ..."
    "... Collapse of oil prices not only revealed who is swimming naked (all shale patch players), but also that the US financial sector forgot nothing and learned nothing from 2008 crash and is as reckless as before, in not more. It also negatively affects conventional oil in the US and elsewhere. ..."
    "... Also stock markets now are under additional pressure because sovereign wealth funds are selling their holdings to cover the deficits. And all of them were heavily invested in the USA stock market. This is essentially QE in reverse. ..."
    "... I think Blanchard is too dismissive of the possibility of a significant downturn in China. ..."
    "... Its not just the effect of their declining purchases of global goods to date that has people concerned. Its what the pace of decline says about their economic prospects in the near term, and how all those stories of leveraged investments in real estate and businesses in China portent possible disaster in a downturn. In other words, there is reasonable fear it will get a lot worse. ..."
    economistsview.typepad.com

    Olivier Blanchard:

    The Price of Oil, China, and Stock Market Herding : The stock market movements of the last two weeks are puzzling.

    Take the China explanation. A collapse of growth in China would indeed be a world changing event. But there is just no evidence of such a collapse. ...

    Take the oil price explanation. It is even more puzzling. Traditionally, it was taken for granted that a decrease in the price of oil was good news for oil importing countries such as the United States. Consumers, with more money to spend, would increase consumption, and increase output. Energy using firms, with lower cost of production, would increase investment. We learned in the last year that, in the short run, the adverse effect on investment on energy producing firms could come quickly and temporarily slow down the effect, but this surely does not undo the general conclusion. Yet the headlines are now about low oil prices leading to low stock prices. I can think of two potential explanations, neither of them convincing.

    First, that very low prices lead to such serious problems for oil producers that this will end up affecting the United States and dominating the scene. I have no doubt that some countries and some companies will indeed be in serious trouble; indeed, some already are. I can also think of ways in which low oil prices also change the geopolitics of the Middle East, with uncertain effects on oil prices. I find it difficult to think that these will dominate the direct real income effects for US consumers.

    Second, that the low prices reflect a yet unmeasured decrease in world growth, much larger than is apparent in other hard data, and that the price of oil, like the celebrated canary in the coal mine, is telling us something about the state of the world economy that other data do not. There is no historical evidence that the price of oil plays such a role. But suppose, for the sake of argument, that, indeed, the low price told us that China is really slowing down. (The fact that non-oil commodity prices, for which China plays a bigger role than for oil, have decreased much less than oil does not support this interpretation.) Then, we would be back to the previous conundrum. It is hard to see how this could have such an effect on the US economy and in turn on the US stock market. Another variation on the theme, which has been raised in some columns, is that the low oil price reflects a slowdown in the United States far beyond what the other current data are telling us. There is zero evidence that this is the case.

    Maybe we should not believe the market commentaries. Maybe it was neither oil nor China. Maybe what we are seeing is a delayed reaction to the slowdown in the world economy, a slowdown that has now gone on for a few years. While there has been no significant news in the last two weeks, maybe markets are only realizing that growth in emerging markets will be lower for a long time, that growth in advanced economies will be unexciting. Maybe…

    I think the explanation is largely elsewhere. I believe that to a large extent, herding is at play. If other investors sell, it must be because they know something you do not know. Thus, you should sell, and you do, and so down go stock prices. Why now? Perhaps because we have entered a period of higher uncertainty. ...

    So how much should we worry? This is where economics ... gives the dreaded two-handed answer. If it becomes clear within a few days or a few weeks that fundamentals are in fact not so bad, stock prices will recover... If, however, the stock market slump lasts longer or gets worse, it can become self-fulfilling. Low stock prices lasting for long lead to lower consumption, lower demand, and, potentially, to a recession. The ability of the Fed, fresh out of the zero lower bound, to counteract a slowdown in demand remains limited.

    One has to hope for the first scenario, but worry about the second. marcus nunes :

    There´s certainly been a lot of recession talk. Some trends are worrisome.
    https://thefaintofheart.wordpress.com/2016/01/17/the-plunging-economy/
    pgl :
    Olivier gives us an interesting and thoughtful discussion of different explanations. I loved his close:

    "So how much should we worry? This is where economics stops giving an answer. Or, more specifically, where it gives the dreaded two-handed answer. If it becomes clear within a few days or a few weeks that fundamentals are in fact not so bad, stock prices will recover, just as they did last summer, and this will be seen as a hiccup. If, however, the stock market slump lasts longer or gets worse, it can become self-fulfilling. Low stock prices lasting for long lead to lower consumption, lower demand, and, potentially, to a recession. The ability of the Fed, fresh out of the zero lower bound, to counteract a slowdown in demand remains limited. One has to hope for the first scenario, but worry about the second."

    In the first scenario - he is saying the fundamentals suggest a recovery of stock prices. And so many people who don't get financial economics claimed the market was over priced simply because P/E ratios are above "historical averages". Of course these clowns have no clue what Olivier means by the fundamentals.

    anne :
    Supposing that the work of Robert Shiller is still meaningful, stock market prices have been very high. Stock market prices have been high enough that if historical pattern holds there is reason to expect either a sustained period of little gain or significantly declining prices.

    Of course, I know that interest rates have been historically low. I also know that returns from corporate revenue have been increasingly going to leading executives and shareholders rather than to ordinary workers. I even know that careful analysts like Brad DeLong * think stock prices were long relatively low, though why has never been clear to me other than an unfortunate historical fear of holding stocks.

    Nonetheless, Shiller's data are disturbing because the reasons for high stock prices are evidently not well understood.

    * I will have to look for the DeLong analysis

    Sanjait -> anne...
    Consider the basic cash flow models of how stocks get priced. The fundamental model is that a stock is worth the discounted value of its future cash flows.

    With this in mind, realize that stock PEs are *suppposed* to be higher ceteris paribus when interest rates are low. The discounting rate on a stock moves with prevailing treasury bond rates.

    Different analysts might have different earnings forecasts and choose different discount rates to fill the model, but to a rough approximation, the low prevailing interest rates explain almost all of the spread between current PEs and historical ones.

    Avraam Jack Dectis :
    .
    Skidelsky, always good, at New Statesman. http://www.newstatesman.com/politics/economy/2016/01/optimism-error

    .

    likbez :
    "Traditionally, it was taken for granted that a decrease in the price of oil was good news for oil importing countries such as the United States."

    He completely missed "shale oil" boom in the USA.

    Essentially it was something like conversion of junk bonds into oil, as profitability of those players was questionable even when oil was above $100 per barrel. In other words that was a very expensive oil that was often sold at discount. It was all EBITDA reporting world in which new money for shale companies were very low cost and abundant. No questions asked loans.

    So like in subprime bubble investment banks were happy to give money to "anybody with breath", again. There are also other connection to subprime bubble here, but of course on much lesser scale. In any case it was a kind of "subprime oil".

    Collapse of oil prices not only revealed who is swimming naked (all shale patch players), but also that the US financial sector "forgot nothing and learned nothing" from 2008 crash and is as reckless as before, in not more. It also negatively affects conventional oil in the US and elsewhere.

    Now there are something between $200 and $500 billion of oil related junk debt on the books on banks. And chances for them to be repaid are slim unless oil recovers to previous, above $100 levels. Of cause banks can also take equity in case of bankruptcies but assets were re-evaluated sharply down. So it's again "mark to fantasy" loans situation.

    Also stock markets now are under additional pressure because sovereign wealth funds are selling their holdings to cover the deficits. And all of them were heavily invested in the USA stock market. This is essentially QE in reverse.

    Some US banks can suffer a shock too. Mostly regional banks. But, for example, Well Fargo has exposure around 17 billion. Some other banks (GS?, Chase?) were also greedy. Around 20% of investment banks revenue were coming from energy. This will change. The total is not life threatening but still pretty able to cause a chain reaction. And if economy slows down and price of oil remains low (say below $50) than not only all shale companies are going to be bankrupt as they have only a limited time to "extend and pretend". There will be a chain reaction to real estate, transportation, municipal bonds, etc. Mostly limited to particular states, of cause.

    For example shale oil bust will affect real estate markets in at least five states.

    === Start of quote ===

    JPMorgan Chase (JPM) CEO Jamie Dimon, in a call with analysts this week, acknowledged there may be "slight negatives" for the bank related to commercial and real estate trouble in Dallas, Denver and Houston.

    http://money.cnn.com/2015/01/16/investing/oil-price-fall-banks-hurt/index.html

    == end of quote ===

    So it looks like the situation is quite different from what Olivier assumed. IMHO if oil stays low for this year it can became pretty dangerous.

    Sanjait :
    I think Blanchard is too dismissive of the possibility of a significant downturn in China.

    It's not just the effect of their declining purchases of global goods to date that has people concerned. It's what the pace of decline says about their economic prospects in the near term, and how all those stories of leveraged investments in real estate and businesses in China portent possible disaster in a downturn. In other words, there is reasonable fear it will get a lot worse.

    Notice that global markets have been following China down. That points us to where the source of the negative surprises are coming from.

    [Jan 17, 2016] Oil and US share prices tumble over fears for global economy

    www.theguardian.com
    Sowatree -> Ibmekon, 2016-01-14 00:24:57
    I did hear on the radio last week that there appears an economic war is being played out between Saudi Arabia and Iran. Truth of this I don't know.

    But, what does concern the world at these prices are major trading companies may go bust. On derivatives and oil futures somewhere someone is carrying huge losses.

    And, concerning the world economy derivatives are a markets of 70 or more trillions dollars , enormous markets, as Warren Buffet once said derivatives are financial weapons of mass destruction.

    Somewhere in the world financial system huge losses on derivatives are sitting.

    World Politicians shied away from the tough decisions under the guise of quantitative easing. QE appears to have caused greater missallocation of resources.

    2008 financial crisis is reemerging from its dormant position. 2008 was just push further down the road.

    Social Cohesion in Britain needs this time to really all be in this together.

    Ibmekon -> Sowatree, 2016-01-14 09:01:38
    " On derivatives and oil futures somewhere someone is carrying huge losses. "

    The Big Lie - "zero sum game".
    If that is true - play Monopoly in your own time with your own money.
    That "zero sum game" pays billions in profits - so where does the money come from ?

    "Financial institutions held OTC swaps with a notional value of $505 trillion at the end of 2014, "
    http://www.bloomberg.com/news/articles/2015-08-06/europe-moves-to-reduce-risk-in-505-trillion-derivatives-market

    Ibmekon -> Ruth Williams, 2016-01-13 21:42:54
    Would love to know that myself.
    This is a much too specific question for an economist - like asking for the winner of the 2-30 at Kempton.
    Perspective is always a good thing -

    Debt per Citizen £24,560
    Interest per Year £39,648,610,427
    UK Debt £ 1,590,708,970,219
    Debt as % of GDP 80.81%
    http://www.nationaldebtclocks.org/debtclock/unitedkingdom

    BantosaurusRex , 2016-01-13 21:14:21
    This is what happens when central banks across the world inflate the biggest bubbles the world has ever seen by keeping interest rates at near zero percent for 7 years. Let's make one thing clear - China is not the only culprit for the latest fears over the global economy, to say that many western economies such as the US or the UK have recovered or are on the road to recovery would be disingenuous to say the least.

    We have been scraping along at the lowest rate of so-called "recovery" (debt-fueled with ZIRP) after a recession despite these interest rates - what would it have been like if rates were increased a couple of years ago? One can only guess, but it would be fair to estimate that we would be back in a recession.

    So, here we are again, back at the latter stages of the next cycle in the boom-bust oscillations of our global economy - and "is this time different"? Yes, but only by the measure that this time there is little that central banks can do to mitigate or even slow the financial crisis. The 2008 crisis never really ended, this year we will undoubtedly see that the real part of that crisis is about to unfold - capitalism should be allowed to take place this time, and if that means huge corporations filing then so be it.

    Ibmekon -> BantosaurusRex, 2016-01-13 21:24:02
    "if that means huge corporations filing then so be it."

    I agree - but they are Ok, in fact loaded with cash.

    "May 8, 2015 At the end of last year, U.S. non-financial companies held a staggering $1.73 trillion in cash, up 4% from the $1.67 trillion on hand at the end of 2013, found Moody's."
    http://www.forbes.com/forbes/welcome /

    So much of the debt has been loaded on sovereigns - what will they do - file for bankruptcy ?

    John Olesen , 2016-01-13 21:17:29
    OPEC should not allow members to sell oil at a financial loss. Oil is trading below its intrinsic value and there are serious imbalances in the market. Member countries that sell oil below market value lose money in two ways. They add supply to a depressed market and they lose money on the transaction itself. It would make much more sense for OPEC to target minimum profitability as their primary goal for all members rather than trying to use their market position to eliminate producers in the United States.

    Since most of the large energy companies in the United States are publicly traded, it would be better for OPEC members to use their profits to purchase equity in these companies rather than trying to make them unprofitable. I propose that OPEC target a specific and stable price long term and then to adjust that price for inflation. For instance, if it is determined that all members can profit at 70 dollar oil, then they should lower production when the price is below that and increase it when it is above that. Member countries then use a percentage of their profits to increase their reserves with share purchases of other non-opec producers, thus increasing reserves long term.

    ID7586903 , 2016-01-13 21:33:29
    Saudi Arabia has again badly miscalculated. By pumping vast amount of Oil, KSA thought it could sink America, Russia and Iran oil companies and Economies
    Well it seems KSA is going broke! I am celebrating...
    Ibmekon -> ID7586903, 2016-01-13 21:58:05
    Make of this what you will. There is talk of Aramco being floated - biggest IPO ever.
    http://www.wsj.com/articles/saudi-arabia-could-list-crude-reserves-in-aramco-ipo-1452509304

    Current Saudi finance minster is Ibrahim Abdulaziz Al-Assaf

    "After leaving academia, Ibrahim moved to Washington, DC where he represented Saudi Arabia at the International Monetary Fund (IMF) and the World Bank
    ...
    In addition to being finance minister, Ibrahim is a member of the board of directors of Saudi Aramco (since 1996), the state-owned national oil company,
    ...
    https://en.wikipedia.org/wiki/Ibrahim_Abdulaziz_Al-Assaf

    makesnoadasense -> ID7586903, 2016-01-13 22:03:02
    I wouldn't celebrate too soon, it would appear that there is a looming $200bn debt over American oil and gas...

    https://www.rt.com/business/220619-shale-debt-us-companies /

    coplani , 2016-01-13 22:25:44
    Is this history repeating itself?...but in China.
    1998 Russian financial crisis.....Their stock market collapsed followed by a run on the ruble which was devalued.
    Most Russians suffered as their pensions, wages etc were severely devalued.
    Same could be happening today in both China and Russia...

