"... They have behaved badly with an unstable value of bitcoin (huge unpredictable Bitcoin deflation damages any use of bitcoin as a means of exchange as much as huge inflation would). ..."
"... Now no one is really interested in cryptocurrency except as a way to gamble and take money from fools. But if anyone were, linking the blockchain program to prices on an exchange would make it more nearly possible to use the cryptocurrency as a means of exchange. ..."
"... The system is vulnerable to a tacit agreement to trade only on unofficial exchanges. It is necessary that the problem is also made easier if daily trading volume on the official exchange is zero. The problem is the price could shoot up on unofficial exchanges, but this would not affect the price on the official exchange if there were no transactions on the official exchange. ..."
"... The basis was and remains to remove any and all national gov'ts across he globe from any influences on values of currencies, thus pure laissez-faire in the extreme .. as you say libertarian chaos. ..."
"... There is a much more severe problem with bitcoin. As the number mined asymptotically approaches the pre-determined maximum, the cost of mining approaches infinity. As miners are the ones who validate coins, what will happen to the reliability of bitcoin when it becomes uneconomical for anyone to participate in mining? ..."
I am going to make a fool
of myself by suggesting that a cryptocurrency might actually be useful. Bitcoin et al have
negative social utility. They are pure speculative assets which enable people to gamble. Also
bitcoin miners use as much electricity as Denmark. The problem is exactly the aspect which has
made bitcoin famous and which bitcoin enthusiasts consider a strength -- the enormous increase
in the dollar price of bitcoin. This increase, and the recent sharp decline, make bitcoin
useless as a means of exchange. Most firms don't want to gamble.
So I (semi-seriously this time) propose botcoin which might have a more stable dollar
exchange rate. The idea is to link the blockchain verification program to an official
exchange.
Backing up, there are two very different sorts of web-servers related to bitcoin. One set,
the bitcoin miners, implements the original idea using the Bitcoin shareware. They keep a copy
of the ledger of all bitcoin transactions -- the blockchain, race to create new blocks, and
evaluate new blocks and add valid new blocks to the chain. The other servers are bitcoin
exchanges in which bitcoin is traded for regular currency. They are not part of the original
plan in which bitcoin would be traded for goods and services and function as a means of
exchange. They have behaved badly with an unstable value of bitcoin (huge unpredictable
Bitcoin deflation damages any use of bitcoin as a means of exchange as much as huge inflation
would).
I propose linking the blockchain program to an exchange. So there would be an official
botcoin exchange (this means it isn't entirely free-entry shareware libertarian anarchism). If
anyone were interested in a new cryptocurrency designed so that speculators can't become rich
(and pigs fly) there would be other unofficial exchanges.
The bitcoin program regulates the frequency of creation of new blocks to roughly one every
six minutes. It does this by adjusting the difficulty of the pointless arithmetic problem which
must be solved to make a new valid block. The idea was to limit the total amount of bitcoin
which will ever be created (to 21 million for some reason). This was supposed to make bitcoin
valuable. So far it has succeeded all too well (I am confident that in the end bitcoin will
have price 0).
It is possible to make the supply of botcoin flexible so the dollar price doesn't shoot up.
I would aim at a price of, say, 1 botcoin = $1000. The idea is to make the pointless problem
which must be solved to add a block easier if the dollar price of botcoin exceeds the target,
and harder if it falls below the target. This should stabilize the price.
Now no one is really interested in cryptocurrency except as a way to gamble and take
money from fools. But if anyone were, linking the blockchain program to prices on an exchange
would make it more nearly possible to use the cryptocurrency as a means of exchange.
The system is vulnerable to a tacit agreement to trade only on unofficial exchanges. It
is necessary that the problem is also made easier if daily trading volume on the official
exchange is zero. The problem is the price could shoot up on unofficial exchanges, but this
would not affect the price on the official exchange if there were no transactions on the
official exchange.
Lyle , December 25, 2017 11:22 pm
Of course Goldman Sachs and its competitors are doing just this building an options and
futures exchange. (it is not really that much different than any other futures and options
business)
Longtooth , December 26, 2017 5:01 am
But Robert,
then the entire foundation for Bitcoin's purpose disappears entirely, so what advantage
remains?
The basis was and remains to remove any and all national gov'ts across he globe from any
influences on values of currencies, thus pure laissez-faire in the extreme .. as you say
libertarian chaos.
By making crypto-currency values subject to national currency exchange rates they cease to
have any reason to exist at all.
We / globally in fact already use crypto exchange via electronic transactions .. adding
block chain to it would be a benefit but a separate cryptocurrency is a worthless redundancy
if it is subject to valuation by exchange rates of national currencies.
What am I missing?.
likbez , December 26, 2017 5:27 am
Great Article !!! I wish I can write about this topic on the same level. Thank you very much. P.S. Happy New Year for everybody !
rick shapiro , December 26, 2017 10:26 am
There is a much more severe problem with bitcoin. As the number mined asymptotically
approaches the pre-determined maximum, the cost of mining approaches infinity. As miners are
the ones who validate coins, what will happen to the reliability of bitcoin when it becomes
uneconomical for anyone to participate in mining?
"... By Servaas Storm, Senior Lecturer at Delft University of Technology, who works on macroeconomics, technological progress, income distribution & economic growth, finance, development and structural change, and climate change. Originally published at the Institute for New Economic Thinking website ..."
"... Forget the myth of a savings glut causing near-zero interest rates. We have a shortage of aggregate demand, and only public spending and raising wages will change that. ..."
"... ceteris paribus ..."
"... simultaneously ..."
"... private households ..."
"... See original post for references ..."
"... This is the night of the expanding man I take one last drag as I approach the stand I cried when I wrote this song Sue me if I play too long This brother is free I'll be what I want to be ..."
by Yves Smith Yves here. This is a terrific takedown
of the loanable funds theory, on which a ton of bad policy rests.
By Servaas Storm, Senior Lecturer at Delft University of Technology, who works on macroeconomics, technological progress,
income distribution & economic growth, finance, development and structural change, and climate change. Originally published at the
Institute for New Economic Thinking website
Forget the myth of a savings glut causing near-zero interest rates. We have a shortage of aggregate demand, and only public
spending and raising wages will change that.
Introduction
Nine years after the Great Financial Crisis, U.S. output growth has not returned to its pre-recession trend, even after interest
rates hit the 'zero lower bound' (ZLB) and the unconventional monetary policy arsenal of the Federal Reserve has been all but exhausted.
It is widely feared that this insipid recovery reflects a 'new normal', characterized by "secular stagnation" which set in already
well before the global banking crisis of 2008 (Summers 2013, 2015).
This 'new normal' is characterized not just by this slowdown of aggregate economic growth, but also by greater income and wealth
inequalities and a growing polarization of employment and earnings into high-skill, high-wage and low-skill, low-wage jobs -- at
the expense of middle-class jobs (Temin 2017; Storm 2017). The slow recovery, heightened job insecurity and economic anxiety have
fueled a groundswell of popular discontent with the political establishment and made voters captive to Donald Trump's siren song
promising jobs and growth (
Ferguson and Page 2017 ).
What are the causes of secular stagnation? What are the solutions to revive growth and get the U.S. economy out of the doldrums?
If we go by four of the papers
commissioned by the Institute for New Economic Thinking (INET) at its recent symposium to explore these questions, one headline
conclusion stands out: the secular stagnation is caused by a heavy overdose of savings (relative to investment), which is caused
by higher retirement savings due to declining population growth and an ageing labour force (Eggertson, Mehotra & Robbins 2017; Lu
& Teulings 2017; Eggertson, Lancastre and Summers 2017), higher income inequality (Rachel & Smith 2017), and an inflow of precautionary
Asian savings (Rachel & Smith 2017). All these savings end up as deposits, or 'loanable funds' (LF), in commercial banks. In earlier
times, so the argument goes, banks would successfully channel these 'loanable funds' into productive firm investment -- by lowering
the nominal interest rate and thus inducing additional demand for investment loans.
But this time is different: the glut in savings supply is so large that banks cannot get rid of all the loanable funds even when
they offer firms free loans -- that is, even after they reduce the interest rate to zero, firms are not willing to borrow more in
order to invest. The result is inadequate investment and a shortage of aggregate demand in the short run, which lead to long-term
stagnation as long as the savings-investment imbalance persists. Summers (2015) regards a "chronic excess of saving over investment"
as "the essence of secular stagnation". Monetary policymakers at the Federal Reserve are in a fix, because they cannot lower the
interest rate further as it is stuck at the ZLB. Hence, forces of demography and ageing, higher inequality and thrifty Chinese savers
are putting the U.S. economy on a slow-moving turtle -- and not much can be done, it seems, to halt the resulting secular stagnation.
This is clearly a depressing conclusion, but it is also wrong.
To see this, we have to understand why there is a misplaced focus on the market for loanable funds that ignores the role of fiscal
policy that is plainly in front of us. In other words, we need to step back from the trees of dated models and see the whole forest
of our economy.
The Market for Loanable Funds
In the papers mentioned, commercial banks must first mobilise savings in order to have the loanable funds (LF) to originate new
(investment) loans or credit. Banks are therefore intermediaries between "savers" (those who provide the LF-supply) and "investors"
(firms which demand the LF). Banks, in this narrative, do not create money themselves and hence cannot pre -finance investment
by new money. They only move it between savers and investors.
We apparently live in a non-monetary (corn) economy -- one that just exchanges a real good that everybody uses, like corn. Savings
(or LF-supply) are assumed to rise when the interest rate R goes up, whereas investment (or LF-demand) must decline when R increases.
This is the stuff of textbooks, as is illustrated by Greg Mankiw's (1997, p. 63) explanation:
In fact, saving and investment can be interpreted in terms of supply an demand. In this case, the 'good' is loanable funds,
and its 'price' is the interest rate. Saving is the supply of loans -- individuals lend their savings to investors, or they deposit
their saving in a bank that makes the loan for them. Investment is the demand for loanable funds -- investors borrow from the
public directly by selling bonds or indirectly by borrowing from banks. [ .] At the equilibrium interest rate, saving equals investment
and the supply of loans equals the demand.
But the loanable funds market also forms the heart of complicated dynamic stochastic general equilibrium (DSGE) models, beloved
by 'freshwater' and 'saltwater' economists alike (Woodford 2010), as should be clear from the commissioned INET papers as well. Figure
1 illustrates the loanable funds market in this scheme. The upward-sloping curve tells us that savings (or LF-supply) goes up as
the interest rate R increases. The downward-sloping curve shows us that investment (or LF-demand) declines if the cost of capital
(R) goes up. In the initial situation, the LF-market clears at a positive interest rate R0 > 0. Savings equal investment, which implies
that LF-supply matches LF-demand, and in this -- happy -- equilibrium outcome, the economy can grow along some steady-state path.
To see how we can get secular stagnation in such a loanable-funds world, we introduce a shock, say, an ageing population (a demographic
imbalance), a rise in (extreme) inequality, or an Asian savings glut, due to which the savings schedule shifts down. Equilibrium
in the new situation should occur at R1 which is negative. But this can't happen because of the ZLB: the nominal interest cannot
decline below zero. Hence R is stuck at the ZLB and savings exceed investment, or LF-supply > LF-demand. This is a disequilibrium
outcome which involves an over-supply of savings (relative to investment), in turn leading to depressed growth.
Ever since Knut Wicksell's (1898) restatement of the doctrine, the loanable funds approach has exerted a surprisingly strong influence
upon some of the best minds in the profession. Its appeal lies in the fact that it can be presented in digestible form in a simple
diagram (as Figure 1), while its micro-economic logic matches the neoclassical belief in the 'virtue of thrift' and Max Weber's Protestant
Ethic, which emphasize austerity, savings (before spending!) and delayed gratification as the path to bliss.
The problem with this model is that it is wrong (see Lindner 2015;
Taylor 2016
). Wrong in its conceptualisation of banks (which are not just intermediaries pushing around existing money, but which can create
new money ex nihilo ), wrong in thinking that savings or LF-supply have anything to do with "loans" or "credit," wrong because
the empirical evidence in support of a "chronic excess of savings over investment" is weak or lacking, wrong in its utter neglect
of finance, financialization and financial markets, wrong in its assumption that the interest rate is some "market-clearing" price
(the interest rate, as all central bankers will acknowledge, is the principal instrument of monetary policy), and wrong in the assumption
that the two schedules -- the LF-supply curve and the LF-demand curve -- are independent of one another (they are not, as Keynes
already pointed out).
Figure 1: The Loanable Funds Market: A Savings Glut Causing Secular Stagnation
I wish to briefly elaborate these six points. I understand that each of these criticisms is known and I entertain little hope
that that any of this will make people reconsider their approach, analysis, diagnosis and conclusions. Nevertheless, it is important
that these criticisms are raised and not shoveled under the carpet. The problem of secular stagnation is simply too important to
be left mis-diagnosed.
First Problem: Loanable Funds Supply and Demand Are Not Independent Functions
Let me start with the point that the LF-supply and LF-demand curve are not two independent schedules. Figure 1 presents savings
and investment as functions of only the interest rate R, while keeping all other variables unchanged. The problem is that the
ceteris paribus assumption does not hold in this case. The reason is that savings and investment are both affected by, and at
the same time determined by, changes in income and (changes in) income distribution. To see how this works, let us assume that the
average propensity to save rises in response to the demographic imbalance and ageing. As a result, consumption and aggregate demand
go down. Rational firms, expecting future income to decline, will postpone or cancel planned investment projects and investment declines
(due to the negative income effect and for a given interest rate R0). This means that LF-demand curve in Figure 1 must shift downward
in response to the increased savings. The exact point was made by Keynes (1936, p. 179):
The classical theory of the rate of interest [the loanable funds theory] seems to suppose that, if the demand curve for capital
shifts or if the curve relating the rate of interest to the amounts saved out of a given income shifts or if both these curves
shift, the new rate of interest will be given by the point of intersection of the new positions of the two curves. But this is
a nonsense theory. For the assumption that income is constant is inconsistent with the assumption that these two curves can shift
independently of one another. If either of them shift, then, in general, income will change; with the result that the whole schematism
based on the assumption of a given income breaks down In truth, the classical theory has not been alive to the relevance of changes
in the level of income or to the possibility of the level of income being actually a function of the rate of the investment.
Let me try to illustrate this using Figure 2. Suppose there is an exogenous (unexplained) rise in the average propensity to save.
In reponse, the LF-supply curve shifts down, but because (expected) income declines, the LF-demand schedule shifts downward as well.
The outcome could well be that there is no change in equilibrium savings and equilibrium investment. The only change is that the
'natural' interest is now R1 and equal to the ZLB. Figure 2 is, in fact, consistent with the empirical analysis (and their Figure
of global savings and investment) of Rachel & Smith. Let me be clear: Figure 2 is not intended to suggest that the loanable funds
market is useful and theoretically correct. The point I am trying to make is that income changes and autonomous demand changes are
much bigger drivers of both investment and saving decisions than the interest rate. Market clearing happens here -- as Keynes was
arguing -- because the level of economic activity and income adjust, not because of interest-rate adjustment.
Figure 2: The Loanable Funds Market: Shifts in Both Schedules
Second Problem: Savings Do Not Fund Investment, Credit Does
The loanable funds doctrine wrongly assumes that commercial bank lending is constrained by the prior availability of loanable
funds or savings. The simple point in response is that, in real life, modern banks are not just intermediaries between 'savers' and
'investors', pushing around already-existing money, but are money creating institutions. Banks create new money ex nihilo
, i.e. without prior mobilisation of savings. This is illustrated by Werner's (2014) case study of the money creation process
by one individual commercial bank. What this means is that banks do pre-finance investment, as was noted by Schumpeter early
on and later by Keynes (1939), Kaldor (1989), Kalecki, and numerous other economists. It is for this reason that Joseph Schumpeter
(1934, p. 74) called the money-creating banker 'the ephor of the exchange economy' -- someone who by creating credit ( ex nihilo
) is pre-financing new investments and innovation and enables "the carrying out of new combinations, authorizes people, in the
name of society as it were, to form them." Nicholas Kaldor (1989, p. 179) hit the nail on its head when he wrote that "[C]redit money
has no 'supply function' in the production sense (since its costs of production are insignificant if not actually zero); it comes
into existence as a result of bank lending and is extinguished through the repayment of bank loans. At any one time the volume of
bank lending or its rate of expansion is limited only by the availability of credit-worthy borrowers." Kaldor had earlier expressed
his views on the endogeneity of money in his evidence to the Radcliffe Committee on the Workings of the Monetary System, whose report
(1959) was strongly influenced by Kaldor's argumentation. Or take Lord Adair Turner (2016, pp. 57) to whom the loanable-funds approach
is 98% fictional, as he writes:
Read an undergraduate textbook of economics, or advanced academic papers on financial intermediation, and if they describe
banks at all, it is usually as follows: "banks take deposits from households and lend money to businesses, allocating capital
between alternative capital investment possibilities." But as a description of what modern banks do, this account is largely fictional,
and it fails to capture their essential role and implications. [ ] Banks create credit, money, and thus purchasing power. [ ]
The vast majority of what we count as "money' in modern economies is created in this fashion: in the United Kingdom 98% of money
takes this form .
We therefore don't need savings to make possible investment -- or, in contrast to the Protestant Ethic, banks allow us to have
'gratification' even if we have not been 'thrifty' and austere, as long as there are slack resources in the economy.
It is by no means a secret that commercial banks create new money. As the Bank of England (2007) writes, "When bank make loans
they create additional deposits for those that have borrowed" (Berry et al. 2007, p. 377). Or consider the following statement
from the Deutsche Bundesbank (2009): "The commercial banks can create money themselves ." Across the board, central bank economists,
including economists working at the Bank for International Settlements (Borio and Disyatat 2011), have rejected the loanable funds
model as a wrong description of how the financial system actually works (see McLeay et al . 2014a, 2014b; Jakab and Kumhof
2015). And the Deutsche Bundesbank (2017) leaves no doubt as to how the banking system works and money is created in actually-existing
capitalism, stating that the ability of banks to originate loans does not depend on the prior availability of saving deposits. Bank
of England economists Zoltan Jakab and Michael Kumhoff (2015) reject the loanable-funds approach in favour of a model with money-creating
banks. In their model (as in reality), banks pre-finance investment; investment creates incomes; people save out of their incomes;
and at the end of the day, ex-post savings equal investment. This is what Jakab and Kumhoff (2015) conclude:
" . if the loan is for physical investment purposes, this new lending and money is what triggers investment and therefore,
by the national accounts identity of saving and investment (for closed economies), saving. Saving is therefore a consequence,
not a cause, of such lending. Saving does not finance investment, financing does. To argue otherwise confuses the respective macroeconomic
roles of resources (saving) and debt-based money (financing)."
Savings are a consequence of credit-financed investment (rather than a prior condition) -- and we cannot draw
a savings-investment cross as in Figure 1, as if the two curves are independent. They are not. There exists therefore no
'loanable funds market' in which scarce savings constrain (through interest rate adjustments) the demand for investment loans. Highlighting
the loanable funds fallacy, Keynes wrote in "The Process of Capital Formation" (1939):
"Increased investment will always be accompanied by increased saving, but it can never be preceded by it. Dishoarding and credit
expansion provides not an alternative to increased saving, but a necessary preparation for it. It is the parent, not the twin,
of increased saving."
This makes it all the more remarkable that some of the authors of the commissioned conference papers continue to frame their analysis
in terms of the discredited loanable funds market which wrongly assumes that savings have an existence of their own -- separate from
investment, the level of economic activity and the distribution of incomes.
Third Problem: The Interest Rate Is a Monetary Policy Instrument, Not a Market-Clearing Price
In loanable funds theory, the interest rate is a market price, determined by LF-supply and LF-demand (as in Figure 1). In reality,
central bankers use the interest rate as their principal policy instrument (Storm and Naastepad 2012). It takes effort and a considerable
amount of sophistry to match the loanable funds theory and the usage of the interest rate as a policy instrument. However, once one
acknowledges the empirical fact that commercial banks create money ex nihilo , which means money supply is endogenous, the
model of an interest-rate clearing loanable funds market becomes untenable. Or as Bank of England economists Jakab and Kumhof (2015)
argue:
modern central banks target interest rates, and are committed to supplying as many reserves (and cash) as banks demand at that
rate, in order to safeguard financial stability. The quantity of reserves is therefore a consequence, not a cause, of lending
and money creation. This view concerning central bank reserves [ ] has been repeatedly described in publications of the world's
leading central banks.
What this means is that the interest rate may well be at the ZLB, but this is not caused by a savings glut in the loanable funds
market, but the result of a deliberate policy decision by the Federal Reserve -- in an attempt to revive sluggish demand in a context
of stagnation, subdued wage growth, weak or no inflation, substantial hidden un- and underemployment, and actual recorded unemployment
being (much) higher than the NAIRU (see Storm and Naastepad 2012). Seen this way, the savings glut is the symptom (or
consequence ) of an aggregate demand shortage which has its roots in the permanent suppression of wage growth (relative
to labour productivity growth), the falling share of wages in income, the rising inequalities of income and wealth (Taylor 2017)
as well as the financialization of corporations (Lazonick 2017) and the economy as a whole (Storm 2018). It is not the cause of the
secular stagnation -- unlike in the loanable funds models.
Fourth Problem: The Manifest Absence of Finance and Financial Markets
What the various commissioned conference papers do not acknowledge is that the increase in savings (mostly due to heightened inequality
and financialization) is not channeled into higher real-economy investment, but is actually channeled into more lucrative financial
(derivative) markets. Big corporations like Alphabet, Facebook and Microsoft are holding enormous amounts of liquidity and IMF economists
have documented the growth of global institutional cash pools, now worth $5 to 6 trillion and managed by asset or money managers
in the shadow banking system (Pozsar 2011; Pozsar and Singh 2011; Pozsar 2015). Today's global economy is suffering from an unprecedented
"liquidity preference" -- with the cash safely "parked" in short-term (over-collateralized lending deals in the repo-market. The
liquidity is used to earn a quick buck in all kinds of OTC derivatives trading, including forex swaps, options and interest rate
swaps. The global savings glut is the same thing as the global overabundance of liquidity (partying around in financial markets)
and also the same thing as the global demand shortage -- that is: the lack of investment in real economic activity, R&D and innovation.
The low interest rate is important in this context, because it has dramatically lowered the opportunity cost of holding cash --
thus encouraging (financial) firms, the rentiers and the super-rich to hold on to their liquidity and make (quick and relatively
safe and high) returns in financial markets and exotic financial instruments. Added to this, we have to acknowledge the fact that
highly-leveraged firms are paying out most of their profits to shareholders as dividends or using it to buy back shares (Lazonick
2017). This has turned out to be damaging to real investment and innovation, and it has added further fuel to financialization (Epstein
2018; Storm 2018). If anything, firms have stopped using their savings (or retained profits) to finance their investments which are
now financed by bank loans and higher leverage. If we acknowledge these roles of finance and financial markets, then we can begin
to understand why investment is depressed and why there is an aggregate demand shortage. More than two decades of financial deregulation
have created a rentiers' delight, a capitalism without 'compulsions' on financial investors, banks, and the property-owning class
which in practice has led to 'capitalism for the 99%' and 'socialism for the 1%' (Palma 2009; Epstein 2018) For authentic Keynesians,
this financialized system is the exact opposite of Keynes' advice to go for the euthanasia of the rentiers ( i.e. design
policies to reduce the excess liquidity).
Fifth Problem: Confusing Savings with "Loans," or Stocks with Flows
"I have found out what economics is,' Michał Kalecki once told Joan Robinson, "it is the science of confusing stocks with flows."
If anything, Kalecki's comment applies to the loanable funds model. In the loanable fund universe, as Mankiw writes and as most commissioned
conference papers argue, saving equals investment and the supply of loans equals the demand at some equilibrium interest rate. But
savings and investment are flow variables, whereas the supply of loans and the demand for loans are stock variables.
Simply equating these flows to the corresponding stocks is not considered good practice in stock-flow-consistent macro-economic modelling.
It is incongruous, because even if we assume that the interest rate does clear "the stock of loan supply" and "the stock of loan
demand", there is no reason why the same interest rate would simultaneously balance savings ( i.e. the increase
in loan supply) and investment ( i.e. the increase in loan demand). So what is the theoretical rationale of assuming that
some interest rate is clearing the loanable funds market (which is defined in terms of flows )?
To illustrate the difference between stocks and flows: the stock of U.S. loans equals around 350% of U.S. GDP (if one includes
debts of financial firms), while gross savings amount to 17% of U.S. GDP. Lance Taylor (2016) presents the basic macroeconomic flows
and stocks for the U.S. economy to show how and why loanable funds macro models do not fit the data -- by a big margin. No interest
rate adjustment mechanism is strong enough to bring about this (ex-post) balance in terms of flows , because the interest
rate determination is overwhelmed by changes in loan supply and demand stocks . What is more, and as stated before, we don't
actually use 'savings' to fund 'investment'. Firms do not use retained profits (or corporate savings) to finance their investment,
but in actual fact disgorge the cash to shareholders (Lazonick 2017). They finance their investment by bank loans (which is newly
minted money). Households use their (accumulated) savings to buy bonds in the secondary market or any other existing asset. In that
case, the savings do not go to funding new investment -- but are merely used to re-arrange the composition of the financial portfolio
of the savers.
Final Problem: The Evidence of a Chronic Excess of Savings Over Investment is Missing
If Summers claims that there is a "chronic excess of savings over investment," what he means is that ex-ante savings are larger
than ex-ante investment. This is a difficult proposition to empirically falsify, because we only have ex-post (national accounting)
data on savings and investment which presume the two variables are equal. However, what we can do is consider data on (global) gross
and net savings rates (as a proportion of GDP) to see if the propensity to save has increased. This is what Bofinger and Ries (2017)
did and they find that global saving rates of private households have declined dramatically since the 1980s. This means,
they write, that one can rule out 'excess savings' due to demographic factors (as per Eggertson, Mehotra & Robbins 2017;
Eggertsson, Lancastre & Summers 2017; Rachel & Smith 2017; and Lu & Teulings 2017). While the average saving propensity of household
has declined, the aggregate propensity to save has basically stayed the same during the period 1985-2014. This is shown in Figure
3 (reproduced from Bofinger and Reis 2017) which plots the ratio of global gross savings (or global gross investment) to GDP against
the world real interest rate during 1985-2014. A similar figure can be found in the paper by Rachel and Smith (2017). What can be
seen is that while there has been no secular rise in the average global propensity to save, there has been a secular decline in interest
rates. This drop in interest rates to the ZLB is not caused by a savings glut, nor by a financing glut, but is the outcome of the
deliberate decisions of central banks to lower the policy rate in the face of stagnating economies, put on a 'slow-moving turtle'
by a structural lack of aggregate demand which -- as argued by Storm and Naastepad (2012) and Storm (2017) -- is largely due to misconceived
macro and labour-market policies centered on suppressing wage growth, fiscal austerity, and labour market deregulation.
Saving/Investment Equilibria and World Real Interest Rate, 1985-2014 Source: Bofinger and Reis (2017), Figure
1(a).
To understand the mechanisms underlying Figure 3, let us consider Figure 4 which plots investment demand as a negative function
of the interest rate. In the 'old situation', investment demand is high at a (relatively) high rate of interest (R0); this corresponds
to the data points for the period 1985-1995 in Figure 3. But then misconceived macro and labour-market policies centered on suppressing
wage growth, fiscal austerity, and labour market deregulation began to depress aggregate demand and investment -- and as a result,
the investment demand schedule starts to shift down and to become more steeply downward-sloping at the same time. In response to
the growth slowdown (and weakening inflationary pressure), central banks reduce R -- but without any success in raising the gross
investment rate. This process continues until the interest rate hits the ZLB while investment has become practically interest-rate
insensitive, as investment is now overwhelmingly determined by pessimistic profit expectations; this is indicated by the new investment
schedule (in red). That the economy is now stuck at the ZLB is not caused by a "chronic excess of savings" but rather by a chronic
shortage of aggregate demand -- a shortage created by decades of wage growth moderation, labour market flexibilization, and heightened
job insecurity as well as the financialization of corporations and the economy at large (Storm 2018).
Figure 4: Secular Stagnation As a Crisis of Weak Investment Demand
Conclusions
The consensus in the literature and in the commissioned conference papers that the global decline in real interest rates is caused
by a higher propensity to save, above all due to demographic reasons, is wrong in terms of underlying theory and evidence base. The
decline in interest rates is the monetary policy response to stalling investment and growth, both caused by a shortage of global
demand. However, the low interest rates are unable to revive growth and halt the secular stagnation, because there is little reason
for firms to expand productive capacity in the face of the persistent aggregate demand shortage. Unless we revive demand, for example
through debt-financed fiscal stimulus or a drastic and permanent progressive redistribution of income and wealth in favour of lower-income
groups (Taylor 2017), there is no escape from secular stagnation. The narrow focus on the ZLB and powerless monetary policy within
the framing of a loanable-funds financial system blocks out serious macroeconomic policy debate on how to revive aggregate demand
in a sustainable manner. It will keep the U.S. economy on the slow-moving turtle -- not because policymakers cannot do anything about
it, but we choose to do so. The economic, social and political damage, fully self-inflicted, is going to be of historic proportions.
It is not a secret that the loanable funds approach is fallacious (Lindner 2015; Taylor 2016; Jakab and Kumhof 2015). While academic
economists continue to refine their Ptolemaic model of a loanable-funds market, central bank economists have moved on -- and are
now exploring the scope of and limitations to monetary policymaking in a monetary economy. Keynes famously wrote that "Practical
men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.
Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back." In
2017, things seem to happen the other way around: academic economists who believe themselves to be free thinkers are caught in the
stale theorizing of a century past. The puzzle is, as Lance Taylor (2016, p. 15) concludes "why [New Keynesian economists] revert
to Wicksell on loanable funds and the natural rate while ignoring Keynes's innovations. Maybe, as [Keynes] said in the preface to
the General Theory, "'The difficulty lies not in the new ideas, but in escaping from the old ones ..' (p. viii)"
Due to our inability to free ourselves from the discredited loanable funds doctrine, we have lost the forest for the trees. We
cannot see that the solution to the real problem underlying secular stagnation (a structural shortage of aggregate demand) is by
no means difficult: use fiscal policy -- a package of spending on infrastructure, green energy systems, public transportation and
public services, and progressive income taxation -- and raise (median) wages. The stagnation will soon be over, relegating all the
scholastic talk about the ZLB to the dustbin of a Christmas past.
"Forget the myth of a savings glut causing near-zero interest rates. We have a shortage of aggregate demand, and only public
spending and raising wages will change that."
But isn't "a savings glut" just the same as "a shortage of aggregate demand"? Or is Keynes so out of favor that this is outre
thinking?
The point is that the "saving glut" is caused bi unequal distribution of income, so it's a good thing that the "shortage of
aggregate demand" is stressed, but still it's just two names for the same thing.
In the end the "money creation" is needed because there is not a "money circulation", IMO.
Putting money into the broadest possible distribution and circulation is the key. It could be done with existing money through
taxation or with new money through the federal fiscal lever.
Given the "Tax Reform" just passed, odds on the first option look vanishingly long. The second option is what the elites do
whenever they want something, normally a war or tax cut. If they want a robust economy, eventually they will pull the fiscal lever.
Feudalism, however, may look better to our depraved current elite crop than any kind of broadly robust economy.
There was a link to an article yesterday called "I write because I hate" that described how incorrect and even dangerous metaphors
can be when it comes to understanding the world. Yours is a case in point.
But isn't "a savings glut" just the same as "a shortage of aggregate demand"
I'm not sure I entirely understand your complaint, but at a first glance a savings glut is one kind of demand shortage, but
not every kind of demand shortage can reasonably be called a savings glut. In one situation you have plenty of resource but no
use for it other than possible future use (savings glut -- you have everything you need so cease purchasing) and in another situation
you have insufficient resource (demand shortage -- you cease purchasing because you can't afford to purchase) but no savings glut.
You don't even have the resources you need for today, never mind saving for tomorrow.
Aye, that's exactly how I understand it, so it is not exactly a chicken-or-the-egg conflation to try to distinguish a savings
glut from a lack of demand.
You seem to have missed the point. The problem is wealth distribution. Mainstream economists don't distinguish who has the
savings in their simplistic models. When the rich already have a widget in every room of their mansion, they are not going to
buy more widgets no matter how low the price of widgets sink. And when the poor have no money, they will not be able to buy the
widgets no matter how much they want them. Demand is not just a function of price. To increase demand, we need a more equitable
form of wealth distribution.
One major difference, according to the author, is that the lack of aggregate demand exists, while the savings glut does not.
The fact of companies sitting on liquidity, is detached from investment, for which they borrow. That investment is lacking because
they do not see good investments, because of a lack of aggregate demand. if they did invest, it would not be constrained
by their 'savings'.
"But this time is different: the glut in savings supply is so large that banks cannot get rid of all the loanable funds even
when they offer firms free loans -- that is, even after they reduce the interest rate to zero, firms are not willing to borrow
more in order to invest."
That needs some explanation. Banks are not offering US businesses free money (excerpt briefly during the Crash). BBB bonds
yields are aprox 4.3% -- and most businesses cannot borrow at that rate (excerpt when posting collateral).
For comparison over long time horizons, the real (ex-CPI) BBB corporate bond rate is 2.5% to 3% -- in the middle of its range
from 1952-1980.
We have considered the political reasons for the opposition to the policy of creating employment by government spending.
But even if this opposition were overcome -- as it may well be under the pressure of the masses -- the maintenance of full
employment would cause social and political changes which would give a new impetus to the opposition of the business leaders.
Indeed, under a regime of permanent full employment, the 'sack' would cease to play its role as a 'disciplinary measure. The
social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would
grow. Strikes for wage increases and improvements in conditions of work would create political tension. It is true that profits
would be higher under a regime of full employment than they are on the average under laissez-faire, and even the rise in wage
rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices,
and thus adversely affects only the rentier interests. But 'discipline in the factories' and 'political stability' are more
appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from
their point of view, and that unemployment is an integral part of the 'normal' capitalist system.
In other words, one potential reason for business to oppose any efforts at addressing the problem is that the people would
have more bargaining power. The elite are not after absolute wealth or power, but relative power over the rest of us.
Imagine for example if the alternative was passed say some form of social democracy with full employment and MMT policy.
This would undermine in their view their ability to dominate over the rest of us. Now they may arguably be richer (ex: we might
see more money for productive parts of society like say, disease research), but they are willing to give that up for dominating
us. That is what we are up against.
If what you say is true (re social democracy + MMT policies), how then to consider for even one second the further existence
of a business cadre dedicated to upending such an agreement? We always theorize as if an actual resistance to "our" policies will
melt away with the displacement of elite political control. I remember Chile and the "strikes" called to bring down Allende.
The innocence of our imaginations is not only disturbing, but dangerous. Once power is gained and capital has been put in its
place, the fight begins right there, anew. Unless we wish to fall into Stalinist methods of "resolution", consideration for alternate
methods of economic control, and an anticipation of backlash, are in demand if the "people" are to prevail.
In my experience as a union organizer and negotiator the opposition by many employers to unions is not particularily because
of money, but because of power and the erosion of the employer's grip of it by the collective action of workers. Many times in
my experience employers have spent a boatload more money on fighting workers and hiring union-busting attorneys than whatever
wage and benefit increase is being proposed. These employers are acting from their political self-interest rather than the narrow
economic self-interest that is commonly assumed.
Great comments -- the motivation behind the ideas is a need for power and control.
You can look at the first 20 years of the Cold War as a domestic experiment in social control: incomes were allowed to rise
for most people, and inequality was moderated in the interest of politically consolidating the country to support arming and fighting
the war.
By the early 70s our handlers -- as shown in the Powell Memo, say -- had tired of the experiment. With more income, free time,
and education, women, students, non-white people, and the newly prosperous working class were entering into contention on every
terrain imaginable -- and that had to reduced to a manageable level. So they "leaned-out the mix", reduced income for most people,
and bumped up the level of indebtedness and indoctrination.
Now the fuel-air mix is so lean that the engine is starting to miss (for example, the Trump election and the Sanders challenge
to the Dem elite). But it looks like they have no other idea but to double-down on austerity. I guess they assume they can maintain
global financial and military hegemony on the backs of a sick, unfit, indebted, and politically fractious population -- an iffy
proposition. No wonder they seem desperate.
The Trump/Republican tax law tells us (if we needed another message) that the link between economic policy and economic theory
is so weak as the bring into question the point of theorizing in the first place, apart, of course, from convincing (semi)-smart
but fearful people to remain timid in the face of powerful lunacy. Government spending to replace worn out capital, to satisfy
basic material needs of the population, and to underwrite investment in an environmental and educational future worth creating
is, OBVIOUSLY, a no-no to Wall Street, war profiteers, and the large population of yes-men and women who promote fear among the
middle class. We should spend less time contesting economic thinking that is nonsense. Instead why not spend time proposing and
explaining fairly obvious fiscal strategies that will promote a better society, as well as the time that will be needed to defend
these life-affirming proposals against the scholastic nonsense that our saltwater and freshwater scaredy-cat friends will put
out every day to explain why what we propose will wreck Civilization. Let's go on the offense for a change.
precisely, but for the forementioned scholastic nonsense of our salty and fresh feline friends, one would need a salient and
orchestrated defense, as to why such meddling with traditional economic trajectories, will mean that: by foregoing my 'short sided
2018 increase in my personal deduction', will I actually allow myself to feel benign about the sagging state of civilization,
that those 'cats of all breeds', have so eloquently perpetuated upon a 'generation of our peers'.
calling 'message central', the 'greater good awaits'. Yes
I still can't get my head around the fact that these models can persist in the economics literature whilst everyone knows they
are based on flawed assumptions. In science these would quickly end up as part of some distant history. Someone would publish
another model, and slowly everyone would start working with it if it had strong explanatory power. Imagine the grief that climate
modellers would get if theirs models were so poorly grounded.
Thank you for this post. It was as good as Michael Hudson and all the clear thinkers you post for us. Since we got rid of Greenspan
(who admitted that interest rates had no effect on the economy but still freaked out about inflaltion), Bernanke and then Yellen
have had better instincts not straightforward, but better. If central banks know the loanable funds theory to be nonsense, the
battle is mostly won. MMT will be the logical next step. Public spending/infrastructure is just good grassroots policy that serve
everyone. Even dithering goofballs like Larry Summers. And, as implied above, public spending takes care of the always ignored
problem of private debt levels which suck productive spending and investment out of the economy, because unemployment. It's hard
to believe that academics have been so wrong-headed for so long without any evidence for their claims. Steve Keen's premise, that
these academics ignore both the existence of private debt and the importance of dwindling energy sources is also addressed above.
Storm's point also made by both old hands and new MMT that there is not a problem with inflation (too much) if there are slack
resources seems to have morphed into an ossified rule whereby some inflexible academics see slack resources as scarce resources.
What is slack is always a political definition. What is slack today is a filthy environment; there is a great surplus of it. Enormously
slack. That's the good news.
Globalization is a disaster wherever you care to look.
Big corporations like Alphabet, Facebook and Microsoft are holding enormous amounts of liquidity . . .
A better example is Apple, with it's roughly 1/4 trillion dollar cash hoard, beaten out of their Chinese work force in collusion
of the Chinese elite. With wages crushed here and there, because they don't want to pay anyone anything anywhere, where will demand
come from? The Chinese peasant slaving away on an Apple farm has a few square feet of living space, like a broiler chicken in
a Tyson cage so where is she going to put the new furniture she can't afford?
Banks create credit, money, and thus purchasing power. [ ] The vast majority of what we count as "money' in modern economies
is created in this fashion: in the United Kingdom 98% of money takes this form .
The banks are the MMT practicing intermediary between the federal government and the peasants.
So much goodness, don't know where to start. It's a long post. It's my day (singular) off. I'm going long. Deacon Blues* applies.
This:
Ever since Knut Wicksell's (1898) restatement of the doctrine, the loanable funds approach has exerted a surprisingly strong
influence upon some of the best minds in the profession. Its appeal lies in the fact that it can be presented in digestible
form in a simple diagram (as Figure 1), while its micro-economic logic matches the neoclassical belief in the 'virtue of thrift'
and Max Weber's Protestant Ethic, which emphasize austerity, savings (before spending!) and delayed gratification as the path
to bliss.
Now we're talking. This puts the doctrine in the context of its parent beliefs.
The way I see it, beliefs:economics as operating system:application as mythology:religion. So shorter Storm: The LFF is a BS
application for a BS OS.
Been dawning on me lately how neoliberalism is the spawn of a degenerate parent belief system, too. I was even thinking of
Weber just the other day.
By speaking in apparently objective, pragmatic, "realistic" terms, public figures are notorious for "dog-whistling" their occult
beliefs in terms their congregations hear loud and clear. When Her Royal Clinton's even more notoriously damned to hell half the
population as "deplorables," she tipped her hand. The obscure term, ephors, is very instructive here.
To refesh the readers memory, "Schumpeter (1934, p. 74) called the money-creating banker 'the ephor of the exchange economy'
-- someone who by creating credit (ex nihilo) is pre-financing new investments and innovation and enables "the carrying out of
new combinations, authorizes people, in the name of society as it were, to form them."
Not so fast, though. Who were the original ephors?
Herodotus claimed that the institution was created by Lycurgus, while Plutarch considers it a later institution. It may
have arisen from the need for governors while the kings were leading armies in battle. The ephors were elected by the popular
assembly, and all citizens were eligible for election. They were forbidden to be reelected. They provided a balance for the
two kings, who rarely cooperated with each other. Plato called them tyrants who ran Sparta as despots, while the kings were
little more than generals. Up to two ephors would accompany a king on extended military campaigns as a sign of control, and
they held the authority to declare war during some periods in Spartan history.[2]
According to Plutarch,[3] every autumn, at the crypteia, the ephors would pro forma declare war on the helot population
so that any Spartan citizen could kill a helot without fear of blood guilt.[4] This was done to keep the large helot population
in check.
The ephors did not have to kneel down before the Kings of Sparta and were held in high esteem by the citizens, because of
the importance of their powers and because of the holy role they earned throughout their functions.
Ain't that something. We don't call it "class war" for nothing. More on the crypteia:
The Crypteia or Krypteia (Greek: κρυπτεία krupteνa from κρυπτός kruptσs, "hidden, secret things") was an ancient Spartan
state institution involving young Spartan men. Its goal and nature are still a matter of discussion and debate among historians,
but some scholars (Wallon) consider the Krypteia to be a kind of secret police and state security force organized by the ruling
classes of Sparta, whose purpose was to terrorize the servile helot population. Others (Kφchly, Wachsmuth) believe it to be
a form of military training, similar to the Athenian ephebia.
So Schumpeter's metaphor is way too apt for comfort. Gets right under my skin.
For a modern equivalent of the pro forma declaration of civil war, I'm thinking "election cycle." Hippie-punching and
all that goes a long way back, eh?
Let's cut to the chase: what's all this talk of econ as religion telling us? ISTM arguing with neoliberals as they frame the
debate is like arguing with theologians in their terms. My learning psych professor, Robert Bolles, regarding the dismantling
of ascendant BS models, always said, you don't take down an enormous tree leaf by leaf, you go where it meets the ground. Where
does neoliberalism meet the ground? And its parent belief system?
Neoliberalism is so poorly grounded, it's shorting out all over the place. This could be easier than it looks. Storm's argument
is compelling (at least to this newbie). What are its other weakest links? (Not being rhetorical here. I really don't know. A
little help?)
Speaking of Weber, one of the major factors in the Reformation was the utter failure of the Catholic church to be able to produce
a valid calendar
. The trouble is of course, in their mythos, you have to perform the proper rituals at the proper time and often in the proper
place, or you will fry in hell forever and ever amen.
Obviously, then, the calculation of the equinox assumed considerable and understandable importance. If the equinox was wrong,
then Easter was celebrated on the wrong day and the placement of most of the other observances -- such as the starts of Lent
and Pentecost -- would also be in error.
As the Julian calendar was far from perfect, errors did indeed begin to creep into the keeping of time. Because of the inherent
imprecision of the calendar, the calculated year was too long by 11 minutes and 14 seconds. The problem only grew worse with
each passing year as the equinox slipped backwards one full day on the calendar every 130 years. For example, at the time of
its introduction, the Julian calendar placed the equinox on March 25. By the time of the Council of Nicea in 325, the equinox
had fallen back to March 21. By 1500, the equinox had shifted by 10 days.
The 10 days were of increasing importance also to navigation and agriculture, causing severe problems for sailors, merchants,
and farmers whose livelihood depended upon precise measurements of time and the seasons. At the same time, throughout the Middle
Ages, the use of the Julian calendar brought with it many local variations and peculiarities that are the constant source of
frustration to historians. For example, many medieval ecclesiastical records, financial transactions, and the counting of dates
from the feast days of saints did not adhere to the standard Julian calendar but reflected local adjustments. Not surprisingly,
confusion was the result.
The Church Saves Time
[Doncha just love that succinct bit of myth-making? smh]
The Church was aware of the inaccuracy, and by the end of the 15th century there was widespread agreement among Church leaders
that not celebrating Easter on the right day -- the most important and most solemn event on the calendar -- was a scandal.
A functioning mythology tells one how to be human right now. The Catholic church couldn't even tell people what date it was,
putting not just ephemeral souls in peril should one die, even more of a daily dread in those days, but lives and property were
increasingly at risk.
ISTM we're in an analogous situation. Our two high holies, Wall Street and Washington, DC, are increasingly irrelevant to us
helots. They're of no use to us in ordering our daily lives. In fact, they've becoming openly hostile, dropping any pretense of
governing for the common good, and I'm not referring only to Trump, eg, whatever happened to habeas corpus ? "If you like
your health plan, you can keep it." The betrayals come fast and furious, too fast to keep up.
Others are rejecting science. A schism here, a schism there, pretty soon it all cracks up one day "outta nowhere." And I do
mean "one day."
Moving right along, let's look at "the virtue of thrift."
In the formative years of United States history, prominent thinkers such as Ben Franklin promoted a "thrift ethic" that
encouraged hard work, frugal spending on self and generous giving to charity, he asserted, maintaining "thrift" was simply
the secular term for the religious stewardship principle . And institutions developed to support that ethic, he noted.
That's what I'm saying: secular institutions are the operationalizations, the applications, of belief systems, and further,
we can study them instead of just saying "religion = bad = no further analysis required" and then dismissing it all out of hand.
As with LF-supply and LF-demand, secular and sectarian are not the independent variables they're made out to be, as argued
so well by Cook & Ferguson right here on NC in The
Real Economic Consequences of Martin Luther , eg, "[Henry VIII] did not abolish the papacy so much as take the pope's place."
Same goes for today, IMNSHO: Our "secular" leaders are sectarian high priests in mufti.
The Baptist article also goes on to say what the flock people should do: ignore Wall St. and DC. Unsuprisingly, it's also chock
full of punching downwards and victim-blaming. Payday lending and lotteries are to blame, they say. People just need to be more
thrifty , which apparently means, impoverish yourself for the betterment of your betters. Or else.
When HRC damned half of us to Hell, she was dog-whistling loud and clear in a tradition going at least as far back as the wars
of the ephors on the helots. When the high priests of our high holy temples of finance tell us we need more austerity, although
they speak in terms apparently objective and especially dispassionate, it's nothing but the failed preachings of the failed priests
of a failed church.
Looked at as comparative mythology, and speaking empirically as well (much obliged to the present author and our hosts, sincerely)
neoliberalism is no way of being human.
Sure, us nerds get that. But wonky discussions don't move people. The execrable Mario Cuomo is credited with saying, "You campaign
in poetry, you govern in prose," and I think it's profoundly true. Telling my friends we've debunked the Loanable Funds Fallacy
will get me nowhere.
Oy vey. The immense satisfaction I had been feeling, of seeing through neoliberalism all the way to its core, sure was short
lived. Now I need to know what MMT says about being human. This is what happens when you start thinking in words, you know. It
never ends!
I've heard Steve Keen's writing won't be much help in popularizing MMT in time. Who's a witty MMTer? Who can express its way
of being human in one-liners? Who's punchy?
(Administrivia: "Suppose there is an exogenous (unexplained) *rise* in the average propensity to save. In reponse, the LF-supply
curve shifts down ." Shouldn't that be "drop"?)
* This is the night of the expanding man
I take one last drag as I approach the stand
I cried when I wrote this song
Sue me if I play too long
This brother is free
I'll be what I want to be
Very interesting rant, Knowbuddhau. Imo all we have to do is get over gold. It made sense before the days of sovereign fiat
that you saved your coins before you spent them. How else? But fiat is the essential spirit of money while gold was/is a craze.
And the Neoliberals are unenlightened just like the Neocons against whom they pretend to react. But they are reactionaries regardless.
That's their problem. All reaction, no action. When Storm refers to Kalecki above saying the original sin of economics was confusing
stocks with flows, I take it to mean confusing fiat with gold in a sense. Once upon a time a store of value (a pouch full of gold
coins) was the same thing as a medium of exchange. Not any more. Fiat is the only mechanism, spent in advance to promote social
well being, that can create an "economy" in this world of zillions of people.
Isn't a bit of an irony that the academic papers being debunked here were commissioned by the Institute for *New* Economic
Thinking ? Sad to see its also been corrupted by the neoliberal virus (political Ebola).
The author writes about the fuctional LF paradigm: "Banks, in this narrative, do not create money themselves and hence cannot
pre -finance investment by new money. They only move it between savers and investors." -- Note that that narrative doesn't
even make sense *within* the loanable-funds model, because with fractional reserve banking, even if banks were required to loan
against pre-existing deposits, they could amplify each dollar of same into multiple units of newly-created credit money. The fact
that what really happens goes even further and entirely omits the need for pre-existing funds from the banks' monetary legerdemain
is the reason for my pet term for the "loans create deposits" reality: "fictional reserve banking."
Aggregate demand increases investment only to the extant that it increases profitable opportunities. If costs remain constant,
then obviously an increase in demand increases profitability. But an increase in wages doesn't merely increase aggregate demand,
it also increases aggregate costs because that's what a wage is to a firm. If aggregate wages were boosted by $1 trillion, consumption
will be boosted by less than 100% of that (workers will save some of their increased income) while firms will have to pay the
full $1 trillion in increased wages if they are to employ the workers. So how is increasing wages supposed to increase profitability
and investment? It seems like it would do the opposite.
We really need to look more at profit. The aggregate profit rate is determined by the cost of the total capital employed in
relation to the output. If the costs rise faster than productivity growth, then profitability falls. How do aggregate costs rise?
By capital accumulation, by an increase in savings and investment. Thus, it would seem that stagnation can only be reached if
too much capital has been accumulated without a corresponding increase in productivity. This hypothesis doesn't rely on the loanable
funds theory (it doesn't matter whether the money exists before it is spent), but it is more similar to the savings glut explanation
because it is the accumulation of capital that leads to the fall in profitability. The suppression of wages is an effect, an attempt
to create profitable opportunities when there are none.
Your model is correct when you limit yourself to the variables in your model. Real life economies are complex, dynamic interactions
of many variables. At different times some variable become more important than others.
I think your variable, capital accumulation, is itself a complicated mix of many variables. Sometimes the cost of "capital
accumulation" may be controlling, and sometimes not. It also depends on which variables within capital accumulation are having
the most impact.
I think one of the major problems of the theory of supply and demand is that it may be true as a static model (all other things
being equal), but the economy (and life) are not static. Unless you can take dynamic effects into account, then this static or
even quasi-static model will just not represent what actually happens. This is just another way of saying what this article says.
Over time, the supply curve and the demand curve interact. There is hardly, if any, point in time when all other things aren't
changing.
In my world of simulating the behavior of integrated circuits, the problem involves non-linear differential equations, not
just non-linear algebraic equations.
Here is another problem. " by the national accounts[,] identity of saving and investment (for closed economies),"
Accounting is also a static snapshot of a dynamic system. A bank creates a loan payable in let's say 30 years. The spending
occurs immediately. In accounting terms these two items balance. However, on impact on the economy, they do not balance. Why else
would capitalism have noticed the value of buy now, pay later?
This is no longer a chicken and egg problem of which came first, the chicken or the egg. In real life, there are lots of chickens
and lots of eggs. Which came first is irrelevant. Chickens create eggs and eggs create chickens.
Models are a simplification of reality. They apply best when the things that were simplified away don't matter much. They fail
when the things that were simplified away become important. So, when does the loanable funds model apply?
IMHO, the loanable funds model applies when there is a run on the bank. When the fractional reserve banking system is running
smoothly, the loanable funds model is irrelevant. That's why banks have reserves and monetary systems have central reserve banks.
These reserve systems let us ignore loanable funds models.
"... With the election of 2016, symptoms of the long emergency seeped into the political system. Disinformation rules. There is no coherent consensus about what is happening and no coherent proposals to do anything about it. The two parties are mired in paralysis and dysfunction and the public's trust in them is at epic lows. Donald Trump is viewed as a sort of pirate president, a freebooting freak elected by accident, "a disrupter" of the status quo at best and at worst a dangerous incompetent playing with nuclear fire. A state of war exists between the White House, the permanent D.C. bureaucracy, and the traditional news media. Authentic leadership is otherwise AWOL. Institutions falter. The FBI and the CIA behave like enemies of the people. ..."
"... They chatter about electric driverless car fleets, home delivery drone services, and as-yet-undeveloped modes of energy production to replace problematic fossil fuels, while ignoring the self-evident resource and capital constraints now upon us and even the laws of physics -- especially entropy , the second law of thermodynamics. Their main mental block is their belief in infinite industrial growth on a finite planet, an idea so powerfully foolish that it obviates their standing as technocrats. ..."
"... The universities beget a class of what Nassim Taleb prankishly called "intellectuals-yet-idiots," hierophants trafficking in fads and falsehoods, conveyed in esoteric jargon larded with psychobabble in support of a therapeutic crypto-gnostic crusade bent on transforming human nature to fit the wished-for utopian template of a world where anything goes. In fact, they have only produced a new intellectual despotism worthy of Stalin, Mao Zedong, and Pol Pot. ..."
"... Until fairly recently, the Democratic Party did not roll that way. It was right-wing Republicans who tried to ban books, censor pop music, and stifle free expression. If anything, Democrats strenuously defended the First Amendment, including the principle that unpopular and discomforting ideas had to be tolerated in order to protect all speech. Back in in 1977 the ACLU defended the right of neo-Nazis to march for their cause (National Socialist Party of America v. Village of Skokie, 432 U.S. 43). ..."
"... This is the recipe for what we call identity politics, the main thrust of which these days, the quest for "social justice," is to present a suit against white male privilege and, shall we say, the horse it rode in on: western civ. A peculiar feature of the social justice agenda is the wish to erect strict boundaries around racial identities while erasing behavioral boundaries, sexual boundaries, and ethical boundaries. Since so much of this thought-monster is actually promulgated by white college professors and administrators, and white political activists, against people like themselves, the motives in this concerted campaign might appear puzzling to the casual observer. ..."
"... The evolving matrix of rackets that prompted the 2008 debacle has only grown more elaborate and craven as the old economy of stuff dies and is replaced by a financialized economy of swindles and frauds . Almost nothing in America's financial life is on the level anymore, from the mendacious "guidance" statements of the Federal Reserve, to the official economic statistics of the federal agencies, to the manipulation of all markets, to the shenanigans on the fiscal side, to the pervasive accounting fraud that underlies it all. Ironically, the systematic chiseling of the foundering middle class is most visible in the rackets that medicine and education have become -- two activities that were formerly dedicated to doing no harm and seeking the truth ! ..."
"... Um, forgotten by Kunstler is the fact that 1965 was also the year when the USA reopened its doors to low-skilled immigrants from the Third World who very quickly became competitors with black Americans. And then the Boom ended, and corporate American, influenced by thinking such as that displayed in Lewis Powell's (in)famous 1971 memorandum, decided to claw back the gains made by the working and middle classes in the previous 3 decades. ..."
"... "Wow is there ever negative!" ..."
"... You also misrepresent reality to your readers. No, the black underclass is not larger, more dysfunctional, and more alienated now than in the 1960's, when cities across the country burned and machine guns were stationed on the Capitol steps. The "racial divide" is not "starker now than ever"; that's just preposterous to anyone who was alive then. And nobody I've ever known felt "shame" over the "outcome of the civil rights campaign". I know nobody who seeks to "punish and humiliate" the 'privileged'. ..."
"... My impression is that what Kunstler is doing here is diagnosing the long crisis of a decadent liberal post-modernity, and his stance is not that of either of the warring sides within our divorced-from-reality political establishment, neither that of the 'right' or 'left.' Which is why, logically, he published it here. National Review would never have accepted this piece ..."
"... "Globalization has acted, meanwhile, as a great leveler. It destroyed what was left of the working class -- the lower-middle class -- which included a great many white Americans who used to be able to support a family with simple labor." ..."
"... Young black people are told by their elders how lucky they are to grow up today because things are much better than when grandpa was our age and we all know this history.\ ..."
"... It's clear that this part of the article was written from absolute ignorance of the actual black experience with no interest in even looking up some facts. Hell, Obama even gave a speech at Howard telling graduates how lucky they were to be young and black Today compared to even when he was their age in the 80's! ..."
"... E.g. Germany. Germany is anything but perfect and its recent government has screwed up with its immigration policies. But Germany has a high standard of living, an educated work force (including unions and skilled crafts-people), a more rational distribution of wealth and high quality universal health care that costs 47% less per capita than in the U.S. and with no intrinsic need to maraud around the planet wasting gobs of taxpayer money playing Global Cop. ..."
"... The larger subtext is that the U.S. house of cards was planned out and constructed as deliberately as the German model was. Only the objective was not to maximize the health and happiness of the citizenry, but to line the pockets of the parasitic Elites. (E.g., note that Mitch McConnell has been a government employee for 50 years but somehow acquired a net worth of over $10 Million.) ..."
On America's 'long emergency' of recession, globalization, and identity politics.
Can a people recover from an excursion into unreality? The USA's sojourn into an alternative universe of the mind accelerated
sharply after Wall Street nearly detonated the global financial system in 2008. That debacle was only one manifestation of an array
of accumulating threats to the postmodern order, which include the burdens of empire, onerous debt, population overshoot, fracturing
globalism, worries about energy, disruptive technologies, ecological havoc, and the specter of climate change.
A sense of gathering crisis, which I call the long emergency , persists. It is systemic and existential. It calls into
question our ability to carry on "normal" life much farther into this century, and all the anxiety that attends it is hard for the
public to process. It manifested itself first in finance because that was the most abstract and fragile of all the major activities
we depend on for daily life, and therefore the one most easily tampered with and shoved into criticality by a cadre of irresponsible
opportunists on Wall Street. Indeed, a lot of households were permanently wrecked after the so-called Great Financial Crisis of 2008,
despite official trumpet blasts heralding "recovery" and the dishonestly engineered pump-up of capital markets since then.
With the election of 2016, symptoms of the long emergency seeped into the political system. Disinformation rules. There is
no coherent consensus about what is happening and no coherent proposals to do anything about it. The two parties are mired in paralysis
and dysfunction and the public's trust in them is at epic lows. Donald Trump is viewed as a sort of pirate president, a freebooting
freak elected by accident, "a disrupter" of the status quo at best and at worst a dangerous incompetent playing with nuclear fire.
A state of war exists between the White House, the permanent D.C. bureaucracy, and the traditional news media. Authentic leadership
is otherwise AWOL. Institutions falter. The FBI and the CIA behave like enemies of the people.
Bad ideas flourish in this nutrient medium of unresolved crisis. Lately, they actually dominate the scene on every side. A species
of wishful thinking that resembles a primitive cargo cult grips the technocratic class, awaiting magical rescue remedies that promise
to extend the regime of Happy Motoring, consumerism, and suburbia that makes up the armature of "normal" life in the USA.
They chatter
about electric driverless car fleets, home delivery drone services, and as-yet-undeveloped modes of energy production to replace
problematic fossil fuels, while ignoring the self-evident resource and capital constraints now upon us and even the laws of physics
-- especially entropy , the second law of thermodynamics. Their main mental block is their belief in infinite industrial growth
on a finite planet, an idea so powerfully foolish that it obviates their standing as technocrats.
The non-technocratic cohort of the thinking class squanders its waking hours on a quixotic campaign to destroy the remnant of
an American common culture and, by extension, a reviled Western civilization they blame for the failure in our time to establish
a utopia on earth. By the logic of the day, "inclusion" and "diversity" are achieved by forbidding the transmission of ideas, shutting
down debate, and creating new racially segregated college dorms. Sexuality is declared to not be biologically determined, yet so-called
cis-gendered persons (whose gender identity corresponds with their sex as detected at birth) are vilified by dint of
not being "other-gendered" -- thereby thwarting the pursuit of happiness of persons self-identified as other-gendered. Casuistry
anyone?
The universities beget a class of what Nassim Taleb prankishly called "intellectuals-yet-idiots," hierophants trafficking in fads
and falsehoods, conveyed in esoteric jargon larded with psychobabble in support of a therapeutic crypto-gnostic crusade bent on transforming
human nature to fit the wished-for utopian template of a world where anything goes. In fact, they have only produced a new intellectual
despotism worthy of Stalin, Mao Zedong, and Pol Pot.
In case you haven't been paying attention to the hijinks on campus -- the attacks on reason, fairness, and common decency, the
kangaroo courts, diversity tribunals, assaults on public speech and speakers themselves -- here is the key take-away: it's not about
ideas or ideologies anymore; it's purely about the pleasures of coercion, of pushing other people around. Coercion is fun and exciting!
In fact, it's intoxicating, and rewarded with brownie points and career advancement. It's rather perverse that this passion for tyranny
is suddenly so popular on the liberal left.
Until fairly recently, the Democratic Party did not roll that way. It was right-wing Republicans who tried to ban books, censor
pop music, and stifle free expression. If anything, Democrats strenuously defended the First Amendment, including the principle that
unpopular and discomforting ideas had to be tolerated in order to protect all speech. Back in in 1977 the ACLU defended the right
of neo-Nazis to march for their cause (National Socialist Party of America v. Village of Skokie, 432 U.S. 43).
The new and false idea that something labeled "hate speech" -- labeled by whom? -- is equivalent to violence floated out of the
graduate schools on a toxic cloud of intellectual hysteria concocted in the laboratory of so-called "post-structuralist" philosophy,
where sundry body parts of Michel Foucault, Jacques Derrida, Judith Butler, and Gilles Deleuze were sewn onto a brain comprised of
one-third each Thomas Hobbes, Saul Alinsky, and Tupac Shakur to create a perfect Frankenstein monster of thought. It all boiled down
to the proposition that the will to power negated all other human drives and values, in particular the search for truth. Under this
scheme, all human relations were reduced to a dramatis personae of the oppressed and their oppressors, the former generally
"people of color" and women, all subjugated by whites, mostly males. Tactical moves in politics among these self-described "oppressed"
and "marginalized" are based on the credo that the ends justify the means (the Alinsky model).
This is the recipe for what we call identity politics, the main thrust of which these days, the quest for "social justice," is
to present a suit against white male privilege and, shall we say, the horse it rode in on: western civ. A peculiar feature of the
social justice agenda is the wish to erect strict boundaries around racial identities while erasing behavioral boundaries, sexual
boundaries, and ethical boundaries. Since so much of this thought-monster is actually promulgated by white college professors and
administrators, and white political activists, against people like themselves, the motives in this concerted campaign might appear
puzzling to the casual observer.
I would account for it as the psychological displacement among this political cohort of their shame, disappointment, and despair
over the outcome of the civil rights campaign that started in the 1960s and formed the core of progressive ideology. It did not bring
about the hoped-for utopia. The racial divide in America is starker now than ever, even after two terms of a black president. Today,
there is more grievance and resentment, and less hope for a better future, than when Martin Luther King made the case for progress
on the steps of the Lincoln Memorial in 1963. The recent flash points of racial conflict -- Ferguson, the Dallas police ambush, the
Charleston church massacre, et cetera -- don't have to be rehearsed in detail here to make the point that there is a great deal of
ill feeling throughout the land, and quite a bit of acting out on both sides.
The black underclass is larger, more dysfunctional, and more alienated than it was in the 1960s. My theory, for what it's worth,
is that the civil rights legislation of 1964 and '65, which removed legal barriers to full participation in national life, induced
considerable anxiety among black citizens over the new disposition of things, for one reason or another. And that is exactly why
a black separatism movement arose as an alternative at the time, led initially by such charismatic figures as Malcolm X and Stokely
Carmichael. Some of that was arguably a product of the same youthful energy that drove the rest of the Sixties counterculture: adolescent
rebellion. But the residue of the "Black Power" movement is still present in the widespread ambivalence about making covenant with
a common culture, and it has only been exacerbated by a now long-running "multiculturalism and diversity" crusade that effectively
nullifies the concept of a national common culture.
What follows from these dynamics is the deflection of all ideas that don't feed a narrative of power relations between oppressors
and victims, with the self-identified victims ever more eager to exercise their power to coerce, punish, and humiliate their self-identified
oppressors, the "privileged," who condescend to be abused to a shockingly masochistic degree. Nobody stands up to this organized
ceremonial nonsense. The punishments are too severe, including the loss of livelihood, status, and reputation, especially in the
university. Once branded a "racist," you're done. And venturing to join the oft-called-for "honest conversation about race" is certain
to invite that fate.
Globalization has acted, meanwhile, as a great leveler. It destroyed what was left of the working class -- the lower-middle class
-- which included a great many white Americans who used to be able to support a family with simple labor. Hung out to dry economically,
this class of whites fell into many of the same behaviors as the poor blacks before them: absent fathers, out-of-wedlock births,
drug abuse. Then the Great Financial Crisis of 2008 wiped up the floor with the middle-middle class above them, foreclosing on their
homes and futures, and in their desperation many of these people became Trump voters -- though I doubt that Trump himself truly understood
how this all worked exactly. However, he did see that the white middle class had come to identify as yet another victim group, allowing
him to pose as their champion.
The evolving matrix of rackets that prompted the 2008 debacle has only grown more elaborate and craven as the old economy of
stuff dies and is replaced by a financialized economy of swindles and frauds . Almost nothing in America's financial life
is on the level anymore, from the mendacious "guidance" statements of the Federal Reserve, to the official economic statistics of
the federal agencies, to the manipulation of all markets, to the shenanigans on the fiscal side, to the pervasive accounting fraud
that underlies it all. Ironically, the systematic chiseling of the foundering middle class is most visible in the rackets that medicine
and education have become -- two activities that were formerly dedicated to doing no harm and seeking the truth !
Life in this milieu of immersive dishonesty drives citizens beyond cynicism to an even more desperate state of mind. The suffering
public ends up having no idea what is really going on, what is actually happening. The toolkit of the Enlightenment -- reason, empiricism
-- doesn't work very well in this socioeconomic hall of mirrors, so all that baggage is discarded for the idea that reality is just
a social construct, just whatever story you feel like telling about it. On the right, Karl Rove expressed this point of view some
years ago when he bragged, of the Bush II White House, that "we make our own reality." The left says nearly the same thing in the
post-structuralist malarkey of academia: "you make your own reality." In the end, both sides are left with a lot of bad feelings
and the belief that only raw power has meaning.
Erasing psychological boundaries is a dangerous thing. When the rackets finally come to grief -- as they must because their operations
don't add up -- and the reckoning with true price discovery commences at the macro scale, the American people will find themselves
in even more distress than they've endured so far. This will be the moment when either nobody has any money, or there is plenty of
worthless money for everyone. Either way, the functional bankruptcy of the nation will be complete, and nothing will work anymore,
including getting enough to eat. That is exactly the moment when Americans on all sides will beg someone to step up and push them
around to get their world working again. And even that may not avail.
James Howard Kunstler's many books include The Geography of Nowhere, The Long Emergency, Too Much Magic: Wishful Thinking,
Technology, and the Fate of the Nation , and the World Made by Hand novel series. He blogs on Mondays and Fridays at
Kunstler.com .
I think I need to go listen to an old-fashioned Christmas song now.
The ability to be financially, or at least resource, sustaining is the goal of many I know since we share a lack of confidence
in any of our institutions. We can only hope that God might look down with compassion on us, but He's not in the practical plan
of how to feed and sustain ourselves when things play out to their inevitable end. Having come from a better time, we joke about
our dystopian preparations, self-conscious about our "overreaction," but preparing all the same.
Look at it this way: Germany had to be leveled and its citizens reduced to abject penury, before Volkswagen could become the world's
biggest car company, and autobahns built throughout the world. It will be darkest before the dawn, and hopefully, that light that
comes after, won't be the miniature sunrise of a nuclear conflagration.
An excellent summary and bleak reminder of what our so-called civilization has become. How do we extricate ourselves from this
strange death spiral?
I have long suspected that we humans are creatures of our own personal/group/tribal/national/global fables and mythologies. We
are compelled by our genes, marrow, and blood to tell ourselves stories of our purpose and who we are. It is time for new mythologies
and stories of "who we are". This bizarre hyper-techno all-for-profit world needs a new story.
"The black underclass is larger, more dysfunctional, and more alienated than it was in the 1960s. My theory, for what it's worth,
is that the civil rights legislation of 1964 and '65, which removed legal barriers to full participation in national life, induced
considerable anxiety among black citizens over the new disposition of things, for one reason or another."
Um, forgotten by Kunstler is the fact that 1965 was also the year when the USA reopened its doors to low-skilled immigrants
from the Third World who very quickly became competitors with black Americans. And then the Boom ended, and corporate American,
influenced by thinking such as that displayed in Lewis Powell's (in)famous 1971 memorandum, decided to claw back the gains made
by the working and middle classes in the previous 3 decades.
Hey Jim, I know you love to blame Wall Street and the Republicans for the GFC. I remember back in '08 you were urging Democrats
to blame it all on Republicans to help Obama win. But I have news for you. It wasn't Wall Street that caused the GFC. The crisis
actually had its roots in the Clinton Administration's use of the Community Reinvestment Act to pressure banks to relax mortgage
underwriting standards. This was done at the behest of left wing activists who claimed (without evidence, of course) that the
standards discriminated against minorities. The result was an effective repeal of all underwriting standards and an explosion
of real estate speculation with borrowed money. Speculation with borrowed money never ends well.
I have to laugh, too, when you say that it's perverse that the passion for tyranny is popular on the left. Have you ever heard
of the French Revolution? How about the USSR? Communist China? North Korea? Et cetera.
Leftism is leftism. Call it Marxism, Communism, socialism, liberalism, progressivism, or what have you. The ideology is the
same. Only the tactics and methods change. Destroy the evil institutions of marriage, family, and religion, and Man's innate goodness
will shine forth, and the glorious Godless utopia will naturally result.
Of course, the father of lies is ultimately behind it all. "He was a liar and a murderer from the beginning."
When man turns his back on God, nothing good happens. That's the most fundamental problem in Western society today. Not to
say that there aren't other issues, but until we return to God, there's not much hope for improvement.
Hmm. I just wandered over here by accident. Being a construction contractor, I don't know enough about globalization, academia,
or finance to evaluate your assertions about those realms. But being in a biracial family, and having lived, worked, and worshiped
equally in white and black communities, I can evaluate your statements about social justice, race, and civil rights.
Long story short, you pick out fringe liberal ideas, misrepresent them as mainstream among liberals, and shoot them down. Casuistry,
anyone?
You also misrepresent reality to your readers. No, the black underclass is not larger, more dysfunctional, and more alienated
now than in the 1960's, when cities across the country burned and machine guns were stationed on the Capitol steps. The "racial
divide" is not "starker now than ever"; that's just preposterous to anyone who was alive then. And nobody I've ever known felt
"shame" over the "outcome of the civil rights campaign". I know nobody who seeks to "punish and humiliate" the 'privileged'.
I get that this column is a quick toss-off before the holiday, and that your strength is supposed to be in your presentation,
not your ideas. For me, it's a helpful way to rehearse debunking common tropes that I'll encounter elsewhere.
But, really, your readers deserve better, and so do the people you misrepresent. We need bad liberal ideas to be critiqued
while they're still on the fringe. But by calling fringe ideas mainstream, you discredit yourself, misinform your readers, and
contribute to stereotypes both of liberals and of conservatives. I'm looking for serious conservative critiques that help me take
a second look at familiar ideas. I won't be back.
I disagree, NoahK, that the whole is incohesive, and I also disagree that these are right-wing talking points.
The theme of this piece is the long crisis in the US, its nature and causes. At no point does this essay, despite it stream
of consciousness style, veer away from that theme. Hence it is cohesive.
As for the right wing charge, though it is true, to be sure, that Kunstler's position is in many respects classically conservative
-- he believes for example that there should be a national consensus on certain fundamentals, such as whether or not there are
two sexes (for the most part), or, instead, an infinite variety of sexes chosen day by day at whim -- you must have noticed that
he condemned both the voluntarism of Karl Rove AND the voluntarism of the post-structuralist crowd.
My impression is that what Kunstler is doing here is diagnosing the long crisis of a decadent liberal post-modernity, and his stance is not that of either
of the warring sides within our divorced-from-reality political establishment, neither that of the 'right' or 'left.' Which is
why, logically, he published it here. National Review would never have accepted this piece. QED.
This malaise is rooted in human consciousness that when reflecting on itself celebrating its capacity for apperception suffers
from the tension that such an inquiry, such an inward glance produces. In a word, the capacity for the human being to be aware
of his or herself as an intelligent being capable of reflecting on aspects of reality through the artful manipulation of symbols
engenders this tension, this angst.
Some will attempt to extinguish this inner tension through intoxication while others through the thrill of war, and it has
been played out since the dawn of man and well documented when the written word emerged.
The malaise which Mr. Kunstler addresses as the problem of our times is rooted in our existence from time immemorial. But the
problem is not only existential but ontological. It is rooted in our being as self-aware creatures. Thus no solution avails itself
as humanity in and of itself is the problem. Each side (both right and left) seeks its own anodyne whether through profligacy
or intolerance, and each side mans the barricades to clash experiencing the adrenaline rush that arises from the perpetual call
to arms.
"Globalization has acted, meanwhile, as a great leveler. It destroyed what was left of the working class -- the lower-middle class
-- which included a great many white Americans who used to be able to support a family with simple labor."
And to whom do we hand
the tab for this? Globalization is a word. It is a concept, a talking point. Globalization is oligarchy by another name. Unfortunately,
under-educated, deplorable, Americans; regardless of party affiliation/ideology have embraced. And the most ironic part?
Russia
and China (the eventual surviving oligarchies) will eventually have to duke it out to decide which superpower gets to make the
USA it's b*tch (excuse prison reference, but that's where we're headed folks).
And one more irony. Only in American, could Christianity,
which was grew from concepts like compassion, generosity, humility, and benevolence; be re-branded and 'weaponized' to further
greed, bigotry, misogyny, intolerance, and violence/war. Americans fiddled (over same sex marriage, abortion, who has to bake
wedding cakes, and who gets to use which public restroom), while the oligarchs burned the last resources (natural, financial,
and even legal).
"Today, there is more grievance and resentment, and less hope for a better future, than when Martin Luther King made the case
for progress on the steps of the Lincoln Memorial in 1963."
Spoken like a white guy who has zero contact with black people. I mean, even a little bit of research and familiarity would
give lie to the idea that blacks are more pessimistic about life today than in the 1960's.
Black millenials are the most optimistic group of Americans about the future. Anyone who has spent any significant time around
older black people will notice that you don't hear the rose colored memories of the past. Black people don't miss the 1980's,
much less the 1950's. Young black people are told by their elders how lucky they are to grow up today because things are much
better than when grandpa was our age and we all know this history.\
It's clear that this part of the article was written from absolute
ignorance of the actual black experience with no interest in even looking up some facts. Hell, Obama even gave a speech at Howard
telling graduates how lucky they were to be young and black Today compared to even when he was their age in the 80's!
Here is the direct quote;
"In my inaugural address, I remarked that just 60 years earlier, my father might not have been served in a D.C. restaurant
-- at least not certain of them. There were no black CEOs of Fortune 500 companies. Very few black judges. Shoot, as Larry Wilmore
pointed out last week, a lot of folks didn't even think blacks had the tools to be a quarterback. Today, former Bull Michael Jordan
isn't just the greatest basketball player of all time -- he owns the team. (Laughter.) When I was graduating, the main black hero
on TV was Mr. T. (Laughter.) Rap and hip hop were counterculture, underground. Now, Shonda Rhimes owns Thursday night, and Beyoncι
runs the world. (Laughter.) We're no longer only entertainers, we're producers, studio executives. No longer small business owners
-- we're CEOs, we're mayors, representatives, Presidents of the United States. (Applause.)
I am not saying gaps do not persist. Obviously, they do. Racism persists. Inequality persists. Don't worry -- I'm going to
get to that. But I wanted to start, Class of 2016, by opening your eyes to the moment that you are in. If you had to choose one
moment in history in which you could be born, and you didn't know ahead of time who you were going to be -- what nationality,
what gender, what race, whether you'd be rich or poor, gay or straight, what faith you'd be born into -- you wouldn't choose 100
years ago. You wouldn't choose the fifties, or the sixties, or the seventies. You'd choose right now. If you had to choose a time
to be, in the words of Lorraine Hansberry, "young, gifted, and black" in America, you would choose right now. (Applause.)"
I love reading about how the Community Reinvestment Act was the catalyst of all that is wrong in the world. As someone in the
industry the issue was actually twofold. The Commodities Futures Modernization Act turned the mortgage securities market into
a casino with the underlying actual debt instruments multiplied through the use of additional debt instruments tied to the performance
but with no actual underlying value. These securities were then sold around the world essentially infecting the entire market.
In order that feed the beast, these NON GOVERNMENT loans had their underwriting standards lowered to rediculous levels. If you
run out of qualified customers, just lower the qualifications. Government loans such as FHA, VA, and USDA were avoided because
it was easier to qualify people with the new stuff. And get paid. The short version is all of the incentives that were in place
at the time, starting with the Futures Act, directly led to the actions that culminated in the Crash. So yes, it was the government,
just a different piece of legislation.
Kunstler itemizing the social and economic pathologies in the United States is not enough. Because there are other models that
demonstrate it didn't have to be this way.
E.g. Germany. Germany is anything but perfect and its recent government has screwed up with its immigration policies. But Germany
has a high standard of living, an educated work force (including unions and skilled crafts-people), a more rational distribution
of wealth and high quality universal health care that costs 47% less per capita than in the U.S. and with no intrinsic need to
maraud around the planet wasting gobs of taxpayer money playing Global Cop.
The larger subtext is that the U.S. house of cards was planned out and constructed as deliberately as the German model was.
Only the objective was not to maximize the health and happiness of the citizenry, but to line the pockets of the parasitic Elites.
(E.g., note that Mitch McConnell has been a government employee for 50 years but somehow acquired a net worth of over $10 Million.)
P.S. About the notionally high U.S. GDP. Factor out the TRILLIONS inexplicably hoovered up by the pathological health care
system, the metastasized and sanctified National Security State (with its Global Cop shenanigans) and the cronied-up Ponzi scheme
of electron-churn financialization ginned up by Goldman Sachs and the rest of the Banksters, and then see how much GDP that reflects
the actual wealth of the middle class is left over.
Right-Wing Dittoheads and Fox Watchers love to blame the Community Reinvestment Act. It allows them to blame both poor black people
AND the government. The truth is that many parties were to blame.
One of the things I love about this rag is that almost all of the comments are included.
You may be sure that similar commenting privilege doesn't exist most anywhere else.
Any disfavor regarding the supposed bleakness with the weak hearted souls aside, Mr K's broadside seems pretty spot on to me.
I think the author overlooks the fact that government over the past 30 to 40 years has been tilting the playing field ever more
towards the uppermost classes and against the middle class. The evisceration of the middle class is plain to see.
If the the common man had more money and security, lots of our current intrasocial conflicts would be far less intense.
Andrew Imlay: You provide a thoughtful corrective to one of Kunstler's more hyperbolic claims. And you should know that his jeremiad
doesn't represent usual fare at TAC. So do come back.
Whether or not every one of Kunstler's assertions can withstand a rigorous fact-check, he is a formidable rhetorician. A generous
serving of Weltschmerz is just what the season calls for.
America is stupefied from propaganda on steroids for, largely from the right wing, 25? years of Limbaugh, Fox, etc etc etc Clinton
hate x 10, "weapons of mass destruction", "they hate us because we are free", birtherism, death panels, Jade Helm, pedophile pizza, and more Clinton hate porn.
Americans have been taught to worship the wealthy regardless of how they got there. Americans have been taught they are "Exceptional" (better, smarter, more godly than every one else) in spite of outward appearances.
Americans are under educated and encouraged to make decisions based on emotion from constant barrage of extra loud advertising
from birth selling illusion.
Americans brain chemistry is most likely as messed up as the rest of their bodies from junk or molested food. Are they even
capable of normal thought?
Donald Trump has convinced at least a third of Americans that only he, Fox, Breitbart and one or two other sources are telling
the Truth, every one else is lying and that he is their friend.
Is it possible we are just plane doomed and there's no way out?
I loathe the cotton candy clown and his Quislings; however, I must admit, his presence as President of the United States has forced
everyone (left, right, religious, non-religious) to look behind the curtain. He has done more to dis-spell the idealism of both
liberal and conservative, Democrat and Republican, rich and poor, than any other elected official in history. The sheer amount
of mind-numbing absurdity resulting from a publicity stunt that got out of control ..I am 70 and I have seen a lot. This is beyond
anything I could ever imagine. America is not going to improve or even remain the same. It is in a 4 year march into worse, three
years to go.
Mr. Kuntzler has an honest and fairly accurate assessment of the situation. And as usual, the liberal audience that TAC is trying
so hard to reach, is tossing out their usual talking points whilst being in denial of the situation.
The Holy Bible teaches us that repentance is the first crucial step on the path towards salvation. Until the progressives,
from their alleged "elite" down the rank and file at Kos, HuffPo, whatever, take a good, long, hard look at the current national
dumpster fire and start claiming some responsibility, America has no chance of solving problems or fixing anything.
Kunstler must have had a good time writing this, and I had a good time reading it. Skewed perspective, wild overstatement, and
obsessive cherry-picking of the rare checkable facts are mixed with a little eye of newt and toe of frog and smothered in a oar
and roll of rhetoric that was thrilling to be immersed in. Good work!
aah, same old Kunstler, slightly retailored for the Trump years.
for those of you familiar with him, remember his "peak oil" mania from the late 00s and early 2010s? every blog post was about
it. every new year was going to be IT: the long emergency would start, people would be Mad Maxing over oil supplies cos prices
at the pump would be $10 a gallon or somesuch.
in this new rant, i did a control-F for "peak oil" and hey, not a mention. I guess even cranks like Kunstler know when to give
a tired horse a rest.
Kunstler once again waxes eloquent on the American body politic. Every word rings true, except when it doesn't. At times poetic,
at other times paranoid, Kunstler does us a great service by pointing a finger at the deepest pain points in America, any one
of which could be the geyser that brings on catastrophic failure.
However, as has been pointed out, he definitely does not hang out with black people. For example, the statement:
But the residue of the "Black Power" movement is still present in the widespread ambivalence about making covenant with a common
culture, and it has only been exacerbated by a now long-running "multiculturalism and diversity" crusade that effectively nullifies
the concept of a national common culture.
The notion of a 'national common culture' is interesting but pretty much a fantasy that never existed, save colonial times.
Yet Kunstler's voice is one that must be heard, even if he is mostly tuning in to the widespread radicalism on both ends of
the spectrum, albeit in relatively small numbers. Let's face it, people are in the streets marching, yelling, and hating and mass
murders keep happening, with the regularity of Old Faithful. And he makes a good point about academia loosing touch with reality
much of the time. He's spot on about the false expectations of what technology can do for the economy, which is inflated with
fiat currency and God knows how many charlatans and hucksters. And yes, the white working class is feeling increasingly like a
'victim group.'
While Kunstler may be more a poet than a lawyer, more songwriter than historian, my gut feeling is that America had better
take notice of him, as The American ship of state is being swept by a ferocious tide and the helmsman is high on Fentanyl (made
in China).
Re: The crisis actually had its roots in the Clinton Administration's use of the Community Reinvestment Act
Here we go again with this rotting zombie which rises from its grave no matter how many times it has been debunked by statisticians
and reputable economists (and no, not just those on the left the ranks include Bruce Bartlett for example, a solid Reaganist).
To reiterate again : the CRA played no role in the mortgage boom and bust. Among other facts in the way of that hypothesis is
the fact that riskiest loans were being made by non-bank lenders (Countrywide) who were not covered by the CRA which only applied
to actual banks and the banks did not really get into the game full tilt, lowering their lending standards, until late in the
game, c. 2005, in response to their loss of business to the non-bank lenders. Ditto for the GSEs, which did not lower their standards
until 2005 and even then relied on wall Street to vet the subprime loans they were buying.
To be sure, blaming Wall Street for everything is also wrong-headed, though wall Street certainly did some stupid, greedy and
shady things (No, I am not letting them off the hook!) But the cast of miscreants is numbered in the millions and it stretches
around the planet. Everyone (for example) who got into the get-rich-quick Ponzi scheme of house flipping, especially if they lied
about their income to do so. And everyone who took out a HELOC (Home Equity Line of Credit) and foolishly charged it up on a consumption
binge. And shall we talk about the mortgage brokers who coached people into lying, the loan officers who steered customers into
the riskiest (and highest earning) loans they could, the sellers who asked palace-prices for crackerbox hovels, the appraisers
who rubber-stamped such prices, the regulators who turned a blind eye to all the fraud and malfeasance, the ratings agencies who
handed out AAA ratings to securities full of junk, the politicians who rejoiced over the apparent "Bush Boom" well, I could continue,
but you get the picture.
"The Holy Bible teaches us that repentance is the first crucial step on the path towards salvation. Until the progressives, from
their alleged "elite" down the rank and file at Kos, HuffPo, whatever, take a good, long, hard look at the current national dumpster
fire and start claiming some responsibility, America has no chance of solving problems or fixing anything."
Pretty sure that calling other people to repent of their sin of disagreeing with you is not quite what the Holy Bible intended.
"... Cohen, who has been quite vocal against the Russophobic witch hunt gripping the nation , believes that this falsified 35 page report is part of an "endgame" to mortally wound Trump before he even sets foot in the White House, by grasping at straws to paint him as a puppet of the Kremlin. The purpose of these overt attempts to cripple Trump, which have relied on ham-handed intelligence reports that, according to Cohen "even the New York Times referred to as lacking any evidence whatsoever," is to stop any kind of dιtente or cooperation with Russia. ..."
With eyebrows suspiciously furrowed, Tucker Carlson sat down tonight with NYU Professor of Russian Studies and contributor to
The Nation , Stephen Cohen, to discuss the 35 page #FakeNews dossier which has gripped the nation with nightmares of golden showers
and other perverted conduct which was to be used by Russia to keep Trump on a leash.
The left leaning Cohen, who holds a Ph.D. in government and Russian studies from Columbia, taught at Princeton for 30 years before
moving to NYU. He has spent a lifetime deeply immersed in US-Russian relations, having been both a long standing friend of Mikhail
Gorbachev and an advisor to President George H.W. Bush. His wife is also the editor of uber liberal " The Nation," so it's safe to
assume he's not shilling for Trump - and Tucker was right to go in with eyebrows guarded against such a heavyweight.
Cohen, who has been quite vocal against the Russophobic witch hunt
gripping the nation , believes that this
falsified 35 page report is part of an "endgame" to mortally wound Trump before he even sets foot in the White House, by grasping
at straws to paint him as a puppet of the Kremlin. The purpose of these overt attempts to cripple Trump, which have relied on ham-handed
intelligence reports that, according to Cohen "even the New York Times referred to as lacking any evidence whatsoever," is to stop
any kind of dιtente or cooperation with Russia.
Cohen believes that these dangerous accusations attempting to brand a US President as a puppet of a foreign government constitute
a "grave American national security threat."
"... Old "classic" land-based oil fields deteriorate to the tune of 5% per year, while deep sea deteriorate more and subprime wells much more. You can probably double the figure for each, although much depends on particular geology. Infill drilling accelerates depletion, allowing to maintain high production for sometimes so changes can be abrupt. ..."
"... Moreover, with each year, "subprime wells" (multi-stage shale well) costs more and now are at a range of n 6-10 million depending on the number and the length of horizontals and number of fracking stages and other factors. Only few area (sweet spots) can recover this capital investment during the life of the shale well at current prices). More at around $80 and almost all around $100 per barrel. The later is also the price that KSA needs to remain solvent (rumored to be in low 90th). ..."
"... The shale oil produced in the USA is really "subprime" because large part of it has lower energy content (by 20% or more) and different mix of various hydrocarbons that "classic" oil. Especially condensate from gas wells. Which optimally can be used only as diluter for heavy oil. EIA does not differentiate between different types oil and use wrong metric (volume instead of weight). May be intentionally. ..."
"... Another factor is that world consumption continue to grow and will do so because population in large part of Asia and Africa is still growing and number of cars on the road increase each year requiring on average 1-1.4 MB/d additionally. ..."
"... By continuing its' easy money policies well past any recession or growth scare, the Fed has created a monster. Most shale companies aren't profitable and are in fact losing money using any kind of GAAP. However, cheap financing allows them to survive and "drill baby drill." The unintended consequences may include destabilizing Saudi Arabia to the point of an economic and political collapse. One can always hope ..."
"... Economic collapse in Venezuela due to low oil prices good! Economic collapse in Saudi Arabia due to low oil prices bad! Solution extend cheap financing to Saudi Arabia via Aramco IPO! ..."
"... The 36″ North Sea Forties pipeline is currently shut down for repairs. Short and medium term prices will carry the effect of that supply loss. In the long term, unexpected developments are common. Considering how completely wrong so many oil analysts have been over the past ten years, including the IEA, there is not a lot of credibility in oil market predictions. ..."
My impression is that this a gap (could be intentional) between IEA statistics and predictions and the reality. This is propaganda
agency after all, with the explicit agenda of keeping the oil price for Us consumers low. So typically that produce too "rosy"
forecasts that later are quietly corrected. Their short-term forecasts are based on oil futures and as such has nothing to do
with the reality on the ground. Which is quite disturbing.
It is undeniable that shale boom which played such a beneficial role for the USA allowing to squeeze oil price (with generous
help from KSA) for two and half years is dead.
Now is kept artificially alive by junk bonds and directs loans that will never be repaid. In other words, the USA now enjoys
a period of "subprime oil. Unless there is a new technological breakthrough there will be an only minor improvement in efficiency
of drilling and oil extraction in the next couple of years, but the lion share of those was already implemented, and on the current
technological level we are close to the "peak efficiency" in drilling and services.
Those minor efficiencies will be negated by rising prices of service industries, which can't take the current pricing any longer
and need to raise prices for their services.
Old "classic" land-based oil fields deteriorate to the tune of 5% per year, while deep sea deteriorate more and subprime
wells much more. You can probably double the figure for each, although much depends on particular geology. Infill drilling accelerates
depletion, allowing to maintain high production for sometimes so changes can be abrupt.
In any case each year you need somehow to find 5 MB/d of oil, finance new wells in those areas and infrastructure required.
All Us shale production is around 6 MD/day. So you get the idea.
Moreover, with each year, "subprime wells" (multi-stage shale well) costs more and now are at a range of n 6-10 million
depending on the number and the length of horizontals and number of fracking stages and other factors. Only few area (sweet spots)
can recover this capital investment during the life of the shale well at current prices). More at around $80 and almost all around
$100 per barrel. The later is also the price that KSA needs to remain solvent (rumored to be in low 90th).
The shale oil produced in the USA is really "subprime" because large part of it has lower energy content (by 20% or more)
and different mix of various hydrocarbons that "classic" oil. Especially condensate from gas wells. Which optimally can be used
only as diluter for heavy oil. EIA does not differentiate between different types oil and use wrong metric (volume instead of
weight). May be intentionally.
So the future remains unpredictable but general trend for oil prices might be up with some spikes, not down. Although many
people, including myself, thought so in early 2015 ;-)
Another factor is that world consumption continue to grow and will do so because population in large part of Asia and Africa
is still growing and number of cars on the road increase each year requiring on average 1-1.4 MB/d additionally.
So it looks like the situation gradually deteriorate despite all efforts and related technological breakthrough which allow
to extract more from the old wells and more efficiently extract shale oil.
The problem is that new large deposits are very hard to find now and several previously oil-exporting countries gradually became
oil-importers. Mexico is one, which will be huge hit.
Obama administration screw the opportunity to move US consumers to hybrid cars so the situation in the USA deteriorates too
despite rise of percentage of more economical vehicle in the personal car fleet each year. Rumors were that they pursue vendetta
against Russia and that was primary consideration - to crash Russian economy and install a new "Yeltsin".
The USA generally is in better position then many other countries as the switch to natural gas and hybrid electric cars for
personal transportation is still possible. It already happened in several European countries for selected types of cars, buses
and trucks (taxi, in-city buses and "daily round trip or short trips trucks).
But there is no money for infrastructure anymore and for example many miles of US rail remain non-electrified. Burning diesel
instead.
As maintenance was neglected for two and half year disruption of existing supply might became more frequent. also mid Eastern
war is also a possibility with Trump saber-rattling against Iran. Recently the leak in undersea pipeline removed 0.5 MB/d from
the market and caused a price spike to $65 for Brent (WTI remains cheaper and never crosses $60 this time).
Also with a young prince in charge and the revolution against "old guard" KSA became more and more unstable so the next "oil
shock" might come from them. They also have problem of depletion which until now they compensated pitting more and more heavy
high sulfur oil deposits online. At some point they will be exhausted too. They also pitch for war with Iran, but they would prefer
somebody else to do heavy lifting.
The only one or countries still can significantly increase oil production now Libya (were we have problem because of the
civil war after US-sponsored Kaddafi removal and killing), and Iraq where there are still untapped areas that might contain some
oil; nothing big, but still substantial in the range of 1 MB/d. Looks like Iran now exports all it could. Same is true for KSA
and Russia. In this sense OPEN oil production cuts might an attempt to preserve impression that they are untapped reserved. I
doubt that there are much and those cuts are just a reasonable insurance policy against quick depletion of existing wells as higher
price gives some space for innovation.
There is also such thing as EBITRA which gradually deteriorates everywhere and can become negative for certain types of oil
(for oil sands it depends on the price of natural gas and they are primary candidate if the price doubles or triples from the
current level).
By continuing its' easy money policies well past any recession or growth scare, the Fed has created a monster. Most shale companies
aren't profitable and are in fact losing money using any kind of GAAP. However, cheap financing allows them to survive and "drill
baby drill." The unintended consequences may include destabilizing Saudi Arabia to the point of an economic and political collapse. One
can always hope
Economic collapse in Venezuela due to low oil prices good!
Economic collapse in Saudi Arabia due to low oil prices bad!
Solution extend cheap financing to Saudi Arabia via Aramco IPO!
Meanwhile, China says it will be moving to all-electric cars and trucks to help solve its horrible urban air pollution problem.
. . Meaning global demand has nowhere to go but down.
Why do I feel that this will not end well for the American hegemon? Particularly with Trump in office working overtime with
boy genius Rick Perry to promote coal and sabotage renewable energy. . .
The 36″ North Sea Forties pipeline is currently shut down for repairs. Short and medium term prices will carry the effect of
that supply loss. In the long term, unexpected developments are common. Considering how completely wrong so many oil analysts
have been over the past ten years, including the IEA, there is not a lot of credibility in oil market predictions.
"... According to Amazon's metrics, I was one of their most productive order pickers -- I was a machine, and my pace would accelerate throughout the course of a shift. What they didn't know was that I stayed fast because if I slowed down for even a minute, I'd collapse from boredom and exhaustion ..."
"... toiling in some remote corner of the warehouse, alone for 10 hours, with my every move being monitored by management on a computer screen. ..."
"... ISS could simply deactivate a worker's badge and they would suddenly be out of work. They treated us like beggars because we needed their jobs. Even worse, more than two years later, all I see is: Jeff Bezos is hiring. ..."
"... I have never felt more alone than when I was working there. I worked in isolation and lived under constant surveillance ..."
"... That was 2012 and Amazon's labor and business practices were only beginning to fall under scrutiny. ..."
"... I received $200 a week for the following six months and I haven't had any source of regular income since those benefits lapsed. I sold everything in my apartment and left Pennsylvania as fast as I could. I didn't know how to ask for help. I didn't even know that I qualified for food stamps. ..."
Nichole Gracely has a master's degree and was one of Amazon's best order pickers. Now, after
protesting the company, she's homeless.
I am homeless. My worst days now are better than my best days working at Amazon.
According to Amazon's metrics, I was one of their most productive order pickers -- I was a machine,
and my pace would accelerate throughout the course of a shift. What they didn't know was that
I stayed fast because if I slowed down for even a minute, I'd collapse from boredom and exhaustion.
During peak season, I trained incoming temps regularly. When that was over, I'd be an ordinary
order picker once again, toiling in some remote corner of the warehouse, alone for 10 hours,
with my every move being monitored by management on a computer screen.
Superb performance did not guarantee job security. ISS is the temp agency that provides warehouse
labor for Amazon and they are at the center of the SCOTUS case Integrity Staffing Solutions
vs. Busk. ISS could simply deactivate a worker's badge and they would suddenly be out of work.
They treated us like beggars because we needed their jobs. Even worse, more than two years later,
all I see is: Jeff Bezos is hiring.
I have never felt more alone than when I was working there. I worked in isolation and lived
under constant surveillance. Amazon could mandate overtime and I would have to comply with any
schedule change they deemed necessary, and if there was not any work, they would send us home
early without pay. I started to fall behind on my bills.
At some point, I lost all fear. I had already been through hell. I protested Amazon. The
gag order was lifted and I was free to speak. I spent my last days in a lovely apartment constructing
arguments on discussion boards, writing articles and talking to reporters. That was 2012 and
Amazon's labor and business practices were only beginning to fall under scrutiny. I walked away
from Amazon's warehouse and didn't have any other source of income lined up.
I cashed in on my excellent credit, took out cards, and used them to pay rent and buy food
because it would be six months before I could receive my first unemployment compensation check.
I received $200 a week for the following six months and I haven't had any source of regular
income since those benefits lapsed. I sold everything in my apartment and left Pennsylvania
as fast as I could. I didn't know how to ask for help. I didn't even know that I qualified for
food stamps.
I furthered my Amazon protest while homeless in Seattle. When the Hachette dispute flared
up I "flew a sign," street parlance for panhandling with a piece of cardboard: "I was an order
picker at amazon.com. Earned degrees. Been published. Now,
I'm homeless, writing and doing this. Anything helps."
I have made more money per word with my signs than I will probably ever earn writing, and
I make more money per hour than I will probably ever be paid for my work. People give me money
and offer well wishes and I walk away with a restored faith in humanity.
I flew my protest sign outside Whole Foods while Amazon corporate employees were on lunch
break, and they gawked. I went to my usual flying spots around Seattle and made more money per
hour protesting Amazon with my sign than I did while I worked with them. And that was in Seattle.
One woman asked, "What are you writing?" I told her about the descent from working poor to homeless,
income inequality, my personal experience. She mentioned Thomas Piketty's book, we chatted a
little, she handed me $10 and wished me luck. Another guy said, "Damn, that's a great story!
I'd read it," and handed me a few bucks.
U6 underemployment rate rose +0.1% from 7.9% to 8.0%
Here are the headlines on wages and the chronic heightened underemployment: Wages and
participation rates
Not in Labor Force, but Want a Job Now: rose +53,000 from 5.175 million to 5.238
million
Part time for economic reasons: rose +48,000 from 4.753 million to 4.801 million
Employment/population ratio ages 25-54: rose +0.2% from 78.8% to 79.0%
Average Weekly Earnings for Production and Nonsupervisory Personnel: rose +$.0.5 from a
downwardly revised $22.19 to $22.24, up +2.4% YoY. (Note: you may be reading different
information about wages elsewhere. They are citing average wages for all private workers. I
use wages for nonsupervisory personnel, to come closer to the situation for ordinary
workers.)
Holding Trump accountable on manufacturing and mining jobs
Trump specifically campaigned on bringing back manufacturing and mining jobs. Is he keeping
this promise?
Manufacturing jobs rose by +31,000 for an average of +15,000 a month vs. the last seven
years of Obama's presidency in which an average of 10,300 manufacturing jobs were added
each month.
Coal mining jobs fell -400 for an average of -15 a month vs. the last seven years of
Obama's presidency in which an average of -300 jobs were lost each month
September was revised upward by +20,000. October was revised downward by -17,000, for a
net change of +3,000.
likbez December 9, 2017 7:52 pm
There are now large categories of jobs, both part-time and full time, that can't provide
for living and are paying below or close to minimum wage (plantation economy jobs). it
looks like under neoliberalism this is the fastest growing category of jobs.
Examples are Uber and Lift jobs (which are as close to predatory scam as one can get) .
Many jobs in service industry, especially retail. See for example
"... The fact is that the rise of the West to global dominance is due to a historical anomaly. It was fuelled (literally) by the discovery and harnessing of the chemical energy embedded in coal (late 18thC) and then oil (late 19thC). The first doubled the population, and as first movers gave the West a running start. The second turned on the afterburners, and population grew >3.5 fold. Again the West led the way. To fuel that ahistorical step-function growth curve, control of resources on a global scale became its civilizational imperative. ..."
From Patrick Armstrong's article (a good one, by the way):
A Russian threat is good for business: there's poor money in a threat made of IEDs, bomb
vests and small arms. Big profits require big threats.
Actually, I'd say the Russian threat is necessary to keep the Europeans too
frightened to protest while the U.S. steals wealth from them. After all, when the U.S.
imports goods and "pays" for them with printed money, it is basically stealing those goods.
The U.S. is draining a lot of wealth from Europe (like $150 billion a year), so something
must be done to keep them docile. Russia's perfect for that.
"(Failed) West and a multipolar Rest". The latter is what I think will actually happen
in the near and medium term.
I think we already have it, except I don't think West has failed yet. Or it has in a way,
the process of failing goes on, but the consequences have not been felt much in the West
yet.
Well, exogenous events aside, "decline and fall" is necessarily a process. A
series of steps and plateaus is typical. A major step occurred in 2007/8, when the money
failed. The bankers, in a frankly heroic display of coordination, propped up the $$$ and the
West got a decade long plateau. Things are going wobbly again, financially speaking and I
suspect the next step function to occur rather soon. Stays of execution have been exhausted, so
it'll be interesting how the West handles it, and how the RoW reacts.
Europeans have been invited to join the Eurasian Project, to create a continental market from
"Lisbon to Vladivostok". Latent dreams of Hegemony hold at least some of their elites back. The
USA has also been invited, but its dreams remain much more virile. That is, until Trump who's
backers seem to read the writing on the wall better than the Straussians.
I don't see any other power than the West (=US) aspiring to 'manage the world'....
The other 'powers' have very modest, regional aspirations... US seems to be obsessed with it.
The fact is that the rise of the West to global dominance is due to a
historical anomaly. It was fuelled (literally) by the discovery and harnessing of the chemical
energy embedded in coal (late 18thC) and then oil (late 19thC). The first doubled the
population, and as first movers gave the West a running start. The second turned on the
afterburners, and population grew >3.5 fold. Again the West led the way. To fuel that
ahistorical step-function growth curve, control of resources on a global scale became its
civilizational imperative.
That growth curve has plateaued, and the rest of the world has caught/is catching up
developmentally. The resources the West needs aren't going to be available to it in the way
they were 100 years ago. Them days is over, for everybody really, but especially for the West
because it has depleted its own hi-ROI resources, and both of its means of control (IMF$ System
& U$M) of what's left of everybody else's are failing simultaneously. So its plateau will
not be flat, or not flat for long between increasingly violent steps.
The West rode an ahistorical rogue wave of development to a point just short of Global
Hegemony. That wave broke, and is now rolling back out into the world leaving the West just
short of its civilizational resource requirements. No way to get back on a broken wave. In any
case, China now holds the $$$ hammer, and Russia holds the military hammer, and they've now got
the surfboard. Both of them, led by historically aware elites, know that Hegemony doesn't work,
so will focus on keeping their neck of the woods as stable & prosperous as possible while
hell blazes elsewhere.
What is really going on is that West has over-reached and can barely handle its own
problems.
IMHO, what's really going on is that the West's problems are simply symptomatic of
what "decline and fall", if not "collapse" looks like from within a failing system. A long time
ago I read the diary of a Roman nobleman who in the most matter-of-fact style wrote of exactly
the same things Westerners complain about today. How this, that or the other thing no longer
works the way it did. For all of his 60+ years, every day was infinitesimally worse than the
day before, until finally he decides to pack up his Roman households and move to his estates in
Spain. It took 170(iirc) more years of continuous decline until Alaric finally arrived at the
Gates of Rome. If wholly due to internal causes, collapse is almost always a slow motion train
wreck.
...
'there would be a vacuum' and 'Russians would move in'. This is obvious nonsense and only
elderly paranoid Cold Warrior types believe it (peterAUS?).
Actually, it's just stupid. Cold Warrior or not, the view betrays a deep and
abiding ignorance of both history and a large part of what drove the West's hegemonic
successes. That both militate against anyone else ever even trying such a thing on a global
scale can't be seen if you look at historical developments and the rest of the world through
10' of 1" pipe.
The idea that Russia wants/needs the Baltics is even more laughable than that it wants/needs
the Ukraine or Poland. None of these tarbabies have anything to offer but trouble. Noisome
flies on an elephant, it is only if they make themselves more troublesome as outsiders than
they would be as vassals would Russia move.
"... What happened to the old "sysadmin" of just a few years ago? We've split what used to be the sysadmin into application teams, server teams, storage teams, and network teams. There were often at least a few people, the holders of knowledge, who knew how everything worked, and I mean everything. ..."