    Financial war....Dinosaurs versus dinosaurs.
    How to wreck a country....Trash it's markets and currency.
    It's the law of the jungle.....The strongest survive.
    However Russia and China will not take it lying down....Scary times indeed.

    It seems that the Chinese market is under the greatest pressure...only to be propped up by the government pumping money into it. (printing money)...result will be their currency devalues and everybody in China suffers.

    It has happened many times to many countries before...e.g. Germany, Argentina, Brazil, Russia etc....

    Ciarán Here -> coplani , 2016-01-13 23:21:25
    It's not Russian or China that is "printing" money have you not heard of quantitative easing in the USA $85billion dollars a month.
    Penfisher , 2016-01-13 22:28:30
    Two quick points.
    First, OPEC has increased flow to destabilise Russian & Iranian profits. However, this situation demonstrates that the price of oil should never have been much higher.
    Second, China has a better approach to wealth re-distribution than OPEC nations and all advanced economies. If a genuine desire to increase economic activity were expressed then wealth sitting in secret accounts and held by the top 10% would be taxed & spread to the true wheel of economy: ordinary people with poor purchasing power.
    bonkthebonk , 2016-01-13 22:50:54
    Finally time to unwind?

    When the debt merchants, the money alchemists and voracious volatility vultures start panicking (Hey, it's all relative. Don't worry, THEY'LL be fine) and looking for 'safe havens' (anything deemed to have an intrinsic value, but still not gold as, 'we're not bloody savages, y'know...yet'), when prices, particularly the golden goose commodities that kept them in (debt fertilised) speculative clover in their (hopefully fitful) sleep, start to reflect genuine economic reality, then you know it's probably squeaky bum time for the hapless cannon fodder that didn't cause this train wreck, reaped little of its rewards, but nevertheless will bear the brunt of its consequences yet again.

    ronnewmexico -> bonkthebonk , 2016-01-13 22:58:38
    High rate temporary debt junk bonds are already failing. Those issued on the small oil drillers. But it is a relatively small part of the junk bond market itself nevertheless financial institutions overall.
    Small companies are due to fail and will. the larger ones will pick up the pieces at rock bottom prices and things will go on.
    ronnewmexico , 2016-01-13 22:55:07
    The numbers anywhere in developed economies don't support recession. China by the worst guesses is still par on GDP. By most takes between 4 and 7 increasing GDP. With the looming effects of el nino on India I would not say it could enter a recession in the next 6 months but that would be a isolated event. The US no where close. People are taking the low oil prices as a read on the economy. It is not this time global consumption is going up not down. It is a supply glut.
    SirWillis -> ronnewmexico , 2016-01-14 00:39:56
    I live near KSA, and I see first-hand how corrupt and morally bankrupt the whole thing is. I also see how incredibly subsidised EVERYTHING is. The people of these countries are little more than spoiled children, with no incentive to work properly or even understand the businesses they are in. Russia has a much more diverse economy, in KSA it is almost entirely oil. The rest of it is industries that rely on oil money - such as the construction sector.

    Offering an IPO on KSA's oil will expose the total incompetence and corruption behind the company, I don't know how they hope to hide it all. So, you're right, all is far from well. I will be packing my bags at the first sign of revolution, which I predict will be in 3-5 years. I don't think people yet realise how bad things are going to get once KSA implodes and Iran and ISIS seek to take advantage. It's going to be ugly, and I must admit, I'm a little scared.

    PhilPharLap , 2016-01-13 23:21:51
    the reason you have a collapsing global economy is because the idiots created one through a battery of Free Trade Agreements that were aimed at over -riding local sovereignty and democracy and accessing scab labour on an international scale

    It didn't work did it - by dismantling local industry and exporting manufacture to countries like China the middle class in the West made itself redundant

    Welcome to the great unwashed guys - you are one of us now and with less skills to survive - I don't think your economic and managerial skills will impress anyone

    You did it all to yourselves ...Get in the queue for the welfare you denied others - and reflect:

    "So the last shall be first, and the first last: for many be called, but few chosen."

    Or alternatively put - "and wait your turn!"

    ronnewmexico -> ronnewmexico , 2016-01-13 23:52:05
    People are confusing the stock market with the economy. The economy is ho humming along. The market is artificially inflated in value by above stated factors. Not by a whole bunch but enough to make a sell off of minor sort a probable.
    Earnings will once again be real and not a thing of less stock per earning share., Report
    AshleyPomeroy -> ronnewmexico , 2016-01-13 23:59:03
    I wish I could upvote this twice. It's not like e.g the dot.com crash, where a bunch of hopeless money-losing pipe dreams fell apart. Facebook, Apple et al actually make a profit and have a niche, it's just that with so many other investments offering desultory returns, the stock market has been pumped up by desperate speculators.
    Blackbag1999 , 2016-01-14 00:21:18
    I am not sure why people think the Saudis are in trouble.

    Most of the shale is becoming uneconomical to recover if you believe the forward curve. $50 oil for 5+ years, they will need closer to $100 to go back to the capped wells. The frackers are just taking the first 30% of the cheapest oil to produce (1st 18 months), capping and moving on. They are churning through oil reserves at 3 times the rate to do it.

    They can still do it until they get to debt repayment. Anyone thinking the industry got ultra efficient over night is optimistic feller.

    The reality is shale gas is not the primary concern. They want rid of artic, deep water and tar sands. My guess is the Saudis would be more than happy to let the US be the swing producer as shale is far more flexible. Shale was the trigger not the problem.

    mrfunbro , 2016-01-14 01:43:18
    I'd be quite happy to see the whole stock market free fall. The current inequity and greed deserves it's reward. Money for nothing investors and free loader corporations that don't pay their share of taxation will be the ones who go down. A new system is required to break away from the old established power and energy companies that have led us to the brink of devastating our planet.
    backatchya , 2016-01-14 02:00:21
    The capitalists are the victims of themselves. Fortunately for them, they own the wealthiest states on the planet. And therefore, can always expect welfare, social assistance and
    bail-outs whenever they burst another bubble. Socialism for the rich.

    We are a stupid species to put up with this casino scam. If you disagree with the ponzy scheme, start by supporting Sanders in the U.S. and Corbyn in the U.K. At least it's a modest beginning to opposing these criminals.

    If_Not_Why_Not , 2016-01-14 02:50:01
    China stock piling oil is a good idea, may help explain recent capital outflows , of which the article does not explain the opaque /nebulous financial details of these movements. It maybe China shuffling pieces on a board.

    "The country's global trade surplus widened by 21% to $60bn in December. Over the whole year it was $594bn. The country's trade surplus in December with the European Union, its biggest trading partner, increased 36.8% to $15.6bn. The surplus with the US contracted 6% to $19.4bn."

    No doubt the figures need to treated like all PRC figures.
    That said it is undeniable that China had another huge trade surplus.
    Yet despite this they manage to cheat on their exchange rate and devalue the Yuan.
    The Currency/Trade Wars are in full swing..

    HollyOldDog -> litesp33d1 , 2016-01-14 14:32:01
    By then then most of the oil residues, waste and plastic products will reside in the Worlds Seas and Oceans. I've not seen much movement to remove the plastic gyres floating around the Southern Pacific Ocean. Land waste management has serious flaws as well. The only 'waste management ' in the UK that is booming is all the junk that motorists chuck out of their cars when mobile - they must think that plastic bags hanging from tree branches 'adds' to natures wonders. In a resturant car park the other day were 2 used babies nappies left in a parking bay - some people are scum and these couldn't have been poor.
    Peter Sembol , 2016-01-14 03:35:11
    Incredible how low the West in cahoots with Saudi Arabia will stoop, and all in an attempt to crush Russia economically and politically. And the media continues the deceptive narrative about troubles everywhere, brought on by 'competition' among oil producers, except pointing to the true and only reason behind the low oil price. The public in general swallows the 'explanations' forgetting that the ball started rolling downhill immediately after the USA twisted Germany's and other western European countries to impose sanctions on Russia in retaliation for it's welcoming Crimea back to the Motherland. In the name of this geopolitical game, the good people of USA, Canada and other countries whose significant part of income derives from natural resources and related products, are loosing their jobs by the thousands. All is well and according to the plan, as long as Russia suffers more than the West, and will be the first to bite the dust. The world economy will then be turned around to everyone's relief.
    MattSpanner , 2016-01-14 04:43:08
    Seems the FED's recent interest rate rise was premature. If another 2008 does happen calls to abolish it will grow ever louder, especially since economic chaos will smooth Trump's path to the White House, and Trump has made FED abolition one of his campaign pledges. After repeated failures catastrophes under Greenspan, Bernanke and now Yellen it seems the FED is surplus to requirements., Report
    NWObserver -> MattSpanner , 2016-01-14 05:35:59
    What will they do after abolishing the Fed? Will they have a single national currency or allow each bank (or any other entity) to issue its own currency and let these different currencies compete with each other?

    If they continue to have a single national currency, who will issue it and set the monetary policy? Another Central Bank or the government? If it is going to be another Central Bank what exactly is the point of abolishing the Fed? Why not change the law to allow the government to remove the Fed's board of governors and appoint those they think are more competent than Janet Yellen and other governors, since abolishing the Fed will anyway require the repeal of the law establishing it i.e. it too needs Congressional approval. If the government is going to be issuing the currency and set the monetary policy, in what way would it be superior to the Fed doing the same?

    If they allow any entity to issue its own currency, what currency will the taxes be denominated in?

    ronnewmexico -> MattSpanner , 2016-01-14 05:42:12
    Well the predictions were for four rate hikes in the year. Now perhaps we see two. The one already and another. Things get better and it is up to four. The dow only dropped three hundred or so and the S and P is above its support level, which is about 1857 to my dim recollection.

    So till we exceed that support to the downside, really things are not bad. A wash out was probably a necessary thing.

    I think people are overdoing this thing. The media seems to be hyping the decline which may account for all the sell side prognostications.
    Earning are just beginning. If I see indications that earming are the mover behind the sell off I would have concern. Alcoa all things considered was not that bad. Certainly not as bad as the tape today. OIl by my guess is the real mover as the new lows have people spooked.
    I am not to worried it can flip up or down but it really is only a small part of the market nowadays not what it was in yesteryear.

    So I repeat this is overdone, that is my opinion. Those calling gloom and doom on this action, no offense but this little resembles any major sell off of a lasting duration spiral down. What is the mover….low oil prices? The rest of the market benefits from low oil prices.

    Sentiment can drive things lower but really only for so long. Chinas last numbers reported were better than expected. Me being cynical and seeing the talking heads talking things down anticipate it is the big money movers trying to create some action on the short side. How long they keep this up is a guess. But it requires someone to keep pressure on to move it down. Without new bad news on China, what is the precipitive factor….nothing new here.

    ekaai Kaewaniti , 2016-01-14 05:52:46
    Unfair market system, Complete waste of time, energy and resources. Destroy all the stock markets along with corporations and Banks. It is time we stop playing this ridiculous economic game and start concentrating on the real issues that we are facing. Poverty, Conflicts in the middle east, environmental degradation, climate change, and many more. What is the root cause of all of these problems? Yes it the socioeconomic system capitalism with its flawed monetary system owned by the corporations and the Banks that does not care about the well being of planet or nature and the well being of all human beings but only care about their own wealth, power, fame, egos. Such idiots!!!!! stop playing their game and move to a new fair game called RBE and other similar systems.
    werdzwerth , 2016-01-14 07:17:28
    It is very stupid of us to base our economy on something as unstable and selfish as the Stock Market, as well as something as unstable as governments, democratic and otherwise. It is about time we became as intelligent and clever as all these whizz kids who invent amazing technology and make amazing discoveries. It is about time we became whizz kids at organising an intelligent and reliable economy. For us.

    Why do banks charge an interest on loans? If the function of money is to get the economy started and running, then the work done and the profits made should be a sufficient reward. Banks could actually give money away on a non-return basis, so long as the money goes to people who will spend it, this spending lending to more spending.

    Perhaps the private owners of the current private currencies want more than a sound economy, perhaps they want power, and want to exercise this power just to know for real that they have it? Perhaps they are not fully-fledged human being animals but suffer some form of genetic or social affliction that makes them behave in dangerous anti-social ways? Perhaps they don´t give a fig about other human being animals - other than those who serve their biological wants and needs? Perhaps shareholders are afflicted in the same way?

    Perhaps we could form our bank to issue our non-returnable money, and even decide what work is worthwhile and is done and what work is not worthwhile and so will not be done?

    Millions of years ago, so we are told, some fish came out of the sea and survived. What I am suggesting is a work and economy evolution of a similar scale. Current economic theory has us all drowning in the quagmire of self-interest-driven chaos, self-styled as a "social science". Perhaps we could come out into fresh air and create a diversity of human activity on a par with the diversity of living things on land and in the air that came from those first brave fish that ventured beyond known limits?

    Columbus did not go over the edge of the world but discovered a whole New World.

    Perhaps we need to go beyond even the "thinking outside the box" box?

    Thank you.

    criminalswelcome , 2016-01-14 07:35:29
    Who funds international terrorism try the oil rich countries in the Middle East so let's assume the Yanks have got smart for once and are flooding oil market to bring down these economys .
    The end game is destabilise them then pick up their oil industries for a song and influence just who makes Middle Eastern policys by economic means .
    Bit of a dream but hey nothing falls down in price to this extent without a hidden reason given its a fossil fuel that should be rising to maintain supplies for the long term .
    litesp33d1 , 2016-01-14 08:09:40
    The economy is like a super tanker and these results are still the effect of the ripples of the economic crash almost a decade ago. The result of lower oil prices will be that ordinary people will start to realise they have more disposable income than they did a year ago and start spending that money on more shit they don't need and the economy will swing back with a vengeance.
    paddyryan , 2016-01-14 08:24:08
    Well surely all those neoliberal economists can't be wrong....it must be the fault of that evil Mr corbyn and his army of trotskyists.....HA HA we are on the slippery slide to another global crash folks ...
    SeeNOevilHearNOevil , 2016-01-14 08:45:19
    Sigh....the stock market....virtual money and speculation...Worst thing ever created causing insane chain effects in economies. Although....why were economies booming before when Oil price was low? Cause sure oil companies profits go down, but every other business that uses the oil increases their profit. Isn't this also a good reason to start doing something about being so oil dependant?
    humbleandpoor , 2016-01-14 09:50:16
    Once in a lifetime chance for the USA to escape from the strangle whole of the Saudi oil grip.
    Fracking gives them a chance to break with the Saudi s or even break them for good.
    Failure doesn't t bear thinking about, and we all know where Obama s sympathies lie - but in modern America who cares.. the battle is between the giant bureaucracies, not the democratic froth on top of the cake.
    Always remember America in you hour of destiny there were Americans long before there was the USA . And will be long after it is gone. And for the love of God .. COLUMBUS did not discover America. Which ironically is named after a Welch sheep farmer.?
    Americo FrontHoovesintheWellies was his full name. Knew a thing or two about sex and sheep., Report
    Eugenios -> humbleandpoor , 2016-01-14 15:28:25
    Most US oil comes from Canada and Mexico, a very small percentage from Saudi Arabia. But they have enormous financial influence through bonds, obviously, and buying media and politicians. Also Israel and Saudi Arabia have been working together under the table for some time, as was obvious during the Gulf War, and now in their efforts to begin a war against Iran. Fracking has never been any threat to the Saudis--the cost is too high. Their present lowering of oil prices is directed against Russia, surely in cahoots with the US.
    HeadInSand2013 , 2016-01-14 17:54:25

    Oil and US share prices tumble over fears for global economy.

    The economists have been telling us that there is little danger for the US economy to be pushed into recession by a slow-down in the Chinese economy - referred to here as "global economy". More importantly, in election years the US Markets have never been good indicators of the US economy, anyway.

    The real reasons for the US market plunge are the trades conducted on behalf of the Wall Street tycoons and the Saudi Royal Family. Both are doing their best to push the markets down, because they are deeply worried of having another Democrat in the White House, come January 2017.

    The Wall Street tycoons are apprehensive about getting dragged into courts for their financial mischiefs during the last decade. The Saudis are concerned that the US leaning further toward Iran, which will encourage their internal oppositions to demand reforms, which could include getting rid of the Royal Family. So, both the Saudis and the Wall Street tycoons have a common cause. They will "keep at it", until they can be sure that the next US president will be a Republican.

    Eugenios , 2016-01-14 18:45:56
    "National debts, i.e., the alienation of the state – whether despotic, constitutional or republican – marked with its stamp the capitalistic era. The only part of the so-called national wealth that actually enters into the collective possessions of modern peoples is their national debt. Hence, as a necessary consequence, the modern doctrine that a nation becomes the richer the more deeply it is in debt. Public credit becomes the credo of capital. And with the rise of national debt-making, want of faith in the national debt takes the place of the blasphemy against the Holy Ghost, which may not be forgiven.

    The public debt becomes one of the most powerful levers of primitive accumulation. As with the stroke of an enchanter's wand, it endows barren money with the power of breeding and thus turns it into capital, without the necessity of its exposing itself to the troubles and risks inseparable from its employment in industry or even in usury. The state creditors actually give nothing away, for the sum lent is transformed into public bonds, easily negotiable, which go on functioning in their hands just as so much hard cash would. But further, apart from the class of lazy annuitants thus created, and from the improvised wealth of the financiers, middlemen between the government and the nation – as also apart from the tax-farmers, merchants, private manufacturers, to whom a good part of every national loan renders the service of a capital fallen from heaven – the national debt has given rise to joint-stock companies, to dealings in negotiable effects of all kinds, and to agiotage, in a word to stock-exchange gambling and the modern bankocracy."

    Karl Marx

    [Jan 17, 2016] Oil price woes deepen as Iran vows to add 500,000 barrels a day

    Notable quotes:
    "... America threatened Russia some time ago about meddling in the affairs of Syria ..."
    "... The US is really going for broke on crashing the oil price ..."
    "... All of this to try to contain Russias military rearmament made possible by sky high oil prices ..."
    "... Has the west finally gotten wise to the Saudi money that flows into extremist groups? Would seem so. West seems to be doing everything it can to contain the Saudis. eems to be doing everything it can to contain the Saudis. ..."
    "... Yes because of millions of refuges that Arab countries caused by supporting ISIS it is completely natural for west to go after Saudi Arabia and its allies sponsor of ISIS. So they got what they deserved. Today I also read that the markets in Saudi Arabia, Qatar and Emirates collapsed and I think this a beginning of an end for them. ..."
    "... The Iranians deciding that their revolution has matured sufficiently for them to plainly state we dont wish death on anybody, our religion is about peace, and to demonstrate our sincerity well urge our people to stop such rhetoric would contribute to Irans rehabilitation as a more or less normal member of the global community of nations. ..."
    "... This has to be the beginning of the end for the Saudis and Qataris and their utter crapulence, all at the expense of the rest of the World. OPEC has no answer for this and is completely impotent to do anything about it. The cartel is busted. ..."
    "... And so it seems with oil. There has to be a base production cost which doesnt vary and I doubt that the Saudis or Iranians are selling it at under that cost - they both need a modest profit - so, one wonders, if they can make that modest profit at $30 a barrel, think how much they were making at $100 ..."
    "... The U.S and Iranians are using each other against their own allies. U.S is using Iran to put pressure on Saudi so that they keep producing more oil to bankrupt Russia, despite it destroying Saudi economy. Iran is using USA as a counterbalance to Russia because as much as they want Russias help, they dont want Russia to become too strong in the region. ..."
    "... In my view Iran was never quite the bad guy that the western governments portrayed it to be. We certainly have differences. But if you compare Iran and Saudi Arabia there is no contest - Iran is far less a bogeyman. ..."
    www.theguardian.com

    The Guardian

    Sean Mcmahon , 2016-01-17 19:10:22
    The funny thing is that the sanctions have probably helped Iran as it had to survive with less. Iran now gets access to it's foreign banking about 50billion net and can start exporting again.

    Saudi is burning through its reserve cash and it's populace are used to getting things for free, will they survive low oil revenues like Iran or is the House of Said on the brink of annihilation? Talk about shooting yourself in the foot!

    It's amazing how detrimental oil has been to the middle east. If only they could have gone down a similar path to Norway....

    Jahanzeb Ahsan , 2016-01-17 18:56:59
    Seeing Iran to go into economical slow down was a depressing sight. OPEC definitely took a huge share of IRAN'S oil fortune and that time can not come back. PART of it was Iran's fault agreed, but since Iran's sanctions are lifted you cant blame it.

    It's just taking a share of what it has lost in years. This will indeed afftect gulf region and other oil exporting countries but HEY BACK TO REALITY!!! Indeed its bad time since oil is already record low thanks to Fracking. This time is like dubstep for environmentalists who are dancing on oil price beats. No one is actually explaining the actual picture behind the scene as hundred of thousands of jobs are being slashed. Its like a death sentence for oil workers like me. 1 year since graduation as a petroleum engineer still no job worried to pay debts and there are countles like me. In short low oil prices won't make things better but worse.

    Xavier Cournet , 2016-01-17 16:21:17
    "The French-listed aircraft maker Airbus also looks set for a significant boost from the sanctions ending"
    It is the first time, a British newspaper says "French aircraft maker Airbus". Yes Airbus is principaly a French company and not a European one contrary to what British newspaper often say.
    ID241823 -> lifeintheusa , 2016-01-17 17:24:40
    Indeed...the magic answer is interesting to say the least. America threatened Russia some time ago about meddling in the affairs of Syria and other cooperative business tactics. This manipulation is more about the benefits beneath mainstream media...plus, it is an election year...of course, oil is welcome and plentiful...somehow...it always is election time...though the added incentive does make Russia cringe a bit...these United States knew the only way to allow Russia to feel pinched was this way...so her and her cohorts have combined efforts to achieve their goals. Hmmm...
    MerlinUK , 2016-01-17 14:41:56
    Hammond is such a prostitute with his comments. They have been sucking up to Saudi/Qatar and UAE for decades, but now they are all on the slippery slope, he says 'dump them all and start courting Iran'. The man has no shame whatsoever.
    opyniated -> MerlinUK , 2016-01-17 15:15:12

    dump them all and start courting Iran

    Best thing he has said in his career. Dump the wahhabi sheikhs while your heads are still standing on your shoulders.

    sokolnik100 , 2016-01-17 14:28:57
    The US is really going for broke on crashing the oil price:-
    1 Deal with Iran (to increase supply)
    2 Saudis pumping as much as they can (favour to US who turn a blind eye or help their regional aspirations by financing ISIS and AQ)(note the price was going nowhere until Ukraine/Crimea appeared then suddenly it started going down whilst Saudi currency actually appreciated)
    3 Letting the US export oil (more supply)
    4 Letting Turkey take oil from ISIS (more supply)

    All of this to try to contain Russia's military rearmament made possible by sky high oil prices.

    DDDFFF -> sokolnik100, 2016-01-17 14:38:39
    that's correct as well as containing the Saudi, Qatari sponsored terrorist groups
    ElfenLied2 -> DDDFFF, 2016-01-17 14:50:05
    I thought that the Saudis see the terrorism as their own failure as well?

    It's not controversial that it is oil money that has caused the situation, but the Saudis seem as powerless as anyone else to stop it.

    Glenn Middleton -> sokolnik100 , 2016-01-17 14:50:16
    Remind us why so many shale producers in america are going bust because of oil prices.
    DDFFF , 2016-01-17 14:19:04
    May the terrorist funding by Saudi and Qatar comes to halt by cheap oil prices. They had made the decision to make it cheap but it is not Iran's decision to make it expensive again. Which believe me Iran doesn't like to do so especially that through the sanction years Saudis, Qatar, Emirates played a nasty role in OPEC by getting rid of production sluts(it was to do by limiting each member to a certain production level but as Iran was sanctioned they thought it is the best way to hurt Iran's share of OPEC by getting rid of it) now this is the only reason they cannot increase the oil price as well as they cannot control Iran's production . Iran will produce even more and has a fresh supply of Cash and its economy is more robust to be only based on Oil so what I want to tell the Saudis, Qatari, Emirates and their allies is to fuck off . Because through these years you were sponsors of ISIS, Cause hundreds of thousands of death tolls and millions of refuges in the world that you have not taken a single refugee and the whole EU and North Americas must pay for it now. YOU GOT WHAT YOU DESERVED ARABS. Hope Iran become friend with Israel too and teach Arabs another lesson.
    MerlinUK -> DDDFFF , 2016-01-17 14:39:49
    Recent events with Saudi princes assaulting maids in the US (then claiming 'diplomatic immunity' and skipping the country before charges could be laid against them) could also be a factor, as it has woken people up as to what the Saudis are really like.

    The highway between Bahrain and Saudi/UAE is like the M25 at weekends, with Wahhabi hypocrites rushing to Bahrain to get pissed and laid. It's been like that for decades. They claim to be pious and expect their subjects, contractors and ex-pats working out there to do as they say, not as they do.

    Tresidentevil , 2016-01-17 14:18:48
    Saudi Arabia is therefore finished as a regional power. Economy crippled by low oil prices. Iran meanwhile has had to endure an embargo for a decade, resulting in a tougher economy that is far more diverse.

    Has the west finally gotten wise to the Saudi money that flows into extremist groups? Would seem so. West seems to be doing everything it can to contain the Saudi's. eems to be doing everything it can to contain the Saudi's.

    DDDFFF -> Tresidentevil, 2016-01-17 14:26:32
    Yes because of millions of refuges that Arab countries caused by supporting ISIS it is completely natural for west to go after Saudi Arabia and its allies sponsor of ISIS. So they got what they deserved. Today I also read that the markets in Saudi Arabia, Qatar and Emirates collapsed and I think this a beginning of an end for them.
    MerlinUK -> Tresidentevil, 2016-01-17 14:35:26
    It really brings David Cameron and the Tories' sucking up to the Saudis into clear perspective, doesn't it, as their credit rating for buying arms will be taking a nosedive. Watch BAE Systems shares start to wobble this coming week.

    It also leaves the Royal family in somewhat of a quandry, as who is Price Charles going to sword dance with now?

    FunctionalAtheist , 2016-01-17 14:02:50
    Iran adding to the current supply glut in oil was an inevitable consequence of the deal. Still, the timing is particularly bad, with the crash in commodities feeding a gloomy mood in stock markets around the world.

    A deflationary spiral for the global economy is now a little more likely, with excess capacity in a range of manufactured goods, from steel to I-Phones, in addition to the glut in oil and other commodities.

    But, that glut is not Iran's fault. The prisoner exchange was good to see.

    Next I'd like to see a symbolic move by Iran: move on from the "Death to America" (and Britain, and Israel) rhetoric. Islam needs some public relations help. The Iranians deciding that their revolution has "matured" sufficiently for them to plainly state "we don't wish death on anybody, our religion is about peace, and to demonstrate our sincerity we'll urge our people to stop such rhetoric" would contribute to Iran's rehabilitation as a more or less "normal" member of the global community of nations.

    MerlinUK , 2016-01-17 13:53:33
    This has to be the beginning of the end for the Saudis and Qataris and their utter crapulence, all at the expense of the rest of the World. OPEC has no answer for this and is completely impotent to do anything about it. The cartel is busted.