"... Now look at what we've done. Knowledge is so decentralized we must invent new roles to act as liaisons between all the IT groups. Architects now hold much of the high-level "how it works" knowledge, but without knowing how any one piece actually does work. In organizations with more than a few hundred IT staff and developers, it becomes nearly impossible for one person to do and know everything. This movement toward specializing in individual areas seems almost natural. That, however, does not provide a free ticket for people to turn a blind eye. ..."
"... Does your IT department function as a unit? Even 20-person IT shops have turf wars, so the answer is very likely, "no." As teams are split into more and more distinct operating units, grouping occurs. One IT budget gets split between all these groups. Often each group will have a manager who pitches his needs to upper management in hopes they will realize how important the team is. ..."
"... The "us vs. them" mentality manifests itself at all levels, and it's reinforced by management having to define each team's worth in the form of a budget. One strategy is to illustrate a doomsday scenario. If you paint a bleak enough picture, you may get more funding. Only if you are careful enough to illustrate the failings are due to lack of capital resources, not management or people. A manager of another group may explain that they are not receiving the correct level of service, so they need to duplicate the efforts of another group and just implement something themselves. On and on, the arguments continue. ..."
What happened to the old "sysadmin" of just a few years ago? We've split what used to be the sysadmin into application teams,
server teams, storage teams, and network teams. There were often at least a few people, the holders of knowledge, who knew how everything
worked, and I mean everything. Every application, every piece of network gear, and how every server was configured -- these
people could save a business in times of disaster.
Now look at what we've done. Knowledge is so decentralized we must invent new roles to act as liaisons between all the IT
groups. Architects now hold much of the high-level "how it works" knowledge, but without knowing how any one piece actually does
work. In organizations with more than a few hundred IT staff and developers, it becomes nearly impossible for one person to do and
know everything. This movement toward specializing in individual areas seems almost natural. That, however, does not provide a free
ticket for people to turn a blind eye.
Specialization
You know the story: Company installs new application, nobody understands it yet, so an expert is hired. Often, the person with
a certification in using the new application only really knows how to run that application. Perhaps they aren't interested in
learning anything else, because their skill is in high demand right now. And besides, everything else in the infrastructure is
run by people who specialize in those elements. Everything is taken care of.
Except, how do these teams communicate when changes need to take place? Are the storage administrators teaching the Windows
administrators about storage multipathing; or worse logging in and setting it up because it's faster for the storage gurus to
do it themselves? A fundamental level of knowledge is often lacking, which makes it very difficult for teams to brainstorm about
new ways evolve IT services. The business environment has made it OK for IT staffers to specialize and only learn one thing.
If you hire someone certified in the application, operating system, or network vendor you use, that is precisely what you get.
Certifications may be a nice filter to quickly identify who has direct knowledge in the area you're hiring for, but often they
indicate specialization or compensation for lack of experience.
Resource Competition
Does your IT department function as a unit? Even 20-person IT shops have turf wars, so the answer is very likely, "no."
As teams are split into more and more distinct operating units, grouping occurs. One IT budget gets split between all these groups.
Often each group will have a manager who pitches his needs to upper management in hopes they will realize how important the team
is.
The "us vs. them" mentality manifests itself at all levels, and it's reinforced by management having to define each team's
worth in the form of a budget. One strategy is to illustrate a doomsday scenario. If you paint a bleak enough picture, you may
get more funding. Only if you are careful enough to illustrate the failings are due to lack of capital resources, not management
or people. A manager of another group may explain that they are not receiving the correct level of service, so they need to duplicate
the efforts of another group and just implement something themselves. On and on, the arguments continue.
Most often, I've seen competition between server groups result in horribly inefficient uses of hardware. For example, what
happens in your organization when one team needs more server hardware? Assume that another team has five unused servers sitting
in a blade chassis. Does the answer change? No, it does not. Even in test environments, sharing doesn't often happen between IT
groups.
With virtualization, some aspects of resource competition get better and some remain the same. When first implemented, most
groups will be running their own type of virtualization for their platform. The next step, I've most often seen, is for test servers
to get virtualized. If a new group is formed to manage the virtualization infrastructure, virtual machines can be allocated to
various application and server teams from a central pool and everyone is now sharing. Or, they begin sharing and then demand their
own physical hardware to be isolated from others' resource hungry utilization. This is nonetheless a step in the right direction.
Auto migration and guaranteed resource policies can go a long way toward making shared infrastructure, even between competing
groups, a viable option.
Blamestorming
The most damaging side effect of splitting into too many distinct IT groups is the reinforcement of an "us versus them" mentality.
Aside from the notion that specialization creates a lack of knowledge, blamestorming is what this article is really about. When a project is delayed, it is all too easy to blame another group. The SAN people didn't allocate storage on time,
so another team was delayed. That is the timeline of the project, so all work halted until that hiccup was restored. Having someone
else to blame when things get delayed makes it all too easy to simply stop working for a while.
More related to the initial points at the beginning of this article, perhaps, is the blamestorm that happens after a system
outage.
Say an ERP system becomes unresponsive a few times throughout the day. The application team says it's just slowing down, and
they don't know why. The network team says everything is fine. The server team says the application is "blocking on IO," which
means it's a SAN issue. The SAN team say there is nothing wrong, and other applications on the same devices are fine. You've ran
through nearly every team, but without an answer still. The SAN people don't have access to the application servers to help diagnose
the problem. The server team doesn't even know how the application runs.
See the problem? Specialized teams are distinct and by nature adversarial. Specialized staffers often relegate
themselves into a niche knowing that as long as they continue working at large enough companies, "someone else" will take care
of all the other pieces.
I unfortunately don't have an answer to this problem. Maybe rotating employees between departments will help. They gain knowledge
and also get to know other people, which should lessen the propensity to view them as outsiders
Venezuela's oil production has been sliding for years, but the descent accelerated in 2015
amid low oil prices and a deteriorating cash position for PDVSA and the government. Production
dipped below 1.9 million barrels in recent weeks, the lowest level in more than three
decades.
The problems will only grow worse, especially because they tend to snowball. Without cash,
PDVSA will struggle to import diluent to blend with its heavy oil – the result could be
steeper production losses. Again, without cash, existing facilities cannot be maintained,
likely leading to an accelerating pace of decline. An array of refineries are "completely
paralyzed," the head of an oil workers union told Bloomberg. Defaults on more debt payments
could spark retaliation from creditors, which could eventually put oil exports in jeopardy.
In short, the woes in Venezuela's oil industry contributed to the crisis, but the dire
economic situation will accelerate the decline of oil production.
A group of analysts told Bloomberg that they expect Venezuela's output to average 1.84 mb/d
in 2018, a level that seems surprisingly optimistic given the pace of decline underway. Other
analysts predict output will plunge much lower.
Venezuela's oil production has been sliding for years, but the descent accelerated in 2015
amid low oil prices and a deteriorating cash position for PDVSA and the government. Production
dipped below 1.9 million barrels in recent weeks, the lowest level in more than three
decades.
The problems will only grow worse, especially because they tend to snowball. Without cash,
PDVSA will struggle to import diluent to blend with its heavy oil – the result could be
steeper production losses. Again, without cash, existing facilities cannot be maintained,
likely leading to an accelerating pace of decline. An array of refineries are "completely
paralyzed," the head of an oil workers union told Bloomberg. Defaults on more debt payments
could spark retaliation from creditors, which could eventually put oil exports in jeopardy.
In short, the woes in Venezuela's oil industry contributed to the crisis, but the dire
economic situation will accelerate the decline of oil production.
A group of analysts told Bloomberg that they expect Venezuela's output to average 1.84 mb/d
in 2018, a level that seems surprisingly optimistic given the pace of decline underway. Other
analysts predict output will plunge much lower.
This aritcle is two years old and not much happned during those two years. But still there is a chance that highly authomated factories
can make manufacturing in the USA again profitable. the problme is that they will be even more profible in East Asia;-)
The rise of technologies such as 3-D printing and advanced robotics means that the next few decades for Asia's economies will
not be as easy or promising as the previous five.
OWEN HARRIES, the first editor, together with Robert Tucker, of The National Interest, once reminded me that experts-economists,
strategists, business leaders and academics alike-tend to be relentless followers of intellectual fashion, and the learned, as Harold
Rosenberg famously put it, a "herd of independent minds." Nowhere is this observation more apparent than in the prediction that we
are already into the second decade of what will inevitably be an "Asian Century"-a widely held but rarely examined view that Asia's
continued economic rise will decisively shift global power from the Atlantic to the western Pacific Ocean.
No doubt the numbers appear quite compelling. In 1960, East Asia accounted for a mere 14 percent of global GDP; today that figure
is about 27 percent. If linear trends continue, the region could account for about 36 percent of global GDP by 2030 and over half
of all output by the middle of the century. As if symbolic of a handover of economic preeminence, China, which only accounted for
about 5 percent of global GDP in 1960, will likely surpass the United States as the largest economy in the world over the next decade.
If past record is an indicator of future performance, then the "Asian Century" prediction is close to a sure thing.
Stagnation that is gripping several of the world's largest economies should be viewed as a secular, long term phenomenon, not
something transient. It is connected with the neoliberalism entering a new phase of its development, when New Deal was already
devoured, 90% or so of population standard of living slides and thus there are no direct mechanisms to increase consumer demand.
Notable quotes:
"... Stagnation is gripping several of the world's largest economies and many view this as secular, not transient. ..."
"... Above all, ideology must conceal, denigrate, diminish, slander and distract from the ONE effective strategy that workers collectively have. This is the spectre that haunts all economics. ..."
"... For many of those who consume the bottom layers of it, what they are ingesting is a barbarous Pink Slime cultural sludge that makes them stupid, frivolous, dependent, impulsive and emotionally erratic something like perpetual 15 year olds. ..."
"... In the center, we have the neoliberals, who are convinced that our world will spontaneously and beneficially organize itself if only we turn the macroeconomic tumblers and stumble on the right interest rate, or inflation rate, or some other version of the One Parameter to Rule Them All mindset. They are also too devoted to the religion of demand-goosing: the idea that everything will be all right as long as we generate enough "demand" as though it makes no difference whether people are demanding high fructose cotton candy or the collected works of Shakespeare. ..."
"... Profits and income share at the top soared; wages and income share at the bottom fell, and employment was maintained by speculative bubbles and increasing debt until the last bubble burst, and the system collapsed. ..."
"... How is an increasing deficit and QE supposed to solve our problems in this situation other than by propping up a failed system that makes the rich richer and the poor poorer by increasing government debt? ..."
"... It seems quite clear to me that it is going to take a very long time for the system to adjust to this situation in the absence of a fall in the value of the dollar and the concentration of income. That kind of adjustment means reallocating resources in a very dramatic way so as to accommodate an economy in which resources are allocated to serve the demands of the wealthy few in the absence of the ability of those at the bottom to expand their debt relative to income. ..."
"... It was the fall in the concentration of income that led to mass markets (large numbers of people with purchasing power out of income) that made investment profitable after WW II in the absence of speculative bubbles, and it was the increase in the concentration of income that led to the bubble economy we have today that has led us into the Great Recession. ..."
"... I think neoliberalism naturally leads to secular stagnation. This is the way any economic system that is based on increasing of inequality should behave: after inequality reached certain critical threshold, the economy faces extended period of low growth reflecting persistently weak private demand. ..."
"... The focus on monetary policy and the failure to enact fiscal policy options is structural defect of neoliberalism ideology and can't be changed unless neoliberal ideology is abandoned. Which probably will not happen unless another huge crisis hit the USA. 2008 crisis, while discrediting neoliberalism, was clearly not enough for the abandonment of this ideology. Like in most cults adherents became more fanatical believers after the prophecy did not materialized. ..."
"... In a way behaviour of the USA elite in this respect is as irrational as behavior of the USSR elite. My impression is that they will stick to neoliberal ideology to the bitter end. But at the same time they are much more reckless. Recent attempt to solve economic problems by unleashing a new wars and relying of war time mobilization so far did not work. Including the last move is this game: Russia did not bite the offer for military confrontation that the USA clearly made by instilling coup d'ιtat in Ukraine. ..."
This column argues that many economies need both demand-side stimulus and supply-side reform to close the output gap and restore
potential-output growth. A combined monetary-fiscal stimulus i.e. helicopter money is needed to close the output gap, and
this should be accompanied with extensive debt restructuring, policies to halt rising inequality, and additional public infrastructure
investment.
Selected Skeptical Comments
Sandwichman -> anne:
Workers, collectively, have a single, incontrovertible lever for effecting change -- withholding their labor power. Nothing
-- not even imprisonment or death -- can prevent workers from withholding their labor power! Kill me and see how much work you
can get out of me.
This is the elementary fact that the elites don't want workers to know. "It is futile!" "It is a fallacy!" "You will only hurt
yourselves!"
Once one comprehends the strategic importance of making the withholding of labor power taboo, everything else falls into place.
Economics actually makes sense as a persuasive discourse to dissuade from the withholding of labor power.
Above all, ideology must conceal, denigrate, diminish, slander and distract from the ONE effective strategy that workers
collectively have. This is the spectre that haunts all economics.
Dan Kervick:
Good stuff by Buiter et al, but here are some suggested additions to the litany of supply side woes:
1. Ineffective economic organization, both inside corporate firms and outside of them.
a. Many corporations are now quite dysfunctional as engines of long-term value creation but not dysfunctional as vehicles
of short-term value extraction for their absurdly over-incentivized key stakeholders.
b. The developed world societies are facing an extreme failure of strategic economic leadership, at both the national and global
level, and at both the formal level of government and the informal level of visionary public intellectuals and industrial "captains".
There is no coherent consensus on which way lies the direction of progress. Since nobody is setting the agenda for what the future
looks like, risk trumps confidence everywhere and nobody knows what to invest in.
2. Dyspeptic dystopianism. The intellectual culture of our times is polluted by obsessive, nail-biting negativity and
demoralizing storylines preaching hopelessness: the robots are going to destroy all the jobs; the Big One is going to bury everything,
the real "neutral" interest rate is preposterously negative, etc. etc. etc. With so much doom and gloom in the air, there is no
reason to invest wealth, rather than consume it. Robert Schiller touched on this at a recent talk at LSE.
3. The popular culture of 2015 America is as in so many other areas - a tale of two cultural cities.For many
of those who consume the bottom layers of it, what they are ingesting is a barbarous Pink Slime cultural sludge that makes them
stupid, frivolous, dependent, impulsive and emotionally erratic something like perpetual 15 year olds. People like this
can be duped by the most shallow demagoguery and consumerist manipulation, and can't organize themselves to pursue their enlightened
self-interest. Enlightened artists and cultural custodians need to step up, organize and find a way to seize the American mind
back from the clutches of consumer capitalist garbage-mongers and philistine society-wreckers.
4. Laissez faire backwardness. We are struggling under left-right-center conspiracy of Pollyanna freedom fools, who
despite their constant kvetching at one another all share in common the view that progress is self-organizing.
On the left we have the Chomsky and Graeber-style "libertarian socialists" who are convinced we could have a functioning and
prosperous society in which seemingly every action is voluntary and spontaneous, nobody is ever compelled to do anything that
their delicate little hearts don't throb to do, and who seemingly have no idea of what it takes even to run a carrot farm.
On the right, we have the clueless paranoid libertarians who think the whole world should revolve around their adolescent desire
not to be "tread on", and seem to have no idea of what it takes and what it took historically - to build a livable civilization.
In the center, we have the neoliberals, who are convinced that our world will spontaneously and beneficially organize itself
if only we turn the macroeconomic tumblers and stumble on the right interest rate, or inflation rate, or some other version of
the One Parameter to Rule Them All mindset. They are also too devoted to the religion of demand-goosing: the idea that everything
will be all right as long as we generate enough "demand" as though it makes no difference whether people are demanding high
fructose cotton candy or the collected works of Shakespeare.
5. I'm an optimist! This is all going to change. We have nearly reached Peak Idiocracy. We're on the verge of a new age of
social organization and planning and a return to mixed economy common sense and public-spirited mobilization and adulthood. This
will happen because ultimately all of those teenagers will stop denying reality, and stop struggling to escape the realization
that a more organized and thoughtfully planned way of life is the only thing that will work in our small, resource strapped, crowded
21st century planet.
George H. Blackford:
Since the 80s, US companies have been buying abroad to sell at home as foreign countries used our trade deficits to depress
their exchange rates. Profits and income share at the top soared; wages and income share at the bottom fell, and employment
was maintained by speculative bubbles and increasing debt until the last bubble burst, and the system collapsed.
There seem to be no more bubbles in the offing. The dollar is overvalued. Debt relative to income is unprecedented, and the
concentration of income has created stagnation for lack of investment opportunities.
How is an increasing deficit and QE supposed to solve our problems in this situation other than by propping up a failed
system that makes the rich richer and the poor poorer by increasing government debt? Does anyone really believe this sort
of thing can go on forever in the absence of a fall in the value of the dollar and in the concentration of income? Who's going
to be left holding the bag when this system collapses again?
It seems quite clear to me that it is going to take a very long time for the system to adjust to this situation in the
absence of a fall in the value of the dollar and the concentration of income. That kind of adjustment means reallocating resources
in a very dramatic way so as to accommodate an economy in which resources are allocated to serve the demands of the wealthy few
in the absence of the ability of those at the bottom to expand their debt relative to income.
We didn't smoothly transition from an agricultural economy to one based on manufacturing. That transition was plagued with
a great deal of civil unrest, speculative bubbles, booms and busts that eventually led to a collapse of the system and the Great
Depression.
And we didn't smoothly transition out of the Great Depression. That was ended by WW II and dramatic changes in our economic
system, the most dramatic changes being the role and size of government and the fall in the concentration of income for thirty-five
years after 1940.
It was the fall in the concentration of income that led to mass markets (large numbers of people with purchasing power
out of income) that made investment profitable after WW II in the absence of speculative bubbles, and it was the increase in the
concentration of income that led to the bubble economy we have today that has led us into the Great Recession.
What this means to me is that we are not going to get out of the mess we are in today in the absence of some kind of catastrophe
comparable to WW II if we, and the rest of the world, do not come to grips with the fundamental problem we face in this modern
age, namely, the trade deficit and the concentration of income.
I think neoliberalism naturally leads to secular stagnation. This is the way any economic system that is based on increasing
of inequality should behave: after inequality reached certain critical threshold, the economy faces extended period of low growth
reflecting persistently weak private demand.
An economic cycle enters recession when total spending falls below expected by producers and they realize that production level
is too high relative to demand. What we have under neoliberalism is kind of Marx constant crisis of overproduction.
The focus on monetary policy and the failure to enact fiscal policy options is structural defect of neoliberalism ideology
and can't be changed unless neoliberal ideology is abandoned. Which probably will not happen unless another huge crisis hit the
USA. 2008 crisis, while discrediting neoliberalism, was clearly not enough for the abandonment of this ideology. Like in most
cults adherents became more fanatical believers after the prophecy did not materialized.
The USA elite tried partially alleviate this problem by resorting to military Keynesianism as a supplementary strategy. But
while military budget was raised to unprecedented levels, it can't reverse the tendency. Persistent high output gap is now a feature
of the US economy, not a transitory state.
"Top everything" does not help iether (top cheap oil is especially nasty factor). Recent pretty clever chess gambit to artificially
drop oil price playing Russian card, and sacrificing US shall industry like a pawn (remember that Saudi Arabia is the USA client
state) was a very interesting move, but still expectation are now so low that cheap gas stimulus did not work as expected in the
USA. It would be interesting to see how quickly oil will return to early 2014 price level because of that. That will be the sign
that gambit is abandoned.
In a way behaviour of the USA elite in this respect is as irrational as behavior of the USSR elite. My impression is that
they will stick to neoliberal ideology to the bitter end. But at the same time they are much more reckless. Recent attempt to
solve economic problems by unleashing a new wars and relying of war time mobilization so far did not work. Including the last
move is this game: Russia did not bite the offer for military confrontation that the USA clearly made by instilling coup d'ιtat
in Ukraine.
Now it look like there is a second attempt to play "madman" card after Nixon's administration Vietnam attempt to obtain concession
from the USSR by threatening to unleash the nuclear war.
"... During the two decades following the neoliberal economists' take-over of Western governments in the 1980s, many felt that the almost mystical terms of economics - such as derivatives, hedging, leverage, contangos, etc - were beyond the understanding of most ordinary people. ..."
"... They pursued them as a matter of faith in the market and its processes, despite the apparent warning signs of their imminent failure. ..."
"... as within many custom or belief systems, what economics enshrines is a social order. One where a dominant minority are able to take a small quantity of wealth from each member of the majority in order to maintain their higher status. ..."
"... idea of economics as an exploitative mechanism is echoed in the cover picture of the book, Bosch's The Conjurer ..."
"... Within its exposition of economics as a quasi-religious theory, Brian Davey's book helps us to understand why economic theory is driving us toward a global system failure - and why politics and economics are incapable of responding to the pressing ecological crisis which the pursuit of economic growth has spawned. ..."
Brian Davey's new book, Credo: Economic Beliefs in a World in Crisis, is an analysis of economic theory as if it were a system
of religious belief.
It's a timely book. The simplistic, perhaps 'supernatural' assumptions which underpin key parts of economic theory demand far
more attention. It's a debate we've failed to have as a society.
... ... ...
During the two decades following the neoliberal economists' take-over of Western governments in the 1980s, many felt that
the almost mystical terms of economics - such as derivatives, hedging, leverage, contangos, etc - were beyond the understanding of
most ordinary people.
And without understanding those terms, irrespective of our gut feeling that there was something wrong, how could we challenge
the political lobby those theories had put into power? In the end it took the
financial crash of 2007/8 to demonstrate
that those in charge of this system didn't understand the complexity and risk of those practices either.
They pursued them as a matter of faith in the market and its processes, despite the
apparent
warning signs of their imminent failure. Those outside 'orthodox' economics could already see where the economy
was heading in the longer-term.
Question is, did economists learn anything from that failure? Or,
through austerity, have they once again committed us to their dogmatic belief system, unchanged by that experience?
... ... ...
However, through simple hubris or optimism bias, the political
class has been convinced that 'fracking' is a solution to our economic woes
- even though there is a paucity of verifiable evidence to demonstrate those claims, and
it has already lost billions of investors money.
Economics is a reflection of power
Ultimately though, as within many custom or belief systems, what economics enshrines is a social order. One where a dominant
minority are able to take a small quantity of wealth from each member of the majority in order to maintain their higher status.
This idea of economics as an exploitative mechanism
is echoed in the cover picture of the book, Bosch's
The Conjurer - where a magician distracts
the public with a sleight of hand trick so that they can be more easily robbed by his associate.
Again, in a world where we're hitting the limits to human material growth, political models of well-being based upon wealth and
consumption are damaging to human society in the long-term. The evidence that we're heading for a longer-term failure is there, as
was the case with the warning signs before the 2007 crash. The problem is that those in positions of power
do not wish to see it.
... ... ...
Within its exposition of economics as a quasi-religious theory, Brian Davey's book helps us to understand why economic theory
is driving us toward a global system failure - and why politics and economics are incapable of responding to the pressing ecological
crisis which the pursuit of economic growth has spawned.
Contrary to the economic hubris of many world leaders, set alongside the reality of ecological limits humanity is not 'too big
to fail'.
"... An interview by Gordon T. Long of the Financial Repression Authority. Originally published at his website ..."
"... One of the most important distinctions that investors have to understand is the difference between secular and cyclical trends Let us begin with definitions from the Encarta World English Dictionary: ..."
"... Secular occurring only once in the course of an age or century; taking place over an extremely or indefinitely long period of time ..."
"... Cycle a sequence of events that is repeated again and again, especially a causal sequence; a period of time between repetitions of an event or phenomenon that occurs regularly ..."
"... Secular stagnation is when the predators of finance have eaten too many sheeple. ..."
"... Real estate rents in this latest asset bubble, whether commercial or residential, appear to have been going up in many markets even if the increases are slowing. That rent inflation will likely turn into rent deflation, but that doesn't appear to have happened yet consistently. ..."
"... Barter has always existed and always will. Debt money expands and contracts the middle class, acting as a feedback signal, which never works over the long term, because the so encapsulated system can only implode, when natural resource liquidation cannot be accelerated. The whole point is to eliminate the initial requirement for capital, work. Debt fails because both sides of the same coin assume that labor can be replaced. The machines driven by dc technology are not replacing labor; neither the elites nor the middle class can fix the machines, which is why they keep accelerating debt, to replace one failed technology only to be followed by the next, netting extortion by whoever currently controls the debt machine, which the majority is always fighting over, expending more energy to avoid work, like the objective is to avoid sweating, unless you are dumb enough to run on asphalt with Nike gear. ..."
"... . . . The whole argument for privatization, for instance, is the opposite of what was taught in American business schools in the 19th century. The first professor of economics at the Wharton School of Business, which was the first business school, was Simon Patten. He said that public infrastructure is a fourth factor of production. But its role isn't to make a profit . It's to lower the cost of public services and basic inputs to lower the cost of living and lower the cost of doing business to make the economy more competitive. But privatization adds interest payments, dividends, managerial payments, stock buybacks, and merges and acquisitions . Obviously these financialized charges are factored into the price system and raise the cost of living and doing business . ..."
GORDON LONG: Thank you for joining us. I'm Gordon Long with the Financial Repression Authority. It's my pleasure to have with
me today Dr. Michael Hudson Professor Hudson's very well known in terms of the FIRE economy to-I think, to a lot of our listeners,
or at least he's recognized by many as fostering that concept. A well known author, he has published many, many books. Welcome, Professor
Hudson.
MICHAEL HUDSON: Yes.
LONG: Let's just jump into the subject. I mentioned the FIRE economy cause I know that I have always heard it coming from yourself-or,
indirectly, not directly, from yourself. Could you explain to our listeners what's meant by that terminology?
HUDSON: Well it's more than just people getting fired. FIRE is an acronym for Finance, Insurance and Real Estate. Basically that
sector is about assets, not production and consumption. And most people think of the economy as being producers making goods and
services and paying labor to produce them and then, labour is going to buy these goods and services. But this production and consumption
economy is surrounded by the asset economy: the web of Finance, Insurance, and Real Estate of who owns assets, and who owes the debts,
and to whom.
LONG: How would you differentiate it (or would you) with what's often referred to as financialization, or the financialization
of our economy? Are they one and the same?
HUDSON: Pretty much. The Finance, Insurance, and Real Estate sector is dominated by finance. 70 to 80% of bank loans in North
America and Europe are mortgage loans against real estate. So instead of a landowner class owning property clean and clear, as they
did in the 19 th century, now you have a democratization of real estate. 2/3 or more of the population owns their own
home. But the only way to buy a home, or commercial real estate, is on credit. So the loan-to-value ratio goes up steadily. Banks
lend more and more money to the real estate sector. A home or piece of real estate, or a stock or bond, is worth whatever banks are
willing to lend against it
As banks loosen their credit terms, as they lower their interest rates, take lower down payments, and lower amortization rates
by making interest-only loans they are going to lend more and more against property. So real estate is bid up on credit. All
this rise in price is debt leverage. So a financialized economy is a debt-leveraged economy, whether it's real estate or insurance,
or buying an education, or just living. And debt leveraging means that a larger proportion of assets are represented by debt. So
debt equity ratios rise. But financialization also means that more and more of people's income and corporate and government tax revenue
is paid to creditors. There's a flow of revenue from the production-and-consumption economy to the financial sector.
LONG: I don't know if you know Richard Duncan. He was with the IMF, etc, and lives in Thailand. He argues right now that capitalism
is no longer functioning, and really what he refers to what we have now is "creditism." Because in capitalism we have savings that
are reinvested into productive assets that create productivity, which leads to a higher level of living. We're not doing that. We
have no savings and investments. Credit is high in the financial sector, but it's not being applied to productive assets. Is he valid
in that thinking?
HUDSON: Not as in your statement. It's confused.
LONG: Okay.
HUDSON: There's an enormous amount of savings. Gross savings. The savings we have that are mounting up are just about as large
as they've ever been about, 18-19% of the US economy. They're counterpart is debt. Most savings are lent out to borrowers se debt.
Basically, you have savers at the top of the pyramid, the 1% lending out their savings to the 99%. The overall net savings may be
zero, and that's what your stupid person from the IMF meant. But gross savings are much higher. Now, the person, Mr. Duncan, obviously-I
don't know what to say when I hear this nonsense. Every economy is a credit economy.
Let's start in Ancient Mesopotamia. The group that I organized out of Harvard has done a 20-study of the origins of economic structuring
in the Bronze Age, even the Neolithic, and the Bronze Age economy 3200 BC going back to about 1200 BC. Suppose you're a Babylonian
in the time of Hammurabi, about 1750 BC, and you're a cultivator. How do you buy things during the year? Well, if you go to the bar,
to an ale woman, what she'd do is write down the debt that you owe. It was to be paid on the threshing floor. The debts were basically
paid basically once a year when the income was there, on the threshing floor when the harvest was in. If the palace or the temples
would advance animals or inputs or other public services, this would be as a debt. It was all paid in grain, which was monetized
for paying debts to the palace, temples and other creditors.
The IMF has this Austrian theory that pretends that money began as barter and that capitalism basically operates on barter. This
always is a disinformation campaign. Nobody believed this in times past, and it is a very modern theory that basically is used to
say, "Oh, debt is bad." What they really mean is that public debt is bad. The government shouldn't create money, the government shouldn't
run budget deficits but should leave the economy to rely on the banks. So the banks should run and indebt the economy.
You're dealing with a public relations mythology that's used as a means of deception for most people. You can usually ignore just
about everything the IMF says. If you understand money you're not going to be hired by the IMF. The precondition for being hired
by the IMF is not to understand finance. If you do understand finance, you're fired and blacklisted. That's why they impose
austerity programs that they call "stabilization programs" that actually are destabilization programs almost wherever they're imposed.
LONG: Is this a lack of understanding and adherence to the wrong philosophy, or how did we get into this trap?
HUDSON: We have an actively erroneous view, not just a lack of understanding. This is not by accident. When you have an error
repeated year after year after year, decade after decade after decade, it's not really insanity doing the same thing thinking it'll
be different. It's sanity. It's doing the same thing thinking the result will be the same again and again and again. The result
will indeed be austerity programs, making budget deficits even worse, driving governments further into debt, further into reliance
on the IMF. So then the IMF turns them to the knuckle breakers of the World Bank and says, "Oh, now you have to pay your debts by
privatization". It's the success. The successful error of monetarism is to force countries to have such self-defeating policies that
they end up having to privatize their natural resources, their public domain, their public enterprises, their communications and
transportation, like you're seeing in Greece's selloffs. So when you find an error that is repeated, it's deliberate. It's not insane.
It's part of the program, not a bug.
LONG: Where does this lead us? What's the roadmap ahead of us here?
HUDSON: A thousand years ago, if you were a marauding gang and you wanted to take over a country's land and its natural resources
and public sector, you'd have to invade it with military troops. Now you use finance to take over countries. So it leads us into
a realm where everything that the classical economists saw and argued for public investment, bringing costs in line with the actual
cost of production that's all rejected in favor of a rentier class evolving into an oligarchy. Basically, financiers the
1% are going to pry away the public domain from the government. Pry away and privatize the public enterprises, land, natural resources,
so that bondholders and privatizers get all of the revenue for themselves. It's all sucked up to the top of the pyramid, impoverishing
the 99%.
LONG: Well I think most people, without understanding economics, would instinctively tell you they think that's what's happening
right now, in some way.
HUDSON: Right. As long as you can avoid studying economics you know what's happened. Once you take an economics course you step
into brainwashing. It's an Orwellian world.
LONG: I think you said it perfectly well there. Exactly. It gets you locked into the wrong way of thinking as opposed to just
basic common sense. Your book is Killing the Host . What was the essence of its message? Was it describing exactly what we're
talking about here?
HUDSON: Finance has taken over the industrial economy, so that instead of finance becoming what it was expected to be in the 19
th century, instead of the banks evolving from usurious organizations that leant to governments, mainly to wage war, finance
was going to be industrialized. They were going to mobilize savings and recycle it to finance the means of production, starting with
heavy industry. This was actually happening in Germany in the late 19 th century. You had the big banks working with government
and industry in a triangular process. But that's not what's happening now. After WW1 and especially after WW2, finance reverted to
its pre-industrial form. Instead of allying themselves with industry, as banks were expected to do, banks allied themselves with
real estate and monopolies, realizing that they can make more money off real estate.
The bank spokesman David Ricardo argued against the landed interest in 1817, against land rent. Now the banks are all in favor
of supporting land rent, knowing that today, when people buy and sell property, they need credit and pay interest for it. The banks
are going to get all the rent. So you have the banks merge with real estate against industry, against the economy as a whole. The
result is that they're part of the overhead process, not part of the production process.
LONG: There's a sense that there's a crisis lying ahead in the next year, two years, or three years. The mainstream economy's
so disconnected from Wall Street economy. What's your view on that?
HUDSON: It's not disconnected at all. The Wall Street economy has taken over the economy and is draining it. Under what economics
students are taught as Say's Law, the economy's workers are supposed to use their income to buy what they produce. That's why Henry
Ford paid them $5 a day, so that they could afford to buy the automobiles they were producing.
LONG: Exactly.
HUDSON: But Wall Street is interjecting itself into the economy, so that instead of the circular flow between producers and consumers,
you have more and more of the flow diverted to pay interest, insurance and rent. In other words, to pay the FIRE sector. It all ends
up with the financial sector, most of which is owned by the 1%. So, their way of formulating it is to distract attention from today's
debt quandary by saying it's just a cycle, or it's "secular stagnation." That removes the element of agency active politicking
by the financial interests and Wall Street lobbyists to obtain all the growth of income and wealth for themselves. That's what happened
in America and Canada since the late 1970s.
LONG: What does an investor do today, or somebody who's looking for retirement, trying to save for the future, and they see some
of these things occurring. What should they be thinking about? Or how should they be protecting themselves?
HUDSON: What all the billionaires and the heavy investors do is simply try to preserve their wealth. They're not trying to make
money, they're not trying to speculate. If you're an investor, you're not going to outsmart Wall Street billionaires, because the
markets are basically fixed. It's the George Soros principle. If you have so much money, billions of dollars, you can break the Bank
of England. You don't follow the market, you don't anticipate it, you actually make the market and push it up, like the Plunge Protection
Team is doing with the stock market these days. You have to be able to control the prices. Insiders make money, but small investors
are not going to make money.
Since you're in Canada, I remember the beginning of the 1960s. I used to look at the Treasury Bulletin and Federal Reserve
Bulletin figures on foreign investment in the US stock market. We all used to laugh at Canada especially. The Canadians don't
buy stocks until they're up to the very top, and then they lose all the money by holding these stocks on the downturn. Finally, when
the market's all the way at the bottom, Canadians decide to begin selling because they finally can see a trend. So they miss the
upswing until they decide to buy at the top once again. It's hilarious to look at how Canada has performed in the US bond market,
and they did the same in the silver market. I remember when silver was going up to $50. The Canadians said, "Yes, we can see the
trend now!" and they began to buy it. They lost their shirts. So, basically, if you're a Canadian investor, move.
LONG: So the Canadian investors are a better contrarian indicator than the front page cover, you're saying.
HUDSON: I'd think so. Once they get in, you know the bubble's over.
LONG: Absolutely on that one. What are you currently writing? What is your current focus now?
HUDSON: Well, I just finished a book. You mentioned Killing the Host . My next book will be out in about three months:
J is for Junk Economics . It began as a dictionary of terms, so I can provide people with a vocabulary. As we got in the argument
at the beginning of your program today, our argument is about the vocabulary we're using and the words you're using. The vocabulary
taught to students today in economics and used by the mass media and by government spokesmen is basically a set of euphemisms.
If you look at the television reports on the market, they say that any loss in the stock market isn't a loss, it's "profit taking".
And when they talk about money. the stock market rises "Oh that's good news." But it's awful news for the short sellers it wipes
out. Almost all the words we get are kind of euphemisms to conceal the actual dynamics that are happening. For instance, "secular
stagnation" means it's all a cycle. Even the idea of "business cycles": Nobody in the 19 th century used the word "business
cycle". They spoke about "crashes". They knew that things go up slowly and then they plunge very quickly. It was a crash. It's not
the sine curve that you have in Josef Schumpeter's book on Business Cycles . It's a ratchet effect: slow up, quick down. A
cycle is something that is automatic, and if it's a cycle and you have leading and lagging indicators as the National Bureau of Economic
Research has. Then you'd think "Oh, okay, everything that goes up will come down, and everything that goes down will come up, just
wait your turn." And that means governments should be passive.
Well, that is the opposite of everything that's said in classical economics and the Progressive Era, when they realized that economies
don't recover by themselves. You need a-the government to step in, you need something "exogenous," as economist say. You need something
from outside the system to revive it. The covert idea of this business cycle analysis is to leave out the role of government. If
you look at neoliberal and Austrian theory, there's no role for government spending, and no role of public investment. The whole
argument for privatization, for instance, is the opposite of what was taught in American business schools in the 19 th
century. The first professor of economics at the Wharton School of Business, which was the first business school, was Simon Patten.
He said that public infrastructure is a fourth factor of production. But its role isn't to make a profit. It's to lower the cost
of public services and basic inputs to lower the cost of living and lower the cost of doing business to make the economy more competitive.
But privatization adds interest payments, dividends, managerial payments, stock buybacks, and merges and acquisitions. Obviously
these financialized charges are factored into the price system and raise the cost of living and doing business.
LONG: Well, Michael, we're-I thank you for the time, and we're up against our hard line. I know we didn't have as much time as
we always like, so we have to break. Any overall comments you'd like to leave with our listeners who might be interested this school
of economics?
HUDSON: Regarding the downturn we're in, we're going into a debt deflation. The key of understanding the economy is to look at
debt. The economy has to spend more and more money on debt service. The reason the economy is not recovering isn't simply because
this is a normal cycle. And It's not because labour is paid too much. It's because people are diverting more and more of their income
to paying their debts, so they can't afford to buy goods. Markets are shrinking and if markets are shrinking, then real estate
rents are shrinking, profits are shrinking. Instead of using their earnings to reinvest and hire more labour to increase production,
companies are using their earnings for stock buybacks and dividend payouts to raise the share price so that the managers can take
their revenue in the form of bonuses and stocks and live in the short run. They're leaving their companies as bankrupt shells, which
is pretty much what hedge funds do when they take over companies.
So the financialization of companies is the reverse of everything Adam Smith, John Stuart Mill, and everyone you think of as a
classical economist was saying. Banks wrap themselves in a cloak of classical economics by dropping history of economic thought from
the curriculum, which is pretty much what's happened. And Canada-I know since you're from Canada, my experience there was that the
banks have a huge lobbying power over government. In 1979, I wrote for the IRPP Institute there on Canada In the New Monetary
Order . At that time the provinces of Canada were borrowing money from Switzerland and Germany because they could borrow it at
much lower interest rates. I said that this was going to be a disaster, and one that was completely unnecessary. If Canadian provinces
borrow in Francs or any other foreign currency, this money goes into the central bank, which then creates Canadian dollars to spend.
Why not have the central bank simply create these dollars without having Swiss francs, without having German marks? It's unnecessary
to have an intermediary. But the more thuggish banks, like the Bank of Nova Scotia, said, "Oh, that way's the road to serfdom." It's
not. Following the banks and the Austrian School of the banks' philosophy, that's the road to serfdom. That's the road
to debt serfdom. It should not be taken now. It lets universities and the government be run by neoliberals. They're a travesty of
what real economics is all about.
LONG: Michael, thank you very much. I learned a lot, appreciate it; certainly appreciate how important it is for us to use the
right words on the right subject when we're talking about economics. Absolutely agree with you. Talk to you again?
Interesting, but after insulting Duncan, Hudson says the banks stopped partnering with industry and went into real estate,
which sounded like what Duncan said.
I mention this because for a non- expert like myself it is sometimes difficult to tell when an expert is disagreeing with someone
for good reasons or just going off half- cocked. I followed what Hudson said about the evils of the IMF, but didn't see where
Duncan had defended any of that, unless it was implicit in saying that capitalism used to function better.
"As we got in the argument at the beginning of your program today, our argument is about the vocabulary we're using and the
words you're using. The vocabulary taught to students today in economics and used by the mass media and by government spokesmen
is basically a set of euphemisms ."Almost all the words we get are kind of euphemisms to conceal the actual dynamics that are
happening."
May consider it's about recognizing and deciphering the "doublespeak", "newspeak", "fedspeak", "greenspeak" etc, whether willing
or unwitting using words for understanding and clarifying as opposed to misleading and confusing dialectic as opposed to sophistry.
What I objected to was the characterization of today's situation as "financialization." I explained that financialization is
the FIRST stage - when finance WORKS. We are now in the BREAKDOWN of financialization - toward the "barter" stage.
Treating "finance" as an end stage rather than as a beginning stage overlooks the dynamics of breakdown. It is debt deflation.
First profits fall, and as that occurs, rents on commercial property decline. This is already widespread here in New York, from
Manhattan (8th St. near NYU is half empty) to Queens (Austin St. in Forest Hills.).
I wrote an article you might be interested in reading. It outlines a tax policy which would help prevent what you are discussing
in your article. The abuse of credit to receive rents and long term capital gains.
Thank you for another eye-opening exposition. My political economy education was negative (counting a year of Monetarism and
Austrian Economics around 1980), so I appreciate your interviews as correctives.
From your interview answer to the question about what we, the 99+% should do,I gathered only that we should not try to beat
the market. Anything more than that?
From my understanding, post Plaza banking lost most of its traditional market to the shadow sector, as a result, expanded off
into C/RE and increasingly to Financialization of everything sundry.
Disheveled Marsupial interesting to note Mr. Hudson's statement about barter, risk factors ?????
One of the most important distinctions that investors have to understand is the difference between secular and cyclical
trends Let us begin with definitions from the Encarta World English Dictionary:
Secular occurring only once in the course of an age or century; taking place over an extremely or indefinitely long period
of time
Cycle a sequence of events that is repeated again and again, especially a causal sequence; a period of time between repetitions
of an event or phenomenon that occurs regularly
Secular stagnation is a condition of negligible or no economic growth in a market-based economy . When
per capita income stays at relatively high levels, the percentage of savings is likely to start exceeding the percentage of longer-term
investments in, for example, infrastructure and education, that are necessary to sustain future economic growth. The absence of
such investments (and consequently of the economic growth) leads to declining levels of per capita income (and consequently of
per capita savings). With the reduced percentage savings rate converging with the reduced investment rate, economic growth comes
to a standstill ie, it stagnates. In a free economy, consumers anticipating secular stagnation, might transfer their savings
to more attractive-looking foreign countries. This would lead to a devaluation of their domestic currency, which would potentially
boost their exports, assuming that the country did have goods or services that could be exported.
Persistent low growth, especially in Europe, has been attributed by some to secular stagnation initiated by stronger European
economies, such as Germany, in the past few years.
Words. What they mean depends on who's talking.
Secular stagnation is when the predators of finance have eaten too many sheeple.
Markets are shrinking and if markets are shrinking, then real estate rents are shrinking, profits are shrinking.
Real estate rents in this latest asset bubble, whether commercial or residential, appear to have been going up in many
markets even if the increases are slowing. That rent inflation will likely turn into rent deflation, but that doesn't appear to
have happened yet consistently.
Perhaps he meant to say that markets are going to shrink as the debt deflation becomes more evident?
Yes, I think we are into turnip country now. Figure 1 in
this
prior article looks clear enough even if you don't like the analysis that went with it. Wealth inequality still climbs but
income inequality has plateaued since Clinton I. Whatever the reasons for that, the 1% should be concerned where is the ROI?
Barter has always existed and always will. Debt money expands and contracts the middle class, acting as a feedback signal,
which never works over the long term, because the so encapsulated system can only implode, when natural resource liquidation cannot
be accelerated. The whole point is to eliminate the initial requirement for capital, work. Debt fails because both sides of the
same coin assume that labor can be replaced. The machines driven by dc technology are not replacing labor; neither the elites
nor the middle class can fix the machines, which is why they keep accelerating debt, to replace one failed technology only to
be followed by the next, netting extortion by whoever currently controls the debt machine, which the majority is always fighting
over, expending more energy to avoid work, like the objective is to avoid sweating, unless you are dumb enough to run on asphalt
with Nike gear.
Labor has no problem with multiwhatever presidents, geneticists, psychologists, or economists, trying to hunt down and replace
labor, in or out of turn, but none are going to be any more successful than the others. Trump is being employed to bypass the
middle class and cut a deal. There is no deal. Labor is always going to pay males to work and their wives to raise children. Obviously,
the majority will vote for a competing economy, and it is welcome to do so, but if debt works so well, why is the majority voting
to kidnap our kids with public healthcare and education policies.
I'm not sure I heard an answer to the question of what people, who might be trying to save for the future or plan for retirement,
can do? Is the point that there isn't anything? Because I'm definitely between rocks and hard places
Yeah, he basically said there is no good savings plan. Big-money interests have rigged the rules and are now manipulating the
market (this used to be the definition of what was NOT allowed). Thus, they use computer algorithms to squeeze small amounts out
of the market millions of times. This means that the "investments" are nothing of the sort. You don't "invest" in something for
milliseconds. He said that the 1% are mostly just trying to hold on to what they have. Very few trust the rigged markets.
Low rent & cheap energy are key to the arts & innovations. My model has to work for airports, starts at the fuel farm as the
CIA & MI6 Front Page Avjet did. Well before that was Air America. I wonder if now American Airlines itself is a Front.
All of America is a Front far as I can about tell. Hadn't heard that Manhattan rents were coming down. Come in from out of
town, how you going to know? Not supposed to I guess.
I got that textbook and I liked that guy John Commons. He says capitalism is great, but it always leads to Socialism because
of unbridled greed.
The frenzy to find another stable cash currency showing in Bit Coin and the discussion of Future Tax Credits while the Euro
is controlled by the rent takers demands change on both sides of the Atlantic.
We got shot dead protesting the war, and civil rights backlash is the gift that keeps giving to the Southerners looking up
every day in every courthouse town, County seat is all about spreading fear and desperation.
How to change it all without violence is going to be really tricky.
. . . So, basically, if you're a Canadian investor, move.
LONG: So the Canadian investors are a better contrarian indicator than the front page cover, you're saying.
HUDSON: I'd think so. Once they get in, you know the bubble's over.
When one reads the financial press in Canada, every dollar extracted by the lords of finance is a glorious taking by brilliant
people at the top of the financial food chain from the stupid little people at the bottom, but when it counts, there was silence,
in cooperation with Canada's one percent.
The story starts about five years ago, with smart meters. Everyone knows what they are, a method by which electrical power
use can be priced depending on the time of day, and day of the week.
To make this tasty, Ontario's local utilities at first kept the price the same for all the time, and then after all the meters
were installed, came the changes, phased in over time. Prices were increased substantially, but there was an out. If you changed
your living arrangements to live like a nocturnal rodent and washed your clothes in the middle of the night, had supper later
in the evening or waited for weekend power rates you could still get low power rates, from the three tier price structure.
The local utilities bought the power from the government of Ontario power generation utility, renamed to Hydro One, and this
is where Michael Hudson's talk becomes relevant.
The successful error of monetarism is to force countries to have such self-defeating policies that they end up having to
privatize their natural resources, their public domain, their public enterprises, their communications and transportation, like
you're seeing in Greece's selloffs. So when you find an error that is repeated, it's deliberate. It's not insane. It's
part of the program, not a bug .
LONG: Where does this lead us? What's the roadmap ahead of us here?
HUDSON: A thousand years ago, if you were a marauding gang and you wanted to take over a country's land and its natural
resources and public sector, you'd have to invade it with military troops. Now you use finance to take over countries. So it leads
us into a realm where everything that the classical economists saw and argued for public investment, bringing costs
in line with the actual cost of production that's all rejected in favor of a rentier class evolving into an oligarchy. Basically,
financiers the 1% are going to pry away the public domain from the government. Pry away and privatize the public enterprises,
land, natural resources, so that bondholders and privatizers get all of the revenue for themselves. It's all sucked up to the
top of the pyramid, impoverishing the 99% .
Eighteen months ago, there was an election in Ontario, and the press was on radio silence during the whole time leading up
to the election about the plans to "privatize" Hydro One. I cannot recall one instance of any mention that the new Premier, Kathleen
Wynne was planning on selling Hydro One to "investors".
Where did this come from? Did the little people rise up and say to the politicians "you should privatize Hydro One" for whatever
reason? No. This push came from the 1% and Hydro One was sold so fast it made my head spin, and is now trading on the Toronto
Stock exchange.
At first I though the premier was an economic ignoramus, because Hydro One was generating income for the province and there
was no other power supplier, so one couldn't even fire them if they raised their prices too high.
One of the arguments put forward by the 1% to privatize Hydro One was a classic divide and conquer strategy. They argued that
too many people at Hydro One were making too much money, and by privatizing, the employees wages would be beat down, and the resultant
savings would be passed on to customers.
Back to Michael Hudson
. . . The whole argument for privatization, for instance, is the opposite of what was taught in American business schools
in the 19th century. The first professor of economics at the Wharton School of Business, which was the first business school,
was Simon Patten. He said that public infrastructure is a fourth factor of production. But its role isn't to make a profit
. It's to lower the cost of public services and basic inputs to lower the cost of living and lower the cost of doing
business to make the economy more competitive. But privatization adds interest payments, dividends, managerial payments,
stock buybacks, and merges and acquisitions . Obviously these financialized charges are factored into the price system
and raise the cost of living and doing business .
Power prices have increased yet again in Ontario since privatization, and Canada's 1% are "making a killing" on it. There has
been another change as well. Instead of a three tier price structure, there are now two, really expensive and super expensive.
There is no longer a price break to living like a nocturnal rodent. The 1% took that for themselves.
I am so tired of seeing that old lie about Old Henry and the $5 a day. I realize it was just a tossed off reference to something
most people believe for the purpose of describing a discarded policy, but the fact is very, very few of Old Henry's employees
ever got that pay. See, there were strings attached.
Old Henry hired a lot of spies, too. He sent them around to the neighborhoods where his workers lived (it was convenient having
them all in Detroit). If the neighbors saw your kid bringing a bucket of beer home from the corner tavern for the family, you
didn't get the $5.
If your lawn wasn't mowed to their satisfaction, you didn't get the $5. If you were thought not to bathe as often as they liked,
you didn't get the $5. If you didn't go to a church on Sundays, you didn't get the $5. If you were an immigrant and not taking
English classes at night school, you didn't get the $5. There were quite a lot of strings attached. The whole story was a public
relations stunt, and Old Henry never intended to live up to it; he hated his workers.
"... Primates with about exponentially increasing physical technologies continue to deliberately ignore and misunderstand themselves as much as is humanly possible, due to the history of warfare making and maintaining the currently existing political economy, whose maliciousness is manifesting through runaway vicious feedback loops, whereby the excessively successful control of Civilization through applications of the methods of organized crime are resulting in that Civilization manifesting runaway criminal insanities. Indeed, in that context, where there is almost nothing but the central core of triumphant organized crime, namely bankster dominated governments, surrounded by various layers of controlled "opposition" groups, which stay within the same bullshit-based frames of reference regarding those phenomena, the overall situation is that society becoming about exponentially sicker and insane. ..."
"... In general, "Asset Managers" are stuck inside taking for granted that everything they do has become almost totally based on being able to enforce frauds, despite some of them noticing the increasingly blatant ways that there are accumulating apparent anomalies in those systems, as vicious feedback loops drive those systems to become about exponentially more fraudulent, and therefore increasingly unbalanced. To come to better terms with those apparent anomalies requires going through series of intellectual scientific revolutions and profound paradigm shifts, which overall become ways that human beings better understand themselves as manifestations of general energy systems. However, since doing so requires recognizing how and why governments are necessarily the biggest forms of organized crime, dominated by the best organized gangsters, the banksters, it continues to be politically impossible to accomplish that. ..."
"... At each open, algos compute the increase in their AUM from the prior day and their margin reach. They then begin buying. All algos do this. Buying whenever cash/margin exists; selling whenever profit targets exist. On pullbacks, the algos withdraw, volume evaporates, minimizing the drop. The algos collectively increase equity prices without consideration of the value of the money involved. Not valuations. No fundamentals. Just ones and zeroes. Just a program. ..."
Macro-prudential regulations follow financial crises, rarely do they precede one. Even when evidence is abundant of systemic risks
building up, as is today, regulators and policymakers have a marked tendency to turn an institutional blind eye, hoping for imbalances
to fizzle out on their own at least beyond the duration of their mandates. It does not work differently in economics than it does
for politics, where short-termism drives the agenda, oftentimes at the expenses of either the next government, the broader population
or the next generation.
It does not work differently in the business world either, where corporate actions are selected based on the immediate gratification
of shareholders, which means pleasing them at the next round of earnings, often at the expenses of long-term planning and at times
exposing the company itself to disruption threats from up-and-comers.
Long-term vision does not pay; it barely shows up in the incentive schemes laid out for most professions . Economics is no exception.
Orthodoxy and stillness preserve the status quo, and the advantages hard earned by the few who rose from the ranks of the establishment
beforehand.
Yet, when it comes to Central Banking, and more in general policymaking, financial stability should top the priority list. It
honorably shows up in the utility function, together with price stability and employment, but is not pursued nearly as actively as
them. Central planning and interventionism is no anathema when it comes to target the decimals of unemployment or consumer prices,
yet is residual when it comes to master systemic risks, relegated to the camp of ex-post macro-prudential regulation. This is all
the more surprising as we know all too well how badly a deep unsettlement of financial markets can reverberate across the real economy,
possibly leading into recessions, unemployment, un-anchoring of inflation expectations and durable disruption to consumer patterns.
There is no shortage of reminders for that in the history books, looking at the fallout of dee dives in markets in 1929, 2000 and
2007, amongst others.
Intriguingly, the other way round is accepted and even theorized. Manipulating bond and stock prices, directly or indirectly,
is mainstream policy theory today. From Ben Bernanke's 'portfolio balance channel theory', to the relentless pursuit of the 'wealth
effect' via financial repression under Janet Yellen and Haruhiko Kuroda, to Mario Draghi tackling the fragmentation of credit markets
across the EU via direct asset purchases, the practice has become commonplace. To some, like us, the 'wealth effect' may be proving
to be more of an 'inequality effect' than much, leading to populism and constantly threatening regime change, but that is beyond
the scope of this note today.
What we want to focus on instead is the direct impact that monetary interventionism like Quantitative Easing ('QE') and Negative
or Zero Interest Rate Policies ('NIRP' or 'ZIRP') have on the structure of the market itself, how they help create a one-sided investment
community, oftentimes long-only, fully invested when not levered up, relying on record-highs for bonds and stocks to perpetuate themselves
endlessly - despite a striking disconnect from fundamentals, life-dependent on the lowest levels of volatility ever seen in history
. The market structure morphed under the eyes of policymakers over the last few years, to become a pressure cooker at risk of blowing-up,
with a small but steadily growing probability as times goes by and the bubble inflates. The
positive feedback loops between monetary flooding and the private investment
community are culpable for transforming an ever present market risk into a systemic risk, and for masking as peaceful what is instead
an unstable equilibrium and
market fragility.
Positive Feedback Loops create divergence from general equilibrium, and Systemic Risks
Positive feedback loops , in finance like in biology, chemistry, cybernetics, breed system instability, as they orchestrate a
further divergence from equilibrium . An unstable equilibrium is defined as one where a small disturbance is sufficient to trigger
a large adjustment.
QE and NIRP have two predominant effects on markets: (i) relentless up-trend in stocks and bonds (the 'Trend Factor') , dominated
by the buy-the-dip mentality, which encapsulates the 'moral hazard' of investors knowing Central Banks are prompt to come to their
rescue (otherwise known as 'Bernanke/Yellen/Kuroda/Draghi put'), and (ii) the relentless down-trend in volatility the 'Volatility
Factor').
Two Factors Explain All: Trend and Volatility
The most fashionable investment strategies these days are directly impacted by either one or both of these drivers. Such strategies
make the bulk of the overall market, after leverage or turnover is taken into account : we will refer to them in the following as
'passive' or 'quasi-passive' . The trend impacts the long-only community, crowning it as a sure winner, making the case for low-
cost passive investing. The low volatility permeates everything else, making the case for full- investment and leverage.
The vast majority of investors these days are not independent from the QE environment they operate within : ETFs and index funds,
Risk Parity funds and Target Volatility vehicles, Low Volatility / Short Volatility vehicles, trend-chasing algos, Machine Learning-inspired
funds, behavioral Alternative Risk Premia funds. They are the poster children of the QE world. We estimate combined assets under
management of in excess of $8trn across the spectrum. They form a broad category of 'passive' or 'quasi-passive' investors, as are
being mechanically driven by two main factors: trend and volatility.
Source: Fasanara Presentations | Market Fragility
- How to Position for Twin Bubbles Bust, 16 th October 2017. The slide is described in details in this
video recording.
Extraordinary monetary policies have feedback loops with the asset management industry as a whole, reinforcing the effects on
markets of such policies in a vicious or virtuous - cycle . QE and NIRP help a large number of investment strategies to flourish,
validating their success and supporting their asset gathering in the process, and are in return helped in boosting bond and stock
markets by their flows joining the already monumental public flows.
Private flows so reach singularity with public flows, and the whole market economy morphs into a one big common bet on ever-rising
prices, in shallow volatility. Here is the story of how $15trn of money printing by major Central Banks in the last ten years, of
which $3.7trn in 2017 alone, is joined by total assets of $8trn managed into buying the same safe and risk assets across, with leverage,
indiscriminately.
How Market Risk became Systemic Risk
Let's give a cursory look at the main players involved (a recent presentation we did is recorded
here) . As markets trend higher, no matter what happens (ever against the
shocked disbeliefs of Brexit, Trump, an Italian failed referendum and nuclear threats in North Korea), investors understand the outperformance
that comes from pricing risks out of their portfolios entirely and going long-only and fully-invested. Whoever under-weighs positions
in an attempt to be prudent ends up underperforming its benchmarks and is then penalized with redemptions. Passive investors who
are long-only and fully invested are the winners, as they are designed to be bold and insensitive to risks. As Central Banks policies
reduce the level of interest rates to zero or whereabouts, fees become ever more relevant, making the case for passive investing
most compelling. The rise of ETF and passive index funds is then inevitable.
According to JP Morgan, in the last 10 years, $2trn left active managers in equities and $2trn entered passive managers (pag.39
here) . We may be excused for thinking they are the
same $ 2trn of underlying investors progressively pricing risk provisions out of books, de facto , while chasing outperformance and
lower fees.
To be sure, ETFs are a great financial innovation, helping reducing costs in an expensive industry and giving entry to markets
previously un-accessible to most investors. Yet, what matters here is their impact on systemic risks, via positive feedback loops.
In circular reference, beyond Central Banks flows, markets are helped rise by such classes of valuations-insensitive passive investors,
which are then rewarded with further inflows, with which they can then buy more. The more expensive valuations get, the more they
disconnect from fundamentals, the more divergence from equilibrium occurs, the larger fat-tail risks become.
In ever-rising markets, 'buy-and-hold' strategies may only possibly be outsmarted by 'buy-the-dip' strategies. Whatever the outcome
of risk events, be ready to buy the dip quickly and blindly. As more investors design themselves up to do so, the dips are shallower
over time, leading to an S&P500 that never lost 3% in 2017, an historical milestone. Machine learning is another beautiful market
innovation, but what is there to learn from the time series of the last several years, if not that buy- the-dip works, irrespective
of what caused the dip. Big Data is yet another great concept, shaping the future of us all. Yet, most data ever generated in humankind
dates back three years only, in and by itself a striking limitation. The quality of the deduction cannot exceed the quality of the
time series upon which the data science was applied. If the time series is untrustworthy, as is heavily influenced by monumental
public flows ($300bn per months), what trust can we put on any model output originating from it? What pattern recognition can we
really be hopeful of getting, in the first place? May some of it just be a commercial disguise for going long, selling volatility
and leveraging up in various shapes or forms? What is hype and what is real? A short and compromised data series makes it hard, if
not possible, to really know. Once public flows abate and price discovery is let free again, then and only then will we be in a position
to know the difference.
Low volatility does what trending markets alone cannot. A state of low volatility presents the appearance of
stuporous, innocuous, narcotized markets, thus
enticing new swathes of unfitting investors in, mostly retail-type 'weak hands'. Weak hands are investors who are brought to like
investments by certain characteristics which are uncommon to the specific investment itself, such as featuring a low volatility.
It is in this form that we see bond-like investors looking at the stock market for yield pick-up purposes, magnetized by levels of
realized volatility similar to what fixed income used to provide with during the Great Moderation. It is in this form that Tech companies
out of the US have started filling the coffers of not just Growth ETF, where they should rightfully reside, but also Momentum ETF,
and even, incredibly, Low-Volatility ETF.
Low volatility is also a dominant input for Risk Parity funds and Target Volatility vehicles . The lower the volatility, the higher
the leverage allowed in such players, mechanically. All of which are long-only players, joining public flows, again helping the market
rise to record levels in the process, in circular reference. Rewarded by new inflows, the buying spree gathers momentum, in a virtuous
circle. Valuations are no real input in the process, volatility is what matters the most. Volatility is not risk, except for them
it is.
It goes further than that. It is not only the level of volatility that count, but its direction too . As volatility implodes,
relentlessly, into historical lows never seen before in history, a plethora of investment strategies is launched to capitalize on
just that, directly: Short Volatility vehicles . They are the best performing strategy of the last decade, by and large. The problem
here is that, due to construction, as volatility got to single-digit territory, relatively small spikes are now enough to trigger
wipe-out events on several of these instruments. Our analysis shows that if equity volatility doubles up from current levels (while
still being half of what it was as recently as in August 2015), certain Short Vol ETFs may stand to lose up to 75% or more. Moreover,
short positions on long-vol ETFs can lose up to 250% of capital. For some, 'termination events' are built into contracts for sudden
losses of this magnitude, meaning that the notes would be prematurely withdrawn. It is one thing to expect a spike in volatility
to cause losses, it is quite another to know that a minor move is all it takes to trigger a default event.
On such spikes in volatility, Morgan Stanley Quant Derivatives Strategy desk warns further that market makers may be forced to
rebalance their exposure non-linearly on a spike in volatility. A drop in the S&P 500 of 5% in one day may trigger approximately
$ 400mn of Vega notional of rebalancing (pag.48 here)
. We estimate that half a trillion dollars of additional selling on S&P stocks may occur following a correction of between 5% and
10%. That is a lot of selling, pre-set in markets, waiting to strike. Unless you expect the market to not have another 5% sell-off,
ever again.
What do ETFs, Risk Parity and Target Vol vehicles, Low Vol / Short Vol vehicles, trend-chasing algos, Machine Learning, behavioral
Alternative Risk Premia, factor investing have in common? Except, of course, being the 'winners take all' of QE-driven markets. They
all share one or more of the following risk factors: long-only, fully invested when not leveraged-up, short volatility, short correlation,
short gamma Thanks to QE and NIRP, the whole market is becoming one single big position.
The 'Trend Factor' and the 'Volatility Factor' are over-whelming, making it inevitable for a high- beta, long-bias, short-vol
proxy to disseminate across. Almost inescapably so, given the time series the asset management industry has to deal with, and derive
its signals from.
Several classes of investors may move to sell in lock-steps if and when markets turn. The boost to asset prices and the zero-volatility
environment created the conditions for systemic risks in the form of an over-compensation to the downside. Record-low volatility
breeds market fragility, it precedes system instability.
Flows Matter, Both Ways!
We will know soon if the fragility of markets is that bad. The undoing of loose monetary policies (NIRP, ZIRP) will create a liquidity
withdrawal of over $1 trillion in 2018 alone (pag.61-62
here) . The reaction of the passive and quasi-passive communities will determine the speed of the adjustment in the pricing for
both safe and risk assets, and how quickly risk provisions will re- enter portfolios. Such liquidity withdrawal will represent the
first real crash-test for markets in 10 years.
As public spending on Wall Street abates, the risk is evident of seeing the whole market turning with it. The shocks of Trump
and Brexit did not manage to derail markets for long, as public flows were overwhelming. Flows is what mattered, above all elusive,
over-fitting economic narratives justifying price action at the margin. Flows may matter again now as they fade
Systemic Risk is Not Just About Banks: Look at Funds
The role of trending markets is known when it comes to systemic risks: a not sufficient but necessary condition. Most trends do
not necessarily lead to systemic risks, but hardly systemic risks ever build up without a prolonged period of uptrend beforehand.
Prolonged uptrends in any asset class hold the potential to instill the perception that such asset class will grow forever, irrespective
of the fundamentals, and may thus lead to excessive risk taking, excess leverage, the formation of a bubble and, ultimately, systemic
risks. The mind goes to the asset class of real estate, its undeterred uptrend into 2006/2007, its perception of perpetuity ("we
have never had a decline in house prices on a nationwide basis''
Ben Bernanke) , the credit bubble built on banks hazardous activities on subprime mortgages as a result, and the systemic risks
which emanated, with damages spanning well beyond the borders of real estate.
The role of volatility is also well-researched, especially low volatility. Hayman Minsky, in his "
Financial Instability
Hypothesis '' in 1977, analyses the behavioral changes induced by a reduction of volatility, postulating that economic agents
observing a low risk are induced to increase risk taking, which may in turn lead to a crisis: "stability is destabilizing". In a
recent study, Jon Danielsson, Director
of the Systemic Risk Centre at the LSE, finds unambiguous support for the 'low volatility channel', insofar as prolonged periods
of low volatility have a strong predictive power over the incidence of a banking crisis, owing to excess lending and excess leverage
. The economic impact is the highest if the economy stays in the low volatility environment for five years : a 1% decrease in volatility
below its trend translates in a 1.01% increase in the probability of a crisis. He also finds that, counter-intuitively, high volatility
has little predictive power : very interesting, when the whole finance world at large is based on retrospective VAR metrics, and
equivocates high volatility for high risk.
Both a persistent trend and prolonged low-volatility can lead banks to take excessive risks. But what about their impact on the
asset management industry?
Thinking at the hard economic impact of the Great Depression (1929-1932) and the Great Recession (2007-2009), and the eminent
role played by banks in both, it comes as little surprise that the banking sector captures all the attention. However, what remains
to be looked into, and perhaps more worrying in today's environment, is the role of prolonged periods of uptrend and low-vol on the
asset management industry
In 2014, the Financial Stability Board (FSB), an international body that makes recommendations to G20 nations on financial risks,
published a consultation paper asking whether fund managers might need to be designated as " global systemically important financial
institution " or G-SIFI, a step that would involve greater regulation and oversight. It did not result in much, as the industry lobbied
in protest, emphasizing the difference between the levered balance sheet of a bank and the business of funds.
The reason for asking the question is evident: (i) sheer size , as the AM industry ballooned in the last few years, to now represent
over [15trnXX] for just the top 5 US players!, (ii) funds have partially substituted banks in certain market-making activities, as
banks dialed back their participation in response to tighter regulation and (iii) , funds can indeed do damage: think of LTCM in
1998, the fatal bailout of two Real Estate funds by Bear Stearns in 2007, the money market funds 'breaking the buck' in 2008 amongst
others.
But it is not just sheer size that matters for asset managers. What may worry more is the positive feedback loops discussed above
and the resulting concentration of bets in one single global pot , life-dependent on infinite momentum/trend and ever-falling volatility.
Positive feedback loops are the link for the sheer size of the AM industry to become systemically relevant. Today more than ever,
they morph market risks in systemic risks.
Volatility will not forever be low, the trend will not forever go: how bad a damage when it stops? As macro prudential policy
is not the art of "whether or not it will happen" but of "what happens if", it is hard not to see this as a blind spot for policymakers
nowadays.
I have never seen it this bad, the numbers are all moutof wack!
It seems many of us are drawn to a good illusion and this proves true for most people in their daily life as well. In some
ways, it could be said that our culture has become obsessed with avoiding what is real.
We must remember that politicians and those in power tend to throw people under the bus rather than rise up and take responsibility
for the problems they create. The article below looks at how we have grown to believe things are fine.
The real estate boom features all the unknowns in today's thinking, which is why they are global.
This simple equation is unknown.
Disposable income = wages (taxes + the cost of living)
You can immediately see how high housing costs have to be covered by wages; business pays the high housing costs for expensive
housing adding to costs and reducing profits. The real estate boom raises costs to business and makes your nation uncompetitive
in a globalised world.
The unproductive lending involved that leads to financial crises.
The economy gets loaded up with unproductive lending as future spending power has been taken to inflate the value of the nation's
housing stock. Housing is more expensive and the future has been impoverished.
" banks make their profits by taking in deposits and lending the funds out at a higher rate of interest" Paul Krugman, 2015.
He wouldn't know, that's financial intermediation theory.
Bank lending creates money, which pours into the economy fuelling the boom; it is this money creation that makes the housing
boom feel so good in the general economy. It feels like there is lots of money about because there is.
The housing bust feels so bad because the opposite takes place, and money gets sucked out of the economy as the repayments
overtake new lending. It feels like there isn't much money about because there isn't.
They were known unknowns, the people that knew weren't the policymakers to whom these things were unknown.
The global economy told policymakers there was something seriously wrong in 2008, but they ignored it, I didn't.
They had pushed Greece into debt deflation by cutting Government spending with austerity.
It wasn't just the IMF, the Troika all went along with this fatally flawed policy, this means the ECB and EU Commission also
didn't know what they were doing.
Richard Koo had watched as Western "experts" told Japan to cut Government spending and seen the fall in GDP as the economy
went downhill. The only way to get things going again was to increase Government spending and he has had decades to work out what
was going on.
The Troika's bad economics has been wreaking havoc across the Club-Med.
Another superficially correct analysis of "Positive Feedback Loops create divergence from general equilibrium, and Systemic
Risks." The vicious feedback loops which have the most leverage are all aspects of the funding of the political processes, which
have resulted in runaway systems of legalized lies, backed by legalized violence, the most important of which are the ways that
the powers of public governments enforce frauds by private banks, the big corporations that have grown up around those big banks.
About exponentially advancing technologies have enabled enforced frauds to become about exponentially more fraudulent. The
underlying drivers were the ways that the combined money/murder systems developed, whose social successfulness became more and
more based on maximizing maliciousness. From a superficial point of view, those results may appear to be due to incompetence,
however, from a deeper point of view those results make sense as due to the excessively successful applications of the methods
of organized crime through the political processes, due to the vicious feedback loops of the funding of those political processes.
The only connections between human laws and natural laws are the abilities to back up lies with violence. Natural selection
pressures have driven Globalized Neolithic Civilization to develop the most dishonest artificial selection systems possible, while
the continuation of the various vicious feedback loops that made and maintained those developments are driving about exponentially
increasing dishonesty. Although the laws of nature are not going to stop working, and the laws of nature underpinned the runaway
development of excessively successful vicious feedback loops of organized crime, on larger and larger scales, to result in Globalized
Neolithic Civilization, the overall results are that Civilization is becoming about exponentially more psychotic. Since Civilization
necessarily operates according to the principles and methods of organized crime, while those who became the biggest and best organized
forms of organized crime, namely, banker dominated governments, also necessarily became most dishonest about themselves, and yet,
their bullshit social stories continue to dominate the public schools, and mainstream mass media, as well as the publicly significant
controlled "opposition" groups.
Political economy is INSIDE human ecology, and therefore, the greatest systematic risks are to be found in the tragic trajectory
of human ecologies which are almost totally buried under maximized maliciousness. "Public debates" about the human death control
systems are based on previously having being as deceitful and treacherous as possible regarding those topics. The most extreme
forms of that manifest as the ways that money is measurement backed by murder. Of course, that the debt controls are backed by
the death controls are issues which are generally not publicly admitted nor addressed.
Global Neolithic Civilization has become almost totally based on being able to enforce frauds, in ways which have become about
exponentially more fraudulent, as the vicious feedback loops which enable that to happen automatically reinforce themselves to
get worse, faster. The almost total triumph of enforced frauds has resulted in social "realities" which are becoming exponentially
more insane, since the social successfulness of enforced frauds requires the most people do not understand that, because they
have been conditioned to not want to understand that. Rather, almost everyone takes for granted deliberately ignoring and misunderstanding
the laws of nature in the most absurdly backward ways possible, because of the long history of successful warfare based on deceits
and treacheries becoming the more recent history of successful finance based on enforcing frauds, despite that tragic trajectory
of vicious feedback loops resulting in about exponentially increasing overall fraudulence.
Various superficially correct analyses, such as the one in the article above, are typical of the content on Zero Hedge , which
does not come remotely close to recognizing the degree to which the dominate natural languages and philosophy of science have
undergone series of compromises with the biggest bullies' bullshit-based world views, which became the banksters' bullshit about
economics. Although it is theoretically possible for human beings to better understand themselves and Civilization, it continues
to become more and more politically impossible to do so, due to the ever increasing vicious feedback loops of enforced frauds
achieving symbolic robberies ...
Although the laws of nature are never going to stop working, it is barely possible to exaggerate the degree to which Civilization
overall is becoming about exponentially more psychotic, due to the social "realities" based on successfully enforcing frauds becoming
more and more out of touch with the surrounding, relatively objective, physical and biological facts. The various superficially
correct analyses presented on Zero Hedge regarding that kind of runaway collective psychosis, driven by the vicious feedback loops
of the funding of all aspects of the funding of the political processes, tend to always grossly understate the seriousness of
that situation, especially including the crucial issues of how to operate the human murder systems after the development of weapons
of mass destruction, which is unavoidable due to the rapid development of globalized electronic monkey money frauds, backed by
the threat of force from apes with atomic weapons.
Those who believe that possessing precious metals, or cryptocurrencies, etc., are viable solutions to those problems are not
remotely close to being in the right order of magnitude. Although there is no doubt that exponentially more "money" is being made
out of nothing as debts, in order to "pay" for strip-mining the natural resources of a still relatively fresh planet, and so,
there is no doubt that the exponentially decreasing value of that "money" is driving the accumulation of apparent anomalies, such
as outlined in the article above, the actually crucial issues continue to be the ways that money is measurement backed by murder,
as the most abstract ways that private property are claims backed by coercions. Stop-gap individual responses to the runaway fraudulence,
such as faith in possessing precious metals or cryptocurrencies, make some relative sense in terms of the public "money" supplies
becoming exponentially more fraudulent, but otherwise dismally fail to be in the ball park of the significant issues driven by
prodigious progress in physical sciences, WITHOUT any genuine progress in political sciences, other than to continue to be able
to better enforce bigger frauds, through the elaborations of oxymoronic scientific dictatorships, which adamantly refuse to become
more genuinely scientific about themselves.
Primates with about exponentially increasing physical technologies continue to deliberately ignore and misunderstand themselves
as much as is humanly possible, due to the history of warfare making and maintaining the currently existing political economy,
whose maliciousness is manifesting through runaway vicious feedback loops, whereby the excessively successful control of Civilization
through applications of the methods of organized crime are resulting in that Civilization manifesting runaway criminal insanities.
Indeed, in that context, where there is almost nothing but the central core of triumphant organized crime, namely bankster dominated
governments, surrounded by various layers of controlled "opposition" groups, which stay within the same bullshit-based frames
of reference regarding those phenomena, the overall situation is that society becoming about exponentially sicker and insane.
That Civilization has been driven by natural selection pressures to manifest runaway psychoses is not going to stop the laws
of nature from continuing to work through that Civilization. However, that will nevertheless drive the currently dominate artificial
selection systems to become increasingly psychotic, in ways whereby their vicious feedback loops are less and less able to be
sanely responded to ... Although some human beings have better and better understood some general energy systems, e.g., electric
and atomic energy, etc., since warfare was the oldest and best developed forms of social science and engineering, whose successfulness
was based on being able to maximize maliciousness, and since those then enabled successful finance to become based on runaway
enforced frauds, human beings living within Globalized Neolithic Civilization are so hidebound by adapting to living inside those
vicious feedback loops based on being able to enforce frauds that those human beings are mostly unwilling and unable to better
understand themselves as also manifestations of general energy systems.
As the report, embedded in the article, begins by quoting Leonardo da Vinci:
"Learn how to see. Realize that everything connects to everything else."
In general, "Asset Managers" are stuck inside taking for granted that everything they do has become almost totally based
on being able to enforce frauds, despite some of them noticing the increasingly blatant ways that there are accumulating apparent
anomalies in those systems, as vicious feedback loops drive those systems to become about exponentially more fraudulent, and therefore
increasingly unbalanced. To come to better terms with those apparent anomalies requires going through series of intellectual scientific
revolutions and profound paradigm shifts, which overall become ways that human beings better understand themselves as manifestations
of general energy systems. However, since doing so requires recognizing how and why governments are necessarily the biggest forms
of organized crime, dominated by the best organized gangsters, the banksters, it continues to be politically impossible to accomplish
that.
At each open, algos compute the increase in their AUM from the prior day and their margin reach. They then begin buying.
All algos do this. Buying whenever cash/margin exists; selling whenever profit targets exist. On pullbacks, the algos withdraw,
volume evaporates, minimizing the drop. The algos collectively increase equity prices without consideration of the value of the
money involved. Not valuations. No fundamentals. Just ones and zeroes. Just a program.
"... Well, again, what he was doing was running a program of a certain scale, of a large scale, through a set of standard macroeconomic assumptions. And that, again, is a reasonable exercise. If you ask me what my personal view is, I've written a whole book called The End of Normal in which I lay out reasons for my chronic pessimism about the capacity of the world economy to absorb a great deal more rapid economic growth. ..."
"... But that's not in the standard models, and it would not be appropriate to layer that on to a forecast of this kind. What Friedman was criticized for was not for putting his thumb on the scale, but for failing to put his thumb on the scale. In fact, that was the reasonable thing to do ..."
"... So what we had here was a, what was essentially an academic exercise that produced a result that was highly favorable to the Sanders position, and showed that if you did an ambitious program you would get a strong growth response. It's reasonable, certainly, for the first three or four years that that would transpire in practice. And what happened was that people who didn't like that result politically jumped on it in a way which was, frankly speaking, professionally irresponsible, in my view. It was designed to convey the impression, which it succeeded in doing for a brief while through the broad media, that this was not a reputable exercise, and that there were responsible people on one side of the debate, and irresponsible people on the other. ..."
"... The true nature of Capitalism has obviously been forgotten over time. Today we think it brings prosperity to all, but that was certainly never the intention. Today's raw Capitalism is showing its true nature with ever rising inequality. Capitalism is essentially the same as every other social system since the dawn of civilization. The lower and middle classes do all the work and the upper, leisure Class, live in the lap of luxury. The lower class does the manual work; the middle class does the administrative and managerial work and the upper, leisure, class live a life of luxury and leisure. ..."
"... The nature of the Leisure Class, to which the benefits of every system accrue, was studied over 100 years ago. "The Theory of the Leisure Class: An Economic Study of Institutions", by Thorstein Veblen. (The Wikipedia entry gives a good insight. It was written a long time ago but much of it is as true today as it was then. This is the source of the term conspicuous consumption.) We still have our leisure class in the UK, the Aristocracy, and they have been doing very little for centuries. The UK's aristocracy has seen social systems come and go, but they all provide a life of luxury and leisure and with someone else doing all the work. ..."
"... Feudalism exploit the masses through land ownership. Capitalism exploit the masses through wealth (Capital) ..."
"... Now the competition has gone, the US middle class is being wiped out. The US is going third world, with just rich and poor and no middle class. Raw Capitalism can only return Capitalism to its true state where there is little demand and those at the bottom live a life of bare subsistence. ..."
"... "The Marxian capitalist has infinite shrewdness and cunning on everything except matters pertaining to his own ultimate survival. On these, he is not subject to education. He continues wilfully and reliably down the path to his own destruction" ..."
"... "We came, we saw, he died" rinse and repeat for 5,000 years. ..."
"... By the 1920s, mass production techniques had improved to such an extent that relatively wealthy consumers were required to purchase all the output the system could produce and extensive advertising was required to manufacture demand for the chronic over-supply the Capitalist system could produce. ..."
"... They knew that if wealth concentrated too much there would not be enough demand. ..."
"... Fiscal conservatism, which champions a balanced budget and expenditure restraints, is often hailed as a politico-economic philosophy as well as a policy of financial responsibility. In practice, it has been used as an argument against free spending by governments which can lead to high levels of debt and inflation. It has not been a positive philosophy which advocates the pro-growth and stability benefits coming from balanced budgets. Rather, it is a negative one reacting against excessive spending and its consequences. This is probably why modern examples of fiscal conservatism in the United States and the United Kingdom have not led to sustainable growth or a significant reduction in public debt. Instead, in the case of the Ronald Reagan era in the US in the 1980s, public debt soared as fiscal conservatism and other policies were abandoned. ..."
"... Galbraith is probably my favorite economist, and eminently reasonable here. It makes me think that Sanders should have used him, or someone like him as an adviser/in house economist, rather than relying on external analyses like Friedman. ..."
"... Is the American public, trained/indoctrinated to think of the USG budget in terms of a household budget analogy, ready for MMT? ..."
"... To me, too many of the supposed (and actual) intellectuals and high level advisers were experts in rationalizing and explaining the chosen party views, but still employed the Cato Institute suggestion to use "Leninist" propaganda techniques as put forth in the 1996 Newt Gingrich/Frank Luntz GoPac memo, "Language: A Key Mechanism of Control." ..."
"... Galbraith said casually about the thesis of his new book: This really is the new normal for capitalism meaning low growth because there is not much growth left. ..."
PERIES: James, the Council of Economic Advisors, they put out economic forecasts each year. And there has been some wildly
optimistic ones. For example, if you look at the 2010 predictions for 2012 and 2013 they have not quite been attained. And one would
say it was done in the interest of trying to make the administration that they were serving more impressive. But what accounts for
this particular attack on Friedman's projection and other fellow economists?
GALBRAITH: This was a classic case of professional bad manners and rank-pulling. What we had here were four former chairs
of the president's Council of Economic Advisors, and two from President Obama, two from President Clinton, who decided to use their
big names and their titles in order to launch an attack on a professor of economics at the University of Massachusetts who had written
a paper evaluating the Sanders economic program.
It's likely that the four bigwigs thought that Professor Friedman was a Bernie Sanders supporter. In fact, as of that time he
was a Hillary Clinton supporter and a modest donor to her campaign. What he had done was simply to write his evaluation of the economic
effects of the ambitious Sanders reform program. The four former council chairs announced that on the basis of their deep commitment
to rigor and objectivity, they had discovered that this forecast was unrealistic. And what I pointed out was that that claim was
based on no evidence and no analysis whatsoever. And when you pressed down on it you found that it was simply based on the obvious
fact that we haven't seen the kinds of growth rates that Professor Friedman's analysis suggested the Sanders program would produce.
And for a very simple reason: the Sanders program is bigger. It's more ambitious than anything we've seen in recent years, so it's
not surprising that when you put it through a model it generates a higher growth rate.
So that was the basic underlying facts, and these guys, two men and two women, announced that they, that it was a disreputable
study, but failed to present any analysis that suggested they'd actually even read the paper before they denounced it. And that's
what I pointed out in my counter letter, in a number of articles that have appeared since.
PERIES: James, so in your letter, how do you counter them? What methods did you use to come to your conclusions?
GALBRAITH: Well, I, no need to say anything beyond the fact that I had looked in their letter for the rigor that they were
so proud of, for the objectivity and the analysis that they were so proud of, and I'd found that they had not done any. They had
not made any such claim, not done any such work.
So that began to provoke a discussion. It's fair to say ultimately, without apologizing for effectively launching an ad hominem
attack on an independent academic researcher, one of the former chairs, Christina Romer of President Obama's council, and her husband
David Romer, a fellow economist, did produce a paper in which they spelled out their differences with the, with the Friedman paper.
But that, again, raised another set of interesting issues which we've continued to discuss at various, various outlets of the press.
PERIES: Now, James Friedman's claim that the growth rate from Sanders' plan to be around 5.3 percent. And some economists,
including Dean Baker at the Center for Economic Policy and Research, have claimed that this is unrealistic. What do you make of that?
GALBRAITH: Well, the question is whether it is an effect, let's say, a reasonable projection, of putting the Sanders program
into an economic model. And the answer to that question, yes, Professor Friedman did a reasonable job. He spelled out what the underlying
assumptions that he was using were. He spelled out the basic rules of thumb that macroeconomists had used for decades to assess the
effects of an economic program. In this case, an expansionary economic program. And he ran them through his model and reported the
results, a perfectly reasonable thing to do.
Now, one can be skeptical. And I am, and Dean Baker is, lots of people are skeptical that the world would work out quite that
way, because lots of things, in fact, happen which are not accounted for in a model. And we've talked, we've basically put together
a list of things that you think might be problematic. But the exercise here was not to put everything into paper that might happen
in the world. The exercise was to take the kind of bare bones that economists use to assess and to compare the consequences of alternative
programs, and to ask what kind of results do you get out? And that's what, again, what Jerry Friedman did. It was a reasonable exercise,
he came up with a reasonable answer, and he reported it.
PERIES: Now, Friedman seems to think that the rate of full employment in 1999 is attainable. However, many labor economists
seem to think that the larger share of the elderly currently in society compared to 1999 explains some of the lack of labor participation,
which creates a lower full employment ceiling that's contradicting Friedman's report. Your thoughts on that?
GALBRAITH: Well, I think it is a fact that the population is getting older. But as, I think, any economist would tell you,
that when you offer jobs in the labor market, the first thing that happens is the people who are looking for work take those jobs.
The second thing that happens is that people who might look for work when jobs were available start coming back into the labor market.
And if that is not enough to fill the vacancies that you have, it's perfectly open to employers to raise their wages so as to bring
more people in, or to increase the pace at which they innovate and substitute technology for labor so that they don't need the work.
So there's no real crisis involved in the situation if it turns out five years from now we're at 3.5 percent unemployment, and
they were beginning to run short of labor. That's not a reason to, at this stage, say no, we're not going to engage in the exercise
and run a more expansionary, vigorous reform program, a vigorous infrastructure project, a major reform of healthcare, a tuition-free
public education program. All of those things, which were part of what Friedman put into his paper, should be done anyway. The fact
that the labor market forecast might prove to have some different, the labor market might have different characteristics in five
years' time is from our present point of view just a, it's an academic or a theoretical proposition, purely.
PERIES: And Friedman's paper, he looks at a ten-year forecast. Did you feel that when you looked at the specifics of that,
including college, universal healthcare, infrastructure spending and of course, expanding Social Security and so on, that those categories
and his predictions or projections, rather, made sense to you?
GALBRAITH:Well, again, what he was doing was running a program of a certain scale, of a large scale, through a set
of standard macroeconomic assumptions. And that, again, is a reasonable exercise. If you ask me what my personal view is, I've written
a whole book called The End of Normal in which I lay out reasons for my chronic pessimism about the capacity of the world economy
to absorb a great deal more rapid economic growth.
But that's not in the standard models, and it would not be appropriate to layer that on to a forecast of this kind. What Friedman
was criticized for was not for putting his thumb on the scale, but for failing to put his thumb on the scale. In fact, that was the
reasonable thing to do.
On the contrary, and on the other side, when Christina and David Romer did put out their forecast, their own criticism of the
Friedman paper, they concluded by asserting that if this program were tried, inflation would soar. So they there were making an allegation
for which, again, they had no evidence and no plausible model, that in the world in which we presently live would produce that result.
So what we had here was a, what was essentially an academic exercise that produced a result that was highly favorable to the
Sanders position, and showed that if you did an ambitious program you would get a strong growth response. It's reasonable, certainly,
for the first three or four years that that would transpire in practice. And what happened was that people who didn't like that result
politically jumped on it in a way which was, frankly speaking, professionally irresponsible, in my view. It was designed to convey
the impression, which it succeeded in doing for a brief while through the broad media, that this was not a reputable exercise, and
that there were responsible people on one side of the debate, and irresponsible people on the other.
And that was, again, something thatan impression that could be conveyed through the mass media, but would not withstand scrutiny,
and didn't withstand scrutiny, once a few of us stood up and started saying, okay, where's your evidence, on what are you basing
this argument? And revealed the point, which the Romers implicitly conceded, and I give them credit for that, that in order to criticize
a fellow economist you need to do some work.
The true nature of Capitalism has obviously been forgotten over time. Today we think it brings prosperity to all, but that
was certainly never the intention. Today's raw Capitalism is showing its true nature with ever rising inequality. Capitalism is
essentially the same as every other social system since the dawn of civilization. The lower and middle classes do all the work
and the upper, leisure Class, live in the lap of luxury. The lower class does the manual work; the middle class does the administrative
and managerial work and the upper, leisure, class live a life of luxury and leisure.
The nature of the Leisure Class, to which the benefits of every system accrue, was studied over 100 years ago. "The Theory
of the Leisure Class: An Economic Study of Institutions", by Thorstein Veblen. (The Wikipedia entry gives a good insight. It was
written a long time ago but much of it is as true today as it was then. This is the source of the term conspicuous consumption.)
We still have our leisure class in the UK, the Aristocracy, and they have been doing very little for centuries. The UK's aristocracy
has seen social systems come and go, but they all provide a life of luxury and leisure and with someone else doing all the work.
Feudalism exploit the masses through land ownership. Capitalism exploit the masses through wealth (Capital)
Today this is done through the parasitic, rentier trickle up of Capitalism:
a) Those with excess capital invest it and collect interest, dividends and rent.
b) Those with insufficient capital borrow money and pay interest and rent.
All this was much easier to see in Capitalism's earlier days.
Malthus and Ricardo never saw those at the bottom rising out of a bare subsistence living. This was the way it had always been
and always would be, the benefits of the system only accrue to those at the top.
It was very obvious to Adam Smith:
"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."
Like most classical economists he differentiated between "earned" and "unearned" wealth and noted how the wealthy maintained
themselves in idleness and luxury via "unearned", rentier income from their land and capital.
We can no longer see the difference between the productive side of the economy and the unproductive, parasitic, rentier side.
This is probably why inequality is rising so fast, the mechanisms by which the system looks after those at the top are now hidden
from us.
In the 19th Century things were still very obvious.
1) Those at the top were very wealthy
2) Those lower down lived in grinding poverty, paid just enough to keep them alive to work with as little time off as possible.
3) Slavery
4) Child Labour
Immense wealth at the top with nothing trickling down, just like today.
This is what Capitalism maximized for profit looks like. Labour costs are reduced to the absolute minimum to maximise profit.
The beginnings of regulation to deal with the wealthy UK businessman seeking to maximise profit, the abolition of slavery and
child labour. The function of the system is still laid bare. The lower class does the manual work; the middle class does the administrative
and managerial work and the upper, leisure, class live a life of luxury and leisure. The majority only got a larger slice of the
pie through organised Labour movements.
By the 1920s, mass production techniques had improved to such an extent that relatively wealthy consumers were required to
purchase all the output the system could produce and extensive advertising was required to manufacture demand for the chronic
over-supply the Capitalist system could produce. They knew that if wealth concentrated too much there would not be enough demand.
In the 1950s, when Capitalism had healthy competition, it was essential that the Capitalist system could demonstrate that it was
better than the competition. The US was able to demonstrate the superior lifestyle it offered to its average citizens.
Now the competition has gone, the US middle class is being wiped out. The US is going third world, with just rich and poor
and no middle class. Raw Capitalism can only return Capitalism to its true state where there is little demand and those at the
bottom live a life of bare subsistence.
When you realise the true nature of Capitalism, you know why some kind of redistribution is necessary and strong progressive
taxation is the only way a consumer society can ever be kept functioning.
A good quote from John Kenneth Galbraith's book "The Affluent Society", which in turn comes from Marx.
"The Marxian capitalist has infinite shrewdness and cunning on everything except matters pertaining to his own ultimate
survival. On these, he is not subject to education. He continues wilfully and reliably down the path to his own destruction"
Marx made some mistakes but he got quite a lot right.
Perhaps, Western civilization had already cultivated and concentrated psychopathic personality traits in its elite before Capitalism
ever begun. Early European history is an endless procession of wars at home and abroad as the elite took their wealth by force
and the masses were kept in check by force whenever necessary.
No peaceful group could ever survive this relentless onslaught of millennia. This psychopathic elite then took their warlike
ways to every corner of the earth. The wealthy elite from this era then became the wealthy elite of the next Capitalist era. Even
today their bloodlust cannot be sated as they look to control a global empire.
Certainly countless hundreds of peaceful, responsible, inclusive, open, empathetic indigenous societies have been co-opted/overthrown
by the western model.
Yes, but it's not just the western model that overthrows peaceful societies. The empires of China, the Japanese monarchies,
the empires of India (together with a cringeworthy caste system), the human sacrificing Aztecs, Mayas, and Incas, all prove that
tyranny is not a western invention.
When a local population becomes too large to be supported by simple egalitarian hunting and gathering, something else is required.
That something is agriculture, and almost inevitably, the organization, specialization, and partial urbanization required by large
scale agricultural society leads to exploitation and tyranny. This is seen in the earliest societies for which we have a written
record, Sumer and Egypt.
Thanks for the explanations of Veblen and Galbraith, which I find enduring basics over more than 100 years of speculation,
real investment, and the best way to keep consumer society healthy.
My unschooled, simple, way to measure the health of an economy is in the Velocity of Money in the real economy of useful products
and services. It appears to be very far below where it was when we did our best, and lower than when we first started measuring
it near the beginning of the Great Depression.
By the 1920s, mass production techniques had improved to such an extent that relatively wealthy consumers were required
to purchase all the output the system could produce and extensive advertising was required to manufacture demand for the chronic
over-supply the Capitalist system could produce.
They knew that if wealth concentrated too much there would not be enough demand.
Of course the Capitalists could never find it in themselves to raise wages and it took the New Deal and Keynesian thinking
to usher in the consumer society.
Fiscal conservatism, which champions a balanced budget and expenditure restraints, is often hailed as a politico-economic
philosophy as well as a policy of financial responsibility. In practice, it has been used as an argument against free spending
by governments which can lead to high levels of debt and inflation. It has not been a positive philosophy which advocates the
pro-growth and stability benefits coming from balanced budgets. Rather, it is a negative one reacting against excessive spending
and its consequences. This is probably why modern examples of fiscal conservatism in the United States and the United Kingdom
have not led to sustainable growth or a significant reduction in public debt. Instead, in the case of the Ronald Reagan era in
the US in the 1980s, public debt soared as fiscal conservatism and other policies were abandoned.
A Monetarily Sovereign government does not need to reduce debt. In the U.S. (which is Monetarily Sovereign) federal so-called
"debt" is actually the total of deposits in T-security accounts at the Federal Reserve Bank. In short, "debt" is bank deposits.
Why anyone would want to reduce the size of deposits at the world's safest bank is a mystery to me - other than the misleading
use of the word "debt."
While all bank accounts are, in fact, debt of banks, most banks boast about the size of their depositors' accounts.
Contrary to popular myth, federal debt (i.e. deposits at the FRB) does not lead to inflation. America's "debt" has grown more
than 9,000% in the past 75 years, and the Fed is struggling to create inflation.
Galbraith is probably my favorite economist, and eminently reasonable here. It makes me think that Sanders should have
used him, or someone like him as an adviser/in house economist, rather than relying on external analyses like Friedman. It
would possibly have given his program more gravitas first amongst elites, and then more generally. At least it would have had
a chance of changing the broader discussion. Whether you agree with it or not, right now the general MSM reporting on the Sanders
plan is that it doesn't add up.
This is speculative, but since Prof. Kelton is actually the economist for the Minority (the Democrats) of the Senate Banking
committee, there may be reasons of protocol that Sanders isn't using her policy ideas at the moment.
Another possibility is that trying to introduce a new economic paradigm while running for the nomination may be a bridge too
far. If Sanders tried to explain to people that taxes don't fund federal spending, etc., heads would explode.
I'm also not sure how one would use Prof. Kelton's ideas without bringing in a whole bunch of MMT concepts. Maybe if Sanders
wins the nomination he can begin to bring some of these ideas into the conversation.
He won't use her ideas simple because the American voter in not yet amenable to the facts of
Monetary Sovereignty .
Try explaining even to your best friend that:
1. Unlike state and local taxes, Federal taxes do not fund federal spending.
2. Even if FICA were eliminated, Social Security and Medicare benefits dramatically could (and should) be increased. There are
no federal "trust funds."
3. Federal deficits are necessary for economic growth
4. Federal "debt" is nothing more than deposits in T-security accounts at the Federal Reserve Bank.
5. America never has had, and is absolutely in no danger of, hyper-inflation.
Perhaps, if Bernie wins the election, he will be freer to educate the masses, as well as the economics community, but meanwhile
he has to claim the popular myth that federal spending has to be "paid for" by taxes.
Is the American public, trained/indoctrinated to think of the USG budget in terms of a household budget analogy, ready
for MMT? I think it's politically OK to use MMT informed policies"deficits don't matter"as the Republicans have, but not
OK to openly acknowledge doing so. MMT runs head on into bedrock beliefs like the protestant moral virtues of thrift and fiscal
responsibility. People cling to this stuff as tightly as they cling to their religion and guns.
MMT is a volatile, explosive doctrine. Tell an ordinary off-the-street taxpayer that Federal taxes don't fund Federal expenditures,
that Federal taxes destroy the money they collect and so keep inflation at desired levels, and ready yourself to answer this:
"If I'm just paying taxes so the money can be burned, why should I pay taxes? What good does paying taxes for that do me,
or people like me?"
And be prepared not to have your answer heard, comprehended, or accepted, after it is given.
It could lead directly and quickly to the end of a system of tax collection based on voluntary compliance. It could ignite
a revolution.
MMT is an unpopular doctrine. Whether it is the true theory, or a truer theory than others, of the state of the worldis not
the point.
She can't. She's his staffer (on the Senate Budget Committee) so she is now allowed to work on the campaign. It would be a
big ethics violation and would produce a scandal. Staffers cannot work on any of their bosses campaigns, including re-elections.
Remember, they are government employees, not on Sanders' personal payroll.
My old party has worked hard to try discredit James Galbraith. I was faced with some ridicule from a Bush era international
negotiator for trying to read "The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too" in
an airport waiting area.
To me, too many of the supposed (and actual) intellectuals and high level advisers were experts in rationalizing and explaining
the chosen party views, but still employed the Cato Institute suggestion to use "Leninist" propaganda techniques as put forth
in the 1996 Newt Gingrich/Frank Luntz GoPac memo, "Language: A Key Mechanism of Control."
I don't oppose them (at that level) expressing their well thought out views, even using the "persuasive" techniques described
in the document at http://www.informationclearinghouse.info/article4443.htm
but I do fault them for trying to prevent people from freely exploring far more comprehensive information and views.
We left the party ancestors had founded and stayed loyal to for 5 generations, though, because of the lower level dirty tricksters
("opposition researchers") that wanted us to corrupt the processes as one fund raiser told me, "We have to fight dirtier than
Democrats."
Galbraith is a voice that must be listened to, just as there may be many others that we should be able to listen to (as I assume
we could have under the old "Fairness Doctrine" before the corporate take over of almost all fully accessible media).
stg Galbraith said casually about the thesis of his new book: This really is the new normal for capitalism meaning low
growth because there is not much growth left. So maybe we are headed for a no growth world in which stability and sustainability
dictate enterprise which is used to maintain a steady state so that sounds more socialist than capitalist out of necessity.
I believe this is our future too. And I think I understand Varoufakis' and Galbraith's "modest proposal" in a clearer light because
growth must be used going forward not willy-nilly, but to achieve our ends. And also too a while back the link that effectively
said we had it backwards when we assume that capitalism supports socialism because capitalism in reality lives off and is only
possible under sufficient socialism. And it seems the 4 presidential advisors are more out to lunch than their letter showed.
Can't respond to all the nonsense. I just read Wolfer's piece and it seems to miss the point (as with the Romers), as noted
in the following 2 articles. I especially recommend the 2nd one from John Cassidy in the New Yorker.
as usual, i hear a lot "they" failed conservatism, never, Conservatism is just the age old avenue to "scam" the other. Bush
"failed" at conservatism, i.e., it was Bush's fault not the ideology of Conservatism. on and on, this self repeated/reinforced
"idea" that we have just not "found" the correct "application" of the ideal/reality that is Conservatism.
it does get old, too. all the people killed due to Conservatism and its' perpetrators. Greed, in other words, and the age old
scam with "new and improved" tactics. These people have no concept of what "society" is, why we are all interrelated. to scam
one is to scam us all. and these people are definitely not Christian in the "Jesus Christ" i've always heard about. Whatsoever
you do unto the poor, you do unto me!
i just suppose psychopaths use any avenue for their "crimes." as i've heard, too, any great fortune is usually the result of
a great crime.
"A minority of Fed officials, however, have become increasingly forceful in registering their concerns. Those officials are
more worried about moving too fast than too slow. They fear that the persistence of sluggish inflation could damage the economy,
for example, by permanently eroding public expectations about the future pace of inflation.
The minutes said that some of those officials are reluctant to vote for additional rate increases until they are convinced
that inflation is indeed gaining strength.
The officials "indicated that their decision about whether to increase the target range in the near term would depend importantly
on whether the upcoming economic data boosted their confidence that inflation was headed toward the Committee's objective.""
"... permanently eroding public expectations about the future pace of inflation..."
[The public, being voting age people at large and all working people and so on, really would rather not expect any inflation
at all. It usually does not work out for them all that well since food prices and other headline inflation goods often rise ahead
of wages and core inflation goods. The public is not going to bail us out of this one. Poor and lower middle income people do
not even have mortgages to refinance. Economic illiteracy among the public is not our friend. The establishment however cannot
afford to make the public more economically literate for fear they will understand how the balance of trade over the last forty
year has ripped them off.]
"It usually does not work out for them all that well since food prices and other headline inflation goods often rise ahead of
wages and core inflation goods."
People also don't like being taxed to pay for infrastructure and public services.
Except for older voters, most people in advanced nations have never experienced moderate inflation.
If macro policy was done entirely by fiscal policy/better trade policy and interest rates were left alone, we'd still see higher
inflation after years of running the economy hot.
I just think that had the government did more fiscal/monetary policy after the financial crisis and allowed inflation to run over
target instead of being paranoid about accelerating inflation, the recovery would have been much quicker and people would have
been much happier even with a little inflation. Hillary would have won and inflation expectations would be higher among people
who think about such things.
When sellers of groceries, household goods, utility services, etc. can successfully raise prices, then shouldn't one think there
is still untapped consumer surplus? People with "extra money" will probably pay more, what do people with no extra money do? Buy
less, substitute down, forgo other more discretionary expenses? Shift other expenses to loaned money? Furniture and appliances
have always had financing programs, not obvious that more is bought on loan.
OTOH where I'm currently shopping, it seems grocery prices were stable over the last year. OTOH "sales" and other frequent short
term price variations are of a larger magnitude than inflation, so it's hard to tell. But a number of years ago I have definitely
noticed YOY price moves - not so now.
Grocery stores operate with very thing margins. Retail prices rise when wholesale prices rise. Rising transportation fuel costs
can push wholesale grocery prices, but a lot of food prices has to do with supply variances due to weather. Demand is not very
price elastic on staples, but luxury demand can fall severely with rising prices. Chuck roast is more of a staple for many people.
Filet mignon is a luxury for most people. Or maybe milk is a staple and candy is a luxury most of the time.
This May 20, 2016 post was probably two years early ;-) I remember looking back on the IEA's 2005 World Energy Outlook and being perplexed that
anyone still takes their price or production forecasts with any seriousness whatsoever. Their 2003 WEO is even more hilarious.
Notable quotes:
"... Eventually market sentiment focused on the recency bias of a 2 year glut is going to shift into the realization that disruptions, depletion, and growing demand have thrown the global balance into a dearth where inventories are being drawn to meet demand such as the news about Saudi's relying on inventory to meet demand, the "missing" 800,000,000 barrels of OECD inventory from Q1 2016, or next weeks inevitable U.S. inventory draw. ..."
"... Suddenly, an extra outage (like say if anything happens to Venezuela) will cause meaningful rallies instead of being mostly written off. ..."
"... The best, live, interactive charts I am most fond of are here: https://www.dailyfx.com/crude-oil ..."
"... I expect one last fight around $50, a few day consolidation move lower. Then market realities will push WTI past $50, and shorts will have to cover pushing it even higher. ..."
"... Next thing you know were range bound in the mid-$50s at the end of June as everyone questions if shale production will magically skyrocket overnight. Maybe the rig count will go up by 3 or 4, and it'll spark a sell-off back to or below $50 because of the psychological recency bias of a "repeat of 2015". ..."
"... I remember looking back on the IEA's 2005 World Energy Outlook and being perplexed that anyone still takes their price or production forecasts with any seriousness whatsoever. Their 2003 WEO is even more hilarious. ..."
"... Most people are simply incapable of seeing a bigger picture, and they'll simply never understand the relationship between depletion, economic and population growth, and the long-term fact that this equals higher prices (and probably also, in the long run, higher poverty and unemployment). ..."
"... It is for that exact same reason that so many people we know will simply never get it. Physics doesn't have agency, it cannot be avoided, cajoled, or "blamed". It simply is, and that is so unsettling to our psyche that most people have a strong, unconscious drive to negate and ignore that conclusion even if they will acknowledge it is a sound and true explanation of how economics, growth, employment, wealth, energy (physics and thermodynamics), and depletion are woven of the same fabric. ..."
"... Brian I think you are closer to reality than EIA or USGS, it will be interesting to see how it plays out against your scenario. ..."
"... There doesn't necessarily have to be more social breakdown in Venezuela to have an impact Haliburton and Schlumberger are pulling out and will have immediate effect as the extra heavy oil production needs continuous attention to the wells. I'm surprised Angola and Algeria haven't seen disruptions yet either. ..."