    I guess that nobody likes the Wahhabi hypocrites any more.

    StuartHX , 2016-01-17 13:39:21
    I suppose it all depends on how much Iranian oil is pumped into the system as a proportion of the total, but then what is the 'right' price for oil anyway?

    It reminds me of a supermarket conundrum - 'What's the price of a packet of Pringles?'. This comes from the notion that in one supermarket they're £1 each or two for £1.50, in another they're £1.25 but one a 'buy one get one free' deal, in another they're £1 each but buy two and get one free... and so on. But not only this - all of these deals change weekly.

    So you begin to wonder, given that a packet of Pringles costs the same to make whatever price they're sold at - and the manufacturer wants to make a modest profit - why can you never determine the true price?

    And so it seems with oil. There has to be a base production cost which doesn't vary and I doubt that the Saudis or Iranians are selling it at under that cost - they both need a modest profit - so, one wonders, if they can make that modest profit at $30 a barrel, think how much they were making at $100

    copyniated , 2016-01-17 13:32:13
    Apparently, according to reuters, Saudi Arabia paid Somalia a $50 million bribe to break diplomatic relations with Iran. Iranians, themselves, would have paid the Somalian government more to beak off diplomatic relations.

    But hey, why complain? It's free! Cheers 'Salman the Barbarian'!

    copyniated -> Katrin3, 2016-01-17 17:06:42
    Saudi Arabia, Israel, Bahrain, Sudan, Somalia, United States, The Comoros and Djibouti all do not have diplomatic relations with Iran. UAE recalled its embassador in sympathy with Sheikh Salman the Barbarian. Iran needed UAE before as it was used as a port for importing into Iran(a sanction busting avenue) but since sanctions are lifted, middlemen are no longer required which means UAE will lose an annual income of $11 billion and Iran will gain. Very sad!

    I hope that The Comoros and Djibouti will soon reestablish relations because it is hurting Iran's economy.

    Vizier , 2016-01-17 12:57:10
    'The UK has played a central role, and I hope British businesses seize the opportunities available to them through the phased lifting of sanctions on Iran. ' said Philip Hammond.

    His department was instrumental in sanctions against Iran while other countries, particularly Germany and France, were lukewarm. Which countries will now benefit? Answers on a postcode, marked 'Clue', to Philip Hammond.

    Phil_Paris , 2016-01-17 12:45:31
    Iran is closer to a development [nations] like Turkey than to Saudi Arabia. Saudis have always been unable to do anything else than watch oil go out of pipelines into tankers, they have no agriculture, no industry.

    Iranians want to industrialize like Turkey, but that doesn't mean democracy and personal freedom. Development gives more means of control and repression to autocrats too, like we have seen in Russia, Turkey, continental China. Not all countries are able to move to democracy like Taiwan and South Korea

    TomBakerIsGod , 2016-01-17 12:23:25
    It is hard to understand why the Guardian labels low oil as an actual woe for the World. It mainly hurts countries like Russia and Saudi Arabia, while in the West we all benefit from cheap fuel.
    copyniated , 2016-01-17 12:18:08
    Doubt it. The news was already in the market and has been for some time. No surprize.

    Even if does go further south, it would be temporary and besides the wahhabi regimes of Arabia are the ones who will suffer the most. Either way, good news for Iran.

    SchraderBrau -> copyniated, 2016-01-17 14:34:34
    The U.S and Iranians are using each other against their own allies. U.S is using Iran to put pressure on Saudi so that they keep producing more oil to bankrupt Russia, despite it destroying Saudi 'economy'. Iran is using USA as a counterbalance to Russia because as much as they want Russia's help, they don't want Russia to become too strong in the region.

    The (seemingly) more likely scenario is to make the excuse for war against Iran this year.... "We really tried with these guys but now we have to 'regime-change' them". That will result in a MASSIVE war.

    A less likely scenario is that USA (at a shot to nothing) thinking they might actually replace saudi oil-fields propping up the $ with IRanian ones. And Iran (at a shot to nothing) thinking they might take the U.S out of Israel's pocket. As unlikely as either of these scenarios are, all bets are off this year. Both those latter plays could push Israel and Russia closer together, resulting in a MASSIVE war which the U.S would lose.

    Either way, a MASSIVE war is coming and this development is more significant than people think.

    Vizier -> MrPeevley, 2016-01-17 13:05:51
    In my view Iran was never quite the bad guy that the western governments portrayed it to be. We certainly have differences. But if you compare Iran and Saudi Arabia there is no contest - Iran is far less a bogeyman.

    It is always worth remembering that nearly all the September 11 hijackers were Saudis, none were Iranian. ISIS was funded and armed by Saudi Arabia, not by Iran. You can draw a direct line from Saudi Arabia through the carnage in Iraq and Syria directly to the terrorist attacks in Paris.

    Whenever the west talks about 'Iran being a state sponsor of terrorism' they mean one thing and one thing only: Hezbollah.

    Disclosure: I have a low opinion of Saudi Arabia so my comments are biased.

    [Jan 16, 2016] Is this the end of the bull market?

    www.cbsnews.com

    Whether the losses deepen or an oversold rebound materializes depends mainly on two things: Crude oil prices stabilizing (despite the lifting of Iranian oil sanctions) and the Fed delaying further rate hikes (until market confidence has been restored).

    The economic data certainly supports a dovish turn by the Fed. Headline retail sales dropped 0.1 percent, with 2015's performance by consumers the weakest since 2009. Industrial production fell a larger-than-expected 0.4 percent in December. U.S. freight volumes are falling for the first time in three years. Wal-Mart (WMT) is firing 16,000 workers and closing 269 stores globally.

    [Jan 16, 2016] Welcome to a new era of volatility on Wall Street

    Notable quotes:
    "... It was easy for many years, says Bill Barker, portfolio manager at Motley Fool Asset Management, whose three mutual funds control about $600 million. That was not an accurate display of what happens in the market all the time. ..."
    "... Over the past 12 months, an investor in an S P 500 index fund has lost nearly 5 percent, including dividends. But over five years, they're up a total of 60 percent, and over 10 years, they're up 79 percent. ..."
    "... From 2012 until last summer, investors basked in a market where the Standard Poor's 500 rarely had a bad day. The widely followed index fell more than 1 percent less often than Los Angeles has rainy days, about 8 percent of the time. During that span, the S P 500 also completely avoided a correction, which is what traders call a sustained drop of 10 percent. ..."
    "... What makes the volatility even more painful to endure is that many analysts are forecasting stock returns to be lower this year and in the coming years than in the recent past. So investors are facing the prospect of higher risk without much higher reward. ..."
    www.cbsnews.com

    The vicious drops feel even more unsettling because they're such a departure from the placid and strong returns that investors had been enjoying for years. Like vacationers returning from a warm beach to a slushy commute to work, the shock of change is making something already painful even more so.

    Now investors just need to get used to it, analysts say. "It was easy for many years," says Bill Barker, portfolio manager at Motley Fool Asset Management, whose three mutual funds control about $600 million. "That was not an accurate display of what happens in the market all the time."

    The painful return of big price swings serves as a reminder that investing in stocks can be harrowing, especially if investors focus on the day-to-day moves.

    That's not to say investors can't still win over the long term. Over the past 12 months, an investor in an S&P 500 index fund has lost nearly 5 percent, including dividends. But over five years, they're up a total of 60 percent, and over 10 years, they're up 79 percent.

    It's just that analysts expect the volatility to continue. The remarkably calm stretch from late 2011 through last summer was an anomaly.

    From 2012 until last summer, investors basked in a market where the Standard & Poor's 500 rarely had a bad day. The widely followed index fell more than 1 percent less often than Los Angeles has rainy days, about 8 percent of the time. During that span, the S&P 500 also completely avoided a "correction," which is what traders call a sustained drop of 10 percent.

    ... ... ...

    What makes the volatility even more painful to endure is that many analysts are forecasting stock returns to be lower this year and in the coming years than in the recent past. So investors are facing the prospect of higher risk without much higher reward.

    [Jan 15, 2016] What If There Is No Fed Put - Paul Brodsky Thinks Yellen Will Not Bailout Markets This Time

    Notable quotes:
    "... His conclusion: Global equity markets are suffering so far in 2016 because the Fed's primary policy has shifted from protecting asset prices to protecting the exchange value of the dollar. Buy USDs and Treasuries ..."
    "... Yeah, I think you cant have your equities implode and expect the world to still clamor for your currency and government bonds. The categories are linked by confidence in the U.S. economy. ..."
    Jan 15, 2016 | Zero Hedge

    His conclusion: "Global equity markets are suffering so far in 2016 because the Fed's primary policy has shifted from protecting asset prices to protecting the exchange value of the dollar. Buy USDs and Treasuries"

    If he is right, watch out below, especially if hints such as this one by San Fran Fed president John Williams, who famously admitted several days ago the Fed was wrong about the "benefits" from crashing out, are an indicator of broader Fed thinking:

    • WILLIAMS DOESN'T SEE SIGNS ASSET VALUES DEPRESSED, BELOW NORMAL

    With the WSJ adding that "Market Volatility Unlikely to Deter Rate Rises Over Next Few Years" - hardly what the abovementioned desperate traders wanted to hear...

    NoDebt

    It's time for some Bob DiNiro from Copland:

    You blew it!

    https://www.youtube.com/watch?v=hqPRwq3QJsk

    Manthong

    It all depends upon how a handful of banks are positioned.

    F the rest of the country and world.

    NoDebt

    "We disagree. The Fed no longer works implicitly for equity investors (i.e., "the Fed Put"); it is primarily working for the U.S. banking system by stabilizing and increasing its deposit base, and for the state by providing an incentive across the world to invest in Treasury debt. By raising rates, it increases the exchange value of the U.S. dollar."

    Even if the assumptions are correct, just look where the BOJ ended up seeking precisely those same goals.

    herkomilchen

    Yeah, I think you can't have your equities implode and expect the world to still clamor for your currency and government bonds. The categories are linked by confidence in the U.S. economy.

    [Jan 15, 2016] Art Cashin Comments On Today's Crash The Fed Will Try Anything

    Zero Hedge

    "The Fed will try anything," warns Art Cashin, calmly explaining that markets "are in 'deep concern' mode," currently and if the S&P hits 1857, "there might be another whole new round of selling." The Fed's solution, Cashin stoically explains to a dumbstruck CNBC anchor, that "it doesn't matter that it hasn't worked in the past," The Fed will unleash moar QE to save the world.

    The venerable Art Cashin unleashes some rather uncomfortable truths and no one dares disagree with him...

    [Jan 15, 2016] Bill Gross' Advice To Traders As Stocks Crash

    Zero Hedge

    Some more Gross courtesy of Bloomberg:

    ... ... ...

    In his e-mail, Gross said that zero-percent interest rates and quantitative easing created leverage that fueled a wealth effect and propped up markets in a way that now seems unsustainable.

    His conclusion: "The wealth effect is created by leverage based on QE's and 0% rates."

    In other words, it was all an illusion.

    [Jan 14, 2016] Neoliberalism was also economics departments orthodoxy for decades

    Notable quotes:
    "... It should never be forgotten that the conservative orthodoxy -- of low taxes on the wealthiest, deregulation of finance, small govt deficits, and the need for inequality to spur individual initiative -- was also economics departments orthodoxy for decades. Economists put their imprimatur on this whole mess, with VERY few exceptions. ..."
    "... 70% of the population STILL believes that federal deficits are a big problem, and also believes that this is standard economic orthodoxy. Until the crash, most people were ready to accept some degree of privatization of Social Security, and Martin Feldstein pushed on this repeatedly with no counterargument from the economics departments. The Clinton economic team was instrumental in pushing financial deregulation, upon the supposed orthodoxy that it is good for the economy. Even the worst nonsense in Friedmans Capitalism and Freedom and Free to Choose barely saw any push-back from other economists in the op-ed pages. ..."
    "... Reaganomics was approved by most economists either through mood affiliation or intellectual incompetence. That 70% currently includes college graduates who took economics classes and traders on Wall Street. ..."
    "... Nonsense. Polls of profession economists opinions abound. Reaganomics/neoliberalism has predominated in economics until recently. On a few big issues (notably, on whether the size of federal deficits as % of GDP should be reduced) the split remained even. ..."
    economistsview.typepad.com

    Lee A. Arnold :

    It should never be forgotten that the "conservative orthodoxy" -- of low taxes on the wealthiest, deregulation of finance, small gov't deficits, and the need for inequality to spur individual initiative -- was also "economics departments orthodoxy" for decades. Economists put their imprimatur on this whole mess, with VERY few exceptions.

    It's been a first-rate intellectual scandal, perpetrated by some of the biggest names in the economics racket, and with most of the lesser lights tagging along, for fear of ostracism.

    And most of them STILL don't have a clear view of what the real problems are.

    Lee A. Arnold -> anne...
    70% of the population STILL believes that federal deficits are a big problem, and also believes that this is standard economic orthodoxy. Until the crash, most people were ready to accept some degree of privatization of Social Security, and Martin Feldstein pushed on this repeatedly with no counterargument from the economics departments. The Clinton economic team was instrumental in pushing financial deregulation, upon the supposed orthodoxy that it is good for the economy. Even the worst nonsense in Friedman's "Capitalism and Freedom" and "Free to Choose" barely saw any push-back from other economists in the op-ed pages.

    "Conservative orthodoxy" can be laid squarely at the feet of the economics departments, up until the crash. If the ones who are supposed to know better, don't make a concerted effort to refute the tons of nonsense spouted in the name of economics, then they should resign their tenure.

    Lee A. Arnold -> pgl...
    It most certainly WAS taken as the orthodoxy. Reaganomics was approved by most economists either through mood affiliation or intellectual incompetence. That 70% currently includes college graduates who took economics classes and traders on Wall Street.
    pgl -> Lee A. Arnold ...
    "Reaganomics was approved by most economists either through mood affiliation or intellectual incompetence."

    Not even remotely true. Criticized by liberal economists. Blasted by the conservative economists who refused to work for the Reagan White House. Even blasted by a young Greg Mankiw but that is before he drank the Bush Kool Aid.

    Lee - your claim here is just wrong. And the more you defend it, the worse it gets.

    Lee A. Arnold -> pgl...
    Nonsense. Polls of profession economists' opinions abound. Reaganomics/neoliberalism has predominated in economics until recently. On a few big issues (notably, on whether the size of federal deficits as % of GDP should be reduced) the split remained even.

    (1992 -- responses from 464 US economists):

    • "A large federal budget deficit has an adverse effect on the economy" 78.7% agree (includes 'agree with provisos').
    • "The money supply is a more important target that interest rates for monetary policy" 56.7% agree.
    • "As the USSR moves toward a market economy. a rapid and total reform (i.e., "going cold turkey") would result in a better outcome than a slow transition" 57.6% agree.
    • "A minimum wage increases unemployment among young and unskilled workers" 78.9% agree.
    • "An economy in short-run equilibrium at a real GNP below potential GNP has a self-correcting mechanism that will eventually return it to potential GNP" 50.8% agree.
    • "Changes in aggregate demand affect real GNP in the short run but not in the long run" 52.8% agree.
    • "Lower marginal income tax rates reduce leisure and increase work effort" 55.4% agree. (Alston et al., "is there a global economic consensus?" AEA Papers and Proceedings, 1992)

    [Jan 13, 2016] Three Ways to Help the Working Class

    Notable quotes:
    "... Yes. The ratio of population to jobs needs to change dramatically. Bust out of the old cycle where the ratio thru out the cycle remains bad. Yes even at the peak of employment -- We need a far higher sustained rate of spending on domestically produced goods and services ..."
    "... One problem with MMTers is they talk about very common ideas, like deficit financed spending, and pretend like they just invented something radically new, while completely failing to acknowledge or address the rest of the conversation that others have been having for years. ..."
    "... Oh no! Whatever you do, cried Brer Rabbit, Dont throw me into the briar patch! ..."
    "... ...So long as business interests dominate the political process, it will be hard to reverse the trend toward increasing inequality. ..."
    "... Mark and most of his ilk support an open door for corporations to import smart, hard working and desperate workers from around the world...impact of that at the margins for wages(along with many other things) have been a disaster for the bottom 80% over the past 30 years. ..."
    economistsview.typepad.com
    I have a new column:
    Three Ways to Help the Working Class : ... In graduate school, I was once told that "people don't have marginal products, jobs do." What does this mean? ...

    I wish I would have connected the last part to the Supreme Court case on public unions.

    RGC :

    "If you took 100 dogs and you buried 95 bones in a field and you told the dogs their job was to go out and find a bone, what's the very best case scenario? The best you can possibly hope for is that 95 dogs come back with bones. Five dogs can't get bones. More likely, some dogs will get lucky; they'll stumble across a few extras. Some may have better skills; they'll find three or four. So, the number of dogs that come back without bones may be ten or fifteen.

    (c. 9:38) "The conventional economist would gather the dogs together, the ones that had no bones, and train them to sniff out bones more effectively. Then they would send those hundred dogs back out into the field and tell them to go come back with a bone. And, again, the best you can get is 95 dogs with bones. What's wrong is that there aren't enough bones. There's nothing wrong with the dogs. The bones are the jobs. There's nothing wrong with the unemployed. There simply aren't enough jobs.

    - Stephanie Kelton at the Summit on Modern Money Theory in Rimini, Italy. She is Creator and Editor of New Economic Perspectives. Her research expertise is in Federal Reserve operations, fiscal policy, social security, healthcare, international finance, and employment policy.

    PPaine -> RGC...
    Yes. The ratio of population to jobs needs to change dramatically. Bust out of the old cycle where the ratio thru out the cycle remains bad. Yes even at the peak of employment -- We need a far higher sustained rate of spending on domestically produced goods and services
    sanjait -> RGC...
    The very conventional new Keynesian response to a shortfall in demand is expansionary demand management policies.

    One problem with MMTers is they talk about very common ideas, like deficit financed spending, and pretend like they just invented something radically new, while completely failing to acknowledge or address the rest of the conversation that others have been having for years.

    RGC -> sanjait...
    It's cute the way you make obviously ignorant assertions with such apparent confidence.
    PPaine -> RGC...
    Don't be too harsh. He very often makes good points. Why he's so hard on MMTers escapes me

    Has he read kalecki Lerner and Vickrey ?
    The young James Meade
    The young Lawrence Klein

    The Post war macro left
    These are not MMTers

    anne -> PPaine ...
    http://www.nytimes.com/2013/10/22/business/economy/lawrence-r-klein-economist-who-forecast-global-trends-dies-at-93.html

    October 21, 2013

    Lawrence R. Klein, Economic Theorist
    By GLENN RIFKIN

    Lawrence R. Klein, who predicted America's economic boom after World War II and was awarded the 1980 Nobel in economic science for developing statistical models that are used to analyze and predict global economic trends, died on Sunday at his home in Gladwyne, Pa. He was 93.

    His daughter Hannah Klein confirmed the death.

    As World War II was ending, Professor Klein, widely regarded as a brilliant theorist, disputed the conventional wisdom that the postwar period would drive the American economy back into a long depression.

    Using his econometric models based on mathematical equations, he predicted correctly that the pent-up demand for consumer goods and housing after the war, coupled with the purchasing power of the returning soldiers, would result not in economic crisis but in a surge in spending and a flourishing economy.

    Though he often testified before federal bodies and served as an economic adviser to Jimmy Carter during his 1976 presidential campaign, Professor Klein chose to remain in academia - he taught economics at the University of Pennsylvania for 33 years - and rejected an offer to join the Carter administration.

    "I am just an academic giving advice," he told People magazine in 1976. "If you are a technician and are asked for help, it is a social obligation of citizenship to give it."

    Professor Klein's use of vast survey data to build statistical economic models for the United States and several other countries has been adopted by economists around the world. "Few, if any, research workers in the empirical field of economic science have had so many successors and such a large impact as Lawrence Klein," the Nobel committee wrote in awarding him the Nobel Memorial Prize in Economic Science....

    anne -> PPaine ...
    Where is a reference? Repeated name-dropping, with no references is widly inconsiderate. Since you use the names repeatedly, why not just have a set of references to put down?

    What should a person read of Lawrence Klein?

    anne -> PPaine ...
    http://mrzine.monthlyreview.org/2010/kalecki220510.html

    1942

    Political Aspects of Full Employment
    By Michal Kalecki

    http://works.bepress.com/cgi/viewcontent.cgi?article=1027&context=timothy_canova

    March, 1997

    The Macroeconomics of William Vickrey
    By Timothy A. Canova

    http://crookedtimber.org/2015/12/17/piketty-meade-and-predistribution/

    December 17, 2015

    Piketty, Meade and Predistribution
    By MARTIN O'NEILL

    anne -> PPaine ...
    http://community.middlebury.edu/~colander/books/map.html

    1980

    MAP: A Market Anti-Inflation Plan
    By David Colander and Abba Lerner

    Preface

    This is a small book about a big topic. This is not the usual book on inflation, simplified- or oversimplified- to make accepted doctrines intelligible to the layman. It presents a new plan- MAP (Market Anti-inflation Plan)- that makes it possible to succeed in curing our inflation. The ideas in it are not easily absorbed. They form a radical new framework- a new way of looking at inflation, and indeed at all macroeconomics, which is at the same time only a synthesis of many divergent old trains of thought. As Albert Einstein said, "Ideas should be expressed as simply as possible, but not more so." We think we have made the book intelligible to nonspecialists, even though its ideas are challenging for all readers, and perhaps even more so for advanced economists.

    We approach inflation as an economic problem, but we make allowances for political realities in designing MAP. Although we believe MAP should be adopted in some form, the book is not written from an advocatory position. We try to consider all arguments, both pro and con, and do not attempt to minimize potential difficulties.

    The methodology is realytic - an unusual word that indicates a contrast with analytic. This means that we are primarily concerned with solving real problems. We believe that the book also contributes importantly to extending theoretical understanding, but it does this only where necessary to solve the problem at hand. *

    * http://www.britannica.com/EBchecked/topic/1085393/Abba-P-Lerner#ref849102

    Sandwichman -> RGC...
    Ah-ha the lump of bones fallacy! Dogs looking for bones will create a supply of bones as a consequence of their demand for bones.

    Dog gets no bone.
    Dog starves.
    Vultures (capitalists) eat meat off dead dog.
    Bones!

    anne :
    http://www.nytimes.com/2016/01/12/us/politics/at-supreme-court-public-unions-face-possible-major-setback.html

    January 11, 2016

    Supreme Court Seems Poised to Deal Unions a Major Setback
    By ADAM LIPTAK

    WASHINGTON - The Supreme Court seemed poised on Monday to deliver a severe blow to organized labor.

    In a closely watched case brought by 10 California teachers, the court's conservative majority seemed ready to say that forcing public workers to support unions they have declined to join violates the First Amendment.

    A ruling in the teachers' favor would affect millions of government workers and culminate a political and legal campaign by a group of prominent conservative foundations aimed at weakening public-sector unions. Those unions stand to lose fees from both workers who object to the positions the unions take and those who simply choose not to join while benefiting from the unions' efforts on their behalf.

    Under California law, public employees who choose not to join unions must pay a "fair share service fee," also known as an "agency fee," typically equivalent to members' dues. The fees, the law says, are meant to pay for collective bargaining activities, including "the cost of lobbying activities." More than 20 states have similar laws.

    Government workers who are not members of unions have long been able to obtain refunds for the political activities of unions like campaign spending. Monday's case, Friedrichs v. California Teachers Association, No. 14-915, asks whether such workers must continue to pay for any union activities, including negotiating for better wages and benefits. A majority of the justices seemed inclined to say no.

    Collective bargaining, Justice Anthony M. Kennedy said, is inherently political when the government is the employer. "Many critical points are matters of public concern," he said, mentioning issues like tenure, merit pay, promotions and classroom size.

    The best hope for a victory for the unions had rested with Justice Antonin Scalia, who has written and said things sympathetic to their position. But he was consistently hostile on Monday.

    "The problem is that everything that is collectively bargained with the government is within the political sphere, almost by definition," he said.

    The court's four liberal members were on the defensive, asking whether there was good reason to overturn a 1977 decision by the court that allowed the fees....

    anne -> anne...
    http://www.nytimes.com/2016/01/09/us/politics/union-fees-friedrichs-v-california-teachers-association.html

    January 8, 2016

    Mandatory Union Fees Getting Hard Look by Supreme Court
    By ADAM LIPTAK

    The justices have already voiced skepticism about making people give money to public unions. They may now be ready to rule that it's unconstitutional.

    PPaine -> anne...
    The unins have no choice but to attack on all fronts

    Public sector insulation from savage attacks ended long ago
    This is just a after dinner beltch by the union eaters

    Peter K. :
    One way to increase worker bargaining power is to employ aggressive macro (fiscal, monetary, currency/trade) policy so that labor markets are tight and businesses are fighting over workers.

    In the late 90s, labor shared in productivity gains as unemployment fell below 4 percent. This ended with the tech stock bubble which morphed into the housing bubble.

    As DeLong recently wrote:

    "What we need now is 1) debt relief to unwind the overhang and 2) much tighter financial regulation to prevent the growth of new fragilities. And if those prove inconsistent with full recovery, then we need massive government spending on infrastructure and other investments financed by money printing until full employment is reattained."

    It could be that achieving aggressive macro policy is as difficult politically as making the environment more favorable towards unions.

    If we look at the post-war social democratic years, both helped raise living standards. Also the financial system was much smaller and much more regulated.

    Peter K. -> Peter K....
    http://www.huffingtonpost.com/brad-delong/global-economic-depression_b_8924596.html?1452263364

    DeLong's quote

    Peter K. -> Peter K....
    Other ideas include work-sharing during downturns, and shorter hours.
    Sandwichman -> Peter K....
    "Oh no! Whatever you do," cried Brer Rabbit, "Don't throw me into the briar patch!"
    pgl :
    Point #2: "We also need to do a better job of providing the educational resources people need to reach their full potential."

    I can see conservative economists echoing this but what specifically do they want policy to do to make this happen? More Pell Grants No - they want to cut that kind of support. Now Greg Mankiw will tell you that you will get a great education if you manage to get into Harvard and pay $300 for his textbook!

    mulp -> pgl...
    If getting a Harvard PhD for every worker means that the California farm worker cutting broccoli and lettuce, or changing bed pans for the bedridden in nursing homes, gets paid $120,000 per year, then I'm all for eliminating poverty by education.

    My guess is education is not the path to eliminating poverty.

    If you think education is the solution, explain why it takes a college degree to pay farm workers, home care workers, child care workers, cleaning people who scrub toilet, middle class wages, instead of simply paying them middle class wages right now.

    RC AKA Darryl, Ron :
    "...So long as business interests dominate the political process, it will be hard to reverse the trend toward increasing inequality."

    [Actually it is the interest of management and the capital owning class that are dominating the political process. Businesses would do just fine if wages were higher, rent seeking - not so much.]

    Peter K. :
    https://www.jacobinmag.com/2016/01/yanis-varoufakis-interview-jeremy-corbyn-greece-eurozone-tsipras/

    The Man Who Knew Too Much

    An illustrated interview with former Greek finance minister Yanis Varoufakis.

    g :
    Mark and most of his ilk support an open door for corporations to import smart, hard working and desperate workers from around the world...impact of that at the margins for wages(along with many other things) have been a disaster for the bottom 80% over the past 30 years.
    PPaine -> Paine...
    Even the great dani rodick and joe Stigilitz could push tis harder
    But they are one worlders

    An honorable club but... Perhaps we need bordered areas to heal themselves first with national policies of true full employment and balance trade forex

    Denis Drew :
    That's right ... You cannot make the retail clerk any more productive. That's talking about the people I care about: bus drivers (taxi drivers -- me :-]), home carers, janitors, etc. But, you can make the economy they inhabit more productive -- and then the economy can pay them more (not less every year!): why barbers in France get paid more than barbers in Poland (classic example).