"The joint-venture Syncrude project told customers to expect no further crude shipments for May, trading sources said on Thursday,
extending a force majeure on crude production from earlier in the month."
Eventually market sentiment focused on the recency bias of a 2 year glut is going to shift into the realization that disruptions,
depletion, and growing demand have thrown the global balance into a dearth where inventories are being drawn to meet demand
such as the news about Saudi's relying on inventory to meet demand, the "missing" 800,000,000 barrels of OECD inventory from Q1
2016, or next weeks inevitable U.S. inventory draw.
Suddenly, an extra outage (like say if anything happens to Venezuela) will cause meaningful rallies instead of being mostly
written off.
In fact, judging by the price action on oil over the last 24 hours, I'd say that sentiment is very close to a shift. From 11
AM forward crude oil marched higher relentlessly, even in opposition to dollar strength. Most every single commodity was down,
as we're most every stock market except oil.
I expect one last fight around $50, a few day consolidation move lower. Then market realities will push WTI past $50, and
shorts will have to cover pushing it even higher.
Next thing you know were range bound in the mid-$50s at the end of June as everyone questions if shale production will
magically skyrocket overnight. Maybe the rig count will go up by 3 or 4, and it'll spark a sell-off back to or below $50 because
of the psychological recency bias of a "repeat of 2015".
That is, until rational minds, or the market itself pushes prices back up as it becomes obvious that a slowdown in U.S. production
declines will mean little in the face of mounting production declines around the globe, and "surprisingly" strong demand because
apparently predicting that lower prices will cause stronger than average demand growth is beyond the economic capability of the
EIA or IEA, and markets tend to take their word as gospel.
I remember looking back on the IEA's 2005 World Energy Outlook and being perplexed that anyone still takes their price
or production forecasts with any seriousness whatsoever. Their 2003 WEO is even more hilarious.
Every step of the way analysts and talking heads will be confused that prices aren't dropping back to $30 just like they were
for 5 straight years from 2003 to 2008. They'll predict Saudi's will raise production to 12 mbpd any day now, or that shale will
magically take off overnight.
They'll never even realize that they don't understand the history of Saudi production, or the logistical and financial complexities
of shale production rising as fast as it did before. Instead they'll blame the banks, or speculators, or Big Oil for artificially
making oil prices rise (without questioning why they let them fall for 2 years in the first place)
But then again if gas is cheap, which average people are fond of, their brain says "I like this, so it must be right". If gas
is expensive their brain says "I don't like this, it must be wrong, what evil force made this happen?!?"
Most people are simply incapable of seeing a bigger picture, and they'll simply never understand the relationship between
depletion, economic and population growth, and the long-term fact that this equals higher prices (and probably also, in the long
run, higher poverty and unemployment).
Their lives will have ups and down, growth and recession, but they'll know and feel it is generally getting harder. They'll
never be aware that this is the "fault" of nothing but physics and thermodynamics, even if told directly and shown all the rather
clear evidence (I know every one of you has experienced this as I have). Instead, they'll blame those dang immigrants, or the
Chinese, or the Congress, or regulations.
They'll blame anything that fits their paradigm enough to allow cohesiveness so their fragile lives can at least MAKE SENSE.
You can't blame physics, and, frankly, I think that is a large psychological barrier for people comprehending what is happening.
We need to have some agent to blame for things, and physics has no agency. Blaming something for a problem is settling because
it gives us something to focus on to solve the problem, or, at the very least, avoid it. The evolutionarily beneficial need to
assign agents as the cause of events is what pre-disposes us to believing that events we cannot easily assign agency to are, nonetheless,
the will of a greater, invisible, omnipresent agent.
It is for that exact same reason that so many people we know will simply never get it. Physics doesn't have agency, it
cannot be avoided, cajoled, or "blamed". It simply is, and that is so unsettling to our psyche that most people have a strong,
unconscious drive to negate and ignore that conclusion even if they will acknowledge it is a sound and true explanation of how
economics, growth, employment, wealth, energy (physics and thermodynamics), and depletion are woven of the same fabric.
Brian I think you are closer to reality than EIA or USGS, it will be interesting to see how it plays out against your scenario.
A couple of other impacts are summer maintenance season in North Sea (Buzzard and, I think, Ekofisk have major turnarounds),
Alaska and Canada (maybe Russia as well) and increased demand from driving season in USA and AC use in Middle East.
There doesn't necessarily have to be more social breakdown in Venezuela to have an impact Haliburton and Schlumberger
are pulling out and will have immediate effect as the extra heavy oil production needs continuous attention to the wells. I'm
surprised Angola and Algeria haven't seen disruptions yet either.
"... By Bill Mitchell, Professor in Economics and Director of the Centre of Full Employment and Equity at the University of Newcastle, NSW, Australia. Originally published at billy blog ..."
"... The overwhelming importance of having a job for happiness is evident throughout the analysis, and holds across all of the world's regions. ..."
"... The pattern of human concerns ..."
"... The pattern of human concerns ..."
"... Journal of Happiness Studies ..."
"... The results show the differences between having a job and being unemployed are "very large indeed" on the three well-being measures (life evaluation, positive and negative affective states). ..."
"... Psychological Bulletin ..."
"... 1. "unemployment tends to make people more emotionally unstable than they were previous to unemployment". ..."
"... 2. The unemployed experience feelings of "personal threat"; "fear"; "sense of proportion is shattered"; loss of "common sense of values"; "prestige lost in own eyes and as he imagines, in the eyes of his fellow men"; "feelings of inferiority"; loss of "self-confidence" and a general loss of "morale". ..."
"... in the light of the structure of our society where the job one holds is the prime indicator of status and prestige. ..."
"... Psychological Bulletin ..."
"... Related studies found that the "unemployed become so apathetic that they rarely read anything". Other activities, such as attending movies etc were seen as being motivated by the need to "kill time" – "a minimal indication of the increased desire for such attendance". ..."
"... In spite of hopeless attempts the unemployed continually look for work, often going back again and again to their last place of work. Other writers reiterate this point. ..."
"... The non-pecuniary effects of not having a job are significant in terms of lost status, social alienation, abandonment of daily structure etc, and that has not changed much over history. ..."
"... I think what is missing from this article is the term "identity." If you meet new people, often the conversation starts with what you do for a living. Your identity, in part, is what you do. You can call yourself a plumber, a writer, a banker, a consultant, a reporter but the point is this is part of your identity. When you lose your job long term, your identity here loses one of its main anchor points. ..."
"... This is a crucial point that UBI advocates often ignore. There is a deeply entrenched cultural bias towards associating our work status with our general status and prestige and feelings of these standings. ..."
"... When unemployed, the stress of worry about money may suppress the creative juices. Speaking from experience. People may well 'keep looking for jobs' because they know ultimately they need a job with steady income. The great experience of some freelancers notwithstanding, not all are cut out for it. ..."
"... When considering the world's population as a whole, people with a job evaluate the quality of their lives much more favorably than those who are unemployed. ..."
"... Data like that provided by Mitchell is important to demolishing the horrid "economic anxiety" frame much beloved by liberals, especially wonkish Democrats.* It's not (a) just feelings , to be solved by scented candles or training (the liberal version of rugged individualism) and (b) the effects are real and measurable. It's not surprising, when you think about it, that the working class is about work . ..."
Posted on
November 21, 2017 by Yves Smith Yves here. Reader
UserFriendly sent this post with the message, "I can confirm this." I can too. And before you
try to attribute our reactions to being Americans, note that the study very clearly points out
that its finding have been confirmed in "all of the world's regions".
By Bill Mitchell, Professor in Economics and Director of the Centre of Full Employment
and Equity at the University of Newcastle, NSW, Australia. Originally published at billy blog
Here is a summary of another interesting study I read last week (published March 30, 2017)
– Happiness at Work
– from academic researchers Jan‐Emmanuel De Neve and George Ward. It explores the
relationship between happiness and labour force status, including whether an individual is
employed or not and the types of jobs they are doing. The results reinforce a long literature,
which emphatically concludes that people are devastated when they lose their jobs and do not
adapt to unemployment as its duration increases. The unemployed are miserable and remain so
even as they become entrenched in long-term unemployment. Further, they do not seem to sense
(or exploit) a freedom to release some inner sense of creativity and purpose. The overwhelming
proportion continually seek work – and relate their social status and life happiness to
gaining a job, rather than living without a job on income support. The overwhelming conclusion
is that "work makes up such an important part of our lives" and that result is robust across
different countries and cultures. Being employed leads to much higher evaluations of the
quality of life relative to being unemployed. And, nothing much has changed in this regard over
the last 80 or so years. These results were well-known in the 1930s, for example. They have a
strong bearing on the debate between income guarantees versus employment guarantees. The UBI
proponents have produced no robust literature to refute these long-held findings.
While the 'Happiness Study' notes that "the relationship between happiness and employment is
a complex and dynamic interaction that runs in both directions" the authors are
unequivocal:
The overwhelming importance of having a job for happiness is evident throughout the
analysis, and holds across all of the world's regions. When considering the world's
population as a whole, people with a job evaluate the quality of their lives much more
favorably than those who are unemployed. The importance of having a job extends far beyond
the salary attached to it, with non-pecuniary aspects of employment such as social status,
social relations, daily structure, and goals all exerting a strong influence on people's
happiness.
And, the inverse:
The importance of employment for people's subjective wellbeing shines a spotlight on the
misery and unhappiness associated with being unemployed.
There is a burgeoning literature on 'happiness', which the authors aim to contribute to.
They define happiness as "subjective well-being", which is "measured along multiple
dimensions":
life evaluation (by way of the Cantril "ladder of life"), positive and negative affect to
measure respondents' experienced positive and negative wellbeing, as well as the more
domain-specific items of job satisfaction and employee engagement. We find that these diverse
measures of subjective wellbeing correlate strongly with each other
Cantril's 'Ladder of Life Scale' (or "Cantril Ladder") is used by polling organisations to
assess well-being. It was developed by social researcher Hadley Cantril (1965) and documented
in his book The pattern of human concerns .
You can learn more about the use of the 'Cantril Ladder' HERE
.
As we read, the "Cantril Self-Anchoring Scale consists of the following":
Please imagine a ladder with steps numbered from zero at the bottom to 10 at the top. The
top of the ladder represents the best possible life for you and the bottom of the ladder
represents the worst possible life for you. On which step of the ladder would you say you
personally feel you stand at this time? (ladder-present) On which step do you think you
will stand about five years from now? (ladder-future)
[Reference: Cantril, H. (1965) The pattern of human concerns , New Brunswick,
Rutgers University Press.]
[Reference: Bjørnskov, C. (2010) 'How Comparable are the Gallup World Poll Life
Satisfaction Data?', Journal of Happiness Studies , 11 (1), 41-60.]
The Cantril scale is usually reported as values between 0 and 10.
The authors in the happiness study use poll data from 150 nations which they say "is
representative of 98% of the world's population". This survey data is available on a mostly
annual basis since 2006.
The following graph (Figure 1 from the Study) shows "the self-reported wellbeing of
individuals around the world according to whether or not they are employed."
The "bars measure the subjective wellbeing of individuals of working age" by employment
status .
The results show the differences between having a job and being unemployed are "very large
indeed" on the three well-being measures (life evaluation, positive and negative affective
states).
People employed "evaluate the quality of their lives around 0.6 points higher on average as
compared to the unemployed on a scale from 0 to 10."
The authors also conduct more sophisticated (and searching) statistical analysis
(multivariate regression) which control for a range of characteristics (gender, age, education,
marital status, composition of household) as well as to "account for the many political,
economic, and cultural differences between countries as well as year-to-year variation".
The conclusion they reach is simple:
the unemployed evaluate the overall state of their lives less highly on the Cantril ladder
and experience more negative emotions in their day-to-day lives as well as fewer positive
ones. These are among the most widely accepted and replicated findings in the science of
happiness Here, income is being held constant along with a number of other relevant
covariates, showing that these unemployment effects go well beyond the income loss associated
with losing one's job.
These results are not surprising. The earliest study of this sort of outcome was from the famous study published by Philip
Eisenberg and Paul Lazersfeld in 1938. [Reference: Eisenberg, P. and Lazarsfeld, P. (1938) 'The psychological effects of
unemployment', Psychological Bulletin , 35(6), 358-390.]
They explore four dimensions of unemployment:
I. The Effects of Unemployment on Personality.
II. Socio-Political Attitudes Affected by Unemployment.
III. Differing Attitudes Produced by Unemployment and Related Factors.
IV. The Effects of Unemployment on Children and Youth.
On the first dimension, they conclude that:
1. "unemployment tends to make people more emotionally unstable than they were previous to
unemployment".
2. The unemployed experience feelings of "personal threat"; "fear"; "sense of proportion is
shattered"; loss of "common sense of values"; "prestige lost in own eyes and as he imagines, in
the eyes of his fellow men"; "feelings of inferiority"; loss of "self-confidence" and a general
loss of "morale".
Devastation, in other words. They were not surprised because they note that:
in the light of the structure of our society where the job one holds is the prime
indicator of status and prestige.
This is a crucial point that UBI advocates often ignore. There is a deeply entrenched
cultural bias towards associating our work status with our general status and prestige and
feelings of these standings. That hasn't changed since Eisenberg and Lazersfeld wrote up the findings of their study in
1938.
It might change over time but that will take a long process of re-education and cultural
shift. Trying to dump a set of new cultural values that only a small minority might currently
hold to onto a society that clearly still values work is only going to create major social
tensions. Eisenberg and Lazarsfeld also considered an earlier 1937 study by Cantril who explored
whether "the unemployed tend to evolve more imaginative schemes than the employed".
[Reference: Cantril, H. (1934) 'The Social Psychology of Everyday Life', Psychological
Bulletin , 31, 297-330.]
The proposition was (is) that once unemployed, do people then explore new options that were
not possible while working, which deliver them with the satisfaction that they lose when they
become jobless. The specific question asked in the research was: "Have there been any changes of interests
and habits among the unemployed?" Related studies found that the "unemployed become so apathetic that they rarely read
anything". Other activities, such as attending movies etc were seen as being motivated by the
need to "kill time" – "a minimal indication of the increased desire for such
attendance".
On the third dimension, Eisenberg and Lazersfeld examine the questions – "Are there
unemployed who don't want to work? Is the relief situation likely to increase this number?",
which are still a central issue today – the bludger being subsidized by income
support.
They concluded that:
the number is few. In spite of hopeless attempts the unemployed continually look for work,
often going back again and again to their last place of work. Other writers reiterate this
point.
So for decades, researchers in this area, as opposed to bloggers who wax lyrical on their
own opinions, have known that the importance of work in our lives goes well beyond the income
we earn. The non-pecuniary effects of not having a job are significant in terms of lost status,
social alienation, abandonment of daily structure etc, and that has not changed much over
history. The happiness paper did explore "how short-lived is the misery associated with being out of
work" in the current cultural settings.
The proposition examined was that:
If the pain is only fleeting and people quickly get used to being unemployed, then we
might see joblessness as less of a key public policy priority in terms of happiness.
They conclude that:
a number of studies have demonstrated that people do not adapt much, if at all, to being
unemployed there is a large initial shock to becoming unemployed, and then as people stay
unemployed over time their levels of life satisfaction remain low . several studies have
shown that even once a person becomes re-employed, the prior experience of unemployment
leaves a mark on his or her happiness.
So there is no sudden or even medium-term realisation that being jobless endows the
individual with a new sense of freedom to become their creative selves, freed from the yoke of
work. To bloom into musicians, artists, or whatever.
The reality is that there is an on-going malaise – a deeply entrenched sense of
failure is overwhelming, which stifles happiness and creativity, even after the individual is
able to return to work.
This negativity, borne heavily by the individual, however, also impacts on society in
general.
The paper recognises that:
A further canonical finding in the literature on unemployment and subjective wellbeing is
that there are so-called "spillover" effects.
High levels of unemployment "increase fear and heighten the sense of job insecurity". Who
will lose their job next type questions?
The researchers found in their data that the higher is the unemployment rate the greater the
anxiety among those who remain employed.
Conclusion
The overwhelming conclusion is that "work makes up such an important part of our lives" and
that result is robust across different countries and cultures.
Being employed leads to much higher evaluations of the quality of life relative to being
unemployed.
The unemployed are miserable and remain so even as they become entrenched in long-term
unemployment. They do not seem to sense (or exploit) a freedom to release some inner sense of
creativity and purpose.
The overwhelming proportion continually seek work – and relate their social status and
life happiness to gaining a job, rather than living without a job on income support.
Modern Monetary Theory (MMT) allows us to understand that it is the government that chooses
the unemployment rate – it is a political choice.
For currency-issuing governments it means their deficits are too low relative to the
spending and saving decisions of the non-government sector.
For Eurozone-type nations, it means that in surrendering their currencies and adopting a
foreign currency, they are unable to guarantee sufficient work in the face of negative shifts
in non-government spending. Again, a political choice.
The Job
Guarantee can be used as a vehicle to not only ensure their are sufficient jobs available
at all times but also to start a process of wiping out the worst jobs in the non-government
sector.
That can be done by using the JG wage to ensure low-paid private employers have to
restructure their workplaces and pay higher wages and achieve higher productivity in order to
attract labour from the Job Guarantee pool.
The Series So Far
This is a further part of a series I am writing as background to my next book with Joan
Muysken analysing the Future of Work . More instalments will come as the research
process unfolds.
The blogs in these series should be considered working notes rather than self-contained
topics. Ultimately, they will be edited into the final manuscript of my next book due in 2018.
The book will likely be published by Edward Elgar (UK).
Perhaps I'm utterly depressed but I haven't had a job job for over 5 years. Plenty of
work, however, more than I can handle and it requires priorisation. But I am deliberately not part of the organized herd. I stay away from big cities –
it's scary how managed the herd is in large groups – and I suppose that unemployment
for a herd animal is rather distressing as it is effectively being kicked out of the
herd.
Anyway my advice, worth what you pay for it but let he who has ears, etc. – is to go
local, very local, grow your own food, be part of a community, manage your own work, and
renounce the energy feast herd dynamics. "Unemployment", like "recession", is a mechanism of
control. Not very practical advice for most, I realize, trapped in the herd as they are in
car payments and mortgages, but perhaps aspirational?
I think what is missing from this article is the term "identity." If you meet new people,
often the conversation starts with what you do for a living. Your identity, in part, is what
you do. You can call yourself a plumber, a writer, a banker, a consultant, a reporter but the
point is this is part of your identity. When you lose your job long term, your identity here
loses one of its main anchor points.
Worse, there is a deliberate stigma attached with being long term unemployed. In that article
you have seen the word bludger being used. In parts of the US I have read of the shame of
'living off the county'. And yes, I have been there, seen that, and got the t-shirt. It's
going to be interesting as mechanization and computers turn large portions of the population
from workers to 'gig' workers. Expect mass demoralization.
yes the lives many of us have lived, no longer exist though we appear not notice, as we
"can" live in many of same "ways" ..rather well known psychologist defined some 40 years ago, best to "drop through
cracks"
Well, you also lose money, maybe you become homeless etc. as you have nowhere else to turn
(if there are kids involved to support it gets even scarier though there are some programs).
Or maybe you become dependent on another person(s) to support you which is of course
degrading as you know you must rely on them to live, whether it's a spouse or lover when you
want to work and bring in money, or mom and dads basement, or the kindest friend ever who
lets you sleep on their couch. I mean these are the things that really matter.
Privileged people whose main worry in unemployment would be losing identity, wow out of
touch much? Who cares about some identity for parties, but the ability to have a stable
decent life (gig work hardly counts) is what is needed.
I normally wouldn't comment like this, but you have brought up some extremely important
points about identity that I would like to address.
Recently I had the most intense mushroom experience of my entire life–so intense
that my identity had been completely stripped and I was left in a formless state, at the
level of seeing my bare, unvarnished animal neural circuitry in operation. Suddenly with a
flash of inspiration I realized that the identity of everyone, all of us, is inextricably
tied up in what we do and what we do for other people.
Following from that, I understood that if we passively rely on others for survival,
whether it be relying on friends, family, or government, then we do not have an identity or
reason for existing. And the inner self, the animal core of who we are, will realise this
lack of identity (even if the concious mind denies it), and will continually generate
feelings of profound depression and intense nihilism that will inevitably destroy us if the
root cause is not addressed.
Before this experience I was somewhat ambivalent about my politics, but immediately after
I knew that the political right was correct on everything important, from attitudes on sex to
economic philosophy. People need a core of cultural stability and hard work to grow and
become actualized. The alternative is rudderless dissatisfaction and envy that leads
nowhere.
On the topic of giving "out of kindnes and goodwill", giving without demanding anything in
return is a form of abuse, as it deprives those who receive our feel-good generosity the
motivation to form a coherent identity. If the parents of a basement-dweller were truly good
people, instead of supporting said dweller they'd drag her out by the ear and make her grow
food in the yard or some such. Likewise, those who have supported you without also giving
concrete demands and expecations in return have been unkind, and for your own good I hope
that you will immediately remove yourself from their support. On the other hand, if you have
been thoughtlessly giving because it warms the cockles of your heart, then stop it now. You
are ruining other people this way, and if your voting habits are informed by this kind of
malevolence I'd encourage you to change those as well.
Anyway the original poster is right about everything. Working and having a purpose in life
is an entirely different animal from making money and being "successful" in the
government-sponsored commercial economy. Society and government deliberately try to conflate
the two for various reasons, primarily graft of labor and genius, but that is only a
deliberate mis-framing that needlessly harms people when the mainstream economic system is in
catastrophic decline, as ours is today. You should try to clear up this misconception within
yourself as a way of getting better.
Well, I hope this message can give you a few different thoughts and help you find your way
out of the existential angst you're caught in. Don't wallow in helplessness. Think of
something useful to do, anything, whether it earns you money or not, and go out and start
doing it. You'll be surprised at how much better you feel about yourself in no time.
The problem is you said – I – had an extreme experience [burning bush], the
truth was reviled to – I – and I alone during this extreme chemically altered
state. Which by the way just happens to conform to a heap of environmental biases I
collected. This is why sound methodology demands peer review. disheveled some people think Mister Toads Wild ride at Disneyland on psychotropics is an
excellent adventure too.
I think your observation about the importance of work to identity is most perceptive. This
post makes too little distinction between work and a job and glosses over the place of work
in defining who we are to ourselves and to others. I recall the scene in the movie "About a
Boy" when the hero meets someone he cares about and she asks him what he does for a
living.
I believe there's another aspect of work -- related to identity -- missing in the analysis
of this post. Work can offer a sense of mission -- of acting as part of an effort toward a
larger goal no individual could achieve alone. However you may regard the value in putting
man on the moon there is no mistaking the sense of mission deeply felt by the engineers and
technicians working on the project. What jobs today can claim service to a mission someone
might value?
Agreed on your points. Wage slavery is nothing to aspire to. Self-determination within a
context of an interdependent community is a much better way to live. We do our thing in the city, however.
Finding that "interdependent community" is the hard part. My experience has been that this
endeavour is almost chance based; Serendipity if you will.
Here Down South, the churches still seem to have a stranglehold on small and mid scale social
organization. One of the big effects of 'churching' is the requirement that the individual
gave up personal critical thinking. Thus, the status quo is reinforced. One big happy 'Holy
Circlejerk.'
This is a crucial point that UBI advocates often ignore. There is a deeply entrenched
cultural bias towards associating our work status with our general status and prestige and
feelings of these standings.
That hasn't changed since Eisenberg and Lazersfeld wrote up the findings of their study
in 1938.
It might change over time but that will take a long process of re-education and cultural
shift. Trying to dump a set of new cultural values that only a small minority might
currently hold to onto a society that clearly still values work is only going to create
major social tensions.
I would agree about the entenched cultural norms, etc. But not the pessimism and timeline
for change. An individual can communicate a complex idea to millions in seconds, things move
fast these days.
For me, it seems that what we (we being UBI/radical change proponents) are lacking is a
compelling easily accessible story. Not just regarding UBI (as that is but one part of the
trully revolutionary transformations that must occur) but encompassing everything.
We have countless think pieces, bits of academic writing, books, etc that focus on
individual pieces and changes in isolation. But we've largely abandoned the all-encompassing
narrative, which at their heart is precisely what religion offers and why it can be so
seductive, successful, and resilient for so long.
The status quo has this type of story, it's not all that compelling but given the fact
that it is the status quo and has inertia and tradition on its side (along with the news
media, political, entertainment, etc) it doesn't have to be.
We need to abandon the single narrow issue activism that has become so prominent over the
years and get back to engaging with issues as unseparable and intimately interconnected.
Tinkering around the edges will do nothing, a new political religion is what is
required.
Sorry, I disagree vehemently. Deeply held cultural attitudes are very slow to change and
the study found that work being critical to happiness examined a large number of
societies.
Look at feminism. I was a half-generation after the time when women were starting to get a
shot at real jobs. IIRC, the first class that accepted women at Harvard Law School was in the
1950 and at Harvard Business School, 1965. And the number of first attendees was puny. The
1965 class at HBS had 10 8 women out of a graduating class of over 800; my class in 1981 had
only 11% women.
In the 1980s, you saw a shift from the belief that women could do what men could do to
promotion of the idea that women could/should be feminine as well as successful. This looked
like seriously mixed messages, in that IMHO the earlier tendency to de-emphasize gender roles
in the workplace looked like a positive development.
Women make less than 80% of what men do in the US. Even female doctors in the same
specialities make 80% of their male peers.
The Speenhamland in the UK had what amounted to an income guarantee from the 1790s to
1832. Most people didn't want to be on it and preferred to work. Two generations and being on
the support of local governments was still seen as carrying a stigma.
More generally, social animals have strongly ingrained tendencies to resent situations
they see as unfair. Having someone who is capable of working not work elicits resentment from
many, which is why most people don't want to be in that position. You aren't going to change
that.
And people need a sense of purpose. There are tons of cases of rich heirs falling into
drug addiction or alcoholism and despair because they have no sense of purpose in life. Work
provides that, even if it's mundane work to support a family. That is one of the great
dissservices the Democrats have done to the citizenry at large: sneering at ordinary work
when blue-collar men were the anchors of families and able to take pride in that.
Regarding the large number of societies, we often like to think we're more different than
we actually are focusing on a few glaringly obvious differences and generalizing from there.
Even going back a few hundred years when ideas travelled slower we were still (especially the
"west" though the "east" wasn't all that much more different either) quite similar. So I'm
less inclined to see the large number of societies as evidence.
Generally on societal changes and movements: The issue here is that the leadership has not
changed, they may soften some edges here or there (only to resharpen them again when we're
looking elsewhere) but their underlying ideologies are largely unchanged. A good mass of any
population will go along to survive, whether they agree or not (and we find increasing
evidence that many do not agree, though certainly that they do not agree on a single
alternative).
It may be impossible to implement such changes in who controls the levers of power in a
democratic fashion but it also may be immoral not implement such changes. Of course this is
also clearly a similar path to that walked by many a demonized (in most cases rightfully so)
dictator and despot. 'Tread carefully' are wise words to keep in mind.
Today we have a situation which reflects your example re: social animals and resentment of
unfairness: the elite (who falls into this category is of course debatable, some individuals
moreso than others). But they have intelligently, for their benefit, redirected that
resentment towards those that have little. Is there really any logical connection between not
engaging in wage labor (note: NOT equivalent to not working) and unfairness? Or is it a myth
crafted by those who currently benefit the most?
That resentment is also precisely why it is key that a Basic income be universal with no
means testing, everyone gets the same.
I think we should not extrapolate too much from the relatively small segment of the
population falling into the the inherited money category. Correlation is not causation and
all that.
It also seems that so often individuals jump to the hollywood crafted image of the
layabout stoner sitting on the couch giggling at cartoons (or something similarly negative)
when the concept of less wage labor is brought up. A reduction of wage labor does not equate
to lack of work being done, it simply means doing much of that work for different reasons and
rewards and incentives.
As I said in the Links thread today, we produce too much, we consume too much, we grow too
much. More wage labor overall as a requirement for survival is certainly not the solution to
any real problem that we face, its a massively inefficient use of resources and a massive
strain on the ecosystems.
I am really gobsmacked at the sense of entitlement on display here. Why are people
entitled to an income with no work? Being an adult means toil: cleaning up after yourself,
cleaning up after your kids if you have them, if you are subsistence farmer, tending your
crops and livestock, if you are a modern society denizen, paying your bills and your taxes on
time. The idea that people are entitled to a life of leisure is bollocks. Yet you promote
that.
Society means we have obligations to each other. That means work. In rejecting work you
reject society.
And the touting of "creativity" is a top 10% trope that Thomas Frank called out in Listen,
Liberal. It's a way of devaluing what the bottom 90% do.
My argument with the article is that, to me, it smacks of Taylorism. A follow-on study
would analyze how many hours a laborer must work before the acquired sense of purpose and
dignity and associated happiness began to decline. Would it be 30 hours a week of
backbreaking labor before dignity found itself eroded? 40? 50? 60? When does the worker
break? Just how far can we push the mule before it collapses?
The author alludes to this: "The overwhelming proportion relate their social status and
life happiness to gaining a job"
Work equals happiness. Got it.
But, as a former robotics instructor, and as one who watches the industry (and former
students), I see an automated future as damn near inevitable. Massive job displacement is
coming, life as a minimum wage burger flipper will cease, with no future employment prospects
short of government intervention (WPA and CCC for all, I say). I'm not a Luddite, obviously,
but there are going to be a lot of people, billions, worldwide, with no prospect of
employment. Saying, "You're lazy and entitled" is a bit presumptuous, Yves. Not everyone has
your ability, not everyone has my ability. When the burger flipping jobs are gone, where do
they go? When roombas mop the floors, where do the floor moppers go?
We could use a new Civilian Conservation Corps and and a Works Progress Administration.
There's lots of work that needs doing that isn't getting done by private corporations.
The outrage at non-work wealth and income would be more convincing if it were aimed also
at owners of capital. About 30% of national income is passive -- interest, rents, dividends.
Why are the owners of capital "entitled to an income with no work?" It's all about the
morality that underlies the returns to capital while sugaring over a devaluation of labor. As
a moral issue, everyone should share the returns on capital or we should tax away the
interest, rents, and dividends. If it's an economic issue, berating people for their beliefs
isn't a reason.
The overwhelming majority do work. The top 0.1% is almost entirely private equity managers
who are able to classify labor income as capital gains through the carried interest loophole.
Go look at the Forbes 400.
The 1% are mainly CEOs, plus elite professionals, like partners at top law and consulting
firms and specialty surgeons (heart, brain, oncology). The CEOs similarly should be seen as
getting labor income but have a lot of stock incentive pay (that is how they get seriously
rich) which again gets capital gains treatment.
You are mistaking clever taking advantage of the tax code for where the income actually
comes from. Even the kids of rich people are under pressure to act like entrepreneurs from
their families and peers. Look at Paris Hilton and Ivanka as examples. They both could have
sat back and enjoyed their inheritance, but both went and launched businesses. I'm not saying
the kids of the rich succeed, or would have succeed to the extent they do without parental
string-pulling, but the point is very few hand their fortune over to a money manager and go
sailing or play the cello.
What's your take on Rutger Bergman's ted talk? i think most jobs aren't real jobs at all,
like marketing and ceo's. why can't we do 20 hour work weeks so we don't have huge amounts of unemployment? Note, I was "unemployed" for years since "markets" decide not to fund science in the US.
Yay Germany At least I was fortunate enough to not be forced to work at Walmart or McDonalds
like the majority of people with absolutely no life choices. Ah the sweet coercion of
capitalism.
Your hopes for a UBI are undone by some of the real world observations I've made over many
years, with regard to how a guaranteed income increase, of any measure, for a whole
population of an area, affects prices. Shorter: income going up means prices are raised by
merchants to capture the new income.
Examples: A single industry town raises wages for all employees by 2% for the new calendar
year. Within the first 2 weeks of the new year, all stores and restaurants and service
providers in the town raise their prices by 2%. This happens every year there is a general
wage increase.
Example: Medicare part D passes and within 2 years, Pharma now having new captive
customers whose insurance will pay for drugs, raise prices higher and higher, even on generic
drugs.
A more recent example: ACA passes with no drug price ceilings. Again, as with the passage
of Medicare part D, Pharma raises drug prices to unheard of levels, even older and cheap but
life saving drugs, in the knowledge that a new, large group will have insurance that will pay
for the drugs – a new source of money.
Your assumption that any UBI would not be instantly captured by raised prices is naive, at
best. It's also naive to assume companies would continue to pay wages at the same level to
people still employed, instead of reducing wages and letting UBI fill in the rest. Some
corporations already underpay their workers, then encourage the workers to apply for food
stamps and other public supports to make up for the reduced wage.
The point of the paper is the importance of paid employment to a person's sense of well
being. I agree with the paper.
For the vast majority, a UBI would be income-neutral – it would have to be, to avoid
massive inflation. So people would receive a UBI, but pay more tax to compensate. The effect
on prices would be zero.
The advantage of a UBI is mostly felt at the lower end, where insecure/seasonal work does
now pay. At the moment, a person who went from farm labourer to Christmas work to summer
resort work in the UK would certainly be working hard, but also relentlessly hounded by the
DWP over universal credit. A UBI would make this sort of lifestyle possible.
Davidab,
Good for you, but your perspicacity is not scalable. People are social animals and your attitude toward "the herd", at least as expressed here,
is that of a predator, even if your taste doesn't run toward predation. Social solutions will necessarily be scalable or they won't be solutions for long.
> the organized herd a herd animal trapped in the herd
I don't think throwing 80% to 90% of the population into the "prey" bucket is especially
perspicacious politically (except, of course, for predators or parasites). I also don't think it's especially perspicacious morally. You write:
Not very practical advice for most, I realize, trapped in the herd as they are in car
payments and mortgages, but perhaps aspirational?
Let me translate that: "Trapped in the herd as many are to support spouses and children."
In other words, taking the cares of the world on themselves in order to care for others.
Unemployed stay at home dad here. My children are now old enough to no longer need a stay
at home dad. Things I have done: picked up two musical instruments and last year dug a
natural swimming pond by hand. Further, one would need to refute all the increased happiness
in retirement (NBER). Why social security but not UBI? I get being part of the precariat is
painful and this is a reality for most the unemployed no matter where you live in the world.
A UBI is unworkable because it will never be large enough to make people's lives
unprecarious. Having said that, I am almost positive if you gave every unemployed person 24 k
a year and health benefits, there would be a mass of non working happy creative folks.
UBI seems to me to encourage non-virtuous behavior – sloth, irresponsibility,
fecklessness, and spendthriftness. I like the Finnish model – unemployment insurance is
not limited – except if you refuse work provided by the local job center. Lots of work
is not being done all over America – we could guarantee honest work to all with some
imagination. Start with not spraying roundup and rather using human labor to control weeds
and invasive species.
I do agree that universal health insurance is necessary and sadly Obamacare is not
that.
The crux of this problem is the definition used for "non-virtuous behaviour."
A new CCC is a good place to start though. (Your Tax Dollars At Work! [For some definition of
tax dollars.])
As for BJ above, I would suppose that child rearing was his "employment" for years. good so
far, but his follow-up is untypical. The 'Empty Nester' mother is a well known meme.
Spendthriftness on 24K a year? Seriously? If we are disgorging unprofessional opinions, I will add my own: sloth and
irresponsibility are more signs of depression rather than freedom from having to work. In
fact, I believe (and I think much of the stuff here) supports the idea that people want to be
seen as useful in some way. Doesn't include me! :) .. unfortunately, I have the charmingly named "dependents" so there
you have it.
I lived 6 years as a grad student on 24k a year and would say it was easy. Only thing I
would have to had worried about was awful health insurance. A two household each with 24k
would be even easier, especially if you could do it in a low cost area. So I am not sure what
you mean by spendthrift. But again it will never happen, so we will be stuck with what we
have or most likely an even more sinister system. I guess I am advocating for a JG with
unlimited number of home makers per household.
except if you refuse work provided by the local job center
And who's to say that the local "job center" has work that would be appropriate for every
person's specific talents and interests? This is no better than saying that you should be
willing to go work for some minimum-wage retail job with unpredictable scheduling and other
forms of employer abuses after you lose a high-paying job requiring special talents. I have
to call bullshit on this model. I went through a two-year stretch if unemployment in no small
part because the vast majority of the available jobs for my skill set were associated with
the MIC, surveillance state or the parasitic FIRE sector. I was able to do this because I had
saved up enough FY money and had no debts or family to support.
I can also attest to the negative aspects of unemployment that the post describes. Its all
true and I can't really say that I'e recovered even now, 2.5 years after finding another
suitable job.
The job center in the neighbouring Sweden had the same function. Had is the important
word. My guess is that the last time someone lost their unemployment insurance payout due to
not accepting a job was in the early 1980s. Prior to that companies might, maybe, possibly
have considered hiring someone assigned to them – full employment forced companies to
accept what was offered. Companies did not like the situation and the situation has since
changed.
Now, when full employment is a thing of the past, the way to lose unemployment insurance
payouts is by not applying to enough jobs. An easily gamed system by people not wanting to
work: just apply to completely unsuitable positions and the number of applications will be
high. Many companies are therefore overwhelmed by applications and are therefore often forced
to hire more people in HR to filter out the unsuitable candidates.
People in HR tend not to know much about qualifications and or personalities for the job so
they tend to filter out too many. We're all familiar with the skills-shortage .
Next step of this is that the companies who do want to hire have to use recruitment agencies.
Basically outsourcing the HR to another company whose people are working on commission.
Recruiters sometimes know how to find 'talent', often they are the same kind of people with
the same skills and backgrounds as people working in HR.
To even get to the hiring manager a candidate has to go through two almost identical and
often meaningless interviews. Recruiter and then HR. Good for the GDP I suppose, not sure if
it is good for anything else.
But back on topic again, there is a second way of losing unemployment insurance payout:
Time. Once the period covered has passed there is no more payouts of insurance. After that it
it is time to live on savings, then sell all assets, and then once that is done finally go to
the welfare office and prove that savings are gone and all assets are sold and maybe welfare
might be paid out. People on welfare in Sweden are poor and the indignities they are being
put through are many. Forget about hobbies and forget about volunteering as the money for
either of those activities simply aren't available. Am I surprised by a report saying
unemployed in Sweden are unhappy? Nope.
meanwhile NYTimes testimonials Friday, show average family of 4 healthprofit costs
(tripled, due to trump demise ACA) to be $30,000. per year, with around $10,000. deductible
end of any semblance of affordable access, "murKa"
Where does a character like Bertie Wooster in "Jeeves" fit in your notions of virtuous
behavior? Would you consider him more virtuous working in the management of a firm,
controlling the lives and labor of others -- and humorously helped by his his brilliant
valet, Jeeves, getting him out of trouble?
For contrast -- in class and social status -- take a beer-soaked trailer trash gentleman
of leisure -- and for sake of argument blessed with less than average intelligence -- where
would you put him to work where you'd feel pleased with his product or his service? Would you
feel better about this fellow enjoying a six-pack after working 8 hours a day 5 days a week
virtuously digging and then filling a hole in the ground while carefully watched and goaded
by an overseer? [Actually -- how different is that from "using human labor to control weeds
and invasive species"? I take it you're a fan of chain-gangs and making the poor pick up
trash on the highways?]
What about some of our engineers and scientists virtuously serving the MIC? Is their
behavior virtuous because they're not guilty of sloth, irresponsibility [in executing their
work], fecklessness, and spendthriftness? On this last quality how do you feel about our
government who pay the salaries for all these jobs building better ways to kill and maim?
It is a design by David Pagan Butler. It is his plunge pool design, deepend is 14 by 8 by
7 deep. I used the dirt to make swales around some trees. Win win all around.
The answer is yes my spouse works. So I do have a schedule of waking up to make her lunch
everyday, meeting her at lunch to walk, and making dinner when she gets home, but we do all
those things on her days off so .
But again we would need to explain away, why people who are retired are happier? Just
because they think they payed into social security? Try explaining to someone on the SS dole
how the government spends money into existence and is not paid by taxes or that the
government never saved their tax money, so there are not entitled to this money.
I hated working for other people and doing what they wanted. I began to feel some
happiness when I had a half acre on which I could create my own projects. Things improved
even more when I could assure myself of some small guaranteed income by claiming Social
Security at age 62. To arise in the morning when I feel rested, with interesting projects
like gardens, fences, small buildings ahead and work at my own pace is the essence of delight
for me. I've been following your arguments against UBI for years and disagree vehemently.
I feel I would behave the same as you, if I had the chance. *But* no statements about
human beings are absolute, and because UBI would work for either of us does not mean it would
work for the majority. Nothing devised by man is perfect.
first you had to buy the half acre in a suitable location, then you had to work many years
to qualify for social security, the availability of which you paid for and feel you deserve.
You also have to buy stuff for fences gardens and small buildings. At most that rhymes with a
ubi but is significantly different in it's make up.
> when I had a half acre on which I could create my own projects
That is, when you acquired the half acre, which not everyone can do. It seems to
me there's a good deal of projecting going on with this thread from people who are, in
essence, statistical outliers. But Mitchell summarizes the literature:
So for decades, researchers in this area, as opposed to bloggers who wax lyrical on
their own opinions, have known that the importance of work in our lives goes well beyond
the income we earn.
If the solution that works for you is going to scale, that implies that millions more will
have to own land. If UBI depends on that, how does that happen? (Of course, in a
post-collapse scenario, the land might be taken , but that same scenario makes the
existence of institutions required to convey the UBI highly unlikely. )
Very glad to hear that Bill Mitchell is working on the "Future of Work" book, and to have
this post, and the links to the other segments. Thank you, Yves!
I don't agree with this statement. Never will. I'm the complete opposite. Give me more
leisure time and you'll find me painting, writing, playing instruments and doing things that
I enjoy. I recall back to when I was a student, I relished in the free time I got (believe me
University gave me a lot of free time) between lectures, meaning I could enjoy this time
pursuing creative activities. Sure I might be different than most people but I know countless
people who are the same.
My own opinion is that root problem lies in the pathology of the working mentality, that
'work' and having a 'job' is so engrained into our society and mindset that once you give
most people the time to enjoy other things, they simply can't. They don't know what to do
with themselves and they eventually become unhappy, watching daytime TV sat on the sofa.
I recall back to a conversation with my mother about my father, she said to me, 'I don't
know how your father is going to cope once he retires and has nothing to do' and it's that
very example of where work for so many people becomes so engrained in their mindset, that
they are almost scared of having 'nothing to do' as they say. It's a shame, it's this
systemic working mentality that has led to this mindset. I'm glad I'm the opposite of this
and proud by mother brought me up to be this way. Work, and job are not in my vocabulary. I
work to live, not live to work.
I agree with Andrew. I think this data on the negative effects says more about how being
employed fundamentally breaks the human psyche and turns them into chattel, incapable of
thinking for themselves and destroying their natural creativity. The more a human is molded
into a "good worker" the less they become a full fledged human being. The happiest people are
those that have never placed importance on work, that have always lived by the maxim "work to
live, not live to work". From my own experience every assertion in this article is the
opposite of reality. It is working that makes me apathethic, uncreative, and miserable. The
constant knowing that you're wasting your life, day after day, engaged in an activity merely
to build revenue streams for the rich, instead of doing things that help society or that
please you on a personal level, is what I find misery inducing.
I agree. If financial insecurity is removed from the equation -- free time can be used creatively
for self-actualization, whatever form that may take: cultivating the arts, hobbies, community
activities, worthy causes and projects. The ideology wafting from Mitchell's post smells to me like a rationale for wage slavery
(market driven living, neo-liberalism, etc.)
Besides how are people supposed to spend their time "exploring other opportunities" when
unemployed anyway? To collect unemployment which isn't exactly paying that much anyway, they
have to show they are applying to jobs. To go to the movies the example given costs money,
which one may tend to be short on when unemployed. They probably are looking for work
regardless (for the income). There may still be some free time. But they could go back to
school? Uh in case one just woke up from a rock they were under for 100 years, that costs
money, which one may tend to be short on when unemployed, plus there is no guarantee the new
career will pan out either, no guarantee someone is just chomping at the bit to hire a newly
trained 50 year old or something. I have always taken classes when unemployed, and paid for
it and it's not cheap.
Yes to use one's time wisely in unemployment in the existing system requires a kind of
deep psychological maturity that few have, a kind of Surrender To Fate, to the uncertainty of
whether one will have an income again or not (either that or a sugar daddy or a trust fund).
Because it's not easy to deal with that uncertainty. And uncertainty is the name of the game
in unemployment, that and not having an income may be the pain in it's entirety.
Sadly this breaking down into a "good worker" begins for most shortly after they begin
school. This type of education harms society in a myriad of ways including instilling a
dislike of learning, deference to authority (no matter how irrational and unjust), and a
destruction of a child's natural curiosity.
I don't buy your premise that people are "creative". The overwhelming majority do not have
creative projects they'd be pursuing if they had leisure and income. Go look at retirees,
ones that have just retired, are healthy, and have money.
You are really misconstruing what the studies have found and misapplied it to your
situation. Leisure time when you have a job or a role (being a student) is not at all the
same as having time when you are unemployed, with or without a social safety net.
Work: that can be me hiring someone to cut my yard, or another type of one-off thing
filled with precariousness.
Job: that less temporary work, but by no means permanent. Just a step up from the
precariousness of work.
Career: that is work in the same field over a long period of time and it is more likely
that someone will develop an identity through performing the work. Still precarious, but
maybe more fulfilling.
Sense of purpose: I was always under the impression that is something you have to give
yourself. If it can be taken away by someone what was the purpose?
one often has a role when unemployed: finding work. But it's not a very fulfilling one!
But if one is trying to find work, it's not exactly the absence of a role either even if it
still leaves significantly more free time than otherwise, maybe winning the lottery is the
absence of a role.
But then it's also not like we give people a UBI even for a few years (at any time in
adult life) to get an education. Only if they take out a student loan approaching the size of
a mortgage or have parents willing to pony up are they allowed that (to pay not just for the
education but to live because having a roof over one's head etc. is never free, a UBI via
debt it might be called).
> Give me more leisure time and you'll find me painting, writing, playing instruments
and doing things that I enjoy.
Nothing to breed resentment of "the creative class" here! Blowback from Speenhamland
brought on the workhouses, so be careful what you wish for.
UBI won't happen and JG has been tried (and failed).
The argument that JG would allow the public sector to hire more people is demeaning to
people already employed in the public sector and demonstrably false – people are hired
into the public sector without there being a JG. It is most certainly possible to be against
a JG while wanting more people working in the public sector.
The way forward is to have a government acting for people instead of for corporations.
Increase the amount of paid vacations, reduce the pension age and stop with the Soviet style
worship of work: While some people are apparently proud of their friends and relatives who
died while at work it is also possible to feel sad about that.
The JG was tried in Communist countries in Europe, Asia and Americas. The arguments then
and there were the same as here and now, made by the same type of social 'scientists'
(economists).
Would a JG be different here and now as the Republicans and Democrats are representing the
best interests of the people? Or are they representing the same kind of interests as the
Communist parties did?
Data, please. The USSR fell because it was spending on its military to keep up with the
US, a much larger economy. Countering your assertion we have this:
As long as people argue that "it's not fair" to fix the inequality issue and employ things
like debt jubilee or student loan forgiveness, or if we fix the ridiculous cost of health
care what will all those insurance agents do then we will wind up with the real kind of class
warfare, rather than the current punching from the top down, the punching will come from the
bottom, because the situation is not fair now, it's just TINA according to those who profit
from it. In my own life there is a balance of creativity and work, and I find work enables my
creativity by putting some pressure on my time, i.e., I get up earlier, I practice at 8:30 am
instead of sleeping til 10 and winding up with S.A..D., I go to bed rather than watch tv or
drink to excess.. in other words i have some kind of weird schedule, I have days off sort of
When I've been unemployed I feel the way s described in the article. I find the arguments in
favor of ubi tend to come from people who already have assets, or jobs, or family who they
take care of which is actually a job although uncommonly described as such. The only truth I
see in real life is that the unemployed I am intimately familiar with first are mentally
oppressed by the notion that to repair their situation will require they work every waking
hour at substandard wages for the rest of their life and that is a major barrier to getting
started, and that is a policy choice the gov't and elite classes purposefully made which
created the precariat and will be their undoing if they are unable to see this.
Interesting point. I read a science fiction story in which the protagonist arrives for
work at his full time job at 10:00 AM, and he's finished for the day at 4:00 PM. I can't
remember the name of the story or novel, unfortunately.
Agreed. And they already have it in places like Denmark. Why don't we talk about that? It
actually exists unlike utopian schemes for either total UBI or total work guarantee
(government job creation is not utopian, but imagining it will employ everyone is, and I
would like the UBI to be more widely tried, but in this country we are nowhere close). Funny
how utopia becomes more interesting to people than actual existing arrangements, even though
of course those could be improved on too.
The Danish work arrangement is less than a 40 hour week, and mothers especially often work
part-time but both sexes can. It's here in this country where work is either impossibly
grueling or you are not working. No other choice. In countries with more flexible work
arrangements more women actually work, but it's flexible and flexible for men who choose to
do the parenting as well. I'm not saying this should be for parents only of course.
My own situation is that I am unhappy in my well-paying job and would like nothing more
than to devote myself to other interests. I'm thirty years on in a relationship with someone
who grew up in bad financial circumstances and panics whenever I talk about leaving my job. I
tell her that we have 2 years of living expenses in the bank but I can't guarantee making the
same amount of money if I do leave my job. She has a job that she loves and is important and
pays barely 1/2 of my own income. So she worries about her future with me. She worries about
losing her home. I suppose that makes me the definition of a wage slave. And it makes for an
increasingly unhappy marriage. I admire those who have faced similar circumstances and found
a way through this. Sorry to vent, but this topic and the comments hit a nerve with me and
I'm still trying to figure this out.
Otis;
We are presently going through a period where that "two year cushion" has evaporated, for
various reasons. We are seeing our way through this, straight into penury and privation.
Take nothing for granted in todays' economy.
yes find the lower paying job that you like more first. If you just quit for nothing in
the hopes of finding one it might not happen. Of course unemployment also happens sometimes,
whether we want it or not.
The newer generations are worse when it comes to lifestyle. Those of that are older can at
least remember a time without cellphones internet streaming services leasing a new car every
2 years etc.
What about the young? My niece and her husband should be all set , his mom sunk money into
a home on the condition she moved into a mother in law apartment. So far so good right? 2
years in they are imploding even with the free child care she provides. Combined their
wireless bill a month is over $300. The sit on the couch side by side and stream netflix
shows to dueling iphones in front of a 65 inch tv that is not even turned on. Wearing
headphones in silence.
Both driving new vehicles , both have gym memberships they don't use . They buy lattes 3
or 4 times a day which is probably another 500 a month.
My uncle passed away recently and my niece asked if she was in the will. It was literally
her only communication on the subject. They are going under and could easily trim a few
thousand a month from the budget but simply won't. No one in the family is going to lift a
finger for them at this point they burned every possible bridge already. I have seen people
living in cars plenty lately but I think these will be the first I see to living in brand new
cars .
Somewhere along the line they got the impression that the american dream was a leased car
a starbucks in one hand and an iphone in the other .
Confront them with the concept of living within a paycheck and they react like a patient
hearing he has 3 months to live.
Yeah being poor, never mind growing up poor, just well and truly sucks and it can really
@@@@ you up. Gives people all sorts of issues. I'm rather like her, but I have had the joy of
multi-hour commutes to unexciting soul crushing work. Happy, happy, joy, joy! However don't
forget that with the current political economy things are likely to go bad in all sorts of
ways. This whole site is devoted to that. My suggestion is to keep the job unless you have
something lined up. Not being able to rent has it own stresses too. Take my word for it.
I may be engaging in semantics but I think conflating work and jobs makes this article a
bit of a mixed bag. I know plenty of people who are terribly unhappy in their jobs, but
nonetheless extract a sense of wellbeing from having a stable source of INCOME to pay their
bills (anecdotally speaking, acute stress from recent job losses is closely linked to
uncertainty about how bills are going to be paid, that's why those with a safety net of
accumulated savings report less stress than those without). Loss of status, social standing
and identity and the chronic stress borne from these become evident much later I.e. when the
unemployment is prolonged, accompanied of course by the still unresolved top-of-mind concern
of "how to pay the bills".
As such, acute stress for the recently unemployed is driven by financial/income
uncertainty (I.e. how am I going to pay the bills) whereas chronic stress from prolonged
unemployment brings into play the more identity driven aspects like loss of social standing
and status. For policy interventions to have any effects, policy makers would have to
delineate the primary drivers of stress (or lack of wellbeing as the author calls it) during
the various phases of the unemployment lifecycle. An Unemployment Insurance Fund (UIF) like
we have here in South Africa appears to address the early stages of unemployment, and the
accompanying acute stress, quite well by providing the income guarantee (for six months) that
cushions the shock of losing a job. What's still missing of course are interventions that
promote the quick return to employment for those on UIF, so maybe a middle of the road
solution between UBI and a jobs guarantee scheme is how policy makers should be framing this,
instead of the binary either/or we currently have.
Lots' of people think they're unhappy with their jobs. Let them sit unemployed for 9
months and ask them if they want that job back. The usual parade of anecdata is on display here in the comments. Mitchell's real data and
analysis in the article above still stand.
If you'd read through my comment, and not rushed through it with a view of dishing out a
flippant response, you'd have seen that nowhere do I question the validity of his data, I
merely question how the argument is presented in some areas (NC discourages unquestioning
deference to the views of experts no??). By the way, anecdotes do add to richer understanding
of a nuanced and layered topic (as this one is) so your dismissal of them in your haste to
invalidate people's observations is hardly helpful.
Yes people many not like their jobs but prefer the security of having them to not. Yes
even if the boss sexually harasses one (as we are seeing is very common). Yes even if there
is other workplace abuse. Yes even when it causes depression or PTSD (but if one stays with
such a job long term it ruins the self confidence that is one prerequisite to get another
job!). Yes even if one is in therapy because of job stress, sexual harassment or you name it.
The job allows the having health insurance, allows the therapy, allows the complaining about
the job in therapy to make it through another week.
When unemployed, the stress of worry about money may suppress the creative juices.
Speaking from experience. People may well 'keep looking for jobs' because they know ultimately they need a job with
steady income. The great experience of some freelancers notwithstanding, not all are cut out
for it.
I would love to see some more about happiness or its lack in retirement–referenced
by stay-at-home dad BJ , above.
I wonder, too, about the impact of *how* one loses one's job. Getting laid off vs fired vs
quitting vs involuntary retirement vs voluntary, etc feel very different. Speaking from
experience on that, too. I will search on these points and post anything of interest.
There are also other things that are degrading about the very process of being unemployed
not mentioned here. What about the constant rejection that it can entail? One is unemployed
and looking for work, one sends out resumes, many of them will never be answered, that's
rejection. Then if one is lucky they get interviews, many will never lead to jobs, yet more
rejection. Does the process of constant rejection itself have a negative effect on a human
being whether it's looking for jobs or dates or whatever? Isn't it learned helplessness to if
one keeps trying for something and keeps failing. Isn't that itself demoralizing entirely
independent of any doubtful innate demoralizing quality of leisure.
I am not so sure if I agree with this article. I think it really depends on whether or not
you have income to support yourself, hate or love your job, and the amount of outside
interests you have, among other things. Almost everyone I know who lives in the NYC area and
commutes into the city .doesn't like their job and finds the whole situation "soul-crushing".
Those that live in Manhattan proper are (feel) a bit better off. I for one stopped working
somewhat voluntarily last year. I write somewhat because I began to dislike my job so much
that it was interfering with my state of well being, however, if I had been allowed to work
remotely I probably would have stuck it out for another couple of years.
I am close enough to
62 that I can make do before SS kicks in although I have completely changed my lifestyle
– i.e. I've given up a materialistic lifestyle and live very frugally.
Additionally I
saved for many years once I decided to embark on this path. I do not find myself depressed at
all and the path this year has been very enriching and exciting (and scary) as I reflect on
what I want for the future. I'm pretty sure I will end up moving and buying a property so
that I can become as self sufficient as possible. Also, I probably will get a job down the
line – but if I can't get one because I am deemed too old that will be ok as well. The
biggest unknown for me is how much health insurance will cost in the future .
The article made clear that the studies included "unemployed but with income" from
government support. It is amazing the degree to which readers ignore that and want to make
the findings about "unemployed with no income".
That's because we Americans all have work=good=worthy=blessed by God while
workless=scum=worthless=accursed by God engraved into our collective soul. Our politics, our
beliefs, are just overlays to that.
Even when we agree that the whole situation just crushes people into paste, and for which
they have no defense regardless of how hard they work, how carefully they plan, or what they
do, that underlay makes use feel that this is their/our fault. Any suggestions that at least
some support can be decoupled from work, and that maybe work, and how much you earn, should
not determine their value, brings the atavistic fear of being the "undeserving poor,"
parasites and therefore reprobated scum.
So we don't hear what you are saying without extra effort because it's bypassing our
conscious thoughts.
Add my voice to those above who feel that forced labor is the bane of existence, not the
wellspring. All this study says to me is that refusing to employ someone in capitalist
society does not make them happy. It makes them outcasts.
So, I say yes to a JG, because anyone who wants work should be offered work. But at the
same time, a proper JG is not forced labor. And the only way to ensure that it is not forced
labor, is to decouple basic needs from wage slavery.
I am critical of those who distinguish between the job and the income. Of course the
income is critical to the dignity of the job. For many jobs, it is the primary source of that
dignity. The notion that all jobs should provide some intrinsic dignity unrelated to the
income, or that people whose dignity is primarily based on the income they earn rather than
the work they do are deluded, is to buy in to the propaganda of "passion" being a requirement
for your work and to really be blind to what is required to make a society function. Someone
has to change the diapers, and wipe the butts of old people. (yes, I've done both.) It
doesn't require passion and any sense of satisfaction is gone by about the second day. But if
you could make a middle class living doing it, there would be a lot fewer unhappy people in
the world.
It is well known that auto factory jobs were not perceived as good jobs until the UAW was
able to make them middle class jobs. The nature of the actual work itself hasn't changed all
that much over the years – mostly it is still very repetitive work that requires little
specialized training, even if the machine technology is much improved. Indeed, I would guess
that more intrinsic satisfaction came from bashing metal than pushing buttons on a CNC
machine, and so the jobs may even be less self-actualizing than they used to be.
The capitalist myth is that the private sector economy generates all the wealth and the
public sector is a claim on that wealth. Yet human development proves to us that this is not
true – a substantial portion of "human capital" is developed outside the paid economy,
government investment in R&D generates productivity growth, etc. And MMT demonstrates
that we do not require private sector savings to fund public investment.
We are still a ways from having the math to demonstrate that government investment in
caring and nurturing is always socially productive – first we need productivity numbers
that reflect more than just private sector "product." But I think we are moving in that
direction. Rather than prioritize a minimum wage JG of make-work, we should first simply pay
people good wages to raise their own children or look after their elderly and disabled
relatives. The MMT JG, as I understand it, would still require people to leave their kids
with others to look after them in order to perform some minimum wage task. That is just
dumb.
Maybe it's dumb, it's certainly dumb in a system like the U.S. where work is brutal and
often low paid and paid childcare is not well remunerated either. But caretakers also working
seems to work in countries with greater income equality, good job protections, flexible work
arrangements, and a decent amount of paid parental leave – yea Denmark, they think
their children should be raised by professionals, but also work-life balance is still pretty
good.
My take is that capitalism has made the benefits and malus of having a job so ingrained
into culture and so reinforced. Having a job is so closely linked to happiness because it
gives you the money needed to pursue it.
A job affords you the ability to pursue whatever goals you want within a capitalist
framework. "Everything" costs money and so having a job gives you the money to pay for those
costs and go on to fulfill your pursuit of happiness.
Analyzing whether people are happy or not under these conditions seem apparent that it is
going to lead to results heavily biased towards finding happiness through employment.
The unemployed are often living off someone else's income and feel like an undeserving
parasite. Adults are generally ingrained with the culture that they have to grow up and be
independent and be able to provide for a new family that they will start up. Becoming
unemployed is like being emasculated and infantile, the opposite of what is expected of
adults.
There's also that not having a job is increasingly being punished especially in the case
of America. American wages have stayed either largely static or have worsened, making being
unemployed that much more of a burden on family or friends. Unemployment has been demonized
by Reaganism and has become systematically punishable for the long term unemployed. If you
are unemployed for too long, you start losing government support. This compounds the frantic
rush to get out of unemployment once unemployed.
There is little luxury to enjoy while unemployed. Life while unemployed is a frustrating
and often disappointing hell of constant job applications and having many of them lead to
nothing. The people providing support often start to become less so over time and become more
convinced of laziness or some kind of lack of character or willpower or education or ability
or whatever. Any sense of systemic failure is transplanted into a sense of personal failure,
especially under neoliberalism.
I am not so sure about the case of Europe and otherwise. I am sure that the third world
often has little or no social safety nets so having work (in exploitative conditions in many
cases) is a must for survival.
Anyways, I wonder about the exact methodologies of these studies and I think they often
take the current feelings about unemployment and then attempt to extrapolate talking points
for UBI/JG from them. Yes, UBI wouldn't change culture overnight and it would take a very,
very long time for people to let down their guard and adjust if UBI is to be implemented in a
manner that would warrant trust. This article seems to understand the potential for that, but
decides against it being a significant factor due to the studies emphasizing the malus of
unemployment.
I wonder how different the results would be if there were studies that asked people how
they would feel if they were unemployed under a UBI system versus the current system. I know
a good number of young people (mostly under 30) who would love to drop out and just play
video games all day. Though the significance of such a drastic demographic shift would
probably lead to great political consequences. It would probably prove the anti-UBI crowd
right in that under a capitalist framework, the capitalists and the employed wouldn't
tolerate the unemployed and would seek to turn them into an underclass.
Personally I think a combination of UBI and JG should be pursued. JG would work better
within the current capitalist framework. I don't think it is without its pitfalls due to
similar possible issues (with the similar policy of full employment) either under
Keynesianism (e.g. Milton Friedman sees it as inefficient) or in the USSR (e.g. bullshit
jobs). There is the possibility of UBI having benefits (not having the unemployed be a burden
but a subsidized contributer to the economy) so I personally don't think it should be fully
disregarded until it is understood better. I would like it if there were better scientific
studies to expand upon the implications of UBI and better measure if it would work or not.
The upcoming studies testing an actual UBI system should help to end the debates once and for
all.
My $0.02:
I have a creative pursuit (no money) and a engineering/physical science technical career
(income!). I am proficient in and passionate about both. Over the last few years, the
technical career became tenuous due to consolidation of regional consulting firms (endemic to
this era)- wages flat to declining, higher work stress, less time off, conversation to
contact employment, etc.- which has resulted in two layoffs.
During the time of tenuous employment, my art took on a darker tone. During unemployment the
art stopped altogether.
I'm recently re-employed in a field that I'm not proficient. Both the peter principle and
imposter syndrome apply. My art has resumed, but the topics are singular about despair and
work, to the point that I feel like I'm constantly reworking the same one piece over and over
again. And the quality has plummeted too.
In some fields (e.g. engineering), being a wage slave is the only realistic option due to
the dominance of a small number of large firms. The big players crowd out independents and
free lancers, while pressuring their own employees through just-high-enough wages and
limiting time off. Engineering services is a relationship- based field, and the big boys (and
they are nearly all boys) have vastly bigger networks to draw work from than a small firm
unless that small firm has a big contact to feed them work (until they get gobbled up). The
big firms also have more areas of expertise which limits how useful a boutique firm is to a
client pool, except under very narrow circumstances. And if you are an introvert like most
engineering people, there's no way to compete with big firms and their marketing staff to
expand a network enough to compete.
In that way, consulting is a lot like art. To make a living at it you need either contacts or
a sponsor. Or an inheritance.
I would be interested to know what the definition of unemployment was for the purpose of
this study (I couldn't find it in the supplied links). If it's simply "people who don't have
a job," for example, then it would include the likes of the idle rich, retirees, wards of the
state, and so on. Binary statements like this one do make it sound like the broad definition
is the one in use:
When considering the world's population as a whole, people with a job evaluate the
quality of their lives much more favorably than those who are unemployed.
The conclusion seems at odds with results I've seen for some of those groups – for
example, I thought it was fairly well accepted that retirees who are supported by a
government plan that is sufficient for them to live on were generally at least as happy as
they had been during their working life.
If, on the other hand, the study uses a narrow definition (e.g. people who are of working
age, want a job or need one to support themselves financially, but can't find one) then the
conclusion seems a lot more reasonable. But that's a heavily loaded definition in economic
and cultural terms. In that case, the conclusion (people are happier if they have a job) only
holds true in the current prevailing model of society. It doesn't rule out the possibility of
structuring society or the economy differently in such a way that people can be non-working
and happy. The existence of one such population already (retirees) strongly suggests that
outcomes like this are possible. A UBI would be an example of just such a restructuring of
society, and therefore I don't think that this study and its result are necessarily a valid
argument against it.
Which makes a person happier -- being considered worthless by one's society or valuable?
How many studies do we need to answer that question? Apparently, a lot, because studies like
this one keep on going. The underlying assumption is that jobs make one valuable. So if you
don't have a job you're worthless. Now, who's happier on the whole, people with jobs or the
unemployed? That's surely good for a few more studies. Did you know that members of socially
devalued groups (minorities, non-heteros, and the like) have higher rates of dysfunction,
rather like the unemployed? Hmm, I wonder if there's maybe a similar principle at work. And
my solution is not to turn all the people of color white nor to change all the women to men
nor to "cure" gays. Well, maybe a few more conclusive studies of this kind will convince me
that we must all be the same, toeing the line for those whom it has pleased God to dictate
our values to us.
I am convinced that we shouldn't outlaw jobs, because I believe the tons of stories about
happy people in their jobs However, I also believe we shouldn't force everyone into jobs,
because I know tons of stories about happy people without jobs. You know, the stories that
the JG people explain away: parents caring for their children (JG -- "oh, we'll make that a
job!"), volunteers working on local planning issues (JG -- "oh, we'll make that a job, too.
In fact, we'll make everything worth doing a job. The important thing is to be able to force
people to work schedules and bosses, because otherwise, they'll all lie around doing nothing
and be miserable"), the retired (JG -- "that's not really the same, but they'd be better off
staying in a job"). And this is all before we get to those who can't really hold a job
because of disability or geography or other responsibilities.
I support the JG over the current situation, but as to what we should be working for, the
more I read the JG arguments, the more paternalistic and just plain narrow minded judgmental
they seem.
Data like that provided by Mitchell is important to demolishing the horrid "economic
anxiety" frame much beloved by liberals, especially wonkish Democrats.* It's not (a) just feelings , to be solved by scented candles or training (the liberal version of
rugged individualism) and (b) the effects are real and measurable. It's not surprising, when
you think about it, that the working class is about work .
* To put this another way, anybody who has really suffered the crawling
inwardness of anxiety, in the clinical sense, knows that it affects every aspect of one's
being. Anxiety is not something deplorables deploy as cover for less than creditable
motives.
Thank you George. IEA will release their WEO next week (14th).
From the OPEC-report:
"Total non-OPEC liquids supply is now forecast to grow from 57 mb/d in 2016 to 62 mb/d in
2022, with the US alone making up 75% of that increase."
The section on decline rates was interesting too (p.184): "the WOO analysis suggests an
average implied decline rate of around 4.4 mb/d in the 2018–2028 period, or 7%, of
underlying non-OPEC suply. Note that this compares with previous, more in-depth, work done by
the Secretariat, which indicated
that underlying observed decline rates in non-OPEC were lower – on average around 5.4%
– though with significant regional variations.
On the one hand, this analysis shows the challenge facing the upstream sector, with a
requirement for more than 5 mb/d p.a. of new supply, if annual average demand growth of 0.9
mb/d in the Reference Case is added to the implied 4.4 mb/d 'lost' due to natural decline. On
the other hand, the calculated implied decline rates and substantial new upstream volumes
coming online suggest that overall upstream investment activity is perhaps higher than a
quick glance at headline capex numbers would suggest "
"with tight oil making up a substantial and growing share of total non-OPEC supply (around
12% in 2016), and given its innate rapid decline rates after initial production, this may in
a sense have accelerated the underlying decline. In other words, the system can said to be
coping, with supply growth meeting demand needs at the moment"
"that overall upstream investment activity is perhaps higher than a quick glance at headline
capex numbers would suggest "
Nope it would suggest that the developments coming on line now follow a normal project
S-curve with the big investment costs in the middle then slowing down during installation and
commissioning.
There aren't many projects in the middle of the development so costs are down but the new
production coming on line is still fairly high (until the second half of next year). The
investment problem isn't going to show up really until a couple of years out, but it can't be
halted by anything that's done now, just like the over-investment impact kept running even as
oil prices crashed.
With all the kerfuffle in Saudi whatever happened to the independent assessments of their
reserves? There was a leaked report that said everything was exactly as the Saudi had been
reporting, which couldn't possibly have credibility as it came out about a week after the
consultants had started work so they wouldn't even have got their computers working properly
yet, and then something about the reports being released early next year – and since
then nothing.
As much as
US$1 trillion
of investments has either been deferred or canceled
with the lower-for-longer oil prices, and this underinvestment will
impact the future of energy, Amin Nasser, the chief executive of Saudi
Aramco, said on Tuesday.
"Not much investments have been going into the
energy sector... $1 trillion has been either deferred or cancelled,"
Nasser said at the Future Investment Initiative conference in Riyadh.
Of the US$1 trillion investment, US$300 billion was earmarked for oil
exploration and another US$700 billion for project developments,
according to the CEO of the state-held oil giant of OPEC's biggest
exporter and de facto leader Saudi Arabia.
"This will have an impact on the future of energy if nothing happens,"
Nasser noted, adding that investments are necessary because of "natural
depreciation of fields and normal rise in demand."
"We are witnessing a transformation... But it will be decades before
renewable energy takes a major share in the energy mix," the head of the
oil giant said.
In July, Nasser said that if the oil and gas industry didn't start
investing again, the global oil supply/demand curve will
reach a turning point
in "a couple of years."
"About $1 trillion in investments have already been lost since the
current downturn began," Nasser said in a
speech
at
the World Petroleum Congress in Istanbul in July.
"... By Sophie Linden, an editorial assistant at AlterNet's office in Berkeley, CA. Originally published at Alternet ..."
"... HoneyBook's research is just one insight into wage gaps. As a largely deregulated economy with unparalleled growth, it is important to make visible the economic and social divides embedded in the independent workforce. We can start by debunking the claim that freelancing is a more equitable field to work in, and with it, the idea that any economy is without prejudice. ..."
"... I would also argue that so called 'regular' employment is trending towards a "freelance" structure. Job tenures are supposedly shrinking and often going away completely. Now, that salaryman window tribe dweller is often outside of that window, washing it on a piecework basis, with no safety line. The underlying rationale for the rise of the 'freelance' work structure is to first crapify the freelance 'experience,' with lower wages a must, and then, second, extend the 'neo-crapified' work rules into the previously "safe" 'regular' work world. ..."
"... Freelancers driving the price of their labor down to $5 per hour because they have to compete against all the other people who can't find steady work is not a feminist issue– its a class issue. And that is no less true if males make $2 more per hour because of sexual discrimination. The real enemy is the billionaire who owns the corporation, the politicians, and the enforcers that grind workers down into virtual servitude. ..."
"... When a fat pig movie director pushes you down on the "casting couch" there has always been the choice to reach for the Mace or the revolver in the purse. Submitting is prostitution, choice is rejecting greed for riches and fame and joining with others to throw the boot off your neck. ..."
"... When they turn 50, if they survive that long, they'll be replaced by younger cheaper labor. Nothing really changes, except the words we use to describe our sad condition and the lower and lower age at which we're discarded. ..."
"... Freelancing is much like entrepreneurship in that it has been way oversold to the public. Most people don't do well either as freelancers or as entrepreneurs and would likely be better off as normal employees. The emphasis on "alternative" work arrangements has taken public attention away from improving the lot of traditional employees and contributes to the devaluation of ordinary workers by suggesting that they are lazy or stupid because they didn't become freelancers or gigsters or entrepreneurs of some sort. ..."
Yves here. Holey moley. One
of the good things about working for fancy firms early in my professional life was I saw how
much they charged, even when the work was often pedestrian or even dubious. So I was never shy
about setting a healthy price for my time. But regardless, how could anyone bid under the
minimum wage?
The only time I could see that making any kind of sense would be if you were
breaking into a new area and would have reason to expect the client would give you a very
valuable reference, or better yet, referrals, if they liked what you did. But my experience has
always been that clients who go cheap never appreciate the work done for them.
By Sophie Linden, an editorial assistant at AlterNet's office in Berkeley, CA.
Originally published at
Alternet
Surround yourself with positivity, exploit all marketing outlets, choose a specialized skill
-- this is the repetitive wisdom passed on to every budding creative entrepreneur. Less often
do we hear advice like, "increase the price of an invoice," or "make it non-negotiable,"
especially as it relates to the gendered wages within self-employment.
The freelance market is arguably trending across industries, with some figureheads going so
far as to say " freelance is
feminist ," mainly because women make up a slight majority. Unfortunately, before feminists
get too heady on the issue, we need to look at whether the freelance market is any more
"freeing" to the women in it, or if it is liberating any of its entrepreneurial workforce.
Right now, it's just another deregulated economy in which workers are underpaid and largely
invisible.
A recent study published by HoneyBook gives some visibility to the subject, showing that
women in the "creative economy" are actually paid significantly less than their male
counterparts, sometimes taking in an average of $5 an hour .
There are many reasons for concern about this wage discrepancy. Not only because HoneyBook
found that 63% of men and
women believed they were earning equal pay, but also because of the growing workforce
within the world of freelance, where there are already 57.3 million
freelancers in the U.S .
Industry data from UpWork and the Freelance Labor Union suggests that freelancers will be
the majority by 2027, growing three times faster than the U.S. workforce overall, and
contributing over $1.4 trillion to the U.S. economy annually. While scenes of cramped coffee
shops may be an indicator of this burgeoning workforce, these numbers are still astounding.
Without sites like UpWork and HoneyBook, they would also be hard to track.
HoneyBook is the self-employed's business management tool, hosting clients similar to those
in the aforementioned study. Labeled under the guise of "creative entrepreneurs," they are
working professionals navigating gigs in industries like photography, graphic design and
writing. With its niche data, the site analyzed over 200,000 client invoices from October
2016-2017 to look at wage discrepancy, finding that on average women made 32% less than their male competitors
. This gap is even larger than the national average, where women earn 24% less than men
nationally , 76 cents to the dollar. Troubling news for the largest, opportunist workforce
around: that is, women in freelance.
In 2015, women made up 53% of the
freelance market . This slight dominance encouraged Sara Horowitz, founder of the Freelance
Labor Union, to preemptively call freelancing "feminist." Horowitz argued that the lifestyle of
a freelancer was more palatable to the roles women desired, whether that was co-careers or
gendered domestic labor. She also argued that freelance work allowed women to avoid male
privilege in the workplace, notably
the boys club at board meetings .
While some of Horowitz's arguments hold value, we can clearly see how freelance work is
still an unequal field, at least if pay is any measure of equality among genders. Women who do
enter the field already consider themselves to have
less bargaining power . Meanwhile, the majority of invoices in HoneyBook's study quoted a
non-negotiable price, meaning women are more likely to charge less for the job. Clearly, the
reasons for the gender pay gap are embedded and multi-layered. Nevertheless, the study shows
that freelance is not entirely the liberated, equal rights, equal pay landscape Horowitz claims
it to be.
Asked why they enter the market, freelancers often cite
the flexibility of the work in a number of terms: the ability to be their own boss, as well
as the ability to choose their projects and work location. In essence, men and women draw upon
idealistic dreams of escaping workplace power-dynamics to find economic independence in their
pajamas --
a depiction that has been repeatedly critiqued . Freelancers still enter a labor force that
has few
congressional protections and is arguably as successful
as the social networks you were economically born into. Essentially it is prey to the same
laissez-faire ideals that have manipulated structural inequity across generations of workers in
the U.S. It just imagines itself differently -- now under the guise of "creative"
entrepreneurship.
HoneyBook's research is just one insight into wage gaps. As a largely deregulated
economy with unparalleled growth, it is important to make visible the economic and social
divides embedded in the independent workforce. We can start by debunking the claim that
freelancing is a more equitable field to work in, and with it, the idea that any economy is
without prejudice.
I would also argue that so called 'regular' employment is trending towards a
"freelance" structure. Job tenures are supposedly shrinking and often going away completely.
Now, that salaryman window tribe dweller is often outside of that window, washing it on a
piecework basis, with no safety line.
The underlying rationale for the rise of the 'freelance' work structure is to first crapify
the freelance 'experience,' with lower wages a must, and then, second, extend the
'neo-crapified' work rules into the previously "safe" 'regular' work world.
The only rational response to managements' claim that "we can get someone to replace you
if you do not agree to our demands," is to simply walk away from the "golden opportunity."
Sooner or later, all exploitative systems fall apart due to their own internal
contradictions. It can be painful, but: No pain (economic micro-dislocation,) no gain
(guillotines in Town Square.)
On the feminism front, and please remember that this is an older man writing, I would find
any situation where the individual allows outside forces to define said individuals self
definition, as the opposite of "liberating." Except in rare cases, what else is 'freelancing'
but a "race to the bottom?" If one is to accept the 'freelancing' ethos as presently
presented, one may as well embrace the 'contemplative life' and accept fasting and privation
as a path to communion with the godhead.
Freelancers driving the price of their labor down to $5 per hour because they have to
compete against all the other people who can't find steady work is not a feminist
issue– its a class issue. And that is no less true if males make $2 more per hour
because of sexual discrimination. The real enemy is the billionaire who owns the corporation,
the politicians, and the enforcers that grind workers down into virtual servitude.
There is
always choice. There are always drugs to be transported and sold, money to be laundered, or
accounting fraud to be fabricated. There is always choice even if the consequences are
severe. It's long been known that the fastest (and only) way for a woman to become a movie
star is on her back.
When a fat pig movie director pushes you down on the "casting couch" there has always
been the choice to reach for the Mace or the revolver in the purse. Submitting is
prostitution, choice is rejecting greed for riches and fame and joining with others to throw
the boot off your neck.
There is no organization called the Freelance Labor Union. Horowitz's organization is
called the Freelancers Union and it is little more than a buyers club. It has yet to call a
strike or organize a picket line. Nor does it call out the companies that exploit
freelancers.
$583,283.25 – using the annuity formula from Stewart's 4th edition precalc book (it
is surely the same formula in all his books ) & taking that 5 bucks an hour TIMES 2080
hours of pay in a year (40*52) = amount to save every year, for 30 years, at 4% interest.
Now, realistically, whoever underpaid you just bought a few more trinkets for today's
mansion, jet, yacht or mistress but you could have saved that money!
When they turn 50, if they survive that long, they'll be replaced by younger cheaper
labor. Nothing really changes, except the words we use to describe our sad condition and the
lower and lower age at which we're discarded.
Freelancing is much like entrepreneurship in that it has been way oversold to the
public. Most people don't do well either as freelancers or as entrepreneurs and would likely
be better off as normal employees. The emphasis on "alternative" work arrangements has taken
public attention away from improving the lot of traditional employees and contributes to the
devaluation of ordinary workers by suggesting that they are lazy or stupid because they
didn't become freelancers or gigsters or entrepreneurs of some sort.
Many young people seem to have fallen into the trap of putting too much emphasis on work
flexibility over a steady paycheck. These kinds of alternative work arrangements might be fun
and cool when you are in your 20s but not so much after 30 and especially if you want to
start a family and need a steady and reliable source of income.
I was a free lance in publishing for about twenty-five years. The tell here is the mention
of pajamas: Are we still in the world of people who want to work in their pajamas? One thing
I learned right away is that you have to get up each morning, dress like an adult, schedule
the number of billable hours that you want to charge for, and send in invoices regularly. The
successful free lances, male and female, did so. The people who started work at three in the
afternoon, after cocoa with marshmallows all day, didn't succeed.
I suspect that hourly charges among free lances are falling: That is part of our friend
"right to work," which keeps wages down. It is also part of the massive amount of outsourcing
going on. In publishing, responsibilities that always were kept in house and should remain in
house are being outsourced.
I'll also note that one of the reasons that I became a free lance, besides knowing what I
could charge for my work, is that many offices are toxic environments socially and
politically. There is a lot of stress on conformity. There is no concern for original
thinking. Inventing the wheel is considered original.
And as someone who has worked in publishing for many years and knows many talented and
powerful women in publishing, I left my last job shortly after the head of the division
introduced the new editor in chief for books as a woman. That's right. The first words: M.K.
is a woman.
M.K. turned out to be a nonentity who exploited the organization for personal ends. She
was a great absentee manager! And I no longer had a desire to be around the endless re-runs
of resentments of fellow employees.
I can remember meeting freelancers in the 1980s and 1990s. The good ones were GOOD. As in,
they had waiting lists -- you had to book them a couple of months in advance. And they
charged accordingly.
These days, that seldom happens. Why? Because there are too many people who can't find
jobs, or they only get hired for part-time work, and they have to fill the rest of their
time. Such trends do not make for increasing hourly rates.
Arizona Slim: My dance card was always filled. But as you mention above, after age 50, I
kept thinking, Am I a daring American entrepreneur and sole proprietor, or am I just
terminally unemployed (and unemployable)?
OK, what's to stop women from charging higher rates? Lower self esteem? Are their lower
wages for each hour worked? Or, do they work fewer hours?
"they are working professionals navigating gigs in industries like photography, graphic
design and writing ." Clean, no lifting, paid to create gigs where you don't get your hands
dirty, or put your body in perilous exhausting situations.
If women want to earn money, learn to be a plumber. Yes, you will get a face full of shit
occasionally, will bleed, get burned and will earn $75 an hour, often in cash.
There's a shortage of linepersons to install power lines. Up on that lift bucket, 80 feet
in the air, leaning out and ratcheting in 10,000 volt live wires covered with a rubber shock
cloth, you can make astounding amounts of money. Why aren't more women up there? Companies go
out of their way to hire women.
No mention of the free labor slave pit called "internships." How many of us have gone
through that
voluntary servitude?
I have training in the trades and have worked as a bike mechanic. On the positive side,
there's a pride of workmanship that you do not get from office work or from freelancing while
sitting at a computer. And there's the camaraderie. I never experienced anything like it --
except in that hot, greasy, dirty bike shop.
On the negative side, you can get too old and broken down to do the work. OTOH, you can be
a sit-down freelancer until you die.
What stops women from negotiating male-equivalent wages varies. Timidity and poor
negotiating skills is part of it. As Yves said above, it helps immensely to have been exposed
to the billing practices of real winners in this game. And they are disproportionately men,
specifically, men who operate like real machers.
The biggest factor is IMO, information deficit. Professional class people throughout many
industries are idiots when it comes to freely discussing remuneration with their fellow wage
slaves. Everyone acts as though their compensation package were as private and faintly dirty
as .. another package.
It's idiotic. The vast majority of us would be better off if we blurted it out over lunch
ever few months. And walking away a few tifmes is key. It's good for you. Likewise, if you do
need to take a poorly paid gig some times, treat it as slightly less than full time. Keep
lining up others. Create the bare minimum of deliverables as swiftly as you can, and get out.
Those who underpay you do not deserve your maximum effort, and they're invariably shitty
references, so do not anguish over doing only the job they've paid for.
Just don't stiff or cheat anyone lower down the line if you take an underpaid gig. I
watched a guy do that recently on a contract job that put him into contact with me, an
under-remunerated grad student. He didn't cheat me, he cheated the agency I worked for of
some small use fee. Right in front of me. His consulting firm is not one I'll be looking to
work for any time soon.
Also, always write a late charge fee in your contract. 120 day "billing cycles" are
abusive garbage in the age of computers. After thirty days, the price goes up.
Women who let themselves get stiffed all the time are a real danger to the interests of
the guys in their line of work, not just themselves. I wish more guys could see that.
Fluffy: Yes. Know rates, and have a group of friendly free lances who will tell you what
they are being offered these days. And what hourly they will turn down.
Firing clients is a necessity. I learned that from a sole proprietor who I worked for in a
small typesetting / editorial / graphic design shop. The customer isn't always right. There
are psychic benefits to firing a bad customer. And word sort-a gets around that there are
people who / companies that you refuse to take work from.
I suspect it's utter mythology that women do not attempt to attain far better paying
manual labor jobs than they do.
Speaking of high voltage wires, I know a woman who was in the International Brotherhood of
Electrical Workers Union (Brotherhood says it all!). She worked on large commercial
construction, such as the NUMI Plant (now Tesla). While she endured it through to her
retirement she had a horridly abusive (and life threatening on one occasion) go of it. Sexual
harassment (made worse by the fact that she had an hourglass figure), an actual physical
threat, knife included, while being locked in a room with someone she had already reported as
having harassed her, but was forced to work with him anyway; utter resentment of women on the
job; and stunning racism (the black males in that Brotherhood , did not fare much
better as to the racism) in the tolerant Bay Area.
As to plumbing, the bay area has current and frequent plumbing school ads on TV which
feature no women at all, and a real bro-bro atmosphere which all women who've been sexually
harassed are familiar with. At one point in my life, despite having a licensed profession, I
offered to apprentice to a plumber who just laughed at me (at the time, I was able to do
twenty chin-ups).
And, my experience (pre putting myself through college to attain a livable wage), trying
to get a job doing manual labor that actually paid a decent wage was utterly unsuccessful. I
did have a nursery job, and a very brief job at a thoroughbred stable (the owner was a horrid
human being so I quit). At both of those jobs, the only males were illegal immigrants from
Mexico, and the wages in both jobs were under regular minimum wage ag wages.
Further, to imply that 'sit' down jobs don't have their fair share of health damage, is
like saying that emotional abuse does not exist, and is not deadly when one's spirit is
killed in a situation where the other wields far more economic and social power.
Many, unfortunately too many woman included, still feel that a white or non-black male
will do a better job, no matter what that job is. For instance (and I don't know what it's
like now) I recollect while waitressing that only males were offered high end, far better
tipping, jobs in pricier restaurants. At the time, I never saw a female waitress in a high
end restaurant.
One of the world's largest fossil fuel companies is betting on electric cars.
Royal Dutch Shell (RDSA) revealed a deal on Thursday to acquire NewMotion, one of Europe's
largest electric vehicle charging providers. NewMotion specializes in converting parking
spots into electric charging stations. The Dutch firm has more than 30,000 electric charge
points in Europe.
The acquisition, Shell's first in this space, shows how Big Oil is being forced to confront
the long-term threat posed by electric cars and efforts to phase out gasoline and diesel
vehicles.
Or maybe the other way round – there's no oil left to develop so they have to find
something else to do – or both supply and demand influences, which is the reality of
all economic decisions, not one or the other however much the media feels it has to simplify
things to that level.
Interesting article. I believe we are going to see a more rapid disintegration of the
Ultra-Deepwater Drilling Industry when the markets finally correct by 20-50%. The notion that
the Ultra-Deepwater Drilling Industry will recover by 2020 or 2024 doesn't take into account
that the broader U.S. Stock markets have experienced a 230% increase from the lows without a
typical 15-20% correction.
Hell, I believe the S&P 500 just hit a record of not experiencing a 3% correction for
more than 453 days.
Transocean drilling rig utilization fell from a peak of 95% in 1H 2013 to 37% in the 1H
2017. Of the 17 Ultra-Deepwater rigs currently drilling for oil in the GoM (source: Baker
Hughes), one leased by Chevron was terminated early. So, the total will be down to 16 in
November.
Again, the wild card of much higher oil prices will only occur if the Fed and Central
banks start up the printing press BIG TIME. When the Fed's QE3 program ended, the price of
oil plummeted.
However, when the Central banks print like crazy, this won't last long. Thus, it won't be
enough to allow the Ultra-Deepwater Drilling Industry to recover.
No idea – I don't do the oil price prediction thing because I'm pretty sure nobody in
history has ever got it right for the right reason. For real 'frontier' type exploration to
start again then there would have to be a pick up in lease sales and really they have been
tailing off even in the high price years (I think I put some charts in a previous post on the
GoM showing how the percentage of offered leases taken up has been falling off. I doubt if
shallow a lot of the deep lease areas will pick up again though, there's little left.
In my opinion, exploration will not pick up too much regardless of oil price because of the
maturity of the basin, as George suggests above. (Actually, exploration may pick up a fair
bit with higher oil prices, but significant successes probably won't).
Now there certainly are those that would disagree with that, and, since I'm still in the
industry, I often hear the message about the tremendous remaining potential in the northern
deepwater GOM coming from those in the ra-ra corner.
Not much and no. I think, if anything, the future GoM production will be a bit less than I
expected about six months ago. As far as STEO goes I think they come up with a future profile
once a year and then just bias it up and down to meet this month's production number –
I think a new profile must be due soon. There is about a 10% decline per year, which might
increase a bit now, so about 170,000 bpd is needed to maintain a plateau, but the STEO has
another 100,000 per year of growth. Next year there is only Stampede early on, which has
topsides nameplate of 60,000, but only 50,000 planned with the rest available for tie backs
and probably only about 70% availability in the first year; plus Constellation – which
has maybe 30,000 but depends on decline in the rest of the Caesar-Tonga field to allow
capacity for some of it, so not all of that is net gain; the LLOG fields I described above;
and Big Foot at the end which won't contribute much in 2018. So from July 2017 to Dec. 2018
they lose maybe 230,000 and add about 90,000 to 110,000 maybe with a bit of brownfield as
well. There's also Atlantis North but I think that only maintains a plateau against fast
declines from their other wells. But EIA are saying the GoM adds 330,000. Also in 2019 Big
Foot isn't going to ramp up fast, contrary to what I previously thought. It has dry trees,
only two have been fully predrilled, the others have the top two conductor sections drilled
but the on-platform rig will have to complete them. I think the oil is pretty heavy so not
huge production from a single well, therefore even with a 70,000 nominal topsides nameplate,
the wells and the usual low availability in the first year will be limiting.
EIA's monthly production data to end of July says US production vs 2016 is averaging about
3.4 million barrels per month higher. divided by 30 is 114K bpd increase over last year
averaged month by month. (not month to month)
For Texas it's 90K bpd increase over last year, as of end of July, averaged month by
month. That's most of the 114K.
Don't know if that's far enough back in months for the correction we get here to have
moderated.
It contains a lot of interesting information. For example on page 15 we can see that oil
field discovery rate has dropped from around 20% to only 5% in 2015. Saying that it has
fallen of a cliff is not an exaggeration.
"... I already picked the peak, 2015. So I was slightly off, but not by all that much as you can clearly see by the chart. I think we are on the peak plateau right now. ..."
I already picked the peak, 2015. So I was slightly off, but not by all that much as you can
clearly see by the chart. I think we are on the peak plateau right now.
The actual 12-month
peak could be anywhere from 2017 to 2019 but no later than that. Well, in my humble opinion
anyway.
The question was about US LTO, you have picked the World C+C peak, but as far as I
remember you have not said anything recently about US LTO except that it will be before
2025.
So far the 12 month centered average for US LTO peaked in June 2015.
If US LTO output continues at the August output level (4750 kb/d) for 5 months, then a new
12 month centered average peak will be reached by Aug 2017 (average output from Feb 2017 to
Jan 2018). US LTO output has risen about 600 kb/d over the past 12 months so an assumption of
no further US LTO output increases over the next 5 months is a conservative estimate in my
view.
"... A bit old so you may have seen it already. But if you haven´t then I highly recommend you to read the global oil supply report from HSBC: YouTube clip: https://www.youtube.com/watch?v=7KfVJBNX2U4 The report: https://drive.google.com/file/d/0B9wSgViWVAfzUEgzMlBfR3UxNDg/view contains a lot of interesting information. For example on page 15 we can see that oil field discovery rate has dropped from around 20% to only 5% in 2015. Saying that it has fallen of a cliff is not an exaggeration. ..."
Iraq's oil production has increased by 1.4 million b/day since oil prices last averaged $100
in July 2014. More than any other country
Chart on Twitter: https://pbs.twimg.com/media/DMHrqLZXkAAFiro.jpg
The report:
https://drive.google.com/file/d/0B9wSgViWVAfzUEgzMlBfR3UxNDg/view contains a lot of interesting information. For example on page 15 we can see that oil
field discovery rate has dropped from around 20% to only 5% in 2015. Saying that it has
fallen of a cliff is not an exaggeration.
2017-10-11 BSEEgov: From operator reports, it is estimated that approximately 32.68 percent
of the current oil production in the Gulf of Mexico remains shut-in, which equates to 571,854
barrels of oil per day. It is also estimated that approximately 20.51 percent of the natural
gas production, or 660.55 million cubic feet per day in the Gulf of Mexico is shut-in.
https://www.bsee.gov/newsroom/latest-news/statements-and-releases/press-releases/bsee-tropical-storm-nate-activity-4
Estimate of "Lost" Gulf of Mexico crude production due to Hurricane Nate is 7.82 million
barrels of oil.
(Possible paywall, I can't quite figure out how it works on Energy Voice)
"This is particularly evident when we look at investment. While investments are expected
to pick up slightly this year and in 2018, it is clear that this is not anywhere close to
past levels and it is more evident in short-cycle, rather than long-cycle projects, which are
the industry's baseload.
"The issue of a potential investment shortfall was a recurring theme at last week's
Russia Energy Week conference, with President Vladimir Putin, as well as many oil and
energy ministers making reference to the critical investment challenge.
"As we have all learned from previous price cycles, such pronounced and long-term
declines in investments are a serious threat to future supply. But given our projected
future demand for oil, with our upcoming World Oil Outlook 2017 expecting demand to reach
over 111 million barrels a day by 2040, an increase of almost 16 million barrels a day, the
world simply cannot afford a supply crunch."
It's noticeable that OPEC, IEA and drillers/service companies, even the Aramco CEO are
raising the lack of investment more and more, but they all stay away from discussing the fall
in discoveries and lack of attractive prospective projects. Part of it is real concern,
though it's noticeable they don't offer much in the way of solutions, and definitely none
that might impact their bottom lines in the short term, but part is pre-emptive
arse-coverage.
A lot of factors seem to be lining up for an economic bust next year, but then they have
looked like that for a few years (maybe the low oil price has contributed to staving off the
problem), if it happens a supply crunch might go unnoticed for some time, and only come
appear as the real problem it will be when there is some sort of recovery expected.
The paper is two years old. Looks how his prediction fared. Stagnation is still with us
althouth low oil prices lifted all the boats. But this period is coming to the end.
Notable quotes:
"... The financial crisis that erupted in 2008 challenged the foundations of orthodox economic theory and policy. At its outset, orthodox economists were stunned into silence as evidenced by their inability to answer the Queen of England's simple question (November 5th, 2008) to the faculty of the London School of Economics as to why no one foresaw the crisis. ..."
"... Six years later, orthodoxy has fought back and largely succeeded in blocking change of thought and policy. The result has been economic stagnation ..."
"... Perspective # 3 is the progressive position which is rooted in Keynesian economics and can be labeled the "destruction of shared prosperity hypothesis" ..."
"... It is identified with the New Deal wing of the Democratic Party and the labor movement, but it has no standing within major economics departments owing to their suppression of alternatives to economic orthodoxy. ..."
"... However, financial excess is just an element of the crisis and the full explanation is far deeper than just financial market regulatory failure According to the Keynesian destruction of shared prosperity hypothesis, the deep cause is generalized economic policy failure rooted in the flawed neoliberal economic paradigm that was adopted in the late 1970s and early 1980s. ..."
"... globalization reconfigured global production by transferring manufacturing from the U.S. and Europe to emerging market economies. This new global division of labor was then supported by having U.S. consumers serve as the global economy's buyer of first and last resort, which explains the U.S. trade deficit and the global imbalances problem. ..."
"... This new global division of labor inevitably created large trade deficits that also contributed to weakening the aggregate demand (AD)generation process by causing a hemorrhage of spending on imports (Palley, 2015) ..."
"... Finance does this through three channels. First, financial markets have captured control of corporations via enforcement of the shareholder value maximization paradigm of corporate governance. Consequently, corporations now serve financial market interests along with the interests of top management. Second, financial markets in combination with corporations lobby politically for the neoliberal policy mix. ..."
"... Third, financial innovation has facilitated and promoted financial market control of corporations via hostile take-overs, leveraged buyouts and reverse capital distributions. Financial innovation has therefore been key for enforcing Wall Street's construction of the shareholder value maximization paradigm. ..."
"... The second vital role of finance is the support of AD. The neoliberal model gradually undermined the income and demand generation process, creating a growing structural demand gap. The role of finance was to fill that gap. Thus, within the U.S., deregulation, financial innovation, speculation, and mortgage lending fraud enabled finance to fill the demand gap by lending to consumers and by spurring asset price inflation ..."
"... this AD generation role of finance was an unintended consequence and not part of a grand plan. Neoliberal economists and policymakers did not realize they were creating a demand gap, but their laissez-faire economic ideology triggered financial market developments that coincidentally filled the demand gap. ..."
"... the financial process they unleashed was inevitably unstable and was always destined to hit the wall. There are limits to borrowing and limits to asset price inflation and all Ponzi schemes eventually fall apart. ..."
"... the long duration of financial excess made the collapse far deeper when it eventually happened. It has also made escaping the after-effects of the financial crisis far more difficult as the economy is now burdened by debts and destroyed credit worthiness. That has deepened the proclivity to economic stagnation. ..."
"... The neoliberal labor market flexibility agenda explicitly attacks unions and works to shift income to wealthier households. ..."
"... That model inevitably produces stagnation because it produces a structural demand shortage via (i) its impact on income distribution, and (ii) via its design of globalization which generates massive trade deficits, wage competition and off-shoring of jobs and investment. In terms of the three-way contest between the government failure hypothesis, the market failure hypothesis and the destruction of shared prosperity hypothesis, the economic policy debate during the Great Recession was cast as exclusively between government failure and market failure. ..."
"... This attitude to fiscal policy reflects the dominance within the Democratic Party of "Rubinomics", the Wall Street view associated with former Treasury Secretary Robert Rubin, that government spending and budget deficits raise real interest rates and thereby lower growth. According to that view, the US needs long-term fiscal austerity to offset Social Security and Medicare Side-by-side with the attempt to reflate the economy, the Obama administration also pushed for major overhaul and tightening of financial sector regulation via the Dodd- Frank Act (2010). ..."
"... The Obama administration's softcore neoliberalism would have likely generated stagnation by itself, but the prospect has been further strengthened by Republicans. ..."
"... The Obama administration was to provide fiscal stimulus to jump start the economy; the Fed would use QE to blow air back into the asset price bubble; the Dodd-Frank Act (2010) would stabilize financial markets; and globalization would be deepened by further NAFTA-styled international agreements. This is a near-identical model to that which failed so disastrously. Consequently, stagnation is the logical prognosis. ..."
"... Consequently, the economy is destined to repeat the patterns of the 1990s and 2000s. However, the US economy has also experienced almost twenty more years of neoliberalism which has left its economic body in worse health than the 1990s. That means the likelihood of delivering another bubble-based boom is low and stagnation tendencies will likely reassert themselves after a shorter and weaker period of expansion ..."
This paper examines the major competing interpretations of the economic crisis in the US and
explains the rebound of neoliberal orthodoxy. It shows how US policymakers acted to stabilize
and save the economy, but failed to change the underlying neoliberal economic policy model.
That failure explains the emergence of stagnation, which is likely to endure
Current economic
conditions in the US smack of the mid-1990s. The 1990s expansion proved unsustainable and so
will the current modest expansion. However, this time it is unlikely to be followed by
financial crisis because of the balance sheet cleaning that took place during the last
crisis
Revised 1: This paper has been prepared for inclusion in Gallas, Herr, Hoffer and Scherrer
(eds.), Combatting Inequality: The Global North and South , Rouledge, forthcoming in
2015.
The crisis and the resilience of neoliberal economic orthodoxy
The financial crisis that erupted in 2008 challenged the foundations of orthodox economic
theory and policy. At its outset, orthodox economists were stunned into silence as evidenced by
their inability to answer the Queen of England's simple question (November 5th, 2008) to the
faculty of the London School of Economics as to why no one foresaw the crisis.
Six years later,
orthodoxy has fought back and largely succeeded in blocking change of thought and policy. The
result has been economic stagnation
This paper examines the major competing interpretations of
the economic crisis in the US and explains the rebound of neoliberal orthodoxy. It shows how US
policymakers acted to stabilize and save the economy, but failed to change the underlying
neoliberal economic policy model.
That failure explains the emergence of stagnation in the US
economy and stagnation is likely to endure.
Current economic conditions in the US smack of the
mid-1990s. The 1990s expansion proved unsustainable and so will the current modest expansion.
However, this time it is unlikely to be followed by financial crisis because of the balance
sheet cleaning that took place during the last crisis.
Competing explanations of the
crisis
The Great Recession, which began in December 2007 and includes the financial crisis of 2008,
is the deepest economic downturn in the US since the World War II. The depth of the downturn is
captured in Table 1 which shows the decline in GDP and the peak unemployment rate. The
recession has the longest duration and the decline in GDP is the largest. The peak unemployment
rate was slightly below the peak rate of the recession of 1981-82. However, this ignores the
fact that the labor force participation rate fell in the Great Recession (i.e. people left the
labor force and were not counted as unemployed) whereas it increased in the recession of
1981-82 (i.e. people entered the labor force and were counted as unemployed).
Table 1. Alternative measures of the depth of US recessions.
... ... ...
Table 2 provides data on the percent change in private sector employment from business cycle
peak to trough. The 7.6 percent loss of private sector jobs in the Great Recession dwarfs other
recessions, providing another measure of its depth and confirming it extreme nature. 2 Over the
course of the 1981-82 labor force participation rose from 63.8 percent to 64.2 percent, thereby
likely increasing the unemployment rate. In contrast, over the course of the Great Recession
the labor force participation rate fell from 66.0 percent to 65.7 percent, thereby likely
decreasing the unemployment. The decrease in the labor force participation rate was even
sharper for prime age (25 – 54 years old) workers, indicating that the decrease in the
overall participation rate was not due to demographic factors such as an aging population.
Instead, it was due to lack of job opportunities, which supports the claim that labor force
exit lowered the unemployment rate. Table 2. U.S. private employment cycles, peak to trough.
Source: Bureau of labor statistics and author's calculations.
... ... ...
Broadly speaking there exist three competing perspectives on the crisis (Palley, 2012).
Perspective # 1 is the hardcore neoliberal position which can be labeled the
"government failure hypothesis" . In the U.S. it is identified with the Republican
Party and with the economics departments of Stanford University, the University of Chicago,
and the University of Minnesota.
The hardcore neoliberal government failure argument is that
the crisis is rooted in the U.S. housing bubble and its bust. The claim is that the bubble
was due to excessively prolonged loose monetary policy and politically motivated government
intervention in the housing market aimed at increasing ownership. With regard to monetary
policy, the Federal Reserve pushed interest rates too low for too long following the
recession of 2001.
With regard to the housing market, government intervention via the
Community Reinvestment Act and Fannie Mae and Freddie Mac, drove up house prices and
encouraged homeownership beyond peoples' means.
Perspective # 2 is the softcore neoliberal position, which can be labeled the "market
failure hypothesis" . It is identified with the Obama administration, the Walls Street
and Silicon Valley wing of the Democratic Party, and economics departments such as those at
MIT, Yale and Princeton. In Europe it is identified with "Third Way" politics.
The softcore
neoliberal market failure argument is that the crisis is due to inadequate financial sector
regulation. First, regulators allowed excessive risk-taking by banks. Second, regulators
allowed perverse incentive pay structures within banks that encouraged management to engage
in "loan pushing" rather than "sound lending." Third, regulators pushed both deregulation and
self-regulation too far. Together, these failures contributed to financial misallocation,
including misallocation of foreign saving provided through the trade deficit, that led to
financial crisis. The crisis in turn deepened an ordinary recession, transforming it into the
Great Recession which could have become the second Great Depression absent the extraordinary
policy interventions of 2008-09
Perspective # 3 is the progressive position which is rooted in Keynesian economics and
can be labeled the "destruction of shared prosperity hypothesis".
It is identified
with the New Deal wing of the Democratic Party and the labor movement, but it has no
standing within major economics departments owing to their suppression of alternatives to
economic orthodoxy. The Keynesian "destruction of shared prosperity" argument is that
the crisis is rooted in the neoliberal economic paradigm that has guided economic policy for
the past thirty years. An important feature of the argument is that, though the U.S. is the
epicenter of the crisis, all countries are implicated as they all participated in the
adoption of a systemically flawed policy paradigm. That paradigm infected finance via
inadequate regulation, enabling financial excess that led to the financial crisis of 2008.
However, financial excess is just an element of the crisis and the full explanation is far
deeper than just financial market regulatory failure According to the Keynesian destruction
of shared prosperity hypothesis, the deep cause is generalized economic policy failure rooted
in the flawed neoliberal economic paradigm that was adopted in the late 1970s and early
1980s.
For the period 1945 - 1975 the U.S. economy was characterized by a "virtuous circle"
Keynesian growth model built on full employment and wage growth tied to productivity growth.
This model is illustrated in Figure 1 and its logic was as follows. Productivity growth drove
wage growth, which in turn fuelled demand growth and created full employment. That provided an
incentive for investment, which drove further productivity growth and supported higher wages.
This model held in the U.S. and, subject to local modifications, it also held throughout the
global economy - in Western Europe, Canada, Japan, Mexico, Brazil and Argentina.
Figure 1. The 1945 – 75 virtuous circle Keynesian growth model. Wage growth Demand
growth Full employment Productivity growth Investment
After 1980 the virtuous circle Keynesian
growth model was replaced by a neoliberal growth model. The reasons for the change are a
complex mix of economic, political and sociological reasons that are beyond the scope of the
current paper. The key changes wrought by the new model were:
Abandonment of the commitment
to full employment and the adoption of commitment to very low inflation;
Severing of the
link between wages and productivity growth.
Together, these changes created a new economic
dynamic. Before 1980, wages were the engine of U.S. demand growth. After 1980, debt and asset
price inflation became the engine The new economic model was rooted in neoliberal economic
thought. Its principal effects were to weaken the position of workers; strengthen the position
of corporations; and unleash financial markets to serve the interests of financial and business
elites.
As illustrated in figure 2, the new model can be described as a neoliberal policy box
that fences workers in and pressures them from all sides. On the left hand side, the corporate
model of globalization put workers in international competition via global production networks
that are supported by free trade agreements and capital mobility.
On the right hand side, the
"small" government agenda attacked the legitimacy of government and pushed persistently for
deregulation regardless of dangers. From below, the labor market flexibility agenda attacked
unions and labor market supports such as the minimum wage, unemployment benefits, employment
protections, and employee rights. From above, policymakers abandoned the commitment of full
employment, a development that was reflected in the rise of inflation targeting and the move
toward independent central banks influenced by financial interests.
Figure 2. The neoliberal
policy box. Globalization WORKERS Abandonment of full employment Small Government Labor Market
Flexibility
Corporate globalization is an especially key feature. Not only did it exert
downward inward pressures on economies via import competition and the threat of job
off-shoring, it also provided the architecture binding economies together. Thus, globalization
reconfigured global production by transferring manufacturing from the U.S. and Europe to
emerging market economies. This new global division of labor was then supported by having U.S.
consumers serve as the global economy's buyer of first and last resort, which explains the U.S.
trade deficit and the global imbalances problem.
This new global division of labor inevitably
created large trade deficits that also contributed to weakening the aggregate demand
(AD)generation process by causing a hemorrhage of spending on imports (Palley, 2015)
An
important feature of the Keynesian hypothesis is that the neoliberal policy box was implemented
on a global basis, in both the North and the South. As in the U.S., there was also a structural
break in policy regime in both Europe and Latin America. In Latin America , the International
Monetary Fund and World Bank played an important role as they used the economic distress
created by the 1980s debt crisis to push neoliberal policy
They did so by making financial
assistance conditional on adopting such policies. This global diffusion multiplied the impact
of the turn to neoliberal economic policy and it explains why the Washington Consensus enforced
by the International Monetary Fund and World Bank has been so significant. It also explains why
stagnation has taken on a global dimension.
III The role of finance in the neoliberal
model
Owing to the extraordinarily deep and damaging nature of the financial crisis of 2008,
financial market excess has been a dominant focus of explanations of the Great Recession.
Within the neoliberal government failure hypothesis the excess is attributed to ill-advised
government intervention and Federal Reserve interest rate policy. Within the neoliberal market
failure hypothesis it is attributed to ill-advised deregulation and failure to modernize
regulation.
According to the Keynesian destruction of shared prosperity hypothesis neither of
those interpretations grasps the true significance of finance. The government failure
hypothesis is empirically unsupportable (Palley, 2012a, chapter 6), while the market failure
hypothesis has some truth but also misses the true role of finance That role is illustrated in
Figure 3 which shows that finance performed two roles in the neoliberal model. The first was to
structurally support the neoliberal policy box. The second was to support the AD generation
process. These dual roles are central to the process of increasing financial domination of the
economy which has been termed financialization (Epstein, 2004, p.3; Krippner, 2004, 2005;
Palley, 2013). Figure 3. The role of finance in the neoliberal model. The role of finance:
"financialization" Supporting the neoliberal policy box Aggregate demand generation Corporate
behavior Economic policy Financial innovation The policy box shown in Figure 2 has four sides.
A true box has six sides and a four sided structure would be prone to structural weakness.
Metaphorically speaking, one role of finance is to provide support on two sides of the
neoliberal policy box, as illustrated in Figure 4.
Finance does this through three channels.
First, financial markets have captured control of corporations via enforcement of the
shareholder value maximization paradigm of corporate governance. Consequently, corporations now
serve financial market interests along with the interests of top management. Second, financial
markets in combination with corporations lobby politically for the neoliberal policy mix.
The
combination of changed corporate behavior and economic policy produces an economic matrix that
puts wages under continuous pressure and raises income inequality.
Third, financial innovation
has facilitated and promoted financial market control of corporations via hostile take-overs,
leveraged buyouts and reverse capital distributions. Financial innovation has therefore been
key for enforcing Wall Street's construction of the shareholder value maximization paradigm.
Figure 4. Lifting the lid on the neoliberal policy box. The neoliberal box Corporations
Financial markets
The second vital role of finance is the support of AD. The neoliberal model
gradually undermined the income and demand generation process, creating a growing structural
demand gap. The role of finance was to fill that gap. Thus, within the U.S., deregulation,
financial innovation, speculation, and mortgage lending fraud enabled finance to fill the
demand gap by lending to consumers and by spurring asset price inflation
Financialization
assisted with this process by changing credit market practices and introducing new credit
instruments that made credit more easily and widely available to corporations and households.
U.S. consumers in turn filled the global demand gap, along with help from U.S. and European
corporations who were shifting manufacturing facilities and investment to the emerging market
economies.
Three things should be emphasized.
First, this AD generation role of finance was an
unintended consequence and not part of a grand plan. Neoliberal economists and policymakers did
not realize they were creating a demand gap, but their laissez-faire economic ideology
triggered financial market developments that coincidentally filled the demand gap.
Second, the
financial process they unleashed was inevitably unstable and was always destined to hit the
wall. There are limits to borrowing and limits to asset price inflation and all Ponzi schemes
eventually fall apart. The problem is it is impossible to predict when they will fail. All that
can be known with confidence is that it will eventually fail.
Third, the process went on far
longer than anyone expected, which explains why critics of neoliberalism sounded like Cassandras (Palley, 1998, Chapter 12). However,
the long duration of financial excess made the
collapse far deeper when it eventually happened. It has also made escaping the after-effects of
the financial crisis far more difficult as the economy is now burdened by debts and destroyed
credit worthiness. That has deepened the proclivity to economic stagnation.
IV
Evidence
Evidence regarding the economic effects of the neoliberal model is plentiful and clear
Figure 5 shows productivity and average hourly compensation of non-supervisory workers (that is
non-managerial employees who are about 80 percent of the workforce). The link with productivity
growth was severed almost 40 years ago and hourly compensation has been essentially stagnant
since then.
Figure 5.
... ... ...
Table
3 shows data on the distribution of income growth by business cycle expansion across the
wealthiest top 10 percent and bottom 90 percent of households. Over the past sixty years there
has been a persistent decline in the share of income gains going to the bottom 90 percent of
households ranked by wealth. However, in the period 1948 – 1979 the decline was gradual.
After 1980 there is a massive structural break and the share of income gains going to the
bottom 90 percent collapses. Before 1980, on average the bottom 90 percent received 66 percent
of business cycle expansion income gains. After 1980, on average they receive just 8 percent.
Table 3. Distribution of income growth by business cycle expansion across the wealthiest top 10
percent and bottom 90 percent of households. Source: Tcherneva (2014), published in The New
York Times , September 26, 2014. '49- '53 '54- '57 '59- '60 '61- '69 '70- '73 '75- '79
'82- '90 '91- '00 '01- '07 '09- '12 Average Pre-1908 Average Post-1980 Top 10% 20% 28 32 33
43 45 80 73 98 116 34% 92% Bottom 90% 80% 72 68 67 57 55 20 27 2 -16 66% 8%
Figure 6
shows the share of total pre-tax income of the top one percent of households ranked by wealth.
From the mid-1930s, with the implementation of the New Deal social contract, that share fell
from a high of 23.94 percent in 1928 to a low of 8.95 percent in 1978. Thereafter it has
steadily risen, reaching 23.5 percent in 2007 which marked the beginning of the Great
Recession. It then fell during the Great Recession owing to a recession-induced fall in
profits, but has since recovered most of that decline as income distribution has worsened again
during the economic recovery. In effect, during the neoliberal era the US economy has retraced
its steps, reversing the improvements achieved by the New Deal and post-World War II
prosperity, so that the top one percent's share of pre-tax income has returned to pre-Great
Depression levels.
Figure 6. US pre-tax income share of top 1 percent. Source:
http://inequality.org/income-inequality/. Original source: Thomas Piketty and Emanuel Saez
(2003), updated at http://emlab.edu/users/saez.
As argued in Palley (2012a, p. 150-151) there
is close relationship between union membership density (i.e. percent of employed workers that
are unionized) and income distribution. This is clearly shown in Figure 7 which shows union
density and the share of pre-tax income going to the top ten percent of wealthiest households.
The neoliberal labor market flexibility agenda explicitly attacks unions and works to shift
income to wealthier households.
Share of income going to the top 10 percent 2013: 47.0% Union
membership density 11.2% 0% 10% 20% 30% 40% 50% 60% 1917 1923 1929 1935 1941 1947 1953 1959
1965 1971 1977 1983 1989 1995 2001 2007 2013 Source: Data on union density follows the
composite series found in Historical Statistics of the United States; updated to 2013 from
unionstats.com. Income inequality (share of income to top 10%) from Piketty and Saez,
"Income
Inequality in the United States, 1913-1998, Quarterly Journal of Economics , 118(1),
2003, 1-39. Updated Figure 7. Union membership and the share of income going to the top ten
percent of wealthiest households, 1917 – 2013. Source: Mishel, Gould and Bivens (2015).
Table 4 provides data on the evolution of the U.S. goods and services trade balance as a share
of GDP by business cycle peak. Comparison across peaks controls for the effect of the business
cycle. The data show through to the late 1970s U.S. trade was roughly in balance, but after
1980 it swung to massive deficit and the deficits increased each business cycle. These deficits
were the inevitable product of the neoliberal model of globalization (Palley, 2015) and they
undermined the AD generation process in accordance with the Keynesian hypothesis.
Table 4. The
U.S. goods & services trade deficit/surplus by business cycle peaks, 1960 – 2007.
Sources: Economic Report of the President, 2009 and author's calculations. Business cycle
peak year Trade balance ($ millions) GDP ($ billions) Trade balance/ GDP (%) 1960 3,508
526.4 0.7 1969 91 984.6 0.0 1973 1,900 1,382.7 0.1 1980 -25,500 2,789.5
-0.9 1981 -28,023 3,128.4 -0.9 1990 -111,037 5,803.1 -1.9 2001 -429,519
10,128.0 -4.2 2007 -819,373 13,807.5 -5.9
Finally, Figure 8 shows total domestic debt
relative to GDP and growth. This Figure is highly supportive of the Keynesian interpretation of
the role of finance. During the neoliberal era real GDP growth has actually slowed but debt
growth has exploded. The reason is the neoliberal model did nothing to increase growth, but it
needed faster debt growth to fill the demand gap created by the model's worsening of income
distribution and creation of large trade deficits. Debt growth supported debt-financed consumer
spending and it supported asset price inflation that enabled borrowing which filled the demand
gap caused by the neoliberal model. Figure 8. Total domestic debt and growth (1952-2007).
Source: Grantham, 2010.
V The debate about the causes of the crisis: why it matters
The importance of the debate about the causes of the crisis is that each perspective
recommends its own different policy response. For hardcore neoliberal government failure
proponents the recommended policy response is to double-down on the policies described by the
neoliberal policy box and further deregulate markets; to deepen central bank independence and
the commitment to low inflation via strict rules based monetary policy; and to further shrink
government and impose fiscal austerity to deal with increased government debt produced by the
crisis For softcore neoliberal market failure proponents the recommended policy response is to
tighten financial regulation but continue with all other aspects of the existing neoliberal
policy paradigm. That means continued support for corporate globalization, socalled labor
market flexibility, low inflation targeting, and fiscal austerity in the long term.
Additionally, there is need for temporary large-scale fiscal and monetary stimulus to combat
the deep recession caused by the financial crisis.
However, once the economy has recovered,
policy should continue with the neoliberal model For proponents of the destruction of shared
prosperity hypothesis the policy response is fundamentally different. The fundamental need is
to overthrow the neoliberal paradigm and replace it with a "structural Keynesian" paradigm.
That involves repacking the policy box as illustrated in Figure 9.
The critical step is to take
workers out of the box and put corporations and financial markets in so that they are made to
serve a broader public interest. The key elements are to replace corporate globalization with
managed globalization that blocks race to the bottom trade dynamics and stabilizes global
financial markets; restore a commitment to full employment; replace the neoliberal
anti-government agenda with a social democratic government agenda; and replace the neoliberal
labor market flexibility with a solidarity based labor market agenda.
The goals are restoration
of full employment and restoration of a solid link between wage and productivity growth.
Figure
9. The structural Keynesian box Corporations & Managed Financial Markets Globalization Full
Employment Social Democratic Government Solidarity Labor Markets
Lastly, since the neoliberal
model was adopted as part of a new global economic order, there is also need to recalibrate the
global economy. This is where the issue of "global rebalancing" enters and emerging market
economies need to shift away from export-led growth strategies to domestic demand-led
strategies. That poses huge challenges for many emerging market economies because they have
configured their growth strategies around export-led growth whereby they sell to U.S.
consumers.
VI From crisis to stagnation: the failure to change
Massive policy interventions, unequalled in the post-war era, stopped the Great Recession
from spiraling into a second Great Depression. The domestic economic interventions included the
2008 Troubled Asset Relief Program (TARP) that bailed out the financial sector via government
purchases of assets and equity from financial institutions; the 2009 American Recovery and
Reinvestment Act (ARRA) that provided approximately $800 billion of fiscal stimulus, consisting
of approximately $550 billion of government spending and $250 billion of tax cuts; the Federal
Reserve lowering its interest target to near-zero (0 - 0.25 percent); and the Federal Reserve
engaging in quantitative easing (QE) transactions that involve it purchasing government and
private sector securities. At the international level, in 2008 the Federal Reserve established
a temporary $620 billion foreign exchange (FX) swap facility with foreign central banks.
That
facility provided the global economy with dollar balances, thereby preventing a dollar
liquidity shortage from triggering a wave of global default on short-term dollar loans that the
financial system was unwilling to roll-over because of panic.3
Additionally, there was
unprecedented globally coordinated fiscal stimulus arranged via the G-20 mechanism. 3
The FX
swaps with foreign central banks have been criticized as being a bail-out for foreign
economies. In fact, they saved the US financial system which would have been pulled down by
financial collapse outside
Despite their scale, these interventions did not stop the recession
from being the deepest since 1945, and nor did they stop the onset of stagnation. Table 5 shows
how GDP growth has failed to recover since the end of the Great Recession, averaging just 2.1
percent for the five year period from 2010 – 2014. Furthermore, that period includes the
rebound year of 2010 when the economy rebounded from its massive slump owing to the
extraordinary fiscal and monetary stimulus measures that were put in place
Table 5. U.S. GDP
growth. Source: Statistical Annex of the European Union, Autumn 2014 and author's calculations.
The growth rate for 2014 is that estimated in October 2014.
Table 6 shows employment creation in the five years after the end of recessions, which provides
another window on stagnation. The job creation numbers show that the neoliberal model was
already slowing in the 1990s with the first episode of "jobless the US.
Many foreign banks
operating in the US had acquired US assets financed with short-term dollar borrowings. When the
US money market froze in 2008 they could not roll-over these loans in accordance with normal
practice. That threatened massive default by these banks within the US financial system, which
would have pulled down the entire global financial system.
The Federal Reserve could not lend
directly to these foreign banks and their governing central banks lacked adequate dollar
liquidity to fill the financing gap. The solution was to lend dollars to foreign central banks,
which then made dollar loans to foreign banks in need of dollar roll-over short-term financing.
recovery".
It actually ground to stagnation in the 2001 – 2007 period, but this was
masked by the house price bubble and the false prosperity it created. Stagnation has persisted
after the Great Recession, but the economic distress caused by the recession has finally
triggered awareness of stagnation among elites economists. In a sense, the Great Recession
called out the obvious, just as did the little boy in the Hans Anderson story about the
emperor's new suit
Table 6. U.S. private sector employment creation in the five year period
after the end of recessions for six business cycles with extended expansions. Source: Bureau of
labor statistics and author's calculations. * = January 1980 the beginning of the next
recession Recession end date Employment at recession end date (millions) Employment five years
later (millions) Percent growth in employment Feb 1961 45.0 52.2 16.0% Mar 1975 61.9 74.6*
20.5% Nov 1982 72.8 86.1 18.3% March 1991 90.1 99.5 10.4% Nov 2001 109.8 115.0 4.7% June 2009
108.4 117.1 8.0% The persistence of stagnation after the Great Recession raises the question
"why"? The answer is policy has done nothing to change the structure of the underlying
neoliberal economic model.
That model inevitably produces stagnation because it produces a
structural demand shortage via (i) its impact on income distribution, and (ii) via its design
of globalization which generates massive trade deficits, wage competition and off-shoring of
jobs and investment. In terms of the three-way contest between the government failure
hypothesis, the market failure hypothesis and the destruction of shared prosperity hypothesis,
the economic policy debate during the Great Recession was cast as exclusively between
government failure and market failure.
With the Democrats controlling the Congress and
Presidency after the 2008 election, the market failure hypothesis won out and has framed policy
since then. According to the hypothesis, the financial crisis caused an exceptionally deep
recession that required exceptionally large monetary and fiscal stimulus to counter it and
restore normalcy. Additionally, the market failure hypothesis recommends restoring and
renovating financial regulation, but other than that the neoliberal paradigm is appropriate and
should be deepened In accordance with this thinking, the in-coming Obama administration
affirmed existing efforts to save the system and prevent a downward spiral by supporting the
Bush administration's TARP, the Federal Reserve's first round of QE (November/December 2008)
that provided market liquidity, and the Federal Reserve's FX swap agreement with foreign
central banks
Thereafter, the Obama administration worked to reflate the economy via passage of
the ARRA (2009) which provided significant fiscal stimulus. With the failure to deliver a
V-shaped recovery, candidate Obama became even more vocal about fiscal stimulus However,
reflecting its softcore neoliberal inclinations, the Obama administration then became much less
so when it took office. Thus, the winners of the internal debate about fiscal policy in the
first days of the Obama administration were those wanting more modest fiscal stimulus.4
Furthermore, its analytical frame was one of temporary stimulus with the 4 Since 2009 there has
been some evolution of policy positions characterized by a shift to stronger support for fiscal
stimulus. This has been especially marked in Larry Summers, who was the Obama administration's
goal of long-term fiscal consolidation, which is softcore neoliberal speak for fiscal austerity
Seen in the above light, after the passage of ARRA (2009), the fiscal policy divide between the
Obama administration and hardcore neoliberal Republicans was about the speed and conditions
under which fiscal austerity should be restored.
This attitude to fiscal policy reflects the
dominance within the Democratic Party of "Rubinomics", the Wall Street view associated with
former Treasury Secretary Robert Rubin, that government spending and budget deficits raise real
interest rates and thereby lower growth. According to that view, the US needs long-term fiscal
austerity to offset Social Security and Medicare Side-by-side with the attempt to reflate the
economy, the Obama administration also pushed for major overhaul and tightening of financial
sector regulation via the Dodd- Frank Act (2010).
That accorded with the market failure
hypothesis's claim about the economic crisis and Great Recession being caused by financial
excess permitted by the combination of excessive deregulation, lax regulation and failure to
modernize regulation Finally, and again in accordance with the logic of the market failure
hypothesis, the Obama administration has pushed ahead with doubling-down and further
entrenching the neoliberal policy box. This is most visible in its approach to globalization.
In 2010, free trade agreements modelled after NAFTA were signed with South Korea, Colombia and
Panama. The Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment
Partnership (TTIP), two mega-agreements negotiated in secrecy and apparently bearing chief
economic adviser when it took office. This shift has become a way of rewriting history by
erasing the memory of initial positions. That is also true of the IMF which in 2010-2011 was a
robust supporter of fiscal consolidation in Europe. similar hallmarks to prior trade
agreements, are also being pushed by the Obama administration
The Obama administration's softcore neoliberalism would have likely generated stagnation by itself, but the prospect has
been further strengthened by Republicans.
Thus, in accordance with their point of view,
Republicans have persistently pushed the government failure hypothesis by directing the policy
conversation to excessive regulation and easy monetary policy as the causes of the crisis.
Consequently, they have consistently opposed strengthened financial regulation and demands for
fiscal stimulus.
At the same time, they have joined with softcore neoliberal Democrats
regarding doubling-down on neoliberal box policies, particularly as regards trade and
globalization Paradoxically, the failure to change the overall economic model becomes most
visible by analyzing the policies of the Federal Reserve, which have changed the most
dramatically via the introduction of QE. The initial round of QE (QE1) was followed by QE2 in
November 2010 and QE3 in September 2012, with the Fed shifting from providing short-term
emergency liquidity to buying private sector financial assets.
The goal was to bid up prices of
longer term bonds and other securities, thereby lowering interest rates on longer-term
financing and encouraging investors to buy equities and other riskier financial assets. The
Fed's reasoning was lower long-term rates would stimulate the economy, and higher financial
asset prices would trigger a positive wealth effect on consumption spending. This makes clear
the architecture of policy.
The Obama administration was to provide fiscal stimulus to jump
start the economy; the Fed would use QE to blow air back into the asset price bubble; the
Dodd-Frank Act (2010) would stabilize financial markets; and globalization would be deepened by
further NAFTA-styled international agreements. This is a near-identical model to that which
failed so disastrously. Consequently, stagnation is the logical prognosis.
VII
Déjà vu all over again: back to the 1990s but with a weaker economy
The exclusion of the destruction of shared prosperity hypothesis, combined with the joint
triumph of the market failure and government failure hypotheses, means the underlying economic
model that produced the Great Recession remains essentially unchanged. That failure to change
explains stagnation. It also explains why current conditions smack of "déjà vu
all over again" with the US economy in 2014-15 appearing to have returned to conditions
reminiscent of the mid-1990s.
Just as the 1990s failed to deliver durable prosperity, so too
current optimistic conditions will prove unsustainable absent deeper change The
déjà vu similarities are evident
in the large US trade deficit that has started
to again deteriorate rapidly;
a return of the over-valued dollar problem that promises to
further increase the trade deficit and divert jobs and investment away from the US economy;
a
return to reliance on asset price inflation and house price increases to grow consumer demand
and construction;
a return of declining budget deficits owing to continued policy disposition
toward fiscal austerity; a return of the contradiction that has the Federal Reserve tighten
monetary policy when economic strength triggers rising prices and wages that bump against the
ceiling of the Fed's self-imposed 2 percent inflation target; and renewal of the push for
neoliberal trade agreements
All of these features mean both policy context and policy design
look a lot like the mid-1990s. The Obama administration saved the system but did not change it
Consequently, the economy is destined to repeat the patterns of the 1990s and 2000s. However,
the US economy has also experienced almost twenty more years of neoliberalism which has left
its economic body in worse health than the 1990s. That means the likelihood of delivering
another bubble-based boom is low and stagnation tendencies will likely reassert themselves
after a shorter and weaker period of expansion
This structurally weakened state of the US
economy is evident in the further worsening of income inequality that has occurred during the
Great Recession and subsequent slow recovery.
... ... ...
Thomas I. Palley, Senior Economic Policy Advisor, AFL-CIO Washington, D.C. [email protected]
"... This year's rise is likely to be closer to about 500,000 barrels, far off an initial forecast by the U.S. Energy Information Administration, according to Hamm, the chairman of Continental Resources Inc. and a pioneer in the shale industry. ..."
"... The EIA projection is "just flat wrong," failing to take into account a new discipline among U.S. drillers, Hamm said in an interview Thursday on Bloomberg TV. "We have capability of producing a whole lot, but you have to get a return on investment," he said, adding, "that's where people have been this last quarter and this year." ..."
"... . "When we're lagging the Brent world price by $6 a barrel, that's not putting America first, that's putting America last. And that's the result of this exaggerated amount that EIA has out there." ..."
"... Once it's clear the EIA is off base, prices could rise to $60 a barrel from around $50 now, Hamm said. ..."
Shale oil entrepreneur Harold Hamm is back doing interviews on the business networks again.
Now he is speaking out against how the oil prices are low due to the EIA.
Shale Billionaire Hamm Slams 'Exaggerated' U.S. Oil Projections
Billionaire oilman Harold Hamm says the government was way too optimistic with its
prediction of more than 1 million new barrels a day in U.S. production, and the snafu is
"distorting" global crude prices.
This year's rise is likely to be closer to about 500,000 barrels, far off an initial
forecast by the U.S. Energy Information Administration, according to Hamm, the chairman of
Continental Resources Inc. and a pioneer in the shale industry.
The EIA projection is "just flat wrong," failing to take into account a new discipline
among U.S. drillers, Hamm said in an interview Thursday on Bloomberg TV. "We have capability
of producing a whole lot, but you have to get a return on investment," he said, adding,
"that's where people have been this last quarter and this year."
The government scenario has contributed to worries about an oversupply that puts U.S. oil
at a steep discount to international crude, according to Hamm. "It's distorting," he said
. "When we're lagging the Brent world price by $6 a barrel, that's not putting America
first, that's putting America last. And that's the result of this exaggerated amount that EIA
has out there."
Once it's clear the EIA is off base, prices could rise to $60 a barrel from around $50
now, Hamm said.
The EIA is making these projections because knuckleheads in the C suite at US shale companies
went hog wild at the first sign of oil price improvement and made these growth projections
for their individual companies, and the EIA just totaled them up.
Every Shale CEO bashes OPEC. OPEC tried to give shale a break by cutting production, and
shale absolutely blew it, just like shale absolutely blew it in late 2014 by not pretty much
shutting down. Instead, shale has lied about profitability for 3 years, and the world E &
P industry has paid the price.
Too bad Oilpro shut down. Lots of non-US E & P Industry folks posted there. They
absolutely could not stand US shale and the US shale CEO smack talk. Hundreds of thousands
out of work, because of shale smack talk and Wall Street encouragement of same, which crashed
oil prices below $30.
Shale better come through. No one seems to be taking serious the possibility of a supply
shock if it cannot.
When shale clearly peaks, what is to keep OPEC and Russia from suddenly making a big cut,
driving prices past $200 and crashing Western economies? Why wouldn't they afterthe hubris of
US shale CEO's, the Wall Street guys who pull their strings, and the US business media who
report everything they say as gospel?
I'd guess a lot of the non-US E&P people complaining about LTO would by from offshore,
and I think that side has been just as much to blame for boom and bust mentality with rose
tinted specs. (see below the UK investment which went nuts when oil went above $100 and now
they have nothing much left). I'd question with the jobs are going to come back offshore even
with a big price rise. As I keep pointing out, there have to be discoveries before
development, and there have to be lease sales before that. We're not seeing either, and
though exploration is down compared with 2011 to 2014, there's still a significant amount
going on, but wildcat, frontier success rates are what have fallen the most (even with the
best seismic methods and computer models we have ever had).
Shallow, I too miss the hell out of Oilpro. That community could debate the unconventional
shale phenomena without bias and with a clear understanding of how it has completely changed
the world oil order.
American's, on the other hand, simply enjoy cheap gasoline; they don't care how they get
it, what it costs, who ultimately pays for it or that it will not last forever. The American
public, and the politicians that govern it, have been lied to and completely deceived about
shale oil and shale gas abundance. It is a matter of American nationalistic pride to believe
what one reads on the internet and to otherwise be stupid about our hydrocarbon future.
I suggested to you several years ago that OPEC and the rest of the world's producing oil
countries were not dumb; they read shale oil K's and Q's and have the same access to SEC
filings we do. They know the shale oil phenomena is failing financially and that in the
process America is drilling the snot out of its last remaining, bottom of the barrel oil
resources. OPEC's production cuts in late 2016, in my opinion, were an effort to give the US
shale oil industry just enough rope to eventually hang itself. It has done just that; in the
past 24 months it has bankrupted out on another $50B, borrowed yet another $50B and is now
back over $300B of upstream long term debt with no current ability to pay that back. Hope
(for higher oil prices) is not a plan. The Bakken and the Eagle Ford have peaked and now well
productivity in the Permian is starting to fade. In a few more years the rest of the world
will have the US right back it its teet and will dictate what the price of oil well be. I
think in the next 12-18 months we are going to see big reserve impairments in the US, again,
and a pretty big shale oil company will end up the toilet, bankrupt. They'll be a bunch of
fist pumping going around the world when that happens.
Harold Hamm is whiner; he has always blamed OPEC for lower oil prices, demanded that OPEC
cut more production, he needs more pipelines, fewer regulations (where are those, by the
way?), needs to be able to export his oil, warned OTHER shale oil companies in the Permian
not to overproduce and drive the price of HIS oil down, the sun is always in his eyes now its
the EIA's fault. He, like the rest of America's shale oil industry, is desperate for
attention and desperate for help. Once again, Shallow, you are spot on.
Mike. It might be worth mentioning here the recent judgment a small OK producer won against
Devon Energy.
Apparently one of Devon's high volume fracs destroyed one of the the conventional
producers' wells.
When I read about these frac hits, I really worry that US is not properly managing these
shale oil resources.
From some reading it appears frac hits are a big deal in PB, and that just a few years in,
PB shale could wind up unperformimg due to reservoir damage from these massive fracs.
So if we assume that since 2014 at least 8 million barrels per day were lost due to aging
fields. Who provided additional supply to keep it steady. Something is fishy here.
Notable quotes:
"... If you're not bringing new production online and the global decline rate is call it 5% then each year from now until 2020 we should see a loss of about four and a half million barrels per day off of supply ..."
"... And in 3 years that's 13 million barrels per day supply reduction and there is no way countries can feed themselves with that quick level of scarcity. ..."
"... Venezuela dropping to 0 while the Lybian civil war flames up again – and there isn't 3 MB/D spare capacity left. Nobody besides SA perhaps does frenetic infill drilling for capacity he don't need and use. Or develops fields and put them on idle. ..."
"... Venezuela is the best example of low oil prices making high one – the production will halt sooner or later. ..."
Way too glib a presumption of supply shortage in the 2020 time frame.
If you're not bringing new production online and the global decline rate is call it 5%
then each year from now until 2020 we should see a loss of about four and a half million
barrels per day off of supply
And in 3 years that's 13 million barrels per day supply reduction and there is no way
countries can feed themselves with that quick level of scarcity.
When one says "supply shortage" the consequence of significance is not higher prices; the
consequence is unfilled orders.
RIO DE JANEIRO, Sept 27 (Reuters) – Only one block in Brazil's prized offshore Santos
basin received a bid in the country's 14th oil round on Wednesday, a sign low global oil
prices may have reduced the allure of potential new crude and gas investments in Latin
America's largest economy.
A lot more interest in the other basins though, especially Campos. It can't be just oil price
that is against Santos, maybe it's similar to the mirror province in Angola, Kwamza, and it's
turning out to be a bust.
I think this year has killed off a few of the promising frontier basins now – Kwanza in
Angola – bust, deep water offshore Canada – mostly bust, Barents – mostly
bust, Santos – looks bust, ultra deep US GoM – mostly played out or uncommercial,
offshore Colombia – looks bust for oil, couple of West Africa areas – dry holes,
offshore Ireland – half way to bust, UK North Sea – very poor lease sale, also
one other lease sale (maybe Oman?) I think didn't do very well from memory.
MARKET SHOULD PREPARE MORE FOR OIL SQUEEZE THAN OPEC SUPPLY GAIN, CITIGROUP SAYS
Those in the oil market fearing a flood of OPEC supply next year will probably be better
off preparing for a shortage, according to Citigroup Inc.
Five countries in the group -- Libya, Nigeria, Venezuela, Iran and Iraq -- may already
be pumping at their maximum capacity this year, Ed Morse, the bank's global head of
commodities research, said in an interview. Rather than a surge in output, there's a risk
of a market squeeze emerging as early as 2018, driven by those nations because of weaker
investment in exploration and development, he said.
"Fear in the market has been that OPEC production will rise dramatically," said Morse.
However, "there could be a supply gap emerging, which could point to a tighter market," he
said in Singapore on the sidelines of the S&P Global Platts APPEC Conference.
Geology has to do a lot with oil prices – the run up in price the last 40 years is
mostly due to geology.
Why? The original oil was the kind of very conventional land based oil. Once discovered,
the most costly thing was the infrastructure to transport it away.
This came to a limit in the 70s. After this, more and more expensive projects where
necessary.
Off shore oil, deep sea oil, small spots on land, arctic oil and last fracking oil. And
old fields with injections, infill, pressure control.
All things with big investments – much more than "we build an oil terminal for
supertankers and drill a few holes".
And so the market gets more and more unstable – these big investments have to pay
out, even when done by a state. And you have bigger and bigger planning time lags, so the
classical pork cycle can get investors in the false moment.
US fracking oil adds to the chaos – it's expensive, but fast rampup – but not
able to replace deep sea oil due to it's pure size.
Old cheap fields are in decline, or not longer cheap as the chinese giants on secondary or
tertiary recovery enhancements. So more and more expensive technology with long planing
horizonts comes to a short paced market, together with the political chaos describes by
you.
And geology gets more complicated, so the long project times you describe will get
longer.
I, without a mathematically model, expect a chaotic market in the future until oil gets
(hopeful) phased out and put in the steam engine age.
Low oil prices make high oil prices, and high ones low. The demand is very inelastic on
the short term, trucks have to drive and people have to drive to work (and the aunt wants the
chrismas visit). Only mid way demand gets flexible, a japanese car instead a SUV next or a
house nearer at the job. Or a company reduces work travelling.
Many 3rd world countries have regulated gas prices – so a price spike don't reduce
demand here on the short term. That makes things even more scary when something happens on
the political scale.
Venezuela dropping to 0 while the Lybian civil war flames up again – and there
isn't 3 MB/D spare capacity left. Nobody besides SA perhaps does frenetic infill drilling for
capacity he don't need and use. Or develops fields and put them on idle.
Venezuela is the best example of low oil prices making high one – the production
will halt sooner or later.
How comes? Annual world demand raises around 1.5 million BPD per year. So since 2014 it rose
probably 4 million BPD. And there is no sizable new discoveries. Iran and Libya cards were
already played and total from them is less then 4 million barrel per day. US output is stagnant.
Canadian is down. Where all this additional oil is coming from ?
Iran is currently exporting about 3 million BPD of crude and condensate vs. less than 1
million BPD when the sanctions were in place.
Libya and Nigeria have increased production by about 0.5 BPD undercutting the 1.2 million BPD
OPEC production cut.
Turkey already threatened to close their border with Iraqi Kurdistan, halting the 0.6 BPD of
oil that the Kurds are exporting through Turkey.
Venezuela problems might take another million BPD off the global market.
KSA has recently been forced to borrow $12.5 billion after borrowing $17.5 billion last
year.
Notable quotes:
"... The cartel revised global oil demand growth for 2017 upward by 50,000 barrels per day (BPD) to 1.42 million BPD. ..."
"... China's oil demand rose by 690,000 BPD in July, marking a 6 percent year-over-year (YOY) increase. China's total oil demand reached 11.67 million BPD in July. Year-to-date data indicates an average growth of 550,000 BPD, more than double the 210,000 BPD growth recorded during the same period in 2016. ..."
OPEC crude oil production decreased by 79,000 BPD in August to average 32.8 million BPD.
This marks the first OPEC production decline since April and was primarily driven by sizable
outages in Libya.
The cartel revised global oil demand growth for 2017 upward by 50,000 barrels per day
(BPD) to 1.42 million BPD. The group reports strong growth from the OECD Americas, Europe,
and China. Global oil demand for 2018 is expected to grow by 1.35 million BPD, an upward
revision of 70,000 BPD from the previous report. Growth next year is expected to be driven by
OECD Europe and China.
China's oil demand rose by 690,000 BPD in July, marking a 6 percent year-over-year (YOY)
increase. China's total oil demand reached 11.67 million BPD in July. Year-to-date data
indicates an average growth of 550,000 BPD, more than double the 210,000 BPD growth recorded
during the same period in 2016.
China's gasoline demand was higher by around 0.10 million BPD YOY, driven by robust sports
utility vehicle (SUV) sales, which were around 17 percent higher than one year ago. China's
overall vehicle sales in July rose by 4 percent YOY, with total sales reaching 1.7 million
units.
The numbers from China are interesting given the constant refrain of weakening Chinese
demand. This seems to be wishful thinking based on China's investments in clean technology.
"... Trump is attacked. The ACLU is attacked. Peace activists opposed to the CIA's regime change operation in Syria are attacked. Tucker Carlson is attacked. Everyone attacked that the CIA and various other aspects of the Deep State want attacked as if the MSM were all sent the same talking points memo. ..."
In the aftermath of competing protests in Charlottesville a wave of dismantling of
Confederate statues is on the rise. Overnight Baltimore
took
down
four Confederate statues. One of these honored Confederate soldiers and sailors,
another one Confederate women. Elsewhere statues were
toppled or defiled
.
The Charlottesville conflict itself was about the intent to dismantle a statue of General
Robert E. Lee, a commander of the Confederate forces during the American Civil War. The
activist part of the political right protested against the take down, the activist part of the
political left protested against those protests. According to a number of witnesses
quoted
in the LA Times sub-groups on both sides came prepared for and readily engaged in violence.
In 2003 a U.S. military tank pulled down the statue of Saddam Hussein on Firdos Square in
Baghdad. Narrowly shot TV picture made it look as if a group of Iraqis were doing this. But
they were mere actors within
a U.S. propaganda show
.
Pulling down the statue demonstrated a lack of respect towards those who had fought under,
worked for or somewhat supported Saddam Hussein. It helped to incite the resistance against the
U.S. occupation.
The right-wing nutters who, under U.S. direction, forcefully toppled the legitimate
government of Ukraine
pulled
down
hundreds of the remaining Lenin statues in the country. Veterans who fought under the
Soviets in the second world war
took this
as
a sign of disrespect. Others saw this as an attack on their fond memories of better times and
protected them
. The forceful erasement of history further split the country:
"It's not like if you go east they want Lenin but if you go west they want to destroy him,"
Mr. Gobert said. "These differences don't only go through geography, they go through
generations, through social criteria and economic criteria, through the urban and the rural."
Statues standing in cities and places are much more than veneration of one person or group.
They are symbols, landmarks and fragments of personal memories:
"One guy said he didn't really care about Lenin, but the statue was at the center of the
village and it was the place he kissed his wife for the first time," Mr. Gobert said. "When
the statue went down it was part of his personal history that went away."
Robert Lee was a brutal man who fought for racism and slavery. But there are few historic
figures without fail. Did not George Washington "own" slaves? Did not Lyndon B. Johnson lie
about the Gulf of Tonkin incident and launched an unjust huge war against non-white people
under false pretense? At least some people will think of that when they see their statues.
Should those also be taken down?
As time passes the meaning of a monument changes. While it may have been erected with a
certain ideology or concept
in
mind
, the view on it will change over time:
[The Charlottesville statue] was unveiled by Lee's great-granddaughter at a ceremony in May
1924. As was the custom on these occasions it was accompanied by a parade and speeches. In
the dedication address, Lee was celebrated as a hero, who embodied "the moral greatness of
the Old South", and as a proponent of reconciliation between the two sections. The war itself
was remembered as a conflict between "interpretations of our Constitution" and between
"ideals of democracy."
The white racists who came to "protect" the statue in Charlottesville will hardly have done
so in the name of reconciliation. Nor will those who had come to violently oppose them. Lee was
a racist. Those who came to "defend" the statue were mostly "white supremacy" racists. I am all
for protesting against them.
But the issue here is bigger. We must not forget that statues have multiple meanings and
messages. Lee was also the man who
wrote
:
What a cruel thing is war: to separate and destroy families and friends, and mar the purest
joys and happiness God has granted us in this world; to fill our hearts with hatred instead
of love for our neighbors, and to devastate the fair face of this beautiful world.
That Lee was a racist does not mean that his statue should be taken down. The park in
Charlottesville, in which the statue stands, was recently renamed from Lee Park into
Emancipation Park. It makes sense to keep the statue there to reflect on the contrast between
it and the new park name.
Old monuments and statues must not (only) be seen as glorifications within their time. They
are reminders of history. With a bit of education they can become valuable occasions of
reflection.
George Orwell wrote in his book 1984: "The most effective way to destroy people is to deny
and obliterate their own understanding of their history." People do not want to be destroyed.
They will fight against attempts to do so. Taking down monuments or statues without a very wide
consent will split a society. A large part of the U.S. people voted for Trump. One gets the
impression that the current wave of statue take downs is seen as well deserved "punishment" for
those who voted wrongly - i.e. not for Hillary Clinton. While many Trump voters will dislike
statues of Robert Lee, they will understand that dislike the campaign to take them down even
more.
That may be the intend of some people behind the current quarrel. The radicalization on
opposing sides may have a purpose. The Trump camp can use it to cover up its plans to further
disenfranchise they people. The fake Clintonian "resistance" needs these cultural disputes to
cover for its lack of political resistance to Trump's plans.
Anyone who wants to stoke the fires with this issue should be careful what they wish
for.
"That Lee was a racist does not mean that his statue should be taken down."
How about the fact that he was a traitor?
"George Orwell wrote in his book 1984: 'The most effective way to destroy people is to
deny and obliterate their own understanding of their history.'"
The only reason statues of traitors like Lee exist is because the South likes to engage in
'Lost Cause' revisionism; to pretend these were noble people fighting for something other
than the right to own human beings as pets.
erasing history seems part of the goal.. i feel the usa has never really addressed
racism.. the issue hasn't gone away and remains a deep wound that has yet to heal.. events
like this probably don't help.
The statues of Lee and his ilk should come down because they are TRAITORS who deserve no
honor. Washington and Jefferson may have owned slaves but they were PATRIOTS. Its really that
simple.
I don't want to get derailed into the rights or wrongs of toppling statues. I wonder whose
brilliant idea it was to start this trend
right at this particular tinder box moment.
That said, the USA has never ever truly confronted either: 1) the systemic genocide of the
Native Americans earlier in our history; and b) what slavery really meant and was. NO
reconciliation has ever really been done about either of these barbarous acts. Rather, at
best/most, we're handed platitudes and lip service that purports that we've "moved on" from
said barbarity - well I guess WHITES (I'm one) have. But Native Americans - witness what
happened to them at Standing Rock recently - and minorities, especially African Americans,
are pretty much not permitted to move on. Witness the unending police murders of AA men
across the country, where, routinely, most of the cops get off scott-free.
To quote b:
The Trump camp can use it to cover up its plans to further disenfranchise they people. The
fake Clintonian "resistance" needs these cultural disputes to cover for its lack of
political resistance to Trump's plans.
While I dislike to descend into the liturgy of Both Siderism, it's completely true that
both Rs and Ds enjoy and use pitting the rubes in the 99% against one another because it
means that the rapine, plunder & pillaging by the Oligarchs and their pet poodles in
Congress & the White House can continue apace with alacrity. And: That's Exactly What's
Happening.
The Oligarchs could give a flying fig about Heather Heyer's murder, nor could they give a
stuff about US citizens cracking each other's skulls in a bit of the old ultra-violence.
Gives an opening for increasing the Police State and cracking down on our freedumbs and
liberties, etc.
I heard or read somewhere that Nancy Pelosi & Chuck Schumer are absolutely committed
to not impeaching Donald Trump because it means all the Ds have to do is Sweet Eff All and
just "represent" themselves as the Anti-Trump, while, yes, enjoying the "benefits" of the
programs/policies/legislation enacted by the Trump Admin. I have no link and certainly cannot
prove this assertion, but it sure seems likely. Just frickin' great.
Lee was not a racist; I'd say you are addressing your own overblown egos. The U.S. Civil War
was long in coming. During the 1830's during Andrew Jackson's presidency, and John Calhoun's
vice-presidency, at an annual state dinner, the custom of toasts was used to present
political views. Jackson toasted the Union of the states, saying "The Union, it must be
preserved." Calhoun's toast was next, "The Union, next to our liberty, most dear."
Calhoun was a proponent of the Doctrine of Nullification, wherein if a national law
inflicted harm on any state, the state could nullify the law, until such time as a
negotiation of a satisfactory outcome could come about. The absolute Unionists were outraged
by such an idea.
My memory tells me that the invention of the cotton gin made cotton a good crop, but that you
needed the slaves. Slaves represented the major money invested in this operation. Free the
slaves and make slave holders poor. Rich people didn't like that idea. I think maybe the
cotton was made into cloth in the factories up north. Just saying.
How would 'addressing the problem' actually work? Should all native Americans and people of
colour go to Washington to be presented with $1 million each by grovelling white men?
But, the memorials to GW, Thomas Jefferson, James Madison,
et al
, does
not honor them for owning slaves. Memorials of Lee, Stonewall Jackson, Jefferson Davis,
et
al
, is because they took up arms against a legitimate government simply to support of a
vile system.
@6
The manufacturing states put export duties on the agricultural states, and tariffs on British
imported cloth. The English mills were undercutting the U.S. mills prices for a number of
reasons, not the least of which was they were more experienced in the industry.
The difference between a statue of Lee vs. a statue of Washington, Jefferson, LBJ, etc., is
that Washington, Jefferson, and LBJ did some good things to earn our respect even though they
did a lot of bad things, too. The Confederacy did no good things. It would be like erecting a
statue to honor Hitler's SS.
If there were statues honoring the SS, would anyone be surprised if Jews objected? Why
then does anyone fail to understand why blacks object to Confederate symbols?
I would, however, support statues that depict a Confederate surrendering. Perhaps the
statue of Lee on a horse could be replaced with a statue of Lee surrendering to Grant?
I am not a fan of the "counter-protests." Martin Luther King never "counter-protested" a
KKK rally. A counter-protest is a good way to start a fight, but a poor way to win hearts and
minds. It bothers me when the 99% fight among themselves. Our real enemy is the 1%.
George Washington "the father of our country" was a slave owner, a rapist and a murderer.
What do we expect from his descendants?
should we remove his face of the dollar bill and destroy his statues?
The civil war was due to economic reasons, free labor is good business.
Now cheap Mexican-labor ( the new type of slavery) is good business to the other side.
when will the new civil war in the US start?
@b
Many years ago, within the leadership of my student organization, I initiated to rename the
University I was attending, which was named after a communist ideological former state acting
figure, with very bloody hands, co-responsible for the death of tenths of thousands and
thousands of people. Today I still think, that educational and cultural institutions (and
many more) should be named either neutral, or by persons with cultural background and with
impeccable moral history, no many to be found. On the other side, I opposed the removal of
the very statue of the same person at a nearby public plaza - and there it stands today - as
a rather painful reminder of the past bloody history of my country, that went through a
conflict, that today seems so bizarre. Wherever I go, I look into black abyss, knowing, that
the very culture I belong to (the so called Christian Liberal Free Western World) has
inflicted so many horrors and crimes against other nations and ethnic groups, its even
difficult to count. Karlheinz Deschner wrote 10 books, titled "The Criminal History of
Christianity (Kriminalgeschichte des Christentums - on YT you can find videos him reading
from it). Yes, this is the very civilization, we Westerners originate from. It was deadly for
centuries - and its about time to change this. And keeping the memory of our so bloody
history, will help us to find the right and hopefully more peaceful solutions in the future.
Don`t tear down monuments or change street names, but give them the so often shameful
meaning, they had in history.
Then southern states have no business being part of United States of America since their
history and customs are not honored. That is good overall I think. Best for the world.
Southern states are very unlikely to attack any other sovereign state thousands of miles
away, but all united as unitary state, we can see how persistent in their aggression on the
rest of the world they are. 222 years out of its 239 years US has been aggressor:
https://www.infowars.com/america-has-been-at-war-93-of-the-time-222-out-of-239-years-since-1776/
Time to break US lust for attacking, invading and raiding other countries.
what little of this history i know - which is to say very little - kgw reflects what i have
read.. the problem is way deeper.. if you want to address racism, you are going to have to
pull down most of the statues in the usa today of historical figures..
if - that is why way you think it will matter, lol.. forgot to add that.. otherwise, forget
pulling down statues and see if you can address the real issue - like @4 rukidding and some
others here are addressing..
A little false equivalency anyone? I'm sure Adolph Hitler had some reasonable remarks at some
point in his life, so, I guess we should tolerate a few statues of him also? States rights as
the cause for the U$A's civil war? baloney, it was about the murder and enslavement of
millions of humans.
Bob Dylan's "Only a Pawn in Their Game" still
spells out
unsurpassed the divide and
rule strategy, to my mind. Powers that be are rubbing their hands with satisfaction at this
point, one would think.
I like your observation, b, that statues don't necessarily represent what they did when
they were erected. It's an important point. It meant something at the time, but now it's a
part of today's heritage, and has often taken on some of your own meaning. To destroy your
own heritage is a self-limiting thing, and Orwell's point is well taken. Perhaps people
without history have nowhere in the present to stand.
Have to add, slavery wasn't the cause for the war. It was centralization, rights of the
states. Yankees wanted strong central government with wide array of power, Southerners
didn't. Yankees were supported by London banking families and their banking allies or agents
in the US, Southerners were on their own. I personally think Southerners were much better
soldiers, more honorable and courageous, but we lacked industrial capacity and financial
funds. I could be biased having Southern blood, but my opinion anyway.
therevolutionwas@10 - Have to agree. The events leading up to the US Civil War and the war
itself were for reasons far more numerous and complex then slavery. Emancipation was a
fortunate and desirable outcome and slavery was an issue, but saying the entire war was about
ending slavery is the same as saying WW II was mostly about stopping Nazis from killing jews.
Dumbing down history serves nobody.
Still wondering how specifically the 'real issue' can be addressed. I don't think any amount
of money will compensate plains Indians .actually some are quite well off due to casinos. But
the days of buffalo hunting are gone and white people will not be going back where they came
from. As for blacks in urban ghettos you could build them nice houses in the suburbs but I
doubt if that will fix the drugs/gangs problem.
"That Lee was a racist does not mean that his statue should be taken down."
If the sole criteria for taking down any statues was that a man was a 'racist', meaning
that he hated people of color/hated black people, can we assume then that all those who owned
slaves were also racist?
Then all the statues in the whole country of Jefferson, Washington, Madison, Monroe and
perhaps all the Founding Daddies who owned slaves, should be removed. I am playing devil's
advocate here.
Fashions come and go.... and so the vices of yesterday are virtues today; and the virtues
of yesterday are vices today.
Bernard is correct at the end: "The fake Clintonian "resistance" needs these cultural
disputes to cover for its lack of political resistance to Trump's plans." The Demos have
nothing, so they tend to fall back on their identity politics.
....In total, twelve presidents owned slaves at some point in their lives, eight of whom
owned slaves while serving as president. George Washington was the first president to own
slaves, including while he was president. Zachary Taylor was the last president to own slaves
during his presidency, and Ulysses S. Grant was the last president to have owned a slave at
some point in his life.
Pitting people against people by inciting and validating fringe groups is a tried and true
social manipulation ploy.....and it seems to be working as intended.
Focus is on this conflict gets folks riled up and myopic about who the real enemies of
society really are.....and then that riled up energy is transferred to bigger conflicts like
war between nations.....with gobs of "our side is more righteous" propaganda
Humanity has been played like this for centuries now and our extinction would probably be
a kinder future for the Cosmos since we don't seem to be evolving beyond power/control based
governance.
And yes, as Dan Lynch wrote just above: "It bothers me when the 99% fight among
themselves. Our real enemy is the 1%"
Robert E. Lee a racist? No, he was a man of his time. B, you blew it with this one. You have
confused what you don't know with what you think you know.
Now, if Lee was a racist, what about this guy?
From Lincoln's Speech, Sept. 18, 1858.
"While I was at the hotel to-day, an elderly gentleman called upon me to know whether I
was really in favor of producing a perfect equality between the negroes and white people.
While I had not proposed to myself on this occasion to say much on that subject, yet as the
question was asked me I thought I would occupy perhaps five minutes in saying something in
regard to it. I will say then that I am not, nor ever have been, in favor of bringing about
in any way the social and political equality of the black and white races -- that I am not
nor ever have been in favor of making VOTERS or jurors of negroes, NOR OF QUALIFYING THEM
HOLD OFFICE, nor to intermarry with white people; and I will say in addition to this that
there is a physical difference between the white and black races which I believe will forever
forbid the two races living together on terms of social and political equality. And inasmuch
as they cannot so live, while they do remain together there must be the position of superior
and inferior, and I as much as any of her man am in favor of having the superior position
assigned to the white race."
All states who joined the confederation cited the "need" and "right" to uphold slavery in
their individual declarations. To say that the civil war was not about this point is strongly
misleading. Like all wars there were several named and unnamed reasons. Slavery was the most
cited point.
The argument of rather unlimited "state rights" is simply the demand of a minority to
argue for the right to ignore majority decisions. With universal state rights a union can
never be a union. There is no point to it. What is needed (and was done) is to segregate
certain fields wherein the union decides from other policy fields that fall solely within the
rights of member states. The conflict over which fields should belong where hardly ever
ends.
P. S.--If it were up to me, I'd tear down monuments to most of the U$A's
presidents for perpetuating and abetting the rise of an empire who has enslaved and murdered
millions around the globe, simply for profits for the few. Economic slavery has replaced the
iron shackles, but the murder is still murder...
P. S.--If it were up to me, I'd tear down monuments to most of the U$A's presidents for
perpetuating and abetting the rise of an empire who has enslaved and murdered millions around
the globe, simply for profits for the few. Economic slavery has replaced the iron shackles,
but the murder is still murder...
Posted by: ben | Aug 16, 2017 2:45:29 PM |
28
/div
The Northern manufacturers were exploiting the South and wanted to continue doing so. They
didn't much care that the raw materials came from slave labor.
Lincoln issued the Emancipation Proclamation to encourage slave rebellion
(meaning
fewer white Southern men available for military service)
and to punish the South.
Yet, while slavery ended when the North won, we all know how that turned out. For nearly
100 years
(and some might say, even today)
, many black people were still virtual
slaves due to discrimination and poor education.
B@27: you're missing a couple of very basic points.
First, not all states that seceded issued declarations. Virginia, for example, of which
the 'racist' Robert E. Leehailed, only seceded after Lincoln made his move on fort sumter. In
fact, Virginia had voted against secession just prior but, as with 3 other southern states,
seceded when Lincoln called for them to supply troops for his war.
Speaking of declarations of causes, have a look at the cherokee declaration. Yes, united
indian tribes fought for the confederacy.
Finally, the causes for secession are not the causes for war. Secession is what the
southerners did. War is what Lincoln did. One should not have automatically led to the
other.
Well, just reading the comments here it is obvious that there are several versions of history
taught at different times in the last century. If not, then all of us would "know" the real
reason for the CW - there would be no need for discussion. What is also obvious is that this
delving back into a muddied history, the defacing of formerly meaningful objects, the
thrusting of certain "rights" into the face of anyone even questioning them - all of it is
working. It is working extremely well in distracting us from things like the numerous
economic bubbles, the deep state scratching at war or chaos everywhere, politicians who are
at best prevaricating prostitutes and at worst thieves enriching themselves at our expense as
we struggle to maintain in the face of their idiocy.
It simply doesn't MATTER what started the Civil War - it ought to be enough to look at the
death toll on BOTH sides and know we don't need to go there again.
Who stands to gain from this? Because it surely isn't the historically ignorant antifa
bunch, who are against everything that includes a moral boundary. It isn't the alt-right, who
get nothing but egg on their face and decimation of position by virtue of many being "white".
CUI BONO?
The single answer is threefold: media, the government and the military - who continue to
refuse to address any of our problems - and feed us a diet of revolting pablum and
double-speak.
Honestly, congress passed a law legalizing propaganda - did anyone notice? Did anyone
factor in that they allowed themselves freedom to lie to anyone and everyone? It wasn't done
for show - it was done to deny future accountability.
Don't let this site get bogged down in history that is being constantly rewritten on
Wikipedia. Don't buy into the left/right division process. Don't let your self identify with
either group, as they are being led by provocateurs.
The lies we know of regarding Iraq, Syria, Libya - aren't they enough to force people to
disbelieve our media completely? The HUGE lies in our media about what is going on in
Venezuela should be quite enough (bastante suficiente) to make most people simply disbelieve.
But they cannot because they are only allowed to see and hear what our government approves -
and for our government, lying is quite legal now.
Let the emotions go - they are pushed via media to force you to think in white or black,
right or left, old vs young - any way that is divisive. Getting beaten for a statue would
likely make the guy who posed for it laugh his butt off most likely...
Speaking of Lincoln's quotes, here is a good one to dispel the myth about slavery being the
cause of war.
Pres. Abraham Lincoln: "I have no purpose, directly or indirectly, to interfere with the
institution of slavery in the States where it exists. I believe I have no lawful right to do
so, and I have no inclination to do so."
I the civil war was for the most part connected with the federal reserve central bank
charter right which unionist Yankees frightful about possible restraints of bankers rights
were keen to give London banking families unrestricted rights to do whatever they please in
the US. Other reasons exclusively included expanding federal government powers. Adding
personal income tax would be unimaginable prior to CW. Creation of all those fed gov agencies
too. It was all made possible by London bankers' servants Yankees.
The civil war in the US was not really started because of slavery. Robert E. Lee did not
join the south and fight the north in order to preserve slavery, in his mind it was state's
rights. Lincoln did not start the civil war to free the slaves.
You're right. The Emancipation Act was an afterthought really because Europe had turned
against the idea of slavery before the Civil War broke out, in fact was repelled by it, and
Lincoln knew that it would hurt commerce.
The southern states felt they had a right to secede, using the tenth amendment as the legal
basis. It states simply " The powers not delegated to the United States by the Constitution,
nor prohibited by it to the States, are reserved to the States respectively, or to the
people.".
Furthermore, the union of states was referred to many times by the founders as a compact.
Under the theory of compacts, when one party doesn't honor said compact, it is rendered
null.
Slavery, regardless of how we may feel today, was a legal and federally protected
institution. With the rise of the republican party, a campaign of agitation towards the south
and slavery had begun. It is this agitation towards a legal institution that rankled
southerners.
The south saw this coming well before the election of Lincoln. William seward, the
favorite to win the election, gave a speech in l858 called "the irrepressible conflict". The
south well knew of this and saw the writing on the wall if a republican was elected
president.
When reading the declarations of causes, this background should be kept in mind if one
wants to understand the southern position. Or, one can just count how many times the word
'slavery' appears like a word cloud.
Probably the best articulated statement on the southern position was south Carolina's
"address to the slaveholding states".
I'm afraid if you go back in time, no US president can be saved from a well-deserved statue
toppling. Including Abraham Lincoln, the hypocrite who DID NOT, and I repeat, DID NOT abolish
slavery. The U.S "elite" has always been rotten through and through, so good luck with those
statues.
https://www.currentaffairs.org/2017/06/the-clintons-had-slaves
You used Lincoln's inaugural address to show that the war was not over slavery. It's plain
enough coming from the horse's mouth, so to speak.
Lincoln, in that same inaugural address, stated what the war would be fought over ......
and it was revenue.
Here's the quote:
The power confided to me will be used to hold, occupy, and possess the property and places
belonging to the Government and to collect the duties and imposts; but beyond what may be
necessary for these objects, there will be no invasion, no using of force against or among
the people anywhere.
As a rare book dealer and history buff with thirty-odd years of experience reading and
studying original civil war era periodicals and documents, a fact stands out for me about
these now-controversial statues. None is from the civil war period. Many, like the Lee statue
in this article, date to the 1920's, which was the era of the second Ku Klux Klan. The
infamous movie "Birth of a Nation" inspired the nationwide revival of that faded terrorist
group. The year that statue was dedicated a hundred thousand Klansmen paraded in full regalia
in the streets of Washington.
The children and grandchildren of the men who had taken up arms against the United States
had by then completed a very flattering myth about 1861 - 1865. Consider too that
romanticized lost cause mythology was integral to the regional spirit long before the
rebellion. The Scots Irish who settled the American south carried with them the long memory
their forebears' defeats at the Boyne and Culloden, at the hands of the English – the
very ancestors of the hated Yankees living to the north of their new homeland.
Note also that many more CSA statues and memorials were built in the 1960s, as symbols of
defiance of the civil rights movement of that era. The War for the Union was fought at its
heart because the elite of the old south refused to accept the result of a fair and free
democratic election, but for those who came after, white supremacy became the comforting myth
that rationalized their ancestors' incredibly foolish treason.
"Robert Lee was a brutal man who fought for racism and slavery."
Would this have been written in his time? Would it be written today in other countries
(Africa included) where slavery (aka human trafficking) is big business today?
I'm disappointed that Moon of Alabama, usually so astute in its presentations, would print
this article.
That the many statutes of America's founding fathers should be re-evaluated is actually a
great idea. Many of these people were simply oligarchs who wanted to be the top of the
pyramid instead of the British. Many owned slaves and perpetuated slavery. Others, like
Andrew Jackson were legitimate psychopaths. Pretty much all of them cheered the genocide of
Native Americans. So maybe we *should* have different heros.
Using the logic b spells out above, one could argue that statues of Nazis should be
allowed too, after all they did come up with the Autobahn (modern highways), jet engines, and
viable rockets, all technology used all over the world. Some patriotic, well meaning Germans
fought in the Wehrmacht, don't they deserve statues, too? What about the Banderists and
Forest Brothers? The Imperial Japanese? Don't those well-meaning fascists deserve to
celebrate their heritage?
But simply saying that idea out loud is enough to realize what a crock that notion is.
Nazis and fascists don't deserve statues, neither do confederates. Neither do most Americans,
for that matter.
Trying to make some moral equivalence between NeoNazis and the leftists who oppose them is
about as silly as it gets. I don't support violence against these idiots, and they have the
same rights as anyone else in expressing their opinion. But to paint legit NeoNazis and the
leftists opposing them (admittedly in a very juvenile manner) in the same brush ("Both sides
came prepared for violence") is utter hogwash. We don't give Nazis a pass in Ukraine, don't
give them a pass in Palestine, and we sure as hell don't give them a pass in the US. It
doesn't matter what hypocritical liberal snowflake is on the other side of the barricade, the
Nazi is still a f*****g Nazi.
"Robert Lee was a brutal man who fought for racism and slavery."
b, you have just displayed your ignorance of the character of Robert E. Lee, why he
fought, and what he fought for. To give you the short n sweet of it, General Lee was a
Christian gentleman respected by those in the North as well as the South. He fought the
Federal leviathan as it had chosen to make war on what he considered to be his home and
country--the State of Virginia. The issue at hand was not racism and slavery but Federal
tyranny. Lincoln himself said he had no quarrel with slavery and as long as the South paid
the Federal leviathan its taxes, the South was free to go. Make a visit to Paul Craig Roberts
site for his latest essay which explains the world of the 1860s American scene much more
eloquently than I can ...
b is completely wrong in thread. The USA has been a highly racist power system historically
where killing non-Whites has been a major historical policy. Lee is not merely a racist, he
epitomizes this policy and is a symbol of it. Attacking racist symbols is essential to
destroying racism.
Historicus@38: that 'fair and free democratic election' was replete with Lincoln supporters
printing counterfeit tickets to the convention in order to shut out seward supporters.
The gambit worked and the rest, as they say, is history.
james @2--You are 1000000000% correct. And given the current state-of-affairs, will
continue to fester for another century if not more thanks to historical ignorance and elite
Machiavellian maneuvering.
Southern Extremist self-proclaimed Fire Eaters were the ones that started the war as they
took the bait Lincoln cunningly offered them. If they'd been kept away from the coastal
artillery at Charlestown, the lanyard they pulled may have remained still and war avoided for
the moment. The advent of the US Civil War can be blamed totally on the Constitution and
those who wrote it, although they had no clue as to the fuse they lit.
Chattel Slavery was introduced in the Western Hemisphere because the enslaved First
Peoples died off and the sugar plantations needed laborers. Rice, tobacco, indigo, "Naval
Stores," and other related cash crops were the next. Cotton only became part of the mix when
the cotton gin made greatly lessened the expense of its processing. But, cotton wore out the
thin Southern soils, so it cotton plantations slowly marched West thus making Mexican lands
attractive for conquest. But slaves were used for so much more--particularly the draining of
swamps and construction of port works. The capital base for modern capitalism was made
possible by slavery--a sentence you will NOT read in any history textbook. There are a great
many books written on the subject; I suggest starting with Marcus Rediker's
The Slave
Ship: A Human History
, followed by Eric Williams's classic
Capitalism and Slavery
, Edward Baptist's
The Half Has Never Been Told: Slavery and the Making of American
Capitalism
, and John Clarke's
Christopher Columbus and the Afrikan Holocaust: Slavery
and the Rise of European Capitalism
.
There are even more books published about the war itself. But as many have pointed out,
it's learning about the reasons for the war that's most important. Vice President Henry
Wilson was the first to write a very detailed 3 volume history of those reasons,
Rise and
Fall of the Slave Power in America
beginning in 1872, and they are rare books indeed;
fortunately, they've been digitized and can be found here,
https://archive.org/search.php?query=creator%3A%22Wilson%2C+Henry%2C+1812-1875%22
Perhaps the most complete is Allan Nevins 8 volume
Ordeal of the Union
, although for
me it begins too late in 1847,
https://en.wikipedia.org/wiki/Ordeal_of_the_Union
Finally, no study of the period's complete without examining the unraveling and utter
dysfunction of the political process that occurred between 1856 and 1860 that allowed Lincoln
to win the presidency, Roy Nichols's
The Disruption of American Democracy
illustrates
that best.
The US Civil War can't be boiled down to having just one cause; it's causes were multiple,
although slavery--being an economic and social system--resides at its core. As an historian,
I can't really justify the removal of statues and other items of historical relevance,
although displaying the Confederate Flag on public buildings I see as wrong; better to
display the Spirit of '76 flag if stars and stripes are to be displayed. (I wonder what will
become of the UK's Union Jack if Scotland votes to leave the UK.) Personal display of the
Stars and Bars for me amounts to a political statement which people within the Outlaw US
Empire still have the right to express despite the animus it directs at myself and other
non-Anglo ethnicities. (I'm Germanic Visigoth with Spanish surname--people are surprised at
my color when they hear my name.)
The current deep dysfunction in the Outlaw US Empire's domestic politics mirrors that of
the latter 1850s somewhat but the reasons are entirely different yet solvable--IF--the
populous can gain a high degree of solidarity.
There's also the school of thought that holds that Honest Abe freed the slaves in order that
northern industrialists could acquire replacements for workers lost in the war.
@37
Aye Woogs. All about expanding fed gov powers, most of which was focused on permanent central
banking charter. Many forget that central banking charter had been in place before CW in the
US and that great statesman Andrew Jackson repelled it. The first central banking charter
caused terrible economic suffering, which is why it was repelled. People had more sense then.
Not so much now.
"Gentlemen! I too have been a close observer of the doings of the Bank of the United
States. I have had men watching you for a long time, and am convinced that you have used the
funds of the bank to speculate in the breadstuffs of the country. When you won, you divided
the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I
take the deposits from the bank and annul its charter I shall ruin ten thousand families.
That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin
fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I
have determined to rout you out, and by the Eternal I will rout you out!"
~Andrew Jackson
It saddens me that so many buy into the South fought for slavery. That story line was used in
the same manner that Weapons of Mass Destruction was used to war with Iraq. The difference is
the internet was able to get the truth out. Doesn't do much good to argue as most believe the
Confederate slavery propaganda. The US is done as a nation. A thousand different groups that
hate each other preaching no hate. Yes it will limp along for a while but it's done for.
many thanks for the history, and the books. I read Murray's essay and consider it a good
take....
".... As an historian, I can't really justify the removal of statues and other items of
historical relevance, although displaying the Confederate Flag on public buildings I see as
wrong..."
I have to agree.
& there is at least one sane (african american) person in LA, as per below article
"....Los Angeles resident Monique Edwards says historical monuments, like the Confederate
statue removed from Hollywood Forever Cemetery, need to be preserved and used as teachable
moments...."
Yankees wanted strong central government with wide array of power, Southerners didn't.
Yankees were supported by London banking families and their banking allies or agents in the
US, Southerners were on their own.
I recall that it was the slavers that wanted the central government to enforce the
Fugitive Slave Act
even in states that outlawed slavery; it was the slavers that
insisted that slavery be legal in the new territories, regardless of the wishes of the
settlers.
Also, the London industrial and banking interest strongly supported the breakaway slavers
because:
(1) It was the slave produced cotton that fueled the textile industry in England.
(2) Imported British ¨prestige¨ items found a ready market with the nouveau riche
planters grown fat on stolen labor.
(3) A Balkanized NA would be more subject to pressure from the ¨Mother Country.¨
(4) Lincoln refused to borrow from the bankers and printed ¨greenbacks¨ to finance
the war; this infuriated the bankers.
Neo-Confederate revisionism creates mythical history, in a large part, by attempting to
deify vile human beings.
Ben@26: Lincoln stated that he would only use force to collect imposts and duties.
The first battle of the war (actually more a skirmish) was the battle of Phillipi in
western Virginia in early June, l86l.
To the best of my knowledge, there were no customs houses in western Virginia as it was
not a port of entry. This was simply an invasion by the union army at Lincoln's command that
revealed his true colors. The war was Lincoln's war, plain and simple.
@51
Joey, I would like yo offer you fairy dust to buy. Interested? Luckily we should part our
ways soon. Should have happened ages ago if you ask me. Your history is not our own. You were
aggressors fighting for foreign entity. Time for us to part I think. have your own history
and say whatever you want there. We will have ours.
In my view, b is comparing a modern sensibility on race relations with that of a mid 19th
century confederate leader and so with this bad thesis it is quite easy to dismiss this post
entirely. Was the north that much more enlightened on the treatent of blacks? I think not.
Was the emancipation proclamation largely a political gesture to incite ire and violence not
only among southerners but also slaves living in these states towards their owners?
Meanwhile, the effect of such a proclamation was exempt on states where said effect would not
"pinch" the south. The north, if anything, was even more racist using blacks as a means
towards the end to consolidate power even more centrally.
It honestly reads like most neutral apologetic drivel out of the "other" msm which is on
the ropes right now from an all-out wholly political assault. If you truly wanted to educate
people on their history you would stand up for fair and honest discourse. Make no mistake,
this is all about obscuration and historical-revisionism. Globalists gotta eat.
"Slavery as an institution, is a moral &political evil in any Country... I think it
however a greater evil to the white man than to the black race... The blacks are immeasurably
better off." Robert E. Lee
Sounds like a man with opinions, but without the burning fire to see that evil enshrined
in a state-policy towards blacks. Basically, one condemns him for sharing a popular view of
the day. CALL THE THOUGHT POLICE!
From a British point of view, Washington and Jefferson were traitors as well.
As for Lee, he was racist, but doesn't seem to have been more racist than the average Yankee.
No more racist than Sherman or Lincoln, and less racist than many of the Confederate top
guys, for instance.
Then, there's the nutjob idea that forcefully taking down other statues in the South will
make these guys "win". At least, the Lee statue had a more or less legal and democratic
process going on, which is the only way to go if you don't want to look like a Taliban.
Really, did these idiots not understand that bringing down Confederate statues without due
process will massively piss off most of the locals? Do they really want the local hardliners
to come armed and ready to use their guns, one of these days? Is this the plan all along, to
spark another civil war for asshat reasons?
(Like B, toppling Saddam and communist statues was the very first thing I thought of. As
if these poor fools had just been freed from a terrible dictatorship, instead of nothing
having changed or been won at all in the last months)
I agree with Woogs (25). How stoopid are we ? History has been re-written and manipulated
going back a long way. Most of the readers here know that our "masters" , and their versions
of history are not accurate. Yet here we are arguing and such ... " he was good...NO He was
bad...." acting as if we know truth from fiction. Back then, as now, it was all planned.
Divide and conquer. Slavery was the "excuse" for war. The Power Elite" were based in Europe
at that time and saw America as a real threat to their global rule. It was becoming too
strong and so needed to be divided. Thus the people of those times were played....just as we
are today. Manipulated into war. Of course America despite the Civil War , continued to grow
and prosper so the elite devised another plan. Plan "B" has worked better than they could
have ever imagined. They have infected the "soul" of America and the infection is spreading
rapidly.Everyone , please re-read oilman2 comments (31)
Thanks B, precisely my thinking. It has a smell of vendetta. And I believe this sort of old
testament thinking is very common in the u.s. of A. What's currently happening will further
alienate both sides and lead to even more urgent need to externalize an internal problem via
more wars.
In 2016, the Southern Poverty Law Center estimated that there were over 1,500 "symbols of
the Confederacy in public spaces" in the United States. The majority of them are located,
as one might expect, in the 11 states that seceded from the union, but as Vice aptly points
out, some can be found in Union states (New York, for example has three, Pennsylvania,
four) and at least 22 of them are located in states that didn't even exist during the Civil
War.
How can that be possible? Because largely, Confederate monuments were built during two
key periods of American history: the beginnings of Jim Crow in the 1920s and the civil
rights movement in the early 1950s and 1960s.
To be sure, some sprung up in the years following the Confederacy's defeat (the concept
of a Confederate memorial day dates back to back to 1866 and was still officially observed
by the governments of Alabama, Mississippi, and South Carolina, as of the publication of
the Southern Poverty Law Center's report), and some continue to be built!USA Today notes
that 35 Confederate monuments have been erected in North Carolina since 2000.
But when these statues!be they historical place markers, or myth-building icons of Lee
or Stonewall Jackson!were built seems to suggest these monuments have very little to do
with paying tribute to the Civil War dead and everything to do with erecting monuments to
black disenfranchisement, segregation, and 20th-century racial tension.
I don't know if b. realizes how many German monuments got destroyed because people did not
wish to recall this particular part of history, the bomb raids of the allies helped, of
course, but there are cemeteries of Marx, Engels and Lenin statues, and
only revisionists recall what was destroyed
after WWII
.
Young people need some space to breath. They don't need monuments of war heros.
b wrote "Statues standing in cities and places are much more than veneration of one person or
group. They are symbols, landmarks and fragments of personal memories..."
Symbols indeed, traits in cultural landscapes. This piece may add another dimension to the
importance of cultural landscape in the context of this conversation:
"To this day, the question remains: why would the Southerners remember and celebrate a losing
team, and how come the non-Southerners care about it so passionately? A convenient answer
revolves around the issue of slavery; i.e., a commemoration of the era of slavery for the
former, and, for the latter, the feeling that the landscape reminders of that era should be
entirely erased."
and
"In the past two decades, the American(s)' intervention has brought down the statues of
Hussein, Gaddafi, Davis, and Lee respectively. Internationally, the work seems to be
completed. Domestically, the next stage will be removing the names of highways, libraries,
parks, and schools of the men who have not done an illegal act. Eventually, all such traits
in the cultural landscape of Virginia may steadily disappear, because they are symbols of
Confederacy."
http://www.zokpavlovic.com/conflict/the-war-between-the-states-of-mind-in-virginia-and-elsewhere/
It warms my heart that you are not a racist. But who really gives a fuck? And what makes you
think not favoring your own kind like every other racial and ethnic group does makes you a
better than those of your own racial group?? Something is wrong with you.
You are certainly entitled to your attitudes, hatreds, memories, affinities and such. You
are not entitled to your own history. History is what happened. Quit lying about it!
Lee is the past. Obama is the present. The 'Nobel Peace Prize' winner ran more concurrent
wars than any other president. He inaugurated the state execution of US citizens by drone
based on secret evidence presented in secret courts. He was in charge when ISIS was created
by the US Maw machine. What about removing his Nobel Peace Prize?
A long time ago Christians destroyed the old god's statues because they were pagan and didn't
comply with their religion (or is it ideology?). Muslims followed and did the same on what
was left. They even do that now when ISIS blows up ancient monuments.
What is next? Burning books? Lets burn the library of Alexandria once again...
Joeymac 69:
I didn't mean the Charlottesville mess was done without due process. I refer to the cases
that have happened these last few days - a trend that won't stop overnight.
Extremists from both sides aren't making friends on the other ones, and obviously are only
making matters worse.
Somebody 63:
"It is futile to discuss what the confederacy was then, when white supremacy groups consider
them their home today."
That's the whole fucking problem. By this logic, nobody should listen to Wagner or read
Nietzsche anymore. Screw that. Assholes and criminals from now should be judged according to
current values, laws and opinions, based on their very own crimes. People, groups, states,
religions from the past should be judged according to their very own actions as well, and not
based on what some idiot would fantasize they were 1.500 years later.
Looks like the Lee apologetics and claims that the war was about state's rights (go read the
CSA constitution, it tramples the rights of its own member states to *not* be slave holding)
or tariffs are alive and well in these comments. That's what these statues represent: the
utter perversion of the historical record. And as pointed out @38, none of these statues are
from anywhere near the Civil War or Reconstruction era.
I think anyone and everyone who instigates a successful campaign to destroy a memorial which
glorifies war should be awarded the Nobel Prize for Peace & Sanity and be memorialised in
bronze, nearby, as a permanent reminder that war WAS a racket, until Reason prevailed.
No offense intended.
Arch-propagandist Rove said "[Those] in what we call the reality-based community, [who]
believe that solutions emerge from your judicious study of discernible reality. That's not
the way the world really works anymore. We're an empire now, and when we act, we create our
own reality [e.g Russia hacked the election]. And while you're studying that
reality!judiciously, as you will!we'll act again, creating other new realities [e.g. Neo-Nazi
White Supremacism], which you can study too, and that's how things will sort out. We're
history's actors and you, all of you, will be left to just study what we do."
There is a coup underway to get rid of Trump [who's 'unpardonable crime' seems to be that
he isn't going along with the War Party]. The War Party will try anything, anything, if there
is a hope that it will work to get rid of him. When Trump launched the cruise missiles
against Syria, there was a moment's silence, totally spooky given all the bs that was flying
... Would he start a war with Russia? Would Trump go all the way with that, as Clinton
probably would have done? When the attack fizzled out, the chorus resumed their attacks as
though nothing had happened.
Their tactical attacks change as they are revealed to be fakes. The current attack,
probably using War Party provacateurs operating on both sides, is the next tactical phase -
out with 'Russian Hacking the Election', in with 'Trump White Supremacist Nazi'. If there is
the standard CIA regime change plan behind this (as outlined by John Perkins and seen in
Ukraine, Libya, Syria)] and the relatively passive actions don't work, they will ultimately
resort to hard violence. At that stage, they resort to using snipers to kill people on both
sides.
The anti-fas' are supposedly liberal, anti-gun, but there already have been stories of
them training with weapons, even working with the Kurds in Syria so the ground is laid for
their use of weapons. There are those on the Trump side who would relish the excuse for gun
violence irrespective on consequence so the whole thing could spiral out of control very
rapidly and very dangerously.
Disclosure - I do not support Trump [or any US politico for that matter]. The whole US
political system is totally corrupt and morally bankrupt. Those that rise [or more accurately
those that are allowed to rise] to the top reflect that corruption and bankruptcy. This could
get very very messy.
There's nothing wrong with being racist. Racism is simply preference for one's extended
family. 'b' calls the admittedly rather goony lot at C'ville 'white supremacists'. But do
they want to enslave blacks or rule over non-whites? No. In fact most of the alt-right lament
the slave trade and all its ills, including mixing two groups who, as Lincoln pointed out,
had no future together. What the left wants to do is reduce Confederate American heritage and
culture down to the slavery issue, despite the fact only a few Southerners owned slaves.
Now, within ethnic European countries, should whites be supreme? You're goddamn right they
should. Just as the Japanese should practice 'yellow supremacy', and so on and so forth. Most
of you lot here, being liberals, will be in favour of no fault divorce. You understand there
can be irreconcilable differences which in way suggest either person is objectively bad. The
same applies to disparate ethnicities. If white Slovaks and Czechs can't get one, why would
white and non-white groups?
You lefties need to have a serious moral dialogue over your rejection of
ethno-nationalism! Time to get on the right side of history! Have you noticed the alt-right,
despite being comprised of 'hateful bigots', is favourably disposed toward Iran, Syria, and
Russia? That's because we consistently apply principles which can protect our racially,
culturally, religiously, and ethnically diverse planet, and mitigate conflict. But the woke
woke left (not a typo) meanwhile has to 'resist' imperialism by constantly vilifying America.
ITS NOT THAT I'M IN FAVOUR OF ASSAD OR PUTIN, ITS JUST THAT AMERICA IS SO NAUGHTY! OH, HOW
BASE ARE OUR MOTIVES. OH, WHAT A POX WE ARE. Weak tea. You have no theoretical arguments
against liberal interventionism or neoconservativism.
Newsflash folks. Hillary Clinton doesn't fundamentally differ from you in principle. She
merely differs on what methods should be employed to achieve Kojeve's universal homogeneous
state. Most of you just want to replace global capitalism with global socialism. Seen how
occupy wall street turned out? Didn't make a dent. See how your precious POCs voted for the
neoliberal war monger? Diversity increases the power of capital. The only force which can
beat globalization is primordial tribalism.
Lee actually thought the Civil War an awful tragedy. He was asked to choose between his
state and his country. That's not much different from being asked to choose between your
family and your clan.
Lee was a racist.
That might be true, depending on one's definition of a racist. But then, why should Abraham
Lincoln get a pass? It's well known that he did not start the Civil War to end slavery --
that idea only occurred to him halfway through the conflict. But there's also the fact that,
while he was never a great fan of slavery, he apparently did not believe in the natural
equality of the races, and
he
even once professed to have no intention of granting blacks equality under the law:
"While I was at the hotel to-day, an elderly gentleman called upon me to know whether I was
really in favor of producing a perfect equality between the negroes and white people. While
I had not proposed to myself on this occasion to say much on that subject, yet as the
question was asked me I thought I would occupy perhaps five minutes in saying something in
regard to it. I will say then that I am not, nor ever have been, in favor of bringing about
in any way the social and political equality of the black and white races -- that I am not
nor ever have been in favor of making VOTERS or jurors of negroes, NOR OF QUALIFYING THEM
HOLD OFFICE, nor to intermarry with white people; and I will say in addition to this that
there is a physical difference between the white and black races which I believe will
forever forbid the two races living together on terms of social and political equality. And
inasmuch as they cannot so live, while they do remain together there must be the position
of superior and inferior, and I as much as any of her man am in favor of having the
superior position assigned to the white race."
It turns out that history's a complicated thing! To bad it wasn't all written by Hollywood
with a bunch of cartoon villains and heroes ...
One gets the impression that the current wave of statue take downs is seen as well deserved
"punishment" for those who voted wrongly - i.e. not for Hillary Clinton. While many Trump
voters will dislike statues of Robert Lee, they will understand that dislike the campaign
to take them down even more.
You nailed it, b. The way things are headed, I now wonder if I will someday be arrested
for owning Lynard Skynard albums (the covers of which usually had Confederate battle flags)
or for having watched Dukes of Hazard shows as a child. It's starting to get that crazy.
Anyway, thanks for running a sane blog in a mad world!
Good interview with a Black, female pastor in Charlottsville who was in church when the march
began Friday night. They caught a lot that wasn't on network news.
"Don't let this site get bogged down in history that is being constantly rewritten on
Wikipedia. Don't buy into the left/right division process. Don't let your self identify with
either group, as they are being led by provocateurs.
The lies we know of regarding Iraq, Syria, Libya - aren't they enough to force people to
disbelieve our media completely? The HUGE lies in our media about what is going on in
Venezuela should be quite enough (bastante suficiente) to make most people simply disbelieve.
But they cannot because they are only allowed to see and hear what our government approves -
and for our government, lying is quite legal now.
Let the emotions go - they are pushed via media to force you to think in white or black,
right or left, old vs young - any way that is divisive. Getting beaten for a statue would
likely make the guy who posed for it laugh his butt off most likely..."
Posted by: Oilman2 | Aug 16, 2017 3:09:32 PM | 31
Well said. Hope to see your thoughts in the future.
And as always, Karlof1 you have some insights I rarely get ever else (especially not in a
comment section)
______________________________
"The US Civil War can't be boiled down to having just one cause; it's causes were
multiple, although slavery--being an economic and social system--resides at its core. As an
historian, I can't really justify the removal of statues and other items of historical
relevance, although displaying the Confederate Flag on public buildings I see as wrong;
better to display the Spirit of '76 flag if stars and stripes are to be displayed. (I wonder
what will become of the UK's Union Jack if Scotland votes to leave the UK.) Personal display
of the Stars and Bars for me amounts to a political statement which people within the Outlaw
US Empire still have the right to express despite the animus it directs at myself and other
non-Anglo ethnicities. (I'm Germanic Visigoth with Spanish surname--people are surprised at
my color when they hear my name.)
The current deep dysfunction in the Outlaw US Empire's domestic politics mirrors that of
the latter 1850s somewhat but the reasons are entirely different yet solvable--IF--the
populous can gain a high degree of solidarity."
Posted by: karlof1 | Aug 16, 2017 3:51:18 PM | 45
____________________________
Also, somebody @63, very poignant to mention. While I could care less whether about some
statues stand or fall (it helps living outside the empire), to deny that they are (generally)
symbols of racism, or were built with that in mind, is a little off base in my eyes. Going to
repost this quote because I think it had quite a bit of value in this discussion.
"In 2016 the Southern Poverty Law Center estimated that there were over 1,500 "symbols of
thE Confederacy in public spaces" in the United States. The majority of them are located, as
one might expect, in the 11 states that seceded from the union, but as Vice aptly points out,
some can be found in Union states (New York, for example has three, Pennsylvania, four) and
at least 22 of them are located in states that didn't even exist during the Civil War.
How can that be possible? Because largely, Confederate monuments were built during two key
periods of American history: the beginnings of Jim Crow in the 1920s and the civil rights
movement in the early 1950s and 1960s.
To be sure, some sprung up in the years following the Confederacy's defeat (the concept of
a Confederate memorial day dates back to back to 1866 and was still officially observed by
the governments of Alabama, Mississippi, and South Carolina, as of the publication of the
Southern Poverty Law Center's report), and some continue to be built!USA Today notes that 35
Confederate monuments have been erected in North Carolina since 2000.
But when these statues!be they historical place markers, or myth-building icons of Lee or
Stonewall Jackson!were built seems to suggest these monuments have very little to do with
paying tribute to the Civil War dead and everything to do with erecting monuments to black
disenfranchisement, segregation, and 20th-century racial tension."
Racism means zero understanding or tolerance of other people/cultures, an attitude that
ones own culture or skin colour or group is far superior to those 'others'.
Hear, hear. Generally, a resurgence of American nationalism WILL take the form of populist
socialism because it will mark a turning away from the global police state which America is
leading currently and will replace it with nationalistic spending on socialist programs with
an emphasis on decreased military spending. This will continue ideally until a balance of low
taxation and government regulation form a true economy which begins at a local level from the
ground up.
In 1861, the vice-president of the Confederacy, Alexander H. Stephens, offered this
foundational explanation of the Confederate cause:
"Its corner-stone rests, upon the
great truth that the negro is not equal to the white man; that slavery, subordination to
the superior race is his natural and normal condition.
This, our new government, is the
first, in the history of the world,
based upon this great physical, philosophical, and
moral truth.
"
how much public space in the US should be dedicated to monuments honoring these people in
the coming century? and for the children and grandchildren of slaves walking by them every
day? what about their heritage? and the public monuments to the indigenous people of this
land who we genocided? oh right, as a country we have still not even officially recognized
that genocide. monuments should not be solely a reflection of the past, but of the future, of
who we want to be. who we choose to recognize in our public spaces says a lot about us.
It's pretty fair too say several of the "alt-right" leaders who planned this event agent are
provocateurs or Sheep Dipped assets running honeypot "white nationalist" operations.
You can see from the make-up of the phony "Nazis" in the groups and their continued use of
various propaganda that serves only to tie people and movements OPPOSED by the Deep State to
"Nazis" and racist ideology, you can see how on the ground level, this event has psyop
planners' fingerprints all over it.
It's also fair too say the complicit media's near universal take on the event signals a
uniform, ready-made reaction more than likely dictated to them from a single source.
Trump is attacked. The ACLU is attacked. Peace activists opposed to the CIA's regime
change operation in Syria are attacked. Tucker Carlson is attacked. Everyone attacked that
the CIA and various other aspects of the Deep State want attacked as if the MSM were all sent
the same talking points memo.
And keep in mind, this all comes right after the news was starting to pick up on the story
that the Deep State's bullshit narrative about a "Russian hack" was falling apart.
Also keep in mind it comes at a time when 600,000 Syrians returned home after the CIA's
terrorist regime change operation fell apart.
The statues were erected when the KKK was at its peak, to keep the blacks in their place.
They started getting torn down after the 2015 massacre of black churchgoers by a Nazi. For
once, don't blame Clinton.
My only argument with your post is "Chattel Slavery was introduced in the Western
Hemisphere"
Chattel = movable property as opposed to your house. In that day and long before women and
children were chattel.
Thinking about what might have been might help. If the south had won would we have had a
strong enough central government to create and give corporate charters and vast rights of way
to railroads which then cross our nation. Would states have created their own individual
banking systems negating the need for the all controlling Federal reserve? Would states have
their own military units willing to join other states to repel an attack instead of the MIC
which treats the rest of the world like expendable slaves?
Before our constitution there was the Articles of Confederation. Article 1,2+3.....
Article I. The Stile of this Confederacy shall be "The United States of America."
Article II. Each state retains its sovereignty, freedom, and independence, and every
Power, Jurisdiction, and right, which is not by this confederation expressly delegated to the
United States, in Congress assembled.
Article III. The said States hereby severally enter into a firm league of friendship with
each other, for their common defense, the security of their liberties, and their mutual and
general welfare, binding themselves to assist each other, against all force offered to, or
attacks made upon them, or any of them, on account of religion, sovereignty, trade, or any
other pretense whatever.
This first set of laws in the new world was later undone in a secret convention with
Madison, input from Jefferson and others found on our money and other honorariums. 1868 gave
us the 14th amendment to the constitution that freed all who are born within this nation and
were given equal rights. (Not saying that this worked for all slaves. Within a few years this
was used to create corporate persons with access to the bill of rights.
I am thinking there were many reasons that people who lived in those times had to fight
for what they did. We today are not in a position to judge why individuals fought. Certainly
many poor white southerners who owned no slaves at all fought and died. Was it to keep slaves
they did not own enslaved or did they fight and die for issues around protection of local or
state rights, freedoms and way of life?
Histories are written and paid for by the winners who control that particular present time
for the glorification of those rulers. A vast removal of historical artifacts speaks of a
weak nation fading into the west's need to clean up some points from history of mean and
brutal behaviors which we as a nation support now in the present but try and make it about
others.
A paragragh here from lemur 77 comment...
"Now, within ethnic European countries, should whites be supreme? You're goddamn right they
should. Just as the Japanese should practice 'yellow supremacy', and so on and so forth. Most
of you lot here, being liberals, will be in favour of no fault divorce. You understand there
can be irreconcilable differences which in way suggest either person is objectively bad. The
same applies to disparate ethnicities. If white Slovaks and Czechs can't get one, why would
white and non-white groups?"
What is the United States of America? It is made up of British, French, Spanish and
Russian territories aquired or conquered, the original colonists in turn taking them from the
native inhabitants. The US has had a largley open imigration policy, people of all cultures,
languages and skin colours and religions.
Why should white Europeans be supreme in the US lemur?
The following is the guts of a posting from Raw Story that I see as quite related.
"
White House senior strategist Steve Bannon is rejoicing at the criticism President Donald
Trump is receiving for defending white nationalism.
Bannon phoned The American Prospect progressive writer and editor Robert Kuttner Tuesday,
according to his analysis of the interview.
In the interview, Bannon dismissed ethno-nationalists as irrelevant.
"Ethno-nationalism!it's losers. It's a fringe element," Bannon noted.
"These guys are a collection of clowns," he added.
Bannon claimed to welcome the intense criticism Trump has received.
"The Democrats," he said, "the longer they talk about identity politics, I got 'em. I want
them to talk about racism every day. If the left is focused on race and identity, and we go
with economic nationalism, we can crush the Democrats."
Kuttner described Bannon as being in "high spirits" during the call
"You might think from recent press accounts that Steve Bannon is on the ropes and
therefore behaving prudently. In the aftermath of events in Charlottesville, he is widely
blamed for his boss's continuing indulgence of white supremacists," Kuttner explained. "But
Bannon was in high spirits when he phoned me Tuesday afternoon to discuss the politics of
taking a harder line with China, and minced no words describing his efforts to neutralize his
rivals at the Departments of Defense, State, and Treasury."
"They're wetting themselves," Bannon said of opponents he planned to oust at State and
Defense.
"
Curtis 6 isn't me. However, I somewhat agree with the point.
Joe 41
Very true. Lee saw himself as defending Virginia. Slavery was the chief issue used in the
states declarations of secession. But the end goal was a separate govt (that actually banned
the importation of new slaves).
Nemesis 57
Excellent. Racism was bad in the North, too.
Strange how the left are pulling down statues of democrats, and the right are fighting to
have them stand. The confederates were democrats, but nobody seem to remember that now
anymore.
Nothing strange about it. The Democrats dropped the southern racists and the Republicans
picked them up with the Southern Strategy. It's all pretty well documented. The current
Republicans are not heirs to Lincoln in any meaningful way.
...."The Democrats," he said, "the longer they talk about identity politics, I got 'em. I
want them to talk about racism every day. If the left is focused on race and identity, and we
go with economic nationalism, we can crush the Democrats.".....
Those who make silly talk about "Patriots and Traitors" (Swallows and Amazons?) are being
obtuse about their history. The whole system was racist through and through, depended upon it
and was built upon it, starting with the very first rapacious sorties inland from the swampy
coast.
Some excellent commentary here, including james's percipient notes, Grieved's point,
RUKidding's and karlof1's, perry's observations and speculations.
Aside, this "99% v.1%" discourse is disempowering and one has to ask whose interests such
talk and attendant disempowerment serve.
This is a meaningful post on a touchy subject. Global Brahmins are looting the developed
world. Color revolutions and ethnic rifts make great fire sales. In a sane world, old
monuments would molder away in obscurity. Instead a faux resistance to divide and conquer the
little people has commenced. But, it is careening out of control due to austerity and job
loss. Deplorable Bushwhackers are fighting for tribalism and supremacy. After the 27 year old
war in Iraq, subjected Sunnis turned to their ethnic myths and traditions to fight back;
obliterating two ancient cities and themselves. The Chaos is coming west.
The problem is that people focus on the effects of history, like slavery and the holocaust,
but if you go into the causes and context of these events, then you get accused of
rationalizing them. Yet being ignorant of the causes is when history gets repeated. By the
time another seriously bad effect rises, it's too late.
As for slavery, it's not as though peoples lives haven't been thoroughly commodified before
and continue to be. Yes, slavery in the early part of this country was horrendous and the
resulting racism arose from the more reptilian parts of people's minds, but that part still
exists and needs to be better understood, not dismissed.
It should also be noted that if it wasn't for slavery, the African American population would
otherwise only be about as large as the Arab American population. It is a bit like being the
offspring of a rape. It might the absolute worst aspect of your life, but you wouldn't be
here otherwise. It's the Native Americans who really got screwed in the deal, but there are
not nearly enough of them left, to get much notice.
PS,
For those who know their legal history, no, I'm not using a pseudonym. There is a lot of
family history in this country, from well before it was a country.
"... Not only will enhanced recovery affect the economics of present unconventional operations, it has the potential to greatly expand the application to numerous, older conventional sources as well as undeveloped – yet recognized – formations with hydrocarbons within them ..."
"... But the problem isn't so much whether oil is still in the ground, but how much it costs to get it out. ..."
"... New technologies that don't reduce costs to make oil profitable to drill aren't all that helpful in keeping the oil flowing. Right now we have LTO because the system accepts financial loss. That could change if alternatives promise a better financial return. ..."
"... The way I understand the term Maximum Reservoir Contact (MRC) is that it refers to multiple laterals being drilled from a single vertical wellbore. ..."
"... From what I have read MRC technology is a great fit for a number of fields in the gulf countries and may be practical in other places including USA. Of course one of the problems applying it here is that I think you need a unitized field, or at least a very large area to be implemented. ..."
"... At that time, I was amazed to learn of the multi lateral, extended reach drilling using ultra sophisticated whipstocks in the mid east, offshore, and – if memory serves – Sakhalin. Probably do need large reservoir to be viable. ..."
"... The article says this: "On the supply side, global oil production advanced by 0.5 percent to reach 92.2 million BPD." You know, factoring in both population growth and world economic growth, this isn't much. There might be a crunch coming. ..."
New technologies did postoned the day f reconing, but they can't increase the total amount
of oil availble so the effects are temporary. Adn they are costly. right now low oil price is
financial scam.
I agree with George that getting stuff wrong is no reason to quit trying. To do so would be
stupid. To look back at why projections were wrong is a much more interesting thing. To that
end, I have been looking back at predictions from the 2005 to 2010 period, starting with
Simmons and progressing to the oil drum and some others. I do not have the technical
expertise that many of these people had, but looking back is a lot easier than looking
forward.
In my opinion, there are two big reasons the projected decline hasn't come about yet.
First, most of the work done was based upon inferred data. Because, the GCC countries don't
release much, most of the folks making these projections took whatever info was available and
ran with it. I don't blame them for this, as I believe they did what they could with what was
out there, but I think they went too far in some instances, and confirmation bias is
evident.
A part of Mr Simmon's efforts to deal with the lack of hard data was his review of many
SPE papers dealing with various issues. I believe one of these papers is a key to
understanding how KSA and others have exceeded projected production. Paper (SPE 88986) deals
with well "Shaybah-220 A Maximum Reservoir Contact (MRC) Well and its implications for
developing tight-facies reservoirs."
https://www.onepetro.org/download/journal-paper/SPE-88986-PA?id=journal-paper%2FSPE-88986-PA
This paper by N.G. Saleri describes the efforts to develop the Shaybah Field. After some
initial efforts to produce there were unsatisfactory, Aramco kept on trying and came up with
the Shaybah 220, a well with eight laterals of around 40,000 feet of reservoir contact, and
producing around 12,000 bbls per day for its first year. Saleri describes this as a
"disruptive technology".
Simmons devoted a lot of attention to Shaybah, calling it "The difficult last Giant". He
included a discussion of horizontal and MRC wells including the aforementioned paper, but I
don't think he fully appreciated these MRC wells. They have allowed KSA to produce lots of
oil in many fields that were in decline. Another example is shown by the 2008 paper by Mr
Asaad Al-Towalib on "Advanced completion technologies in successful extraction of attic oil
reserves in a mature giant carbonate field." In this paper they describe how this technology
was adapted to produce the attic oil of Abqaiq, KSA's oldest giant. To summarize, Abqaiq had
been produced since the 40's, and had produced about 57% of the original oil, but had around
25 feet of attic oil in poorer reservoir that they had not been able to produce. They tried
to produce this attic oil via vertical and conventional horizontal wells with little success.
They improved their technology and eventually completed many successful MRC wells with
geosteering which allowed them to follow structure, and intelligent completions which delay
the effects of coning.
So, much as most of us would have underestimated how successful our light-tight frac oil
has now become, many underestimated how successful MRC, and associated technology has been
for many gulf nations.
I think the next question is what happens next, so using Abqaiq as an example, after
successfully producing that attic oil is there another encore or does it become just a
depleted field? They have also used this technology to get more out of Ghawar and many other
fields, do they have room to run, or are they done?
That is simply an outstanding display of, and description of, a serious effort in
understanding what is unfolding in the world of hydrocarbon production.
I would suggest that the entire concept of MRC is being currently applied in this 'shale
revolution' primarily in the area of maximizing recovery rates, aka better
fracturing/completion processes.
Not only will enhanced recovery affect the economics of present unconventional
operations, it has the potential to greatly expand the application to numerous, older
conventional sources as well as undeveloped – yet recognized – formations with
hydrocarbons within them
But the problem isn't so much whether oil is still in the ground, but how much it costs
to get it out.
New technologies that don't reduce costs to make oil profitable to drill aren't all
that helpful in keeping the oil flowing. Right now we have LTO because the system accepts
financial loss. That could change if alternatives promise a better financial return.
I kind of 'flipped' the MRC concept in dc's post of 'more iron meeting' oil to 'more oil
meeting iron' via the greatly enhanced fracturing/conductivity recently taking place in the
shales.
Regarding multilaterals, the early (2007-2009) Bakken wells regularly contained 2 or 3
lateral from one vertical.
They used the term "turkey legs' and can still be easily seen on the ND DMR Gis map.
Virtually no one except Slawson still does this and even then, only rarely.
(Correction, might still be done in Madison formation, especially Bottineau county. Would
have to check. Gis map is easiest way to literally see this).
BHP said a year ago that they would attempt to try this in the future, but I've not kept
close track of their efforts.
Thank you very much coffee, I appreciate your kind words.
From what I have read MRC
technology is a great fit for a number of fields in the gulf countries and may be practical
in other places including USA. Of course one of the problems applying it here is that I think
you need a unitized field, or at least a very large area to be implemented.
I'm pretty sure you know a whole lot more about this stuff than I do.
I started digging into it a few years back when the series of stunningly high IPs started
to emerge from the Deep Utica.
Big buzz developed about feasibility of sharing hardware/facilities to develop Marcellus and
Utica together.
At that time, I was amazed to learn of the multi lateral, extended reach drilling
using ultra sophisticated whipstocks in the mid east, offshore, and – if memory serves
– Sakhalin. Probably do need large reservoir to be viable.
Time will tell if this approach makes sense in the shales. Like everything else, economics
will be the ultimate determinator.
The article says this: "On the supply side, global oil production advanced by 0.5 percent
to reach 92.2 million BPD." You know, factoring in both population growth and world economic
growth, this isn't much. There might be a crunch coming.
The 1973 so-called "oil embargo" which reduced oil supply to the USA by somewhere around 3%
or 4%. It slammed the US economy, caused the largest stock market crash since the great
depression, doubled gasoline prices, severely damaged US industry and caused a 55 MPH
national speed limit which remained in effect for ten years.
Just wait until we experience a 10% or 20% drop in oil supplies. In a few years or sooner
we certainly will. When it hits the economic and social damage will be catastrophic.
The end of Western Civilization, from China to Europe, to the US, will not occur when oil
runs out. The economic and social chaos will occur when supplies are merely reduced
sufficiently. As former Saudi Oil Minister Sheikh Yamani once said "The Oil Age may come to
an end for a shortage of oil".
They are talking about 25-30% and the verbage talks about it being in railcars . . . the
suggestion is it's part of the total Bakken flow of 1 million bpd. 25-30% of that is ethane?
What a scam this would be.
max Book is just anothe "Yascha about Russia" type, that Masha Gessen represents so vividly.
The problem with him is that time of neocon prominance is solidly in the past and now unpleasant
question about the cost from the US people of their reckless foreign policies get into some
newspapers and managines. They cost the USA tremedous anount of money (as in trillions) and those
money consititute a large portion of the national debt. Critiques so far were very weak and
partially suppressed voices, but defeat of neocon warmonger Hillary signify some break with
the past.
Notable quotes:
"... National Interest ..."
"... Carlson's record suggests that he has been in the camp skeptical of U.S. foreign-policy intervention for some time now and, indeed, that it predates Donald Trump's rise to power. (Carlson has commented publicly that he was humiliated by his own public support for the 2003 invasion of Iraq.) According to Carlson, "This is not about Trump. This is not about Trump. It's the one thing in American life that has nothing to do with Trump. My views on this are totally unrelated to my views on Donald Trump. This has been going since September 11, 2001. And it's a debate that we've never really had. And we need to have it." He adds, "I don't think the public has ever been for the ideas that undergird our policies." ..."
"... National Interest ..."
"... But the fight also seems to have a personal edge. Carlson says, "Max Boot is not impressive. . . . Max is a totally mediocre person." Carlson added that he felt guilty about not having, in his assessment, a superior guest to Boot on the show to defend hawkishness. "I wish I had had someone clear-thinking and smart on to represent their views. And there are a lot of them. I would love to have that debate," Carlson told me, periodically emphasizing that he is raring to go on this subject. ..."
"... New York Observer ..."
"... National Interest ..."
"... Weekly Standard ..."
"... Weekly Standard ..."
"... Though he eschews labels, Carlson sounds like a foreign-policy realist on steroids: "You can debate what's in [the United States'] interest. That's a subjective category. But what you can't debate is that ought to be the basic question, the first, second and third question. Does it represent our interest? . . . I don't think that enters into the calculations of a lot of the people who make these decisions." Carlson's interests extend beyond foreign policy, and he says "there's a massive realignment going on ideologically that everybody is missing. It's dramatic. And everyone is missing it. . . . Nobody is paying attention to it, " ..."
This week's primetime knife fights with Max Boot and Ralph Peters are emblematic of the
battle for the soul of the American Right.
To be sure, Carlson rejects the term
"neoconservatism,"
and implicitly, its corollary on the Democratic side, liberal internationalism. In 2016, "the reigning
Republican foreign-policy view, you can call it neoconservatism, or interventionism, or whatever you
want to call it" was rejected, he explained in a wide-ranging interview with the National Interest
Friday.
"But I don't like the term 'neoconservatism,'" he says, "because I don't even know what it means.
I think it describes the people rather than their ideas, which is what I'm interested in. And to
be perfectly honest . . . I have a lot of friends who have been described as neocons, people I really
love, sincerely. And they are offended by it. So I don't use it," Carlson said.
But Carlson's recent segments on foreign policy conducted with Lt. Col.
Ralph Peters and the prominent neoconservative journalist and author
Max Boot were acrimonious even by Carlsonian standards. In a discussion on Syria, Russia and
Iran, a visibly upset Boot accused Carlson of being "immoral" and taking foreign-policy positions
to curry favor with the White House, keep up his
ratings , and by proxy, benefit financially. Boot says that Carlson "basically parrots whatever
the pro-Trump line is that Fox viewers want to see. If Trump came out strongly against Putin tomorrow,
I imagine Tucker would echo this as faithfully as the pro-Russia arguments he echoes today." But
is this assessment fair?