    US per capita income in 1968, $15,000. In 2016, $30,000.

    Minimum wage nearly $4 an hour below what it was in 1968 (adjusted). Ditto for the price of US labor across the mid-to-lower board.

    US mid-to-low labor price so extraordinarily low that half (HALF! -- 100,000!) of Chicago's gang age, minority males would rather join a street gang. Then there's my gang, Chicago's old (mostly retired) American born taxi drivers. Wouldn't get us into that job today for $500, if lucky, for 60 grueling hours.
    http://www.cbsnews.com/news/gang-wars-at-the-root-of-chicagos-high-murder-rate/

    The core American trouble isn't wages not keeping up with productivity per se (though that parallels); the core labor sickness is wages not even remotely approaching what the consumer (not the boss) might be very willing to pay.

    We do not need to attract businesses that provide good jobs -- the jobs cannot be good if the pay is miserly. High wage opportunities don't happen -- they are made (ask Jimmy Hoffa).

    Educational resources are not needed to help retail clerks reach their full potential. Good pay for retail clerks is needed to help Detroit's schools reach their full potential. Nationwide: poverty area schools don't work because students (and teachers!) don't feel it worth making the effort -- given the job market doesn't promise anything remunerative enough to strive for when it's time for them to go to work.
    http://www.amazon.com/gp/product/B00332EXDM/ref=dp-kindle-redirect?ie=UTF8&btkr=1

    "I believe this is mainly due to differences in bargaining power." Which is mainly due to absurdly unenforceable labor laws in this country which -- uniquely in all markets -- allows one side in the labor market to bully the other side out of being able to meaningfully bargain. Simple enough solution: make union busting a felony (like every other kind of market warping -- try to take a movie in the movies and telling them you were only kidding).

    The labor laws enabling collective bargaining have long been in place; the need for collective barraging presumably settled. So when are progressive states going to begin -- one state at a time; forget Congress -- to make these laws enforceable? Federal preemption means individual states cannot subtract from national law, but states may add. In Maryland for one, Democrats have a 33-17 edge in the State Senate and a 91-50 edge in the House. WA, OR, CA, IL, NY, anybody listening?

    IS ANYBODY, ANYWHERE LISTENING?! Retail clerks (and their hungry families) desperately want to know.

    PPaine -> PPaine ...
    Criminalize anti union activity
    mulp -> Denis Drew ...
    Conservatives want lower gdp growth.

    Or else they believe in free lunch economics:

    Step 1. Cut wages to increase profits
    Step 2. Produce more and price it twice as high
    Step 3. Demand government allow workers to borrow at high interest rates to buy twice as much as before their wages were cut in half
    Step 4. Blame government, and especially Obama when the math does not work out.

    If you want faster gdp growth, you must pay workers, who are after all 99% of the consumers, more and increase their pay faster.

    Economies are zero sum.

    It is possible to time shift, say by exporting more than imported and taking the difference and saving it by buying debt, or stored labor, in other countries, but at some point, the process is reversed. For the US, savings has flowed into the US blocking exports and increasing imports. At some point, that will need to reverse. Someone will need to work more and consume less. That will need to be the 1% because for decades, most US workers have worked more and consumed less, unless they got to borrow and consume so they will need to work more and consume less.

    Unless there is a massive redistribution of wealth, either war, or bankruptcy. Trying to tax wealth to redistribute will only destroy the wealth. After all, 99% of the wealth in the US was not built by labor, but inflated into existence by pump and dump asset churn or by high rents inflating decaying scarce assets in price.

    [Jan 10, 2016] Comprehensive financial planners now do a lot of the work that family attorneys did in generations past

    www.nakedcapitalism.com

    Jim in SC , January 9, 2016 at 8:57 pm

    I think that comprehensive financial planners now do a lot of the work that family attorneys did in generations past. This is partly because the sort of person who goes to law school now is much more intellectual -- and thus often a little more introverted and socially inept–than in years past. Watergate caused that, I believe. All of a sudden everybody was interested in the mechanism of the law. Fifty years ago a right-of-way agreement from the local utility was three sentences. Now it's five pages single spaced, in some English derived technical gibberish.

    Anyway, you really need the professional when somebody dies. That professional is far more likely to be the financial planner than the lawyer these days, in part because the financial planner is paid by assets under management, rather than hundreds of dollars per hour, so the financial planner would be paid anyway. I think it is rare to see attorneys designated as executors of estates these days. They charge six percent by statute, and that's too much for many people's blood. God forbid that one should be appointed to manage a trust with multiple beneficiaries. They'll stretch it out thirty years.

    [Jan 09, 2016] For the Wealthiest, a Private Tax System That Saves Them Billions

    mobile.nytimes.com
    Neretva'43 | Jan 9, 2016 10:33:05 AM | 77

    Re: dahoit | Jan 9, 2016 9:51:32 AM | 74

    here is an important article for you. While the whole article is astonishing I'll post just one small passage. If someone can not figure out who the real (not perceived) enemy than s/he is lost cause.

    "For the Wealthiest, a Private Tax System That Saves Them Billions"
    http://mobile.nytimes.com/2015/12/30/business/economy/for-the-wealthiest-private-tax-system-saves-them-billions.html?_r=3

    "We do have two different tax systems, one for normal wage-earners and another for those who can afford sophisticated tax advice," said Victor Fleischer, a law professor at the University of San Diego who studies the intersection of tax policy and inequality. "At the very top of the income distribution, the effective rate of tax goes down, contrary to the principles of a progressive income tax system."

    [Jan 09, 2016] Intellectual property and the decline of the U.S. labor share

    Equitable Growth

    The paper -by Dongya Koh of the University of Arkansas, Raul Santaeulalia-Llopis of the Washington University in St. Louis, and Yu Zheng of the City University of Hong Kong-takes advantage of newly updated GDP data from the U.S. Bureau of Economic Analysis. While the Bureau is constantly releasing new data on economic growth, it also revises previous data. Sometimes those revisions show an increase in total U.S. economic output, and sometimes the revisions show a change in the composition of that output. It's the latter kind of revision that's important in this case.

    In 2013, the Bureau of Economic Analysis updated its treatment of a variety of issues, including how it treats research and development spending. The BEA previously treated R&D spending as a business expense but, as the BEA realized, it makes more sense to think of spending that could potentially boost a firm's output as a capital investment. As the authors of the paper show, counting investments in intellectual property as, well, investment significantly increases the amount of investment showing up in the data. According to their calculations, intellectual property products have increased from 8 percent of U.S. investment in 1947 to 26 percent in 2013.

    Accounting for this kind of capital investment means that the decline in the U.S. labor share starts much earlier than previously thought. According to the paper, the decline starts in 1947, which would mean the labor share was declining throughout the period it was famously stated to be constant. But not only does the decline start earlier than previously thought-it's also much larger. It's actually twice as large. And the increase in intellectual property products explains the entirety of the decline.

    [Jan 09, 2016] That's rich! Why so many wealthy Americans think they're middle class

    Jan 09, 2016 | Salon.com

    Earlier this year, for example, Hillary Clinton made headlines when, in response to a question about her personal fortune, she claimed her family was "dead broke" when they left the White House. That statement followed New York Gov. Andrew Cuomo's top aide casting those making $500,000 a year as merely upper middle class.

    According to IRS data, 99 percent of American households make less than $388,000 a year, and 95 percent make less than $167,000 a year. The true middle in terms of income - that is, the cutoff to be in the top 50 percent of earners - is roughly $35,000 a year.

    While Lew claims his private-sector compensation was not "in the stratosphere," the data suggest otherwise.

    According to New York University records, Lew was usually paid between $700,000 and $800,000 a year as the school's vice president, while also receiving a $440,000 mortgage subsidy. Lew also earned $300,000 a year from Citigroup, with a "guaranteed incentive and retention award of not less than $1 million," according to an employment agreement obtained by Businessweek.

    [Jan 07, 2016] 5 of the Worst Examples of Biased and Distorted Media Coverage of Education in 2015

    Notable quotes:
    "... Sure the myth of meritocracy and American exceptionalism is all over public education, however, Im not sure this is the fault of teachers themselves. Public curriculum is now mostly controlled from without, and teachers are largely constrained as to what they can teach, when they can teach it, and how. The constant battery of tests really limits the freedom teachers have in offering a variety of materials, because if those kids dont produce exactly what the test maker is looking for, it could be their job on the line. You cant teach bell hooks, if you dont have a teaching job to begin with. ..."
    "... Too true! I keep returning to Paul Goodmans classic screed, Compulsory Miseducation . 1964. Crapification has been with us a long time. We are now harvesting its rotten fruits. ..."
    "... I only wish American teachers had anywhere near as much agency as you think they do! Are you aware who controls the curriculum, and how politicized this is? While I taught in the nations largest public school system, it was under mayoral control. His education chancellors were mostly non-educators (a lawyer, and, most briefly and notoriously, a publisher), and hired private contractors and spent millions of public money on charters. ..."
    "... The curriculum has been hijacked by the Common Core, which dictates which materials can be covered, and how it can be covered. ..."
    December 31, 2015 | nakedcapitalism.com

    kings , December 31, 2015 at 6:19 am

    today's Republicans and defending teachers(and firefighters and police) to the very last stand. Yes, public education is one of the foundations of our country, and should never be 'privatized'(um, stolen) to a political bidder. But also, teachers(and f's and p's) generally make outstanding salaries, paid for by property taxes, and have their retirement funded, and are allowed to strike to add more whenever they like. Oh, then they can retire after 20-30 years and still receive significant pension benefits.

    The 'everyone pays' for the select few is a problem in this country, and is never discussed in any media that I see.

    Teachers' personal money is the most common source of funding for classroom projects. On average, teachers spent a total of $398 on school supplies in 2009-2010 and an additional $538 on educational materials." The total expended that year by the nation's 3.7 million teachers? A whopping $3.5 billion.

    And it's not just teachers. According to the Summer 2012 issue of NEA Today, the newsmagazine of the National Education Association, 66 percent of education support professionals – a category that includes bus drivers, custodians, lunchroom staff, secretaries, security guards and skilled trades people – dig into their pockets to help kids in need. Their expenditures? An average of $216 per employee per year."
    http://www.truth-out.org/news/item/12504-public-school-teachers-spend-billions-of-their-own-money-on-student-needs

    (sigh) too often i hear people complain about property taxes & schools…now dayz i suggest we all stop paying the tax and enjoy the short life span the bored & uneducated kids will rein on us!

    jgordon , December 31, 2015 at 7:03 am

    I have a general antipathy towards teachers; no matter how well intentioned they are, ultimately they're still responsible for indoctrinating the world-view and cultural myths required for children to become good corporate state consumers/employees. No matter how progressive and enlightened the curriculum, nor how lavish the facilities and small the class sizes, Howard Zinn won't be taught.

    I won't say that all education is bad–but compared to what passes for education now in America, I believe that our students and society would be better off if we had no education at all, since what we have now is leading society and humanity off a cliff. Therefore the only real problem I have with breaking up teachers unions and closing schools is that they'll probably be replaced with something even more corporate and soul-destroying.

    Uahsenaa , December 31, 2015 at 8:30 am

    I think you're blaming the wrong people for this. Sure the myth of meritocracy and American exceptionalism is all over public education, however, I'm not sure this is the fault of teachers themselves. Public curriculum is now mostly controlled from without, and teachers are largely constrained as to what they can teach, when they can teach it, and how. The constant battery of tests really limits the freedom teachers have in offering a variety of materials, because if those kids don't produce exactly what the test maker is looking for, it could be their job on the line. You can't teach bell hooks, if you don't have a teaching job to begin with.

    jgordon , December 31, 2015 at 11:19 am

    teachers are largely constrained as to what they can teach

    Well that's exactly my point. Teachers are ultimately servants to the corporate state. They have little to no free will themselves. They will train their students to be model employees and insatiable consumers–who love America because patriotism, or they will be fired.

    I'm not blaming them for their lot. Teaching is certainly a crappy, and unappreciated job in this society–and there is something admirable about someone who chooses to wear such a hair shirt, even if there is no point to it. I'm saying that the whole apparatus of public education in America should be radically redone, and until it's redone this whole institutional (public and private) education debacle should be suspended immediately. The cultural/social monoculture it's creating is a genuine danger to humanity.

    Torsten , December 31, 2015 at 3:57 pm

    Too true! I keep returning to Paul Goodman's classic screed, Compulsory Miseducation . 1964. Crapification has been with us a long time. We are now harvesting its rotten fruits.

    All the Trump supporters (and let us not forget, e.g., Spiro Agnew, superhero vanquisher of the nattering nabobs, and his minions), all those B and C and D and F students who now can vote away the pensions of the teachers who gave the voters those grades. .

    There's lots of revenge voting going on.

    Inverness , December 31, 2015 at 11:29 am

    Jgordon, your comment begs a lot of questions. I'll try to address them. As a former New York City teacher, I'd like to share my views.

    I only wish American teachers had anywhere near as much agency as you think they do! Are you aware who controls the curriculum, and how politicized this is? While I taught in the nation's largest public school system, it was under mayoral control. His education chancellors were mostly non-educators (a lawyer, and, most briefly and notoriously, a publisher), and hired private contractors and spent millions of public money on charters.

    Since you mentioned it, what about what is taught, and who controls that? The curriculum has been hijacked by the Common Core, which dictates which materials can be covered, and how it can be covered. This was developed by many non-educators who don't have a clue about how children and adolescents learn, and this is reflected by the abysmally low test scores, even in regions where there were no problems before. Even before the Common Core, you have the New York States Regents exams, which trivializes history, making it impossible to teach properly, unless you want to risk your job (remember, low test scores, bad ratings).