Carlson's record suggests that he has been in the camp skeptical of U.S. foreign-policy intervention
for some time now and, indeed, that it predates Donald Trump's rise to power. (Carlson has commented
publicly that he was humiliated by his own public support for the 2003 invasion of Iraq.) According
to Carlson, "This is not about Trump. This is not about Trump. It's the one thing in American life
that has nothing to do with Trump. My views on this are totally unrelated to my views on Donald Trump.
This has been going since September 11, 2001. And it's a debate that we've never really had. And
we need to have it." He adds, "I don't think the public has ever been for the ideas that undergird
our policies."
Even if Carlson doesn't want to use the label neocon to describe some of those ideas, Boot is
not so bashful. In 2005, Boot wrote an essay called
"Neocons May Get
the Last Laugh." Carlson "has become a Trump acolyte in pursuit of ratings," says Boot, also
interviewed by the National Interest . "I bet if it were President Clinton accused of colluding
with the Russians, Tucker would be outraged and calling for impeachment if not execution. But since
it's Trump, then it's all a big joke to him," Boot says. Carlson vociferously dissents from such
assessments: "This is what dumb people do. They can't assess the merits of an argument. . . . I'm
not talking about Syria, and Russia, and Iran because of ratings. That's absurd. I can't imagine
those were anywhere near the most highly-rated segments that night. That's not why I wanted to do
it."
But Carlson insists, "I have been saying the same thing for fifteen years. Now I have a T.V. show
that people watch, so my views are better known. But it shouldn't be a surprise. I supported Trump
to the extent he articulated beliefs that I agree with. . . . And I don't support Trump to the extent
that his actions deviate from those beliefs," Carlson said. Boot on Fox said that Carlson is "too
smart" for this kind of argument. But Carlson has bucked the Trump line, notably on Trump's April
7 strikes in Syria. "When the Trump administration threw a bunch of cruise missiles into Syria for
no obvious reason, on the basis of a pretext that I
question . . . I questioned [the decision] immediately. On T.V. I was on the air when that happened.
I think, maybe seven minutes into my show. . . . I thought this was reckless."
But the fight also seems to have a personal edge. Carlson says, "Max Boot is not impressive. .
. . Max is a totally mediocre person." Carlson added that he felt guilty about not having, in his
assessment, a superior guest to Boot on the show to defend hawkishness. "I wish I had had someone
clear-thinking and smart on to represent their views. And there are a lot of them. I would love to
have that debate," Carlson told me, periodically emphasizing that he is raring to go on this subject.
Boot objects to what he sees as a cavalier attitude on the part of Carlson and others toward allegations
of Russian interference in the 2016 election, and also toward the deaths of citizens of other countries.
"You are laughing about the fact that Russia is interfering in our election process. That to me is
immoral," Boot told Carlson on his show. "This is the level of dumbness and McCarthyism in Washington
right now," says Carlson. "I think it has the virtue of making Max Boot feel like a good person.
Like he's on God's team, or something like that. But how does that serve the interest of the country?
It doesn't." Carlson says that Donald Trump, Jr.'s emails aren't nearly as important as who is going
to lead Syria, which he says Boot and others have no plan for successfully occupying. Boot, by contrast,
sees the U.S. administration as dangerously flirting with working with Russia, Iran and Syrian president
Bashar al-Assad. "For whatever reason, Trump is pro-Putin, no one knows why, and he's taken a good
chunk of the GOP along with him," Boot says.
On Fox last Wednesday, Boot reminded Carlson that he originally supported the 2003 Iraq decision.
"You supported the invasion of Iraq," Boot said, before repeating, "You supported the invasion of
Iraq." Carlson conceded that, but it seems the invasion was a bona fide turning point. It's most
important to parse whether Carlson has a long record of anti-interventionism, or if he's merely
sniffing the throne of the president (who, dubiously, may have opposed the 2003 invasion). "I
think it's a total nightmare and disaster, and I'm ashamed that I went against my own instincts in
supporting it," Carlson told the New York Observer in early 2004. "It's something I'll never
do again. Never. I got convinced by a friend of mine who's smarter than I am, and I shouldn't have
done that. . . . I'm enraged by it, actually." Carlson told the National Interest that he's
felt this way since seeing Iraq for himself in December 2003.
The evidence points heavily toward a sincere conversion on Carlson's part, or preexisting conviction
that was briefly overcome by the beat of the war drums. Carlson did work for the Weekly Standard
, perhaps the most prominent neoconservative magazine, in the 1990s and early 2000s. Carlson today
speaks respectfully of William Kristol, its founding editor, but has concluded that he is all wet.
On foreign policy, the people Carlson speaks most warmly about are genuine hard left-wingers: Glenn
Greenwald, a vociferous critic of both economic neoliberalism and neoconservatism; the anti-establishment
journalist Michael Tracey; Katrina vanden Heuvel, editor of the Nation ; and her husband,
Stephen Cohen, the Russia expert and critic of U.S. foreign policy.
"The only people in American public life who are raising these questions are on the traditional
left: not lifestyle liberals, not the Williamsburg (Brooklyn) group, not liberals in D.C., not Nancy
Pelosi." He calls the expertise of establishment sources on matters like Syria "more shallow than
I even imagined." On his MSNBC show, which was canceled for poor ratings, he cavorted with noninterventionist
stalwarts such as
Ron Paul , the 2008 and 2012 antiwar GOP candidate, and Patrick J. Buchanan. "No one is smarter
than Pat Buchanan," he said
last year of the man whose ideas many say laid the groundwork for Trump's political success.
Carlson has risen to the pinnacle of cable news, succeeding Bill O'Reilly. It wasn't always clear
an antiwar take would vault someone to such prominence. Jeb Bush, Marco Rubio or Mitt Romney could
be president (Boot has advised the latter two). But here he is, and it's likely no coincidence that
Carlson got a show after Trump's election, starting at the 7 p.m. slot, before swiftly moving to
the 9 p.m. slot to replace Trump antagonist Megyn Kelly, and just as quickly replacing O'Reilly at
the top slot, 8 p.m. Boot, on the other hand, declared in 2016 that the Republican Party was
dead , before it went on to hold Congress and most state houses, and of course take the presidency.
He's still at the Council on Foreign Relations and writes for the New York Times (this seems
to clearly annoy Carlson: "It tells you everything about the low standards of the American foreign-policy
establishment").
Boot wrote in 2003 in the Weekly Standard that the fall of Saddam Hussein's government
"may turn out to be one of those hinge moments in history" comparable to "events like the storming
of the Bastille or the fall of the Berlin Wall, after which everything is different." He continued,
"If the occupation goes well (admittedly a big if ), it may mark the moment when the powerful
antibiotic known as democracy was introduced into the diseased environment of the Middle East, and
began to transform the region for the better."
Though he eschews labels, Carlson sounds like a foreign-policy realist on steroids: "You can debate
what's in [the United States'] interest. That's a subjective category. But what you can't debate
is that ought to be the basic question, the first, second and third question. Does it represent our
interest? . . . I don't think that enters into the calculations of a lot of the people who make these
decisions." Carlson's interests extend beyond foreign policy, and he says "there's a massive realignment
going on ideologically that everybody is missing. It's dramatic. And everyone is missing it. . .
. Nobody is paying attention to it, "
Carlson seems intent on pressing the issue. The previous night, in his debate with Peters, the
retired lieutenant colonel said that Carlson sounded like Charles Lindbergh, who opposed U.S. intervention
against Nazi Germany before 1941. "This particular strain of Republican foreign policy has almost
no constituency. Nobody agrees with it. I mean there's not actually a large group of people outside
of New York, Washington or L.A. who think any of this is a good idea," Carlson says. "All I am is
an asker of obvious questions. And that's enough to reveal these people have no idea what they're
talking about. None."
Curt Mills is a foreign-affairs reporter at the National Interest . Follow him on Twitter:
@CurtMills .
"... Oh, it was glorious fun, yielding the kind of satisfaction that us anti-interventionists rarely get to enjoy: not one but two prominent neoconservatives who have been wrong about everything for the past decade – yet never held accountable – getting taken down on national television. Tucker Carlson, whose show is a shining light of reason in a fast-darkening world, has performed a public service by demolishing both Ralph Peters and Max Boot on successive shows. But these two encounters with evil weren't just fun to watch, they're also highly instructive for what they tell us about the essential weakness of the War Party and its failing strategy for winning over the American people. ..."
"... For the neocons, it's always 1938. The enemy is always the reincarnation of Hitler, and anyone who questions the wisdom of war is denounced as an "appeaser" in the fashion of Neville Chamberlain or Lindbergh. ..."
"... Reprinted with permission from Antiwar.com . ..."
Oh, it was glorious fun, yielding the kind of satisfaction that us anti-interventionists
rarely get to enjoy: not one but two prominent neoconservatives who have been wrong about
everything for the past decade – yet never held accountable – getting taken down on
national television. Tucker Carlson, whose show is a shining light of reason in a
fast-darkening world, has performed a public service by demolishing both Ralph Peters and Max
Boot on successive shows. But these two encounters with evil weren't just fun to watch, they're
also highly instructive for what they tell us about the essential weakness of the War Party and
its failing strategy for winning over the American people.
Tucker's first victim was Ralph Peters , an alleged "military expert" who's been a fixture
on Fox News since before the Iraq war, of which he was a rabid proponent. Tucker starts out the
program by noting that ISIS "caliph" Abu Bakr al-Baghdadi may have been killed in a Russian
airstrike and that the talk in Washington is now moving away from defeating ISIS and focusing
on Iran as the principal enemy. He asks why is this? Why not take a moment to celebrate the
death of Baghdadi and acknowledge that we have certain common interests with the Russians?
Peters leaps into overstatement, as is his wont: "We can't have an alliance with terrorists,
and the Russians are terrorists. They're not Islamists, but they are terrorists." He then
alleges that the Russians aren't really fighting ISIS, but instead are bombing hospitals,
children, and "our allies" (i.e. the radical Islamist Syrian rebels trained and funded by the
CIA and allied with al-Qaeda and al-Nusra). The Russians "hate the United States," and "we have
nothing in common with the Russians" –nothing!" The Russians, says Peters, are paving the
way for the Iranians – the real evil in the region – to "build up an empire from
Afghanistan to the Mediterranean." Ah yes, the "
Shia crescent " which the Israelis and their amen corner in the US have been warning
against since before the Iraq war. Yet Tucker points out that over 3,000 Americans have been
killed by terrorists in the US, and "none of them are Shi'ites: all of [these terrorists] have
been Sunni extremists who are supported by the Saudis who are supposed to be our allies." And
while we're on the subject: "Why," asks Tucker, "if we're so afraid of Iran did we kill Saddam
Hussein, thereby empowering Iran?"
"Because we were stupid," says Peters.
Oh boy! Peters was one of the most militant advocates of
the Iraq war: we were "stupid," I suppose, to listen to him. Yet Tucker lets this ride
momentarily, saving his big guns for the moment when he takes out Peters completely. And Peters
walks right into it when Tucker wonders why we can't cooperate with Russia, since both
countries are under assault from Sunni terrorists:
PETERS: You sound like Charles Lindbergh in 1938 saying Hitler hasn't attacked us.
TUCKER: I beg your pardon? You cannot compare me to somebody who makes apologies for
Hitler. And I don't think Putin is comparable.
PETERS: I think Putin is.
TUCKER: I think it is a grotesque overstatement actually. I think it's insane.
PETERS: Fine, you can think it's insane all you want.
For the neocons, it's always 1938. The enemy is always the reincarnation of
Hitler, and anyone who questions the wisdom of war is denounced as an "appeaser" in the fashion
of Neville Chamberlain or Lindbergh. Yet no one ever examines and challenges the assumption
behind this rhetorical trope, which is that war with the enemy of the moment – whether it
be Saddam Hussein, the Iranian ayatollahs, or Vladimir Putin – is inevitable and
imminent. If Putin is Hitler, and Russia is Nazi Germany, then we must take the analogy all the
way and assume that we'll be at war with the Kremlin shortly.
After all, Charles Lindbergh's opponents in the great debate of the 1940s openly said that
Hitler, who posed an existential threat to the West, had to be destroyed, and that this goal
could not be achieved short of war. Of course, Franklin Roosevelt pretended that this wasn't
so, and pledged repeatedly that we weren't going to war, but secretly he manipulated events so
that war was practically inevitable. Meanwhile, the more honest elements of the War Party
openly proclaimed that we had to aid Britain and get into the war.
Is this what Peters and his gaggle of neocons are advocating – that we go to war with
nuclear-armed Russia and annihilate much of the world in a radioactive Armageddon? It certainly
seems that way. The Hitler-Lindbergh trope certainly does more than merely imply that.
Clearly riled by the attempt to smear him, Tucker, the neocon slayer, then moves in for the
kill:
I would hate to go back and read your columns assuring America that taking out Saddam Hussein
will make the region calmer, more peaceful, and America safer, when in fact it has been the
opposite and it has empowered Russia and Iran, the two countries you say you fear most
– let's be totally honest, we don't always know the outcomes.
They are not entirely predictable so maybe we should lower that a little bit rather than
calling people accommodationist.
This is what the neocons hate: reminding them of their record is like showing a
vampire a crucifix. Why should we listen to Peters, who's been wrong about everything for
decades? Peters' response is the typical neocon riposte to all honest questions about their
policies and record: you're a traitor, you're "cheering on Vladimir Putin!" To which Tucker has
the perfect America Firster answer:
I'm cheering for America as always. Our interests ought to come first and to the extent that
making temporary alliances with other countries serves our interests, I'm in favor of that.
Making sweeping moral claims – grotesque ones – comparing people to Hitler
advances the ball not one inch and blinds us to reality.
Peters has no real argument, and so he resorts to the method that's become routine
in American politics: accuse your opponent of being a foreign agent. Tucker, says Peters, is an
"apologist" not only for Putin but also for Syrian President Bashar al-Assad. Again, Tucker
answers smears with cold logic:
So because I'm asking rational questions about what's best for America I'm a friend to
strongmen and dictators? That is a conversation stopper, not a beginning of a rational
conversation. My only point is when Syria was run by Assad 10% of the population was
Christian and they lived in relative peace.
And that's really the whole point: the War Party wants to stop the conversation.
They don't want a debate – when, really, have we ever had a fair debate in this country
over foreign policy? They depend on fear, innuendo, and ad hominem "arguments" to drag us into
war after war – and Tucker is having none of it.
So why is any of this important? After all, it's just a TV show, and as amusing as it is to
watch a prominent neocon get creamed, what doe it all mean in the end? Well, it matters because
Tucker didn't start out talking sense on foreign policy. He started out, in short, as a
conventional conservative, but then something happened. As he put it to Peters at the end of
the segment:
I want to act in America's interest and stop making shallow, sweeping claims about countries
we don't fully understand and hope everything will be fine in the end. I saw that happen and
it didn't work.
What's true isn't self-evident, at least to those of us who aren't omniscient.
Many conservatives, as well as the country as a whole, learned something as they saw the
disasters in Iraq, Afghanistan, Libya, and Syria unfold. On the right, many have rejected the
neoconservative "idealism" that destroyed the Middle East and unleashed ISIS. When Donald Trump
stood before the South Carolina GOP debate and told the assembled mandarins that we were lied
into the Iraq war, the chattering classes declared that he was finished – yet he won that
primary, and went on to win the nomination, precisely because Republican voters were ready to
hear that message.
Indeed, Trump's "America First" skepticism when it comes to foreign wars made
the crucial difference in the election , as a recent study shows :
communities hard hit by our endless wars put him over the top in the key states of Wisconsin,
Michigan, and Pennsylvania. This, and not "Russian meddling," handed him the White House.
Tucker Carlson's ideological evolution limns the transformation of the American right in the
age of Trump: while Trump is not, by a long shot, a consistent anti-interventionist, Tucker
comes pretty close. He is, at least, a realist with a pronounced antipathy for foreign
adventurism, and that is a big step forward from the neoconservative orthodoxy that has bathed
much of the world in blood.
Perhaps the neocons, having been trounced in round one, thought Boot could do better: they
were mistaken. Tucker took him apart simply by letting him talk: Boot didn't answer a single
question put to him, and, in the course of it all, as Boot resorted to the typical ad hominems,
Tucker made a cogent point:
[T]o dismiss people who disagree with you as immoral – which is your habit –
isn't a useful form of debate, it's a kind of moral preening, and it's little odd coming from
you, who really has been consistently wrong in the most flagrant and flamboyant way for over
a decade. And so, you have to sort of wonder, like –
BOOT: What have I been wrong about, Tucker? What have I been wrong about?
CARLSON: Well, having watch you carefully and known you for a long time, I recall vividly
when you said that if we were to topple the governments of Afghanistan and Iraq, the region
will be much safer and the people who took their place would help us in the global war on
terror. Of course it didn't happen –
Boot starts to completely melt down at this point, screeching "You supported the
Iraq war!" To which Tucker trenchantly replies:
I've been wrong about a ton of things, you try to learn your lesson. But when you get out
there in the New York Times and say, we really should have done more to depose Qaddafi,
because you know, Libya is going to be better when that happens. And then to hear you say we
need to knock off the Assad regime and things will be better in Syria, he sort of wonder
like, well, maybe we should choose another professions. Selling insurance, something you're
good at. I guess that's kind of the point. Are there no sanctions for being as wrong as you
have?
Why oh why should we listen to Peters and Boot and their fellow neocons, who have
been – literally – dead wrong about everything: their crackbrained ideology has led
to untold thousands of deaths since September 11, 2001 alone. And for what?
In the end, Boot falls back on the usual non-arguments: Tucker is "immoral" because he
denies that Trump is a Russian agent, and persists in asking questions about our foreign policy
of endless intervention in the Middle East. Tucker keeps asking why Boot thinks Russia is the
main threat to the United States, and Boot finally answers: "Because they are the only country
that can destroy us with a nuclear strike."
To a rational person, the implications of this are obvious: in that case, shouldn't we be
trying to reach some sort of détente, or even achieve a degree of cooperation with Moscow?
Oh, but no, because you see the Russians are inherently evil, we have "nothing" in common with
them – in which case, war is inevitable.
At which point, Tucker avers: "Okay. I am beginning to think that your judgment has been
clouded by ideology, I don't fully understand where it's coming from but I will let our viewers
decide."
I know where it's coming from. Tucker's viewers may not know that Boot is a Russian
immigrant, who – like so many of our Russophobic warmongers – arrived on our shores
with his hatred of the motherland packed in his suitcase. There's a whole platoon of them:
Cathy Young, who recently released her polemic
arguing for a new cold war with Russia in the pages ofReason magazine; Atlantic writer and
tweeter of anti-Trump obscenities Julia Ioffe, whose visceral hatred for her homeland is a
veritable monomania; Gary Kasparov, the former chess champion who spends most of his energy
plotting revenge against Vladimir Putin and a Russian electorate that has consistently rejected
his hopeless presidential campaigns, and I could go on but you get the picture.
As the new cold war envelopes the country, wrapping us in its icy embrace and freezing all
rational discussion of foreign policy, a few people stand out as brave exceptions to the
groupthinking mass of the chattering classes: among the most visible and articulate are Tucker
Carlson, Glenn Greenwald, journalist Michael Tracey, Prof. Stephen Cohen, and of course our own
Ron Paul. I tip my hat to them, in gratitude and admiration, for they represent the one thing
we need right now: hope. The hope that this madness will pass, that we'll beat back this latest
War Party offensive, and enjoy a return to what passes these days for normalcy.
"... Cohen's appearance on Carlson's show last night demonstrated again at what a blistering pace public opinion in the West about Putin and Russia is shifting, for the better. ..."
"... Cohen is always good, but last night he nailed it, calling the media's coverage of Hamburg 'pornography'. ..."
"... It was just a year ago, pre-Trump, that professor Cohen was banned from all the networks, from any major media outlet, and being relentlessly pilloried by the neocon media for being a naive fool for defending Putin and Russia. ..."
"... "The first thing you notice is just how much the press is rooting for this meeting between our president and the Russian President to fail. It's a kind of pornography. Just as there's no love in pornography, there's no American national interest in this bashing of Trump and Putin. ..."
"... Carlson tried to draw Cohen out about who exactly in Washington is so against Assad, and why, and Cohen deflected, demurring - 'I don't know - I'm not an expert'. Of course he knows, as does Carlson - it is an unholy alliance of Israel, Saudi Arabia and their neocon friends in Washington and the media who are pushing this criminal policy, who support ISIS, deliberately. But they can't say so, because, ... well, because. Ask Rupert Murdoch. ..."
Cohen's appearance on Carlson's show last night demonstrated again at what a blistering pace public opinion in the West about
Putin and Russia is shifting, for the better.
Cohen is always good, but last night he nailed it, calling the media's coverage of Hamburg 'pornography'.
Ahh, the power of the apt phrase.
It was just a year ago, pre-Trump, that professor Cohen was banned from all the networks, from any major media outlet, and
being relentlessly pilloried by the neocon media for being a naive fool for defending Putin and Russia.
Last night he was the featured guest on the most watched news show in the country, being cheered on by the host, who has him on
as a regular. And Cohen isn't remotely a conservative. He is a contributing editor at the arch-liberal Nation magazine, of which
his wife is the editor. It doesn't really get pinker than that.
Some choice quotes here, but the whole thing is worth a listen:
"The first thing you notice is just how much the press is rooting for this meeting between our president and the Russian
President to fail. It's a kind of pornography. Just as there's no love in pornography, there's no American national interest in
this bashing of Trump and Putin.
As a historian let me tell you the headline I would write instead:
"What we witnessed today in Hamburg was a potentially historic new detente. an anti-cold-war partnership begun by Trump and
Putin but meanwhile attempts to sabotage it escalate." I've seen a lot of summits between American and Russian presidents, ...
and I think what we saw today was potentially the most fateful meeting ... since the Cold War.
The reason is, is that the relationship with Russia is so dangerous and we have a president who might have been crippled or
cowed by these Russiagate attacks ... yet he was not. He was politically courageous. It went well. They got important things done.
I think maybe today we witnessed president Trump emerging as an American statesman."
Cohen goes on to say that the US should ally with Assad, Iran, and Russia to crush ISIS, with Carlson bobbing his head up and
down in emphatic agreement.
Carlson tried to draw Cohen out about who exactly in Washington is so against Assad, and why, and Cohen deflected, demurring
- 'I don't know - I'm not an expert'. Of course he knows, as does Carlson - it is an unholy alliance of Israel, Saudi Arabia and
their neocon friends in Washington and the media who are pushing this criminal policy, who support ISIS, deliberately. But they can't
say so, because, ... well, because. Ask Rupert Murdoch.
Things are getting better in the US media, but we aren't quite able to call a spade a spade in the land of the free and the home
of the brave.
I can't stand Tucker Carlson from his time as a loyal footsoldier in the ranks of the George Dubya Bush Apologist Army, but it's
easy to feel in synch with him here just because CNN is so deservedly hated. Can't argue with your conclusions, either.
Then this will make you chuckle Mark when I was discussing CNN at a meeting, one of the smarter analysts commented: "yet another
reason to hate CNN is because they're making Tucker Carlson look good! Why doesn't anyone bring that up?"
The room responded with laughter. Remember the days when CNN used to claim that they're "the most trusted name in news" well
they're not doing that anymore:
"In the poll published Wednesday by Rasmussen Reports, 1,000 likely voters were asked to describe their media viewing habits.
Seventy-five percent said they watch at least some form of cable news each week, with 42 percent saying they most frequently watch
Fox News, 35 percent usually choosing CNN, and 19 percent favoring MSNBC. An even 50 percent of frequent Fox News viewers agreed
with a followup question, "Do you trust the political news you are getting?" By comparison, 43 percent of frequent MSNBC viewers
and just 33 percent of those who mostly watch CNN said they trust their political news."
"For instance, on Tuesday, over the course of the day, CNN was only able to attract a measly 670,000 viewers. For context,
MSNBC nearly doubled this number; Fox News nearly tripled it. CNN has almost always lagged a bit behind MSNBC in total viewers,
but not like this."
Why couldn't it be 620,000? The reason I'm asking, is because 6.2 million Americans watched Putin's interview with Megyn Kelly.
I'm not yet sure about Stone's Putin Interviews but that number also seems to be very positive and in the millions. Of course
losing to Discovery Channel didn't help CNN:
"Furthermore, throughout this same quarter, CNN lost to MSNBC in total and primetime demo viewers. This is the first time since
2014 that CNN has lost that demo crown to its leftwing rival. In total viewers last quarter, among all cable news channels, Fox
News placed first, MSNBC third, and CNN is all alone in tenth place, just barely ahead of Investigative Discovery, a second-tier
offshoot of the Discovery Network."
I predicted this would happen back when they fucked up their coverage of the Ossetian War. Now I'm just watching the train-wreck,
thinking "am I really eating the best tasting popcorn? Have I finally found it?"
I hope they are driven right out of existence I can't wait to see Wolf Blitzer sitting on a bench outside Hope Cottage in downtown
Halifax, bleary-eyed and waiting for the free soup line to open. All of a journalist's enemies should be among the corrupt mages
of the state apparatus when the common man earnestly prays for you to be brought low, you've lost your way, and are feeding
on a projected image of yourself. I think it's safe to say that we have seen the most precipitous decline in ethics in journalism,
this past decade, that has occurred since its humble beginnings.
"... It implies that it is money supply that contributes to inflation. However it is not money supply that contributes to inflation it is income. That is money times the velocity of money ..."
Now I just read an article by some guy with the typical quantitative easing is bad because it
just dilutes everyones wealth , debases the currency value and and all that
This is nonsense
It implies that it is money supply that contributes to inflation. However it is not money
supply that contributes to inflation it is income. That is money times the velocity of money
and in fact it is not income that contributes to inflation it is income times the propensity
to consume of that income
money in bonds is not really actively involved in income except for the interest it's earning
so when the central bank "prints money" and then uses that money to buy bonds all the central
bank is doing is exchanging one form of inactive wealth with another form of inactive wealth
that is neither the value of the bond nor the value of the money that the fed printed by the
bond were actively involved in income anyway, except for the interest earned
therefore they do not affect inflation
in fact the value that bond at this point wasn't about to be used for consumption anyway, it
was just being held
after the fed purchases the bond, that the former bondholder now has cash that is no longer
getting a return, (as now the fed is getting the return)
which will prompt the former bondholder to look for a place to put that money
the idea is that the former bondholder will invest the money, that that money will find its
way into funding ventures that cause increased employment, income and production
and it is that investment that will stimulate the economy
like maybe buy other bonds and the issuer of the bond gets that money and can invest in their
business, creating jobs and income and production for their employees.
Which then will have the usual multiplier effect if we are at less than full employment
and at any point the fed can sell back the bond reducing the money supply
in the meantime we might have been able to keep the economy functioning at a high level, keep
more people from being excluded from the benefits, and not lose all that production that is so
essential to increasing our quality of life
"McDonald's has repeatedly said that adding kiosks won't result in mass layoffs, but will instead
move some cashiers to other parts of the restaurant where it's adding new jobs, such as table service.
The burger chain reiterated that position again on Friday."
Is McDonald's denial believable? What would you expect the company to say?
McDonald's has to deny the story or it might have a hiring problem, a morale problem, and other
problems.
"Our CEO, Steve Easterbrook, has said on many occasions that self-order kiosks in McDonald's restaurants
are not a labor replacement," a spokeswoman told Business Insider. "They provide an opportunity to
transition back-of-the-house positions to more customer service roles such as concierges and table
service where they are able to truly engage with guests and enhance the dining experience."
Move cashiers to table service? Really?
Yeah, right.
An interesting political rule from the British sitcom "Yes, Minister" is to "never believe anything
until it's officially denied".
Will Humans Be Necessary?
When someone can be replaced by a robot, how can the push for $15 be justified?
Let's start with jobs likely to be eliminated, starting with the present and with those lower-level
jobs.
Already, don't you prefer a ATM to a teller, self-checkout to the supermarket checker, drive-through
tolls rather than stop for the toll-taker, automated airline check-in rather than waiting for a clerk,
shopping on Amazon rather than fighting traffic, parking, and the check-out experience with a live
clerk, assuming the store has what you want in your size? Indeed,
malls are
closing while online retailers led by Amazon
are growing.
As minimum wage and mandated benefits rise,
fast-food restaurants especially are accelerating use of, for example, order-taking kiosks, which
McDonald's
is rolling out in 2,500 stores, robotic burger flippers and fry cooks, even
pizza, ramen and sushi makers . Even that fail-safe job, barista, is at-risk, Bosch now makes
an automated barista . Mid-range
restaurants such as Olive Garden, Outback, and Applebee are
replacing waiters
with tabletop tablets . Will you really miss having your conversation interrupted by a waiter
hawking hors de oeuvres and expecting a 15+% tip? If you owned a fast-food franchise, mighn't you
be looking to replace people with automated solutions? Can it really be long until there are completely
automated fast-food and even mid-range restaurants?
BlackRock, the world's largest fund company
has replaced seven of its 53 analysts with AI-driven stock-picking.
The remaining jobs
In such a world, how can a human justify asking to be paid to work?
Four scenarios
The range of scenarios would seem circumscribed by these. How likely do you think each of these
are?
Continue on the current path: The world continues to slowly make progress, e.g., birth rates
declining in developing nations, slowed global warming, more education and health care. Those positives
would be mitigated by declining jobs, more
concentration of wealth.
World socialism.
Mass population reduction, for example, by nuclear war, pandemic, or, per Clive Cussler, highly
communicable biovirus simultaneously put into the water supply of a half-dozen cruise ships?
A world run by machines and the few people they deem worthy.
Here is a debate between an optimistic and a
pessimist on the future
of the world.
The truth may well be something we can't even envision. After all, he who lives by the crystal
ball usually eats broken glass.
Note that Psychology Today author Marty Nemko did not ask about $15. He wonders if pay for some
jobs is worth anything at all.
When all the jobs are taken over by machines there won't be anybody with money left to buy
or pay for anything at all. WTF then? A world of no work is a world of little or no income. The
ones who survive are the ones who know how to provide for themselves without the use of currency
(barter, trade, farming, etc ).
Before that happens, these machines will be heavily vandalized. It's all part of the inevitable
ISEP problem (It's Someone Else's Problem).
For one firm to do this, it's understandable, but for an entire sector, they're ripping their
face off and everyone else's. But those making the decisions are unwilling or unable to care about
even their long-term positions. To start, they largely exist to kick the can down the road until
... you guess it! ... it's ISEP. It's a problem for the next round of overcompensated intellectual-light
and morally-bankrupt executives.
But don't think "the market" is going to fix that. Markets never do. Markets have failures
all the time yet people still pretend like they have this inherent magical property. Markets would
be fine ... in a human-free world ... because anything a sociopath touches will be turned to sh*t.
And power, be it government or "market" will attract these people. Any ideology can work, but
only until the sociopaths game the sh*t out of the system and destroy it from the inside.
Now, the less stupid people in these positions will realize the ISEP problem but know full
well the government of the future can be extorted into, effectively, bailing them out somehow.
Think of the "mandate" of ObamaCare and realize "thinkers" at the Heritage Institute saw this
down the road back in the early 1980s. Right now, I'm starting to wonder if this whole "livable
wage" is just a proxy bailout on behalf of large actors like McDonald's (who can no longer expect
growth as the incomes and costs at the bottom shrink in the former and explode in the latter).
That leadership knows full well that even if they took a leadership position on living wages,
they'll be expected to be the only ones. The sociopaths at the other firms will think ... you
got it! ... ISEP. Those firms can continue on f**king their employees while a large firm like
McDonald's is expected to shoulder the entire burden or drive them into bankruptcy. In either
of those cases, the status quo remains across the industry.
FIRE-HC-E (Financial, Insurance, Real Estate, Healthcare, Education; the major rackets of ourlives)
is destroying the markets for not just McDonald's employees, but also markets for other brick-and-mortar
companies like Apple or Home Depot. This is why I focus heavily on our poor leadership because
the leadership of the industrial sectors as a whole just sat back and watched as the likes of
Wall Street slowly eroded the bedrock of the economy.
The author, Mike Shedlock, links to a POS article in Psychology Today, authored by Marty Nemko
Ph.D. Did anyone else read that? It says under An
optimistic vision
"Longer term, it's even possible that we'll be able to accomplish more of what we want by using
gene therapy or
a chip embedded in our brain -Research to make that happen is already being funded by the
federal government." Ah, no thank you!
Mike also asks " how can the push for $15 be justified? And links to the Psycholgy Today article
which say "we may also need a guaranteed basic income paid heavily by successful corporations
and wealthy individuals". Which view do you support Mike?
Psychology Today article also states "What about journalism? Even in major media outlets, many
journalism jobs have already been lost to the armies of people willing to write for free. In addition,
software such as Quill can replace some human journalists" Maybe in this case, that's not a bad
thing.
Thousands of workers face unemployment as retailers
struggle to adapt to online shopping. But even as
e-commerce grows, it isn't absorbing these workers.
JOHNSTOWN, Pa. - Dawn Nasewicz comes from a family of
steelworkers, with jobs that once dominated the local
economy. She found her niche in retail.
She manages a store, Ooh La La, that sells prom dresses
and embroidered jeans at a local mall. But just as the jobs
making automobile springs and rail anchors disappeared, local
retail jobs are now vanishing.
"I need my income," said Ms. Nasewicz, who was told that
her store will close as early as August. "I'm 53. I have no
idea what I'm going to do."
Ms. Nasewicz is another retail casualty, one of tens of
thousands of workers facing unemployment nationwide as the
industry struggles to adapt to online shopping.
Continue reading the main story
Photo
A sporting goods store in a Johnstown, Pa., mall is having a
going-out-of-business sale. Credit George Etheredge for The
New York Times
Small cities in the Midwest and Northeast are particularly
vulnerable. When major industries left town, retail accounted
for a growing share of the job market in places like
Johnstown, Decatur, Ill., and Saginaw, Mich. Now, the work
force is getting hit a second time, and there is little to
fall back on.
Moreover, while stores in these places are shedding jobs
because of e-commerce, e-commerce isn't absorbing these
workers. Growth in e-commerce jobs like marketing and
engineering, while strong, is clustered around larger cities
far away. Rural counties and small metropolitan areas account
for about 23 percent of traditional American retail
employment, but they are home to just 13 percent of
e-commerce positions.
E-commerce has also fostered a boom in other industries,
including warehouses. But most of those jobs are being
created in larger metropolitan areas, an analysis of Census
Bureau business data shows.
Almost all customer fulfillment centers run by the online
shopping behemoth Amazon are in metropolitan areas with more
than 250,000 people - close to the bulk of its customers -
according to a list of locations compiled by MWPVL
International, a logistics consulting firm. An Amazon
spokeswoman noted, however, that the company had recently
opened warehouses in two distressed cities in larger
metropolitan areas, Fall River, Mass., and Joliet, Ill.
The Johnstown metropolitan area, in western Pennsylvania,
has lost 19 percent of its retail jobs since 2001, and the
future is uncertain. At least a dozen of Ooh La La's
neighbors at the mall have closed, and a "Going out of
business" banner hangs across the front of the sporting goods
store Gander Mountain.
"Every time you lose a corner store, every time you lose a
restaurant, every time you lose a small clothing store, it
detracts from the quality of life, as well as the job loss,"
said John McGrath, a professor of management at the
University of Pittsburgh Johnstown.
This city is perhaps still best known for a flood that
ravaged it nearly 130 years ago. After rebuilding, Johnstown
eventually became prosperous from its steel and offered a
clear path to the middle class. For generations, people could
walk out of high school and into a steady factory job.
But today, the area bears the marks of a struggling town.
Its population has dwindled, and addiction treatment centers
and Dollar Generals stand in place of corner grocers and
department stores like Glosser Brothers, once owned by the
family of Stephen Miller, President Trump's speechwriter and
a policy adviser.
When Mr. Trump spoke about "rusted-out factories scattered
like tombstones across the landscape of our nation" in his
Inaugural Address, people like Donald Bonk, a local economic
development consultant, assumed that Mr. Miller - who grew up
in California but spent summers in Johnstown - was writing
about the old Bethlehem Steel buildings that still hug long
stretches of the Little Conemaugh River.
The county voted overwhelmingly for Mr. Trump, eight years
after it helped to elect Barack Obama. (It also voted for
Mitt Romney in 2012, but not by as wide a margin.)
Here and in similar towns, when the factory jobs left, a
greater share of the work force ended up in retail.
Sometimes that meant big-box retailers like Walmart, which
were often blamed for destroying mom-and-pop stores but at
least created other jobs for residents. The damage from
e-commerce plays out differently. Digital firms may attract
customers from small towns, but they are unlikely to employ
them.
Some remaining retailers are straining for solutions. ...
"... What's needed is not the arbitrary adoption of UBI, but a conversation about what a welfare state is for. In their incendiary book Inventing the Future, the authors Alex Williams and Nick Srnicek argue for UBI but link it to three other demands: collectively controlled automation, a reduction in the working week, and a diminution of the work ethic. Williams and Srnicek believe that without these other provisions, UBI could essentially act as an excuse to get rid of the welfare state. ..."
"... What's needed is not the arbitrary adoption of UBI, but an entirely different conversation about what a welfare state is for. As David Lammy MP said, after the Grenfell Tower disaster: "This is about whether the welfare state is just about schools and hospitals or whether it is about a safety net." The conversation, in light of UBI, could go even further: it's possible for the welfare state not just to act as a safety net, but as a tool for all of us to do less work and spend more time with our loved ones, pursuing personal interests or engaging in our communities. ..."
Lane Kenworthy's article shows how America is already great, with many more people working
in poverty than in the UK, Ireland or Australia. Maybe the robots stole better paying jobs? Maybe
they need more education and to skill up?
Love the idea of a universal basic income? Be careful what you wish for
Ellie Mae O'Hagan
Friday 23 June 2017 10.36 EDT
Yes, UBI could be an important part of a radical agenda. But beware: its proponents include
neoliberals hostile to the very idea of the welfare state
For some time now, the radical left has been dipping its toes in the waters of universal basic
income (or unconditional basic income, depending on who you talk to). The idea is exactly as it
sounds: the government would give every citizen working or not a fixed sum of money every
week or month, with no strings attached. As time goes on, universal basic income (UBI) has gradually
been transitioning from the radical left into the mainstream: it's Green party policy, is picking
up steam among SNP and Labour MPs and has been advocated by commentators including this newspaper's
very own John Harris.
Supporters of the idea got a boost this week with the news that the Finnish government has
piloted the idea with 2,000 of its citizens with very positive results. Under the scheme, the
first of its kind in Europe, participants receive 560 (£473) every month for two years without
any requirements to fill in forms or actively seek work. If anyone who receives the payment finds
work, their UBI continues. Many participants have reported "decreased stress, greater incentives
to find work and more time to pursue business ideas." In March, Ontario in Canada started trialling
a similar scheme.
Given that UBI necessarily promotes universalism and is being pursued by liberal governments
rather than overtly rightwing ones, it's tempting to view it as an inherently leftwing conceit.
In January, MEPs voted to consider UBI as a solution to the mass unemployment that might result
from robots taking over manual jobs.
From this perspective, UBI could be rolled out as a distinctly rightwing initiative. In fact
it does bear some similarity to the government's shambolic universal credit scheme, which replaces
a number of benefits with a one-off, lower, monthly payment (though it goes only to people already
on certain benefits, of course). In the hands of the right, UBI could easily be seen as a kind
of universal credit for all, undermining the entire benefits system and providing justification
for paying the poorest a poverty income.
In fact, can you imagine what UBI would be like if it were rolled out by this government, which
only yesterday promised to fight a ruling describing the benefits cap as inflicting "real misery
to no good purpose"?
Despite the fact that the families who brought a case against the government had children too
young to qualify for free childcare, the Department for Work and Pensions still perversely insisted
that "the benefit cap incentivises work". It's not hard to imagine UBI being administered by the
likes of A4e (now sold and renamed PeoplePlus), which carried out back-to-work training for the
government, and saw six of its employees receive jail sentences for defrauding the government
of £300,000. UBI cannot be a progressive initiative as long as the people with the power to implement
it are hostile to the welfare state as a whole.
What's needed is not the arbitrary adoption of UBI, but a conversation about what a welfare
state is for. In their incendiary book Inventing the Future, the authors Alex Williams and Nick
Srnicek argue for UBI but link it to three other demands: collectively controlled automation,
a reduction in the working week, and a diminution of the work ethic. Williams and Srnicek believe
that without these other provisions, UBI could essentially act as an excuse to get rid of the
welfare state.
What's needed is not the arbitrary adoption of UBI, but an entirely different conversation
about what a welfare state is for. As David Lammy MP said, after the Grenfell Tower disaster:
"This is about whether the welfare state is just about schools and hospitals or whether it is
about a safety net." The conversation, in light of UBI, could go even further: it's possible for
the welfare state not just to act as a safety net, but as a tool for all of us to do less work
and spend more time with our loved ones, pursuing personal interests or engaging in our communities.
UBI has this revolutionary potential but not if it is simply parachuted into a political
economy that has been pursuing punitive welfare policies for the last 30 years.
On everything from climate change and overpopulation to yawning inequality and mass automation,
modern western economies face unprecedented challenges. These conditions are frightening but they
also open up the possibility of the kind of radical policies we haven't seen since the postwar
period. UBI could be the start of this debate, but it must not be the end.
> "One of the reasons I support UBI is that it
refocuses political discussions to some of the fundamental
issues, as this article points out."
I agree.
UBI might probably be the most viable first step of
Trump's MAGA. But he betrayed his electorate. Similarly it would be a good step in Obama's "change we
can believe in" which never materialized.
The level of automation that currently exists makes UBI
quite a possibility.
But...
The problem is the key idea of neoliberalism is
"socialism for rich and feudalism and/or plantation
slavery for poor."
So neither Republicans, nor Clinton Democrats are
interested in UBI. It is anathema for neoliberals.
"Big Ships Account for 80 Percent of Shipping's CO2"
By Paul Benecki...2017-06-13...20:16:44
"At Nor-Shipping 2017, researchers with DNV GL released a study that points to the difficulty
of reducing the industry's CO2 output below current levels. The problem is structural: big cargo
vessels emit 80 percent of shipping's greenhouse gases, but they're also the industry's most efficient
ships, and squeezing out additional improvements may be a challenge.
Just 35 percent of the fleet mostly large bulkers, tankers and container ships is responsible
for 80 percent of shipping's fuel consumption, according to Christos Chryssakis, DNV GL's group leader
for greener shipping. Unfortunately, these are already the fleet's most efficient vessels per ton-mile.
"This is a paradox, but if we want to reduce our greenhouse gas emissions, we actually have to improve
the best performers," Chryssakis says."...
Similar situation with trucking, but in the USA around one half of gas consumption goes into
private cars. So by improving efficiency of private fleet by 100% you can cut total consumption
only by 25%. All this talk about electrical cars like Tesla Model 3 right now is mostly cheap talk. They
by-and-large belong to the luxury segment.
I would say precious metals are subject to tighter physical
constraints (first of all, availability) than most of what
have been considered "fiat" currencies.
E.g. emergency
"fiat" coin has been produced from cheaper metals, e.g. iron,
aluminum, or brass. Forgery-resistant paper currency is not
cheap, but probably still cheaper than precious metals.
All that is beside the point - today's currencies are only
virtual accounting entries (though with a not so cheap
supervision and auditing infrastructure attached to enforce
scarcity, or rather limit issuance to approved parties).
Gold and silver prices are
determined by labor costs of production.
Cartels act to limit global supply to push prices above
labor costs, but even the Cartels have trouble resisting
selling into the market when the price far exceeds labor cost
of the marginal unit of production.
In today's political economy, the barrier to entry is rule
of law which requires paying workers to produce without
causing harm to others. The lowest cost new gold production
is all criminal, involving theft of gold from land the miners
have no property rights, done by causing harm and death to
bystanders, with protection of the criminal operations coming
from criminals who capture most of the profit from the
workers.
Estimates vary, but some believe 90% of all gold mined in
5000 years is still held by humans as property. If a method
of extracting gold from sea water at a labor cost of $300 an
ounce, the "destruction of wealth" would be many trillions of
dollars.
All that's needed is a method of processing sea water that
could be built for $300 per ounce of lifetime asset life. A
$300 million in labor cost processing ship that kept working
for 30 years producing over that 30 years a million ounces of
gold would quickly drive the price of gold to $350-400. If it
doesn't, a thousand ships would be quickly built that would
add a billion ounces to the global supply in 30 years
representing 1/6th global supply after 5000 years.
Unless gold suddenly gained new uses, say dresses that
every upper middle class women had to have, and that cost
more than $300 an ounce to return to industrial gold, such
production would force the price of gold to or below labor
cost.
However, a dollar coin plated one atom thick in 3 cents of
gold will always have a value of a dollar's worth of labor.
The number of minutes of labor or the skills required for
each second of labor can change, but as long as the dollar
buys labor, it will have a dollar of value.
If robots do all the work, then a dollar becomes
meaningless. A theoretical economy of robots doing all the
work means a car can be priced at a dollar or a gigadollars,
but the customers must be given that dollar or that
gigadollars, or the robots will produce absolutely nothing.
Robots producing a million cars a month which no one has the
money to buy means the cars cost zero. To simply produce cars
that are never sold means the marginal cost is zero.
Money is a rationing mechanism to control the use and
distribution of scarce economic resources. Labor (of various
specializations) is a scarce resource, or the scarcest
resource commanding the highest price, only if other
resources are more plentiful.
There are many cases where
labor, even specialized labor, is not the critical
bottleneck, and is not the majority part of the price. E.g.
in the case of patents where the owner can charge what the
market will bear due to intellectual property enforcement. Or
any other part of actual or figurative "toll collection" with
ownership or control of critical economic means or
infrastructure. That's pure rent extraction.
Some things cost a lot *not* because of the labor involved
- a lot of labor (not spent on producing the actual good) can
be involved because the obtainable price can pay for it.
The value of precious metals or gems is also entirely
arbitrary. They only have value because someone says they do,
as they have little utilitarian value.
The initial allure of bitcoin has been "anonymity", until
people figured out that all transactions are publicly
recorded with a certain amount of metadata. This can be
partially defeated by "mixing services", i.e. systematic
laundering. There have also been alleged frauds (complete
with arrests) that got a lot of press in the scene, where
bitcoin "safekeeping services" (I don't quite want to say
"banks") "lost" currency or in any case couldn't return
deposits to depositors. No deposit insurance, not much in the
way of contract enforcement, etc.
Then there were stories
about computer viruses and malware targeted at stealing
account credentials or "wallet files".
FWIW, I regard bitcoin as a colossal folly intended to appeal
to crazed libertarian idiots, goldbug nutters, and criminals
and has little utility or real value. Investing in bubble gum
cards makes more sense.
"... Everything about Comey is wrong. The fact that he felt the need to 'take notes' because the President asked for loyalty is fucking absurd. What sort of example did he make for fellow G men when he referred to his dealings with his commander in chief as being 'slightly cowardly'? The whole thing is rot, helping to fuel a bogus investigation spearheaded by a broken democratic party who have lost their fucking mind. ..."
"... He also touched upon the mercenary media's fake news about Trump, provided by bad sources, which was confirmed by Comey today. ..."
"... Don't forget it was McCain who took the 'pee' dossier that had been floating around DC which was so phoney even the media wouldn't touch - and told Comey to investigate. ..."
"... This is nothing less than a coordinated overthrow of the government by the deep state, media and uniparty ..."
"... So what do we need special counsel Mueller for in light of all this? Everyone knows the whole Russia collusion affair is politically motivated BS and deflection. ..."
"... Not to mention Comey handing out immunity deals like Christmas candy on Hillary's email investigation. Why would he do that? ..."
"... Comey took notes because he planned to blackmail Trump in the future just like J Edgar Hoover did when he ran the FBI. ..."
"... "Politicized" by the global central banks who own and operate virtually all world governments. I believe we need to keep the players very CLEAR in our minds. It's all of us; humanity, against the globalists who want us dead. Politicians, our institutions... all are aligned with the globalist psychopaths. It's that simple. ..."
"... Comey makes a memo, because that is the M.O. of the FBI. He fully expects gullible sheeple to believe any written statement by an FBI agent is truth, rather than a manipulating fake. ..."
"... Comey has admitted to a number of criminal acts ..."
"... Comey and his FBI partner should be legally charged by the Justice Department for releasing his FBI Memo to NY Times. His FBI partner should be fired and charged. They had no authority to release private government information and breach confidentiality with the president of the United States. The memo proved nothing and meant nothing but releasing it by a fired employee and FBI partner is a breach to FBI and the office of the president of the USA. ..."
"... Not one coward on that Senate committee had the balls to ask about the Seth Rich investigation........disappointing ..."
"... Comey also stated as 100% undisputed fact that Russia had "meddled" with the election. Again, no proof was cited, yet not a single Republican asked for such proof, nor has Trump managed to articulate a similar request. This is somewhat disturbing. ..."
"... The threat of being "Clintoned" is a powerful force. ..."
There will come a day when the city square will be packed with gibbets filled with swinging heads
of traitorous bastard commies -- most readily found in leftshit cities. The degeneracy must end.
Today's testimony by Comey was a farce, a transparent attempt by a spent and bitter bureaucrat trying
to hurt a sitting President.
Everything about Comey is wrong. The fact that he felt the need to 'take notes' because the President
asked for loyalty is fucking absurd. What sort of example did he make for fellow G men when he referred
to his dealings with his commander in chief as being 'slightly cowardly'? The whole thing is rot,
helping to fuel a bogus investigation spearheaded by a broken democratic party who have lost their
fucking mind.
Tucker chimes in and reviews the day's events, pointing out the hypocrisy of Comey and his dealings
with AG Lynch, who asked for Comey to word the investigation of Hillary Clinton's email scandal as
a 'matter.' If that's not collusion and political pressure on the FBI, nothing is.
He also touched upon the mercenary media's fake news about Trump, provided by bad sources, which
was confirmed by Comey today.
After watching this political circus it is very clear that no one should be re-elected from
either party, with the single exception of Paul.
Looks like what we really need is a new political party that actually serves the public tax
payers, unfortunately it may take a major financial depression and its accompanying turmoil to
bring that about.
IMHO, the Comey hearing was John McCain's chance to redeem himself, and he blew it. I think
his idea to go after Comey's interactions with the Obama regime was a great idea, but he came
unprepared and unrehearsed. McCain had an opportunity to display leadership, but he failed to
lead.
Don't forget it was McCain who took the 'pee' dossier that had been floating around DC
which was so phoney even the media wouldn't touch - and told Comey to investigate.
It's time 81 year old McCain - last in his Naval Academy class - shuffled off to an assisted
living center in Arizona.
Comey created a memo because it's hard to leak to multiple sources at one time in person.
We're living history folks. This is nothing less than a coordinated overthrow of the government
by the deep state, media and uniparty dominated by leftojihadis. The Gang of 8 is composed
of 4 dimocrites and 4 rinos. The rinos had a duty to come forward and not only refute the lies
in the media but to reveal it all as a hoax. Only Nunes told President Trump what was going on
and he was forced to recuse himself from the intelligence committee investigation.
Even an atheist has to admit there's divine intervention at work here. Flawed though he admits
to be, Trump is being guided and protected by a force more powerful than the swamp.
So what do we need special counsel Mueller for in light of all this? Everyone knows the
whole Russia collusion affair is politically motivated BS and deflection.
But Mueller won't. He & Comey are besties of 25 year standing. All Mueller will do it find
no direct links between the Russians and Trump or his administration but justify Comey's investigation
by saying the Russians are bad, evil people who were trying to co-opt naive and inexperienced
Trump colleagues.
If they wanted an honest and truthful investigation they would not have selected a retired
swamp general.
It scares me that people actually believe this shit. I guess we are doomed considering how
many morons like PitBullsRule are lapping up the koolaid with their heads in the sand
Not to mention Comey handing out immunity deals like Christmas candy on Hillary's email
investigation. Why would he do that?
Comey's (limited hangout) strategy: Say a few things to look honest, so he could sell "the
Russians did it (hack)" - despite showing no evidence. Otherwise, there would be no need for a
Special Counsel and he knows Mueller will forment more troubles for Trump, perhaps for years.
Trump needs to end this Russian hack nonsense ASAP.
I'd like Loretta Lynch to show me where in the FBI handbook it explains the proper procedure
for conducting "matters".
They just make shit up to suit their needs. The Comey incident is another sad example of how
every branch of government and every agency has become politicized by both sides, to the point
they can no longer perform their intended function.
"Politicized" by the global central banks who own and operate virtually all world governments.
I believe we need to keep the players very CLEAR in our minds. It's all of us; humanity, against
the globalists who want us dead. Politicians, our institutions... all are aligned with the globalist
psychopaths. It's that simple.
"how every branch of government and every agency has become politicized by both sides, to the
point they can no longer perform their intended function" and should therefore be disbanded. Fixed
it for you.
Comey makes a memo, because that is the M.O. of the FBI. He fully expects gullible sheeple
to believe any written statement by an FBI agent is truth, rather than a manipulating fake. Trump's
possible recording constrained Comey's M.O..
Nobody will do anything about any of this. Time to shitcan the lot of them. I hope not a single
doofus up for re-election goes back to D.C. in '18.
It's hard to know which to slap first, those that break the law out in the open--or those that
turn a blind eye to the flagrant lawlessness of the trangressors.
Comey has admitted to a number of criminal acts I think.
He admitted leaking FBI information to the media
He admitted leaking FBI information to the media in order to have an effect on the country
(ie a counsel)
He admitted he was concerned enough with his meeting with Trump to make a memo of it - instead
of going to the DOJ as required by law
He admitted he was concerned with Lynch telling him to not use the word investigation (which
was the truth) and agreeing to it, instead of resigning or reporting it.
He demonstrates that he leaked information to the media, but not the truth that Trump was not
under investigation - thus showing politcal bias in his job.
There are a few crimes there that I gather the DOJ has no option but to prosecute, how can
it not? Since they are also prosecuting Winner for the exact same thing?
Feral Bureau of Weasels Head Weasel James Comey said that he behaved 'slightly cowardly'. Well,
that is the sort of behavior one expects from a Weasel.
[No insults intended to the small mammals grouped together in the weasel family.]
Great review Tucker Carlson! Comey is a disgruntled loser like Killary. Comey never followed
up on Seth Rich murder, a more serious matter than playing stupid politics.
Comey and his FBI partner should be legally charged by the Justice Department for releasing
his FBI Memo to NY Times. His FBI partner should be fired and charged. They had no authority to
release private government information and breach confidentiality with the president of the United
States. The memo proved nothing and meant nothing but releasing it by a fired employee and FBI
partner is a breach to FBI and the office of the president of the USA.
Feral Bureau of Weasels Head Weasel James Comey was actively covering up for the murderers
who murdered Seth Rich and the people who hired them. He should be shitting whole goats knowing
that Attorney General Sessions seized everything in his office while he was in LACALIFUSA. Comey
will probably be joining Obama shortly wherever it is that he is hanging out overseas.
Comey also stated as 100% undisputed fact that Russia had "meddled" with the election.
Again, no proof was cited, yet not a single Republican asked for such proof, nor has Trump managed
to articulate a similar request. This is somewhat disturbing.
"the President cited this NERA study, commissioned by the American Council for Capital Formation,
and the U.S. Chamber of Commerce. Why didn't the President rely upon his own experts within the
White House?"
Because his CEA is not yet staffed. The NERA "study":
NERA uses its "model" to forecast that the cost to real GDP by2040 will be a 9% shortfall and
the cost to employment will by 31.6 million jobs. Now that sounds BAD, BAD. But it sort of reminds
me of the kind of "quality analysis" we might expect from the Heritage Foundation. Of course that
is what the American Council for Capital Formation, and the U.S. Chamber of Commerce paid NERA
to do.
I learned much reading this about Russia's taxing of its crude oil...you may find it interesting
as well...
Careful though, Irina Slav neglected to mention that Russia never stopped producing as much
oil as it could during OPEC's deal to cut production so this is hardly a balanced article
Putin and the Russian Oligarchs are not going to cut production, Mother Russia (Putin) needs
the cash flow (as do the other OPEC cheaters)
"OPEC Cuts Send Russia's Oil Heartland Into Decline"
By Irina Slav...Jun 03, 2017,...2:00 PM CDT
"Western Siberia is to Russia what the Permian is to the U.S. Well, kind of. Kind of in a sense
that it's one of the longest-producing oil regions and there's still a lot of oil in it. Yet,
thanks to the production cut deal with OPEC, Russian companies have had additional motivation
to move to new territories in the east and the north, where taxes are lower.
In Russia, the older the fields, the higher the taxes operators have to pay. Now that the country
has pledged to continue cutting 300,000 bpd for another nine months, the most obvious choices
for the cut are the mature Western Siberian fields. In the first quarter of 2017, for example,
output at Rosneft's Yugansk field fell by 4.2 percent, Bloomberg reported.
Production at other Western Siberian fields is set for a decline as well, with the daily output
rate from lower-tax deposits in the Caspian Sea, Eastern Siberia, and the North seen to rise to
866,000 bpd by the end of the year, or 74 percent on the year. The shift away from mature fields
to new ones will continue over the medium term, according to BofA analyst Karen Kostanian, as
overall Russian output grows. No wonder, as tax relief on new projects sometimes reaches 90 percent.
Lukoil's output from the Filanovsky field in the Caspian, for instance, is taxed at 15 percent
at a price per barrel of US$50. The average for mature fields is 58.1 percent, in a combination
of mineral resource tax and export duty.
And this is not the end of it: in 2018, the Kremlin will test a new tax regime for the oil
industry as it seeks to maintain production growth and the respective revenues, contributing a
solid chunk of federal budget revenues. The new regime, Deputy Energy Minister Alexei Texler told
Reuters, will first be introduced for a selection of 21 fields with a combined output of 300,000
bpd for a period of five years.
In case the government is happy with the results from the test, the new regime would be expanded
to the whole industry. Hopes are for a substantial increase in output thanks to the new tax regime:
up to 20 percent over the five-year period. These hopes seem to be limited to the Energy Ministry,
however, the Finance Ministry worries that the new regime will make it harder to control the flow
of tax money. The treasury is also against combining the new regime with already existing tax
incentives for the industry.
So, the move away from what Bloomberg calls the oil heartland of the world's top producer is
all but inevitable. It will come at a cost for the state coffers of some US$25 a barrel of Western
Siberian oil, or US$2.7 billion annually, according to a Renaissance Capital analyst, but the
cost will be worth it. The cost would increase, too, if the current output cut arrangement with
OPEC fails to push up prices, which for now is exactly what we are seeing, while the ramp-up in
the U.S. oil heartland continues."
"With enough thrusts pigs can fly. It is just dangerous to stand were they are going to land."
This quote is perfectly applicable to OPEC and Russia oil production now.
Neglecting maintenances and using "in fill" drilling just shorten the life of the traditional
oil fields. And new large oil fields are difficult to come by.
My impression is that most of "cuts" in production by Russia and OPEC are "forced moves". Production
was declining from mid 2016 when old investment were already all put into production and few new
investments were made since late 2014.
If we assume the lag period of two years, than in mid 2018 we will feel the results of decisions
to cut investments made in 2016.
In this situation announcing cuts allow to save face.
The net result is the same -- the oil price should rise to the level when it is economical
to develop "more expensive oil" (deep see drilling, Arctic oil and such) as replacement rate in
traditional fields is insufficient to maintain the production.
As long as The US government allow shale companies to generate junk bonds (which will never
be repaid representing kind of hidden subsidy) along with "subprime oil", shale can slightly compensate
the decline in production, but my impression is that this card was already played. Despite all
hoopla from WSJ and other major MSM.
The fact that oil production for some time was artificially kept flat or slightly rising is
strange and might be politically motivated (Saudi) which put other producers in situation when
they were force to follow Saudi lead or lose customers. China played Russians against Saudi pretty
well and got what they want at lower prices.
Those "intensification of production" were short term measures which in a long run are detrimental
to old oil fields output.
They might even lessen the total amount of oil that can be extracted from a given field.
The key question here is: Does Russian oil firms has the amount of money needed to maintain
production on the current level (at the current oil price levels ) or not.
Obama has a chance to move the US personal fleet to hybrid and more economical cars. He lost
this chance. SUV is now dominant type of personal cars int he USA, the trend opposite to what
it should be. Even hybrid SUVs like RAV4 hybrid get only around 33 miles highway, less in city
traffic.
Transition to Prius type cars (with their around 50 miles per gallon) would allow US consumers
to save almost half of oil spend on personal transportation (which probably represent around 60%
of total US consumption
http://needtoknow.nas.edu/energy/energy-use/transportation/
)
There's a plausible sounding theory, even though posted on Zero Hedge, that the Chinese have been
filling their SPR over the last two years, and that is about to stop. This would mostly account
for why OECD storage levels only took about 35% of the supply-demand imbalance. If they do stop
then about 1 mmbpd of demand would suddenly be lost, but it might also imply that the real economy
demand growth in the period since January 2015 has only been half what it looks to have been.
Taking account of the sudden drop and a slower growth in demand would mean a longer time would
be needed to draw down OECD stocks. However if the China SPR scenario is correct then almost all
the drawdown would come from OECD. By my reckoning this would push a balancing out to late 2018
(although by then we may be seeing some bigger supply drops as the pipeline for new project start-ups
will be drying up). But if the balancing is pushed out then the chances of many FIDs this year
or next will decline and the possibility of a sudden supply crunch in 2019 through 2022 would
be greater. The green curve below gives possible drawdown under this scenario. The red one was
a previous assumption that the OECD stocks would be drawn down at only about 35% of the imbalance
(as happened when they were rising). I seemed a bit iffy when I fitted it that way, and I think
the China SPR filling is a better explanation.
SPRs in general try to have 90 days of domestic consumption in them. This was a standard put into
place mostly in Europe. China has embraced it.
The US at 750ish million barrels and having a consumption (net of production) of about 11 million
bpd (remember, this is real stuff . . . consumption, no refinery gain BS allowed) and so not quite
70 days domestic consumption.
China, at net consumption of about 7 million bpd X 90 needs an SPR of 630 million barrels.
That's about what they have, but of course with 5% consumption growth they'll have to adjust up,
but for now . . . all is well.
There probably is no flow in or out of China for SPR reasons. Already full. Have been for a
while.
This is the chart Zero Hedge had, or linked to the key is Xinhua CFC, who have Chinese data
not otherwise available and charge a lot of money for it. I don't know how you'd go about checking
if it's correct.
Hello, don't forget that Xinhua doesn't publish China's SPR figures. The SPR figure in the chart
is an estimate based on (Production + Imports Refinery Inputs). I'm not sure if all the teapots
are included in the official refinery data.
I guess that Chinese demand must be higher than estimated. Like this article was suggesting
Bloomberg October 11th 2016
China's appetite for oil.
Fuel use grew by about 5 percent in the first half of 2016, according to China's biggest oil refiner,
faster than the 0.4 percent derived from government data. That "official" number is clouded by
rising gasoline exports - blends that don't show up in official figures, according to the International
Energy Agency, Sinopec Group and Energy Aspects Ltd.
Chinese authorities are also having trouble tracking refinery activity because of the surge of
processing by independent refiners, known as teapots, according to Energy Aspects' Meidan.
http://www.bloomberg.com/news/articles/2016-10-10/gasoline-cocktails-mix-with-gaps-in-data-to-cloud-china-oil-view
?
Enno's shaleprofile.com is full of facts. I went back and looked at his 1/17 summary of all US
oil producing shale fields. Interesting that despite adding over 13,000 new wells since the peak
in 3/15, US as of 1/17 was still 600K bopd below the 3/15 peak.
I do realize data is somewhat incomplete due to TX. I also realize not all wells are included.
Still, going to take a lot of CAPEX to climb the ladder back to 5, 6 and maybe 7 million bopd
from the shale fields.
Soon, GOM will start declining. Onshore conventional is like the sun setting. Just 60 or so
straight hole rigs active, half of the 1998-99 trough. Alaska doesn't appear to add anything.
Unless demand tanks, per Tony Seba's theories, maybe its time to be bullish? When it is clear
US shale has hit the wall, price could sky?
XOM Potential 2nd Downgrade unless APPL or Bazos jumps to the rescue. /
sarc
"However,
unlike its peers such as Chevron and BP, Exxon Mobil is
not targeting meaningful growth in production.
Although Exxon Mobil is working on a number of shale oil, conventional oil
and LNG projects which will come online in the near term, they will largely
help the company in offsetting the negative impact of field declines and asset
sales -
Shell, Chevron, and BP carry debt loads of $91.6 billion, $45.3
billion and $61.8 billion, respectively. "
"... Why didn't the FBI do their own investigation? ..."
"... "They say that, but it's bogus," Cohen argued. "When Clapper, the director of national intelligence, signed that report in January, technically he represents all seventeen. I'll bet you a dime to a nickel you couldn't get a guest on, unprepared, who could name ten of them. This figure -- seventeen -- is bogus!" ..."
"... "The one agency that could conceivably have done a forensic examination on the Democratic computers is a national security agency ..."
Professor Stephen Cohen: Not One Piece of Factual Evidence That Russia 'Hacked the Election' March 31, 2017
chat 176 comments
Prof. Cohen: Not One Piece of Factual Evidence That Russia 'Hacked the Election'
Stephen F. Cohen, professor emeritus of Russian studies at New York University and Princeton, spoke Thursday evening with
Fox News' Tucker Carlson about the
latest shoes to drop in the investigations into the Trump campaign's possible ties to Russia.
The Wall
Street Journal reported late Thursday that Michael Flynn, President Trump's former national security advisor, has told the FBI
and congressional investigators that he is willing to be interviewed in exchange for a grant of immunity from prosecution -- not
a particularly good sign for the Trump White House.
Cohen, one of the country's foremostexperts on Russia, has been arguing for months that the anti-Russia hysteria in Washington,
D.C., is becoming a
"grave national security threat."
Carlson began the discussion by bringing up what he sees as the core issue-- the allegations that the Russian government "hacked
our election" by breaking into email accounts at the DNC and the Clinton campaign office.
"Everyone assumes this is true," he said. "We're all operating under the assumption that it's true. Do we know it's true?"
"No," Cohen answered flatly. "And if you listen to the hearings at the Senate today, repeatedly it was said -- particularly by
Senator Warner, the Democratic co-chair of the proceedings -- that Russia had hijacked our democracy. What he means is that, the
Russians, at Putin's direction, had gone into the Democratic National Committee's emails, which were embarrassing to Mrs. Clinton,
given them to Wikileaks, Wikileaks then released them to damage Mrs. Clinton and put Trump in the White House."
He noted, "This is a very dramatic narrative and they're saying in Washington that this was an act of war.... So whether or not
it's true is existential. Are we at war?"
After studying Russian leadership for 40 years, focusing on Putin in particular, Cohen said it was hard for him believe that the
Russian president would have done such a thing.
"I could find not one piece of factual evidence," he said. "The only evidence ever presented was a study hired by the Clintons
-- the DNC -- to do an examination of their computers.They
[Crowdstrike] concluded the Russians did it. Their report
has fallen apart." He
added, " Why didn't the FBI do their own investigation? "
Tucker pointed out that even Republicans say that seventeen U.S. intelligence agencies (including Coast Guard Intelligence!) have
concluded that Russian intelligence was behind this.
"They say that, but it's bogus," Cohen argued. "When Clapper, the director of national intelligence, signed that report in
January, technically he represents all seventeen. I'll bet you a dime to a nickel you couldn't get a guest on, unprepared, who could
name ten of them. This figure -- seventeen -- is bogus!"
The professor made one more critical point: "The one agency that could conceivably have done a forensic examination on the
Democratic computers is a national security agency ," he said.
He continued: "When they admit that they have no evidence, they fall back on something else which I think is very important. They
say Putin directed Russian propaganda at us and helped elect Trump. I don't know about you, Tucker, but I find that insulting --
because the premise they're putting out ... at this hearing is that the American people are zombies. ... It's the premise of democracy
that we're democratic citizens," he said. "That we have a B.S. detector in us and we know how to use it."
ValVeggie
2 months ago Maybe not, but let's not forget that there IS evidence that the Obama administration apparently employed police-state
tactics to spy on their political rivals during the election, and to widely disseminate the information they collected in hope
that it would be illegally leaked in order to undermine the Trump administration.
Remember, the only felony we have clear proof of is the leak of Flynn's surveillance data to the press.
Time to get focused on where the crimes are, and stop falling for the progressive's shell game.
RedDog
ValVeggie
2 months ago Now what do we have here....
WikiLeaks Reveals "Marble": Proof CIA Disguises Their Hacks As Russian, Chinese, Arabic...
"... On "Tucker Carlson Tonight," Dana Loesch said the agenda-driven media is focused on negatively portraying Trump, while they're largely giving Democrats a pass. ..."
"... Let's talk for a moment about the California Democrat convention ... where you had a number of Democrats on stage screaming 'expletive Trump' and 'expletive Republicans.'" She said Democrats and the mainstream media then want to turn around and accuse Trump and those on the right of fomenting violence. ..."
Following Montana Republican congressional candidate Greg Gianforte's alleged assault of a reporter, some in the mainstream media
are trying to blame the incident on President Trump. CNN host Don Lemon argued that Trump has culpability because he's said "very
horrible things" about reporters and suggested that they are the enemy of the American people. MSNBC's Andrea Mitchell said that
Trump has helped whip up "hostility" toward the press, while Joe Scarborough said a "straight line" can be drawn between Trump's
anti-media rhetoric and the Gianforte incident.
On "Tucker Carlson Tonight," Dana Loesch said the agenda-driven media is focused on negatively portraying Trump, while they're
largely giving Democrats a pass.
"Let's discuss Tom Perez and his cussing crusade that he's been giving at so many different fundraisers.
Let's talk for a
moment about the California Democrat convention ... where you had a number of Democrats on stage screaming 'expletive Trump' and
'expletive Republicans.'" She said Democrats and the mainstream media then want to turn around and accuse Trump and those on the
right of fomenting violence.
I had another
topic lined up today, but this (
hat
tip alert reader ChrisAtRU
) is so remarkable - and so necessary to
frame
contextualize immediately - I thought I should bring it your
attention, dear readers. The headline is
"Toward a Marshall Plan for America
," the authors are a gaggle of CAP
luminaries with Neera Tanden leading and Rey Teixeira trailing, and the
"Marshall Plan" indeed includes something called a "Jobs Guarantee." Of
course, I trust Clinton operatives like Tanden, and Third Way types like
Teixeira, about as far as I can throw a concert grand piano. Nevertheless,
one sign of an idea whose time has come is that sleazy opportunists and
has-beens try to get out in front of it to seize credit[1] and stay
relevant. So, modified rapture.
In this brief post, I'm going to look at the political context that drove
CAP - taking Tanden, Teixeira, and the gaggle as a proxy for CAP - to
consider a Jobs Guarantee (JG), briefly describe the nature and purpose of a
JG, and conclude with some thoughts on how Tanden, Teixeira would screw the
JG up, like the good liberals they are.
Political Context for CAP's JG
Let's begin with the photo of Prairie du Chien, WI at the top of CAP's JG
article. Here it is:
I went to Google Maps Street View, found
Stark's Sports Shop
(and Liquor Store), and took a quick look round
town. Things don't look too bad, which is to say things look pretty much
like they do in my own home town, in the fly-over state of Maine; many local
businesses. The street lamps make my back teeth itch a little, because along
with bike paths to attract professionals, they're one of those panaceas to
"bring back downtown," but as it turns out Prairie du Chien has marketed
itself to summer tourists quite successfully as "
the
oldest Euro-American settlement established on the Upper Mississippi River,"
so those lamps are legit! (Of course, Prairie du Chien, like so much of
flyover country,
is fighting an opioid problem
, but that doesn't show up in Street View,
or affect the tourists in any way.)
In 2012, [Lydia Holt] voted for Barack Obama because he promised her
change, but she feels that change hasn't reached her here. So last year
she chose a presidential candidate unlike any she'd ever seen, the
billionaire businessman who promised to help America, and people like
her, win again. Many of her neighbors did, too .
In this corner of middle America, in this one, small slice of the
nation that sent Trump to Washington, they are watching and they are
waiting, their hopes pinned on his promised economic renaissance. And if
four years from now the change he pledged hasn't found them here, the
people of Crawford County said they might change again to someone else.
"[T]hings aren't going the way we want them here," she said, "so we
needed to go in another direction."
And the issues:
[Holt] tugged 13 envelopes from a cabinet above the stove, each one
labeled with a different debt: the house payment, the student loans, the
vacuum cleaner she bought on credit.
Lydia Holt and her husband tuck money into these envelopes with each
paycheck to whittle away at what they owe. They both earn about $10 an
hour and, with two kids, there are usually some they can't fill. She did
the math; at this rate, they'll be paying these same bills for 87 years.
Kramer said she's glad the Affordable Care Act has helped millions get
insurance, but it hasn't helped her he and her husband were stunned to
find premiums over $1,000 a month. Her daughter recently moved into their
house with her five children, so there's no money to spare. They opted to
pay the penalty of $2,000, and pray they don't get sick until Trump, she
hopes, keeps his promise to replace the law with something better.
Among them is a woman who works for $10.50 an hour in a sewing
factory, who still admires Obama, bristles at Trump's bluster, but can't
afford health insurance. And the dairy farmer who thinks Trump is a jerk
- "somebody needs to get some Gorilla Glue and glue his lips shut" - but
has watched his profits plummet and was willing to take the risk.
So that's Prairie du Chien, Wisconsin. CAP frames the electoral context
this way:
While the election was decided by a small number of votes overall,
there was a significant shift of votes in counties in critical Electoral
College states, including Iowa, Michigan, Ohio, Pennsylvania, and
Wisconsin.
(I could have told them that.
In fact, I did!
) And the reasons for the shift:
What was going on in these heavily white working-class counties that
might explain support for Trump? Without diminishing the importance of
cultural and racial influences, it is clear to us that lingering [sic]
economic pressures among important voting blocs helped to create a larger
opening for Trump's victory.
We do not yet know the exact reasons for the drop in turnout among
young people and black voters. But with President Obama not on the ticket
to drive voter enthusiasm, it is quite possible that lingering job and
wage pressures in more urban areas with lots of young people, and in
areas with large populations of African-Americans, yielded similar, if
distinct, economic anxiety in ways that may have depressed voter turnout
among base progressives. The combined effect of economic anxiety may have
been to drive white noncollege voters toward Trump and to drive down
voter engagement and participation among base progressives.
Either way, issues related to lost jobs, low wages, high costs, and
diminished mobility played a critical role in setting the stage for a
narrow populist victory for Trump.
(I could have told them that, too.
In fact, I did!
) Note the lingering
"Obama Coalition"
/
identity
politics
brain damage that casually assumes "base progressives" equate
to African-Americans and youth. Nevertheless, mild kudos to CAP for fighting
through to the concept that "economic pressures among important voting blocs
helped to create a larger opening for Trump's victory." The CAP paper then
goes on to recommend a JG as an answer to such "economic pressures."[2]
How would the JG work from the perspective of a working person (not an
owner?) Or from the perspective of the millions of permanently
disemployed?
The MMT Primer
:
If you are involuntarily unemployed today (or are stuck with a
part-time job when you really want to work full time) you only have
three choices:
Employ yourself (create your own business-something that
usually goes up in recessions although most of these businesses
fail)
Convince an employer to hire you, adding to the firm's
workforce
Convince an employer to replace an existing worker, hiring you
The second option requires that the firm's employment is below
optimum-it must not currently have the number of workers desired to
produce the amount of output the firm thinks it can sell. …
If the firm is in equilibrium, then, producing what it believes it
can sell, it will hire you only on the conditions stated in the third
case-to replace an existing worker. Perhaps you promise to work
harder, or better, or at a lower wage. But, obviously, that just
shifts the unemployment to someone else.
It is the "dogs and bones" problem: if you bury 9 bones and send 10
dogs out to go bone-hunting you know at least one dog will come back
"empty mouthed". You can take that dog and teach her lots of new
tricks in bone-finding, but if you bury only 9 bones, again, some
unlucky dog comes back without a bone.
The only solution is to provide a 10
th
bone. That is
what the JG does: it ensures a bone for every dog that wants to hunt.
It expands the options to include:
There is a "residual" employer who will always provide a job to
anyone who shows up ready and willing to work.
It expands choice. If you want to work and exhaust the first 3
alternatives listed above, there is a 4
th
: the JG.
It expands choice without reducing other choices. You can still try
the first 3 alternatives. You can take advantage of all the safety net
alternatives provided. Or you can choose to do nothing. It is up to
you.
If I were one of the millions of people permanently disemployed, I
would welcome that additional choice. It's certainly far more humane than
any policy on offer by either party. And the JG is in the great tradition
of programs the New Deal sponsored, like the CCC, the WPA,
Federal Writers' Project
, and the
Federal Art Project
. So what's not to like? (
Here's
a list
of other JGs). Like the New Deal, but not temporary!
Intuitively: What the JG does is set a baseline[3] for the entire
package offered to workers, and employers have to offer a better package,
or not get the workers they need. When I came up here to Maine I'd quit
my job voluntarily and so wasn't eligible for unemployment. Then the
economy crashed, and I had no work (except for blogging) for two years.
There were no jobs to be had. I would have screamed with joy for a
program even remotely like this, and I don't even have dependents to take
care of. It may be objected that the political process won't deliver an
offer as good as the Primer suggests. Well, don't mourn. Organize. It may
be objected that a reform like the JG merely reinforces the power of the
0.01%. If so, I'm not sure I'm willing to throw the currently disemployed
under the bus because "worse is better," regardless. Anyhow, does
"democratic control over the living wage"
really
sound all that
squillionaire-friendly to you? Aren't they doing everything in their
power to fight anything that sounds like that? The JG sounds like the
slogan Lincoln ran on, to me:
"Vote yourself a farm!"
[3]
So, what does the JG for the economy? MMT was put together by
economists; from an economists perspective, what is it good for? Why did
they do that?
The Primer
once more:
some supporters emphasize that a program with a uniform basic
wage[4] also helps to promote economic and price stability.
The JG/ELR program will act as an automatic stabilizer as
employment in the program grows in recession and shrinks in economic
expansion, counteracting private sector employment fluctuations. The
federal government budget will become more counter-cyclical because
its spending on the ELR program will likewise grow in recession and
fall in expansion.
Furthermore, the uniform basic wage will reduce both inflationary
pressure in a boom and deflationary pressure in a bust. In a boom,
private employers can recruit from the program's pool of workers,
paying a mark-up over the program wage. The pool acts like a "reserve
army" of the employed, dampening wage pressures as private employment
grows. In recession, workers down-sized by private employers can work
at the JG/ELR wage, which puts a floor to how low wages and income can
fall.
Research by Pavlina Tcherneva and Rania Antonopoulos indicates that
when asked, most people want to work. Studying how job guarantees
affect women in poor countries, they find the programs are popular
largely because they recognize-and more fairly distribute and
compensate-all the child- and elder care that is now often performed
by women for free (out of love or duty), off the books, or not at all.
We propose today a new jobs guarantee, and we further expect a
robust[3] agenda to be developed by the commission.
The low wages and low employment rates for those without college
degrees only exist because of a failure of imagination. There is no
shortage of important work that needs to be done in our country. There
are not nearly enough home care workers to aid the aged and disabled.
Many working families with children under the age of 5 need access to
affordable child care. Schools need teachers' aides, and cities need
EMTs. And there is no shortage of people who could do this work. What has
been missing is policy that can mobilize people.
To solve this problem, we propose a large-scale, permanent program of
public employment and infrastructure investment-similar to the Works
Progress Administration (WPA) during the Great Depression but modernized
for the 21st century. It will increase employment and wages for those
without a college degree while providing needed services that are
currently out of reach for lower-income households and cash-strapped
state and local governments. Furthermore, some individuals may be hired
into paying public jobs in which their primary duty will be to complete
intensive, full-time training for high-growth, in-demand occupations.
These "public apprenticeships" could include rotations with public and
private entities to gain on-the-ground experience and lead to guaranteed
private-sector employment upon successful completion of training.
Such an expanded public employment program could, for example, have a
target of maintaining the employment rate for prime-age workers without a
bachelor's degree at the 2000 level of 79 percent. Currently, this would
require the creation of 4.4 million jobs. At a living wage-which we can
approximate as $15 per hour plus the cost of contributions to Social
Security and Medicare via payroll taxes-the direct cost of each job would
be approximately $36,000 annually. Thus, a rough estimate of the costs of
this employment program would be about $158 billion in the current year.
This is approximately one-quarter of Trump's proposed tax cut for the
wealthy on an annual basis.
With tis background, let's look at how liberals would screw the JG up.
How a CAP JG Would Go Wrong
Before getting into a little policy detail, I'll examine a few
cultural/framing issues. After all, CAP
does
want the program's
intended recipients to accept it with good grace, no? Let me introduce the
over-riding concern, from Joan C. Williams in
The Financial Times
:
"They don't want compassion. They want respect"
:
Williams warns that Republican errors alone won't give Democrats back
the WWC.
Or any part of the WC; as even CAP recognizes, although WWC
disproportionately voted Trump, and non-WWC disproportionately stayed home.
While [Williams] agrees that the Democrats have mobilised their base
since Trump's election, she has "one simple message" for the party: it
needs to show the WWC respect, "in a tone suitable for grown-ups".
Democrats must say: "We regret that we have disrespected you, we now hear
you." She asks: "Is this so hard? Although the risk is that the response
will be, 'Oh, those poor little white people with their opioid epidemics,
let's open our hearts in compassion to them.' That's going to infuriate
them. They don't want compassion, they want respect."
To show respect, it would really behoove liberals to deep-six the phrase
"economic anxiety," along with "economic frustrations," "economic concerns,"
"economic grievances," and "lingering economic pressures."[4] All these
phrases make successful class warfare a psychological condition, no doubt to
be treated by a professional (who by definition is not anxious, not
frustrated, has no grievances, and certainly no economic pressures, because
of their hourly rate (or possibly their government contract).
To show respect, it would also behoove liberals to deep-six the concept
that markets come first; people who sell their labor power by the hour tend
to be sensitive about such things. Take, for a tiny example, the caption
beneath the image of Prairie du Chein. Let me quote it:
A customer crosses the street while leaving a shop along the main
business district in Prairie du Chien, Wisconsin, January 2017.
Really? A
customer
? Does the human figure have to be a
customer
? Why?
Along the same lines, drop the "affordable" crap; ObamaCare should have
ruined that branding already; what seems like it's affordable to CAP writers
in the Beltway probably isn't affordable at all to somebody making $10 an
hour. Anyhow, if something like childcare or for that matter #MedicareForAll
ought to be a universal direct material benefit, then deliver it!
To show respect, abandon the "Marshall Plan" framing immediately. Because
it means the "winners" are going to graciously help the "losers," right? And
prudentially, liberals don't really want to get the working class asking
themselves who conducted a war against them, and why, right?
To show respect, make the JG a truly universal benefit, a real guarantee,
and don't turn it into an ObamaCare-like Rube Goldberg device of
means-testing, worthiness detection, gatekeeping, and various complex forms
of insult and degradation, like narrow networks. This passage from CAP has
me concerned:
Such an expanded public employment program could, for example, have
a target
of maintaining the employment rate for prime-age
workers without a bachelor's degree at the 2000 level of 79 percent.
That 'target" language sounds to me very much like the "dogs and bones"
problem. Suppose currently we have 6 bones and 10 dogs. The "target" is 7
bones. Suppose we meet it? There are still 3 dogs without bones! Some
guarantee! The JG should be simple: A job for everyone who wants one. None
of this targeting or slicing and dicing demographics. The JG isn't supposed
to be an employment guarantee for macro-economists (who basically have one
anyone).
To show respect, make the JG set the baseline for wages (and working
conditions). This passage from CAP has me concerned:
Second, because it would employ people to provide services that are
currently needed but unaffordable, it would not compete with existing
private-sector employment.
This language seems a bit slippery to me. If Walmart is paying $10.00 an
hour, is the JG really going to pay $9.50?
Finally, you will notice that the CAP JG is shorn of any macro-economic
implications. Note, for example, that replacing our current cruel system of
regulating the economy by throwing people out of work isn't mentioned. Note
also that CAP also accepts the false notion that Federal taxes pay for
Federal spending. That puts CAP in the austerity box, meaning that the JG
might be cut back just when it is most needed, not least by working people.
Conclusion
I do want to congratulate CAP, and without irony, for this passage:
[The JG] would provide the dignity of work, the value of which is
significant. When useful work is not available, there are large negative
consequences, ranging from depression, to a decline in family stability,
to "deaths of [sic] despair."
It's good to see the Case-Deaton study penetrating the liberal hive mind.
Took long enough. Oh, and this makes the JG a moral issue, too. The pallid
language of "economic anxiety" should be reformulated to reflect this, as
should the program itself.
NOTES
[1] The JG originally comes from the MMT community;
here is a high-level summary
. Oddly, or not, there's no footnote
crediting MMTers. Interestingly, Stephanie Kelton, who hails from the
University of Missouri at Kansas City's MMT-friendly economics department,
before Sanders brought her onto the staff at the Senate Budget committee,
was not able to persuade Sanders of the correctness and/or political utility
of MMT generally or the JG in particular.
[2] I guess
those famous Democrat 2016 post mortems
will
never
be
published, eh? This will have to do for a poor substitute. Or maybe the
Democrats just want us to read
Shattered
.
[3] In my view, "robust" is a bullshit tell. Back when I was a hotshot
consultant, the operational definition of "robust" was "contained in a very
large three-ring binder."
[4] Dear God. Are these people demented? Nobody who is actually under
"economic pressure" would use these words. And so far as I can tell,
"lingering" means permanent.
About Lambert Strether
Readers, I have had a correspondent characterize my views as realistic
cynical. Let me briefly explain them. I believe in universal programs
that provide concrete material benefits, especially to the working class.
Medicare for All is the prime example, but tuition-free college and a
Post Office Bank also fall under this heading. So do a Jobs Guarantee and
a Debt Jubilee. Clearly, neither liberal Democrats nor conservative
Republicans can deliver on such programs, because the two are different
flavors of neoliberalism ("Because markets"). I don't much care about the
"ism" that delivers the benefits, although whichever one does have to put
common humanity first, as opposed to markets. Could be a second FDR
saving capitalism, democratic socialism leashing and collaring it, or
communism razing it. I don't much care, as long as the benefits are
delivered. To me, the key issue - and this is why Medicare for All is
always first with me - is the tens of thousands of excess "deaths from
despair," as described by the Case-Deaton study, and other recent
studies. That enormous body count makes Medicare for All, at the very
least, a moral and strategic imperative. And that level of suffering and
organic damage makes the concerns of identity politics - even the worthy
fight to help the refugees Bush, Obama, and Clinton's wars created -
bright shiny objects by comparison. Hence my frustration with the news
flow - currently in my view the swirling intersection of two, separate
Shock Doctrine campaigns, one by the Administration, and the other by
out-of-power liberals and their allies in the State and in the press - a
news flow that constantly forces me to focus on matters that I regard as
of secondary importance to the excess deaths. What kind of political
economy is it that halts or even reverses the increases in life
expectancy that civilized societies have achieved? I am also very hopeful
that the continuing destruction of both party establishments will open
the space for voices supporting programs similar to those I have listed;
let's call such voices "the left." Volatility creates opportunity,
especially if the Democrat establishment, which puts markets first and
opposes all such programs, isn't allowed to get back into the saddle.
Eyes on the prize! I love the tactical level, and secretly love even the
horse race, since I've been blogging about it daily for fourteen years,
but everything I write has this perspective at the back of it.
Yes, a great essay. And thank you commentariat.
Of course, there is a potential conflict from those who want a basic
income, but don't want to work. Such a position frames such people
badly, but a basic income remains an essential part of a JG world IMO.
The JG would provide incentive if you didn't lose the safety net and
could add to it by working in a JG program.
Most here in this place accept that a sovereign government can pay for
programs which are not funded by taxes (or debt) and the JG and basic
income concepts could be a way to test this in a controlled way.
The main reason I think that politicians continue to have blinkers (LA
LA, CAN'T HEAR YOU) with respect to MMT is that they are scared
witless of a government with unlimited spending powers. That's why we
can't have nice things.
don't want to work, hmm I don't even know if I could work in a
job without a decent amount of slack (A.D.D. mind may not be
capable of it or something and often not for lack of trying, though
I do a decent amount of unpaid work in my precious leisure time).
Or at least not the full 40 hours, so if the job guarantee bosses
are slave drivers, I don't know, I'd probably be fired from my job
guaranteed job period.
But what if a job was aligned with one's interest? Don't know,
never experienced that.
But all that aside and never even mind unemployment, given how
horrible the job circumstances are that I see many people caught in
(and I definitely don't mean having slack that's a good thing, I
mean verbal ABUSE, I mean working endless hours of unpaid overtime
etc.), any alternative would seem good.
The "target" language also makes me worry that they're defining optimal
employment by the inflation-obsessed standards of Chicago-school economists,
thus coming up short in the name of protecting the investor class.
Minor quibble: Does Maine constitute flyover country? Usually that term
means the parts of the country that the well-to-do "fly over" from east
coast cities to west coast ones, with perhaps an exception for Chicago. You
wouldn't fly over Maine for any of those routes. Not to mention, Maine is a
popular vacationing/summer home state for rich New Englanders, so it doesn't
exactly have an "other" status for them the way rural Wisconsin would.
I think Maine is legit flyover country as flying over Maine was once
mandatory on the transatlantic route in order to Gander Airport in
Newfoundland. I know, I know, it's a bit of a stretch but I'm trying
here!
As for Maine's other status, you're spot on about "down east"
(coastal) Maine and some of the lakes being popular with the landed
gentry, but the interior of the state is sparsely populated, poor, white,
and marginalized. Many of the paper mills have gone belly-up and the
economy in many places consists of picking potatoes or cutting down
trees.
I used to do a lot of business travel to Nova Scotia. Hard to get
there from the US without flying over Maine. But I think Lambert meant
flyover in the pejorative "why would you live here when you could be an
artisanal pickle maker in Brooklyn" sense.
Matt Bruenig had other issues with the article:
More Job Guarantee Muddle
. While he points out that the jobs
suggested in the article should be permanent rather than temporary jobs,
I go on with my own little sense of discomfort that they all involve
putting the otherwise jobless in charge of caring for the helpless. I
don't find that a good idea. I've spent enough time both working with and
volunteering in human service organizations to have observed that it's
not really appropriate work for a lot of people, even for many
good-hearted volunteers. It really dampens my enthusiasm for a JG that I
have yet to see an argument for it that doesn't invoke child and elderly
care as just great jobs that the jobless can be put to doing.
Just another quibble with this post. I first heard of a job guarantee
and heard arguments for it in the U.S. civilian society from Michael
Harrington in the early 1980s (guaranteed jobs have been a feature of the
state capitalist societies that call themselves socialist throughout the
20th c.), so I don't find it particularly odd when the MMT community
isn't mentioned as originating the idea. In fact, I tend to respond with
"Hey, MMTers, learn some history."
Thanks for this article Lambert. Why should we trust CAP to handle this
when they have done nothing toward this end in their entire history. In
fact, in undeniable fact, if we don't do something about demand in this
country we will have no economy left at all. For these guys to even approach
a JG you know they are panicked. Nobody goes over this fact because it turns
them all into instant hypocrites. I spent yesterday listening to some MMTers
on U-Tube, Wray and some others. They all clearly and succinctly explain the
systemic reasons for JG. Not nonsense. In fact, MMT approaches a JG as the
opposite of nonsense on so many levels. As you have pointed out these CAP
people are a little late to reality. And their dear leader Obama is first in
line for the blame, followed closely by Bill Clinton and his
balance-the-budget cabal of bankster idiots. And etc. And these JG jobs
could be just the jobs we need to turn global warming around. It could be
the best spent money ever. It is a very straight-forward calculation.
I don't know how you even bother. America is so far away from this
intellectually and culturally, there is no chance. Right now the "jobs
guarantee" is get arrested for something bogus and be sentenced to prison to
do forced labor for outsourcing corporations (yes this is real). Look where
the GOP stands on basic issues which were settled long ago in Europe, they
are in the Stone age. The Dems are right wing everywhere else.
With US institutions usually run horribly how do you expect this to be
well run? Is the VA a shining example? I certainly would not have hope for
this at the federal level.
I feel the same way often but I've got to allow myself some hope once
in a while. This development is at least turn in the right direction for
the moment, nothing else. There's nothing wrong with being
(aprehensively) pleased about that.
I'd like to get a basic unemployment welfare scheme going first. We
don't even have that! We have an "insurance" program which requires
you to first have held a job which paid enough for long enough, and
then get fired, not quit. And it only pays for six months. Again, this
was settled in other rich countries a long time ago.
There is a job guarantee in Castro's Cuba. So wonderful, people are
swimming from Miami to Havana ever day.
Though you have it exactly right in the US the job guarantee is to
be a felon on a privatized prison farm usually called a "plantation". I
am looking forward to my neighbors finally being put to work. At least it
is only building a Presidential Library for Obama, not a pyramid for
Pharaoh.
My prediction: by the time this makes it through Congress, it will be a
guarantee for no more than 15 hours per week at slightly below the minimum
wage and you'll only be able to be in the program for nine months,
total during your lifetime. Or am I being overly cynical?
Maybe we need to update that old saw: "First they ignore you, then they
laugh at you, then they co-opt your idea and strip the soul out of it, then
you kinda win but not really, but hey that's progress, right?"
Even though I'm cynical, I'm with Lambert in being for just about
anything that makes us bottom-20%ers lives better, even if it is highly
flawed. Heck, I'd even be for a BIG on that basis, even if Yves is right
about the negative side-effects of that policy.
If I understood correctly, Norway is running such a program since many
years.
Basically, when you are out of a job, you get unemployment benefits (a low
but decent salary, health care and other modern facilities unheard of is the
US) which last
forever
.
On the other hand, any public institution can call you in to help a hand:
washing dishes at the school kitchen one day, waiting on the elderly the
other day, helping out in the local library wherever hands are needed but
not available.
So it is not really a JG, but you are guaranteed to help out your local
community, and you are guaranteed a minimal income. That seems close enough
to me.
Thanks, Lambert, for a very interesting post. I combed through CAP's
panel of "experts." I was not impressed.
I'm going to start my own think tank. Gonna call it CRAP: Center for Real
American Progress.
Of course in the north in the winter you could go back to shoveling snow
with snow shovels (no machines allowed) and ban use by public employees of
riding lawnmowers in the summer in favor of powered walk behind mowers. From
what I have read this is what china did on the 3 gorges dam, partly making
the project a jobs project by doing things in a human intensive way. (of
course you could go back to the hand push non powered reel mower but then
you have to worry about folks and heart attacks. (Or use those in their 20s
for this. Growing up in MI and In this is how we mowed the yard. (in the
1950s and 1960) and for snow shoveling, my dad got a snow blower when I went
off to college.
Now if you really want a low productivity way of cutting grass get one of
the hand grass trimmers and set to work cutting it by that, it would employ
a lot of folks and not have the exertion problem of a push mower (Again I
used these in the 1960s in MI before we had the string trimmers and edgers
etc. (also recall the old hand powered lawn edgers.)
It sounds like the CAP JG proposal is "top down" in that the "palette" of
jobs to be funded is decided by the same agency (or an agency at the same
level of government) as the fund disbursement authority, or is specified in
the law itself.
IIRC, the JG concept proposed in the MMT primer would devolve the
decision of "how to usefully employ willing underutilized workers" to local
level. Funding would still be Federal. There would be some kind of "request
for proposals/peer review" process to decide which locally-wanted projects
would receive JG dollars (presumably in order to be a guarantee, enough
projects would be approved for every locality to employ the available
under-utilized willing workforce. If a locality only proposed one project,
that would be funded)
It that right, Lambert? Is "top down" another way that centrists could
screw up a JG? And might the "local devolution" aspect of the NEP/MMT Primer
concept appeal to folks on the right?
Great write up. I obviously have a long-running disagreement on the
policy prescription of JG, but I do find it interesting talking about how
groups like CAP present it outside the specific confines of MMT (and,
apparently, without even tipping the hat to them ?).
One concrete bit of info I would love to know is how they estimate 4.4
million workers for take-up. First, it's a hilarious instance of false
precision. Second, it's remarkably low. $15/hr is approximately the median
wage. Tens of millions of workers would sign up, both from the ranks of the
crap jobs and from the ranks of those out of the labor force.
Perhaps this report raises the possibility that this low
pressure low growth economy may actually lead to a new
high in the prime working age cohort, still with little
wage growth.
Boomers are retiring and that increases employment in
prime age (25-54) cohort. So to take only prime age is a
little bit disingenuous. This effect needs to be taken
into consideration.
Those who were born before 1950 were probably the most
numerous. They all will be over 67 at the end of the year.
Posted on
April 25, 2017
by
Yves Smith
Yves here. The article makes a comment in passing
that bears teasing out. The inflation that started
in the later 1960s was substantially if not entirely
the result of Lyndon Johnson refusing to raise taxes
because it would be perceived to be to pay for the
unpopular Vietnam War. Richard Nixon followed that
approach.
By Michael Bordo, Professor
of Economics, Rutgers University. Originally
published at
VoxEU
Scholars and policymakers interested in the
reform of the international financial system have
always looked back to the Bretton Woods system as an
example of a man-made system that brought both
exemplary and stable economic performance to the
world in the 1950s and 1960s. Yet Bretton Woods was
short-lived, undone by both flaws in its basic
structure and the unwillingness of key sovereign
members to follow its rules. Many commentators hark
back to the lessons of Bretton Woods as an example
to possibly restore greater order and stability to
the present international monetary system. In a
recent paper, I revisit these issues from over a
half century ago (Bordo 2017).
The Bretton Woods system was created by the 1944
Articles of Agreement at a global conference
organised by the US Treasury at the Mount Washington
Hotel in Bretton Woods, New Hampshire, at the height
of WWII. It was established to design a new
international monetary order for the post war, and
to avoid the perceived problems of the interwar
period: protectionism, beggar-thy-neighbour
devaluations, hot money flows, and unstable exchange
rates. It also sought to provide a framework of
monetary and financial stability to foster global
economic growth and the growth of international
trade.
The system was a compromise between the fixed
exchange rates of the gold standard, seen as
conducive to rebuilding the network of global trade
and finance, and the greater flexibility to which
countries had resorted in the 1930s to restore and
maintain domestic economic and financial stability.
The Articles represented a compromise between the
American plan of Harry Dexter White and the British
plan of John Maynard Keynes. The compromise created
an adjustable peg system based on the US dollar
convertible into gold at $35 per ounce along with
capital controls. The compromise gave members both
exchange rate stability and the independence for
their monetary authorities to maintain full
employment. The IMF, based on the principle of a
credit union, whereby members could withdraw more
than their original gold quotas, was established to
provide relief for temporary current account
shortfalls.
It took close to 15 years to get the Bretton
Woods system fully operating. As it evolved into a
gold dollar standard, the three big problems of the
interwar gold exchange standard re-emerged:
adjustment, confidence, and liquidity problems.
The
adjustment
problem in Bretton Woods
reflected downward rigidity in wages and prices
which prevented the normal price adjustment of the
gold standard price specie flow mechanism to
operate. Consequently, payment deficits would be
associated with rising unemployment and recessions.
This was the problem faced by the UK, which
alternated between expansionary monetary and fiscal
policy, and then in the face of a currency crisis,
austerity a policy referred to as 'stop-go'. For
countries in surplus, inflationary pressure would
ensure, which they would try to block by
sterilisation and capital controls.
A second aspect of the adjustment problem was
asymmetric adjustment between the US and the rest of
the world. In the pegged exchange rate system, the
US served as central reserve country and did not
have to adjust to its balance of payments deficit.
It was the
n-1th
currency in the system of
n
currencies (Mundell 1969). This asymmetry
of adjustment was resented by the Europeans.
The US monetary authorities began to worry about
the balance of payments deficit because of its
effect on
confidence
. As official dollar
liabilities held abroad mounted with successive
deficits, the likelihood increased that these
dollars would be converted into gold and that the US
monetary gold stock would eventually reach a point
low enough to trigger a run. Indeed by 1959, the US
monetary gold stock equalled total external dollar
liabilities, and the rest of the world's monetary
gold stock exceeded that of the US. By 1964,
official dollar liabilities held by foreign monetary
authorities exceeded that of the US monetary gold
stock (Figure 1).
Figure 1.
US gold stock and
external liabilities, 1951-1975
Source
: Banking and Monetary
Statistics 1941‐1970, Washington DC Board of
Governors of the Federal Reserve System, September
1976, Table 14.1, 15.1.
A second source of concern was the dollar's role
in providing
liquidity
to the rest of the
world. Elimination of the US balance of payments
deficits (as the French and Germans were urging)
could create a global liquidity shortage. There was
much concern through the 1960s as to how to provide
this liquidity.
Robert Triffin (1960) captured the problems in
his famous dilemma. Because the Bretton Woods
parities, which were declared in the 1940s, had
undervalued the price of gold, gold production would
be insufficient to provide the resources to finance
the growth of global trade. The shortfall would be
met by capital outflows from the US, manifest in its
balance of payments deficit. Triffin posited that as
outstanding US dollar liabilities mounted, they
would increase the likelihood of a classic bank run
when the rest of the world's monetary authorities
would convert their dollar holdings into gold
(Garber 1993). According to Triffin when the tipping
point occurred, the US monetary authorities would
tighten monetary policy and this would lead to
global deflationary pressure. Triffin's solution was
to create a form of global liquidity like Keynes'
(1943) bancor to act as a substitute for US dollars
in international reserves.
Policies to Shore Up the System
The problems of the Bretton Woods system were
dealt with by the IMF, the G10 plus Switzerland, and
by US monetary authorities. The remedies that
followed often worked in the short run but not in
the long run. The main threat to the system as a
whole was the Triffin problem, which was exacerbated
after 1965 by expansionary US monetary and fiscal
policy which led to rising inflation.
After a spike in the London price of gold to
$40.50 in October 1960 based on fears that John F
Kennedy, if elected, would pursue inflationary
policies led the Treasury to develop policies to
discourage Europeans from conversing dollars into
gold. These included:
Moral suasion on Germany with the threat of
pulling out US troops;
The creation of the Gold Pool in 1961, in
which eight central banks pooled their gold
reserves in order to keep the London price of
gold close to the $35 per ounce parity price;
The issue of Roosa bonds (foreign currency
denominated bonds);
The General Arrangements to Borrow in 1961,
which was an IMF facility large enough to offer
substantial credit to the US;
Operation Twist in 1962, in which the US
Treasury bought long term debt to lower long
term interest rates and encourage investment,
while the Federal Reserve simultaneously sold
short-term Treasury bills to raise short-term
rates and attract capital inflows; and
The Interest Equalization Tax in 1963, which
imposed a tax on capital outflows.
The US Treasury, aided by the Federal Reserve,
also engaged in sterilised exchange market
intervention.
The main instrument used by the Fed to protect
the gold stock was the swap network. It was designed
to protect the US gold stock by temporarily
providing an alternative to foreign central bank
conversion of their dollar holdings into gold. In a
typical swap transaction, the Federal Reserve and a
foreign central bank would undertake simultaneous
and offsetting spot and forward exchange
transactions, typically at the same exchange rate
and equal interest rate. The Federal Reserve swap
line increased from $900 million to $11.2 billion
between March 1962 and the closing of the gold
window in August 1971 (see Figure 2 and Bordo et al.
2015)
Figure 2.
Federal Reserve swap
lines, 1962 1973
Source
: Federal Reserve System.
The swaps and ancillary Treasury policies
protected the US gold reserves until the mid-1960s,
and were viewed at the time as a successful policy.
The Breakdown of Bretton Woods, 1968 to 1971
A key force that led to the breakdown of Bretton
Woods was the rise in inflation in the US that began
in 1965. Until that year, the Federal Reserve
Chairman, William McChesney Martin, had maintained
low inflation. The Fed also attached high importance
to the balance of payments deficit and the US
monetary gold stock in its deliberations (Bordo and
Eichengreen 2013). Beginning in 1965 the Martin Fed
shifted to an inflationary policy which continued
until the early 1980s, and in the 1970s became known
as the Great Inflation (see figure 3).
Figure 3
. Inflation rates
Source
: US Bureau of Labor
Statistics, IMF (various issues).
The shift in policy mirrored the accommodation of
fiscal deficits reflecting the increasing expense of
the Vietnam War and Lyndon Johnson's Great Society.
The Federal Reserve shifted its stance in the
mid-1960s away from monetary orthodoxy in response
to the growing influence of Keynesian economics in
the Kennedy and Johnson administrations, with its
emphasis on the primary objective of full employment
and the belief that the Fed could manage the
Phillips Curve trade-off between inflation and
unemployment (Meltzer 2010).
Increasing US monetary growth led to rising
inflation, which spread to the rest of the world
through growing US balance of payments deficits.
This led to growing balance of payments surpluses in
Germany and other countries. The German monetary
authorities (and other surplus countries) attempted
to sterilise the inflows but were eventually
unsuccessful, leading to growing inflationary
pressure (Darby et al. 1983).
After the devaluation of sterling in November
1967, pressure mounted against the dollar via the
London gold market. In the face of this pressure,
the Gold Pool was disbanded on 17 March 1968 and a
two-tier arrangement put in its place. In the
following three years, the US put considerable
pressure on other monetary authorities to refrain
from converting their dollars into gold.
The decision to suspend gold convertibility by
President Richard Nixon on 15 August 1971 was
triggered by French and British intentions to
convert dollars into gold in early August. The US
decision to suspend gold convertibility ended a key
aspect of the Bretton Woods system. The remaining
part of the System, the adjustable peg disappeared
by March 1973.