    Furthermore, you mention that teachers don't teach Howard Zinn. Well, I'm shocked at how many enlightened, left-leaning teachers I met in the States, considering the huge propaganda campaign waged against progressive thinking, that most certainly did not end with the McCarthy era in the 1950's! So you're working in a nation which has actively tried to target, and even destroy, the careers of people left-leaning or sympathetic to "enemies of the State." I always felt like I was one unpopular move away from becoming a New York Post headline, for daring to challenge the mainstream perception of Hugo Chavez and for discussing why many consider Bush a war criminal. I have had to deal with complaints from principals and parents. I soldiered on for years, but after awhile, your health suffers.

    Also, keep in mind that history teachers in New York must somehow manage to teach a ridiculously overloaded curriculum. They cannot choose to stop everything and really teach in a more meaningful way, because they are judged by their students' test scores. They mustn't anger their administrators and superintendents, who are scared of politicians and parents. I would love to have had more freedom to teach the way I wanted to, most of the time. To cover a worthwhile secondary source like Zinn means having the time and resources to do that. Also, it means that you will be supported by your administrators and parents. This is extremely difficult, even in a state like New York, which is not nearly as open-minded as it claims to be.

    Covering historians like Zinn would also be easier if we had some control over our classroom materials. Who do chooses and writes the textbooks? Many textbook authors must please Texas, the largest state. This does not exactly encourage, shall we say, the most progressive thinking. Teachers often have to fight to just get their photocopies done, and straight lecturing is forbidden. So they have to rely on the texts their buildings provide them. Teachers also get a bit paranoid, since anything - ANYTHING can get them smeared in papers like the New York Post and the The New York Daily News. So I agree that Zinn's views should be a part of the curriculum, but much of TPTB aren't exactly on my side.

    You also need to understand that if the US doesn't produce mostly progressive economists, university presidents, politicians, lawyers and citizens…why would teachers be so different? The US, with a mainstream press that promotes Hillary Clinton as the ideal presidential candidate, is not exactly a hotbed of innovative thinking. Teachers aren't magical people, despite what Hollywood tells us, which features teachers that can somehow transform poor, hungry students into academic stars, fueled by charisma, sugary snacks, and iron will alone.

    Thank you for bearing with me this far (if you that's the case). I know so many talented teachers in New York who seemed to work themselves so hard, so it kind of kills me to read these kinds of blanket statements. Forget Hollywood's hackneyed portrayal of teachers. For me, the real miracle is that after all of the hatred, union-busting, conservative propaganda, deprofessionalisation, …the real miracle is that there still are some fantastic teachers in the field.

    [Jan 06, 2016] Another Slow Year for the Global Economy

    Notable quotes:
    "... Sometimes … demand is restricted by the fact that nobody has any money in their pocket. ..."
    "... the only takeaway is that most economists are nothing more than rancid witch doctors doing backflips to skirt the basic explanation that aggregate demand has been deliberately sabotaged. ..."
    "... Modern neoliberal economics is just an ideology not a science. It exists to justify the current distribution of wealth with pseudoscientific nonsense written in abstruse mathematical language. Milton Friedman was to economics what T.D. Lysenko was to Soviet biology. Pseudoscience in service to the ruling class. ..."
    "... [Economists are] clueless about the real world because their fat paycheck magically appears in their bank account, while producing nothing. ..."
    Jan 06, 2016 | naked capitalism

    By Ashoka Mody, Professor of Economics at Princeton. Originally published at Project Syndicate

    For starters, world trade is growing at an anemic annual rate of 2%, compared to 8% from 2003 to 2007. Whereas trade growth during those heady years far exceeded that of world GDP, which averaged 4.5%, lately, trade and GDP growth rates have been about the same. Even if GDP growth outstrips growth in trade this year, it will likely amount to no more than 2.7%.

    The question is why. According to Christina and David Romer of the University of California, Berkeley, the aftershocks of modern financial crises – that is, since World War II – fade after 2-3 years . The Harvard economists Carmen Reinhart and Kenneth Rogoff say that it takes five years for a country to dig itself out of a financial crisis. And, indeed, the financial dislocations of 2007-2008 have largely receded. So what accounts for the sluggish economic recovery?

    One popular explanation lies in the fuzzy notion of "secular stagnation": long-term depressed demand for goods and services is undermining incentives to invest and hire. But demand would remain weak only if people lacked confidence in the future. The only logical explanation for this enduring lack of confidence, as Northwestern University's Robert Gordon has painstakingly documented and argued , is slow productivity growth.

    Before the crisis – and especially from 2003 to 2007 – slow productivity growth was being obscured by an illusory sense of prosperity in much of the world. In some countries – notably, the United States, Spain, and Ireland – rising real-estate prices, speculative construction, and financial risk-taking were mutually reinforcing. At the same time, countries were amplifying one another's growth through trade.

    Central to the global boom was China, the rising giant that flooded the world with cheap exports, putting a lid on global inflation. Equally important, China imported a huge volume of commodities, thereby bolstering many African and Latin American economies, and purchased German cars and machines, enabling Europe's largest economy to keep its regional supply chains humming.

    This dynamic reversed around March 2008, when the US rescued its fifth-largest investment bank, Bear Sterns, from collapse. With the eurozone banks also deeply implicated in the subprime mortgage mess and desperately short of US dollars, America and much of Europe began a remorseless slide into recession. Whereas in the boom years, world trade had spread the bounty, it was now spreading the malaise. As each country's GDP growth slowed, so did its imports, causing its trading partners' growth to slow as well.

    The US economy began to emerge from its recession in the second half of 2009, thanks largely to aggressive monetary policy and steps to stabilize the financial system. Eurozone policymakers, by contrast, rejected monetary stimulus and implemented fiscal austerity measures , while ignoring the deepening distress of their banks. The eurozone thus pushed the world into a second global recession.

    Just when that recession seemed to have run its course, emerging economies began to unravel. For years, observers had been touting the governance and growth-enhancing reforms that these countries' leaders had supposedly introduced. In October 2012, the IMF celebrated emerging economies' "resilience." As if on cue, that facade began to crumble, revealing an inconvenient truth: factors like high commodity prices and massive capital inflows had been concealing serious economic weaknesses, while legitimizing a culture of garish inequality and rampant corruption .

    These problems are now being compounded by the growth slowdown in China, the fulcrum of global trade. And the worst is yet to come. China's huge industrial overcapacity and property glut needs to be wound down; the hubris driving its global acquisitions must be reined in; and its corruption networks have to be dismantled.

    In short, the factors that dragged down the global economy in 2015 will persist – and in some cases even intensify – in the new year. Emerging economies will remain weak. The eurozone, having enjoyed a temporary reprieve from austerity, will be constrained by listless global trade. Rising interest rates on corporate bonds portend slower growth in the US. China's collapsing asset values could trigger financial turbulence. And policymakers are adrift, with little political leverage to stem these trends.

    The IMF should stop forecasting renewed growth and issue a warning that the global economy will remain weak and vulnerable unless world leaders act energetically to spur innovation and growth. Such an effort is long overdue.


    ArkansasAngie , January 6, 2016 at 6:17 am

    "But demand would remain weak only if people lacked confidence in the future"

    Sometimes … demand is restricted by the fact that nobody has any money in their pocket.


    James Levy, January 6, 2016 at 6:45 am

    Is he kidding:

    The only logical explanation for this enduring lack of confidence, as Northwestern University's Robert Gordon has painstakingly documented and argued, is slow productivity growth.

    Real wages for a hefty percentage of the population haven't risen since 1971. Most people are treading water or losing ground. Over 90% of the modest gains since the 2008 crash have gone to 1% or less of the population. But the problem is productivity! And this guy has a tenured job at Princeton. Standards for employment there must include smug self-assurance, ideological blinders, and the inability to assimilate any facts not cogent to people richer than you are.


    Jim Haygood, January 6, 2016 at 11:37 am

    If Princeton's most illustrious alumnus can finally make some serious loot in the private sector, soon the author will be toiling at the Bernanke School of Economics.

    Skippy, January 6, 2016 at 8:18 am

    Productivity is the cocaine of the labour pool, like the old cocaine ad of the 80s in Calif [during the epidemic].

    White square room about 6M X 6M, top shelf sale executive sort doing laps like a con and the verse goes like…. I do cocaine because I'm more productive… so I make more money… so I can do more cocaine… over and over and with each litany increases his speed until a blur….

    Skippy…. the end is a wrung out wretch sitting on the step of some low socioeconomic apt talking about losing, wife, kids, job, everything…. w burnt out dopamine receptors as a lullaby till morte'

    efschumacher, January 6, 2016 at 8:50 am

    Here in the US:it's not like there's a shortage of work to be done to fix the massively inappropriate national infrastructure – to make it human sustainable – I mean for the 'little people'. There is of course the perennial lack of congressional vision and long term planning. There lies a huge root of the problem.

    RabidGandhi, January 6, 2016 at 9:12 am

    Is this meant as a good cop/bad cop contrast piece with the Ann Pettifor post?

    Here, I gave up any hope of Mody being at all earnest when he cited Rogoff and Reinhart (!!!). Then the rest of the article completely self-destructs: weak productivity and insufficient innovation are the issue?

    When combined with yesterday's NYT article on inequality, the only takeaway is that most economists are nothing more than rancid witch doctors doing backflips to skirt the basic explanation that aggregate demand has been deliberately sabotaged.

    Stephen Gardner, January 6, 2016 at 9:33 am

    Modern neoliberal economics is just an ideology not a science. It exists to justify the current distribution of wealth with pseudoscientific nonsense written in abstruse mathematical language. Milton Friedman was to economics what T.D. Lysenko was to Soviet biology. Pseudoscience in service to the ruling class.

    cnchal, January 6, 2016 at 9:43 am

    . . . the only takeaway is that most economists are nothing more than rancid witch doctors doing backflips to skirt the basic explanation that aggregate demand has been deliberately sabotaged.

    They are the useless eaters. [Economists are] clueless about the real world because their fat paycheck magically appears in their bank account, while producing nothing.

    Here is Mody

    The US economy began to emerge from its recession in the second half of 2009, thanks largely to aggressive monetary policy and steps to stabilize the financial system.

    Totally clueless.

    susan the other, January 6, 2016 at 2:02 pm

    "Lack of confidence" – let me count the ways. This is a phrase to match every vacuous denial of human economic chaos ever pontificated. Yuck.

    [Jan 05, 2016] Citi turns 'underweight' on US stocks

    The S&P 500, ended the year down 0.73 percent after three straight years of double digit gains.
    Notable quotes:
    "... Alain Bokobza, head of global asset allocation at Societe Generale, told CNBC last week that he was expecting the S P 500 to absorb the Fed rate hikes this year and finish the year flat at around 2,050 points. ..."
    finance.yahoo.com

    Citi strategists led Robert Buckland highlighted the potential for weaker earnings per share (EPS) momentum in the U.S., in a note released on Tuesday. EPS is an important metric used by analysts and is used an indicator of a company's profitability.

    "Fading EPS momentum and rising Fed funds mean that, after six consecutive years of outperformance, we cut the U.S. to underweight," Citi said in the note.

    ... ... ...

    David Kostin, chief U.S. equity strategist at Goldman Sachs, told CNBC in December that stock markets could be mostly flat in 2016. Meanwhile, Alain Bokobza, head of global asset allocation at Societe Generale, told CNBC last week that he was expecting the S&P 500 to absorb the Fed rate hikes this year and finish the year flat at around 2,050 points.

    [Jan 05, 2016] A stock-market crash of 50%+ would not be a surprise - or the worst-case scenario

    finance.yahoo.com

    By many, many historically predictive valuation meassures, stocks are overvalued to the tune of 75%-100%.

    In the past, when stocks have been this overvalued, they have often "corrected" by crashing (1929, 1987, 2000, 2007, for example) . They have also sometimes corrected by moving sideways and down for a long, long time (1901-1920, 1966-1982, for example).
    ... ... ...

    Stocks are wildly overvalued on historically predictive measures

    According to several historically valid measures, stocks are now more expensive than they have been at any time in the past 130 years, with the exception of 1929 and 2000 (and we know what happened in those years).

    For example, the chart below is from Yale professor Robert Shiller. It shows the cyclically adjusted price-earnings ratio of the S&P 500 for the past 130 years.

    As you can see, the current PE ratio of at least 26 is miles above the long-term average of 15. In fact, it is higher than at any point in the 20th century, with the exception of the months that preceded the two biggest stock-market crashes.

    [Jan 04, 2016] Dollar Dominance Deconstructing the Myths and Untangling the Web

    Notable quotes:
    "... The US empire is one of Multi-National corporations and International Trade Deals. ..."
    "... Im intrigued by that assertion, especially if this comes from a more libertarian perspective and an author who actually mentions NATO. Of course corporate welfare in various forms is a key part of what is happening, but the core issue is a literal military empire, not some vague commercial facsimile of one. ..."
    "... The direct imperial threats include economic warfare, as displayed by the IMF and ECB. As demonstrated in Greece, Ukraine, and before Greece Ireland. ..."
    "... By 1978, US inflation had risen to 9% while inflation in the rest of the world slowed dramatically by comparison. Both the Carter administration and the Fed did everything in their power to control dollar devaluation, but it was clear by this time that without the assistance from foreign governments the dollar would not be able to survive . … Over the course of the next six years the dollar experienced a meteoric rise in value. ..."
    Jan 04, 2016 | naked capitalism

    washunate , January 4, 2016 at 10:43 am

    The US empire is one of Multi-National corporations and International Trade Deals.

    I'm intrigued by that assertion, especially if this comes from a more libertarian perspective and an author who actually mentions NATO. Of course corporate welfare in various forms is a key part of what is happening, but the core issue is a literal military empire, not some vague commercial facsimile of one. One of the most successful Big Lies in our domestic political discourse is to blame convenient corporate villains instead of the public officials who are responsible for decision-making and implementation.

    This isn't the 1980s anymore. The global financial system (post Bretton Woods) collapsed somewhere there in the 1990s. Today, things are held together by direct imperial threats, not corporate board rooms.

    Synoia , January 4, 2016 at 10:50 am

    The direct imperial threats include economic warfare, as displayed by the IMF and ECB. As demonstrated in Greece, Ukraine, and before Greece Ireland.