A key reason for Bretton Woods' collapse was the
inflationary monetary policy that was inappropriate
for the key currency country of the system. The
Bretton Woods system was based on rules, the most
important of which was to follow monetary and fiscal
policies consistent with the official peg. The US
violated this rule after 1965 (Bordo 1993).
Conclusion
The collapse of the Bretton Woods system between
1971 and 1973 led to the general adoption by
advanced countries of a managed floating exchange
rate system, which is still with us. Yet this
outcome (at least at the time) was not inevitable.
As was argued by Despres et al. (1966) in
contradistinction to Triffin, the ongoing US balance
of payments deficit was not really a problem. The
rest of the world voluntarily held dollar balances
because of their valuable service flow the deficit
was demand-determined. In their view, the Bretton
Woods system could have continued indefinitely. This
of course was not the case, but although the par
value system ended in 1973 the dollar standard
without gold is still with us, as McKinnon (1969,
1988, 2014) has long argued.
The dollar standard was resented by the French in
the 1960s and referred to as conferring "the
exorbitant privilege" on the US, and the same
argument was made in 2010 by the Governor of the
Central Bank of China. However, the likelihood that
the dollar will be replaced as the dominant
international currency in the foreseeable future
remains remote. The dollar standard and the legacy
of the Bretton Woods system will be with us for a
long time.
'Because the Bretton Woods parities, which
were declared in the 1940s, had undervalued the
price of gold, gold production would be insufficient
to provide the resources to finance the growth of
global trade.'
Twenty years on from Britain's "lost decade" of
the 1920s - caused by repegging sterling to gold at
the pre-World War I parity - the same mistake was
repeated at Bretton Woods. (The US had made the
identical error in 1871, which required 25 years of
relentless deflation to sweat out Civil War
greenback inflation.)
Even as the Bretton Woods conference was underway
in 1944, it went unnoticed that the US Federal
Reserve had embarked on a vast buying spree of US
Treasuries. This was done to peg their yield at 2.5%
or below, in order to finance WW II at negative real
yields. By 1945, US Treasuries (shown in blue and
orange on this chart) loomed larger in the Fed's
balance sheet than gold (shown in chartreuse):
Obviously a fixed gold price is utterly
incompatible with a central bank expanding its
balance sheet with government debt, reducing its
gold holdings to the tiny residual that they
constitute today.
Bretton Woods might have worked by limiting
central banks' ability to monetize gov't securities.
Or it might have worked with the gold price allowed
to float with expanding central bank assets,
according to a formula.
What was lost with Bretton Woods was fixed
exchange rates, which are conducive to trade. Armies
of traders seeking to extract rents from
fluctuations between fiat currencies are a pure
deadweight loss to the global economy.
In North America, sharp depreciations of the
Mexican and Canadian currencies against the USD are
fanning US protectionism, in forms ranging from a
proposed border wall to countervailing duties on
Canadian lumber and dairy products. What a mess.
Irredeemable fiat currencies are a tribulation
visited on humanity. When the central bank blown
Bubble III explodes in our fool faces, this insight
will be more widely appreciated.
Fiat currency is a tribulation visited on
capitalist trade advocates and their financial
backers.
International trade, which is hobbled by fiat
currencies as you say, was a rounding error in
most peoples lives until the Thatcher/Reagan
neoliberal innovations.
Since then that rounding error has rounded
away most of the distributive properties of the
economic systems so distorted to facilitate
capital profits through long distance trade that
they are impoverishing enough people that Brits
vote Brexit, Yanks vote Trump and French vote Le
Pen.
Bretton Woods would have worked a lot better
if Keynes had won the argument in favor of
"bancor", but he was arguing from a position of
weakness and lost out.
And yes, when this blows, as it will, it will
all become more widely appreciated.
missing from the article is the decision to
raise the price of oil in order to put most of
the 3rd world into debt slavery. This
exasperated the inflation mentioned, caused by
US deficits. Because the US was still a
manufacturing leader and the Unions were strong
we had the wage price stagflation of the
70's,. The elites solution Nixon went to China
not to open up a market of a billion people
but to make use of a disciplined labor force
that would work for cheap breaking the power
of the unions with globalisation aided by
computers. The Republicans in the US and
Thatcher in England broke the unions in the
80s.Clinton went along in the 90s. Was that plan
a factor in the decision to leave the gold
standard?
This was most interesting for its lack of regret
for losing a dollar pegged to $35 oz. gold. It is
almost a rationale for letting inflation and deficit
spending occur because in the end the system using a
reserve currency works as good as anything. I do
think the expense of the Vietnam war and the obvious
policy that it was necessary to allow inflation
(from the 70s onward) was incomplete, looking at
everything today, because it was based on an
assumption that we humans could just aggressively
keep growing our way into the future like we had
always done. Already in 1970 there were
environmental concerns, well-reasoned ones, and
global warming was being anticipated. If it had been
possible to use a hard gold standard we might not be
in this ecological disaster today, but there would
have been some serious poverty, etc. The obvious
policy today is to put our money into the
environment and fix it and by doing that put people
to work for a good and urgent cause. As opposed to
bombing North Korea; building a Wall to nowhere;
giving money to corporations which do not contribute
to repairing the planet; and impoverishing people
unnecessarily, etc. Money, in the end, is only as
valuable as the things it accomplishes.
Wrong on your poverty concept. It is the
inflation associated with a reckless fiat
monetary system that causes much of the poverty.
Prior the fiat era there was minimal inflation.
As Keynes explained in his prophetic criticism
of the Treaty of Versailles, The Economic
Consequences of the Peace, when he called
attention to Lenin, of all people:
"By a continuing process of inflation,
governments can confiscate, secretly and
unobserved, an important part of the wealth of
their citizens. By this method, they not only
confiscate, but they confiscate arbitrarily;
and, while the process impoverishes many, it
actually enriches some. The sight of this
arbitrary rearrangement of riches strikes not
only at security, but at confidence in the
equity of the existing distribution of wealth.
Those to whom the system brings windfalls . . .
become 'profiteers', who are the object of the
hatred of the bourgeoisie, whom the inflationism
has impoverished not less than the proletariat.
As the inflation proceeds . . . all permanent
relations between debtors and creditors, which
form the ultimate foundation of capitalism,
become so utterly disordered as to be almost
meaningless.
Lenin was certainly right. There is no
subtler, nor surer means of overturning the
existing basis of society that to debauch the
currency. The process engages all the hidden
forces of economic law on the side of
destruction, and does it in a manner which not
one man in a million is able to diagnose."
The core problem with hard currency is
the power asymmetry of the fixed interest
contract in whatever form.
Because costs are constant and growing
under such contracts, income requirements
become "sticky": in a market reverse, wage
earners, renters, mortgage holders etc are
obligated by these contracts and cannot
accept a cut in their wage unless they have
adequate financial reserves. Recessions soak
these reserves from debtors to creditors
despite the loose underwriting of creditors
in the speculative and ponzi phases of the
Minsky cycle being the root cause of the
business cycle, not profligacy or
irresponsibility by wage earners and small
business people. In a depression, this
liquidationist dynamic starts working its
way up the the industrial supply chain,
dismantling the actual means of production.
The main potential public benefit of fiat
currency is that in such conditions it costs
the state nothing to preserve the wealth of
those not implicated in causing the collapse
and to preserve those means of production.
Unfortunately, what we saw in 2008 was
Bush/Obama using the innocent victims of the
business cycle to "foam the runway" for the
institutions that caused it.
Poverty is a simple result of being cut
off from possible income sources. To the
extent that inflation is managed with what
Keynes called "a reserve army of the
unemployed", high levels of poverty are
assured. In the high wage, high cost era of
the New Deal, the intent was take what
burden of financial risk could be taken off
of workers and small producers and to
provide good paying opportunities for one
cycle's economic losers to get back on their
feet in the next cycle. But this only works
with full employment where labor has the
power to bid for a share of the overall
returns on investments.
I found this fascinating and quite
persuasive.
But unless you can posit the existence
of a state that will reliably act to
"preserve the wealth of those not
implicated in causing the collapse and
to preserve those means of production"
it is just a useless academic exercise.
I do not see any such state anywhere in
view, with the possible exception of the
Chinese, who seem to understand
"preserving the means of production" as
a state priority. For the West however
that idea is a real howler.
If it had been possible to use a hard
gold standard we might not be in this
ecological disaster today, but there would
have been some serious poverty, etc.
Some serious poverty only if because the
elites would have been even more neoliberal.
The last gold-standard-free 50 years of
innovation and growth have made extinct
1. Shoes that last more than a few months
2. Clothes that you can pass on to future
generations
3. Likewise, furniture
4. Milk or Coke in glass bottles
etc.
Isn't that because we have evicted
competition from our global commercial model
and replaced it with planned production so
every factory knows the size of its likely
market?
At what point would China, for example, be able
to assert more of a reserve currency, or at least
alternative, role based on its economic and trade
power and build-up of hard and financial assets? Or
is their near-term internal surplus recycling
through uneconomic lending enough to keep them
off-balance for quite a while on the world financial
stage? Many in the West are watching the development
of the One Belt/One Road infrastructure and shifting
country linkages and alliances with grave concern.
The key to reserve status is large external
holdings of your monetary instruments: for
foreigners to transact in your currency they
must have it. China, thus far, fails profoundly
on this count, no one has its currency.
The inverse of this is that the best way for
the US to end the dollars reserve status is to
eliminate the "National Debt", which is in fact
nothing other than the inventory if dollar
instruments the rest of the world holds in order
to be able to spend dollars into our system:
eliminate that inventory and the dollar will no
longer be a reserve currency.
This raises the large question of whether
"reserve status" is actually beneficial.
Apparently it consists largely of being
enormously in debt and in fact, it's been
a way for Japanese and Chinese to buy up
large chunks of our "means of production."
The prosperity of my original home town,
Columbus, IN, rests on Japanese
"investment." It does mean some good
Japanese restaurants in town.
To me the question is, who benefits
from it? It has been of great benefit to
a very particular set of people here in
the US and quite destructive since the
70s to most everyone else.
It is a power relationship that has
been used for imperial aims rather than
for the good of citizens. It needn't be
that way, but as US power has become
increasingly unaccountable its abuse of
this particular tool has grown.
First, the US could just as easily
deficit spend. We are not "in debt"
because the US can always create more
dollars to retire Treasury bonds.
The requirement for being a reserve
currency is running trade deficits. That
does require that furriners take and
hold your paper. They prefer bonds or
other investments to cash to get some
yield.
Running ongoing trade deficits also
means that you are using your domestic
demand to support jobs overseas. That is
the problematic feature, not all of this
other noise.
The concept of a reserve currency came
about from resolution 9 of the Genoa
Monetary Conference of 1922. The idea was
that any currency that was convertible to
gold was de facto equivalent to gold and
therefore an acceptable central bank reserve
asset. In other words there is really no
such thing as an international reserve
currency without gold in the system
according to the very reasoning that
established the idea. The U.S. pulled off
the greatest bait and switch in history when
it "suspended" the gold window in 1971. The
whole system because an enormous debt based
Ponzi scheme after that and we are now
dealing with the consequences.
And yes the key to reserve status: is
large external holdings of your monetary
instruments for foreigners to transact in".
But what incentive do they have to hold such
a currency and transact in it? Remember they
don't need it since they generally run trade
surpluses. The answer was, because that
currency was convertible to gold. What about
now when it is not tied to gold? Why hold
the currency of profligate debtor nation?
Answer provided in post below.
And anyone who thinks that running large
trade and budget deficits is the secret to
reserve currency status is a moron.
Argentina or Paraguay could just as easily
produce the necessary surplus liquidity
under that logic.
" But what incentive do they have to
hold such a currency and transact in it?
Remember they don't need it since they
generally run trade surpluses. "
Restart back at the very beginning,
forget everything you know, and try
again.
"They" got foreign reserve currency
by selling to the US and getting paid in
dollars. Their banks then traded the
dollars to the PBoC central bank for
freshly printed renimbi.
yes, but why would the central
bank endlessly collect another
country's debt?
And you inadvertently point out
one of the key frauds in the system.
The dollar supports a double pyramid
of credit, one domestic and the
other foreign. There is also a third
pyramid of credit, the euro dollar
market, which is built on top of the
U.S. domestic pyramid of credit, but
lets ignore that for now.
So "they" give us real stuff made
of raw material and labor inputs and
we give them wampum!!! Greatest scam
in history.
"The dollar supports a double
pyramid of credit, one domestic
and the other foreign. "
Except the PBoC prints the
Many Yuan to buy dollars from
the Chinese banking system. The
value of the Many Yuan is backed
by sales of exports, in that
case. A tiny little subset where
MMT (The imaginary version) is
actually in force. Then the PBoC
buys our debt with these foreign
reserves, which we wisely spend
on our country and citizens.
Next, the Chinese banking
system, thru the power of The
Money Multiplier, uses that base
money to make loans and expand
credit to Chinese.
" The value of the Many
Yuan is backed by sales of
exports, in that case."
WTF? The value the "Many
Yuan" is backed by the sale
of exports which yields
wampum, uh I mean dollars,
and they purchase the
dollars with the many yuan
they created. The PBoC
expands its balance sheet to
buy those dollars with yuan
created from nothing, hence
the double pyramid of
credit. The dollars get lent
back to us in the form of
U.S. government securities
because we issue the word's
"boomerang" currency.
And yes you can run a
system like this; for how
long? That is the big
question.
And you have misunderstood
what those reserves are for. The
Fed also can't spend all of
those US assets it holds on its
balance sheet either, now can
it?
The use of foreign currency
reserves is to defend the
currency and keep the IMF away.
Having a currency depreciate
rapidly leads to a big inflation
spike (unless you are close to
being an autarky) due to the
prices of foreign goods, in
particular commodities, going up
in your currency.
China is not self sufficient
in a whole bunch of things,
including in particular energy.
It had a spell last year when
it was running through its FX
reserves at such a rate that it
would have breached the IMF
trouble level for an economy of
its size if it had persisted for
4-6 months more.
A chemist, a physicist and
economist are ship wrecked on a
deserted island with only some
canned goods for food. They sit down
to figure out how they are going to
open the cans. To which the
economist says: "assume we have a
can opener"
Three MMT Economists are
stranded on a desert island.
They say, "WTF's a can
opener? That sounds like work!"
and live 3 months and are then
rescued by Skipper, Gillian,
Mary Ann and the Perfesser too,
on an Easter Break Tour. Ginger
and Mr. Howe are downstairs busy
downstairs knocking up.
They are living happily ever
after in Kansas City, Mo.
Seems to me the dollar system will work until
it doesn't. And those who run it have been doing
all within their power for about 15 years to
encourage anyone who can to come up with an
alternative.
None look viable, and they won't until
suddenly one is.
The euro isn't one due to the mess its
banking system is in. Japan doesn't want the
job and in any event is a military
protectorate of the US.
China is a minimum of 20 years away. Even
though it would like the status of being the
reserve currency, it most decidedly does not
want the attendant obligations, which are
running ongoing trade deficits, which is
tantamount to exporting jobs. Maintaining
high levels of employment and wage growth
are the paramount goals for China's leaders.
There are underreported riots pretty much
all the time in China due to dissatisfaction
over labor conditions now. The officialdom
is not going to commit political suicide.
Domestic needs always trump foreign goals.
Just getting around to reading Piketty's
doorstopper and was struck by his argument that
prior to WWI there had been very little inflation
worldwide for centuries. It was the need to pay off
all the war debt that shook things up.
Graeber's book on debt also makes the argument
that money as physical circulating metal currency
came about because of the need to pay for wars.
Something similar seems to have been going on
with the Bretton Woods agreement.
I know it's crazy but I'm just going to throw it
out there maybe if we'd like a more stable economy
we could try starting fewer very destabilizing,
extremely expensive wars???
That is exactly my thought. There is a
disturbing cycle of war, monetary expansion to
pay for the war, post-war deflation leading to
political instability, leading to a repeat of
the cycle, at least in Europe and the U.S.
One can see this even in the period between
the creation of the Bank of England through the
end of the Napoleonic wars.
It is evident as well in the United States
pre- and post-Civil war.
Deficit hawks never seem to have a problem
with war-time deficit spending, only general
welfare deficit spending.
We could have a system where the fiscal power
of the state is fully harnessed for the general
welfare, but that would threaten the current
system which allows a small minority to
overwhelmingly reap the benefits of the money
creation power of the state and private banks.
This renders the issue a political one more
than a purely economic one. If history is any
guide, we will continue to have the kind of
political uncertainty we've experienced until
there has been enough war spending to start the
cycle over again. :(
" The inflation that started in the later 1960s
was substantially if not entirely the result of
Lyndon Johnson refusing to raise taxes "
I'm almost afraid to ask, but how does this make
sense? Any increase in taxes will be passed on to
the consumer to increase prices even more. If you
doubt this, watch what Trump's import taxes do to
prices.
No, you have been propagandized by the right
wing anti tax people.
Taxes drains demand from the economy. Lower
demand means more slack, more merchants having
to compete with each other, some headcount cuts,
etc.
By deficit spending in an economy that was
already at full employment, Johnson basically
guaranteed inflation. Both his own former
economist, Walter Heller, and Milton Friedman
warned against it. But because Heller was a Dem
and an outlier (most Dems weren't gonna
challenge their own party's policies), it was
Friedman's warnings that were publicized.
Another subject that is relevant to the current
post 2008 collapse and FED shenanigans to save the
day. i.e. save their cronies. And what it is
completely missing in this piece written by the
insiders is exactly that Bretton Woods; Cui
Bono:namely US ruling elite and new world order
after WWII.
Bretton Woods was a monetary session of the
overall conference 1944-1945 of new world order
namely a formal switch from British empire global
dominance system into American global dominance
system and trade/monetary policies were just an
important but small part of overall new global
political and military arrangement.
Global pound was killed, global dollar has been
created and blessed by western sphere of influence
and defended by supposedly the most powerful US
militarily in the world, [as was British navy
before] US military of global reach via US navy and
air force.
The political symbolism of Bretton Woods
conference correlated with invasion of Normandy in
June 1944, the last step in defeating Nazism in
Europe cannot be understated.
Also the dominance of two figures of White and
Keynes in this conference is an exemplification of
closing era of British empire as a world [decaying
at that time] leader which was accelerated by the
role of Japanese and German/Italian aggression in
colonial Asia, Africa [also helped by French
surrender to Nazis that spurred western support for
independent French colony of Algeria] and ME boosted
up the anti-colonial movements and political
parties, which like in Vietnam even US supported
during WWII.
Little known fact is that Nazis championed
themselves as anti-colonial force in ME while they
attempted to colonize eastern Europe.The many Arabs
fell for this propaganda siding with Nazis against
British colonialism in Palestine setting themselves
against Jews vehemently anti Nazi at that time.
In other words Bretton Woods was a consequence of
the fact that British empire was collapsing fast
ironically with the help of its allies and that
Included Soviets. Also helped that British were
broke and all the British Gold was already in the US
as a payment for bankrolling British defenses in
Europe since 1940 and elsewhere, so were Soviet gold
payments for military technology and materiel they
received from US and allies.
The political void had to be filled or it would
have been filled by Soviets, and hence the Bretton
Woods system was not based on unfettered
exploitation of slaves of newly expanded US empire
what US Oligarchy would have liked and was freely
practicing before 1929, but for ideological reason
was aimed for economic improvements in order to stem
massive anti-capitalist, communist and anti-colonist
movements that threatened western hegemony over the
world and hence the dreaded anti-capitalist words
used by in Bretton Woods system like fixed exchange
rate or blasphemous capital controls, things the
would crucify you if you utter them today during a
seminar in any Ivy league economy department.
Bretton Woods was primarily a tool into an
ideological war west and Soviets knew they would
have to fight, cold or hot.
This [economic dominance] war ended in mid
nineteen sixties when seeds of collapse of Soviet
Union and betrayal of leftist ideals and
socialist/communists movements all over the world
were sawed and hence Bretton Woods was no longer
needed and brutality of unfettered capitalist could
begin to return starting with Kennedy tax cut
freeing capital in private hands and then FED going
full fiat in later 1960-ties, capital flow
deregulation, free floating currencies, all that for
benefit of oligarchic class and of colossal
detriment to American workers, devastating result of
which we are experiencing now.
One of the great ironies of Bretton Woods is
that Harry Dexter White, the US rep at the talks
was in fact a Soviet agent. I wonder if he
understood monetary economics enough to hope
that the Bretton Woods gold standard system, as
opposed to Keynes bancor proposal, would self
immolate with a run on US gold stocks and take
the West down with it.
Let's think of "root causes", both Keynes
and White were big fans of Soviet-style
command and control top-down planned
economies ("I have seen the future and it
works!"). So that's what they divined and
devised for money: a top-down price-fixing
regime.
So while people would laugh themselves
silly if you told them we were going to
price things the way the Soviets did ("we'll
raise X number of cows because we'll need Y
quantity of shoe leather"), we somehow
accept central planning for the price of the
most important item of all: money itself.
The supreme geniuses at the Fed et al, with
their supreme formulae, can divine at any
moment precisely what the price of money
should be. This, of course, is folly.
And people should understand that the
gold standard (not the gold-exchange
standard it is often confused with) was not
designed, was not somehow imposed, and was
not agreed upon by some collective body. It
simply arose organically because time and
again through painful experience throughout
history it was shown that any system where
people can simply vote themselves more money
ends in tears. Not usually, but always.
You'd think that a 100% historical failure
rate would clue people in to rethink the
head-hammer-hitting approach.
And as Dr. Haygood points out above,
"everything floating against everything
else" is nothing but a colossal waste of
time and money. You wouldn't attempt to
build or make something without an agreed
and immutable unit of measure.
Completely untrue of Keynes. He ran
the UK Treasury twice very pointedly in
the interests of industrial capitalists.
He was however very opposed to financial
rents, a real classicist in that regard.
Keynes ran the UK treasury twice more
or less along classical lines: in favor
of industrial capitalism and against
financial rents. Not top down, not
Soviet. Its not clear where you get your
facts, fiat systems have lasted hundreds
of years many times. They tend to arise
in empires with secure borders. They
depend on the productive relations of
their societies for the value of their
money rather than a commodity hedge.
Warfare favors the commodity hedge
because the productive relations in a
society are frequently destroyed by war.
Because of the stickyness of wages, hard
currency tends to choke economic growth
because a fixed money supply has to be
spread increasingly thin as more real
wealth is created to be denominated with
a fixed quantity of specie, requiring
wages to drop because there is more
stuff to purchase.
Each has benefits and costs, both are
tools and while the one favors growth
and the other war, neither must be used
for either. A representative system will
use either as its constituencies direct,
an authoritarian one according to the
intent of the authority. It isn't tools
that make the problems, though some are
better for some purposes than others. It
is the intent of the powerful that is
expressed and from which others suffer.
@jsn " fiat systems have lasted
hundreds of years many times."
what? can you please back that
statement up. Only major fiat system
in history that I have ever seen
written about is the one that
existed in China several hundred
years ago. If there were others you
need to give some examples.
I think you objected to my
comments without actually refuting
them:
1. We have a top-down price fixing
money system;
2. Keynes and White were a big fans
of Soviet central planning (see The
Battle for Bretton Woods for chapter
and verse);
3. And I've never understood the
"fixed quantity of specie" argument.
Surely it's about price, not
physical quantity. You could easily
run the world economy on 100 tons of
gold if it was priced accordingly.
Michael Hudson's book Superimperialism, published
astonishingly in 1972, nailed it. Details some great
history of FDR's economic diplomacy during the late
Depression and WW2 period that preceded the Bretton
Woods settlement. Worth a read.
yes Michael Hudson is great, but that is why
he must be marginalized/ignored. Can't maintain
control of the official narrative if people like
Hudson were to ever be taken seriously..
"However, the likelihood that the dollar will be
replaced as the dominant international currency in
the foreseeable future remains remote. The dollar
standard and the legacy of the Bretton Woods system
will be with us for a long time."
That is the BIG question and the answer remains
to be seen. I for one don't believe it will continue
much longer, but then again nobody knows. Bordo also
leaves out a critical part of the narrative, i.e.,
the U.S. secret deal with Saudi Arabia in 1974 to
officially tie the dollar to oil. See link below for
details. Without this secret arrangement the dollar
would have never survived as the international
reserve currency. The Saudis reportedly pushed for
greater use of the SDR, but the U.S. made them a
deal they couldn't refuse and the Saudi royal family
realized that if they didn't go along with U.S.
demands the CIA would find some other branch of the
family that would.
The system is a mess and it is retarded to allow
one country's currency to serve as the main reserve
asset for the system. That is the ultimate free
lunch and the equivalent to believing in a perpetual
motion machine. It is hard to believe in can
continue much longer despite of Bordo's view that it
will. It has reached a point where it has created
massive problems that can not continue.
So in a sense when China and Russia are
forced to hold dollars for global trade,
they're essentially paying for the Pentagon
to do what it's doing. You can see why
they'd be mad.
It is almost a gift from heaven when fixing a
single problem offers the chance to fix a whole
bunch of them. This IMHO is very possibly one of
those gifts. Without this "ultimate free lunch"
the globalization scam of allowing this
country's and the world's 1% to keep adding
zeros to their bank accounts ("to keep score" as
Pres. Trump puts it) would not have been
possible. Without countries like Saudi Arabia
willing to keep accepting more "debt that can't
be repaid (and) won't be", the US military
industrial complex would not be able to keep
increasing its threat to world peace and
threatening the survival of humanity. Without
the Saudi stranglehold over politics and US
Middle Eastern policy the US could stop killing
Muslims in its bogus 'war on terror'. It could
get busy replacing its fossil fuel energy
sources with renewable ones and its oil-powered
transportation system with an electrified one
(yes, maybe even a few EVs)
It is hard to believe in can continue
much longer despite of Bordo's view that it
will.
And yet where is the dollar's replacement?
If you'd told me ten years that the
petrodollar as an institution enforcing
compliance w. the dollar as global reserve
currency could end and yet the dollar would
continue with that status, I'd have laughed at
you. However, that increasingly looks like it
might happen.
Yes, yes, I know - we await the basket of
currencies solution pushed by China and Russia,
and others sick of the situation. We've been
waiting for a while now.
I'm thinking globalization has something
to do with the dollar's longevity. Strip a
country of the ability to support itself by
exporting its jobs and it's people become
dependent on a strong military to insure
it's money continues to be "accepted" even
when it's people no longer have anything to
trade for what they really need.
@Moneta, these numbers are
roughly correct. The U.S. defense
budget is about $600 billion, the
trade deficit is about $600 billion
and last year we issued $1.4
trillion in incremental debt.
Foreigners own about 40% of U.S.
debt. 40% of of $1.4 trillion is
$560 billion so yes there is a
pretty strong correlation. Massive
defense budget wouldn't be possible
without reserve currency scam.
I'm completely confused. Anything available in
plain English for laypeople?
"The adjustment problem in Bretton Woods
reflected downward rigidity in wages and prices
which prevented the normal price adjustment of the
gold standard price specie flow mechanism to
operate"
Canada which was one of the founding members of
Bretton Woods pulled out as early as 1949 in order
to move to a floating exchange rate and full capital
mobility. Bretton Woods was dead before it ever
began.
If the Federal Reserve can create trillions of dollars with a single keystroke, and the Fed
is the government's bank, then why does President Obama claim we've "run out" of money?
Why have Democrats and so-called progressives supported job-killing budget cuts in the name
of "shared sacrifice"? Why are we throwing away the equivalent of $9.8 billion in lost output
every single day? Why don't we do something about our $2.2 trillion infrastructure deficit, 25
million underemployed and unemployed Americans, 100 million Americans in or very near poverty,
and so on?
The answer is simple. Most of us don't understand the monetary system. Instead of deciding
how the government should wield its power over the dollar, we live in fear of the ratings agencies,
the Chinese, the bond market vigilantes and other imaginary evils. And this holds all of us back.
Unused resources abound, human needs go unmet, and the vast majority of Americans believe that
'There Is No Alternative' (TINA). Or, as Warren Mosler says, "Because we fear becoming the next
Greece, we're turning ourselves into the next Japan."
There is an alternative. And it begins with an understanding of the monetary system. The cat
is already out of the bag. Chairman Bernanke confirms it. Money is no object.
RGC,
the people here have been brainwashed and can not think for themselves. If it has not been approved
by their favorite academic, it is a crank theory. they'd rather believe in fairy tales like NGDP
level targeting - the fed will wish it into reality. Rather than pay attention to the MMT that
you and I subscribe to.
Moreover it is logical for them to stick to the "the Fed is omnipotent" as it bids up asset prices
and maintains the status quo. It vests more power in the institutions that benefit the people
you see here.
Blame the right, blame the deregulators, blame the tax cutters, blame the liberatarians, etc.
that is the how they maintain the status quo. And Mosler is right on - Bernanke turned us into
Japan trying to save us from that fate. And he is sliding down the rabbit hole - "I should have
doubled down on my failed strategy"
why? because he was able to bid up the stock market? I bet you everyone of the Fed worshippers
here benefit personally from the asset price binges that the stupid Fed has gotten us addicted
to.
Per Rubin and his cronies in the Wall Street banking cartel, the Fed is fine as it is...serving
the interests of the Wall Street banking cartel. The cartel has a good think going...why disrupt
it by taking into account the public good?
Has Rubin ever done anything in the interest of the public?
China and Currency Values: Fast Growing Countries Run
Trade Deficits
I don't generally comment on pieces that reference me, but
Jordan Weissman has given me such a beautiful teachable
moment that I can't resist. Weissman wrote * about Donald
Trump's reversal on his campaign pledge to declare China a
currency manipulator. Weissman assures us that Trump was
completely wrong in his campaign rhetoric and that China does
not in fact try to depress the value of its currency.
"It's pretty hard to argue with that. Far from devaluing
its currency, China has actually spent more than $1 trillion
of its vaunted foreign reserves over the past couple of years
trying to prop up the value of the yuan as investors have
funneled money overseas. There are some on the left, like
economist Dean Baker, who will argue that Beijing is still
effectively suppressing the redback's value by refusing to
unwind its dollar reserves more quickly. But if China were
really keeping its currency severely underpriced, you'd
expect it to still have a big current account surplus,
reminiscent of 10 years ago, which it doesn't anymore."
Okay, to start with, I hate the word "manipulation" in
this context. China isn't doing anything in the dark of the
night that we are trying to catch them at. The country pretty
explicitly manages the value of its currency against the
dollar, that is why it holds more than $3 trillion in
reserves. So let's just use the word "manage," in reference
to its currency. It is more neutral and more accurate.
It also allows us to get away from the idea that China is
somehow a villain and that we here in the good old US of A
are the victims. There are plenty of large U.S. corporations
that hugely benefit from having an under-valued Chinese
currency. For example Walmart has developed a low cost supply
chain that depends largely on goods manufactured in China. It
is not anxious for the price of the items it imports rise by
15-30 percent because of a rise in the value of the yuan
against the dollar.
The same applies to big manufacturers like GE that have
moved much of their production to China and other developing
countries. These companies do not "lose" because China is
running a large trade surplus with the United States, they
were in fact big winners.
Okay, but getting back to the issue at hand, I'm going to
throw the textbook at Weissman. It is not true that we should
expect China "to still have big current account surplus" if
it were deliberately keeping its currency below market
levels.
China is a developing country with an annual growth rate
of close to 7.0 percent. The U.S. is a rich country with
growth averaging less than 2.0 percent in last five years.
Europe is growing at just a 1.0 percent rate, and Japan even
more slowly. Contrary to what Weissman tells us, we should
expect that capital would flow from slow growing rich
countries to fast growing developing countries. This is
because capital will generally get a better return in an
economy growing at a 7.0 percent rate than the 1-2 percent
rate in the rich countries.
If capital flows from rich countries to poor countries,
this means they are running current account surpluses. The
capital flows are financing imports in developing countries.
These imports allow developing countries to sustain the
living standards of their populations even as they build up
their infrastructure and capital stock. In other words, if
China was not depressing the value of its currency we should
it expect it to be running a large trade deficit.
This is actually the way the world worked way back in the
1990s, a period apparently beyond the memory of most
economics reporters. The countries of East Asia enjoyed
extremely rapid growth, ** while running large trade
deficits. This all changed following the East Asian financial
crisis and the disastrous bailout arranged by Secretary of
Treasury Robert Rubin and friends. *** Developing countries
became huge exporters of capital as they held down the value
of their currencies in order to run large trade surpluses and
build up massive amounts of reserves.
But Weissman is right that China is no longer buying up
reserves, but the issue is its huge stock of reserves. As I
explained in a blogpost **** a couple of days ago:
"Porter is right that China is no longer buying reserves,
but it still holds over $3 trillion in reserves. This figure
goes to well over $4 trillion if we include its sovereign
wealth fund. Is there a planet where we don't think this
affects the value of the dollar relative to the yuan?
"To help people's thought process, the Federal Reserve
Board holds over $3 trillion in assets as a result of its
quantitative easing program. I don't know an economist
anywhere who doesn't think the Fed's holding of assets is
still keeping interest rates down, as compared to a scenario
in which it had a more typical $500 billion to $1 trillion in
assets.
"Currencies work the same way. If China offloaded $3
trillion in reserves and sovereign wealth holdings, it would
increase the supply of dollars in the world. And, as Karl
Marx says, when the supply of something increases, its price
falls. In other words, if China had a more normal amount of
reserve holdings, the value of the dollar would fall,
increasing the competitiveness of U.S. goods and services,
thereby reducing the trade deficit."
So, there really are no mysteries here. China is holding
down the value of its currency, which is making the U.S.
trade deficit worse. It is often claimed that they want their
currency to rise. That may well be true, which suggests an
obvious opportunity for cooperation. If the U.S. and China
announce a joint commitment to raise the value of the yuan
over the next 2-3 years then we can be fairly certain of
accomplishing this goal.
This should be a very simple win-win for both countries.
Walmart and GE might be unhappy, but almost everyone else
would be big winners, especially if we told them not to worry
about Pfizer's drug patent and Microsoft's copyright on
Windows.
== quote ==
In much of the world, of course, electricity demand is still
growing. In China, per-capita electricity use has more than
quadrupled since 1999. Still, most other developed countries
have experienced a plateauing or decline in electricity use
similar to that in the U.S. over the past decade. And while
the phenomenon has been most pronounced in countries such as
the U.K. where the economy has been especially weak, it's
also apparent in Australia, which hasn't experienced a
recession since 1991.
== end of quote ==
From comments:
One interesting data point that should be within that
"industrial" number: "U.S. aluminum production has gone from
2.5 million tons in 2005 to 1.6 million in 2015."
http://www.seattletimes.com...
Aluminum smelting uses a lot of electricity, and that's a
36% decline. I'm not sure of the total electricity use of the
aluminum industry in the U.S. but it's conceivably big enough
to make a difference in that last graph.
It is unfortunate that Donald Trump seems closer to the
mark on China and trade than many economists and people who
write on economic issues for major news outlets. Today,
Eduardo Porter gets things partly right in his column *
telling readers "Trump isn't wrong on China currency
manipulation just late." The thrust of the piece is that
China did in fact deliberately prop up the dollar against its
currency, thereby causing the U.S. trade deficit to explode.
However, he argues this is all history now and that China's
currency is properly valued.
Let's start with the first part of the story. It's hardly
a secret that China bought trillions of dollars of foreign
exchange in the last decade. The predicted and actual effect
of this action was to raise the value of the dollar against
the yuan. The result is that the price of U.S. exports were
inflated for people living in China and the price of imports
from China were held down.
Porter then asks why the Bush administration didn't do
anything when this trade deficit was exploding in the years
20022007. We get the answer from Eswar Prasad, a former
I.M.F. official who headed their oversight of China:
"'There were other dimensions of China's economic policies
that were seen as more important to U.S. economic and
business interests,' Eswar Prasad, who headed the China desk
at the International Monetary Fund and is now a professor at
Cornell, told me. These included 'greater market access,
better intellectual property rights protection, easier access
to investment opportunities, etc.'"
Okay, step back and absorb this one. Mr. Prasad is saying
that millions of manufacturing workers in the Midwest lost
their jobs and saw their communities decimated because the
Bush administration wanted to press China to enforce Pfizer's
patents on drugs, Microsoft's copyrights on Windows, and to
secure better access to China's financial markets for Goldman
Sachs.
This is not a new story, in fact I say it all the time.
But it's nice to have the story confirmed by the person who
occupied the International Monetary Fund's China desk at the
time.
Porter then jumps in and gets his story completely 100
percent wrong:
"At the end of the day, economists argued at the time,
Chinese exchange rate policies didn't cost the United States
much. After all, in 2007 the United States was operating at
full employment. The trade deficit was because of Americans'
dismal savings rate and supercharged consumption, not a cheap
renminbi. After all, if Americans wanted to consume more than
they created, they had to get it somewhere."
Sorry, this was the time when even very calm sensible
people like Federal Reserve Board Chair Ben Bernanke were
talking about a "savings glut." The U.S. and the world had
too much savings, which lead to a serious problem of
unemployment. Oh, we did eventually find a way to deal with
excess savings.
Anyone remember the housing bubble? The demand generated
by the bubble eventually pushed the labor market close to
full employment. (The employment rate of prime age workers
was still down by 2.0 percentage points in 2007 compared to
2000 - and the drop was for both men and women, so skip the
problem with men story.)
Yeah, that bubble didn't end too well. So much for
Porter's no big deal story.
But what about the present, are we all good now?
Porter is right that China is no longer buying reserves,
but it still holds over $3 trillion in reserves. This figure
goes to well over $4 trillion if we include its sovereign
wealth fund. Is there a planet where we don't think this
affects the value of the dollar relative to the yuan?
To help people's thought process, the Federal Reserve
Board holds over $3 trillion in assets as a result of its
quantitative easing program. I don't know an economist
anywhere who doesn't think the Fed's holding of assets is
still keeping interest rates down, as compared to a scenario
in which it had a more typical $500 billion to $1 trillion in
assets.
Currencies work the same way. If China offloaded $3
trillion in reserves and sovereign wealth holdings, it would
increase the supply of dollars in the world. And, as Karl
Marx says, when the supply of something increases, its price
falls. In other words, if China had a more normal amount of
reserve holdings, the value of the dollar would fall,
increasing the competitiveness of U.S. goods and services,
thereby reducing the trade deficit.
At the beginning of the piece, Porter discusses the
question of China's currency "manipulation." (I would much
prefer the more neutral and accurate term "currency
management." There is nothing very secret here.) He tells
readers:
"It would be hard, these days, to find an economist who
feels China fits the bill."
Perhaps. Of course it would have been difficult to find an
economist who recognized the $8 trillion housing bubble, the
collapse of which wrecked the economy. As the saying goes,
"economists are not very good at economics."
Dr Krugman ignored another wrinkle in France leaving the euro; the euro
itself.
While GB joined the EU, it retained the british pound. So, Brexit won't
affect it monetarily. France, on the other hand, did convert to the euro
(in hindsight, another enormous mistake). Each euro has an identifier, similar
to how we designate the origin by Fed Reserve, which designates it's country
of origin.
So, should France leave the EU, would euros held by, say, someone in
Italy then become worthless? This isn't someone most people concern themselves
with. When was the last time someone on this blog check to see which dollars
in your wallet came from the Denver Fed? But, it may well be that the EU
would stop honoring French euros, should they leave.
Interesting conjecture, but a Euro printed in France belongs to the Euro
Area rather than to France in the same way that a dollar printed in Denver
belongs to the United States. There is by the way, to my understanding,
no treaty provision describing how any country in the Euro Area might leave.
"Start with the euro. The single currency was and is a flawed project, and
countries that never joined Sweden, the UK, Iceland have benefited from
the flexibility that comes from independent currencies. There is, however,
a huge difference between choosing not to join in the first place and leaving
once in."
Okay, but then the bank reserves
which are held at the Fed by law could be defined as part of "outside money", because they
aren't backed by anything in the private economy. Those reserves are established, or insisted
upon, by government fiat, in essence. We know those reserves are not really backed by a precious
metal or anything else but faith. So why are bank reserves held at the Fed not included in
the definition of "outside money"?
From the standpoint of the private
economy, reserves are 'outside money", because they circulate only within the Fed system. Currency
is inside money because it circulates within the private economy, although it also circulates
between government and private banks.
The monetary base is both currency and reserves.
So it takes a clear understanding of the purpose of the discussion and maybe even a Venn
diagram.
Outside money
is money that is either of a fiat nature (unbacked) or backed by some asset that is not in
zero net supply within the private sector of the economy.
Thus, outside money is a net asset for the private sector. The qualifier outside is short
for (coming from) outside the private sector.
Inside money is an asset representing, or backed by, any form of private credit that circulates
as a medium of exchange.
Since it is one private agent's liability and at the same time some other agent's asset,
inside money is in zero net supply within the private sector.
The qualifier inside is short for (backed by debt from) inside the private sector.
These are entries in accounts owned by the banks and put there by the banks and
are money. These can not be 'taken' by the govt without compensation per law.
JF, Sorry, I only meant that
the minimum reserves are established by the decree of the public-private partnership known
as the central bank. So I was using "fiat" in the sense of "law". I should not have written
that the bank reserves are established by gov't "fiat" in a discussion about money, because
that is confusing.
And the reason for this law is to make sure that banks can cover their
needs for cash, to prevent a run on the banking system.
But what this means, is that the ultimate foundation of part of the individual's trust in
the money that is used, is based upon the existence of the requirement for bank reserves. Otherwise,
people wouldn't trust the money supply. The trust is not based on any function more basic than
bank reserves.
What else do people trust? Well of course people already trust paper notes and coins in
daily transactions: they automatically suppose that the gov't backs it up. Backs it up, with
what?, they do not know; but it works. And for checks and debits, they suppose that the bank
is good for the cash -- which ultimately is based on the reserve requirement. So therefore,
"trust" of money by the common folk is presently based upon 2 things, the existence of currency
and the (vaguely understood yet reassuring) existence of bank reserves.
Well, the "money base" is defined as reserves + cash & coin. However, this seems to me to
be the same definition as "outside money". So I am still wondering if there is another difference
between the definitions.
Certainly people think of gold & silver as money, but if that is the only difference between
"monetary base" and "outside money", I think it would be easy to alter the definition of "currency"
to include them.
"... Of course after legacy systems [people] were retrenched or shown the door in making government more efficient MBA style, some
did hit the jack pot as consultants and made more that on the public dime . but the Gov balance sheet got a nice one time blip. ..."
"... In the government, projects "helped" by Siemens, especially at the Home and Passport Offices, cost billions and were abandoned.
At my former employer, an eagle's nest, it was Deloittes. At my current employer, which has lost its passion to perform, it's KPMG and
EY helping. ..."
"... My personal favourite is Accenture / British Gas . But then you've also got the masterclass in cockups Raytheon / U.K. Border
Agency . Or for sheer breadth of failure, there's the IT Programme That Helped Kill a Whole Bank Stone Dead ( Infosys / Co-op ). ..."
"... I am an assembler expert. I have never seen a job advertised, but a I did not look very hard. Send me your work!!! IBM mainframe
assembler ..."
"... What about Computer Associates? For quite a while they proudly maintained the worst reputation amongst all of those consultancy/outsourcing
firms. ..."
"... My old boss used to say a good programmer can learn a new language and be productive in it in in space of weeks (and this
was at the time when Object Oriented was the new huge paradigm change). A bad programmer will write bad code in any language. ..."
"... The huge shortcoming of COBOL is that there are no equivalent of editing programs. ..."
"... Original programmers rarely wrote handbooks ..."
"... That is not to say that it is impossible to move off legacy platforms ..."
After we've been writing about the problem of the ticking time bomb of bank legacy systems written in COBOL that depends on a shrinking
pool of aging programmers to baby them for now nearly two years, Reuters reports on the issue. Chuck L flagged a Reuters story, Banks
scramble to fix old systems as IT 'cowboys' ride into sunset, which made some of the points we've been making but frustratingly missed
other key elements.
Here's what Reuters confirmed:
Banks and the Federal government are running mission-critical core systems on COBOL, and only a small number of older software
engineers have the expertise to keep the systems running . From the article:
In the United States, the financial sector, major corporations and parts of the federal government still largely rely on it
because it underpins powerful systems that were built in the 70s or 80s and never fully replaced
Experienced COBOL programmers can earn more than $100 an hour when they get called in to patch up glitches, rewrite coding
manuals or make new systems work with old.
For their customers such expenses pale in comparison with what it would cost to replace the old systems altogether, not to
mention the risks involved.
Here's what Reuters missed:
Why young coders are not learning COBOL . Why, in an era when IT grads find it hard to get entry-level jobs in the US, are young
programmers not learning COBOL as a guaranteed meal ticket? Basically, it's completely uncool and extremely tedious to work with
by modern standards. Given how narrowminded employers are, if you get good at COBOL, I woudl bet it's assumed you are only capable
of doing grunt coding and would never get into the circles to work on the fantasy of getting rich by developing a hip app.
I'm sure expert readers will flag other issues, but the huge shortcoming of COBOL is that there are no equivalent of editing programs.
Every line of code in a routine must be inspected and changed line by line.
How banks got in this mess in the first place. The original sin of software development is failure to document the code. In fairness,
the Reuters story does allude to the issue:
But COBOL veterans say it takes more than just knowing the language itself. COBOL-based systems vary widely and original programmers
rarely wrote handbooks, making trouble-shooting difficult for others.
What this does not make quite clear is that given the lack of documentation, it will always be cheaper and lower risk to have
someone who is familiar with the code baby it, best of all the guy who originally wrote it. And that means any time you bring someone
in, they are going to have to sort out not just the code that might be causing fits and starts, but the considerable interdependencies
that have developed over time. As the article notes:
"It is immensely complex," said [former chief executive of Barclays PLC Anthony] Jenkins, who now heads startup 10x Future
Technologies, which sells new IT infrastructure to banks. "Legacy systems from different generations are layered and often heavily
intertwined."
I had the derivatives trading firm O'Connor & Associates as a client in the early 1990s. It was widely recognized as being one
of the two best IT shops in all of Wall Street at the time. O'Connor was running the biggest private sector Unix network in the world
back then. And IT was seen as critical to the firm's success; half of O'Connor's expenses went to it.
Even with it being a huge expense, and the my client, the CIO, repeatedly telling his partners that documenting the code would
save 20% over the life of the software, his pleas fell on deaf ears. Even with the big commitment to building software, the trading
desk heads felt it was already taking too long to get their apps into production. Speed of deployment was more important to them
than cost or long-term considerations. 1 And if you saw this sort of behavior with a firm where software development was
a huge expense for partners who were spending their own money, it's not hard to see how managers in a firm where the developers were
much less important and management was fixated on short term earnings targets to blow off tradeoff like this entirely.
Picking up sales patter from vendors, Reuters is over-stating banks' ability to address this issue . Here is what Reuters would
have you believe:
The industry appears to be reaching an inflection point, though. In the United States, banks are slowly shifting toward newer
languages taking cue from overseas rivals who have already made the switch-over.
Commonwealth Bank of Australia, for instance, replaced its core banking platform in 2012 with the help of Accenture and software
company SAP SE. The job ultimately took five years and cost more than 1 billion Australian dollars ($749.9 million).
Accenture is also working with software vendor Temenos Group AG to help Swedish bank Nordea make a similar transition by 2020.
IBM is also setting itself up to profit from the changes, despite its defense of COBOL's relevance. It recently acquired EzSource,
a company that helps programmers figure out how old COBOL programs work.
The conundrum is the more new routines banks pile on top of legacy systems, the more difficult a transition becomes. So delay
only makes matters worse. Yet the incentives of everyone outside the IT areas is to hope they can ride it out and make the legacy
system time bomb their successor's problem.
If you read carefully, Commonwealth is the only success story so far. And it's vastly less complex than that of many US players.
First, it has roughly A$990 billion or $740 billion in assets now. While that makes it #46 in the world (and Nordea is of similar
size at #44 as of June 30, 2016), JP Morgan and Bank of America are three times larger. Second, and perhaps more important, they
are the product of more bank mergers. Commonwealth has acquired only four banks since the computer era. Third, many of the larger
banks are major capital markets players, meaning their transaction volume relative to their asset base and product complexit is also
vastly greater than for a Commonwealth. Finally, it is not impossible that as a government owned bank prior to 1990 that not being
profit driven, Commonwealth's software jockeys might have documented some of the COBOL, making a transition less fraught.
Add to that that the Commonwealth project was clearly a "big IT project". Anything over $500 million comfortably falls into that
category. The failure rate on big IT projects is over 50%; some experts estimate it at 80% (costly failures are disguised as well
as possible; some big IT projects going off the rails are terminated early).
Mind you, that is not to say that it is impossible to move off legacy platforms. The issue is the time and cost (as well as risk).
One reader, I believe Brooklyn Bridge, recounted a prototypical conversation with management in which it became clear that the cost
of a migration would be three times a behemoth bank's total profit for three years. That immediately shut down the manager's interest.
Estimates like that don't factor in the high odds of overruns. And even if it is too high for some banks by a factor of five,
that's still too big for most to stomach until they are forced to. So the question then becomes: can they whack off enough increments
of the problem to make it digestible from a cost and risk perspective? But the flip side is that the easier parts to isolate and
migrate are likely not to be the most urgent to address.
____ 1 The CIO had been the head index trader and had also help build O'Connor's FX derivatives trading business, so he was
well aware of the tradeoff between trading a new instrument sooner versus software life cycle costs. He was convinced his partners
were being short-sighted even over the near term and had some analyses to bolster that view. So this was the not empire-building
or special pleading. This was an effort at prudent management.
Accenture is also working with software vendor Temenos Group AG to help
and promptly splurted my coffee over my desk. "Help" is the last thing either of these two ne'redowells will be doing.
Apart from the problems ably explained in the above piece, I'm tempted to think industry PR and management gullibility to it
are the two biggest risks.
Heaps of IT upgrades have gone a bit wonky over here of late, Health care payroll, ATO, Centerlink, Census, all assisted by
private software vendors and consultants after drum roll .. PR management did a "efficiency" drive [by].
Of course after legacy systems [people] were retrenched or shown the door in making government more efficient MBA style,
some did hit the jack pot as consultants and made more that on the public dime . but the Gov balance sheet got a nice one time
blip.
disheveled . nice self licking icecream cone thingy and its still all gov fault . two'fer
It's the same in the UK as Clive knows and can add.
In the government, projects "helped" by Siemens, especially at the Home and Passport Offices, cost billions and were abandoned.
At my former employer, an eagle's nest, it was Deloittes. At my current employer, which has lost its passion to perform, it's
KPMG and EY helping.
What I have read / heard is that the external consultants often cost more and will take longer to do the work than internal
bidders. The banks and government(s) run an internal market and invite bids.
They keep writing books on how to avoid this sort of thing. Strangely enough, none of them ever tell CEOs or CIOs to pay people
decent wages, not treat them like crap and to train up new recruits now and again. And also fail to highlight that though you
might like to believe you can go into the streets in Mumbai, Manila or Shenzhen waving a dollar bill and have dozens of experienced,
skilled and loyal developers run to you like a cat smelling catnip, that may only be your wishful thinking.
Just wait 'til we get started trying to implement Brexit
Oh man, if you only had a look at the kind of graduates Infosys hires en masse and the state of graduate programmers coming
out of universities here in India you'd be amazed how we still haven't had massive hacks. And now the government, so confident
in the Indian IT industry's ability to make big IT systems is pushing for the universal ID system(aadhar) to be made mandatory
for even booking flight tickets!
So would you recommend graduates do learn COBOL to get good jobs there in the USA?
I'd pick something really obscure, like maybe MUMPS
- yes, incredibly niche but that's the point, you can corner a market. You might not get oodles of work but what you do get
you can charge the earth for. Getting real-world experience is tricky though.
Another alternative, a little more mainstream is assembler. But that is hideous. You deserve every penny if you can learn that
and be productive in it.
For a bit more on why Cobol is hard to use see Why We Hate Cobol
. To summarise, Cobol is barely removed from programming in assembler, i.e. at the lowest level of abstraction, with endless
details needing to be taken care of. It dates pack to the punched card era.
It is particularly hard for IT grads who have learned to code in Java or C# or any modern language to come to grips with, due
to the lack of features that are usually taken for granted. Those who try to are probably on their own due to a shortage of teachers/courses.
It's a language that's best mastered on the job as a junior in a company that still uses it, so it's hard to get it on your CV
before landing such a job.
There are potentially two types of career opportunities for those who invest the time to get up-to-speed on Cobol. The first
is maintenance and minor extension of legacy Cobol applications. The second and potentially more lucrative one is developing an
ability to understand exactly what a Cobol program does in order to craft a suitable replacement in a modern enterprise grade
language.
Well, COBOL's shortcomings are part technical and part "religious". After almost fifty years in software, and with experience
in many of the "modern enterprise grade languages", I would argue that the technical and business merits are poorly understood.
There is an enormous pressure in the industry to be on the "latest and greatest" language/platform/framework, etc. And under such
pressure to sell novelty, the strengths of older technologies are generally overlooked.
@Yves, I would be glad to share my viewpoint (biases, warts and all) at your convenience. I live nearby.
"It is particularly hard for IT grads who have learned to code in Java or C# or any modern language to come to grips with"
which tells you something about the quality of IT education these days, where "mastering" a language is more often more important
than actually understanding what goes on and how.
My old boss used to say a good programmer can learn a new language and be productive in it in in space of weeks (and
this was at the time when Object Oriented was the new huge paradigm change). A bad programmer will write bad code in any language.
IMHO, your old boss is wrong about that. Precisely because OO languages are a huge paradigm change and require a programmer
to nearly abandon everything he/she knows about programming. Then get his brain around OOP patterns when designing a complex system.
Not so easy.
As proof, I put forth the 30% success rate for new large projects in the latter 90s done with OOP tech. Like they say, if it
was easy, everyone would be doing it.
More generally, on the subject of Cobol vs Java or C++/C#, in the heyday of OOPs rollout in the early 90s, corporate IT spent
record amounts on developing new systems. As news of the Y2K problem spread, they very badly wanted to replace old Cobol/mainframe
legacy systems. As things went along, many of those plans got rolled back due to perceived problems with viability, cost and trained
personnel.
Part of the reason was existing Cobol IT staff took a look at OOP, then at their huge pile of Cobol legacy code and their brains
melted down. I was around lots of them and they had all the symptoms of Snow Crash. [Neil Stephenson] I hope they got better.
It never occurred to me that the OOP-lite character of the newer "hipster" languages (Golang / Go or even plain old javascript)
are a response to OOP run amok.
In the university course I took, we were taught Algol-60. Then it turned out that the univ. had no budget for Algol compiles
for us. So we wrote our programs in Algol-60 for 'publication' and grading, and rewrote them in FORTRAN IV to run in a cheap bulk
FORTRAN execution system for results. Splendid way to push home Turing's point that all computing is the same. So when the job
needed COBOL, "Sure, bring it on."
My old boss used to say a good programmer can learn a new language and be productive in it in in space of weeks (and this
was at the time when Object Oriented was the new huge paradigm change). A bad programmer will write bad code in any language.
Yes. Learning a new programming language is fairly easy but understanding existing patchwork code can be very hard indeed.
It just gets harder if you want to make reliable changes.
HR thinking, however, demands "credentials" and languages get chosen as such based on their simple labels. They are searchable
on L**kedIn!
A related limitation is the corporate aversion to spending any time or money on employee learning of either language or code.
There may not be anyone out there with all the skills needed but that will not stop managers from trying to hire them or, better
still, just outsourcing the whole mess.
Your boss was correct in my opinion - but also atypical. Most firms look for multi-years of experience in a language. They'll
toss your resume if you don't show you've used it extensively.
Even if a new coder spent the time to learn COBOL, if he wasn't using it on the job or in pretty significant projects he would
not be considered. And there aren't exactly many open source projects out there written in COBOL to prove one's competence. The
limiting factor is not whether you "know" COBOL, or whether you know how to learn it. The limiting factor is the actual knowledge
of the system, how it was implemented, and all the little details that never get written down no matter how good your documentation.
If your system is 30+ years old it has complexity hidden in every nook and cranny.
As for the language itself, COBOL is an ancient language from a much older paradigm than what students learn in school today.
Most students skip right past C, they don't learn structural programming. They expect to have extensive libraries of pre-written
routines available for reuse. And they expect to work in a modern IDE (development environment), a software package that makes
it much easier to write and debug code. COBOL doesn't have tools of this level.
When I was in the Air Force I was trained as a programmer. COBOL was one of the languages they "taught". I never used it, ever,
and wouldn't dream of trying it today. It's simply too niche. I would never recommend anyone learn COBOL in the hopes of getting
a job. Get the job first, and if it happens to include some COBOL get the expertise that way.
having seen the 'high level code' in C++, not sure what makes it 'modern'.its really an out growth of C, which is basically
the assembler language of Unix. which it self is no spring chicken. mostly what is called 'modern' is just the latest fad, has
the highest push from vendors. and sadly what we see in IT, is that the IT trade magazines are more into what they sell, that
what companies need (maybe because of advertising?)
as to why schools tend to teach these languages than others? mainly cause its hip. its also cheaper for the schools, as they
dont have much in the way of infrastructure to teach them ( kids bring their own computers). course teachers are as likely to
be influenced by the latest 'shinny;' thing as any one else
C++ shares most of the core C spec but that's it. [variables and scope, datatypes, functions sorta, math and logic operatives,
logic control statements] The reason you can read high level C++ is because it uses objects that hide the internal code and are
given names that describe their use which if done right makes the code somewhat readable, along with a short comment header, and
self documenting.
Then at high level most code is procedural and/or event driven, which makes it appear to function like C or any other procedural
language. Without the Goto statements and subroutines, because that functionality is now encapsulated within the C++ objects.
{which are a datatype that combines data structures and related functions that act on this data)
Well put. I was going to make this point. Note that the today's IT grads struggle with Cobol for the same reason that modern
airline pilots would struggle to build their own airplane. The industry has evolved and become much more specialized, and standard
'solved' problems have migrated into the core toolsets and become invisible to developers, who now work at a much higher level
of abstraction. So for example a programmer who learned using BASIC on a Commodore 64 probably knows all about graphics coding
by direct addressing of screen memory, which modern programmers would consider unnecessary at best and dangerous at worst. Not
to mention it's exhausting drudgery compared to working with modern toolsets.
The other reason more grads don't learn COBOL is because it's a sunset technology. This is true even if systems written in
COBOL are mission critical and not being replaced. As more and more COBOL programmers retire or die, banks will eventually reach
the point where they don't have enough skilled staff available to keep their existing systems running. If they are in a position
where they have to fix things anyway, for example due to a critical failure, they will be forced to resort to cross-training other
developers, at great expense and pain for all concerned, and with no guarantee of success. One or two of these experiences will
be enough to convince them that migration is necessary, whatever the cost (if their business survives them, which isn't a given
when it comes to critical failures involving out of date and poorly-understood technology). And while developers with COBOL skills
will be able to name their own price during those events, it's not likely to be a sustainable working environment in the longer
term.
It would take a significant critical mass of younger programmers deciding to learn COBOL to change this dynamic. One person
on their own isn't going to make any difference, and it's not career advice I would ever give to a young graduate looking to enter
IT.
I am an experienced developer who has worked with a lot of different languages, including some quite low level ones in my early
days. I don't know COBOL, but I am confident that I could learn it well enough to perform code archaeology on it given enough
time (although probably nowhere near as efficiently as someone who built a career on it). Whether I could be convinced to do so
is another question. If you paid me never-need-to-work-again money, then maybe. But nobody is ever going to do that unless it's
a crisis, and I'm not likely to sign up for a death march situation with my current family commitments.
"Experienced COBOL programmers can earn more than $100 an hour"
Then the people hiring are getting them dirt cheap. This is a lot closer to consulting than contractinga very specialized
skill set and only a small set of people available. The rate should be $200-300/hour.
I wonder if it has something to do with the IRS rules that made that guy fly a plane into an IRS office? Because of the rules,
programmers aren't allowed to work as independent consultants. Since their employer/middleman takes a huge cut the pay they receive
is a lot lower. Coders with a security clearance make quite a bit but that requires an "in", getting the clearance in the first
place which most employers won't pay for.
you're right. I've seen it on cluckny databases in a clothing firm in NY State, a seed and grain distribution facility in Minnesota
and a bank in Minneapolis. They're horrible and Yves is right documentation is completely ABSENT
No different than the failure of the public sector to maintain dams, bridges and highways. Basic civil engineering but our
business model never included maintenance nor replacement costs. That is because our business model is accounting fraud.
I grew up on Fortran, and Cobol isn't too different, just limited to 2 points past the decimal to the right. I feel so sorry
for these code jockies who can't handle a bit of drudgery, who can't do squat without a gigabyte routine library to invoke. Those
languages as scripting languages or report writers back in the old days.
Please hire another million Indian programmers they don't mind being poorly paid or the drudgery. Americans and Europeans are
so over-rated. Business always complains they can't hire the right people some job requires 2 PhDs and we can't pay more than
$30k, am I right? Business needs slaves, not employees.
This was a "new payroll" system for school teachers in NZ. It was an ongoing disaster. If something as simple (?) as paying
NZ teachers could turn into such a train-wreck, imagine what updating the software of the crooked banks could entail. I bet that
there are secret frauds hidden in the ancient software, like the rat mummies and cat skeletons that one finds when lifting the
floor of old houses.
"Novopay is a web-based payroll system for state and state integrated schools in New Zealand, processing the pay of 110,000
teaching and support staff at 2,457 schools .. From the outset, the system led to widespread problems with over 8,000 teachers
receiving the wrong pay and in some cases no pay at all; within a few months, 90% of schools were affected .."
"Many of the errors were described as 'bizarre'. One teacher was paid for 39 days, instead of 39 hours getting thousands of
dollars more than he should have. Another teacher was overpaid by $39,000. She returned the money immediately, but two months
later, had not been paid since. A relief teacher was paid for working at two different schools on the same day one in Upper
Hutt and the other in Auckland. Ashburton College principal, Grant McMillan, said the 'most ludicrous' problem was when "Novopay
took $40,000 directly out of the school bank account to pay a number of teachers who had never worked at the college".
"but the huge shortcoming of COBOL is that there are no equivalent of editing programs. Every line of code in a routine must
be inspected and changed line by line"
I'm not sure what you mean by this.
If you mean that COBOL doesn't have the new flash IDEs that can do smart things with "syntactic sugar", then it really depends
on the demand. Smart IDEs can be written for pretty much any languages (smart IDEs work by operating on ASTs, which are part and
parcel of any compiler. The problem is more of what to do if you have an externalised functions etc, which is for example why
it took so long for those smart IDEs to work with C++ and its linking model). The question is whether it pays and a lot of old
COBOL hands eschew anything except for vi (or equivalent) because coding should be done by REAL MEN.
On the general IT problem. There are three problems, which are sort of related but not.
The first problem is the interconnectedness of the systems. Especially for a large bank, it's not often clear where one system
ends and the other begins, what are the side-effects of running something (or not running), who exactly produces what outputs
and when etc. The complexity is more often at this level than cobol (or any other) line-by-line code.
The second problem is the IT personell you get. If you're unlucky, you get coding monkeys, who barely understand _any_ programming
language (there was time I didn't think people like that get hired. I now know better), and have no idea what analytical and algorithmic
thinking is. If you're lucky, you get a bunch of IT geeks, who can discuss the latest technology till cows come home, know the
intricate details of what a sequence point in C++ is and how it affects execution, but don't really care that much about the business.
Then you get some possibly even brilliant code, but often also get unnecessary technological artifacts and new technologies just
because they are fun even though a much simpler solution would work just as well if not better. TBH, you can get this from the
other side too, someone who understands the business but doesn't know even basic language techniques, which generally means their
code works very well for the business, but is a nightmare to maintain (a typical population of this groups are front office quants).
If you are incredibily lucky, you get someone who understands the business and happens to know how to code well too. Unfortunately,
this is almost a mythical beast, especially since neitehr IT nor the business encourage people to understand each other.
Which is what gets me to the thirds point politics of it. And that's, TBH, is why most projects fail. Because it's easier
to staff a project with 100 developers and then say all that could have been done was done, than get 10 smart people working on
it, but risk that if it fails you get told you haven't spent enough resources. "We are not spending enough money" is paradoxically
one of the "problems" I often see here, when the problem really is "we're not spending money smartly enough". Because in an organization
budget=power. I have yet to see an IT project that would have 100+ developers that would _really_ succeed (as opposed to succeed
by redefining what it was to deliver to what was actually delivered).
Oh, and last point, on the documentation. TBH, documentation of the code is superfluous if a) it's clear what business problem
is being solved b) has a good set of test cases c) the code is reasonably cleanly written (which tends to be the real problem).
Documenting code by anything else but example is in my experience just a costly exercise. Mind you, this is entirely different
from documenting how systems hang together and how their interfaces work.
On the last point, I have to tell you I in short succession happened to work not just with O'Connor, but about a year later,
with Bankers Trust, then regarded as the other top IT shop on Wall Street. Both CIOs would disagree with you vehemently on your
claim re documentation.
Yes, in 90s there was a great deal of emphasis on code documentation. The problem with that is that the requirements in real
world change really quick. Development techniques that worked for sending the man to the moon don't really work well on short-cycle
user driven developments.
90s was mostly the good old waterfall method (which was really based on the NASA techniques), but even as early as 2000s it
started to change a lot. Part of it come from the realization that the "building" metaphor that was the working approach for a
lot of that didn't really work for code.
When you're building a bridge, it's expensive, so you have to spend a lot of time with blueprints etc. When you're doing code,
documenting it in "normal" human world just adds a superfluous step. It's much more efficient to make sure your code is clean
and readable than writing extra documents that tell you what the code does _and_ have to be kept in sync all the time.
Moreover, bits like pretty pictures showing the code interaction, dependencies and sometimes even more can now be generated
automatically from the code, so again, it's more efficient to do that than to keep two different versions of what should be the
same truth.
With all due respect, O'Connor and Bankers Trust were recognized at top IT shops then PRECISELY because they were the best,
bar none, at "short cycle user driven developments." They were both cutting edge in derivatives because you had to knock out the
coding to put new complex derivatives into production.
Don't insinuate my clients didn't know what they were talking about. They were running more difficult coding environments than
you've ever dealt with even now. The pace of derivative innovation was torrid then and there hasn't been anything like it since
in finance. Ten O'Connor partners made $1 billion on the sale of their firm, and it was entirely based on the IT capabilities.
That was an unheard of number back then, 1993, particularly given the scale of the firm (one office in Chicago, about 250 employees).
I can't talk about how good/bad your clients were except for generic statements and the above were generic statements that
in 90s MOST companies used waterfall.
At the same time please do not talk about what programming environments I was in, because you don't know. That's assuming it's
even possible to compare coding environments because quant libraries that first and foremost concentrate on processing data
(and I don't even know it's what was the majority of your clients code) is a very very different beast from extremely UI complex
but computationally trivial project, or something that has both trivial UI and computation but is very database heavy etc. etc.
I don't know what specific techniques your clients used. But the fact they WANTED to have more documentation doesn't mean that
having more documentation would ACTUALLY be useful.
With all due respect, I've spent the first half of 00s talking to some of the top IT development methodologists of the time,
from the Gang Of Four people to Agile Manifesto chaps, and practicing/leading/implementing SW development methodology across a
number of different industries (anything from "pure" waterfall to variants of it to XP).
The general agreement across the industry was (and I believe still is) that documenting _THE CODE_ (outside of the code) was
waste of time (actually it was ranging from any design doc to various levels of design doc, depending on who you were talking
to).
Again, I put emphasis on the code that is not the same as say having a good whitepaper telling you how the model you're implementing
works, or what the hell the users actually want i.e. capturing the requirements.
As an aside implementation of new derivative payoffs can be actually done in a fairly trivial way, depending on how exactly
you model them in the code. I've wrote an extensive library that did it, whose whole purpose was to deal with new products and
allow them to be incubated quickly and effectively and that most likely involved doing things that no-one at BT/O'Conner even
looked at in early 1990s (because XVA wasn't even gleam in anyone's eye at that time).
Well at my TBTF, where incomprehensible chaos rules, the only thing - and I do mean the only thing - that keeps major disasters
averted (perhaps "ameliorated" is putting it better) is where some of the key systems are documented. Most of the core back end
is copiously and reasonably well documented and as such can survive a lot of mistreatment at the hands of the current outsourcer
de jour.
But some "lower priority" applications are either poorly documented or not documented at all. And a "low priority" application
is only "low priority" until it happens to sit on the critical path. Even now I have half of Bangalore (it seems so, at any rate)
sitting there trying to reverse engineer some sparsely documented application - although I suspect there was documentation, it
just got "lost" in a succession of handovers - desperate in their attempts to figure out what the application does and how it
does it. You can hear the fear in their voices, it is scary stuff, given how crappy-little-VB6-pile-of-rubbish is now the only
way to manage a key business process where there are no useable comments in the code and no other application documentation, you
are totally, totally screwed.
It seems like you guys are talking past each other to some degree. I get the sense that vlade is talking about commenting code,
and dismissing the idea of code comments that don't live with the code. Yves' former colleagues are probably referring to higher
level specifications that describe the functionality, requirements, inputs, and outputs of the various software modules in the
system.
If this is the case, then you're both right. Even comments in the code can tend to get out of date due to application of bug fixes,
and other reasons for 'drift' in the code, unless the comments are rigorously maintained along wth the code. Were the code-level
descriptions maintained somewhere else, that would be much more difficult and less useful. On the other hand the higher-level
specifications are pretty essential for using, testing, and maintaining the software, and would sure be useful for someone trying
to replace all or parts of the system.
In my experience you need a combination of both. There is simply no substitute for a brief line in some ghastly nested if/then
procedure that says "this section catches host offline exceptions if the transaction times out and calls the last incremental
earmarked funds as a fallback" or what-have-you.
That sort of thing can save weeks of analysis. It can stop an outage from escalating from a few minutes to hours or
even days.
There is some problem-solving/catastrophe-avoiding discussion about setting up a new bank with a clean, updated (i.e., this
millennium) IT approach and then merging the old bank into that and decommissioning that old one. Many questions arise about applicable
software both in-house and at all those vendor shops that would need some inter-connectivity.
Legacy systems lurk all over the economy, from banks to utilities to government and education. The O'Connor CIO advice relating
to life-cycle costing was probably unheard in many places besides
The Street.
building them from scratch is usually the most likely to be a failure as to many in both IT and business only know parts of
the needs. and if a company cant implement a vendor supplied package to do the work, what makes us think they can do it from scratch
I did learn COBOL when I was at the University more than three decades ago, and at that time it was already decidedly "uncool".
The course, given by an old-timer, was great though. I programmed in COBOL in the beginnings of my professional life (MIS applications,
not banking), so I can provide a slightly different take on some of those issues.
As far as the language itself is concerned, disregard those comments about it being like "assembly". COBOL already showed its
age in the 1980s, but though superannuated it is a high-level language geared at dealing with database records, money amounts
(calculations with controlled accuracy), and reports. For that kind of job, it was not that bad.
The huge shortcoming of COBOL is that there are no equivalent of editing programs.
While in the old times a simple text editor was the main tool for programming in that language, modern integrated, interactive
development environments for COBOL have been available for quite a while - just as there are for Java, C++ or C#.
And that is a bit of an issue. For, already in my times, a lot, possibly most COBOL was not programmed manually, but generated
automatically - typically from pseudo-COBOL annotations or functional extensions inside the code. Want to access a database (say
Oracle, DB2, Ingres) from COBOL, or generate a user interface (for 3270 or VT220 terminals in those days), or perform some networking?
There were extensions and code generators for that. Nowadays you will also find coding utilities to manipulate XML or interface
with routines in other programming languages. All introduce deviations and extensions from the COBOL norm.
If, tomorrow, I wanted to apply for a job at one of those financial institutions battling with legacy software, my rusty COBOL
programming skills would not be the main problem, but my lack of knowledge of the entire development environment. That
would mean knowing those additional code generators, development environments, extra COBOL-geared database/UI/networking/reporting
modules. In an IBM mainframe environment, this would probably mean knowing things like REXX, IMS or DB2, CICS, etc (my background
is DEC VMS and related software, not IBM stuff).
So those firms are not holding dear onto just COBOL programmers - they are desperately hoarding people who know their way around
in mainframe programming environments for which training (in Universities) basically stopped in the early 1990s.
Furthermore, I suspect that some of those code generators/interfaces might themselves be decaying legacy systems whose original
developers went out of business or have been slowly withdrawing from their maintenance. Correcting or adjusting manually the COBOL
code generated by such tools in the absence of vendor support is lots of fun (I had to do something like that once, but it actually
went smoothly).
Original programmers rarely wrote handbooks
My experience is that proper documentation has a good chance to be rigorously enforced when the software being developed is
itself a commercial product to be delivered to outside parties. Then, handbooks, reference manuals and even code documentation
become actual deliverables that are part of the product sold, and whose production is planned and budgeted for in software development
programmes.
I presume it is difficult to ensure that effort and resources be devoted to document internal software because these are purely
cost centers - not profit centers (or at least, do not appear as such directly).
That is not to say that it is impossible to move off legacy platforms
So, we knew that banks were too big to fail, too big to jail, and are still too big to bail. Are their software problems too
big to nail?
actually suspect banks like the rest of business dont really care about their systems, till they are down, as they will find
the latest offshore company to do it cheaper.
Why then have I been told that reviewing code for Y2K had to be done line by line?
I said documentation, not handbooks. And you are assuming banks hired third parties to do their development. Buying software
packages and customizing them, as well as greater use of third party vendors, became a common practice only as of the 1990s.
I know it will screw me and people I care about, and "throw the world economy into chaos," but who effing cares (hint: not
me) if the code pile reaches past the limits of its angle of repose, and slumps into some chaotic non-form?
Maybe a sentiment that gets me some abuse, but hey, is it not the gravamen of the story here that dysfunction and then collapse
are very possible, maybe even likely?
And where are the tools to re-build this Tower of Babel, symbol of arrogant pride? Maybe G_D has once again, per the Biblical
story, confounded the tongues of men (and women) to collapse their edifices and reduce them to working the dirt (what's left of
it after centuries of agricultural looting and the current motions toward temperature-driven uninhabitability.)
My first job out of uni, I was trained as a MVS/COBOL programmer. After successfully completing the 11-week pass/fire course,
I showed up to my 1st work assignment where my boss said to me, "Here's your UNIX terminal."
;-) COBOL didn't strike me as difficult, just arcane and verbose. Converting to SAP is a costly nightmare. That caused to
me to leave a job once had no desire to deal with SAP/ABAP. I'm surprised no one has come up with an acceptable next-gen thing
. I remember years ago seeing an ad for
Object-Oriented-COBOL in
an IT magazine and I almost pissed myself laughing. On the serious side, if it's still that powerful and well represented in Banking,
perhaps someone should look into an upgraded version of the language/concepts and build something easy to lift and shift COBOL++?
This sounds like an opportunity for a worker's coop, to train their workers in COBOL and to get back at these banks by REALLY
exploiting them good and hard.
so is this why no one is willing to advocate regulating derivatives in an accountable way? i almost can't believe this stuff.
i can't believe that we are functioning at all, financially. 80% of IT projects fail? and if legacy platforms are replaced at
great time and expense, years and trillions, what guarantee is there that the new platform will not spin out just as incomprehensibly
as COBOL based software evolved, with simplistic patches of other software lost in translation? And maybe many times faster. Did
Tuttle do this? I think we need new sophisticated hardware, something even Tuttle can't mess with.
I think it is only 80% of 'large' IT projects fail. I think it says more about the lack of scalability of large software projects,
or our (in-) ability to deal with exponential complexity growth
Looks like there are more than a few current NYC jobs at Accenture, Morgan Stanley, JPMorgan Chase, and Bank of America for
programmers who code in COBOL.
...But Larry is surprisingly blasι about a China problem:
excess savings (really, an East Asia problem, as Brad Setser
points out). I associate this problem with Summers' own work
on "secular stagnation"-persistent demand shortfalls even in
recovery. Another way to view sec stag is as a function of
excess savings: the globe is awash in more savings that we
have good, productive uses for. That, in turn, can lead to
depressed interest rates, credit bubbles, large trade
surpluses in savings glut countries, which in turn force
large trade deficits elsewhere, and high unemployment,
depending on what offsets are in play in trade deficit
countries. Larry himself has recognized this problem (as has
Ben Bernanke since the mid-2000s in his seminal savings glut
speech) and wisely called for public infrastructure
investment to help offset it.
Our trade deficit with China is 1.6 percent of GDP; that's
a significant drag on demand. In terms of offsets, the Fed is
pushing in the other direction (tightening) and the fiscal
authorities um Congress can't find the light switch. We're of
course doing better than most other advanced economies, but
here we are in year eight of an expansion and (slight) output
gaps still persist...
To Jared Bernstein - Bernanke's savings glut theory is a
classic exercise in
1) theory that is NOT backed up by
data. just because there is a persistent deficit vs China in
the US does not mean they are consuming less. we could be
consuming too much. (was there a savings glut vs. Japan
before East Asia and Europe before then?) The US has run
deficits since the Vietnam era. Surpluses do not prove
anything just like deficits dont prove US is overconsuming.
2) shifting blame to someone else. which is what Jared is
doing here and Bernanke was doing when he came up with this
bs.
3) If you look at China, gross investment rates at 50% of
GDP rates have left the country with debt levels that are
astronomical. A lot of people say a debt crisis is coming. If
you look at the reality on the ground, it is excess
investment. what demand shortfall?
Am I supposed to take the mutterings of these clueless
academics like Bernanke who blew 2 bubbles and blew up the
economy in 2007-08?
Give me some evidence, or give me a break from these
fanciful notions of a savings glut.
I don't trust that Lindsey Graham any more than Obama
Alexander Solzhenitsyn
Graham is a fucking asshole. The man is despicable FILTH.
Yanin Rodriguez
Disappointing questions Tucker with all due respect. Fact - Syrians support Assad up to 82%. Fact #2 - Rebels in Syria are
by most accounts not even Syrian. Follow up on "liberating the Syrians" - with that mentality what about the Saudis?????
War is profits and comprises of the highest % of employment in the US - so until we transfer that sector of the economy to
more peaceful endeavors - we will be permanently be in illegal wars. Lastly - where are any of these wars constitutional?
Why has congress relinquished this responsibility???
We know the answers but never hear the questions asked...
Josh Hempfleng
The strike in Syria really made the Military industrial complex show themselves. The media, Democrats and Rhino's all cheering
on the attack now that they see a chance to make some money off war.
Rumi900
+Josh Hemplfeng - You say '... Democrats and Rhino's all cheering ...' Why Democrats and Rhino's?
I'd be okay with you saying Democrats and Republicans, but you seem to be letting the bulk of Republicans off the hook. Or,
are you saying all the Republican elite are Rhinos? If so, I agree. The point is, surely, that much of Washington (on both sides)
is bought and paid for by the wealthiest elites, through their lobbyists.
This isn't a partisan issue. I wish people would stop making it one! Republicans and Democrats are all equally culpable.
There are Democrats and Republicans who are not just shills for the elite. And those are the politicians we should be championing.
Trump talked about it during the election - 'draining the swamp'. The 'swamp' is not some secret power, some nefarious underground
that is controlling things.
The 'swamp' is bought and paid for politicians - politicians bought and paid for by massive donations that can now hide behind
the opaque screens of the SuperPACs. It's not just politicians on the 'other' side. Both sides are equally involved.
I don't believe Trump is serious about 'draining the swamp'. If he is, he should be going after things like the Citizen's United
decision. The Supreme Court bounced that back to the House, because it's the House that makes the law. The Supreme Court is there
to say whether the law is Constitutional. They don't make law. it's up to Congress to do that.
But politicians in the house, Republicans and Democrats alike, are happy with Citizen's United and SuperPACs and the opportunities
for massive secret donations it has allowed. It's how they all get rich.
If Trump was serious about draining the swamp, he'd be tackling those issues. But he's not. Just look at his appointees! I
didn't vote for Trump. Because I didn't believe his rhetoric. I still don't.
It's you guys, his ardent supporters, who should be holding his feet to the fire! And unfortunately, I see way too much adulation,
mindless hero worship, and not enough demanding accountability.
Joanne K
They don't want us to know that ISIS is in Syria (Islamic State of Iraq and Syria) and that is what Assad is fighting, along
with other Islamic groups. The L in ISIL stands for Levant. Leave Syria out so that overthrowing Assad will only leave the amorphous
oppressed rebels (really ISIS or Al Nusra or Al Qaeda).
They are deceivers.
Zack Edwards
So basically the Neoconservatives haven't learned a goddamn thing!
"... Probably the biggest single factor was public employment was savagely cut during the Obama presidency which would have kept economic activity higher at a fairly cheap cost. ..."
"... the owning/lending class tends to dislike inflation for some reason... ..."
"... I think this is highly dependent on one's understanding of "equitable". Monetary policy can be used in a way that ensures safe income streams to those who already own many financial assets. Some people think that is how it should be and therefore "equitable". ..."
"The central bank remains important for useful tasks - the clearing of checks, the replacement of
worn and dirty banknotes, as a loan source of last resort. These tasks it performs well.
With other public agencies in the United States, it also supervises the subordinate commercial
banks. This is a job which it can do well and needs to do better. In recent years the regulatory
agencies, including the Federal reserve, have relaxed somewhat their vigilance. At the same time
numerous of the banks have been involved in another of the age-old spasms of optimism and feckless
expansion. The result could be a new round of failures. It is to such matters that the Federal Reserve
needs to give its attention.
These tasks apart, the reputation of central bankers will be the greater, the less responsibility
they assume. Perhaps they can lean against the wind - resist a little and increase rates when the
demand for loans is persistently great, reverse themselves when the reverse situation holds.
But, in the main, control must be - as it was in the United States during the war years and the
good years following - over the forces which cause firms and persons to seek loans and not over whether
they are given or not given the loans."
-From "Money: Whence it came,Where it went" 1975 - pgs 305,6.
[Mariner Eccles explained it
way back in the 1930's:]
"Pushing on a String: An Origin Story
There's a long-standing metaphor in monetary policy that the central bank "can't push on
a string." It means that while a central bank can certainly slow down an economy or even drive
an economy into recession with an ill-timed or too-large increase interest rates, the power
of monetary policy is not symmetric.
When a central bank reduces interest rates in an attempt to stimulate the economy, it may
not make much difference if banks don't think it's a good time to lend or firms and consumers
don't think it's a good time to borrow. In other words, monetary policy is like a string with
which a central bank can "pull" back the economy, but pushing on a string just crumples the
string.
The "can't push on a string" metaphor appears in many intro-level economics texts.
It has also gotten a heavy work-out these last few years as people have sought to understand
why either economic output or inflation wasn't stimulated more greatly by having the Federal
Reserve's target interest rate (the "federal funds" rate) near zero percent for going on seven
years now, especially when combined with "forward guidance" promises that this policy would
continue into the future and a couple trillion dollars of direct Federal Reserve purchases
of Treasury debt and mortgage-backed securities.
The first use of "pushing on a string" in a monetary policy context may have occurred in
hearings before House Committee on Banking and Currency on March 18, 1935, concerning the proposed
Banking Act of 1935. Marriner Eccles, who was appointed Chairman of the Fed in 1934 and served
on the Board of Governors until 1951, was taking questions from Rep. Thomas Alan Goldsborough
(D-MD) and Prentiss M. Brown (D-MI). The hearings are here; the relevant exchange is on p.
377, during a discussion of what the Fed might be able to do to end deflation."
The Fed didn't try very hard
with its unconventional monetary policy. It was always worried about inflation. Plus it had
to overcome the unprecedented austerity which Congress pushed on the economy.
If you look
at the recovery and say monetary policy didn't work, you are either insane or highly ideological.
Now, the recovery could have been much quicker and better with the help of fiscal policy
and other policies.
Must be so, because the following certainly is not true =
"We are all Keynesians now"
OK, not all one way or the other but the Keynesians are under siege by monetarists including
ones that do not know what a monetarist is or that they are one.
It is not that monetary policy
is entirely ineffective at stimulating demand, but that its effects are very limited according
to the very narrow channels in which its effects are most pronounced, intermediation risks,
widening the term spread or yield curve, and making short term business loans and related prime
rate small short term loans. It does next to nothing towards reducing credit rationing by financial
institutions after a shock, which would be highly stimulative compared to just lowering the
FFR. Purchase of the riskiest assets by the Fed was probably most effective at reducing credit
rationing since it lowered the risk of bank loan portfolios. Just buying up safe assets had
mixed results on lowering long term interest rates, but was more successful on that than reducing
credit rationing.
All your jargon obscures the
point that the Fed didn't really try that hard with its unconventional policy b/c of politics.
It's like arguing that the ARRA didn't work very well. It did work and could have been bigger
and better but policymakers are too conservative when it comes to macro policy.
Tight money means credit rationing.
Cheap money does not necessarily get looser. Yes, widening the term spread helps loosen, but
narrowing the term spread does not. Other forms of monetary policy such as government loan
guarantees on small business loans loosen money more than QE.
Because you're wrong and misleading.
The Fed does the minimal amount of experimental unconventional policy - always paranoid over
inflation - while Congress forces unprecedented fiscal austerity on the economy. I'd say monetary
policy works. Doesn't mean fiscal policy doesn't work better.
"Now here we are, in 2017, after
the Obama Administration has brought the deficit down from $1.5 trillion in Fiscal Year 2009
to $621 billion in FY2016, "
Via Max Sawicky, below. $900 billion in austerity that monetary
policy had to fight against.
I don't think it is as simple
as you have outlined here. Debt as a percentage of GDP has doubled since 2009 so that has provided
some relief.
Probably the biggest single factor was public employment was savagely cut
during the Obama presidency which would have kept economic activity higher at a fairly cheap
cost.
"Debt as a percentage of GDP
has doubled since 2009 so that has provided some relief."
wut?
The largest difference was there was little to no Federal aid to the states which had to
run balanced budgets.
We can all agree after the ARRA ran its course, there was massive, unprecedented austerity
forced on the economy by Republicans, just as in the UK and we see the results when central
banks didn't do enough unconventional policy to fully offset it.
A crappy recovery and the election of Trump/Brexit.
I think this is highly dependent
on one's understanding of "equitable". Monetary policy can be used in a way that ensures safe
income streams to those who already own many financial assets. Some people think that is how
it should be and therefore "equitable".
I have no idea how monetary policy with its currently defined policy tools can be used effectively,
by itself, to redistribute wealth in the other direction, which is probably most people's understanding
of "equitable".
If it was, by itself, able to cause large jumps in inflation, that might feed back into
rapidly rising nominal wages and large losses to the current holders of financial assets like
bonds and loan books. That might be considered more "equitable" to some, but current limitations
on monetary policy prevent it from creating inflation all by itself.
RGC
April 08, 2017 at 06:53 AM
Re: The Economy May Be Stuck in a Near-Zero
World - Justin Wolfers
...................
"In a nutshell, the American economy appears to have changed in a way that undermines the effectiveness
of monetary policy but not fiscal policy, which may need to be wielded more actively."
......................
[The economy hasn't changed. Monetary policy has always been ineffective in stimulating demand and
is an instrument that neoclassical/neoliberal economists have used to avoid discussion of fiscal
policy. They serve their plutocratic masters in that way and thus reap their rewards of tenured professorships,
lucrative consulting positions, government positions and media acclaim.]
RGC -> RGC...
,
April 08, 2017 at 07:17 AM
As John Kenneth Galbraith remarked:
"The central bank remains
important for useful tasks - the clearing of checks, the replacement
of worn and dirty banknotes, as a loan source of last resort.
These tasks it performs well.
With other public agencies in the United States, it also supervises
the subordinate commercial banks. This is a job which it can
do well and needs to do better. In recent years the regulatory
agencies, including the Federal reserve, have relaxed somewhat
their vigilence. At the same time numerous of the banks have
been involved in another of the age-old spasms of optimism and
feckless expansion. The result could be a new round of failures.
It is to such matters that the Federal Reserve needs to give
its attention.
These tasks apart, the reputation of central bankers will
be the greater, the less responsibility they assume. Perhaps
they can lean against the wind - resist a little and increase
rates when the demand for loans is persistently great, reverse
themselves when the reverse situation holds.
But, in the main, control must be - as it was in the United
States during the war years and the good years following - over
the forces which cause firms and persons to seek loans and not
over whether they are given or not given the loans."
-From "Money: Whence it came,Where it went" 1975 - pgs 305,6.
[Mariner Eccles explained it way back in the 1930's:]
"Pushing on a String: An Origin Story
There's a long-standing metaphor in monetary policy that the
central bank "can't push on a string." It means that while a
central bank can certainly slow down an economy or even drive
an economy into recession with an ill-timed or too-large increase
interest rates, the power of monetary policy is not symmetric.
When a central bank reduces interest rates in an attempt to
stimulate the economy, it may not make much difference if banks
don't think it's a good time to lend or firms and consumers don't
think it's a good time to borrow. In other words, monetary policy
is like a string with which a central bank can "pull" back the
economy, but pushing on a string just crumples the string.
The "can't push on a string" metaphor appears in many
intro-level economics texts. It has also gotten a heavy work-out
these last few years as people have sought to understand why
either economic output or inflation wasn't stimulated more greatly
by having the Federal Reserve's target interest rate (the "federal
funds" rate) near zero percent for going on seven years now,
especially when combined with "forward guidance" promises that
this policy would continue into the future and a couple trillion
dollars of direct Federal Reserve purchases of Treasury debt
and mortgage-backed securities.
The first use of "pushing on a string" in a monetary policy
context may have occurred in hearings before House Committee
on Banking and Currency on March 18, 1935, concerning the proposed
Banking Act of 1935. Marriner Eccles, who was appointed Chairman
of the Fed in 1934 and served on the Board of Governors until
1951, was taking questions from Rep. Thomas Alan Goldsborough
(D-MD) and Prentiss M. Brown (D-MI). The hearings are here; the
relevant exchange is on p. 377, during a discussion of what the
Fed might be able to do to end deflation."
The Fed didn't try very hard with its unconventional monetary
policy. It was always worried about inflation. Plus it had to
overcome the unprecedented austerity which Congress pushed on
the economy.
If you look at the recovery and say monetary policy
didn't work, you are either insane or highly ideological.
Now, the recovery could have been much quicker and better
with the help of fiscal policy and other policies.
Must be so, because the following certainly is not true =
"We are all Keynesians now"
OK, not all one way or the other but the Keynesians are under
siege by monetarists including ones that do not know what a monetarist
is or that they are one.
It is not that monetary policy is entirely ineffective at stimulating
demand, but that its effects are very limited according to the
very narrow channels in which its effects are most pronounced,
intermediation risks, widening the term spread or yield curve,
and making short term business loans and related prime rate small
short term loans. It does next to nothing towards reducing credit
rationing by financial institutions after a shock, which would
be highly stimulative compared to just lowering the FFR. Purchase
of the riskiest assets by the Fed was probably most effective
at reducing credit rationing since it lowered the risk of bank
loan portfolios. Just buying up safe assets had mixed results
on lowering long term interest rates, but was more successful
on that than reducing credit rationing.
All your jargon obscures the point that the Fed didn't really
try that hard with its unconventional policy b/c of politics.
It's like arguing that the ARRA didn't work very well. It did
work and could have been bigger and better but policymakers are
too conservative when it comes to macro policy.
"Sure, it's lovely that unemployment in Seattle dips under
3%. But an attempt to tie that drop in the unemployment rate
to the minimum wage isn't going to work. For we can as easily
note that the unemployment rate has dropped everywhere in the
US over this same time period and the minimum wage hasn't
risen everywhere over that time period. We've not even got a
consistent correlation between minimum wages and unemployment
that is.mWhat we've actually got to do is try to work out
some method of what would have happened in Seattle from all
of the effects of everything else other than the minimum
wage, then compare it to what did happen with the minimum
wage. The difference between these two will be the effect of
the minimum wage rise. Seattle City Council know this, which
is why they asked the University of Washington to run exactly
such a study."
"... When the Federal Reserve lowered interest rates to close to zero during the financial crisis, it was an extraordinary move. The central bank had hit the limits of conventional monetary policy, leaving the recovery to sputter along with less help than it needed ..."
"... A new study suggests that near-zero interest rates - accompanied by a lackluster recovery - may become a common occurrence. ..."
" When the Federal Reserve lowered interest rates to close to zero during the financial
crisis, it was an extraordinary move. The central bank had hit the limits of conventional monetary
policy, leaving the recovery to sputter along with less help than it needed ."
This is a huge lie. The Fed did not do what it could have done. It did the minimal amount possible,
always afraid of setting off inflation. The Fed said it delivered the recovery it wanted. It gave
the economy exactly the help the Fed thought it needed. Then why the dishonesty from Wulfers.
It's the kind we get from PGL the Facile.
Why did the Fed deliver a lame recovery is the question Wolfers should be asking, but it's
the kind of thing mainstream economists like him and PGL avoid. It's class war.
" A new study suggests that near-zero interest rates - accompanied by a lackluster recovery
- may become a common occurrence.
That's troubling for many reasons. If the Fed can't cut rates as much as required to fight
a slowing economy, then recessions will become more common and more painful. It suggests an urgent
need to reconsider how we will counter the next bout of bad economic news, preferably before it
arrives. If monetary policy won't be enough, perhaps fiscal policy will be. Certainly, this is
no time for complacency."
Yes fiscal policy would help deliver a better recovery as the Fed has repeatedly said, but
again Wolfers is misleading his readers. The Fed could do more. It's not out of bullets. It's
raising rates. Wolfers is really doing a disservice to his readers in an apparent attempt to talk
up fiscal policy in a dishonest way. WTF.
"But when normal interest rates are closer to 3 percent, the Fed can cut rates only a few times,
because rates can only go so low - perhaps as low as zero, maybe a tad lower. This means that
in even a typical downturn, the Fed may be unable to cut rates as much as it would like."
But then it turns to unconventional policy. Seriously. WTF.
"This dynamic can feed on itself. The less ammunition the Fed has to blast the economy out
of its malaise, the weaker and slower will be the recovery, making it more likely that the next
bad shock will require the Fed to cut rates more than is feasible."
It doesn't have less ammunition. Now Wolfers finally admits there's something called unconventional
policy.
"The Fed has already been experimenting with monetary policy, but it hasn't been enough. In
the wake of the financial crisis, for example, it bought bonds in a program known as quantitative
easing, cutting long-term interest rates once short-term rates were near zero. The resulting stimulus
was relatively small, reducing long-term rates by only a fraction of a percentage point, and the
program was politically unpopular.
The authors suggest an alternative approach in which the Fed makes up for "missing stimulus"
by promising to keep rates lower, for longer periods. In their view, the Fed needs to make up
for the interest rate cuts that it wishes it could have made, but couldn't. Promising this in
the depths of a downturn would offer businesses reason to be optimistic, they say, boosting the
recovery. The Fed would need to keep rates low, even as inflation overshot its target.
It's a promising approach, but would people really believe the Fed's promises? I know a lot
of central bankers, and I fear they are incapable of sitting still while inflation rises above
their stated target."
Wolfers admits that central bankers haven't pushed very hard on unconventional policy, shattering
his thesis. They're paranoid over inflation.
"Perhaps the answer lies outside the Fed. It may be time to revive a more active role for fiscal
policy - government spending and taxation - so that the government fills in for the missing stimulus
when the Fed can't cut rates any longer. Given political realities, this may be best achieved
by building in stronger automatic stabilizers, mechanisms to increase spending in bad times, without
requiring Congressional action."
That's a good idea no matter whether unconventional monetary policy works or not. But Republicans
are blocking it, so monetary policy is all we have. It doesn't help to say it doesn't work and
we must suffer long painful recoveries.
"The general distrust of fiscal policy may well have made sense; many economists are more likely
to trust the technocrats at the Fed to manage the business cycle than the election-driven politicians
on Capitol Hill. But in a world of low interest rates in which the Fed is frequently hamstrung,
we may not have that choice."
No the sidelining of fiscal policy never made any sense. But that doesn't mean we should sideline
monetary policy when fiscal policy isn't forthcoming.
This is from Jamie Dimon's letter to stockholders:
"If the work participation rate for this group [men ages
25-54] went back to just 93% the current average for the
other developed nations approximately 10 million more
people would be working in the United States. Some other
highly disturbing facts include: Fifty-seven percent of these
non-working males are on disability"
I don't know where he got the statistic from, but if it is
true it is potent evidence that the main factor behind the 60
year long decline in prime age labor force participation by
men is an increase in those on disability, probably due to
both the expansion of the program, and better longevity and
diagnostics -- and probably also tied in to opiate addiction
as well.
So does Jamie sitting on his mountain of other people's money
have some magic solution that will get this EPOP back to 93%?
I guess if we all bank at JPMorganChase, all will be fine?
C'mon Jamie.
There has been a bit of a discussion on this - most of which
I sort of found unconvincing. Sorry but I am not the expert
on this one. And I doubt Jamie Dimon is not either.
"This is another common explanation for the drop in male
participation. But again it doesn't explain more than a
fraction of the phenomenon.
There's not much doubt that Social Security Disability
Insurance takes people out of the workforce, often by
inelegant design. In order to qualify for disability
payments, people typically have to prove that they cannot
work full-time. SSDI critics say this policy sidelines many
people who might otherwise be able to contribute to the
economy.
But how many people does SSDI really remove? From 1967 to
2014, the share of prime-age men getting disability insurance
rose from 1 percent to 3 percent. There is little chance that
this increase is entirely the result of several million
fraudulent attempts to get money without working. But even if
it were, SSDI would still only explain about one-quarter of
the decline in the male participation rate over that time.
There are many good reasons to reform disability insurance.
But it's not the singular driving force behind the decline of
working men."
Captain Renault: I'm shocked, shocked
to find that gambling is going on in here!
From the classic scene in
Casablanca,
made in 1942
The latest scandal du jour seems to be about what is now called
LIBORgate. But is it a scandal or is it really just business as
usual?
And if we don't know which it is, what does that say about how
we organize the financial world, in which $300-800 trillion, give
or take, is based on LIBOR?
This is actually just the second verse of the old song about
derivatives, which is a much larger market. Which of course is a
problem that was not solved by Dodd-Frank and that has the
potential to once again create true havoc with the markets, whereas
LIBOR can only cost a few billion here and there. (Sarcasm
intended.)
The problem is the lack of transparency. Why would banks want to
reveal how much profit they are making? The last thing they want is
transparency. This week I offer a different take on LIBOR, one
which may annoy a few readers, but which I hope provokes some
thinking about how we should organize our financial world.
There Is Gambling in the House? I Am Shocked...
Let's quickly look at what LIBOR is. The initials stand for
London InterBank Offered Rate. It is the rate that is based on what
16 banks based in London (some are US banks) tell Thomson
Reuters
they expect to pay for overnight loans (and other
longer loans). Thomson Reuters throws out the highest four numbers
and the lowest four numbers and then gives us an average of the
rest. Then that averaged number becomes about 150 other "rates,"
from overnight to one year and in different currencies. The key is
that the number is not what the banks actually paid for loans, it's
what they
expect
to pay. Also, please note that the
British Banking Association, on its official website, calls this a
price "fixing."
Most of the time the number is probably pretty close to real, or
close enough for government work. But then, there are other times
when it is at best a guess and at worst manipulated.
Back in the banking and credit crisis panic of 2008 the
interbank market dried up. No bank was loaning other banks any
money at any price. Thus there was clearly no way for the LIBOR
number to be anything
but
fictitious. Anyone who was not
aware of this was simply not paying attention.
The regulators certainly knew on both sides of the Atlantic. All
along there were clear records, we now learn, that bankers were
telling the FSA (the Financial Services Authority) that they had
problems. Regulators were worried about what was happening but were
pointing out that there was a large hole in the ship that was
already admitting water, and they didn't want to make it any
bigger. Timothy Geithner, then President of the New York Federal
Reserve Bank (and now Secretary of the Treasury) wrote a rather
pointed letter to the FSA, suggesting the need for better
practices.
Some banks reported lower rates, to make it appear they were
better off than they were (since no one was actually lending to
them), and others might have given higher rates, for other reasons.
Remember, this was a British Banking Association number. Whether
you personally won or lost money on the probably wrong price
information depends on whether you were lending or borrowing and
whether you really wanted the entire market to appear worse than it
already was.
This was the equivalent of an open-book test where you got to
grade your own paper. And we are supposed to be shocked that there
might have been a few bad "expectations" here and there by bankers
acting in their own self-interest, with the knowledge of the
regulators? The more amazing proposition would be that in a time of
crisis the number had any close bearing on reality to begin with.
Call me skeptical, but I fail to see how we should be surprised.
The larger question that really needs to be asked is how in the
name of all that is holy did we get to a place where we base
hundreds of trillions of dollars of transactions worldwide on a
number whose provenance is not clearly transparent. Yes, I get that
the methodology of the creation of the number
after
the
banks call in their "expectations" is clear, but the process of
getting to that number was evidently not well understood and looks
to be even muddier than my rather cynical previous understanding of
it.
It now seems that there will be a feeding frenzy as politicians
and regulators hammer the various banks for improper practices. And
they are pretty easy targets: there is just no way you can explain
this that does not sound bad.
You're a big banker. The world is falling down before your eyes.
No one trusts anyone. If you put out a bad number (whatever "bad"
means in a time of sheer utter blind panic) the markets will kill
you even more than they already are and you could lose your job.
You have got to come up with a number in ten minutes.
"Hey, Nigel, what do you think we
should tell Tommie [Thomson Reuters]?"
"I don't know, Winthorpe, maybe
Mortimer has an idea; let's ask him."
Simply fining a few bankers is not going to fix the larger
problem: the lack of transparency for arguably the most important
number in financial markets. A very clear methodology needs to be
developed, along with guidelines for what to do in times of crisis
when the interbank market is frozen and there really is no number.
Having no number might be worse than having a number that is a
guess. But having a number that can be fudged by banks for their
benefit is also clearly not in the public's interest.
The point of the rule of law is that it is supposed to level the
playing field. But the rule of law means having a very transparent
process with very clear rules and guidelines and penalties for
breaking the rules.
I had dinner with Dr. Woody Brock this evening in Rockport. We
were discussing this issue and he mentioned that he had done a
study based on analysis by an institution that looks at all sorts
of "fuzzy" data, like how easy it is to start a business in a
country, corporate taxes and business structures, levels of free
trade and free markets, and the legal system. It turned out that
the trait that was most positively correlated with GDP growth was
strength of the rule of law. It is also one of the major factors
that
Niall Ferguson
cites in his book
Civilization
as a
reason for the ascendency of the West in the last 500 years, and a
factor that helps explain why China is rising again as it emerges
from chaos.
One of the very real problems we face is the growing feeling
that the system is rigged against regular people in favor of "the
bankers" or the 1%. And if we are honest with ourselves, we have to
admit there is reason for that feeling. Things like LIBOR are
structured with a very real potential for manipulation. When the
facts come out, there is just one more reason not to trust the
system. And if there is no trust, there is no system.
Opacity and Credit Default Swaps
Which brings me to my next point. We just went through a crisis
where derivatives were a major part of the problem, and
specifically the counterparty risk of over-the counter (OTC)
derivatives.
Taxpayers
had to back-stop derivatives sold by banks (and
specifically
AIG
) that were clearly undercapitalized. That cost tens of
billions. Yet the commissions and bonuses paid for selling those
bad derivatives went on being paid. Congress held hearings and
expressed outrage, but in the end Dodd-Frank sold out.
"Efforts to create an exchange-traded futures contract tied to
credit-default swaps haven't yet gained traction after 18 months of
talks, but banks dealing in the private multitrillion-dollar market
for credit derivatives believe such contracts will eventually
appear for a simple reason: They should attract new players.
"Credit-default swaps function like insurance for bonds and
loans. Investors use them to hedge or speculate against changes in
a borrower's creditworthiness. If a borrower defaults, sellers of
the protection compensate buyers.
"The swaps traded over the phone or on-screen, with prices
known only to trading partners are the domain of asset managers
and hedge funds with the sophistication and financial wherewithal
to take on complex risks.
"Futures, by contrast, are more routine instruments used by
institutions and individual or "retail" investors. Futures prices
are displayed publicly on exchanges, and customers can trade them
directly with other customers unlike in the swaps market, where a
dealer is on one side of every trade.
"Dealers have long been fiercely protective of keeping the
status quo in credit-default swaps or 'CDS' because they have
booked fat profits from customers not being able to see where other
customers are trading." (Market Watch)
And that is the issue. Bankers do not want transparency, because
it will seriously cut into their profits. And while I like everyone
to make a profit, the implicit partner in every trade is the
taxpayer and, last time I looked, we do not get a piece of that
trade. Derivatives traded on an exchange were not part of the
problem during the last credit crisis; OTC derivatives were.
An exchange makes it very clear where the counterparty risk is
and what the price mechanism is. It creates a transparent rule of
law and places the risk on the backs of those buying and selling
derivatives and not on the taxpayer. Exchange-traded derivatives do
not pose a potential threat to the economies of the world, while we
don't know the extent of the threat posed by OTC trades. JPMorgan
has lost around $6 billion on the trading of their "London Whale."
If
Jamie Dimon
and the JPM board couldn't guarantee reasonable
corporate governance, then why should we assume that in another
crisis we won't find another AIG?
Dodd-Frank needs to be repealed and replaced. The last time, the
process was too clearly in the hands of those being regulated and
has contributed to their profits. Enough already.
Credit default swaps and any other derivative large enough to
put the system at risk must be moved to an exchange, to make clear
the counterparty risks.