    Synoia , January 4, 2016 at 10:47 am

    It is not dollar hegemony that rules the world, but the global financial system which gives the dollar its place of privilege.

    Syllogism? What came first the chicken or the egg?

    Where to begin – one could suggest the author read Chapter 1 of Wray's MMT and rewrite considering sector balances and fiat currencies, and present the different line of argument which would arise.

    MyLessThanPrimeBeef , January 4, 2016 at 1:18 pm

    Unless you entice, seduce, leave no other option for the workers but to borrow, at ever lower rates, thank God.

    Then, you can export jobs overseas. Wait, that's how we have managed so far…that, and renting out rooms/beds/bathrooms in your apartment.

    Left in Wisconsin , January 4, 2016 at 1:29 pm

    "By 1978, US inflation had risen to 9% while inflation in the rest of the world slowed dramatically by comparison. Both the Carter administration and the Fed did everything in their power to control dollar devaluation, but it was clear by this time that without the assistance from foreign governments the dollar would not be able to survive ." … "Over the course of the next six years the dollar experienced a meteoric rise in value."

    Maybe not central to the main argument but I found this claim (in bold) implausible.

    [Jan 03, 2016] Irving Berlin on Taxes

    Notable quotes:
    "... I am always struck by the difference between the oligarchs of today and those (a very small group) who ran the uk in the late 17 and 18 century. Proud, brutal but they taxed themselves as necessary to build effective institutions and instruments in the service of common goals ..."
    "... in this culture we recognize the Midas touch as a positive good, rather than the curse the Greeks knew it to be. ..."
    "... My feeling has always been that taxes are the price you pay to live in a civilized society. Conservatives are obviously opposed to that. ..."
    "... An even more commercially successful writer, J. K. Rowling, has expressed similar enlightened views. There ought to be a hall of fame for such folks. ..."
    "... To become a hedge fund billionaire you can have no heart and you can have no soul. You must be a ruthless predatory bastard with no concern for morality or justice. So it is not surprising that the question of whether you owe something to others doesnt really register with hedge fund billionaires. ..."
    economistsview.typepad.com
    Chris Dillow on our " narcisstocracy ":
    Irving Berlin on taxes : The New York Times reports on how some of the US's richest men are dodging taxes. Compare this to the response of Irving Berlin when his lawyer offered him a tax shelter:
    I want to pay taxes. I love this country.
    He even wrote a song expressing this sentiment. He said: "I owe all my success to my adopted country." ...
    He embodied -- knowingly so -- a point made by Herbert Simon, that we westerners owe our fortunes not so much to our own efforts but to the good luck of living in societies which enable us to prosper - which have peace, the rule of law and material and intellectual resources ...
    Now, songwriting is pretty much as individualistic an activity as one can find; But even songwriters require a conducive environment such as musical traditions on which to draw and a marketplace for their work. Berlin knew this: 1930s Siberia had no equivalent of Tin Pan Alley or Hollywood.
    If even songwriters owe their wealth to social capital, how much more true is this of hedge fund managers. They would be nothing without wealthy investors or large liquid financial markets: how many billionaire fund managers are there in Burkina Faso?
    Which poses the question: why, then, don't hedge fund managers have the same attitude to paying tax as Irving Berlin? It could be that they are more motivated ... by personal greed. But there might be another reason..., they believe their wealth is the product of their own "talent" and so they are entitled to it... Others of us prefer to call it an example of one of the disfiguring diseases of our time - narcissism.
    Perhaps there's another explanation, though. Maybe hedge fund billionaires are greater geniuses than Irving Berlin who have contributed more to human happiness. But how likely is this?

    ilsm:

    More of Berlin:

    https://en.wikipedia.org/wiki/Stay_Down_Here_Where_You_Belong

    Groucho Marx did that one on Dick Cavitt.

    pgl:

    "The New York Times reports on how some of the US's richest men are dodging taxes."

    But Jay Bird just today declared corporations ARE paying their taxes. Really? There is no such thing as Base Erosion and Profit Shifting?

    pgl -> Jay...

    You need to get a life. Start with laying off the booze.

    Roland:

    I am always struck by the difference between the oligarchs of today and those (a very small group) who ran the uk in the late 17 and 18 century. Proud, brutal but they taxed themselves as necessary to build effective institutions and instruments in the service of common goals

    EMichael:

    Berlin realized that he did not build that.

    Robert Marshall:

    What is more likely is that songwriting and billionairing require very different character traits to reach the top. I wish I knew what it took to be a songwriter, but to be a billionaire, you have to think the right way to go about life is to try to get as much as you can for as little as you have to give up, and not even that if you can get out of it. And yet in this culture we recognize "the Midas touch" as a positive good, rather than the curse the Greeks knew it to be.

    SomeCallMeTim:

    Is it unseemly to infer that maybe these MOTUs hear the same dogwhistle symphony they fund? Or are they above that sort of thing, and just 'have a business to run'?

    DrDick:

    My feeling has always been that taxes are the price you pay to live in a civilized society. Conservatives are obviously opposed to that.

    Jay -> DrDick...

    You take the mortgage interest deduction?

    Tax dodger!

    DrDick -> Jay...

    I rent.

    DrDick -> DrDick...

    And I take essentially nothing except the personal deduction.

    Ken D :

    An even more commercially successful writer, J. K. Rowling, has expressed similar enlightened views. There ought to be a hall of fame for such folks.

    Benedict@Large -> Ken D ...

    Why is everyone so concerned with diagnosis? We know that great piles of money in few hands leads to no good, and that is enough. Tax it away. Then let the formerly rich use their newly-freed time writing poems describing the beauty of skimming from other people's cash flows.

    DeDude:

    To become a hedge fund billionaire you can have no heart and you can have no soul. You must be a ruthless predatory bastard with no concern for morality or justice. So it is not surprising that the question of whether you "owe" something to others doesn't really register with hedge fund billionaires.

    [Jan 01, 2016] Economics Joke Time

    Notable quotes:
    "... GDP. Great deposits of poo. ..."
    "... [The financial crisis is worse than thought …] ..."
    "... – Yes Prime Minister, A Real Partnership ..."
    "... Economists: purveyors of fictions upon which the superstructure of organized robbery is raised. ..."
    "... "Market Failure" is the name that economists who believe that the market cannot ever fail use when the market fails. ..."
    "... "Economists put decimal points in their forecasts to show that they have a sense of humour" ..."
    "... "Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else." ..."
    December 30, 2015 | naked capitalism
    Posted on by

    ... ... ...

    The Standup Economist has a routine that has become a classic:

    And of course, there are the economist variants of the lightbulb joke, originating in a 1994 Wharton Journal, as later recapped in Forbes:

    Q: How many economists does it take to change a light bulb?

    A1: None. The darkness will cause the light bulb to change by itself.

    A2: None. If it really needed changing, market forces would have caused it to happen.

    A3: None. If the government would just leave it alone, it would screw itself in.

    A4: None. There is no need to change the light bulb. All the conditions for illumination are in place.

    A5: None. Because, look! It's getting brighter! It's definitely getting brighter!!!

    A6: None. They're all waiting for the unseen hand of the market to correct the lighting disequilibrium.

    tony, December 30, 2015 at 6:12 am

    Q: What do you call an economist that makes a prediction?

    A: Wrong.

    ben, December 30, 2015 at 3:28 pm

    Two economists are walking on the street. They notice a pile of horseshit, and the older one says to the younger one: "I'll pay you twenty thousand if you eat that." The younger one ponders for a moment, then agrees and eats it. They walk a bit more and run into another pile of horse feces. So the younger one tells the elder: "I'll pay you twenty thousand if you eat that!". The older economist considers the offer and starts eating. After a while the younger economists stops and asks: "What was the point of this? We both ate a pile shit and neither of us got richer." The older one answers: "What are you talking about? We both produced and received twenty thousand worth in income and services."

    GDP. Great deposits of poo.

    Clive, December 31, 2015 at 5:41 am

    "This economy is really terrible."

    "How bad is the economy?"

    "The economy is so bad, this year oysters are making fake pearls…"

    "The economy is so bad, organised crime just laid off 10 judges…"

    (and so on)


    Paul Jonker-Hoffrén, December 30, 2015 at 7:27 am

    "Knock Knock!"

    "Who's there?"

    "It's Return to Growth!"

    Two years later…

    "Knock Knock!"

    "Who's there?"

    "It's Return to Growth!"

    And ad finitum…

    Clive, December 30, 2015 at 6:21 am

    "Knock Knock"

    "Who's there?"

    "Janet Yellen"

    "Well there's no need to shout, I heard you knocking"

    Joaquin Closet, December 30, 2015 at 7:42 am

    The number of economists is the only thing that contradicts the Law of Supply and Demand.

    craazyboy, December 30, 2015 at 9:00 am

    Q: How many economists does it take to change a light bulb?

    A: Three. A micro-economist to hold the ladder, a macro-economist to rotate the room, and a university economist to develop the math model and forecast how long it will take.

    Ulysses, December 30, 2015 at 9:56 am

    A mathematician, an accountant and an economist apply for the same job at an oil company.

    The interviewer calls in the mathematician and asks "What do two plus two equal?" The mathematician replies "Four." The interviewer asks "Four, exactly?" The mathematician looks at the interviewer hard and says "Yes, four, exactly."

    Then the interviewer calls in the accountant and asks the same question "What do two plus two equal?" The accountant says "On average, four – give or take ten percent, but on average, four."

    Then the interviewer calls in the economist and poses the same question "What do two plus two equal?" The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says, "What do you want it to equal"?

    Paul Tioxon, December 30, 2015 at 10:02 am

    What do you call a cruise ship sinking with 500 PhD economists chained below deck?

    A good start.

    allan, December 30, 2015 at 10:03 am

    Frederic Mishkin.

    Yves Smith, December 30, 2015 at 4:32 pm

    Oh, that is good!

    Paul

    An economist is someone who will tell you tomorrow why what they predicted yesterday didn't happen today.

    An economist, a physicist, and an engineer are stranded on an island with a can of food, and no opener.

    The engineer says, "Let's smash the can open with a rock and eat".
    The physicist replies, "Naw, that's going to splatter the food all over the place. Let's light a fire, the expanding gases will force the can to pop open and presto: warm food!"
    The economist says, "Bad idea: the can will explode and the food will be all over the place. Now… let's assume we have a can opener…."

    Blue Meme

    A physician, an engineer, and an economist were discussing who among them belonged to the oldest profession. The physician said, "Remember, on the sixth day God took a rib from Adam and fashioned Eve, making him the first surgeon. Therefore, medicine is the oldest profession."

    The engineer replied, "But, before that, God created the heavens and earth from chaos, thus he was the first engineer. Therefore, engineering is an older profession than medicine."

    Then, the economist spoke up. "Yes," he said, "But who do you think created the chaos?"

    aj

    The First Law of Economists: For every economist, there exists an equal and opposite economist.
    The Second Law of Economists: They're both wrong.

    fresno dan

    Pareto's law of optimal economic theory:
    an economic theory has reached an optimal state when no other economist can make it wronger

    pat b

    The Third Law of Economists : The two economists theories don't add up.

    twonine

    "Economics is extremely useful as a form of employment for economists."
    ― John Kenneth Galbraith

    gordon

    JKG has some excellent one-liners. My favourite:

    "The trouble with competition is that in the end somebody wins."

    Joe Hill

    "Again, since I'm not an economist I really have no idea what the wrong solution is."

    ~ @RudyHavenstein

    Ramanan

    [The financial crisis is worse than thought …]

    James Hacker: Bernard, Humphrey should have seen this coming and warned me.

    Bernard Woolley: I don't think Sir Humphrey understands economics, Prime Minister; he did read Classics, you know.

    James Hacker: What about Sir Frank? He's head of the Treasury!

    Bernard Woolley: Well I'm afraid he's at an even greater disadvantage in understanding economics: he's an economist.

    – Yes Prime Minister, A Real Partnership

    JEHR

    More economist jokes here: http://www3.nd.edu/~jstiver/jokes.htm

    flora

    Economists: purveyors of fictions upon which the superstructure of organized robbery is raised.
    (apologies to Ambrose Bierce)

    Synoia

    Q: What do you call an Economist who tells the truth?

    A: Unemployed.

    Ivy

    If you laid all the economists end to end,

    it would probably be a good thing.

    They still wouldn't reach a conclusion.

    ben

    A farmer and two bankers are shipwrecked on an island. Two weeks later help finally arrives. The bankers greet their rescuer who remarks how well they look.

    BankerA: "we realised the potential of the natural resources on this island were tremendous".

    BankerB: "I created some fiat money, we divided it up. I lent BankerA ten times my share for a coconut farm startup, he invested ten times his share in an accountancy startup."

    Rescuer: "well that's amazing, only where is it all, I don't see any produce – how did you actually survive?"

    BankerA: "We each used our debt to invest in futures given the fertile land it was clear the land could generate wealth once labour was applied. We both realised significant paper profits. Oh and we ate the farmer"

    --

    Bankers live off our backs.

    Nortino

    What did the supply curve say to the demand curve?

    If you shift a little to the right, I'll give you some more of what you want.

    _________

    Why did the economist cross the road?

    Because his models predicted he would.

    TG

    "Market Failure" is the name that economists who believe that the market cannot ever fail use when the market fails.

    Synoia

    Hmm, it seems you should take your own advice to heart. :-)

    What is a person called who claims to predict the future and has a history of 100% failure in predictions?

    a) A Charlatan
    b) An Economist
    c) A prophet

    afreeman

    In the same vein:
    econ entropy: money invented from hot air evaporates, what do you expect?

    Warren

    "Economists put decimal points in their forecasts to show that they have a sense of humour"
    - William Gilmore Simms (https://twitter.com/TheBrowser/status/680887672890589184?s=17)

    TG

    How many economists does it take to screw in a lightbulb?

    Only one, but the lightbulb has to be hanging from the ceiling. Because economists can only screw things up.

    Minnie Mouse

    It takes one economist to change a light bulb and take the entire power grid down.

    James McFadden

    "Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else." Lyndon Johnson

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