Donald Trump's election as president should have reminded liberals that Americans want more than
money from their work. They responded to Trump's promise of jobs more than to Hillary Clinton's promise
of government benefits because in addition to money, people also need dignity, a sense of self-reliance
and respect within their community. For centuries, jobs have provided all of those.
To say that work is disappearing would be an exaggeration. But despite the low unemployment rate,
fewer Americans have jobs than in years past:
[chart]
This new class of non-workers may be able to survive on the government dole, the charity of friends
and family or via black-market activities like drug sales. But they've probably lost some of the
dignity and respect that used to come with working for a living. Falling employment has been linked
to declining marriage rates, reduced happiness and opiate abuse. Some economists even blame disappearing
jobs for the recent rise in mortality rates afflicting white Americans.
What's more, the longer people stay out of the labor force, the more trouble they will have getting
back into it. They lose work ethic, skills and connections, and employers become suspicious of the
large gaps in the resumes. Economists Brad DeLong and Larry Summers have shown that this so-called
labor-market hysteresis can have potentially large, long-lasting negative effects on the economy.
When the economy is in recession, the best approach is probably a combination of fiscal and monetary
stimulus. But when the labor-force dropout problem is chronic, as it is now, a different kind of
policy may be needed -- a government-job guarantee.
The U.S. has used an approach like this before. In 1935, the administration of President Franklin
Roosevelt established the Works Progress Administration, which employed millions of American men,
mostly in public-works projects. WPA employees received hourly wages similar to other unskilled workers
in the surrounding area. Most of them built infrastructure and buildings, but a few were paid to
make art and write books. The total cost of the program was high -- $1.3 billion a year, or about
1.7 percent of U.S. gross domestic product. An equivalent expenditure now would be a little more
than $300 billion, or about half of federal defense spending. But the popularity of the program is
hard to deny, given Roosevelt's resounding victory in his reelection bid in 1936.
The idea of a new work program isn't a new one -- economists on all sides of the political spectrum
have been kicking it around for years now. It has received support from Stephanie Kelton, an adviser
to the Bernie Sanders presidential campaign, and from Kevin Hassett, who is reportedly Trump's pick
to lead the Council of Economic Advisers. Jeff Spross has an excellent article in Democracy exploring
the idea in depth.
William Darity of Duke University has been a particularly avid promoter of a job guarantee. He
describes it thus:
Any American 18 years or older would be able to find work through a federally funded public service
employment program -- a "National Investment Employment Corps." Each National Investment Employment
Corps job would offer individuals non-poverty wages, a minimum salary of $20,000, plus benefits including
federal health insurance. The types of jobs offered could address the maintenance and construction
of the nation's physical and human infrastructure, from building roads, bridges, dams and schools,
to staffing high quality day care.
There is no shortage of work to be done. Even beyond the tasks Darity lists, the U.S. is full of
jobs that need doing, from elder care to renovation of old decaying buildings, to cleanup of lead
and other pollution, to construction and staffing of transit systems.
Darity estimates the cost of the program at $750 billion a year, Spross at $670 billion. That's
about equivalent to all of the U.S.'s current anti-poverty programs, and would be about twice the
size of the old WPA. So this would be a very big deal. But the true cost to society would be considerably
less, because the jobs would provide value. Better infrastructure, more child care and elder care,
and a cleaner, healthier environment would make the nation a richer, better place to live -- in other
words, those benefits should defray much of the program's cost. Also, the program would take people
off of the welfare rolls and cut government anti-poverty spending. Finally, even when the economy
isn't in a recession, more income will probably increase demand in the local economy.
All told, the program could end up being a bargain. And if the guarantee is limited to distressed,
low-employment areas, which could lower the costs down even more, and allow for pilot programs to
establish the viability of the concept.
Many people on the left and elsewhere don't like this idea. They doubt that government make-work
will provide dignity. And they believe strongly in the theory that automation will soon put large
numbers of people out of a job entirely. The only solution, they say, is to change U.S. culture and
values to make work less important, and to rely on programs like universal basic income. On the right,
some would inevitably see the plan as a first step on the road to socialism.
Maybe the critics will prove right in the long run. But for now, forcing a dramatic change on
American culture is a lot harder than simply giving people jobs. Robot-driven unemployment and new
social values are still mostly in the realm of science fiction, while the American public wants jobs
now. A job guarantee looks like a very good thing to try.
Peter K. said in reply
to Peter K....
Do both, the UBI and Job Guarantee.
Why doesn't Noah Smith discuss Fed Fail in detail and about how conservatives forced unprecedented
austerity on the economy.
This is not just "natural" or the evolution of technology, demographics and innovation.
This FT -- the most deep neoliberal swamp among mainstream newspaper. So they do not like any
critique of thier beloved neloneral world order with the dominance of reckless financial oligarchy
as one of the key components.
Notable quotes:
"... She argues that under our deregulated financial system "commercial bankers can create credit . . . effectively without limit, and with few regulatory constraints." She says that because the government and central banks impose no restrictions on what credit is used for, banks increasingly lend for speculative activities, rather than "sound, productive investment". ..."
"... The collateral for this borrowing is in the form of "promises to pay", which can "evaporate" and be defaulted upon - which risks dragging down the rest of the system. ..."
"... many of the remedies Pettifor recommends are, as she acknowledges, fairly mainstream: monitoring the evolution of credit relative to national income, limiting loan-to-value mortgage ratios more strictly, imposing stronger regulation on banks and issuing government debt at low interest rates across the maturity spectrum. ..."
"... Less mainstream are her calls for controls on international capital flows through a Tobin tax on financial transactions, and for central banks to "manage exchange rates over a specified range by buying and selling currency". ..."
"... its confrontational style - criticising financial market players, most economists, politicians and ideas from other left-leaning economists ..."
'The Production of Money', by Ann Pettifor - a financial education
16 HOURS AGO by: Review by Gemma Tetlow
Ann Pettifor's The Production of Money, is a work in three parts. It provides an explanation
of how money and credit are created in modern economies and of some of the problems that helped
foment the financial crisis. The author, an economist, then sets out her views on how these problems
should be fixed, including introducing controls on international capital flows. Finally, and less
obviously from the title, the book strays into a critique of fiscal austerity.
"Citizens," Pettifor argues, "were unprepared for the [financial] crisis, and remain on the
whole ignorant of the workings of the financial system." This is one reason why policymakers have
failed to address its failings. One of her objectives is to "simplify key concepts in relation
to money, finance and economics, and to make them accessible to a much wider audience".
Chapter two provides a clear, intuitive explanation of how money is created and how this can
facilitate economic growth. Money creation is a complex and intangible concept in a world where
it is no longer backed by gold bars held by the central bank, and Pettifor provides the most accessible
and thorough explanation I have seen.
In the rest of the book, the author sets out her diagnosis of the problems afflicting the world's
monetary system and her prescription for how they should be fixed. She argues that under our deregulated
financial system "commercial bankers can create credit . . . effectively without limit, and with
few regulatory constraints." She says that because the government and central banks impose no
restrictions on what credit is used for, banks increasingly lend for speculative activities, rather
than "sound, productive investment".
The collateral for this borrowing is in the form of "promises to pay", which can "evaporate"
and be defaulted upon - which risks dragging down the rest of the system.
The description is informative as far as it goes. However, it does not provide the sort of
compelling, insightful account of the problems before the crisis that is provided by, for example,
Michael Lewis in The Big Short.
She strikes a revolutionary tone when setting out the problem. But many of the remedies Pettifor
recommends are, as she acknowledges, fairly mainstream: monitoring the evolution of credit relative
to national income, limiting loan-to-value mortgage ratios more strictly, imposing stronger regulation
on banks and issuing government debt at low interest rates across the maturity spectrum.
Less mainstream are her calls for controls on international capital flows through a Tobin tax
on financial transactions, and for central banks to "manage exchange rates over a specified range
by buying and selling currency".
Her support for these measures is consistent with her belief - expressed throughout the book
- that everything was well until the global financial system began to liberalise following the
breakdown of the Bretton Woods system in 1971.
The evidence she provides to support her belief that policies in place during the Bretton Woods
era were superior to those operating now appears rather selective. She cites data presented in
Carmen Reinhart and Kenneth Rogoff's book, This Time is Different, as evidence that "financial
crises proliferated" after the 1970s. However, Reinhart and Rogoff's thesis was that we have been
here before in centuries past - and will be again.
The Production of Money presents one view of issues afflicting the world's financial systems
and how they should be dealt with, and will be useful to readers unfamiliar with these issues.
But in other places it provides a partial or rather confusing descriptions of aspects of the monetary
system. Saying the global economy "is once again at risk of slipping into recession" and faces
"deflation" are statements that have aged badly.
This book will help the public "develop a much greater understanding" of how banking and financial
systems work. However, its confrontational style - criticising financial market players, most
economists, politicians and ideas from other left-leaning economists - may put some readers off
before they get to the meat of the argument. The characterisations of these groups' views are
selective and her criticisms are at times not well supported by the evidence she presents.
For a while there it looked like the US and its main trading partners
had
finally achieved escape velocity.
Growth was up, inflation was poking through
the Fed's 2% target, and most measures of
consumer sentiment
were bordering on euphoric.
Then it all started to
evaporate.
Lackluster manufacturing and consumer spending reports sent the
Atlanta Fed's reading of Q1 GDP
off a cliff to less than 1%:
And this morning the Wall Street Journal highlighted some recent changes in the yield
curve that point towards further slowing:
Long-term Treasury yields have declined modestly, while short-term yields have
risen.
A flattening of the Treasury yield curve in 2017 is a worrying sign for investors
banking on resurgent U.S. inflation and growth.
Long-term Treasury yields, which are largely driven by the U.S. economic and
inflation outlook, have declined modestly this year, following a sharp rise in the
wake of the November election of Donald Trump as president. The 10-year U.S. Treasury
yield has fallen to 2.396% from 2.446% at the end of 2016.
At the same time, short-term yields, which are more influenced by monetary policy,
have risen in 2017 as Federal Reserve officials have made clear that they expect to
continue raising the fed-funds rate through the rest of the year.
As a result, the yield premium on the 10-year note relative to the two-year
note-known in the market as the 2-10 spread-slipped Wednesday to 1.107 percentage
points, its lowest level since the election.
FIRST QUARTER REPORT CARD
While the yield curve, like all market indicators, is subject to the ebb and flow
of investor sentiment, economic data and political developments, a flattening yield
curve gets special attention from investors world-wide because it can serve as an
early signal of both economic slowing and overpricing in riskier asset classes.
Those concerned that U.S. share prices were getting ahead of themselves took note
in the first quarter when they "started to see the flattening of the yield curve,"
said David Albrycht, president and CIO of Newfleet Asset Management, the fixed-income
affiliate of Virtus Investment Partners . The Dow industrials have fallen 2% since
hitting a record of 21115 on March 1.
Though economic data in the first quarter were mixed, many investors believe the
flattening of the curve is the result of the unwinding of "Trump trade" bets that
inflation and growth would pick up imminently with the adoption of tax cuts and
fiscal stimulus President Donald Trump has promised. Hopes of a so-called
reflationary agenda have been set back by the defeat in Congress of a White House
sponsored health-care bill. That raised questions about whether Mr. Trump can get
other legislation through Congress.
Expectations for higher long-term yields and a steeper curve rested on two
pillars: first, that the economy on its own was showing signs of improvement, and
second, that it would get an extra lift from promised tax cuts, infrastructure
spending and regulatory relief.
At the outset of the second quarter, both of those pillars are still standing, yet
neither is looking as sturdy as before.
The Journal goes on to note that the spreads between Treasuries and junk bonds are
widening, which indicates growing fears of a slowdown-induced credit crunch. And that
junk bond issuance is soaring, which implies a desire on the part of
sub-investment-grade borrowers to raise cash while they can.
What's happening? There are several possibilities
:
1) There never really was a recovery.
The post-election pop was, as
the Journal asserts, just the human nervous system responding to a "new and improved" US
government the way grocery store shoppers instinctively reach for boxes that promise a
better version of an old stand-by. Now that the novelty has worn off, the markets are
experiencing a "same corn flakes, different box" let-down. In which case 1% 2% growth
might be the ceiling, and debt/GDP will continue to soar world-wide. Make no mistake,
this is an epic worst-case scenario.
2) Oil spiked in 2016, which led many to conclude that the global economy was
growing because it was demanding more energy.
But then crude gave back most of
its gains, extinguishing the previous optimism and causing economic indicators like
consumer spending to stall (because we're all paying a bit less for gas lately). So
risk-off: sell stocks and junk bonds, buy Treasuries. It's no more complicated than
that.
3) No one has the slightest idea what's happening as insane levels of debt
distort the models economists use to predict the future.
From here on out, it's
unpleasant surprises all the way down.
Time will tell, but door number 3 is an increasingly safe bet.
"Please, understand that if the amount of money in a closed system
doubles, the value of each monetary unit halves, and the price of
everything, including stocks, increases 100%."
If it were that simple,
it would be that obvious. Like a microwave oven on HI, newly-created
money heats the economy unevenly, bidding up the prices of some assets
like stocks and real estate (behold! an economic recovery!) while
ignoring other things like oil and food (behold! no inflation!)
In Weimar Germany, speculators borrowed trillions of marks, bought
anything they could move, and sold it in other countries for hard
currency. There are no "other countries" this time because the
money-printing madness is global. This has never happened before so we
don't know how it will end.
On May 23, 1933, Congressman, Louis T. McFadden,
brought formal charges against the Board of Governors of the Federal Reserve
Bank system, The Comptroller of the Currency and the Secretary of United States
Treasury for numerous criminal acts, including but not limited to, CONSPIRACY,
FRAUD, UNLAWFUL CONVERSION, AND TREASON.
The petition for Articles of Impeachment was thereafter referred to the
Judiciary Committee and has YET TO BE ACTED ON.
"Mr. Chairman, we have in this Country one of the most
corrupt institutions the world has ever known. I refer to the Federal Reserve
Board and the Federal Reserve Banks, hereinafter called the Fed. The Fed has
cheated the Government of these United States and the people of the United
States out of enough money to pay the Nation's debt. The depredations and
iniquities of the Fed has cost enough money to pay the National debt several
times over.
"This evil institution has impoverished and ruined the
people of these United States, has bankrupted itself, and has practically
bankrupted our Government. It has done this through the defects of the law
under which it operates, through the maladministration of that law by the Fed
and through the corrupt practices of the moneyed vultures who control it.
"Some people who think that the Federal Reserve Banks
United States Government institutions. They are private monopolies which prey
upon the people of these United States for the benefit of themselves and their
foreign customers; foreign and domestic speculators and swindlers; and rich and
predatory money lender. In that dark crew of financial pirates there are those
who would cut a man's throat to get a dollar out of his pocket; there are those
who send money into states to buy votes to control our legislatures; there are
those who maintain International propaganda for the purpose of deceiving us
into granting of new concessions which will permit them to cover up their past
misdeeds and set again in motion their gigantic train of crime.
"These twelve private credit monopolies were deceitfully
and disloyally foisted upon this Country by the bankers who came here from
Europe and repaid us our hospitality by undermining our American institutions.
Those bankers took money out of this Country to finance Japan in a war against
Russia. They created a reign of terror in Russia with our money in order to
help that war along. They instigated the separate peace between Germany and
Russia, and thus drove a wedge between the allies in World War. They financed
Trotsky's passage from New York to Russia so that he might assist in the
destruction of the Russian Empire. They fomented and instigated the Russian
Revolution, and placed a large fund of American dollars at Trotsky's disposal
in one of their branch banks in Sweden so that through him Russian homes might
be thoroughly broken up and Russian children flung far and wide from their
natural protectors. They have since begun breaking up of American homes and the
dispersal of American children. "Mr. Chairman, there should be no partisanship
in matters concerning banking and currency affairs in this Country, and I do
not speak with any.
"In 1912 the National Monetary Association, under the
chairmanship of the late Senator Nelson W. Aldrich, made a report and presented
a vicious bill called the National Reserve Association bill. This bill is
usually spoken of as the Aldrich bill. Senator Aldrich did not write the
Aldrich bill. He was the tool, if not the accomplice, of the European bankers
who for nearly twenty years had been scheming to set up a central bank in this
Country and who in 1912 has spent and were continuing to spend vast sums of
money to accomplish their purpose.
"We were opposed to the Aldrich plan for a central bank.
The men who rule the Democratic Party then promised the people that if they
were returned to power there would be no central bank established here while
they held the
reigns
of government. Thirteen months
later that promise was broken, and the Wilson administration, under the
tutelage of those sinister Wall Street figures who stood behind Colonel House,
established here in our free Country the worm-eaten monarchical institution of
the "King's Bank" to control us from the top downward, and from the cradle to
the grave.
"The Federal Reserve Bank destroyed our old and
characteristic way of doing business. It discriminated against our 1-name
commercial paper, the finest in the world, and it set up the antiquated 2-name
paper, which is the present curse of this Country and which wrecked every
country which has ever given it scope; it fastened down upon the Country the
very tyranny from which the framers of the Constitution sough to save us.
PRESIDENT JACKSON'S TIME
"One of the greatest battles for the preservation of this
Republic was fought out here in Jackson's time; when the second Bank of the
United States, founded on the same false principles of those which are here
exemplified in the Fed was hurled out of existence. After that, in 1837, the
Country was warned against the dangers that might ensue if the predatory
interests after being cast out should come back in disguise and unite
themselves to the Executive and through him acquire control of the Government.
That is what the predatory interests did when they came back in the livery of
hypocrisy and under false
pretenses
obtained the
passage of the Fed.
"The danger that the Country was warned against came upon
us and is shown in the long train of horrors attendant upon the affairs of the
traitorous and dishonest Fed. Look around you when you leave this Chamber and
you will see evidences of it in all sides. This is an era of misery and for the
conditions that caused that misery, the Fed are fully liable. This is an era
of financed crime and in the financing of crime the Fed does not play the part
of a disinterested spectator.
"It has been said that the draughts man who was employed
to write the text of the Aldrich bill because that had been drawn up by
lawyers, by acceptance bankers of European origin in New York. It was a copy,
in general a translation of the statues of the
Reichsbank
and other European central banks. One-half million dollars was spent on the
part of the propaganda organized by these bankers for the purpose of misleading
public opinion and giving Congress the impression that there was an
overwhelming popular demand for it and the kind of currency that goes with it,
namely, an asset currency based on human debts and obligations.
Dr.
H. Parker Willis had been employed by Wall
Street and propagandists, and when the Aldrich measure failed- he obtained
employment with Carter Glass, to assist in drawing the banking bill for the
Wilson administration. He appropriated the text of the Aldrich bill. There is
no secret about it. The test of the Federal Reserve Act was tainted from the
first.
thank you for sharing... i have a question though.
how does one reconcile
Carter Glass and his duplicitous role in the above and the creation of the
Glass-Steagall Act? i suppose he could correctly assume the banks would not
need to manage both sides of a Wall Street trade when granted sole
independent authority over our nation's money. but par for the course,
subsequent greedy banksters weren't satisfied with keys to the kingdom; they
wanted the peasants to feel the pain of oppression and desolation. the world
is not enough.
It's looking like the shorter cycle times for LTO just means the the
volatility acts over higher frequency but doesn't go away. A fundamental
problem remains that all the E&Ps use basically the same model, and
therefore they all make essentially the same decisions at around the same
time, and therefore you get boom and bust. Volatility may be the biggest
contribution to delaying or preventing long term investment in bigger
(principally deep water and oil sand) projects, but I think the impact of
the big drop off in discoveries is significant, and not being fully
appreciated.
The backlog of discoveries are mostly difficult and expensive
developments that were not considered as top prospects when oil was over
$100.
The few larger, new discoveries are also in frontier, and therefore
generally more expensive, regions. E&Ps are turning to gas, or near field
developments, or are giving up on offshore altogether. Much higher, and
stable, prices might be needed to get these big projects going. If high
prices cause a fast demand collapse, by whatever mix of mechanisms, then
they might well not get done.
Jason Furman
(PIIE)
March 21, 2017 6:00 PM
The US economy will likely grow at a rate of around 2 percent a year over the next
decade. While this estimate seems low relative to the average annual growth rate
of 3.5 percent from 1950 to 2000, it is not reflective of some newly found
pessimism. Instead, it is largely based on two demographic facts: aging baby
boomers entering retirement and the end of the influx of women into the workforce.
In fact, without the cyclical boost in recent years from the falling unemployment
rate, achieving even 2 percent annual growth will require substantially faster
productivity growth than the United States has seen in recent years, along with a
stabilized labor force participation rate on an age-adjusted basis.
A piece I
wrote on
Vox
(link is external)
explores plausible variations around this central expectation, either due to luck
or to policy. A possible range of this uncertainty-that is, how different
assumptions about productivity growth and labor force participation would affect
this growth forecast-is shown in the table below. The
Vox
piece also
documents how policy can make a small difference but cannot radically change the
picture.
How Money Made Us Modern
: About 9,500 years ago in the
Mesopotamian region of Sumer, ancient accountants kept track of
farmers' crops and livestock by stacking small pieces of baked
clay, almost like the tokens used in board games today. One piece
might signify a bushel of grain, while another with a different
shape might represent a farm animal or a jar of olive oil.
Those humble little
ceramic
shapes might not seem have much in common with today's
$100 bill, whose high-tech anti-counterfeiting features include a
special security thread designed to turn pink when illuminated by
ultraviolet light, let alone with credit-card swipes and online
transactions that for many Americans are rapidly taking the place
of cash.
But the roots of those modern modes of payment may lie in the
Sumerians' tokens. ...
The article is poorly researched. The author needs to read
Innes, Graeber, Ingham, Wray and Hudson on the history of
money from the perspective of credit instead of relying on
Davies, who emphasizes commodity money and doesn't
distinguish between bullion and chartal.
I was speaking specifically of the early history in my
comment, but the entire article was rather one-sided. The
debated on the history and nature of money is nuanced and
the author made it seem as through the article presents a
definitive version. The audience to which it is addressed
would not glean that from the article and would likely
come away with a one-sided and simplistic perspective on
the history and nature of money.
Michael Hudson offers a wonderful piece on the ancient
middle east, how they handled oppressive debt, and how, in
the Anglo-Saxon word, the biblical word for debt got
translated into 'sin.'
"From the actual people who study
cuneiform records, 90% of which are economic, what we have
surviving from Sumer and Babylonia, from about 2500 BC to
the time of Jesus, are mainly marriage contracts, dowries,
legal contracts, economic contracts, and loan contracts.
Above all, loans....
The rulers had what we would call an economic model.
They realized that every economy tended to become unstable
as a result of compound interest. We have the training
tablets that they trained scribal students with, around
1800 or 1900 BC. They had to calculate: How long does it
take debt to double its size, at what we'd call 20%
interest? The answer is 5 years. How does long it take to
multiply four-fold? The answer is 10 years. How much to
multiply 64 times? The answer is 30 years. Well you can
imagine how fast the debts grew.
So they knew how the tendency of every society was that
people would run up debts. Now when they ran up debts in
Sumer and Babylonia, and even in in Judea in Jesus' time,
they didn't borrow money from money lenders. People owed
debts because they were in arrears: They couldn't pay the
fees owed to the palace. We might call them taxes, but
they actually were fees for public services. And for beer,
for instance. The palace would supply beer and you would
run up a tab over the year, to be paid at harvest time on
the threshing floor. You also would pay for the boatmen,
if you needed to get your harvest delivered by boat. You
would pay for draught cattle if you needed them. You'd pay
for water. Cornelia Wunsch did one study and found that
75% of the debts, even in neo-Babylonian times around the
5th or 4th century BC, were arrears.
Sometimes the harvest failed. And when the harvest
failed, obviously they couldn't pay their fees and other
debts. Hammurabi canceled debts four or five times during
his reign. He did this because either the harvest failed
or there was a war and people couldn't pay.
What do you do if you're a ruler and people can't pay?
One reason they would cancel debts is that most debts were
owed to the palace or to the temples, which were under the
control of the palace. So you're canceling debts that are
owed to yourself.
Rulers had a good reason for doing this. If they didn't
cancel the debts, then people who owed money would become
bondservants to the tax collector or the wealthy
creditors, or whoever they owed money to. If they were
bondservants, they couldn't serve in the army. They
couldn't provide the corvιe labor duties the kind of tax
that people had to pay in the form of labor. Or they would
defect. If you wanted to win a war you had to have a
citizenry that had its own land, its own means of
support."
http://michael-hudson.com/2017/01/the-land-belongs-to-god/
"The focus of my talk today will be Jesus' first sermon
and the long background behind it that helps explain what
he was talking about and what he sought to bring about."
Glad you are researching the ancient history of monetary
regimes. Especially since your research into monetary
history over the past 150 years is so incredibly wrong.
Sunday, March 19, 2017
What is full employment anyway, and how
would we know if we are there?
What are people talking about when they
say "full employment?" Maybe they don't
know either? Whatever it is, "full
employment" is thought to be important
for policy, particularly monetary
policy. Indeed, it typically enters the
monetary policy discussion as "maximum
employment," the second leg of the Fed's
dual mandate - the first leg being
"price stability."
Perhaps surprisingly, there are still
people who think the US economy is not
at "full employment." I hate to pick on
Narayana, but he's a convenient example.
He posted this on his
Twitter account:
Are we close to full emp? In steady
state, emp. growth will be about 1.2M
per year. It's about *twice* that in
the data. (1) Employment is growing
much faster than long run and
inflation is still low. Conclusion:
we're well below long run steady
state. end
Also in
an interview on Bloomberg,
Narayana
gives us the policy conclusion.
Basically, he thinks there is still
"slack" in the economy. My understanding
is that "slack" means we are below "full
employment."
So what is Narayana saying? I'm assuming
he is looking at payroll employment -
the employment number that comes from
the
establishment survey.
In his
judgement, in a "steady state," which
for him seems to mean the "full
employment" state, payroll employment
would be growing at 1.2M per year, or
100,000 per month. But over the last
three months, the average increase in
payroll employment has exceeded 200,000
per month. So, if we accept all of
Narayana's assumptions, we would say the
US economy is below full employment - it
has some catching up to do. According to
Narayana, employment can grow for some
time in excess of 100,000 jobs per
month, until we catch up to full
employment, and monetary policy should
help that process along by refraining
from interest rate hikes in the
meantime.
Again, even if we accept all of
Narayana's assumptions, we could
disagree about his policy
recommendation. Maybe the increase in
the fed funds rate target will do little
to impede the trajectory to full
employment. Maybe it takes monetary
policy a period of time to work, and by
the time interest rate hikes have their
effect we are at full employment. Maybe
the interest rate hikes will allow the
Fed to make progress on other policy
goals than employment. But let's explore
this issue in depth - let's investigate
what we know about "full employment" and
how we would determine from current data
if we are there or not.
Where does Narayana get his 1.2M number
from? Best guess is that he is looking
at demographics. The working age
population in the United States (age
15-64) has been growing at about 0.5%
per year. But labor force participation
has grown over time since World War II,
and later cohorts have higher labor
force participation rates. For example,
the labor force participation rate of
baby-boomers in prime working age was
higher than the participation rate of
the previous generation in prime working
age. So, this would cause employment
growth to be higher than population
growth. That is, Narayana's assumptions
imply employment growth of about 0.8%
per year, which seems as good a number
as any. Thus, the long-run growth path
for the economy should exhibit a growth
rate of about 0.8% per year - though
there is considerable uncertainty about
that estimate.
But, we measure employment in more than
one way. This chart shows year-over-year
employment growth from the establishment
survey, and from the household survey
(CPS):
For the last couple of years, employment
growth has been falling on trend, by
both measures. But currently,
establishment-survey employment is
growing at 1.6% per year, and household
survey employment is growing at 1.0% per
year. The latter number is a lot closer
to 0.8%. The establishment survey is
what it says - a survey of
establishments. The household survey is
a survey of people. The advantages of
the establishment survey are that it
covers a significant fraction of all
establishments, and reporting errors are
less likely - firms generally have a
good idea how many people are on their
payrolls. But, the household survey has
broader coverage (includes the
self-employed for example) of the
population, and it's collected in a
manner consistent with the unemployment
and labor force participation data -
that's all from the same survey. There's
greater potential for measurement error
in the household survey, as people can
be confused by the questions they're
asked. You can see that in the noise in
the growth rate data in the chart.
Here's another interesting detail:
This chart looks at the ratio of
household-survey employment to
establishment-survey employment. Over
long periods of time, these two measures
don't grow at the same rate, due to
changes over time in the fraction of
workers who are in establishments vs.
those who are not. For long-run
employment growth rates, you should put
more weight on the household survey
number (as this is a survey of the whole
working-age population), provided of
course that some measurement bias isn't
creeping into the household survey
numbers over time. Note that, since the
recession, establishment-survey
employment has been growing at a
significantly higher rate than
household-survey employment.
So, I think that the conclusion is that
we should temper our view of employment
growth. Maybe it's much closer to a
steady state rate than Narayana thinks.
But, on to some other measures of labor
market performance. This chart shows the
labor force participation rate (LFPR)
and the employment-population ratio
(EPOP).
Here, focus on the last year. LFPR is
little changed, increasing from 62.9% to
63.0%, and the same is true for EPOP,
which increased from 59.8% to 60.0%.
That looks like a labor market that has
settled down, or is close to it.
A standard measure of labor market
tightness that labor economists like to
look at is the ratio of job vacancies to
unemployment, here measured as the ratio
of the job openings rate to the
unemployment rate:
So, by this measure the labor market is
at its tightest since 2001. Job openings
are plentiful relative to would-be
workers.
People who want to argue that some slack
remains in the labor market will
sometimes emphasize unconventional
measures of the unemployment rate:
In the chart, U3 is the conventional
unemployment rate, and U6 includes
marginally attached workers (those not
in the labor force who may be receptive
to working) and those employed part-time
for economic reasons. The U3 measure is
not so far, at 4.7%, from its previous
trough of 4.4% in March 2007, while the
gap between current U6, at 9.2% and its
previous trough, at 7.9% in December
2006, is larger. Two caveats here: (i)
How seriously we want to take U6 as a
measure of unemployment is an open
question. There are problems even with
conventional unemployment measures, in
that we do not measure the intensity of
search - one person's unemployment is
different from another's - and survey
participants' understanding of the
questions they are asked is problematic.
The first issue is no worse a problem
for U6 than for U3, but the second issue
is assuredly worse. For example, it's
not clear what "employed part time for
economic reasons" means to the survey
respondent, or what it should mean to
the average economist. Active search, as
measured in U3, has a clearer meaning
from an economic point of view, than an
expressed desire for something one does
not have - non-satiation is ubiquitous
in economic systems, and removing it is
just not feasible. (ii) What's a normal
level for U6? Maybe the U6 measure in
December 2006 was undesirably low, due
to what was going on in housing and
mortgage markets.
Another labor market measure that might
be interpreted as indicating labor
market slack is long term unemployment
(unemployed 27 weeks or more) - here
measured as a rate relative to the labor
force:
This measure is still somewhat elevated
relative to pre-recession times.
However, if we look at short term
unemployment (5 weeks or less), this is
unusually low:
As well, the insured unemployment rate
(those receiving unemployment insurance
as a percentage of the labor force) is
very low:
To collect UI requires having worked
recently, so this reflects the fact that
few people are being laid off -
transitions from employment to
unemployment are low.
An interpretation of what is going on
here is that the short-term and
long-term unemployed are very different
kinds of workers. In particular, they
have different skills. Some skills are
in high demand, others are not, and
those who have been unemployed a long
time have skills that are in low demand.
A high level of long-term unemployed is
consistent with elevated readings for U6
- people may be marginally attached or
wanting to move from part-time to
full-time work for the same reasons that
people have been unemployed for a long
time. What's going on may indicate a
need for a policy response, but if the
problem is skill mismatch, that's not a
problem that has a monetary policy
solution.
So, if the case someone wants to make is
that the Fed should postpone interest
rate increases because we are below full
employment - that there is still slack
in the labor market - then I think
that's a very difficult case to make. We
could argue all day about what an output
gap is, whether this is something we
should worry about, and whether monetary
policy can do much about an output gap,
but by conventional measures we don't
seem to have one in the US at the
current time. In terms of raw economic
performance (price stability aside),
there's not much for the Fed to do at
the current time. Productivity growth is
unusually low, as is real GDP growth,
but if that's a policy problem, it's in
the fiscal department, not the monetary
department.
But there is more to Narayana's views
than the state of the labor market. He
thinks it's important that inflation is
still below the Fed's target of 2%.
Actually, headline PCE inflation, which
is the measure specified in the Fed's
longer-run goals statement,
is
essentially at the target, at 1.9%. I
think what Narayana means is that, given
his Phillips-curve view of the world, if
we are close to full employment,
inflation should be higher. In fact, the
long-run Fisher effect tells us that,
after an extended period of low nominal
interest rates, the inflation rate
should be low. Thus, one might actually
be puzzled as to why the inflation rate
is so high. We know something about
this, though. Worldwide, real rates of
interest on government debt have been
unusually low, which implies that, given
the nominal interest rate, inflation
will be unusually high. But, this makes
Narayana's policy conclusion close to
being correct. The Fed is very close to
its targets - both legs of the dual
mandate - so why do anything?
A neo-Fisherian view says that we should
increase (decrease) the central bank's
nominal interest rate target when
inflation is too low (high) - the
reverse of conventional wisdom. But
maybe inflation is somewhat elevated by
increases in the price of crude oil,
which have since somewhat reversed
themselves. So, maybe the Fed's nominal
interest rate target should go up a bit
more, to achieve its 2% inflation target
consistently.
Though Narayana's reasoning doesn't lead
him in a crazy policy direction, it
would do him good to ditch the Phillips
curve reasoning - I don't think that's
ever been useful for policy. If one had
(I think mistakenly) taken Friedman to
heart (as appears to be the case with
Narayana), we might think that
unemployment above the "natural rate"
should lead to falling inflation, and
unemployment below the natural rate
should lead to rising inflation. But,
that's not what we see in the data.
Here, I use the CBO's measure of the
natural rate of unemployment (quarterly
data, 1990-2016):
According to standard Friedman
Phillips-curve logic, we should see a
negative correlation in the chart, but
the correlation is essentially zero.
One thing I wonder
about is the
possibility that
policy implementing
economists are a bit
insulated from
reality. It seems
possible their
personal experiences
might reinforce a
feeling that
everything is all
right.
Meanwhile
countervailing data
may subconsciously be
given short shrift. A
shrinking middle
class, stagnant wages,
declining labor force
participation of adult
males all seem
ignored.
Could it be argued
that full employment
is characterized by a
robust and growing
middle class?
Economics is both a
hard and social
science and social
criteria may belong in
the definition of full
employment.
Is it wise to try to
throttle growth as
soon as policy
mandates are achieved,
thus seeking to
maintain a virtuous
steady state
equilibrium? Might it
not be better to
attempt more of a sine
wave economic policy,
deliberately
overshooting targets
to bring the marginal
sidelined workers into
the economy where they
can gain experience
and then, if
necessary, briefly
overshooting
constraining measures
to quickly contain
possible excesses?
"It can
do so by increasing the federal minimum wage to $10 per hour
and indexing it to inflation. The best existing research
suggests that modest increases such as this have had little
or no employment-reducing impact. And the government should
also increase the Earned Income Tax Credit, a refundable tax
credit for workers, for people who don't have children (a
strategy Brooks endorses)."
Here we go again. First, I thought we had left EITC behind
as any kind of substantial answer to underpaid Americans:
redistributing all of 1/2 of one percent of overall income
when 45% of our workforce is earning less than what we think
the minimum wage should be, $15 an hour.
$15 may be the most fast food can pay. Sometimes in
McDonald's there are more people behind the counter than in
front (most customers come through the drive through). If
fast food (33% labor costs) can pay $15, then maybe Target
(10%-15%) can pay $20, and maybe super efficient WalMart (7%)
can pay $25.
Always keeping in mind that labor bought and sold sort of
on margin. Doubling Walmart's pay could add only 7% to
prices.
Bottom 45% of workforce now takes 10% share of overall
income -- used to be 20%. Top 1% now 20% instead of 10%. How
to get that 10% back -- how to supply the economic and
political muscle to TAKE IT BACK: just put some teeth in the
(federal) law that already says union busting is illegal.
States can do this without any fear of confronting federal
preemption. States can make it a crime for wholesalers for
instance to pressure individual retailers from combining
their bargaining power -- same such law can overlap federal
labor area; especially since fed left blank for 80 years.
Blank or not: may overlap as with min wage.
No need for complicated policy researches; no need to
spend a dime: states just make union busting a felony and let
people organize if they wish to -- and get out of their way.
:-)
Back to min wage. If you sell fewer labor hours for more
dollars that works out better for labor than for potatoes --
because in the labor market the potatoes get the money to
spend -- and they are more likely to spend it more on other
potatoes than more upscale. Why min wage raises often
followed by higher min wage employment. (Higher wage jobs
lost -- everybody looking in wrong place.)
Re: The Man Who Made Us See That Trade Isn't Always Free -
Noah Smith
"Instead, he and his co-authors found that trade
with China in the 2000s left huge swathes of the U.S.
workforce permanently without good jobs -- or, in many cases,
jobs at all.
"This sort of concentrated economic devastation sounds
like it would hurt not just people's pocketbooks, but the
social fabric. In a series of follow-up papers, Autor and his
team link Chinese import competition to declining marriage
rates and political polarization. Autor told me that these
social ills make the need for new thinking about trade policy
even more urgent."
Here we go again. US manufacturing going from 16% of
employment from 2000 to 12% in 2016 (half due automation)
nowhere near as sucking-all-the-oxygen-out-of-life as the the
bottom 45% of earners taking 10% of overall income, down from
20% over two generations -- more and more being recognized
due to the loss of collective bargaining power ...
... for which loss the usual litany of causatives NEVER
seem to include one mention of the complete lack of teeth
protecting union organizing from market power in US labor
law.
Simple answer: no studies or research needed, not a dollar
appropriated: simply make union busting a felony at state
level -- and get out of people's way.
States can do this without conflict with federal
preemption. States can make it a crime for wholesalers for
instance to pressure individual retailers from combining
their bargaining power -- same such law can overlap federal
labor area; especially since fed left blank for 80 years.
Blank or not: may overlap as with min wage.
Don't do this and you'll never bring back collective
bargaining power -- and all the genuine populist politics
that goes with it!
"... Tax cuts kill jobs. Plain and simple. You can't create jobs by cutting the amount you paid workers. Taxes are prices that workers .pay You dodge taxes by underpaying workers. If taxes are cut, both paying workers is cut AND paying workers to dodge taxes is cut. ..."
Forecasting is done to change human behavior to invalidate
the forecasts.
Thus forecasts are by design never accurate
about the future.
This is different than designing systems using natural
laws.
A plane is designed to fly, because every forecast for it
crashing has resulted in design changes to invalidate that
forecast.
Conservatives hate forecasts because they hate changing
their plans. To forecast slower gdp growth and job creation,
or even contraction from tax cuts and spending cuts is
unacceptable. Thus they strive to change forecasts or
discredit them to get their policy implemented.
My forecast in the late 90s and early 00s was for economic
disaster as a result of conservative policy eventually being
implemented.
Tax cuts kill jobs. Plain and simple. You can't create
jobs by cutting the amount you paid workers. Taxes are prices
that workers .pay You dodge taxes by underpaying workers. If taxes
are cut, both paying workers is cut AND paying workers to
dodge taxes is cut.
That would have been the forecast in the 60s.
Today even Krugman and Bernie support job killing tax cuts
based on that creating jobs. Lots of bad forecasting is done
to back tax cuts. The tax cuts fail to create jobs, so the
bad forecasts are blamed so every forecast is ignored, even
the good ones.
When Congressional critters learned to read,
45th POTUS was suddenly and permanently unable to drain the
swamp of critters who grow fat on the pork-barrel-legislation
that drains the public treasure of We the Workers and Savers.
These parasitic critters will grow fat and strong, strong
enough to gobble up the the once brave workers who feed the
fat in DC.
Noni Mausa :
March 13, 2017 at 04:13 PM
What the wealthy right wing has decided in the past 40 years is that they don't need citizens. At
least, not as many citizens as are actually citizens. What they are comfortable with is a large population
of free range people, like the longhorn cattle of the old west, who care for themselves as best they
can, and are convenient to be used when the "ranchers" want them.
Of course, this is their approach to foreign workers, also, but for the purpose of maintaining
a domestic society within which the domestic rich can comfortably live, only native born Americans
really suit.
With the development of high productivity production, farming, and hands-off war technology the
need for a large number of citizens is reduced. The wealthy can sit in their towers and arrange the
world as suits them, and use the rest of the world as a "farm team" to supply skills and labour as
needed.
Proof of this is the fact that they talk about the economy's need for certain skills, training,
services and so on, but never about the inherent value of citizens independent of their utility to
someone else.
No wonder the unemployed increasingly kill themselves, or others. The whole economy tells them,
indirectly but unmistakably, that their human value does not exist. ken melvin : ,
March 13, 2017 at 04:48 PM
Can someone get me from $300 billion tax cut for the rich to getting the markets work for health
care?
It isn't about 'markets', never is. It is about extraction of as much profit as possible using
whatever means necessary. This is what the CEOs of insurance companies get payed to do. Insurance
policies they don't pay out, the ones Ryan is referring to, are as good as any for scoring.
"It isn't about 'markets', never is. It is about extraction of as much profit as possible using
whatever means necessary. This is what the CEOs of insurance companies get payed to do."
What surprises me most in this discussion is how Obamacare suddenly changed from a dismal and
expensive failure enriching private insurers to a "good deal".
When the PPACA band-aid is pulled off the US health care mess the gusher will be blamed on "the
Russians running the White House".
Cuba does better than the US despite being economically sanctioned for 55 years. Distribution
of artificially scarce health care resources is utterly broken. This failed market is financed
by a mix of 'for profit' insurance and medicare (which sublets a big part to 'for profit' insurance).
Coverage!!! PPACA added taxpayers' money to finance a bigger failed market. It did nothing
to address the market fail!
Single payer would not address the market failure. Single payer would put the government financing
most of the failed market.
Democrats have put band-aids on severe bleeds since Truman made the cold war more important
than Americans.
Cuba is the shining example of how doing the first 20% of healthcare well for everyone gets you
80% of the benefit cheap.
The US is the shining example of how refusing to do the first 20% of healthcare well for everyone
only gets you 80% of the benefit no matter how much you spend.
Mark's very nice argument does nothing to address The Official Trump Counter Argument:
[Shorter version: Obamacare is doomed, going to blow up. Any replacement is therefore better
than Obamacare; Facts seldom win arguments against beliefs]
"During a listening session on healthcare at the White House on Monday, President Donald Trump
said Republicans "are putting themselves in a very bad position by repealing Obamacare."
Trump said that his administration is "committed to repealing and replacing" Obamacare and
that the House Obamacare replacement will lead to more choice at a lower cost. He further stated,
"[T]he press is making Obamacare look so good all, of a sudden. I'm watching the news. It looks
so good. They're showing these reports about this one gets so much, and this one gets so much.
First of all, it covers very few people, and it's imploding. And '17 will be the worst year. And
I said it once; I'll say it again: because Obama's gone."
He continued, "And the Republicans, frankly, are putting themselves in a very bad position
- I tell this to Tom Price all the time - by repealing Obamacare. Because people aren't gonna
see the truly devastating effects of Obamacare. They're not gonna see the devastation. In '17
and '18 and '19, it'll be gone by then. It'll - whether we do it or not, it'll be imploded off
the map."
He added, "So, the press is making it look so wonderful, so that if we end it, everyone's going
to say, 'Oh, remember how great Obamacare used to be? Remember how wonderful it used to be? It
was so great.' It's a little bit like President Obama. When he left, people liked him. When he
was here, people didn't like him so much. That's the way life goes. That's human nature."
Trump further stated that while letting Obamacare collapse on its own was the best thing to
do politically, it wasn't the right thing to do for the country.
Borio is head of the Monetary and
Economic Department at the Bank of
International Settlements. In turn, BIS
was set up in 1930 and its membership is
made up of 60 central banks from all
over the world. BIS acts as a bank for
central banks in certain international
financial transactions, and also holds
meetings and does research to encourage
communication between central banks.
Under Borio's leadership, the BIS has
been a strong voice expressing concerns
over financial cycle and their
deleterious effects, so no one who knows
the BIS research output will be
surprised that he finds fiscal cycle
drag, rather than secular stagnation,
the more plausible explanation for slow
growth. Here's how he lays out the
argument (for readability, citations,
footnotes, and references to graphs are
omitted):
The secular stagnation hypothesis can
be summarised in three propositions.
First, the world has been haunted for
a very long time, well before the
crisis, by a structural aggregate
demand deficiency that is likely to
persist well into the future and keep
growth sluggish. Many factors are
typically mentioned in this context,
including ageing populations, growing
income and wealth inequality, and
falling tangible investment owing to
technological change. Second, the
pre-crisis financial boom (or
"bubble") was the only reason why
output reached potential, ie full
employment. Third, and more
technically, the natural (or
equilibrium) real interest rate has
been falling steadily and has been
negative for some time. Now, the
natural or equilibrium interest rate
is typically defined as the rate that
would prevail if output was at its
potential level and hence inflation
was stable. So, in plainer language,
given the major structural demand
deficiency, real (inflation-adjusted)
interest rates must be negative in
order to ensure that the economy
operates at full employment and to
avoid a costly deflationary spiral.
Such a spiral would arise because,
with nominal interest rates stuck at
the zero lower bound, falling prices
would raise real interest rates,
which would cut spending further,
which, in turn, would depress output
and employment and hence prices, and
so on.
The financial cycle drag hypothesis
can also be summarised in three
propositions largely the mirror
image of the previous ones. First,
the world has been haunted by the
inability to restrain financial booms
that, once they turn to bust, cause
huge and long-lasting economic damage
deep and protracted recessions,
weak and drawn-out recoveries, and
persistently slower productivity
growth. Such outsize financial cycles
are best characterised by the joint
fluctuations in credit and asset
prices, especially property prices,
as risk-taking ebbs and flows. And
they tend to be much longer than
"traditional" business cycles (say,
1520 years rather than 810).
Second, the pre-crisis boom actually
pushed output above potential and
undermined productivity. In other
words, it was not even required to
achieve full employment. Third, the
natural or equilibrium real interest
rate is positive and considerably
higher than the secular stagnation
hypothesis would suggest. There are
two related reasons for this.
Defining and measuring an equilibrium
rate without explicitly considering
the build-up of financial imbalances
is too narrow an approach. In
addition, the global demand
deficiency has been overestimated
while the role of primarily positive,
and benign, secular supply side
global factors in driving inflation
has been underestimated. ...
The [secular stagnation] hypothesis
is quite compelling in some respects,
but even a cursory look at the facts
raises some questions. The hypothesis
was originally developed for the
Unites States, a country that posted
a large current account deficit even
pre-crisis hardly a symptom of
domestic demand deficiency. True, US
growth pre-crisis was not
spectacular, but it was not weak
either recall how people hailed the
Great Moderation, an era of
outstanding performance. Likewise,
the world as a whole saw record
growth rates and low unemployment
rates again, hardly a symptom of
global demand deficiency. Finally,
recent declines in unemployment rates
to historical averages and, in some
cases, such as the United States,
close to estimates of full employment
point to supply, rather than
demand, constraints on growth.
At the same time, a number of
specific pieces of evidence support
the financial cycle drag hypothesis.
First, there is plenty of evidence
that banking crises, which occur
during financial busts, cause very
long-lasting damage to the economy.
They result in permanent output
losses, so that output may regain its
pre-crisis long-term growth trend but
evolves along a lower path. There is
also evidence that recoveries are
slower and more protracted. And in
some cases, growth itself may also be
seriously damaged for a long time. If
so, given the GFC's almost
unprecedented depth and breadth, the
subsequent evolution of output is not
that surprising although it would
have been so for forecasters that did
not adjust their "models" to take
such patterns into account.
Second, BIS research has found
evidence that financial (credit)
booms tend to undermine productivity
growth, further helping to explain
the post-crisis weakness ... Drawing
on a sample of over 40 countries and
over 40 years, the data suggest that
this happens mainly as a result of a
misallocation of resources towards
lower-productivity growth sectors,
notably construction, and that the
impact of the misallocations that
occur during the boom is twice as
large in the wake of a subsequent
banking crisis. The reasons are
unclear, but may reflect, at least in
part, the fact that overindebtedness
and a broken banking system make it
harder to reallocate resources away
from bloated sectors during the bust.
... The findings could help explain
the faster pace of the long-term
decline in productivity growth seen
in recent years.
Third, measures of output gaps used
in policymaking now show that output
was indeed above potential
pre-crisis. ... The reason is simple:
the symptom of unsustainable
expansion was not rising inflation,
which stayed low and stable, but the
buildup of financial imbalances, in
the form of unusually strong and
persistent credit growth and property
price increases.
Or course, one need not make a totally
black-or-white choice between the
secular stagnation and the fiscal cycle
drag hypotheses. For example, one could
believe in secular stagnation, and still
feel that it's pretty important to find
ways to prevent financial cycles from
blowing up into bubbles and crises.
The "thirty-year crisis" of capitalism, which encompassed two world wars and the Great Depression,
was followed by a period that some economists call the Golden Age of capitalism. Today, however,
capitalism is once again enmeshed in a crisis that portends far-reaching consequences. I am not referring
here to the mere phenomenon of the generally slower average growth that has marked the system since
the mid-1970s. Rather, I am talking specifically of the crisis that started with the collapse of
the U.S. housing bubble in 2007-8 and which, far from abating, is only becoming more pronounced.
The Western media often give the impression that the capitalist world is slowly emerging from
this crisis. Since the Eurozone continues to be mired in stagnation, this impression derives entirely
from the experience of the United States, where there has been talk of raising the interest rate
on the grounds that the crisis is over, and inflation is now the new threat. There are, however,
two points about the U.S. "recovery" that need to be noted.
First, the so-called recovery has been greatly influenced by the boost in consumer demand, which
in turn was stimulated by the drastic fall in oil prices. However, this increased demand has not
been accompanied by any notable increase in investment activity, despite the fact that long-term
interest rates are near zero-that is, despite a monetary policy that has been as supportive as it
can be. We have, in other words, a repeat of the situation of the late 1930s, prior to the U.S. rearmament
drive, when capacity utilization improved in the consumption goods sector without much recovery in
the capital goods sector.
1
Secondly, even this limited recovery in the United States has coincided with an extraordinarily
high rate of unemployment. Official statistics show an exactly opposite picture, of a decline in
unemployment to just 5 percent at present. But what is missed in these figures is the large exodus
from the labor force: millions have become too discouraged to continue seeking work, and are therefore
no longer counted as unemployed. In fact, if one takes the labor force to working-age population
ratio (the labor force participation rate) from 2007, when the Great Recession began, and recalculates
the size of the current labor force on that basis, then the current unemployment rate would be around
11 percent.
2 Many would put the figure even higher, on the grounds that the official size of the labor force
is an underestimate even for the base date.
To claim, therefore, that the United States is experiencing a full recovery is, in terms of working
class well-being and economic security, wrong. And if we consider the rest of the world, especially
recent developments in the "emerging economies," the situation is much worse.
II
The most significant of these developments is the slowing down of the growth rate in countries
like India and China-that is, the spread of the crisis to the so-called emerging economies, especially
China. Let us locate this slowdown in its proper context.
Since 2005, the trade-weighted exchange rate (TWER) of China-its exchange rate vis-ΰ-vis a basket
of currencies, where the weight of each currency depends upon its relative importance in China's
trade-has appreciated by 50 percent. Even between 2009, when the TWER spiked, and 2015, the extent
of appreciation was 20 percent. This basically meant that the Chinese economy was creating more room
for the rest of the world to compete with it, and hence, in effect, to grow at China's own expense.
China could afford to do so because an asset price bubble was then sustaining its domestic growth
rate. In a sense, therefore, China was supporting the growth rate of the rest of the world, in much
the same way that the United States had done decades earlier-though of course the stimulus provided
by China was not as large. This Chinese support explains why the crisis continued, but not in as
accentuated a form as it would have otherwise.
But the asset price bubble in China has now collapsed, which, together with the effect of global
stagnation on Chinese exports, has slowed the nation's growth rate. This explains the recent devaluation
of the yuan by a little less than 4 percent, and the Chinese government's apparent willingness to
effect greater devaluation in the future, camouflaged as a commitment to make the yuan more "market-determined."
In a number of ways, the devaluation of the yuan, and official hints that further devaluations
cannot be ruled out, constitutes the start of a whole new dynamic. First, it marks the beginning
of a spate of competitive currency depreciations-apparently effected by the market but with the connivance
of their respective governments-and hence of "beggar-thy-neighbor" policies, another echo of the
1930s, after the collapse of the gold standard. Indeed, after the devaluation of the yuan, several
currencies have also depreciated vis-ΰ-vis the dollar. This is because the "market"-that is, speculators-have
expected such depreciations and hence behaved in a way that actually brings them about. Meanwhile,
goverments have been either unwilling to intervene to support their currencies, since that would
hurt competitiveness and reduce net exports, or unable to do so, in cases where they lack adequate
foreign exchange reserves.
This spate of currency depreciations, which are likely to recur, represents, in effect, a struggle
between countries for a larger share in a non-expanding world market. I discuss the issue of non-expansion
below, but two points about this struggle over markets should be noted here. First, the United States
is at a disadvantage in this struggle, since the currency depreciations are all vis-ΰ-vis the U.S.
dollar. This means that there is no way that the dollar itself can be made to depreciate relative
to other currencies. The United States has predictably postponed the increase in its interest rate,
which the Fed has been promising for some time, since such an increase would only have appreciated
the value of the dollar still further. Unfortunately, the Fed cannot lower its interest rates any
further since they are already close to zero, and monetary policy is incapable of pushing them into
negative digits.
Thus, while the United States cannot use monetary policy to defend its net exports and hence prevent
the additional unemployment arising from a reduction in net exports, it also cannot even hope that
the value of the dollar vis-ΰ-vis other currencies will stabilize at their current level. When other
currencies fall relative to the dollar, it only strengthens the tendency of wealth-holders around
the world to flock to the dollar. This means that the undermining of the United States' net-exports
position will continue, thereby exacerbating U.S. unemployment. In short, the dollar's role as a
universal medium of wealth-holding, which has allowed the United States to finance massive current
account deficits, will act as an albatross at the level of domestic activity and employment.
To defend its domestic activity, the United States therefore has no alternative policy measure
but to impose implicit or explicit trade restrictions, such as those in the Bring Jobs Home Act introduced
in the Senate in July 2014. For even if the United States were to overcome the neoliberal aversion
to fiscal activism in pursuit of larger employment and actually undertake a fiscal stimulus, without
trade restrictions, the employment-generating effects of such a stimulus would leak out abroad even
more than before. But any imposition of trade restrictions would undermine the neoliberal order,
presided over by international finance capital, which the United States is committed to defending.
The second point to note about this struggle over a non-expanding world market is that it would
no longer just remain "non-expanding" in the weak sense of the term, but would actually begin to
contract. This is because in a situation of widespread currency depreciation all currencies do not
move up or down exactly synchronously. Consequently the calculation of profitability on projects
becomes more difficult, as costs and revenues can fluctuate over any arbitrary stretch of time. Hence,
the risks associated with investment increase, causing everywhere a shrinking of investment below
what it otherwise would have been, and with it an overall contraction in the world market.
This brings us to the second aspect of the new dynamic. The recent fall in China's growth rate
has led to a collapse in world commodity prices (though some, like oil, began falling even earlier).
This has already affected the growth rates of a whole range of countries dependent on commodity exports,
like Australia, Chile, and Brazil, with the latter now "officially" declared to be suffering from
a recession. The generalized fall in commodity prices will serve to shrink the world market still
further.
True, I said earlier that the fall in oil prices was a factor in boosting demand in the
United States and hence provided a demand stimulus for the world economy. But there is a difference
between the effect of a fall in oil prices alone and that of a fall in commodity prices in general.
In the case of oil, the mean "marginal propensity" to spend-to use a Keynesian term-is higher for
the buyers than for the sellers (since the latter are dominated by kings and sheikhs), while the
opposite is likely to be true for other commodities.
Though the fall in commodity prices in itself constitutes an additional cause of the worsening
crisis, it poses a still greater threat through another channel, namely the prospect of what the
early twentieth-century economist Irving Fisher called "debt deflation."
3 Fisher argued that if primary commodity prices, and consequently manufactured goods prices,
fall, then the real burden of debt goes up for those for whom such goods appear on the asset side,
against money-denominated debt obligations on the liability side. To improve their balance sheets,
therefore, they try selling these assets, which only makes things worse, leading to huge falls in
asset prices and hence to bankruptcies that deepen the recession. The advanced capitalist countries
have been on the brink of deflation for a long time; current developments may push them over the
edge and compound the crisis greatly.
The third feature of the current crisis is the tendency toward falling stock prices. This can
be part of the above-mentioned process of a commodity price fall-induced debt deflation itself. And
insofar as the prospect of slower growth leads to stock price falls, independent of any fall in commodity
prices, it can be an autonomous source of debt deflation. Falling stock prices, in other words, would
also increase the pressure for balance sheet adjustments, which result in further falls in stock
prices-and so on.
What is particularly noteworthy here is that these three aspects-falls in exchange rates (vis-ΰ-vis
the U.S. dollar), in commodity prices, and in stock prices-are likely to reinforce one another, as
is happening now. World capitalism, in short, is poised for a serious accentuation of the crisis.
And at the core of this crisis is the fact that there are no expansionary factors working towards
an increase in the size of the world market. On the contrary, even the long-run tendency is now in
the opposite direction, toward contraction. Let us now examine this latter issue.
III
A long line of argument going back to Rosa Luxemburg and Michał Kalecki states that a capitalist
economy requires exogenous stimuli, as distinct from endogenous stimuli, for its sustained growth.
4 "Endogenous stimuli" are those stimuli for increased productive capacity that arise from the
very fact that the economy has been growing. Their inadequacy for explaining sustained growth arises
from the following problem: just as an economy subject to growth generates expectations of future
growth, and hence induces capitalists to add to capacity in anticipation of such expansion, thereby
keeping the momentum of growth going, so any slackening must work in the opposite direction. Capitalists
must cut back on additions to productive capacity, and this will exacerbate such slowing of growth.
And if an economy is caught in stagnation with no expansion at all, then capitalists have no reason
to expect any growth (if endogenous stimuli are all that exist), and hence will not add to productive
capacity, which in turn, by suppressing demand, would tether the economy to stagnation.
Since this has not been the actual experience of capitalist economies, then there must be exogenous
stimuli that bring forth investment, or autonomous additions to demand, quite independently of whether
the economy has been growing. Exogenous stimuli, in short, prevent the economy from remaining trapped
in stagnation and explain sustained long-term growth.
This argument follows quite simply from a rejection of Say's Law, that is, from a recognition
of the possibility of a deficiency of aggregate demand. The fact that aggregate demand may be deficient
is what makes capitalists assess demand prospects before deciding to increase capacity, and this
in turn is what makes endogenous stimuli insufficient for explaining growth, and giving rise to the
need for exogenous stimuli.
5
Among exogenous stimuli, three in particular have received attention from economists: pre-capitalist
markets, state expenditure, and innovations. I use the last term in its widest sense: advances which
make capitalists, with access to some new process or product, undertake additions to capacity in
the hope of stealing a march over their rivals (or at least of not falling behind). However, the
role of innovations as exogenous stimuli has been questioned, in my view legitimately, by a number
of writers.
6 In oligopolistic markets, where price cuts to sell at the expense of rivals are generally eschewed,
capitalists tend to give whatever investment they would have otherwise undertaken the form
that innovation demands, rather than actually undertaking additional investment (that is, adding
further to capacity), and in that case innovations cease to be genuinely exogenous stimuli. This
is also confirmed by economic historians, who show that during the interwar Great Depression, the
available innovations, instead of helping capitalism overcome its crisis, actually remained unused,
and were introduced only in the postwar period of high aggregate demand.
Pre-capitalist markets, or more generally the phenomenon of capital pushing outwards from its
metropolitan core, played an important role as an exogenous stimulus in the pre-First World War period.
The picture, however, was not as straightforward as Rosa Luxemburg suggested, in which capitalism
simply selling at the expense of the pre-capitalist producers in the colonies. It was much more complex.
Both labor and capital migrated from the metropoles of Europe toward the temperate regions of white
settlement, such as the United States, Canada, Australia, New Zealand, South Africa, and Argentina.
Over four-fifths of all capital exports went to these regions. But the goods produced in the metropolis,
especially in Britain, the largest capital exporter of the period, were not necessarily the ones
most in demand in these developing "new regions," which rather required raw materials and foodstuffs
from the tropical zones. Metropolitan goods were sold in the tropical colonies, and the tropical
goods were exported to the new regions.
The important point is that the tropical goods exported from the tropical colonies to the new
regions in this system, which was dominated by the British, were not just equal in value to the metropolitan
goods imported to the tropical colonies. That is, the tropical colonies were not merely used to change
the form of the goods exported to the new white settler regions. The tropical exports to the "new
world" were of much greater value than the goods the tropical countries received as imports from
the metropolis, and while the domestic currency payment to the local producers of this export surplus
came out of the colonial government's tax revenue (extracted largely from the very same producers),
the gold and foreign exchange earnings from this export surplus were appropriated by the metropolitan
country, without the tropical colony acquiring any claims upon the metropolis. This difference
therefore constituted a gratuitous extraction by the metropolis from the tropical colonies without
any quid pro quo (an imbalance that Indian nationalist writers, who were the first to uncover it,
called a "drain of surplus" from the colonies).
The exogenous stimulus in the pre-First World War period, in other words, came from the colonial
system, which incorporated both the colonies of conquest, like India, and the colonies of settlement,
like the United States, through a complex mechanism. This mechanism had three interlinked elements:
a process of "deindustrialization," that is, displacement of pre-capitalist producers, notably textile
manufacturers, inflicted upon the colonies of conquest by imports from the metropolis, which Rosa
Luxemburg highlighted; the drain of surplus described above; and through this drain the ability of
the metropolis to export capital for developing regions of recent settlement, in the commodity-form
of tropical primary commodities, which these regions needed. The largest colony of conquest, India,
posted the second largest merchandise trade surplus in the world for fifty years before 1928-second
only to the United States-but its exchange earnings were entirely appropriated for supporting the
metropolitan balance of payments.
7
This entire arrangement, which underlay the secular boom spanning the Victorian and Edwardian
eras, fell apart after the First World War. We need not enter here in detail into the reasons for
this collapse, which included, inter alia , the "closing of the frontier"; the encroachment
by Japan on the Asian colonial markets of Britain; and the world agricultural crisis, which led to
a collapse of the colonies' exchange earnings, undermining the triangular system of payments.
8
The subsequent interwar period was thus one when capitalism was without any exogenous stimulus,
with the colonial system no longer effective and state intervention in "demand management" not yet
even part of the theoretical discourse.
9 Is it any surprise then that the Great Depression of the 1930s occurred precisely during this
period?
State intervention to boost aggregate demand was tried first in Japan under Finance Minister Takahashi
in 1931, but was extended by the Japanese militarists far beyond what Takahashi had wanted-to the
point of having him murdered when he objected to higher military spending. It was introduced in Germany
in 1933 with the Nazi rearmament drive. In the liberal bourgeois economies, it came on the eve of
the war itself, with a stepping up of military expenditure necessitated by the fascist threat. It
became a normal feature of capitalism, as distinct from a mere contingent necessity, only in the
postwar years when, under the twin impact of the socialist threat from outside and of working-class
restiveness from within, metropolitan capitalism was forced to abandon for the moment the principles
of "sound finance." Such working-class agitation within the metropolis arose because workers who
had made great sacrifices during the war were unwilling to return to their pre-war situation of unemployment
and poverty.
The postwar years of state intervention in demand management, which produced low levels of unemployment
unprecedented in the history of capitalism, and hence high levels of growth (in response to the high
demand), high levels of growth in labor productivity, and high levels of growth in real wages, have
been described as a Golden Age of capitalism. While state intervention occurred in nearly every nation,
the entire system was also buttressed by massive military expenditure by the United States, which
opened (and maintains) a string of military bases all over the globe. As the Vietnam War escalated
and U.S. military expenditure swelled, financed by printed dollars-decreed to be as good as gold
under the Bretton Woods system-the rest of the world was obliged to hold on to these dollars, even
as excess demand generated inflation. This inflation prompted a shift to commodities, and later to
gold, resulting in the abandonment of the Bretton Woods system. An engineered recession followed,
made worse by the fact that the price of one crucial commodity, oil, was kept up by a cartel, OPEC,
even as other prices subsided.
But if the mid-1970s recession in the capitalist world was the start of the dismantling of state
intervention in demand management, the basis for this dismantling lay elsewhere. It lay in the phenomenon
of the globalization of capital, especially finance capital, which had been occurring since the late
1960s and which had since gathered momentum. The regime of globalized finance meant that while finance
was international, the state remained a nation-state. All nation-states therefore had to bow before
the demands of finance capital in order to prevent any capital flight.
This in turn meant controlling fiscal deficits, because, as we have seen, finance capital favors
"sound finance" and dislikes fiscal deficits; it also meant reducing the tax burden on capitalists.
These together snuffed out the scope for state intervention in demand management. Any stimulation
of activity, either through a fiscal deficit or through a balanced budget multiplier (where revenues
are raised to match increased state expenditure by taxing the rich) became well-nigh impossible.
10 Subsequently, of course, austerity in government spending was projected as a virtue on the
purported grounds that private investment was crowded out by government "profligacy," an argument
which was only Say's Law (supply creates its own demand) in a new guise.
The point of this disquisition is to suggest that capitalism in the present era, the era of globalization
which entails above all the globalization of finance, is without either of its two main exogenous
stimuli-pre-capitalist markets and state spending to boost demand. The only stimulus for a boom therefore,
apart from debt-financed enhancement of consumer expenditure (which can only be transient), arises
from the formation of occasional asset-price bubbles. But such bubbles, even though they may produce
occasional booms, inevitably collapse, so that the average level of activity through booms and slumps
is lower than under the regime of state intervention. Besides, asset-price bubbles cannot be made
to order; the system cannot hold a gun to the heads of speculators and force them to feel the kind
of euphoric expectations that underlie bubbles. Consequently there may be long intervals, even during
this period of general slow growth, when the system is submerged in prolonged stagnation and recession.
There is, however, an additional factor of great importance that makes matters even worse in the
era of globalization. Let us turn to it now.
IV
In the period before the current globalization, the world economy was deeply segmented. Labor
from the South was not allowed to move freely to the North. As W. Arthur Lewis pointed out, there
were two great streams of migration in the nineteenth century: a migration of labor from tropical
and subtropical regions like India and China, which went as "coolie" or indentured labor to other
tropical or subtropical regions; and a migration of labor from temperate zones of Europe, which went
to other temperate regions like the United States, Canada, and Australia.
11 Once the era of slavery had run its course, these two streams were kept strictly separate
through severe restrictions on tropical migration to the temperate lands.
But while tropical labor was not free to move into the temperate regions, capital from the latter
was free to move into the former. Yet despite this formal freedom, capital chose not to
do so except in specific spheres like mines, plantations, and external trade. In particular, it did
not move manufacturing to the tropical regions, despite the very low wages prevailing there-a result
of the process of deindustrialization mentioned earlier. Capital from the temperate regions generally
moved into other countries within the temperate region itself, complementing the flow of labor migration.
The world economy was therefore segmented between the tropical and the temperate regions. In this
segmented universe, the labor reserves of the South did not restrain the rise of real wages in the
North when labor productivity increased. There was consequently, on the one hand, a widening of inequalities
between the North and the South that encompassed even the workers, and on the other hand, a boost
to demand in the North from rising wages that would not have occurred in the absence of this segmentation.
12
Contemporary globalization has brought this segmentation to an end. Even though labor from the
South is still not free to move to the North, capital from the North is now far more willing than
before to locate manufacturing and service-sector activities-the latter largely through outsourcing-in
the South. This now makes real wages in the North subject to the baneful influence of the massive
labor reserves of the South. Not that real wages in the United States or any other advanced country
are anywhere near parity with Southern real wages. However, they tend to remain stagnant even as
labor productivity increases in the North. In fact, in the period of globalization, while the vector
of real wages across the world remains more or less unchanged owing to the restraining influence
of third-world labor reserves, the vector of labor productivities increases across the world. Both
in individual countries and in the world as a whole, therefore, the tendency is for the share of
surplus in output to increase. It is this context which explains Joseph Stiglitz's finding that even
as the labor productivity in the United States has increased substantially between 1968 and 2011,
the real wage rate of an American male worker has not increased during this period; indeed if anything
it has marginally declined.
13
This has two major implications. First, the increase in inequality now is not so much between
two geographical parts of the globe (indeed, several third-world countries have experienced faster
per capita income growth than the advanced capitalist world) as between the working people of the
world on the one side and the capitalists of the world and others living off the surplus on the other.
It is this increase in "vertical" as distinct from "horizontal" inequality that is reflected in recent
works by several mainstream economists, like those of Thomas Piketty, though they attribute this
inequality to altogether different and unpersuasive reasons.
The second implication is that, since the "marginal propensity to consume"-again to use a Keynesian
expression-is higher from wage income than from incomes derived from economic surplus, this growing
vertical inequality in incomes (or, more precisely, the tendency toward a rise in the share of surplus
in world output) produces a tendency toward a deficiency of aggregate demand and the problem of surplus
absorption.
This of course is an ex ante tendency, which could be kept in check if-as Baran and Sweezy
argued, noting a tendency toward such stagnation in the United States a half-century ago-state expenditure
could be appropriately increased to counteract it.
14 But what is noteworthy about the current period of globalization is that it both produces
an ex ante tendency towards global demand deficiency and also prevents any
possible counteracting state expenditure to overcome this tendency, due to the opposition of the
vested interests to fiscal deficits and taxes on the rich. (It should be noted that larger state
expenditure financed through taxes on the poor and the working class, who have a high propensity
to consume anyway, does not boost aggregate demand, and so cannot counteract the tendency toward
deficient demand.)
The only offset against this trend toward demand deficiency, therefore, can come from the occasional
asset price bubbles discussed earlier. Unfortunately, since they cannot be made to order, and since
they inevitably collapse, the world economy in the era of globalization becomes particularly vulnerable
to crises of recession and stagnation, which is exactly what we are now experiencing.
In other words, when we combine these two features of the current globalization-namely the absence
of any exogenous stimuli together with the endogenous tendency toward a global demand deficiency-we
get an inkling of the structural susceptibility of contemporary capitalism to protracted stagnation.
Either of these two features, i.e., the internal and external contradictions, would produce a tendency
toward stagnation on its own. In the current period, however, the two features act together, and
it is this fact which underlies the travails of contemporary capitalism.
V
The economic implications of protracted stagnation, and the possible systemic responses to it
at the macroeconomic level, are matters I shall not enter into here. I shall, however, end by drawing
attention to an obvious political implication, one that relates to the threat to democracy that this
protracted stagnation poses, of particular significance in the case of my own country, India.
The general incompatibility between capitalism and democracy is too obvious to need repetition
here: capitalism is a spontaneous system driven by its own immanent tendencies, while the essence
of democracy lies in people intervening through collective political praxis to shape their destinies,
including especially their economic destinies, which militates against this spontaneity. The fate
of Keynesianism, which thought that capitalism could be made to operate at close to full employment,
and thereby be made into a humane system through state intervention in demand management, shows the
impossibility of the project of retaining capitalism while overcoming its spontaneity.
This conflict becomes particularly acute in the era of globalization, when finance capital becomes
globalized, while the state, which remains the only possible instrument through which the people
could intervene on their own behalf, remains a nation-state. Here, as already mentioned, the state
accedes to the demands of finance capital, so that no matter whom the people elect, the same policies
remain in place, as long as the country remains within the vortex of globalized finance. Greece is
only the latest example to underscore this point.
But once we reckon with the tendency of the system in the era of globalization to fall into a
protracted crisis, this incompatibility becomes even more serious. In the context of crisis-induced
mass unemployment, the corporate-financial oligarchies that rule many countries actively promote
divisive, fascist, and semi-fascist movements, so that while the shell of democracy is preserved,
their own rule is not threatened by any concerted class action. And the governments formed by such
elements, even when they do not move immediately towards the imposition of a fascist state as in
the case of classical fascism, move nonetheless towards a "fascification" of the society and the
polity that constitutes a negation of democracy. In third-world societies such fascification not
only continues but even increases the scope for "primitive accumulation of capital" at the expense
of petty producers (which also ensures that the world labor reserves are not exhausted).
But that is not all. Since such fascism invites retaliation in the form of counter-fascistic movements,
as in the case of Hindu supremacism in India, which is starting to encourage a Muslim fundamentalist
response, the net result is social disintegration. This disintegration is the denouement of the current
globalization in societies like mine, and no doubt in many others. It is important, of course, to
struggle against this, but at the current juncture, when there are no international workers' movements,
let alone any international peasant movements, and hence no prospects for any synchronized transcendence
of capitalist globalization, any such struggles must necessarily be informed by an agenda of "delinking"
from capitalist globalization. This delinking should entail capital controls, management of foreign
trade, and an expansion of the domestic market through the protection and encouragement of petty
production, including peasant agriculture; through larger welfare expenditure by the state; and through
a more egalitarian distribution of wealth and income.
Notes
↩ For a discussion on this point, see Harry Magdoff, "Militarism and Imperialism," reprinted
in his collection
Imperialism Without Colonies (New York: Monthly Review Press, 2003).
↩ This is calculated from the U.S. Labor Statistics, Department of Labor. If we divide the
number of persons employed in October 2015 (when the unemployment rate was 5 percent) by the workforce
as it would have stood if the employment-population ratio in June 2007 were the same in October
2015, then the employment rate comes to 89.4 percent. This gives an unemployment rate of 10.6
percent, or 11 percent in round numbers. This is pretty close to the U-6 unemployment rate of
the BLS (10 percent), even though the latter is calculated differently.
↩ Irving Fisher, "The Debt-Deflation Theory of Great Depressions," Econometrica
1, no. 4 (1933): 33757.
↩ See Rosa Luxemburg, The Accumulation of Capital (New York: Monthly Review Press,
1951 [1913]), and Michał Kalecki, "Observations on the Theory of Growth," The Economic Journal
285 (1962): 13453.
↩ A detailed discussion of this issue can be found in Prabhat Patnaik, Accumulation
and Stability under Capitalism (Oxford: Oxford University Press, 1997).
↩ See for instance Joseph Steindl,
Maturity and Stagnation in American Capitalism (New York: Monthly Review Press,
1976); Joan Robinson, introduction to Luxemburg, The Accumulation of Capital ; and
Paul A. Baran and Paul M. Sweezy,
Monopoly Capital
(New York: Monthly Review, 1966). For a discussion of this point in an historical context,
see W. A. Lewis, Growth and Fluctuations 18701913 (London: Allen and Unwin, 1978).
↩ For a detailed discussion of the issues involved, see Utsa Patnaik, "The Free Lunch: Transfers
from the Tropical Colonies and Their Role in Capital Formation in Britain During the Industrial
Revolution," in K. S. Jomo, ed., Globalization under Hegemony: The Long Twentieth Century
(New Delhi: Oxford University Press, 2006); and "India in the World Economy 19001935:
The Inter-War Depression and Britain's Demise as World Capitalist Leader," Social Scientist
42 (2014): 48889.
↩ While the first of these factors was emphasized by Alvin Hansen in his book Full Recovery
or Stagnation? (New York: Norton, 1938); the second factor, the role of Japanese competition,
is discussed in Prabhat Patnaik, Accumulation and Stability ; and the third, the
world agricultural crisis, in Utsa Patnaik, "India in the World Economy."
↩ Lloyd George's proposal in 1929 for a public works program financed by a fiscal deficit
to provide jobs to the unemployed, whose numbers had by then already risen to a million in Britain,
was shot down by the British Treasury on the basis of an utterly erroneous argument that Joan
Robinson, in her book Economic Philosophy (Harmondsworth: Penguin, 1966), calls "the
humbug of finance." The famous article by Richard Kahn on the "multiplier" effect ("The Relation
of Home Investment to Unemployment," Economic Journal 41, no. 162 [1931]: 17398),
which provided the theoretical core of the Keynesian revolution, was written as a refutation of
this Treasury view. For a discussion of the arguments involved, see Prabhat Patnaik, "The Humbug
of Finance," in The Retreat to Unfreedom (New Delhi: Tulika, 2002).
↩ The United States no doubt constitutes an exception here: since its currency is still taken
to be "as good as gold," increases in U.S. fiscal deficits do not cause any capital flight and
are therefore sustainable. But at the same time, the consideration that the demand expansion caused
by such an increase would significantly leak out abroad through higher imports, which would mean
greater external indebtedness of the U.S. for generating jobs abroad, stands in the way. The closeness
of the U.S. government to financial interests that frown on fiscal deficits, and the pervasive
prevalence of the ideology of "sound finance," also work in the same direction.
↩ W. A. Lewis, The Evolution of the International Economic Order , (Princeton,
NJ: Princeton University Press, 1978).
↩ This demand aspect is emphasized by Joan Robinson in her introduction to Luxemburg,
The Accumulation of Capital , 2627.
↩ Joseph Stiglitz, remarks to the AFL-CIO Convention on April 8, 2013.
↩ Indeed, this was the crux of their argument in Monopoly Capital .
Blast from the past. That is politics not economics and, clearly, as for Taylor, it comes down to the usual question:
are Republicans more stupid of more evil.
Notable quotes:
"... The thing that holds back businesses from deploying their stash of cash, is not "policy uncertainty" or "increased regulation". It is lack of demand. ..."
"... If the demand is there then the product/service will be produced. When demand is not there then the cash will sit idle or be used non-productively for things like stock buybacks or takeover of competitors. Any individual business owner who fail to meet demand (because of policy uncertainty or regulation) will simply give up market share to those of his/her competitors that chose not to be held back by those things. ..."
Here's the Jared Bernstein response to John Taylor that Roger Farmer is referring to:
Taylor v. Summers on Secular Stagnation: ... In a recent speech I've featured here in numerous
posts, Larry Summers raised the possibility that the economy is growing below its potential, with
all the ancillary problems that engenders (e.g., weak job and income growth), and not just in
recession, but in recovery. Stagnation is by definition expected in recession, but not in
an expansion...
Taylor argues, however, that secular stagnation is "hokem." His argument rest on two points,
both of which seem obviously wrong.
First, he claims that the current recovery has been weak is not due to any underlying problems
in the private sector or lousy fiscal policy, but due to "policy uncertainty, increased regulation,
including through the Dodd Frank and Affordable Care Act." But the recovery began in the
second half of 2009, well before either of those measures took effect. And, in fact, since
they've done so, if anything, growth and jobs have accelerated. Financial markets have done
particularly well...
Taylor's antipathy toward fiscal stimulus leads him to completely omit the fact of austerity in
the form of fiscal drag as a factor in the weak recovery. ...
His second argument is that if secular stagnation were a real problem, we would have seen it in
the 2000s expansion, yet instead we saw "boom-like conditions, especially in residential investment."
...
Yes, there was a lot-too much-residential investment, but employment growth was terribly weak...,the
share of the population employed actually declined. Real GDP grew almost a point more slowly
per year over the 2000s business cycle relative to the prior two cycles. Business investment
grew less than half as fast in the 2000s than it did in the 1990s. In fact, after rising
pretty steeply in the 1990s, CBO's estimate of potential GDP fell sharply in the 2000s..., a serious
cost of the problem Summers is raising and Taylor is wrongly debunking.
It's also worth noting that middle-class incomes and poverty rates did much better in the 1990s,
thanks to full employment conditions in the latter half of that cycle, than in the 2000s, when
slack labor markets led to a flattening trend in real median income and increasing poverty rates.
I doubt any of this will convince Taylor and others who simply want to go after the ACA, the Fed,
stimulus measures, et al. But those of us interested in blazing the path back to full employment
should recognize these arguments as politically motivated distractions. ...
The thing that holds back businesses from deploying their stash of cash, is not "policy uncertainty"
or "increased regulation". It is lack of demand.
If the demand is there then the product/service will be produced. When demand is not there
then the cash will sit idle or be used non-productively for things like stock buybacks or takeover
of competitors. Any individual business owner who fail to meet demand (because of policy uncertainty
or regulation) will simply give up market share to those of his/her competitors that chose not
to be held back by those things.
DeDude -> Matt Young...
I am actually not talking about GDP. The issue is why do businesses not hire more people. The
explanation that right wing fools and smart business people love to give is that it's because
of regulations and policies that they don't like. However, as pointed out over on "calculated
risk" they always complain about regulations and there is no correlation between their complaining
(or not) and their actual hire of new employees. The only thing that determine whether a business
will hire more people is whether the demand for its products/services is in excess of what can
be delivered by its current workforce. And they will respond to such demand regardless of cumbersome
regulations - or they will lose market share to competitors that are more than happy to fill the
demand.
Fred C. Dobbs:
(Found out on the web.)
Definition of the term secular stagnation theory is presented. It refers to the protracted economic
depression characterized by a falling population growth, low aggregate demand and a tendency to
save rather than invest.
"... We should adopt appropriate fiscal policies that provide for expansionary investment. ..."
"... sanjait repeats the old canard that a rising tide lifts all boats. What the experience of the last 40 years shows is that a rising tide lifts the yachts while small boats gradually sink. ..."
You are reading this because of the long, steady decline in nominal
and real interest rates on all kinds of safe investments, such as
US Treasury securities. The decline has created a world in which,
as economist Alvin Hansen put it when he saw a similar situation in
1938, we see "sick recoveries die in their infancy and
depressions feed on themselves and leave a hard and seemingly
immovable core of unemployment " In other words, a world of secular
stagnation. Harvard Professor Kenneth Rogoff thinks this is a
passing phase-that nobody will talk about secular stagnation in
nine years. Perhaps. But the balance of probabilities is the other
way. Financial markets do not expect this problem to go away for at
least a generation.
Eight reinforcing factors have driven and continue to drive this
long-term reduction in safe interest rates:...
The natural response to this secular stagnation is for governments
to adopt much more expansionary tax and spending (fiscal) policies.
When interest rates are low and expected to remain low, all kinds
of government investments-from bridges to basic research-become
extraordinarily attractive in benefit-cost terms, and government
debt levels should rise to take advantage of low borrowing costs
and provide investors the safe saving vehicles (government bonds)
they value. ..
Critics of Summers's secular stagnation thesis miss the point. Each
seems to focus on one of the eight factors driving the decline in
interest rates and then say that factor either will end soon or is
healthy for some contrarian reason.
Since the turn of the century, the North Atlantic economies have
lost a decade of what we used to think of as normal economic
growth, with secular stagnation the major contributor. Only if we
do something about it is it likely that in nine years we will no
longer be talking about secular stagnation.
John Taylor provides a couterargument (I chose to highlight one
over the other based upon my agreement with the arguments):
"These shifts are closely related to changes in
economic policy-mainly supply-side or structural policies:
in other words, those that raise the economy's productive
potential and its ability to produce. During the 1980s and
1990s, tax reform, regulatory reform, monetary reform, and
budget reform proved successful at boosting productivity
growth in the United States. In contrast, the stagnation
of the 1970s and recent years is associated with a
departure from tax reform principles, such as low marginal
tax rates with a broad base, and with increased
regulations, as well as with erratic fiscal and monetary
policy. During the past 50 years, structural policy and
economic performance have swung back and forth together in
a marked policy-performance cycle."
This is just incorrect. Pure propaganda. The social
democratic post war years so better productivity than the
post-Reagan neoliberal years. (*Middle finger* @ yuan)
During the neoliberal years, productivity growth has
been associated with ponzi bubbles like the dot.com tech
stock bubble and epic housing bubble. And then it goes
away after the bubble pops. Unsustainable. Accounting
tricks.
You think productivity growth in high aggregate growth
years is "accounting tricks"?
I think you *want* to
believe that because "grr neoliberals".
But I think if you sat and thought about it for a few
minutes, you could recognize that high growth causes
improved productivity in the medium term, and if you sat
and looked at sector-specific productivity data, you'd see
the hypothesis that aggregate productivity was cause by
accounting tricks in single sector bubbles makes no sense
at all.
To me the question is
fairly simple, though it seems economists often treat it
as complex and mysterious.
Simply, when the economy is good, workers are thriving
and climbing the ladder, and companies are investing in
efficiency and capacity. Those factors both should lead to
higher productivity in the short and long term. A weak
economy has the converse effect.
sanjait repeats the old canard that a rising tide
lifts all boats. What the experience of the last 40 years
shows is that a rising tide lifts the yachts while small
boats gradually sink.
The fruits of productivity
growth went mostly to the top 1%.
The Bush boom? You are dumber that Jerry FuzzCharts
Bowyer.
Peter K. :
, -1
DeLong and other progressive soft neoliberals promote
fiscal expansion but then there are some asterisks. Better
monetary or trade policy would help as well.
One
asterisk is that politically they supported establishment
Democrat Hillary along with PGL and many others. Her
monetary and trade policy wouldn't have done much to push
against the SecStags.
Her fiscal policy was such that Alan Blinder admitted
it wouldn't effect the Fed's reaction function. If the Fed
wanted to keep giving us slow growth and lame recoveries
they would.
DeLong: "Since the turn of the century, the North
Atlantic economies have lost a decade of what we used to
think of as normal economic growth, with secular
stagnation the major contributor."
Another asterisk is that when Trump provides fiscal
expansion and a possibility of a quicker normalization of
rates, Krugman and PGL point to how Reagan and Volcker
raised rates which deindustrialized America via currency
rates and trade policy.
Another asterisk is if Hillary had provided strong
fiscal action, the Fed would have raised rates more
quickly and drawn capital away from Europe and Japan which
are still engaged in QE for their weak economies.
So the export sector would have shrunk and the DeLongs
would have called for a stronger safety net like they did
in the 90s while Bill Clinton did welfare reform.
"U.S. oil exporters set a new record last week: shipments leaving the country averaged 1.2
million barrels of crude per day, roughly double the levels seen at the end of last year.
Analysts told Bloomberg that the rising American exports are driven in large part by falling
domestic prices. West Texas Intermediate futures (the domestic benchmark) are trading below the
international Brent standard by $2 per barrel or more, and are now cheaper than some Middle Eastern
grades of lesser quality. This makes American crude more attractive to Asian buyers.
There is also an incentive for traders to sell their oil abroad: U.S. storage is costly. If
the price of crude is not expected to rise, brokers have no incentive to hang on to their supply
and pay rent on a tank to put it in."...
You are just regular incompetent chichenhawk. And it shows. Try to read something about US oil
industry before positing. It is actually a very fascinating topic. That's where the battle for
survival of neoliberalism in the USA (with its rampant militarism and impoverishment of lower
50% of population) is now fought.
If you list also domestic consumption, you will understand that you are completely misunderstanding
and misrepresenting the situation. The USA is a huge oil importer (Net Imports: 6.075 Mbbl; see
ilsm post), not an exporter. You can consider it to be exported only after drinking something
really strong.
It refines and re-export refined products and also export condensate and shale light oil that
is used for dilution of heavy oils in Canada and Latin America. That's it.
US shale can't be profitable below, say, $65 per barrel (so called "break-even" price for well
started in 2009-2016), and if interest on already existing loans (all shale industry is deeply
in debt; ) and minimum profitability (2.5%) is factored in, probably $77.
That's why production is declining and will decline further is prices stay low because there
is only fixed amount of "sweet spots" which can produce oil profitably at lower prices. In 2017
they are mostly gone, so what's left is not so attractive at the current prices. And this is an
understatement.
The same is true to Canadian sands. Plans for expansion are now revised down and investments
postponed.
So in order to sustain the US shale industry prices need to grow at least over $65 this year
And those war-crazy militarists from Obama administration essentially continued Bush II policies
and wasted money in Middle East, Afghanistan and Ukraine, instead of facilitating conversion of
passenger cards to hybrids (and electrical for short commutes).
The US as a country waisted its time and now is completely unprepared for down of oil age.
The net result of Obama policies is that SUVs became that most popular type of passenger cars
in the USA. That can be called Iran revenge on the USA.
The conflict between Donald Trump and the US Deep State can be explained that deep state can't
allow Trump dιtente with Russia and stopping wars on neoliberal expansion at Middle East. That's
why they torpedoed General Flynn. It is not about Flynn, it was about Trump. To show him who is
the boss and warn "You can be fired".
Due to "overconsumption" of oil inherent in neoliberalism with its crazy goods flows that might
cross the ocean several times before getting to customer, US neoliberal empire (and neoliberalism
as social system) can well go off the cliff when cheap oil is gone.
The only question is when it happens and estimates vary from 10 to 50 years.
So in the best case neoliberalism might be able to outlive Bolshevism which lasted 74 years
(1917-1991) by only something like 15 years.
"Noble Energy has sanctioned the first phase of the Leviathan natural gas project offshore Israel,
with first gas targeted for the end of 2019.
Noble Energy is the operator of the Leviathan Field, which contains 22 trillion cubic feet (Tcf)
of gross recoverable natural gas resources.
The announcement was hailed by Israeli Prime Minister Benjamin Netanyahu who has played a key
role in negotiations with Noble. Netanyahu says the discovery of large reserves will bring energy
self-sufficiency and billions of dollars in tax revenues, reports The Times of Israel, but critics
say the deal gave excessively favorable terms to the government's corporate partners...
Production will be gathered at the field and delivered via two 73-mile flowlines to a fixed platform,
with full processing capabilities, located approximately six miles offshore."...
"U.S. oil exporters set a new record last week: shipments leaving the country averaged 1.2
million barrels of crude per day, roughly double the levels seen at the end of last year.
Analysts told Bloomberg that the rising American exports are driven in large part by falling
domestic prices. West Texas Intermediate futures (the domestic benchmark) are trading below
the international Brent standard by $2 per barrel or more, and are now cheaper than some Middle
Eastern grades of lesser quality. This makes American crude more attractive to Asian buyers.
There is also an incentive for traders to sell their oil abroad: U.S. storage is costly.
If the price of crude is not expected to rise, brokers have no incentive to hang on to their
supply and pay rent on a tank to put it in."...
You are just regular incompetent
chichenhawk. And it shows. Try to read something about US oil industry before positing. It
is actually a very fascinating topic. That's where the battle for survival of neoliberalism
in the USA (with its rampant militarism and impoverishment of lower 50% of population) is now
fought.
If you list also domestic consumption, you will understand that you are completely misunderstanding
and misrepresenting the situation. The USA is a huge oil importer (Net Imports: 6.075 Mbbl;
see ilsm post), not an exporter. You can consider it to be exported only after drinking something
really strong.
It refines and re-export refined products and also export condensate and shale light oil
that is used for dilution of heavy oils in Canada and Latin America. That's it.
US shale can't be profitable below, say, $65 per barrel (so called "break-even" price for
well started in 2009-2016), and if interest on already existing loans (all shale industry is
deeply in debt; ) and minimum profitability (2.5% is factored in, probably $77.
That's why production is declining and will decline further is prices stay low because there
is only fixed amount of "sweet spots" which can produce oil profitably at lower prices. In
2017 they are mostly gone, so what's left is not so attractive at the current prices. And this
is an understatement.
The same is true to Canadian sands. Plans for expansion are now revised down and investments
postponed.
So in order to sustain the US shale industry prices need to grow at least over $65 this
year
And those war-crazy militarists from Obama administration essentially continued Bush II
policies and wasted money in Middle East, Afghanistan and Ukraine, instead of facilitating
conversion of passenger cards to hybrids (and electrical for short commutes).
The US as a country wasted its time and now is completely unprepared for down of oil age.
The net result of Obama policies is that SUVs became that most popular type of passenger
cars in the USA. That can be called Iran revenge on the USA.
The conflict between Donald Trump and the US Deep State can be explained that deep state
can't allow Trump dιtente with Russia and stopping wars on neoliberal expansion at Middle East.
That's why they torpedoed General Flynn. It is not about Flynn, it was about Trump. To show
him who is the boss and warn "You can be fired".
Due to "overconsumption" of oil inherent in neoliberalism with its crazy goods flows that
might cross the ocean several times before getting to customer, US neoliberal empire (and neoliberalism
as social system) can well go off the cliff when cheap oil is gone.
The only question is when it happens and estimates vary from 10 to 50 years.
So in the best case neoliberalism might be able to outlive Bolshevism which lasted 74 years
(1917-1991) by only something like 15 years.
Unemployment versus Underemployment: Assessing Labor Market Slack
:
The U-3 unemployment rate has returned to prerecession levels and is
close to estimates of its longer-run sustainable level. Yet other
indicators of slack, such as the U-6 statistic, which includes people
working part-time but wanting to work full-time (often referred to as
part-time for economic reasons, or PTER), has not declined as quickly
or by as much as the U-3 unemployment rate.
If unemployment and PTER reflect the same business-cycle effects, then they should move pretty
much in lockstep. But as the following chart shows, such uniformity hasn't generally been the case.
In the most recent recovery, unemployment started declining in 2010, but PTER started to move
substantially lower beginning only in 2013. The upshot is that for each unemployed worker, there are
now many more involuntary part-time workers than in the past.
Unemployment and Unemployment-Underemployment * rates,
1994-2017
* Total unemployed, plus all marginally attached workers,
plus total employed part time for economic reasons, as a
percent of the civilian labor force plus all marginally
attached workers; age 16 and over.
Unemployment and Unemployment-Underemployment * rates,
1994-2017
* Total unemployed, plus all marginally attached workers,
plus total employed part time for economic reasons, as a
percent of the civilian labor force plus all marginally
attached workers; age 16 and over.
"during the last recession, firms reduced the hours of
workers in low-skill jobs more than they cut the number of
low-skill jobs"
I believe this is the correct explanation.
I used to tack growth in hours vs. growth in payrolls, and
what I found was that, had the 2008 recession followed the
pattern of previous recessions, the peak unemployment rate
would have been considerably higher. Let me do a little
digging ....
The value reached its lowest level ever in 2009. In other
words, relative more hours than jobs were cut in the Great
Recession, even compared to other recessions.
Dean covers a ton of material here. One is his points is
right in one sense. We are below full employment so we need
some sort of aggregate demand expansion. Would trade
protection do this for the US? Perhaps if we had fixed
exchange rates and we did not suffer a trade war. But as Dean
has noted elsewhere, we need more expansionary monetary
policy. Dean repeats something that Jared Bernstein wrote:
'If we wanted better data on bilateral trade flows, then it
would be desirable to pull out the re-exports from both our
exports to Canada and our imports from Germany. This
adjustment would make our trade deficit with Canada appear
larger and trade deficit with Germany smaller, but would
leave our total trade balance unchanged.'
So Dean and Jared thinks that a US multinational that buys
a product from Mexico at $80 which ultimately sells in Canada
for $100 charges the Canadian distribution affiliate only
$80? Dean knows better as he in the past has written about
transfer pricing. No - transfer pricing games do affect the
current reporting of the trade balance. Dean needs to read
Brad Setser.
According to CBO
, potential GDP for the 4
th
quarter of 2016
was $19,049 billion. This is 1.0 percent higher than the estimate of GDP for
the quarter of $18,860.8 billion. This means that if CBO is right, if there
had been more demand in the economy, for example due to imports being
replaced by domestically produced goods, GDP could have been 1.0 percent
higher last quarter.
Of course CBO's estimates of potential GDP are not
especially accurate. Its most recent estimates for potential GDP in 2016 are
more than 10 percent below what it had projected for potential GDP in 2016
back in 2008, before the severity of the crash was recognized. It is
possible it overstated potential by a huge amount in 2008, but it is also
possible it is understating potential today. It also hugely understated
potential GDP in the mid-1990s, with 2000 GDP coming in more than 5 percent
above the estimate of potential that CBO made in 1996. In other words, it
would not be absurd to think that the economy could sustain a level of
output that is 2.0 percent above the current level. (The fact that the
employment rate of prime age workers [ages 25-54] is still 4.0 percentage
points below the 2000 peak is certainly consistent with this view.)
Suppose that GDP were consistently 2.0 percent higher than current
projections over the next decade due to a lower trade deficit. This would
imply an additional $4.6 trillion in output over this period. If the
government captures 30 percent of this in higher taxes and lower spending on
transfer programs like unemployment insurance and food stamps, this would
imply a reduction in the projected deficit of $1.38 trillion over the
decade. That's not quite the $1.74 trillion projected by Navarro, but close
enough to make the derision unwarranted.
In terms of how you get a lower trade deficit, Navarro's strategy of
beating up on China is probably not the best way to go. But there is in fact
precedent for the United States
negotiating a lower
value for the dollar
under President Reagan, which had the desired
effect of reducing the trade deficit.
There is no obvious reason it could not pursue a similar path today,
especially since it is widely claimed in business circles that China
actually wants to raise the value of its currency. The U.S. could help it.
The second area of seemingly gratuitous Trump trade bashing comes from a
Wall Street Journal
news article
on the Trump administration's efforts to correct for
re-exports in trade measures. Before getting to the article, it is important
to understand what is at issue.
Most of what the United States exports to countries like Mexico, Japan,
or elsewhere are goods and services produced in the United States. However,
some portion of the goods that we export to these countries consists of
items imported from other countries which are just transshipped through the
United States.
The classic example would be if we offloaded 100 BMWs on a ship in New
York and then 20 were immediately sent up to Canada to be sold there. The
way we currently count exports and imports, we would count the 20 BMWs as
exports to Canada and also as imports from Germany. These re-exports have
zero impact on our aggregate trade balance, but they do exaggerate out
exports to Canada and our imports from Germany.
If we wanted better data on bilateral trade flows, then it would be
desirable to pull out the re-exports from both our exports to Canada and our
imports from Germany. This adjustment would make our trade deficit with
Canada appear larger and trade deficit with Germany smaller, but would leave
our total trade balance unchanged.
This better measure of trade flows would be useful information to have if
we wanted to know what happened to trade with a specific country following a
policy change, for example the signing of a trade deal like NAFTA. The
inclusion of re-exports in our export data would distort what had happened
to actual flows of domestically produced exports and imports for domestic
consumption.
The United States International Trade Commission already produces a
measure of trade balances
that
excludes imports that are re-exported. However this measure is still not an
accurate measure of bilateral trade balances since it still includes the
re-exports on the import side. In the case mentioned above, it would include
the BMWs imported from Germany that were immediately sent to Canada, as
imports. In principle, we should be able to construct a measure that
excludes these items on the import side as well. If this is what the Trump
administration is trying to do, then it is asking for a perfectly reasonable
adjustment to the data.
This is where we get to the WSJ article. According to the piece, the
Trump administration was asking the Commerce Department to produce measures
of bilateral trade balances that took out the re-exports on the export side,
but left them in on the import side. This would have the effect of
artificially inflating our trade deficit with a bogus number. If this is in
fact what the Trump administration is trying to do, then we should be
shooting at them with all guns. (This is metaphorical folks, I'm not
advocating violence.)
However some skepticism might be warranted at this point. No one with a
name actually said the Trump administration asked for this bogus measure of
trade balances. The sole source listed is "one person familiar with the
discussions."
There was an official statement from the Commerce Department's Bureau of
Economic Analysis (BEA), which collects and compiles the data:
"Any internal discussions about data collection methods are no more than
the continuation of a longstanding debate and are part of the bureau's
normal process as we strive to provide the most precise statistics
possible."
I take very seriously efforts to mess with the data. We are fortunate to
have independent statistical agencies with dedicated civil servants who take
their work very seriously. However we should wait until we have a bit more
solid evidence before assuming that the Trump administration is trying to
interfere in their independence, as opposed to trying to make a totally
legitimate adjustment to the data that the BEA staff would almost certainly
agree is an improvement.
Abe
Lincoln was protectionist
2 hours ago
Yes - Pres. Trump is MUCH MUCH better at economics than many so-called
American economists.
Also ignores transfer pricing. US corporations
are good at gaming their own tax system but face tough regulations
elsewhere. Their solution to pulling profits out of their foreign
operations and putting them in a non-taxed US is to export phantom
products to foreign countries from their American subsidiaries. The US
is Ireland on a large scale - the real trade deficit with China is
probably closer to $10 in imports for every $1 of export rather than
the official $4 in imports to $1 in exports.
urban legend
5 hours ago
Economists often seem to pooh-pooh the employment-to-population ratio
as some kind of unrealistic never-again-to-be achieved holy grail --
as if the phenomenon of women going back into the labor force had been
completely expended and there would thereafter be no change in the
education level of working age adults. In fact, women entering the
labor force continued to grow, and faster than men dropping out, and
the education level (and employability) of working age adults has been
improving, especially in Southern states that had relatively low high
school or college graduation rates and, therefore, low
employment-to-population ratios that pulled down the national rate.
While looking at the employment rate of all non-institutional adults
16 and older may be complicated by baby boomers hitting senior status,
the prime working age (25-54) employment rate should be even higher
than it was in 2000, not just the same or lower. We saw an inkling
then of what full employment might look like, and an inflation problem
did not raise its ugly head.
It's also to be noted that while in January 1994 when the
"marginally attached to the labor force" and "discouraged worker"
measures were first reported, only two million members of the 16+
adult population were counted as marginally attached and only 600,000
were considered to be discouraged. Yet as demand grew, almost 20
million people crawled out from outside the labor force or from being
counted as potential workers by any measurement and took jobs when
they became available. That's 18 million more than BLS statistics
suggested would be the outermost limit to the size of the labor force.
In other words, it seems absurd, indeed absurd enough to consider
it almost to be offered in bad faith, to suggest that we are anywhere
remotely close to full employment. One must ask what the agenda is for
it to continue to be suggested, since slowing growth has certain
consequences that may help the wealthier members of our society while
hurting everyone else.
pieceofcake
urban legend
5 hours ago
'In other words, it seems absurd, indeed absurd enough to consider
it almost to be offered in bad faith, to suggest that we are
anywhere remotely close to full employment.'
If We would be
anywhere remotely close to full employment - there would be NO
'gig-economy' - no companies on the Internet which help you to
(still) write all these resumes - and probably NO Uber - as - do
you know anybody who is willing to work as a Uber driver if he or
she can have a real Job?
And about the wealthier members of our society - Yeah they did
that!
pieceofcake
pieceofcake
5 hours ago
- and since I'm back again in the homeland - I have been the
guest of 63 Uber-Drivers in 16 different cities -(right now I'm
in Redwood City CA) - and the overwhelming majority of the
drivers agreed with me - that there might be no better measure
for the real unemployment situation in the homeland and the
terrible Job market - that so many Americans - who actually have
learned some real Jobs - end up driving idiots like me around.
For heavens sake - the other day I even had a History Prof. -
and if I will get Mr. Baker one day as my driver - I tell'ya - I
will get really worried.
If this boosterism seems out of character for a primetime populist like Carlson, he doesn't seem to mind
the dissonance. He speaks glowingly of his Northwest Washington neighborhood, a tony enclave of liberal affluence where,
he tells me, he is surrounded by diplomats, lawyers, world bankers, and well-paid media types. They are reliably
"wonderful"; unfailingly "nice"; "some of my favorite people in the world." If you've watched Carlson on TV lately, you
know they are also wrong about virtually everything.
Indeed, throughout the 2016 election cycle Carlson routinely deployed his anonymous neighbors as a device
in his political punditry -- pointing to them as emblems of the educated elite's insular thinking. He scoffed at their
affection for Marco Rubio in the primaries, and he ridiculed their self-righteous reactions to the Republican nominee in
the general. "On my street," he
wrote
in
Politico Magazine
, "there's never been anyone as unpopular as Trump."
This shtick worked brilliantly for Carlson, catapulting him from a weekend hosting gig to the coveted 9
p.m. slot in Fox's primetime lineup. He now regularly pulls in more than 3 million viewers a night -- a marked improvement
on the program he replaced -- and he counts the commander in chief among his loyal fans. Just this past weekend, President
Trump set off a minor international firestorm when he suggested Sweden was experiencing an immigrant-fueled spike in
crime -- a (
dubious
)
claim he picked up by watching
Tucker Carlson Tonight
.
In an era when TV talking heads are more influential than ever, Carlson has suddenly -- and rather
improbably -- emerged as one of the most powerful people in media. The question now is what he wants to do with that perch.
To the extent that Carlson's on-air commentary these days is guided by any kind of animating idea, it is
perhaps best summarized as a staunch aversion to whatever his right-minded neighbors believe. The country has reached a
point, he tells me, where the elite consensus on any given issue should be "reflexively distrusted."
"Look, it's really simple," Carlson says. "The SAT 50 years ago pulled a lot of smart people out of every
little town in America and funneled them into a small number of elite institutions, where they married each other, had
kids, and moved to an even smaller number of elite neighborhoods. We created the most effective meritocracy ever."
"But the problem with the meritocracy," he continues, is that it "leeches all the empathy out of your
society The second you think that all your good fortune is a product of your virtue, you become highly judgmental,
lacking empathy, totally without self-awareness, arrogant, stupid -- I mean all the stuff that our ruling class is."
Carlson recounts, with some amusement, how he saw these attitudes surface in his neighbors' response to
Trump's victory. He recalls receiving a text message on election night from a stunned Democratic friend declaring his
intention to flee the country with his family. Carlson replied by asking if he could use their pool while they were
gone.
"I mean people were, like, traumatized," he says. And yet, in the months since then, "no one I know has
learned anything. There's been no moment of reflection It's just, 'This is what happens when you let dumb people
vote.'" Carlson finds this brand of snobbery particularly offensive: "Intelligence is not a moral category. That's what
I find a lot of people in my life assume. It's not. God doesn't care how smart you are, actually."
McKay Coppins
is a staff writer at The Atlantic and the author of The Wilderness, a book about the battle over the future of the Republican Party.
...In it, Krugman attempts to account for the no-growth economy by marshaling
the stock-in-trade legerdemain of academic economics: productivity,
demographics, and labor metrics. Krugman actually knows zip about what afflicts
us in the present disposition of things, namely the falling
energy-return-on-energy-investment in the oil industry, which is approaching
the point where the immense activity of getting oil out of the ground won't be
worth the cost and trouble of doing it. And since most of the things we do and
produce in this economy are based on cheap oil - with no reality-based prospect
of replacing it with so-called "renewables" or as yet undiscovered energy
rescue remedies - we can't generate enough wealth to maintain anything close to
our assumed standard of living. We can't even generate enough wealth to pay the
interest on the debt we've racked up in order to hide our growing energy
predicament. And that, in a nutshell, is what will blow up the financial
system. And when that department of the economy goes, the rest will follow.
... ... ...
So, on one side you have Trump and his trumpets and trumpistas heralding the
return of "greatness" (i.e. a booming industrial economy of happy men with
lunchboxes) which is not going to happen; and on the other side you have a
claque of clueless technocrats who actually believe they can "solve" the
productivity problem with measures that really only boil down to different
kinds of accounting fraud.
You also have an American public, and a mass media, who do not question the
premise of a massive "infrastructure" spending project to re-boot the
foundering economy. If you ask what they mean by that, you will learn that they
uniformly see rebuilding our highways, bridges, tunnels, and airports. Some
rightly suspect that the money for that is not there - or can only be summoned
with more accounting fraud (borrowing from our future). But on the whole, most
adults of all political stripes in this country think we can and should do
this, that it would be
a good thing
.
And what is this infrastructure re-boot in the service of? A living
arrangement with no future. A matrix of extreme car dependency that has zero
chance of continuing another decade. More WalMarts, Target stores, Taco Bells,
muffler shops, McHousing subdivisions, and other accoutrement of our fast-zombifying
mode of existence? Isn't it obvious, even if you never heard of, or don't
understand, the oil quandary, that we have shot our wad with all this? That we
have to start down a different path if we intend to remain human?
It's not hard to describe that waiting world, which I've done in a bunch of
recent books. We're going there whether we like it or not. But we can make the
journey to it easier or harsher depending on how much we drag our heels getting
on with the job.
History is pretty unforgiving. Right now, the dynamic I describe is
propelling us toward a difficult reckoning, which is very likely to manifest
this spring as the political ineptitude of Trump, and the antipathy of his
enemies, leaves us in a constitutional maelstrom at the very moment when the
financial system comes unglued. Look for the debt ceiling debate and another
Federal Reserve interest rate hike to set off the latter. There may be yet
another converging layer of tribulation when we start blaming all our problems
on Russia, China, Mexico, or some other patsy nation. It's already obvious that
we can depend on the Deep State to rev that up.
== quote ==
...In it, Krugman attempts to account for the no-growth
economy by marshaling the stock-in-trade legerdemain of
academic economics: productivity, demographics, and labor
metrics. Krugman actually knows zip about what afflicts us
in the present disposition of things, namely the falling
energy-return-on-energy-investment in the oil industry,
which is approaching the point where the immense activity
of getting oil out of the ground won't be worth the cost
and trouble of doing it. And since most of the things we
do and produce in this economy are based on cheap oil -
with no reality-based prospect of replacing it with
so-called "renewables" or as yet undiscovered energy
rescue remedies - we can't generate enough wealth to
maintain anything close to our assumed standard of living.
We can't even generate enough wealth to pay the interest
on the debt we've racked up in order to hide our growing
energy predicament. And that, in a nutshell, is what will
blow up the financial system. And when that department of
the economy goes, the rest will follow.
... ... ...
So, on one side you have Trump and his trumpets and
trumpistas heralding the return of "greatness" (i.e. a
booming industrial economy of happy men with lunchboxes)
which is not going to happen; and on the other side you
have a claque of clueless technocrats who actually believe
they can "solve" the productivity problem with measures
that really only boil down to different kinds of
accounting fraud.
You also have an American public, and a mass media, who do
not question the premise of a massive "infrastructure"
spending project to re-boot the foundering economy. If you
ask what they mean by that, you will learn that they
uniformly see rebuilding our highways, bridges, tunnels,
and airports. Some rightly suspect that the money for that
is not there - or can only be summoned with more
accounting fraud (borrowing from our future). But on the
whole, most adults of all political stripes in this
country think we can and should do this, that it would be
a good thing.
And what is this infrastructure re-boot in the service
of? A living arrangement with no future. A matrix of
extreme car dependency that has zero chance of continuing
another decade. More WalMarts, Target stores, Taco Bells,
muffler shops, McHousing subdivisions, and other
accoutrement of our fast-zombifying mode of existence?
Isn't it obvious, even if you never heard of, or don't
understand, the oil quandary, that we have shot our wad
with all this? That we have to start down a different path
if we intend to remain human?
It's not hard to describe that waiting world, which
I've done in a bunch of recent books. We're going there
whether we like it or not. But we can make the journey to
it easier or harsher depending on how much we drag our
heels getting on with the job.
History is pretty unforgiving. Right now, the dynamic I
describe is propelling us toward a difficult reckoning,
which is very likely to manifest this spring as the
political ineptitude of Trump, and the antipathy of his
enemies, leaves us in a constitutional maelstrom at the
very moment when the financial system comes unglued. Look
for the debt ceiling debate and another Federal Reserve
interest rate hike to set off the latter. There may be yet
another converging layer of tribulation when we start
blaming all our problems on Russia, China, Mexico, or some
other patsy nation. It's already obvious that we can
depend on the Deep State to rev that up.
Revoking trade deals will not help American middle classes
The advent of global supply chains has changed production patterns in the US
by Larry Summers
FEBRUARY 5, 2017
Trade agreements have been central to American politics for some years. The idea that renegotiating
trade agreements will "make America great again" by substantially increasing job creation and economic
growth swept Donald Trump into office.
More broadly, the idea that past trade agreements have damaged the American middle class and that
the prospective Trans-Pacific Partnership would do further damage is now widely accepted in both
major US political parties.
As Senator Daniel Patrick Moynihan once observed, participants in political debate are entitled
to their own opinions but not their own facts. The reality is that the impact of trade and globalisation
on wages is debatable and could be substantial. But the idea that the US trade agreements of the
past generation have impoverished to any significant extent is absurd.
There is a debate to be had about the impact of globalisation on middle class wages and inequality.
Increased imports have displaced jobs. Companies have been able to drive harder bargains with workers,
particularly in unionised sectors, because of the threat they can outsource. The advent of global
supply chains has changed production patterns in the US.
My judgment is that these effects are considerably smaller than the impacts of technological progress.
This is based on a variety of economic studies, experience in hypercompetitive Germany and the observation
that the proportion of American workers in manufacturing has been steadily declining for 75 years.
That said I acknowledge that global trends and new studies show that the impact of trade on wages
is much more pronounced than a decade ago.
But an assessment of the impact of trade on wages is very different than an assessment of trade
agreements. It is inconceivable that multilateral trade agreements, such as the North American Free
Trade Agreement, have had a meaningful impact on US wages and jobs for the simple reason that the
US market was almost completely open 40 years ago before entering into any of the controversial agreements.
American tariffs on Mexican goods, for example, averaged about 4 per cent before Nafta came into
force. China had what was then called "most favoured nation" trading status with the US before its
accession to the World Trade Organization and received the same access as other countries. Before
the Korea Free Trade Agreement, US tariffs on Korea averaged a paltry 2.8 per cent.
The irrelevance of trade agreements to import competition becomes obvious when one listens to
the main arguments against trade agreements. They rarely, if ever, take the form of saying we are
inappropriately taking down US trade barriers.
Rather the naysayers argue that different demands should be made on other countries during negotiations
- on issues including intellectual property, labour standards, dispute resolution or exchange rate
manipulation. I am sympathetic to the criticisms of TPP, but even if they were all correct they do
not justify the conclusion that signing the deal would increase the challenges facing the American
middle class.
The reason for the rise in US imports is not reduced trade barriers. Rather it is that emerging
markets are indeed emerging. They are growing in their economic potential because of successful economic
reforms and greater global integration.
These developments would have occurred with or without US trade pacts, though the agreements have
usually been an impetus to reform. Indeed, since the US does very little to reduce trade barriers
in our agreements, the impetus to reform is most of what foreign policymakers value in them along
with political connection to the US.
The truth too often denied by both sides in this debate is that incremental agreements like TPP
have been largely irrelevant to the fate of middle class workers. The real strategic choice Americans
face is whether the objective of their policies is to see the economies of the rest of the world
grow and prosper. Or, does the US want to keep the rest of the world from threatening it by slowing
global growth and walling off products and people?
Framed this way the solution appears obvious. A strategy of returning to the protectionism of
the past and seeking to thwart the growth of other nations is untenable and would likely lead to
a downward spiral in the global economy. The right approach is to maintain openness while finding
ways to help workers at home who are displaced by technical progress, trade or other challenges.
" The right approach is to maintain
openness while finding ways to help workers at home who are displaced by technical progress,
trade or other challenges."
People like Summers, DeLong, PGL and Krugman have been saying
this for 30 years ever since NAFTA was passed.
The voters no longer believe them. They're like the boy who cried wolf.
I would actually agree with the stance in general, if there
would be an actuall intention to help the affected
people/populations, but there is none. Retraining for yet
another job that doesn't exist (in sufficient volume so you
can realistically get it) is not help. It is just cover for
victim blaming - see we forgive you for choosing an incorrect
career, here is your next chance, don't blow that one too
(which we know "you will" as there are not enough jobs there
either).
Must-Read: Five things are going on with respect to
America's blue-, pink-, and--increasingly--white lower-middle
and middle-middle working classes. Three of them are real,
and two of them are fake:
Technology: It has--worldwide--greatly amplified
manufacturing labor productivity, accompanied by limited
demand for manufactured goods: few of us want more than one
full-sized refrigerator, and very very few of us want more
than two. That means that if you are hoping to be relatively
high up in the wage distribution by virtue of your position
as a hard-to-replace cog on a manufacturing assembly line,
you are increasingly out of luck. If you are hoping for high
blue-collar wages to lift your own via competition, you are
increasingly out of luck.
Legal and institutional bargaining power: The fact that
bargaining power has flowed to finance and the executive
suite and away from the shop- and assembly-floor is the
second biggest deal here. It could have been otherwise--this
is, primarily, a thing that has happened in English-speaking
countries. It has happened much less elsewhere. It could have
happened much less here.
Macro policy: Yes, the consequences of the Reagan deficits
were to cream midwestern manufacturing and destroy worker
bargaining power in export and import-competing industries.
Yes, the low-pressure economies of Volcker, late Greenspan,
and Bernanke wreaked immense damage. Any more questions?
Globalization: Globalization deepens the division of
labor, and does so in a way that is not harmful to
high-paying manufacturing jobs in the global north. The
high-paying manufacturing jobs that require skills and
expertise (as opposed to the lower-paying ones that just
require being in the right place at the right time with some
market power) are easier to create and hold on to if you can
be part of a globalized value chain than otherwise. This is
largely fake.
Trade agreements: This is a nothingburger: completely
fake.
As somebody who strongly believes that supply curves slope
up--are neither horizontal nor vertical--and that demand
curves slope down--are neither horizontal nor vertical--I
think that Larry Summers is misguided here when he talks
about how "companies have been able to drive harder bargains
with workers, particularly in unionised sectors, because of
the threat they can outsource." This was certainly true since
the 1950s with the move of American manufacturing to the
south, and the rise of deceptively-named "right-to-work"
laws. But the threat to outsource is zero-sum on a national
level: the balance of payments balances. Individual sectors
lose--and manufacturing workers have been big losers. But
that is, I think, only because of our macro policies. If we
were a normal global North manufacturing power--a Germany or
a Japan--exporting capital and running a currency policy that
did not privilege finance, he would not be talking a out how
"companies have been able to drive harder bargains with
workers, particularly in unionised sectors, because of the
threat they can outsource." He would be talking about how the
opportunity to participate in global value chains increases
the productivity of semi-skilled and skilled manufacturing
workers in the U.S.
Thus I think Larry conceded too much here. Blame macro
policy. Blame technology. Blame the conflict between the
market society's requirements that only property rights
matter and that everything pass a profitability test against
people's strong beliefs that even if they have no property
rights they have rights to stable communities, stable
industries, and stable occupations. But, to channel Pascal
Lamy, look not at the finger but at the moon here.
However, Larry is right on his main point: NAFTA really
ain't the problem:
Lawrence Summers: Revoking Trade Deals Will Not Help
American Middle Classes: "There is a debate to be had about
the impact of globalisation on middle class wages and
inequality...
For Delong to be right on trade, thousands of rust belt
politicians, journalists, and business leaders and a few
hundred thousand workers would have to be delusional.
He is
right in the sense that it is too late to revoke NAFTA, the
damage is done.
I expect that if you look at the pre-bellum South, there will
be plenty of examples of stagnant wages, low interest
rates...
In Mexico, wages never rose regardless of monetary
policy.
The point that I've been making for a while: despite a few
progressive economists delusions for rapid economic growth to
tighten wages, it won't happen for the following reasons.
1) most employers will just say 'no,' probably encouraged
centrally by the US Chamber of Commerce and other industry
associations. Collusion? You bet.
2) employers will just move jobs abroad, where there's
plenty of slack. Flexible labor markets has been one of the
big goals of globalization, promoted by the usual suspects
including 'librul' economists like Krugman.
3) immigration, which will be temporarily constrained as
Trump deports people, but will ultimately be resumed as
employers demand cheap, malleable labor.
I disagree. It happened in late 90s. The ideas you mention
are factors, including the decline of unions.
What has
happened in recent decades is that asset bubbles - like the
dot.com and housing bubbles - have popped sending a high
pressure economy into a low pressure one with higher
unemployment.
Neoliberal economists often talk about "flexible labor
markets" as desirable but I don't think Krugman ever has.
Maybe he has in a roundabout, indirect way.
Fed funds
rates were consistently about double the rate of inflation.
The fact that the economy boomed and wages increased was due
to the tech boom--an unrepeatable anomaly. The Fed and
Clinton administration unsuccessfully attempted to stifle it
with high rates and budget balancing.
To make sure that wages never rose again, Clinton signed
China PNTR, granting China access to WTO, ushering in the
great sucking sound of jobs going to China. Krugman cheered.
"Fed funds rates were consistently about double the rate
of inflation."
That doesn't matter. What matters is if they were
tightening or loosening. Where they reducing access to credit
or expanding it.
The real history is that Democrats on the FOMC wanted to
raise rates - as Dean Baker has discussed.
Greenspan decided not to raise rates for various reasons
and unemployment stayed low at around 4 percent with wages
sharing in productivity gains until the Dot.com stock bubble
popped.
I see no reason why you should believe labor markets will
never get tight again and that even if they do it won't lead
to increased worker bargaining power and higher wages.
There are numerous reasons why wages won't increase even if
labor markets tighten...you just don't want to acknowledge
the nefarious consequences of neoliberal policies: business
collusion, offshoring, immigration, and the tax system's
preference for returns of returns to capital over wages,
which preferences technology.
The real interest rate was around 2.5% per your own argument
which was a lot lower than real rates in the 1980's. So by
any reasonable standard - we did have easy money.
"Another round of tax and regulatory giveaways can create a
short-term boom," as part of the race to the bottom for
wages...IOW Republicans and their Democratic allies will have
succeeded when American wages are about the same as wages in
China or Mexico. But, per their logic, then jobs will be
plentiful because there will be no need to off-shore.
Yep...slavery is the most direct method of keeping wages low.
The policies I outlined--monopsony, offshoring, and
immigration--are all a fall back, to be used when industry
can't use their best policy.
If the neoliberal elite can't part with at least a small part
of their privileges, the political destabilization will
continue and they might lose everything.
"People of privilege will always risk their complete
destruction rather than surrender any material part of their
advantage." -- John Kenneth Galbraith
You may know that JK Galbraith served on the US' evaluation
of strategic bombings effect in WW II.
He is one of the
minority whose opinion was suppressed by the military
industry complex which concluded outside the A bomb no
relation to bombing and victory was proven, including both
industry output and energy production in Germany.
Allied bombing did kill a lot of civilians, which if
Germans or Japan had won bomber commanders would have been
hanged.
"...the political destabilization will continue and they
might lose everything."
Or they might find a way to end the
political destabilization. You know, we're not arresting you,
we just want to know, in the war on Muslim terrorists and
Mexican criminals, are you with us or against us? You'd be
surprised (or maybe you wouldn't!) how the question is enough
to quiet everybody down.
"... Because that's what pays and what brought him where he is now. Krugman is not a scientist ready to be burned for his convictions. He is a despicable presstitute. Such people have no morals. ..."
"... Plato oil might throw a monkey wrench into such projections. Globalization is based on cheap oil and consume obscene amount of it for transportation of food and goods from one continent to another. ..."
"... Also Kunsler question stands: what type of growth do we need? Growth of what? Of Wall Street banks and hedge funds? Of private equity sharks ? Do we need more Wal-Marts, more McDonalds? Do we need more battleships, fighter planes and attack helicopters? ..."
"... Or we need more hybrid and electrical cars, huge upgrade of the US national grid (east-West high voltage lines, new, safer types of nuclear reactors and huge investments in improving oil extraction technologies. ..."
Did he really know nothing of economic history? Did he not think that the US would follow 19th
century free trade colonies and semi-colonies into dustbin and economic hell of deindustrialization?
Had Krugman never honestly heard of the city of Camden? Did he never wonder at the consequences
of 0% tariffs in a mercantilist world?
Time for free trade economists to sit down, be quiet and admit their mistakes.
"Why did Krugman insist free trade would be wonderful?"
Because that's what pays and what brought him where he is now. Krugman is not a scientist
ready to be burned for his convictions. He is a despicable presstitute. Such people have no morals.
Absolutely the best description and explanation of Trump and his presidency that I read
" Trump administration is basing its budget projections on the assumption that the U.S.
economy will grow very rapidly over the next decade - in fact, almost twice as fast as independent
institutions like the Congressional Budget Office and the Federal Reserve expect. There is,
as far as we can tell, no serious analysis behind this optimism; instead, the number was plugged
in to make the fiscal outlook appear better.
I guess this was only to be expected from a man who keeps insisting that crime, which is
actually near record lows, is at a record high, that millions of illegal ballots were responsible
for his popular vote loss, and so on: In Trumpworld, numbers are what you want them to be,
and anything else is fake news. ..."
I'm going to keep this metric in mind whenever Trump or his Administration declares something
to be right and everyone else wrong, i.e., fake news
Plato oil might throw a monkey wrench into such projections. Globalization is based on cheap oil
and consume obscene amount of it for transportation of food and goods from one continent to another.
Also Kunsler question stands: what type of growth do we need? Growth of what? Of Wall Street
banks and hedge funds? Of private equity sharks ? Do we need more Wal-Marts, more McDonalds? Do
we need more battleships, fighter planes and attack helicopters?
Or we need more hybrid and electrical cars, huge upgrade of the US national grid (east-West
high voltage lines, new, safer types of nuclear reactors and huge investments in improving oil
extraction technologies.
The political stability of neoliberal society much like stability of Bolshevism depends on
whether the promises of higher standard of living for everybody are delivered.
If not, and for the bottom 80% they were not, the society enters the period of political instability.
Which in the USA probably has started with the election of Trump.
MSM dogs who are now barking at Trump are barking to the wrong tree.
Article in NYT yesterday re an essentially jobless recovery
in the TX oil industry. Technology has advanced to the point
where they only need a small fraction of workers they did a
few years ago to get the oil out of the ground. (Lose-lose in
that lower extraction costs support lower fuel costs which
support higher CO2 emissions and there's no employment gain.)
Will post the link to the NYT article later.
Texas Oil Fields Rebound From Price Lull, but Jobs Are
Left Behind
The industry is embracing technology, and finding new ways to
pare the labor force. But as jobs go away, what of
presidential promises to bring them back?
By CLIFFORD KRAUSS
The temporary adrenaline shot may help some people
"temporarily" (probably a decade or so), vs. no help at all.
In the long run we are all dead, but you can have had more or
less of a life before that. A decade is a significant period
in anybody's life.
Revoking trade deals will not help American middle classes
The advent of global supply chains has changed production
patterns in the US
by Larry Summers
FEBRUARY 5, 2017
Trade agreements have been central to American politics
for some years. The idea that renegotiating trade agreements
will "make America great again" by substantially increasing
job creation and economic growth swept Donald Trump into
office.
More broadly, the idea that past trade agreements have
damaged the American middle class and that the prospective
Trans-Pacific Partnership would do further damage is now
widely accepted in both major US political parties.
As Senator Daniel Patrick Moynihan once observed,
participants in political debate are entitled to their own
opinions but not their own facts. The reality is that the
impact of trade and globalisation on wages is debatable and
could be substantial. But the idea that the US trade
agreements of the past generation have impoverished to any
significant extent is absurd.
There is a debate to be had about the impact of
globalisation on middle class wages and inequality. Increased
imports have displaced jobs. Companies have been able to
drive harder bargains with workers, particularly in unionised
sectors, because of the threat they can outsource. The advent
of global supply chains has changed production patterns in
the US.
My judgment is that these effects are considerably smaller
than the impacts of technological progress. This is based on
a variety of economic studies, experience in hypercompetitive
Germany and the observation that the proportion of American
workers in manufacturing has been steadily declining for 75
years. That said I acknowledge that global trends and new
studies show that the impact of trade on wages is much more
pronounced than a decade ago.
But an assessment of the impact of trade on wages is very
different than an assessment of trade agreements. It is
inconceivable that multilateral trade agreements, such as the
North American Free Trade Agreement, have had a meaningful
impact on US wages and jobs for the simple reason that the US
market was almost completely open 40 years ago before
entering into any of the controversial agreements.
American tariffs on Mexican goods, for example, averaged
about 4 per cent before Nafta came into force. China had what
was then called "most favoured nation" trading status with
the US before its accession to the World Trade Organization
and received the same access as other countries. Before the
Korea Free Trade Agreement, US tariffs on Korea averaged a
paltry 2.8 per cent.
The irrelevance of trade agreements to import competition
becomes obvious when one listens to the main arguments
against trade agreements. They rarely, if ever, take the form
of saying we are inappropriately taking down US trade
barriers.
Rather the naysayers argue that different demands should
be made on other countries during negotiations - on issues
including intellectual property, labour standards, dispute
resolution or exchange rate manipulation. I am sympathetic to
the criticisms of TPP, but even if they were all correct they
do not justify the conclusion that signing the deal would
increase the challenges facing the American middle class.
The reason for the rise in US imports is not reduced trade
barriers. Rather it is that emerging markets are indeed
emerging. They are growing in their economic potential
because of successful economic reforms and greater global
integration.
These developments would have occurred with or without US
trade pacts, though the agreements have usually been an
impetus to reform. Indeed, since the US does very little to
reduce trade barriers in our agreements, the impetus to
reform is most of what foreign policymakers value in them
along with political connection to the US.
The truth too often denied by both sides in this debate is
that incremental agreements like TPP have been largely
irrelevant to the fate of middle class workers. The real
strategic choice Americans face is whether the objective of
their policies is to see the economies of the rest of the
world grow and prosper. Or, does the US want to keep the rest
of the world from threatening it by slowing global growth and
walling off products and people?
Framed this way the solution appears obvious. A strategy
of returning to the protectionism of the past and seeking to
thwart the growth of other nations is untenable and would
likely lead to a downward spiral in the global economy. The
right approach is to maintain openness while finding ways to
help workers at home who are displaced by technical progress,
trade or other challenges.
" The right approach is to maintain openness while finding
ways to help workers at home who are displaced by technical
progress, trade or other challenges."
People like Summers,
DeLong, PGL and Krugman have been saying this for 30 years
ever since NAFTA was passed.
The voters no longer believe them. They're like the boy
who cried wolf.
Economix - Explaining the Science of Everyday Life
Undoing the Structural Damage to Potential Growth
By JARED BERNSTEIN MARCH 3, 2014 11:00 AM
What follows is macroeconomics, but I'll start with the
micro - a microcosm, in fact, of the larger idea I'm hoping
to get at here.
I think it was around 1998, and I was on a tram between
terminals at O'Hare Airport in Chicago. Two young men, who
clearly worked for the airport (they had a bunch of badges
dangling around their necks) were trying to figure out how
they knew each other, while I eavesdropped. Turned out they
had met each other in prison.
At the time, I was beginning a research project on the
benefits of full employment, and my first thought was, "Aha -
another example of how tight labor markets pull in the
hard-to-employ." This was also the era of work-based welfare
reform, and while analysts worried that employers would avoid
those with welfare histories, strong demand turned out to an
antidote to such preferences.
Basically, profiling based on gender, race and experience
is a luxury that employers can't afford when the job market
is really tight. That is not to imply, of course, that
employers broadly discriminate, but there is strong evidence
that many do, most recently against the long-term unemployed.
In tight markets, however, they face a choice of indulging
their preferences or leaving profits on the table, and
profits usually win.
Now, put this story aside for a second and let's turn to
the macro. A few months ago, I reported on a study by a few
Federal Reserve economists with pretty striking results of
the damage done to the economy's future growth rate by the
deep and protracted downturn known as the Great Recession.
The Congressional Budget Office just published a similar
analysis, resulting in the chart below showing growth in
gross domestic product as projected in 2007, before the
recession, and a revised projection from this year. By 2017,
the budget office predicts that the new and decidedly
not-improved level of G.D.P. will be 7.3 percent below the
old projection.
What does 7.3 percent of lost gross domestic product
actually mean? Well, last year G.D.P. amounted to about $16.8
trillion, and 7.3 percent of that comes to around $1.2
trillion. Conventional estimates translate that into more
than 10 million jobs.
It would be very good to avoid that fate. The thing is,
both the Fed economists and the Congressional Budget Office
basically argue that while their estimates are admittedly
uncertain, that fate cannot be avoided - it's baked into the
economic cake by the assumption that once your trend growth
rate slows as ours has, it does not come back barring some
positive, unforeseen shock. Here is how the Fed guys put it:
Policy makers cannot undo labor market damage once it has
occurred, but must instead wait for it to fade away on its
own accord; in other words, there is no special advantage,
given this specification, to running a high-pressure economy.
I disagree! I think the damage can be at least partly
reversed precisely by running "a high-pressure economy." I
saw it myself that day in the airport.
Technically, I'm talking about "reverse hysteresis." When
a cyclical problem morphs into a structural one, economists
invoke the concept of hysteresis. When this phenomenon takes
hold, the rate at which key economic inputs like labor supply
and capital investment enter the economy undergoes a
downshift that lasts through the downturn and well into the
expansion, reducing the economy's speed limit. But what I'm
suggesting here is that by running the economy well below
conventional estimates of the lowest unemployment rate
consistent with stable inflation, and doing so for a while,
we can pull workers back in, raise their career trajectories,
improve their pay and their living standards, and turn that
downshift to an upshift that raises the level and growth rate
of G.D.P.
Won't that be inflationary? Three points. First, if
anything, the current economy is suffering from inflation
that is too low (same with Europe), so near-term
growth-oriented policy seems clearly safe in this regard.
Second, the precise relationship between full employment and
inflation is poorly understood. When that latter-1990s story
above was taking place, economists frequently and incorrectly
warned that full employment would dangerously juice
inflation. Third, the correlation between these two variables
- inflation and labor market tightness - has become far
weaker in recent years (i.e., the Phillips Curve has
flattened, for those who like the jargon).
How do we reverse the hysteresis process (which is to ask:
How do we get back to very tight labor markets)? In earlier
posts, I've suggested a number of policies that would help,
including investment in public goods, direct job creation,
reducing the trade deficit and work-sharing. Still, you may
well be wondering, "Wait a minute - this dude wants us to go
with him down this path because of a conversation he
overheard 16 years ago?"
O.K., I'll admit that the economic journals are not
busting with evidence in support of reverse hysteresis. But
those of us who closely monitored full-employment economies
have observed and documented significantly positive labor
supply and investment outcomes. (True, a lot of that
investment has flowed into bubbles; I'm not saying this idea
solves every problem.)
The employment rates for young African-American adults,
like the guys I saw in the airport, averaged around 70
percent in the 1970s and '80s, but hit 80 percent in the late
1990s; they are in the mid-60s now. The employment rates for
single mothers also hit new highs in those years. The labor
force participation rate, itself an important victim of
hysteresis right now, hit its all-time high at the end of the
1990s expansion. In other words, full employment pulled a lot
of new people into the job market.
As part of the full-employment project I'm running at the
Center on Budget and Policy Priorities (and have written
about before on this blog), a number of top economists are
looking into the relationships between fiscal policy, and
hysteresis and reverse hysteresis. They are coming up with
some compelling findings, which I'll share once they are
ready. For now, allow me to assert the following: We have
shown we can do a lot of economic damage. With the political
will, sorely lacking these days, it can also be undone.
"What does 7.3 percent of lost gross domestic product
actually mean? Well, last year G.D.P. amounted to about $16.8
trillion, and 7.3 percent of that comes to around $1.2
trillion. Conventional estimates translate that into more
than 10 million jobs."
Obama's Economic Disappointment by Narayana Kocherlakota
In January 2009, at the beginning of Obama's first term,
the nonpartisan Congressional Budget Office issued a 10-year
forecast for the U.S. economy, including such indicators as
unemployment, gross domestic product, the budget deficit,
government debt and interest rates. Here's a table comparing
the CBO's expectations for the year 2015 to what has actually
happened:
NGDP forecast to grow 33 percent, actually grew 22
percent.
"A final argument for gradually adjusting policy relates
to the desirability of achieving a prompt return of inflation
to the FOMC's 2 percent goal, an objective that would be
advanced by allowing the unemployment rate to decline for a
time somewhat below estimates of its longer-run sustainable
level. To a limited degree, such an outcome is envisioned in
many participants' most recent SEP projections. A tight labor
market may also work to reverse some of the adverse
supply-side developments resulting from the financial crisis.
The deep recession and slow recovery likely have held back
investment in physical and human capital, restrained the rate
of new business formation, prompted discouraged workers to
leave the labor force, and eroded the skills of the long-term
unemployed.15 Some of these effects might be reversed in a
tight labor market, yielding long-term benefits associated
with a more productive economy. That said, the quantitative
importance of these supply-side mechanisms are difficult to
establish, and the relevant research on this point is quite
limited."
"... Privilege: still exorbitant. Here's a nice analysis of the international role of the dollar. This is the same argument I tried to make in my Roosevelt Institute piece on trade policy last summer. The Economist* says it better: ..."
"... "Unlike other aspects of American hegemony, the dollar has grown more important as the world has globalised, not less. As economies opened their capital markets in the 1980s and 1990s, global capital flows surged. Yet most governments sought exchange-rate stability amid the sloshing tides of money. They managed their exchange rates using massive piles of foreign-exchange reserves Global reserves have grown from under $1trn in the 1980s to more than $10trn today. ..."
"... Dollar-denominated assets account for much of those reserves. Governments worry more about big swings in the dollar than in other currencies; trade is often conducted in dollar terms; and firms and governments owe roughly $10trn in dollar-denominated debt. the dollar is, on some measures, more central to the global system now than it was immediately after the second world war. ..."
"... America wields enormous financial power as a result. It can wreak havoc by withholding supplies of dollars in a crisis. When the Federal Reserve tweaks monetary policy, the effects ripple across the global economy. Hιlθne Rey of the London Business School argues that, despite their reserve holdings, many economies have lost full control over their domestic monetary policy, because of the effect of Fed policy on global appetite for risk. ..."
"... America's return on its foreign assets is markedly higher than the return foreign investors earn on their American assets That flow of investment income allows America to run persistent current-account deficits -- to buy more than it produces year after year, decade after decade." ..."
Privilege: still exorbitant. Here's a nice analysis of the international role of the dollar.
This is the same argument I tried to make in my Roosevelt Institute piece on trade policy last
summer. The Economist* says it better:
"Unlike other aspects of American hegemony, the dollar has grown more important as the
world has globalised, not less. As economies opened their capital markets in the 1980s and 1990s,
global capital flows surged. Yet most governments sought exchange-rate stability amid the sloshing
tides of money. They managed their exchange rates using massive piles of foreign-exchange reserves
Global reserves have grown from under $1trn in the 1980s to more than $10trn today.
Dollar-denominated assets account for much of those reserves. Governments worry more about
big swings in the dollar than in other currencies; trade is often conducted in dollar terms; and
firms and governments owe roughly $10trn in dollar-denominated debt. the dollar is, on some
measures, more central to the global system now than it was immediately after the second world
war.
America wields enormous financial power as a result. It can wreak havoc by withholding
supplies of dollars in a crisis. When the Federal Reserve tweaks monetary policy, the effects
ripple across the global economy. Hιlθne Rey of the London Business School argues that, despite
their reserve holdings, many economies have lost full control over their domestic monetary policy,
because of the effect of Fed policy on global appetite for risk.
During the heyday of Bretton Woods, Valιry Giscard d'Estaing, a French finance minister (later
president), complained about the "exorbitant privilege" enjoyed by the issuer of the world's reserve
currency. America's return on its foreign assets is markedly higher than the return foreign
investors earn on their American assets That flow of investment income allows America to run
persistent current-account deficits -- to buy more than it produces year after year, decade after
decade."
Exactly right. You can have free capital mobility, or you can have a balanced trade for the
US. But you can't have both, as long as the world depends on dollar reserves."
"... As far as the folks with uninsured loans that would have lost, well, many of these people were hedge-fund types and other financial institutions. They would have paid a price for not being very competent. The bailout ensured that they would not be left to suffer the consequences of their actions. ..."
"... As far as the top executives of the banks, while some were shown the door, many of these people continue to earn paychecks in the millions or tens of millions as the financial sector remains hugely bloated. We had an opportunity to downsize the financial sector in one fell swoop, eliminating this enormous albatross which sucks money out of the economy and hands it to the very rich. ..."
"... The narrow securities and commodities trading sector is now close to 2.5 percent of GDP ($470 billion a year). In the seventies, it was around 0.5 percent of GDP. Does anyone believe that capital is being allocated more effectively today than forty years ago or that our savings are safer? ..."
Contrary to What Robert Samuelson Says We Did Bail Out the Bankers and Did Not Prevent a Second Great
Depression
Dean Baker
13 February 2017
Robert Samuelson is unhappy that people continue to believe something that is true - that we bailed
out the bankers - and happy that people still believe something that is not true - that we prevented
a second Great Depression. In his column Samuelson complains:
"The real Dodd-Frank scandal is that this misinterpretation of events, widely embraced by both
parties, has been allowed to stand. In many bailouts, banks' shareholders suffered huge losses or
were wiped out; similarly, top managers lost their jobs. The point was not to protect them but to
prevent a collapse of the financial system."
Okay, let's imagine the counterfactual. We decide to take the free market seriously and let it
work its magic on Citigroup, Bank of America, Goldman Sachs and the rest of the high rollers. These
huge banks all go into bankruptcy with the commercial banking parts of the operations taken over
by the FDIC. All insured deposits are fully protected, with the FDIC and Fed having the option to
raise the limits to protect smaller savers.
The shareholders of these banks are out of luck. They have zero. Samuelson is right that share
prices were depressed during the crisis, but that is different than going to zero. Furthermore, operating
with the protection of Treasury Secretary Timothy Geithner's promise of "no more Lehmans," the share
prices soon bounced back.
As far as the folks with uninsured loans that would have lost, well, many of these people
were hedge-fund types and other financial institutions. They would have paid a price for not being
very competent. The bailout ensured that they would not be left to suffer the consequences of their
actions.
As far as the top executives of the banks, while some were shown the door, many of these people
continue to earn paychecks in the millions or tens of millions as the financial sector remains hugely
bloated. We had an opportunity to downsize the financial sector in one fell swoop, eliminating this
enormous albatross which sucks money out of the economy and hands it to the very rich.
The narrow securities and commodities trading sector is now close to 2.5 percent of GDP ($470
billion a year). In the seventies, it was around 0.5 percent of GDP. Does anyone believe that capital
is being allocated more effectively today than forty years ago or that our savings are safer?
The additional money spent operating this sector is a huge waste from an economic standpoint,
which also plays a large role in the upward redistribution of the last four decades.
In terms of preventing a second Great Depression, this is a nice children's story that the elite
like to tell. (And, they get very mad and call people names if they don't agree - we are supposed
to take name-calling by the elites very seriously.) We know how to get out of a depression, we learned
that lesson in the last one. It's called "spending money."
The claim that we would have suffered a decade of double-digit unemployment if we had not bailed
out the banks is premised on a political claim, not an economic one, that we would never have spent
the money needed to boost the economy out of a prolonged slump. This claim is not only that any initial
stimulus would have been shot down, but even after two, three, or five years of double-digit unemployment
the president and congress would not have agreed to a serious stimulus.
This is a pretty strong claim since even tax cuts would serve to provide stimulus, albeit less
than spending. (Anyone ever meet a Republican that didn't like tax cuts?) Remember, the first stimulus
occurred with George W. Bush in the White House and a 4.7 percent unemployment rate. Those making
the claim that in the counterfactual the politicians in Washington never would have done anything
to boost the economy has a really low opinion of these folks intelligence and/or honesty. That would
be a good topic for a column, if someone really believed it.
I looked at Mexico production by area as below. The numbers in brackets show
percentage year on year change for exit rate 2016 to 2017. Only the small area
in northern offshore, which is not LMZ or Cantarell, is not declining. Even KMZ
looks like it might be turning over. If it goes like Cantarell as Nitrogen and
or water start hitting the producers then the will be a big acceleration, if
not then the decline might flatten out as the other fields make up increasingly
less of the mix. The plateau that KMZ achieved after N2 injection was started
is now quite long for an offshore field.
"... For the past eight years we were fed the constant stream of stories of mythical economic "recovery" and all the wealth created in this period from the bankers and economist. And as a result of all that illusory "wealth" retail sector was able to sell goods to consumers with empty wallets and maxed credit cards only by smashing prices to the bone leaving almost nothing for the profit. ..."
"... Imagine the state of economy without this extra unconventional 5-6 mbd and $100 per barrel as a consequence. ..."
Steve,
Oil industry, and particularly Shale & Oil Sands part, lives in hope for the
last 3 years. And that is not reality, because hope means dream. Unless
someone's live in reality, here and now, they are dreaming. They are dead
weight, and tomorrow which will fulfill all their hopes is never to come.
Shale and Oil Sands are mostly North American origin of production with 5-6 mbd.
where we have the most consumption per capita in the entire world.
For the past eight years we were fed the constant stream of stories of
mythical economic "recovery" and all the wealth created in this period from the
bankers and economist. And as a result of all that illusory "wealth" retail
sector was able to sell goods to consumers with empty wallets and maxed credit
cards only by smashing prices to the bone leaving almost nothing for the
profit.
Imagine the state of economy without this extra unconventional 5-6 mbd
and $100 per barrel as a consequence.
I disagree that it implies subsidies. What is implied is that
when oil is scarce, the price of oil will increase and more of the expensive
oil will be profitable to produce. Eventually the high oil price will lead
to greater efficiency in the use of oil (as measured by real World GDP per
barrel of oil consumed) and also some substitution of natural gas, and
electricity for oil in the transportation sector and after 10 to 20 years
demand for oil might fall below the supply of oil and lead to lower prices.
My main point is that the supply of oil depends on profits, not on net
energy or exergy of the oil produced. Profits will depend on revenue minus
costs and revenue will be determined by the oil price which is a function of
both
supply and demand for oil.
There is strong evidence that the US economy can survive only oil
prices below $100 per barrel without sliding into recession. Some
researchers put this magic "perma-stagnation" oil price as low as $60
per barrel. I think understanding of this fact is partially behind
this prolonged "oil price crush".
So it might well be that we do not have the freedom of "arbitrary"
oil prices in the US economy. and in worst case scenario we have oil
prices already close to the celling, unless the economy is
restructured.
That's why your line of thinking about this problem might be wrong.
In other words, this is a very serious situation for the USA. "The
long emergency" as James Howard Kunstler aptly called it (not that I
agree with his line of thinking or endorse his book).
Meanwhile the US is wasting time and money on the wars of
neoliberal expansion, which partially is "brut force" way of securing
privileged access to remaining oil deposits. Around 5 trillion was
spent so far, or 167 millions of Toyota Priuses at $30K per car, or
half of the US passenger fleet (there were 260 million registered
passenger vehicles in the United States in 2014)
So instead on concentrating on this fundamental problem that nation
is facing, the USA is just "waiving dead chicken" with the military
force. If we add the possibility of Seneca cliff that situation might
be even worse then I described. The nation does need radically cut the
amount of oil spend on personal transportation. Using all ways for
this that are technologically feasible. Because this is the lowest
hanging fruit. But very little was done in this direction on both
federal and state levels.
Meanwhile we expanded the fleet of SUVs for personal transportation
- this is now the most popular "form factor" for personal car, which
overtook sedans. Growth of the fleet of hybrid cars is unacceptably
slow (over 4 million units sold through April 2016; Japan, a much
smaller and compact nation, sold 5 millions).
Even such a symbolic act as switching of all personal government
cars to hybrids was not done by Obama administration, which preferred
only talk about the problem and opened spigot for shale junk bond. The
only their "real" achievement was "Iran deal" which probably was
instrumental in crashing oil prices. Which probably helped Obama much
more than it helped the USA economy as whole, but we should not
inspect the teeth of the horse that was given as a gift, as old saying
goes.
Also attempts to lessen huge traffic jams in large cities like NY
and SF are feeble, despite the fact that the technology is available
both to reroute the cars and to optimize traffic lights.
Converting existing roads network into "one way" network is almost
unheard outside the city center, even when two more or less adequate
parallel roads exists with the short distance of each other.
Variation of the number of lines each way is practiced very rarely,
in some city centers and selected bridges.
Green wave for traffic using Wifi connections between traffic
lights and cameras is in a very rudimentary stage.
The only progress that I noticed is that more and more traffic
lights at night autodetect the presence of the car on intersection and
switch to green light if there is not traffic in "main" direction.
From what I have seen it is generally accepted that EROEI for FF has
been and will continue (lots of peer reviewed papers documenting this)
to be in a downward trend. Then it is open for projections how fast
this downward trend will develop and its consequences.
What matters
is net affordable energy that will be made available for societies.
In the short term it is about flows, longer term; size and quality of
remaining stocks.
Selling assets to pay down dividends/buy back stocks is
liquidation.
Further up in this post Nathanel shared some great insights;
"Personally, from my background in general financial analysis,
the two really big metrics I've been watching lately: Dividends in
excess of current earnings mean a company in decline. Borrowing money
to pay the dividend means a company which is in unmanaged,
uncontrolled decline. (Managed decline would involve liquidating
assets to pay dividends, and *paying off* debt.)
"
"Look at what they do and not what they say."
Several big oil companies have used money for stock buy backs, but
another trend I found interesting is also how they move into renewable
(solar and wind). This should be an indicator about what these
companies find profitable.
Just to be clear, I think renewables are great, but we also need to
recognize the dominant role of FF.
"... First of all, the unemployment rate in the USA actually increased from 4.7% to 4.8%, despite the job growth. ..."
"... Simply put, due to the way the Bureau of Labour Statistics is gathering its data, almost 700,000 people have been 'removed' from the civilian population. The total size of the civilian population is rebalanced on a yearly basis, in January. ..."
"... The smaller size of the civilian population caused the labor force participation rate to increase by 0.2%, and this by itself caused the unemployment rate to increase as well, despite the job creation number. ..."
"... But perhaps even more important is the extremely disappointing update on the average hourly earnings ('AHE') . The AHE increase fell to just 0.1% in January on a month/month comparison, but the real catch is in the details. ..."
Ever since the gold report was published, the gold price moved up. This caught several investors
by surprise, as some of them even continued to dump gold, scared by what appeared to be a good jobs
report.
'Appeared to be', because?
Yes, 227,000 new jobs
were created , and we can't deny that's a positive evolution. However, the increased job number
is also the only positive thing in the jobs report, and there are two other issues that haven't really
been highlighted.
Two issues that could, and probably will, have an impact on the interest rate decisions later
this year.
First of all, the unemployment rate in the USA actually increased from 4.7% to 4.8%, despite
the job growth.
How is that possible?
Simply put, due to the way
the Bureau of Labour Statistics
is gathering its data, almost 700,000 people have been 'removed' from the civilian population.
The total size of the civilian population is rebalanced on a yearly basis, in January.
Source: Bureau of Labor Statistics
The smaller size of the civilian population caused the
labor force participation rate
to increase by 0.2%, and this by itself caused the unemployment rate to increase as well, despite
the job creation number.
And as the unemployment rate is one of the key factors the Federal Reserve is looking at to determine
whether or not a rate hike is appropriate, this small increase could have an impact on the decision
making process. And keep in mind this is the second consecutive increase in the unemployment rate
as the December unemployment rate also came in higher than the unemployment rate in November (and
this did not include any population rebalancing exercise).
But perhaps even more important is the extremely disappointing update on the
average hourly earnings
('AHE') . The AHE increase fell to just 0.1% in January on a month/month comparison, but the
real catch is in the details.
Exactly because the 0.1% increase is focusing on a monthly update, the revision of the wage increase
in December is actually telling you something more serious is going on. The December wages have been
revised down by 0.2%, so if that would NOT have happened, the average hourly wage would have DECREASED
in January.
"... There are two major forces behind secular stagnation: ..."
"... 1. Neoliberalism which undermines the purchasing power of lower 80% of population due to redistribution of wealth up. Like in the "classic Marxism" theory of the absolute impoverishment of the working class under capitalism. ..."
"... 2. End of cheap oil, which undermines both productivity growth and, simultaneously, neoliberal globalization, which was the source of (fake) productivity growth in GDP statistics (which by itself is very suspect). ..."
Short-Run Effects of Lower Productivity Growth
: A Twist on the Secular Stagnation Hypothesis:
Despite interest rates being very close to zero, US GDP growth has been anemic in the last four
years largely due to lower optimism about the future, more specifically to downward revisions in
growth forecasts, rather than legacies of the past. Put simply, demand is temporarily weak
because people are adjusting to a less bright future.
Anne,
> Having read the paper again, the work still reads as
parody. I find no coherence.
I agree. Looks like
There are two major forces behind secular
stagnation:
1. Neoliberalism which undermines the purchasing
power of lower 80% of population due to redistribution of
wealth up. Like in the "classic Marxism" theory of the
absolute impoverishment of the working class under
capitalism.
2. End of cheap oil, which undermines both
productivity growth and, simultaneously, neoliberal
globalization, which was the source of (fake) productivity
growth in GDP statistics (which by itself is very
suspect).
"... This is really good stuff. And I think it gets to the central core of what is wrong with traditional macroeconomic models: bargaining power. ..."
"... Technology is not driving consolidation. It only enables it, by enabling larger economies of scale. Without IT, managing operations in a large and complex company would require much higher personnel overhead just to handle all the data, information, coordination, conveying orders, etc. This overhead is not a linear function of size. ..."
Last week, we published
the first part
of an extensive three-part interview with Bernard
(Bernie) Yeung, Dean of National University of Singapore's business
school. This is the second part. The third and final part will be
published next week. In the first part of our interview with Bernard
Yeung, we talked about his seminal papers on power concentration, on
which he collaborated mainly with Randall Morck. The discussion there
focused on dominant players and their ability to shape their own
markets, the capital market, and even the economy. In this
installment, we talk about how free trade may have backfired, how
wealth and power are connected, how big corporations can control and
distort the market for ideas, and why governments may actually prefer
markets that are controlled by dominant players rather than by many
competitors. ...
... GR: Can you elaborate on what you call economic conditioning,
mainly the part in which you say it may not be vicious?
BY: Let's imagine I got rich and now own and control a bank. I'm
saying to myself that I know what's right and what's wrong. I cannot
allow new people to set up new banks and compete with me in an unruly
manner. That will create chaos. They will cause people to lose their
jobs. I help to set up barriers to entry in the financial sector. I
myself lend money to my rich friends and they will create many jobs. I
think I'm right-and I am righteous.
I overlook the positive effects that competition will generate for the
economy. I overlook the contributions of new ideas and innovations
which leads to strong future growth and good future jobs. I focus on
my lending to the established, which preserves current jobs and
creates interest earnings for me. I am not [attuned] to the
counterfactuals. I'm conditioned to believe that all I've done is good
for my bank, for the financial sector, and for the country. That's
economic conditioning. I'm not being sinful. I'm not being vicious. I
only see what's good for me, and I believe that's good for the whole
society.
GR: This was the case for the Robber Barons in the U.S. more then a
century ago.
BY: Oh yes, and I believe it's very much how Donald Trump is thinking.
GR: Do you think they genuinely believe that the country should be run
by the incumbent oligarchs?
BY: If it ain't broken don't fix it, right? 'Look at all the good
things I have done. If I'm so rich and keep so many people employed, I
cannot be so bad. I will never see people who cannot get into the
market because of my behavior. I never see them. Indeed, I am always
thinking that, in helping my established friends and using business
judgment that brings me profits, I help society, create jobs and
wealth, and my donations help society further. I see myself and my
friends as pillars of our country.' ...
... In a system with dominance, and I've already put that in paper, I
think there is built-in resistance to change. Rich people don't like
change and competition. And they themselves don't invest too much in
innovations that displace their own business; that is, no creative
self-destruction.
I believe that a vibrant and robust capital market that gives people
with good ideas a chance is very important. The problem is failed
capital markets, lack of transparency and alternatives and dominant
players in control who don't encourage entrepreneurship. ...
... GR: Is there empirical data that shows that, when we take out
economic concentration, we get better growth, better distribution of
income, and a better quality of life?
BY: Yes. Once, Randall, his student, and I looked at a current list of
top firms, compared it to a similar list of 20 years earlier, and
asked ourselves how many survived. We showed that high stability is
correlated with lower growth, lower productivity, and poorer Gini. ...
This is really good stuff. And I think it gets to the central
core of what is wrong with traditional macroeconomic models:
bargaining power.
Traditional models assume a supply curve
and a demand curve, but do not ask *why* particular players
might have a particullar supply or demand curve. If there is
market power, and sooner or later just via random chance the
number of players in any given area will shrink down to a
small numbe rthat have bargaining power, the ultimate rule
is, "Thims that has, gits."
"thims that has, gits" is why libertarianism -- and
neoclassical economic theory -- are ultimately nonsense.
An individual
worker typically has undiversified skills, constraints on
liquidity, constraints on mobility, limited information on
local market wages, few options of potential employers and a
short time horizon to consider.
Labor markets behave in very unideal fashion and generally
disadvantage the worker in negotiations with employers.
Employers, these days, can set up offices anywhere,
outsource, hire from large numbers of candidates, and they
usually know what they can get away with paying. They can
also survive without a position filled for an extended time,
while employees can only go limited time without a job.
think of each corporation as encapsulated by a circle! Each
circle encapsulates the corporate directors, the company's
workers, customers, suppliers, creditors, part time
consultants, institutional share holders, private
shareholders and foreign share holders. Such overlapping
circles constitute a Venn-diagram which provides a view of
innumerable distinct classes of folks.
Technology is not driving consolidation. It only enables it,
by enabling larger economies of scale. Without IT, managing
operations in a large and complex company would require much
higher personnel overhead just to handle all the data,
information, coordination, conveying orders, etc. This
overhead is not a linear function of size.
Fundamentally
with IT this overhead doesn't go away, but the maximal size
at which a company still remains manageable increases.
There is one "driving" aspect of technology - as having
technology becomes mandatory, the technology overhead costs
for smaller businesses tend to be larger, again because of
economies of scale and differentials in variable cost being
low compared to fixed cost, i.e. having an IT installation
that has twice the capacity doesn't cost nearly twice as much
(because it doesn't need twice the equipment and staff).
Actually you did mention the latter aspect. But in the case
you cite it is not only about the equipment and operating
cost of technology, but (by law or de facto) high fixed costs
to manage all kinds of processes and bureaucracy. Again, the
technology is only there to enable or execute the processes
and the complexity.
"... Start focusing on the predators at the top of the pyramid scheme and then watch how those same culprits and their networks "come to the rescue" in order to capitalize on the "pain and suffering" they help to create. I see a pattern, don't you? ..."
"... Don't forget student debt. Not only are many recent graduates underemployed or unemployed, they're in the hole tens of thousands. Further incentive not to make any sort of financial commitment. Student debt should be cancelled to promote earlier family formation. ..."
"... It's almost a negative feedback loop. ..."
"... Very true. Capitalism only works as long as enough people (or states) are able to take up ever-larger debt, to close the gap (called "profit") between expensive goods and comparatively cheap labour. ..."
"... Good to point out Gat Gourmet. Almost all outsourced jobs in the beginning of places where I have worked were once part of the company. ..."
"... Still, it's hard not to notice there could be nothing more convenient to the corporate and governmental powers-that-be than a nonprofit that takes it upon itself to placate, insure, and temper the precarious middle-class. ..."
"... So which ivy-league management school / guru is most culpable in unleashing the whole lean-mean-outsourcing-machine monster because it's slowly destroying my ability to remain in IT. ..."
"... "how the big company love of outsourcing means that traditional employment has declined and is expected to fall further." ..."
"... Story of my life! I'm still trying to get paid for freelance work that I did in December. This payment delay is wreaking havoc with MY cash flow. ..."
"... Another area of friction and waste with IT consulting and other contracting, is that an employee of a company simply and efficiently plugs into their existence administrative system (HR, timekeeping, payroll, etc). ..."
"... I work in engineering at a gigantic multinational vehicle manufacturer and the role of "consultants" has been expanding with time. Rather than consultants being people with specific technical expertise who work on one subsystem component with clear interfaces to other things, it now encapsulates project managers and subsystem / function responsible people who need to have large networks inside the company to be effective. ..."
"... Considering the huge amount of time it takes to get a new hire up and running to learn the acronyms and processes and the roles of different departments, it's a bit absurd to hire people for such roles under the assumption that they can be quickly swapped out with a consultant from Company B next week. ..."
"... It's pretty clear that management sees permanent employees on the payroll as a liability and seeks to avoid it as much as possible. ..."
"... Because they, unlike us, understand class. I can state for a fact that the Big Three auto companies are well aware of how much cheaper health care costs are for them in Canada and how much better off they would be here, cost-wise, with a national health care system where McDonald's and Wal-mart have to pay the same per hour or per employee cost as they do. But it turns out cost isn't everything. Corporate (capitalist) solidarity rules. ..."
"... Michelle Malkin ..."
"... βThe Marxian capitalist has infinite shrewdness and cunning on everything except matters pertaining to his own ultimate survival. On these, he is not subject to education. He continues wilfully and reliably down the path to his own destructionβ. ..."
The Wall Street Journal has an important new story,
The End of Employees
, on how the big company love of outsourcing means that traditional employment
has declined and is expected to fall further.
Some key sections of the article:
Never before have American companies tried so hard to employ so few people. The outsourcing wave
that moved apparel-making jobs to China and call-center operations to India is now just as likely
to happen inside companies across the U.S. and in almost every industry.
The men and women who unload shipping containers at Wal-Mart Stores Inc. warehouses are provided
by trucking company Schneider National Inc.βs logistics operation, which in turn subcontracts with
temporary-staffing agencies. Pfizer Inc. used contractors to perform the majority of its clinical
drug trials last year .
The shift is radically altering what it means to be a company and a worker. More flexibility for
companies to shrink the size of their employee base, pay and benefits means less job security for
workers. Rising from the mailroom to a corner office is harder now that outsourced jobs are no longer
part of the workforce from which star performers are promoted
For workers, the changes often lead to lower pay and make it surprisingly hard to answer the simple
question βWhere do you work?β Some economists say the parallel workforce created by the rise
of contracting is helping to fuel income inequality between people who do the same jobs.
No one knows how many Americans work as contractors, because they donβt fit neatly into the
job categories tracked by government agencies. Rough estimates by economists range from 3% to 14%
of the nationβs workforce, or as many as 20 million people.
As you can see, the story projects this as an unstoppable trend. The article is mainly full of success
stories, which naturally is what companies would want to talk about. The alleged benefits are two-fold:
that specialist contractors can do a better job of managing non-core activities because they are specialists
and have higher skills and that using outside help keeps companies lean and allows them to be more "agile".
The idea that companies who use contractors are more flexible is largely a myth
.
The difficulty of entering into outsourcing relationships gives you an idea of how complex they are.
While some services, like cleaning, are likely to be fairly simple to hand off, the larger ones are
not. For instance, for IT outsourcing, a major corporation will need to hire a specialist consultant
to help define the requirements for the request for proposal and write the document that will be the
basis for bidding and negotiation. That takes about six months. The process of getting initial responses,
vetting the possible providers in depth, getting to a short list of 2-3 finalists, negotiating finer
points with them to see who has the best all-in offer, and then negotiating the final agreement typically
takes a year. Oh, and the lawyers often fight with the consultant as to what counts in the deal.
On the one hand, the old saw of "a contract is only as good at the person who signed it" still holds
true. But if a vendor doesn't perform up to the standards required, or the company's requirements change
in some way not contemplated in the agreement, it is vasty more difficult to address than if you were
handling it internally. And given how complicated contracting is, it's not as if you can fire them.
So as we've stressed again and again, these arrangements increase risks and rigidity. And companies
can mis-identify what is core or not recognize that there are key lower-level skills they've mis-identified.
For instance, Pratt & Whitney decided to contract out coordination of deliveries to UPS. Here is the
critical part:
For years, suppliers delivered parts directly to Prattβs two factories, where materials handlers
unpacked the parts and distributed them to production teams. Earl Exum, vice president of global
materials and logistics, says Pratt had βa couple hundredβ logistics specialists. Some handlers
were 20- or 30-year veterans who could βlook at a part and know exactly what it is,β he adds .
Most of the UPS employees had no experience in the field, and assembly kits arrived at factories
with damaged or missing parts. Pratt and UPS bosses struggled to get the companiesβ computers in
sync, including warehouse-management software outsourced by UPS to another firm, according to Pratt..
The result was $500 million in lost sales in a quarter. Pratt & Whitney tried putting a positive
spin on the tale, that all the bugs were worked out by the next quarter. But how long will it take Pratt
& Whitney to recover all the deal costs plus the lost profits?
There's even more risk when the company using contractor doesn't have much leverage over them. As
a Wall Street Journal reader, Scott Riney, said in comments:
Well managed companies make decisions based on sound data and analysis. Badly managed companies
follow the trends because they're the trends. A caveat regarding outsourcing is that, as always,
you get what you pay for. Also, the vendor relationship needs to be competently managed. There was
the time a certain, now bankrupt technology company outsourced production of PBX components to a
manufacturer who produced components with duplicate MAC addresses. The contract manufacturer's expertise
obviously didn't extend to knowing jack about hardware addressing, and the management of the vendor
relationship was incompetent. And what do you do, in a situation like that, if your firm isn't big
enough that your phone calls get the vendor's undivided attention? Or if you're on different continents,
and nothing can get done quickly?
We've discussed other outsourcing bombs in past posts, such as when British Airways lost "tens of
millions of dollars" when its contractor, Gate Gourmet, fired employees. Baggage handlers and ground
crew struck in sympathy, shutting down Heathrow for 24 hours. Like many outsourced operations, Gate
Gourmet had once been part of British Airways.
And passengers blamed the airline
, not the wprkers.
Now admittedly, there are low-risk, low complexity activities that are being outsourced more, such
as medical transcription, where 25% of all medical transcriptionists now work for agencies, up by 1/3
since 2009. The article attributes the change to more hospitals and large practices sending the work
outside. But even at its 2009 level, the use of agencies was well established. And you can see that
it is the sort of service that smaller doctor's offices would already be hiring on a temp basis, whether
through an agency or not, because they would not have enough activity to support having a full-time
employee. The story also describes how SAP has all its receptionists as contractors, apparently because
someone looked at receptionist pay and concluded some managers were paying too much. So low level clerical
jobs are more and more subject to this fad. But managing your own receptionists is hardly going to make
a company less flexible.
Contracting, like other gig economy jobs, increase insecurity and lower growth.
I hate to belabor the obvious, but people who don't have a steady paycheck are less likely to make major
financial commitments, like getting married and setting up a new household, having kids, or even buying
consumer durables. However, one industry likely makes out handsomely: Big Pharma, which no doubt winds
up selling more brain-chemistry-altering products for the resulting situationally-induced anxiety and/or
depression. The short-sightedness of this development on a societal level is breath-taking, yet overwhelmingly
pundits celebrate it and political leaders stay mum.
With this sort of rot in our collective foundation, the rise of Trump and other "populist" candidates
should not come as a surprise.
I would add this. It was deplorable for Trump to have fired Acting AG Sally Yates after she ordered
Justice Department lawyers to stop defending Mr. Trumpβs executive order banning new arrivals to the
U.S. from seven Muslim-majority countries.
But Sally Yates was a hero for another reason. Yates was cracking down on systemic abuses by holding
top healthcare executives personally accountable for false Medicare and Medicaid claims and illegal
physician relationships.
I remember hoping: Well, maybe Obama will actually get some decent folks into the Judiciary bring
kids home from Iraq, maybe try for Medicare over 55 (to the advantage of the insurance & Pharma sectors?)
But the one thing I'd actually expected him to accomplish was enact
https://www.congress.gov/bill/110th-congress/senate-bill/2044
which would get the Kleptocrats a
few more years out of the moldering corpse of American Labor (and not hurt multinationals, who'd off-shored,
outsourced or speciously re-classified their largely undocumented, 3rd party, contingency/ gig employees
decades previously).
Wage-theft Democrats was a new concept to some of us more easily deluded working
class Yankees, reeling from Bush. I think a strong fantasy life's essential nowadays.
I imagine that this is among the pesky downsides of living in our YOOJ autocratic neo-Confederate
theocratic kleptocracy; wage theft has always been right at the top of both parties' platforms?
If they can't hide it, who will they blame it on?
"people who donβt have a steady paycheck are less likely to make major financial commitments,
like getting married and setting up a new household, having kids"
"more brain-chemistry-altering products for the resulting situationally-induced anxiety and/or depression."
Decline in family formation and a populace seeking to anesthetize itself are indications of a civilization
in decline. Our problem is much bigger than employment.
You can employ deplorables, you can enslave deplorables, you can kill deplorables. The only way
that a "return maximizing" system won't choose killing, is if the unit cost of killing is higher
than enslavement or employment. I can hope that the bureaucratic effect of increasing costs will
work faster on the cost of killing or enslavement. Reducing the cost of employment (regulations)
wouldn't hurt.
We'd guessed this was why Dickens, NiccolΓ² Machiavelli, Frederick Douglass, E. A. Blair &
Marx were being burnt by the DeVos Christians. Why teach management for FREE, when the drooling
Know Nothings will PAY to send their dead-eyed vipers to seminars or A Beka online curricula?
Eliminate environmental protections and the entire industry that investigates, researches,
enforces, litigates, and mitigates environmental impacts are likewise eliminated. These are generally
highly skilled professions, and has wide ranging impacts from workers all the way to the global
ecosystem. Then there are economic ripple effects on top of that.
If we are going to eliminate an entire career tree, health insurance is a better choice.
Not sure what this has to do with the article, but yes people will LOSE jobs to Trump, skilled
and socially beneficial jobs like at the EPA.
For heaven knows what, jobs building useless walls to nowhere I guess, which somehow in
Trumps warped mind is a more productive line of work (it won't even work to curtail immigration).
Thank you for your astute, pertinent & seldom mentioned comment (which to those of us in
QA, is something we've believed central to the issue, not a tangent or unexpected side benefit
of our sharecropper corporatocracy).
We'd noticed contract buy-outs & forced early-retirement
in the steel industry, in the 90's, our clients' engineers (scruffy & cantankerous, who'd stand
by us if we were right & replace us if we got out of hand) were all replaced by clueless, gullible
desk jockeys, devoid of empirically honed judgement eventually, we'd have 2-3 gnarled old
timers, amidst crews of neophytes (first they tried very well trained & knowledgeable foreign
nationals, then pensioners, let go from the vendors) finally, they tried to 1099 the desperate
ones, on the run from skip-chasers, deputies & repo-men.
They'd try sending us half way across
the country, mention nothing, then see what we'd do (once we figured out we'd earned no overtime?)
We'd be in Indian or Russian owned mills where 80% of the employees were totally undocumented
foreign nationals, many of the balance wildly underpaid temps.
And the good-old-boy management
resembled characters outa Harriet Beecher Stowe. Lots of our counterparts were straight back
from Afghanistan & Iraq, verifying that most of their gig- economy contingency employment had
all been the same, regardless of industry sector: off-shored aircraft, as well as bridge, structural,
water, nuclear, inspectors what regulation?
Leveraging guilt to rationalize the Invitation of the least educated into your nation from the
most barbaric failed states and cultures in the world is another sign of civic decay.
Yup, many of the Taxi and Uber drivers around here arrived and took out private loans to
get "educated" and now are deep in debt and are too ashamed to go home.
Start focusing on the predators at the top of the pyramid scheme and then watch how those
same culprits and their networks "come to the rescue" in order to capitalize on the "pain
and suffering" they help to create. I see a pattern, don't you?
Barbarians are at the gates but you may be looking in the wrong place. Beware all types
of people are "vulnerable" and they will more easily identify with other human beings living
under a variety of diminished circumstances. Victim shaming won't be a viable option in the
not so distant future.
Dave, I hope you are not including Syria in your "failed states and cultures" description.
Syrians are
very well educated
and will add much to any nation's economy.
It is not a sign of "civic decay"
in the Syrian culture, but a sign of civic decay in a nation that will not accept people from
a war zone. An invitation should not be dependent on one's education but on one's need and desire
to survive a war zone..
Iraqis were also comparatively educated, right up through university, under its autocratic
leader. Libyans were, by and large, well educated, or at least getting so, under its autocratic
leader. The most poorly educated, probably, are those countries which have been under US or
European hegemony for generations: a lot of Central and south America, a lot of Africa, etc.
Not to mention the US itself, which has been colonizing its own hinterland for many decades.
The same applies to countries like Canada, Australia, etc. particularly in terms of their indigenous
populations.
Don't forget student debt. Not only are many recent graduates underemployed or unemployed, they're
in the hole tens of thousands. Further incentive not to make any sort of financial commitment. Student
debt should be cancelled to promote earlier family formation.
This trend matches up with the trends of dropping life expectancy, especially among the lower half
of income earners, and with slowing economies globally.
It's almost a negative feedback loop.
Politcal implications: the rise of far right politics; if you are a monarchist, or want to create
an aristocracy, these trends are probably in your interest.
Sure, it is partly psychological but it also has direct connection (by DESIGN) to the fact that
such people don't have healthcare, even with Obamacare insurance. The idiots that sing the praises
of Obamacare and how millions now have insurance seem to think that means those people have HEALTHCARE
to go with it.
Insurance is theft. Insurance is not even remotely "healthcare". Much of those newly insured have
their insurance, thanks to a government subsidy, but STILL lack healthcare because their premiums
and deductibles are too high to allow them to see doctors. Thus, they're dying or going to die sooner
due to untreated maladies, but at least they paid insurance company CEOs their bonuses with their
subsidized insurance payments!
Mutual insurance however is (was) socialist by nature. The true mutuals were crushed out of
existence by share for share conversions to private companies that ripped off policy holders and
gave a big payday to the C suites and the lawyers. Thanks to inept state insurance commissioners
and assemblies for that one.
while having health insurance doesnt mean you have health care, not having it does mean not
having health care at all, short of having a life or death condition, as hospitals (for now an
way) are only required to stabilize you. they arent required to cure you.
but then the high deductible insurance is one of those scams that some politicians gave us
because they could suggest that the patient (customer) could just shop around for better deals.
course that depends on us patients knowing what medical treatment is best for us, and which is
the cheapest of those., the former pretty much requires patients to be as knowledgeable as doctors.
the latter means we have to know what the treatments cost. could luck with that
I would force policy-makers in every advanced western nation to read and reflect on the last paragraph,
because it describes a mindset and a series of practices that are now found everywhere in western economies.
As David Harvey reminds us in his book on the Contradictions of Capitalism, Marx identified long ago
that there was a contradiction between holding down employees wages, and still expecting them to have
the purchasing power to buy the goods their cheap labour was making.
This problem has become more acute
with time, simply because we buy a lot more "stuff" than they did in the 19th century, and we take a
lot longer to pay for it, often on credit. Houses, cars, household goods, even computers, are now significant
expenditure decisions, repaid at least over months, if not years and even decades. The social corollary
of mass home ownership, after all, is some assurance that you will be employed over the life of the
mortgage. Otherwise, not only won't you buy the house, you won't improve or extend it, or even maintain
it, so a whole series of other purchases won't get made, and the construction and maintenance industries
will have less work. Instead, you'll save money, so removing purchasing power from the economy.
I assume there are people in large private sector companies clever enough to under stand this, but as
always they are focused on how much money they can extract from the system in the next few years. After
that, if the system crashes, well, who cares, They're all right.
Very true. Capitalism only works as long as enough people (or states) are able to take up ever-larger
debt, to close the gap (called "profit") between expensive goods and comparatively cheap labour.
Watching developments in recent years, this very source of profit and thus base of the economic system
is, even on a global level, quite limited
Sure. Marx Capital 1 on the crisis of production. Marx capital 2 on the crisis of realization but
this constitutes just one undesirable aspect-this one indeed very macro- among the many others which
the expansion of the "contracting-subcontracting chain" has brought and will bring about.
The Wall
Street Journal article is-as it is to expect- late, blind to the core problems of workers and incapable
to see and understand the true practical raison ( & reasons) d'Γͺtre of outsourcing. I guess Yves
Smith purpose was just to broadly replicate WSJ article
Good to point out Gat Gourmet. Almost all outsourced jobs in the beginning of places where I have
worked were once part of the company. The entire art department save two management employees were played
off and rehired by a new company doing the same work with less benefits.
Then that company was later disolved. I have seen this many times in the corporate design field now. Usually ends with disaster
and he hire of folks some back to full time but most to freelance. So I guess in a way it works out
for the company in the end and not for the worker. Amazing the amount of money a company is willing
to lose this way then use the same to pay workers better.
An excellent critique, for those who were wondering. The take away paragraph, summing up
the actual work done and purpose of, the Freelancers Union:
Still, it's hard not to notice there could be nothing more convenient to the corporate
and governmental powers-that-be than a nonprofit that takes it upon itself to placate, insure,
and temper the precarious middle-class.
So which ivy-league management school / guru is most culpable in unleashing the whole lean-mean-outsourcing-machine
monster because it's slowly destroying my ability to remain in IT.
I don't know the answer to your question, but you would have to go back over twenty years to find
it. What I find remarkable is that even though everybody affected in the early stages could see what
a dumb, destructive idea it was, the MBA types never caught on, even though most of them were not
so far up the hierarchy they could not ultimately be affected.
Contractors need Guilds or Trade Associations that are well organized and legally able to set minimum
standards for billing and performance. This is an area where Trade Unions have failed with respect to
some professions, and apparently (from what I've heard) the RICO statutes need to be amended to allow
for this. It's time to rig the other side to make companies think twice before replacing employees with
temp workers or contractors, to keep jobs within the US, and to provide a cushion and a "floor" to those
that take the risk of entrepreneurship, preventing a race to the bottom.
Yes! Geographically bound temp unions or hiring halls for all temp workers allied with low-wage
worker associations. This is NOT something that established unions want, so who will agitate for
it?
Something like the I.W.W is what I'd like to see. Yea I know the response is: they are still
around? Well not what they were long ago of course, but with the prison strike, yes around and
rising.
"how the big company love of outsourcing means that traditional employment
has declined and is expected to fall further."
This line pissed me off this morning more than most other mornings. I literally just said goodbye
to a long-time colleague (Big Pharma) who is being outsourced as of today. The kicker(s):
The job is not high tech
Employee(s) trained their replacement who are H-1B from India
The company is moving the division to India
Of note, my state (MA) is responsible for over one-quarter of all H-1B's every year. Thankfully a
few in the industry are helping get the word out, like Nanex's Eric Hunsader yesterday. The outsourcing,
off-shoring, and H-1B abuse has to stop, but not sure The People have the will to hold political office
holders accountable enough to truly change this paradigm.
Agreed, but I've been saying the exact same thing since 1980, so I've been lobbying and being
a volunteer activist against this for many years, and yet I still run into women (not too many men
anymore) in their 60s and 70s who believe offshoring of American jobs, and insourcing foreign visa
replacement workers is fantastic (truly, we are a dumbed down society today, where they routinely
protest on behalf of the financial hegemons).
Best book on this (and I am no conservative and have never voted r-con) is Michelle Malkin's book
(with John Miano),
Sold Out!
This has been going on for a long time, and by design: with every "jobless recovery" one-fifth
of the workforce is laid off, and one-half of that one-fifth will never find another job, while one-half
of the remainder, will only find lower-paying jobs.
And each and every time, more jobs are restructured as temporary or contractor type jobs. We've
had a lot of "jobless recoveries" to date.
A recent study from Lawrence Katz and Alan Krueger found that 94% of the new jobs created over
the past some years were all part-time, while a study from Rutgers University a year or so ago found
that one-third of the new jobs created couldn't be verified as actually existing!
Nothing particularly new here, as it has been going on for quite some time (another great book
is Ron Hira's book,
Outsourcing America
).
In every category of labor blue and white collar the press is on to increase the supply and reduce
the demand for labor.
The book ends: The Clintons in 92′ put thru the WTO / NAFTA shut down 10's of millions of jobs
and factories blue & white collar. Obama did the same, with anticipating Hillary would be elected,
put forth the TTP to enable unlimited H1-b for tech workers from off shore. The Neo Liberal Democrats
were at the forefront of of this 25 year Plan for labor devaluation (with Republican help).
The Immigration Policy by government both illegal and legal were at the epicenter of increasing the
supply in all categories with various programs while Obama also increased the regulations to wipe out
more factories and deliberately reduce demand.
The solution is eliminate immigration in all forms until the 95 Million are employed and wages rise
by the equivalent of what was lost in the past 15 years plus Tariffs to enable a marginal cost compared
to imports to allow domestic factories to expand demand.
Increase the demand and lower the supply of labor will mean potentially a switch will occur from
1099 to W-2 as companies have to secure labor reliability in a short labor market which is squeezed.
The Millennials sooner or later will figure it out. Identity Politics which enables a greater supply
of labor and diversion of attention to intangible values at the expense of tangible values has to be
substituted for Labor Only Politics.
These young people have been duped based on the recent focus of the demonstrations. They don't understand
they were screwed deliberately and with great malice by "Going with Her".
I've been keeping count over the years, and as close as I can find, over 170,000 production facilities
were shipped out of the country. (Or, as David Harvey phrased it: "Identity politics instead of class
analysis.")
One aspect of outsourcing that the article does not hit upon is the impact on company cash flows,
which has some importance to large outsourcing initiatives. A company must pay its employees within
6 (it might be 7) days of the end of the pay cycle, which is typically two week. By contrast, when outsourcing,
at the end of the month the contractor will provide an invoice, the company will then pay according
to its payment cycle. This could be 30, 45, 60, 90, or even 120 days. The contractor still must pay
its bills, in essence it's providing a low cost loan to firm (which often has a lower cost of capital).
This approach, including the extension of payments has been largely driven by financial/business consultants.
It can actually get worse they might not pay you at all, hoping that you'll file a lawsuit,
which will be interpreted according to the contract, rather than legislation which covers employment
issues. The litigation costs might exceed any payments you'd receive.
My guess is that this wouldn't happen to an individual working under a 1099 (as word might
get around), and very large firms often have leverage (not providing continuing services), but
medium-size firms often get held up for months and years (especially once the contract has
ended).
Another thing the article glosses over is that most outsourcing is simply wage cutting. I have
never once seen confirmation of the notion that "specialist" firms provide better services at comparable
labor costs than firms can do in-house. The double-bubble is that firms (and public sector employers)
often spend more on outsourcing than they would doing the work in house despite the wage savings,
which all accrue to the outsourcer of course.
When the airlines went on their deliberate BK spree in the 90's, they outsourced flying to
regional carriers. Regional a/c (45-90 seaters) have higher CASM's than the a/c the airlines actually
owned. In brief, it is cheaper to transport 100 passengers on a 100 seat a/c than to transport
100 passengers on two 50 seat a/c. That's been a fact since the Wright brothers broke the ground.
FWIW, SouthWest never went the regional route, never went BK and pays their unionized employees
quite well.
The BK spree was all about breaking labor, not operational efficiencies that would actually
save money.
but now it seems the majors are not to happy with the regionals , cause customers cant tell
the difference between them, the next problem is that for some reason the regionals cant find
pilots. seems that pilots dont want to work for less than 30,000 a year.
Another area of friction and waste with IT consulting and other contracting, is that an employee
of a company simply and efficiently plugs into their existence administrative system (HR, timekeeping,
payroll, etc).
With a consultant, there has to be reconciliation between the vendor's records and the
company's records, which means work hours burned matching everything up. And that assumes they do match
up neatly; If the vendor says "our consultant worked 50 hours this week, pay them as such" and whoever
oversees the consultant at the company claims they only approved for 40 hours, now you've got a mess
on your hands, could potentially go to the lawyers.
The idea that companies who use contractors are more flexible is largely a myth.
The difficulty of entering into outsourcing relationships gives you an idea of how
complex they are. While some services, like cleaning, are likely to be fairly simple
to hand off, the larger ones are not.
I work in engineering at a gigantic multinational vehicle manufacturer and the role of "consultants"
has been expanding with time. Rather than consultants being people with specific technical expertise
who work on one subsystem component with clear interfaces to other things, it now encapsulates project
managers and subsystem / function responsible people who need to have large networks inside the company
to be effective.
Considering the huge amount of time it takes to get a new hire up and running to learn
the acronyms and processes and the roles of different departments, it's a bit absurd to hire people
for such roles under the assumption that they can be quickly swapped out with a consultant from Company
B next week.
It's pretty clear that management sees permanent employees on the payroll as a liability and seeks
to avoid it as much as possible.
"
It's pretty clear that management sees permanent employees on the payroll as a liability. "
No doubt correct. But why is that? Over time, mandates on employers - particularly large employers
- just keep escalating. Health care; pensions; overtime; layoff notifications: regulators just keep
raising the ante. Employers respond by trying to reduce their profile and present a smaller target
to their predators. Staying under 50 employees wins a lot of exemptions from federal regulations.
Taken to an extreme, some developing countries (Argentina being one example) have European-style
labor regulations guaranteeing job security and mandating generous compensation when employees are
laid off. With hardscrabble small businesses being in no position to shoulder such risks, the result
is that about 40 percent of employment is
trabajo en negro
, with no benefits or protections
whatsoever - a perfect example of unintended consequences.
Editorial comments such as "these [contracting] arrangements increase risks and rigidity" ignore
that government employment regulations
also
increase risks and rigidity. There's a balance
of power. Overreaching, such as Obama's surprise order to vastly increase the number of employees
subject to overtime pay, leads to employer pushback in the form of more contracting and outsourcing.
Getting whacked out of the blue with a big new liability is unfair.
Concur about costs, and health care is the big one. Every other industrialized nation we compete
against has national health care. Given that, why doesn't business support Medicare for all and
get health costs off their books? Plus it would be a damsite easier to start up a business if
one had health care.
Because they, unlike us, understand class. I can state for a fact that the Big Three
auto companies are well aware of how much cheaper health care costs are for them in Canada
and how much better off they would be here, cost-wise, with a national health care system
where McDonald's and Wal-mart have to pay the same per hour or per employee cost as they
do. But it turns out cost isn't everything. Corporate (capitalist) solidarity rules.
Yes, yes, damn yes!! It's about your class, not your race, not your education, not
your gender. As Lambert might say, identity politics (your race, your education, your
gender) is used to keep your eye
off
the prize: economic opportunity
and security.
It is also easier to have part-time workers because they are still covered by health insurance
in some sort of national health insurance system. In the US, the part-time workers will have
high turnover as they look for full-time jobs to get access to health insurance.
Workers are also more likely to start their own businesses to provide services since the
health insurance is just a fee they pay instead of an astronomical non-group insurance bill.
COBRA insurance premiums are ginormous if you need to continue coverage after you leave a company.
Economists have been decrying the lack of employee mobility and small business formation
over the past decade or so. Health insurance is probably a primary reason for this. Obamacare
hasn't been around long enough and with enough certainty to change that dynamic yet.
It's probably part of it, though I suspect the bad labor market is part of it as well.
It's one thing to quit a job to start a business when you think "if it doesn't work out,
I can always go back to my old career and easily be hired", another when quitting a good
job means one might not land another ever.
haven't seen any more info on Hollande's "Flex Security" plans to give corporations a way
to lay off workers to improve the corporation's revenue. French Labor was having none of it and
then Hollande went negative in the polls and was done for. Our contracting out former corporation
departments sounds like bad quality control at best. If the state whatever state you can name
is going to prop up all corporations everywhere because they can no longer successfully compete
then something is fundamentally wrong with the system that demands such murderous and mindless
competition.
well there also that wage theft rules, that employers don't like. course if you look at work
mans comp, you will find that it no longer works to protect employees any more. and maybe that
is also why employers are get rid of employees. plus there is all of that needing to manage them.
but you still end up having to manage vendors too, and while i suppose you could hire another
vendor to manage the vendors (not really sure this will work out well), it still leaves the biggest
problem
since consumers are about 70% of the entire economy (always wonder if this is true. because
almost all corporate 'investment' is done because of customer demand), seems like this business
fad, will end up with fewer customers (which seems to be the way its working too, as evidenced
by the falling sales figures from companies, even Apple), so it like business is like lemmings,
going a cliff, because some one else started
So are you a proponent of Medicare-for-all? It would be a tremendous benefit to corporations
to get out of the healthcare business and also increase employees' willingness to become freelancers
and consultants, since they'd never have to worry about healthcare.
The truth is that citizens expect a certain amount of social welfare and security. This can
be provided by 1) individuals themselves, 2) private players e.g. corporations, or 3) public players
e.g. govt. Each has downsides. If you expect individuals to provide for themselves, it will less
inefficient than having professional managers, and individuals will cut down on other consumption
and save more, thereby hurting an economy such as ours which is highly dependent on consumption.
This leaves companies and government. If companies lobby against public welfare programs like
nationalized health insurance, unemployment insurance, social security, etc., they shouldn't be
surprised if government foists those requirements back on them through back-door regulations.
To be fair to companies, most of the ones engaged in the "real economy" e.g. manufacturing,
actually wouldn't mind medicare for all, or some other program that relieves them of the burden
of providing healthcare to their employees. But they're being drowned out by the financial economy
of Wall St., banking, insurance, etc. who depend on putting more money in the hands of individuals
from whom they can extract much higher fees than they ever could from govt or corporate HR depts.
If companies don't want increased health mandates, for example, their enemy wasn't Obama: it
was the private health insurance companies that didn't want a public plan.
Yeah when I worked for one of the big 3 at an assembly plant, I felt that the use of temporary
contractors could have very negative implications.
Most of the staff though were reasonably well paid, although asked to work long hours. I think
though that overall, highly paid permanent workers pay for themselves many times over.
One aspect of the whole fandango that I don't get is how the IRS allows whole departments within
a company to be outsourced: If people show up at your plant or office every day to work on your tasks,
they are your employee, not a contractor. Is this melting away of the idea of an employee because of
lack of enforcement or some change in IRS rules that I am not aware of?
Basically, if you control a worker's day, and if that worker works regularly for you, the person
is your employee. I don't see how companies get away with this sleight of handavoiding, at the most
basic legal level, who is on staff or not. [Unless the result, as many note above, is to increase class
warfare.]
The company doesn't get away with it if someone is willing to whistleblow to the IRS and said
company fails the IRS 20-Factor Test (IC vs. employee). The nice thing there too, is that the tax
burden will be on the company and not the employee. While I don't advocate being a stoolie, if a
company wants to screw me over turn-about is fair play. I do the best I can to avoid those kinds
of companies in the first place.
"
One aspect of the whole fandango that I donβt get is how the IRS allows whole departments
within a company to be outsourced
. . "
If I understand your question correctly it is because a federal regulation was enacted by congress
(I believe one of them was faux-progressive, Jim McDermott, no longer in congress but co-founder
of the India Caucus, to replace American workers with foreign visa workers from India) which
forbids
oversight of the foreign visa program
- and yes, they established a federal regulation killing
oversight of the program by the government!
Someone quoted Norm Matloff (a known bigot) above. You are now quoting anchor child Filipino
bigot
Michelle Malkin
of all people ? It's not helping your case.
The H1-B program is a few hundred thousand
legal
tax paying people a year. There are
21 million Mexican illegals in this country. What do you think has more downward pressure on wages
? .005% H1-B (yeah, you read that right) of the total immigrant/wage pressure ? It's idiotic and
a purely bigoted worldview.
We are supposed to regard "a few hundred thousand" as bupkis when they are concentrated
in one sector?
The H1-B visa program has has a huge impact on wages in the IT sector and has virtually
eliminated entry-level computer science jobs. This is strategically foolhardy, in that the
US is not creating the next generation of people capable of running critical infrastructure.
And the illegal immigrants do pay taxes: sales, gas, and property taxes through their rents.
And many actually do pay FICA. The Treasury recognizes that certain Social Security numbers
are reused many times, and it's almost certainly for illegal immigrants. In fact, the IRS encourages
illegal immigrants to "steal" Social Security numbers:
That article whinges about possible tax credit scamming, but even that estimate is well
below what they pay in FICA, $12 billion. And pretty much none of them will draw benefits.
This is from memory, but I believe they collect over $4 billion from these SSN per year.
And most of these jobs are seasonal and/or too low wage for them to pay much in the way of
income taxes when they are being paid in cash.
H1-B is not in one industry, the .005% is spread across entry level jobs in all industries:
finance, automotive, insurance, arts, film, automation, etc. The total amount of H1-B is
minuscule, vanishingly close to zero in a country of 300+ million and 20+ million illegals.
You don't seem to be complaining about the tens of
millions
that used to concentrated
in one sector..actual manufacturing. Wonder why ? Here's a hint: that sector
used
to make computer peripherals, keyboards, mice, terminals, monitors, LCD's, chips, motherboards,
pretty much everything in the USA.
Employees in china, taiwan, etc pay zero USA taxes and they displaced millions of manufacturing
jobs. And ironically, you are using an entirely outsourced computer (that actually displaced
tens of millions of jobs in the aggregate) to complain about the minuscule .005% H1-B effect.
A few hundred thousand entry level coding jobs (which are ridiculously simple and lo-tech,
google
13 year olds
getting Microsoft certified to see how low down on the value
chain this is). You genuinely think writing a few for-loops (I am simplifying a little but
you get the idea) is hard ?
Certainly, way way less capital intensive and way way less barrier to entry than Hi-Tech
manufacturing. It's all going to be outsourced much faster than manufacturing was, since
there is literally no barrier to entry. And H1-B is a good thing, relatively speaking, compared
to full on outsourcing (just like manufacturing was).
Like I said, the only explanation for these anti H1-B posts is plain old bigotry. No
other explanation comes close.
Might as well finish my train of thought..then I'm outta here.
There are less H1-B visas this year than
refugees
, Refugees (not to mention
the 20 million illegals) also put downward pressure on wages across all industries, but
of course, those are all food servicing/picking/janitorial jobs and who cares about those
people right ? (sarcasm for the impaired)
So, coming back to H1-B's..let's take the logical alternative and ban all H1-B's entirely
and deport the ones on H1-B visas. What happens then ?
1) They can do the job exactly as well remotely (all they need is email/internet/skype).
2) They get paid even less (but more than zero).
3) They pay no taxes.
4) Their output is words..code is the same as prose and math. Good luck banning math/words..if
it can be printed on a t-shirt, it ain't bannable. (See the famous bernstein crypto case
from the early 90's for a illustration of this).
5) And finally..there are zero new jobs added for native USA'ians (which would now cost
more, given the alternative).
It makes the situation far worse than it is today. There is fewer local coffee shop
selling coffee, fewer rental units getting rented, fewer groceries getting bought, cars
being purchased, etc.
For a easily displaceable and low barrier to entry coding gig, there isn't any easy
answer. H1-B's are actually the best
solution
(or at the very least neutral),
not the problem.
The H1-B visa program is operated so as to wreck the bargaining power of native born young
U.S. workers. Young Americans are increasingly likely to be nonwhite AND from the less valued
(not Asian) subgroups of nonwhite. The damage H1-Bs do to our white Baby Boomers is almost
incidental at this point; they are aging out of the workforce. And given the intense age bigotry
of the IT subculture, they are not a factor within it at all at this point.
H1-B visas lock our striving, capable working class young people out of upward mobility.
Kids who are now graduating from say, San Jose State with skills as good as those of South
Asians don't get jobs that they are qualified for, because they are shut out of entry to the
business. They are disdained in Silicon Valley because the majority of entry level conduits
to employment are now locked up (via social contacts, and "who-you-know" relationships) by
men from the subcontinent.
Your race argument is pernicious and I suspect, promoted in the full the knowledge of this
fact. It is a great shame that we are relying on kooks like Malkin to promote obvious truths,
but the shame belongs to our morally derelict 'liberal' chattering class, not those who listen
to her and her ilk for lack of other sources.
An underappreciated aspect of contracting versus cultivating your own employees is that it hollows
out the organization to the point that it may no longer have competence to perform its mission. Having
an apparent success at contracting out menial tasks, the temptation is to keep going and begin to contract
out core functions. This pleases the accountants but leaves the whole organization dependent on critical
talent that has very little institutional loyalty. When an inevitable technical paradigm shift occurs,
who can you count on to give you objective and constructive advice?
Costs of training and cultivating employees are high, and it is tempting to think that these costs
can be eliminated by using contractors. It is strictly an apparent, short-term gain which will in due
time be revealed as a strategic mistake. Do we have to learn every lesson the hard way?
yes, and when I read that Pfizer farms out research, I also wondered if retention of the outsource
company contract is results-related. could new drug results hinge on a company wanting to keep their
Pfizer contract by telling them what they want to hear?
Agreed. Every time a company offshores jobs or goes through another round of layoffs, it loses
its institutional memory. This is particularly acute in the mainframe IT systems that prop up the
TBTFs (yep, they offshored these too). After a while, nobody understands exactly how these systems
work and can only get to the bottom of them by reading code, which is a pretty flawed way to learn
the business. This has been going on for years and nobody cares.
Centralized bargaining - a.k.a., sector wide labor agreements - is the only strategic answer to contracting
out. Done in continental Europe, French Canada, Argentina, Indonesia.
(Take a vacation from reality with Soma - one gram and I don't give a damn.)
The one word I don't see in your excellent writeup is
loyalty
. Companies, like countries
depend to a great extent on social constraints to keep people committed to the group. You cannot monitor
all people all the time and doing so causes them to turn against you. But companies staffed with contractors
and temps and temps supervising contractors have no loyalty to the company. Ergo no one employee has
any reason to go the extra inch or to turn down the chance to sell out for personal gain should the
opportunity arise.
All that imposes real costs that companies conveniently ignore because they are not always realized
in share price.
I was going to add the same thought, but use the label "goodwill." It is something that appears
on balance sheets in enormous amounts depending on what the accountants think it may represent.
There is a "goodwill bank" in the labor pool of any given company, and when the balance hits zero,
the company will fail, "emigrate" its capital, or go public to the greater fools. Companies are engaged
in a savage race to the bottom that is inherent in corporate structure: executives are now playing
with somebody else's money, and somebody else's life. If corporate liability were suddenly returned
to the days of the partnership, what a change we would see. And those days were not so long ago:
Wall Street remembers the 1960s.
PS What a treat to come here and see informative journalism and commentary instead of the monkey
cage.
My daughter was recruited and interviewed by Genentech and then sent to work for an organization
called PPD. PPD did nothing in this relationship, other than take money from Genentech pocketed about
1/2 of that and then pay her the rest. I really couldn't figure out what the heck the point of this
was, other than some long running strategy to ultimately depress salaries of Genentech chemists.
One of my kids works in a unionized metal foundry (they still exist in the US!). When they need
new workers, they bring several in through a temp agency for several months. If they can cut it and
are acceptable, then they get pulled into the union or into the plant management team. This allows
them to try out several people on a rent-to-own basis, but in the long run they become loyal company
employees with very low turnover.
Contract-to-hire is not new. The problem from an employee perspective is trying to evaluate
when a company is actually serious about hiring if the contractee does a good job, and when it's
just empty promises and they have no intent of making full time job offers at all.
BTW the Genentech scientists probably get a bunch of benefits like bonuses and stock options,
etc. that are not available to the contract workers. They probably have more protections if they
are terminated or laid off whereas the contract workers would be done that day. The really good contract
workers may get offers to work at the company for the long-run.
Outsourcing is done in the public realm, too; my first job after grad school was with a major housing
authority except it wasn't for them (despite me having a "housingauthority.org" email address). I
worked for a contractor of the housing authority, who paid us shit and treated us like cattle. I lasted
three months.
One area not discussed in this post is municipal outsourcing. What this means in practice is the
loss of organizational memory . assuming that records are not adequately maintained since the "old-timers"
were still around. But with the loss of human memory banks, no new ones (digital?) have taken their
place. Further, when consultants are hired for a specific project, when they have completed that project,
what they have learned as ancillary knowledge is lost cuz the end-product is all that counts, not the
process.
i.e. Rip up the entire street to find where the pipe is because the old public works director
who was replaced with a bright young woman with a degree before he qualified for his pension, got
even and deleted the maps on the software. :-)
Didn't Yves mention this loss of institutional memory in reference to fianancial services, or
was it banks, and their IT?
Further to government outsourcing:
Back a few years my wife and I worked for a school district on the East coast of Canada. The janitorial
service had been outsourced a few years previously, with the former head janitor becoming the main
contractor, who then hired other cleaning staff to work for him. He/she was already being squeezed
to reduce his rates, leading to work not done or his working from 8AM to midnight to save an after-school
employee. Solower employment overall, all at minimum wage, including the main contractor.
One district had bucked the province-wide trend by keeping its own cleaning staff. Visiting the
schools in that district those few years later, one could see the result, in vastly superior level
of cleanliness, better co-ordination between admin and teaching staff with cleaners, and much better
relations with students as well.
The staff weren't bosses, the cleaners weren't minions, and the students weren't customers. They
were a team.
I don't think there will be a change in this because it's too profitable for the CEOs to strip mine
the companies assets (knowledgeable employees are an asset) for maximum "shareholder value" (always
replace "shareholder value" with "my compensation"). I suppose this will change when all companies are
stripped to the bone and go under. But we now call these "too big to fail" and prop them up with taxpayer
dollars.
We need to change incentives. These might help:
Make corporations really pay taxes so that it makes sense to invest in the company rather than strip
it.
Don't prop up TBTF companies, let them fail so that many small companies can grow.
Stop all the fraud and corruption. Send corrupt CEOs to jail.
Medicare for All would be a boon for businesses, especially the smaller and mid-sized ones.
Herb Kelleher, CEO of Southwest, was once asked where he ranked shareholders vs employees. He replied
employees were first (because if the employees are not happy, then the customers are not happy), customers
(they pay the bills), and shareholders (they buy and sell shares in seconds). If the company is successful,
the shareholders will come. We somehow need to get back to these company values. A successful company
starts with the employees.
This is a pretty ugly development in our history. The 'end of employees' is a very accurate description
of what is going on in our gig economy related to a specific legal contradiction. In the U.S., we've
adopted a vast body of labor laws ( many in response to the Industrial Revolution and Great Depression
) that are primarily designed to protect "employees" from exploitation. Buried deep in our tax law is
a second designation for worker called "independent contractor", defined as a self-employed person providing
services to other businesses that is exempt from most labor laws on the principle that a self-employed
person can't exploit themselves. The key here is labor laws protect 'employees' from 'employer' abuses.
Changing a workers classification from employee to ( self-employed ) contractor, will change an employers
classification to customer, and remove the workers legal protections from exploitation. Labor law protections
include minimum wage and hours, workplace safety and health, wrongful dismissal protections, anti-discrimination
protections, employee benefits security, and worker compensation protections. This contradiction is
allowing many companies to sidestep centuries of laws enacted to stabilize and and protect our society.
Some companies push this power imbalance even further by transferring many of the business costs associated
with their revenue to employee contractors ( see Uber ).
Hopefully when there is enough public outcry, regulators and prosecutors will decide to challenge
these interpretations of existing laws and force businesses back in line regardless of their political
influence.
Incidentally, the slippery logic that removes labor law protections by classifying a worker
as self-employed ( both employer and employee ) might also grant businesses protections from their
workers via consumer protection laws against fraud and unfair practices ( when businesses become
customers of their now self-employed former employees ).
As has been stated several times, sometimes government entities are the worst offenders here. Grover
Norquist & Co. insisted on shrinking the size of government. The obedient elected officials and managers
immediately replaced employees with contractors and could claim that they had indeed reduced the size
of government. Unfortunately the budget probably went up since we now have to provide profit for the
rent extracting contract vendors.
A few years ago I was working for a family of local weekly papers, run on a shoestring (of course)
with pathetic salaries for the tiny staff. At one point, they heard about possibly outsourcing designlayout
of modular pagesto cheap labor in Romania. But when they ran the numbers .our in-house designers were
already cheaper than the Romanians!
Second point: At my current magazine I am one of just two full-time staffers on the edit side. Our
copy-editor/proofreader is paid on an hourly basis, and works off-site. Our designer works on a monthly
retainer, off-site. And so on.
That makes the relationship between us and our workers competitive and antagonistic: They try to
do the least amount of work, and we try to pay the least amount of money. So when the publisher wants
to be "innovative" or try something different, the designer resists. He doesn't want to spend any more
time on us than he normally does. So we don't do anything well, we get by with just good enough.
Point 3 institutional knowledge: One of our key competitive advantages has been/is being eroded
because there are things we haven't done in two years due to turnover. When I arrived and took up one
such project, hugely important to the company's bottom line, no one could tell me how it was done. Everyone
who had been involved in it was gone. We've now spent several months reinventing this particular wheel.
But the publisher doesn't see that as money. He only sees money as money.
BTW the financial sector is ripe for this. Automation is taking over many positions and people
in active investing is getting slashed big-time. Ironically, places like Vanguard may actually be some
of the last bastions of actual employees.
The problem with these short term contract jobs are immense. Employees that don't have a steady income
have difficulty getting loans for cars or homes. They certainly have less protection too. Our son worked
for SKY TV as a part time employee through a temp agency for 3 years, working 40 hour weeks. But when
an unstable full time employee assaulted him, in front or several witnesses, he was the one fired on
the spot without explanation. He was a non-person. The temp agency didn't want to get involved for fear
of losing their contract. With no union, no rights and little money, there was little he could do. They
knew he couldn't afford a lawyer and involving the police wouldn't get his job back. This goes on all
the time now. 20 years ago would have been unthinkable. I see a revolution coming, in many countries
Given the long evident fact that our corporate owners and their servants in government will not do
a bloody thing to make life better for us, what can we do? As a first step toward any solution, we need
to recognize that nothing is possible within the narrow boundaries of our political and economic system.
What you describe as a first step seems a lot like a claim of inevitable failure. Rather than
expect failure, I recommend as a first step that we try to block a few of Trump's predatory cabinet
nominations. Andrew Puzder, the nominee to head the Labor Department, and Steven Mnuchin, nominated
to be the Secretary of the Treasury, seem to be very relevant to the scope of this article. Also
Tom Price, nominated to be the Secretary of Health and Human Services. Tell your Senators that you
don't want them to be confirmed. It's easy, although you might need to make a few extra phone calls,
because the Congressional phone lines are often busy these days.
I ask, Why can't banks be fully automated? You wouldn't need CEOs and COOs and CFOs in banks because
IT can do all those jobs automatically. Then we would find out that we only need ONE bankthe central
bank and, voila, the banks no longer can create money by making loans. (I'm sure there is a weak point
in this argument!!!) However, I can see something like this happening in the future if only we separate
investment banking from commercial banking.
Marx saw capitalism as an endless class struggle between the bourgeoisie and the proletariat.
He wasnβt far wrong.
1920s high inequality, high banker pay, low taxes for the wealthy, robber barons, reckless bankers,
globalisation phase (bourgeoisie in the ascendency)
1970s β" low inequality, worker and union power, high taxes on the wealthy (proletariat in the ascendency)
(probably more true in the UK than the US)
2000s β" high inequality, high banker pay, low taxes on the wealthy, robber CEOs, reckless bankers,
globalisation phase (bourgeoisie in the ascendency)
The pendulum swings back and forth and always swings too far in both directions.
If the human race could take a more sensible, big picture view they might see it as a balance between
the supply side (bourgeoisie) and the demand side (proletariat).
The neoliberal era has been one where a total ignorance of debt has held sway.
Redistributive capitalism was removed to be replaced with a capitalism where debt based consumption
has become the norm. without a single mainstream economist realising the problem.
The world is maxing out on debt, this system is set to fail due to a lack of demand. The Bourgoisie
have been in the ascendency and made their usual mistake.
βThe Marxian capitalist has infinite shrewdness and cunning on everything except matters pertaining
to his own ultimate survival. On these, he is not subject to education. He continues wilfully and reliably
down the path to his own destructionβ.
Keynes thought income was just as important as profit, income looks after the demand side of the
equation and profit looks after the supply side.
He has the idea of balance.
Just maximising profit β" The Bourgeoisie looking after their own short term, self interest with
no thought of the longer term.
1) Money at the top is mainly investment capital as those at the top can already meet every need,
want or whim. It is supply side capital.
2) Money at bottom is mainly consumption capital and it will be spent on goods and services. It is
demand side capital.
You need to keep the balance.
Too much capital at the bottom and inflation roars away.
Too much capital at the top and there is no where sensible to invest and the Bourgeoisie indulge
in rampant speculation leading to the inevitable Wall Street Crash, 1929 and 2008.
Todayβs negative yield investments?
Too much capital at the top, no one wants it and you have to pay people to take it off your hands.
"You need to keep the balance." The post war era was balance, that was the middle of the pendulum
swing, we have never seen you're next sentence:
"Too much capital at the bottom and inflation roars away." When? Name one instance outside of
extraordinary political situations like weimar germany and zimbabwe where this has occurred?
Inflation is the boogey man that the elite throw around to scare us into submission. They don't
care when its inflation of house prices, they don't care when its inflation of healthcare costs,
education costs, etc. etc. But they damn sure start sweating a lot when its the cost of labor that
goes up. Shocker.
"Gate Gourmet had once been part of British Airways. And passengers blamed the airline."
You can transfer expenses, you can transfer legal and regulatory liability risk, you can transfer
financial risk, but it is virtually impossible to transfer reputational risk. Companies who think they
can do so (or ignore the fact) do so at their own peril.
My d-i-l, a research professional, has survived five down-sizings, assuming an additional work load
each time. The last time she also got a small promotion (well, you'd think they'd give her something
positive after all this). To myself I thought, they're going to wear this woman out till she has nothing
left to give and dump her.
It's worse. The corporation (company is a concept from
my
early working days) just announced
that everyone would have to bid for their projects(jobs). What this means of course is "how much are
you willing to give?" not to mention pitting one employee against another.
I "work" (temp/contract/no benefits) at a large multinational electronics company in cust service
and have seen this first hand. In response to a couple years of dropping profits, they outsourced the
entire department (couple hundred employees) to the Philippines. They cut full time employees, replace
them with temps for half the pay, because people will do it, and we live in desperate times with no
bargaining power.
As someone mentioned, its a negative feedback loop, less demand, less employment, less demand, until
the whole world is greece. We won't make it through another world war, the world is too globalized,
too connected, too advanced technologically. We need a relatively peaceful populist revolution which
we seem to be seeing the first real signs of or our species is done for.. and the sad part is I'm
not even exaggerating.
One point you missed is that a company cannot manage, let alone write a contract very well unless
it has sufficient expertise on staff. It is not sufficient to hire a consultant unless that arrangement
is more or less permanent. Too many things can go wrong, as they often do even with competent staff
when projects are complex or innovative.
"... Your analysis is wrong. The wealthy elites backed Jeb! Bush and Rubio. Trump picked up the economic nationalism of Jeff Session, Steve Bannon and talk radio. The rubes voted for Trump in the primary even though the wealthy spent a lot on their candidates. The rubes want to scapegoat both parties (Bill Clinton and the corrupt Republican insiders - drain the swamp). ..."
"... Trump channeled the anger of the rubes. Hillary didn't get the turnout that hope and change Obama got. She flip-flopped on the TPP while Obama spent his remaining months trying to pass it. Now it's dead. ..."
"... The actual solutions will require sacrifice from the rich. Even more important (and difficult); it will require that we abandon the narrative of the rugged individual who "takes care of himself" and "don't need no gobinment". The future belongs to countries that can build up effective systems to educate each individual to the fullest extend of their capabilities (not their wallets) - thereby making sure that critical human resources do not go to waste. The future doesn't belong to the dying empire of the US. ..."
"... Obama averaged 1.7 percent annual GDP growth over his 8 years after the largest financial crisis since the Great Depression. ..."
"... This is very true. Even if you want to quibble about whether trade is somewhat more important than Delong says it is. The real problem is the US does not have a functioning workforce policy. ..."
"... And trade is more easily scapegoated- I mean who can argue against technological progress? The overall problem will not be addressed by focusing all attention on job loss due to trade. ..."
"... Excellent comment by jonny bakho. Much better than Delong's I think. ..."
"... But it is also true that scapegoating trade can get you votes, so there is a political problem. ..."
Worker dislocation by factory closings and layoffs is an issue the US does not address very well
for lack of a workforce policy
Dislocations can be caused by offshoring and trade
Dislocations can be caused by technological advance.
We make more goods today with fewer workers; from 30 percent to 8.6 percent
As DeLong points out, 18 of the 21% loss is due to technology.
0.1% is due to NAFTA and trade agreements.
The problem of worker dislocation will never be addressed if all the focus is on the 0.1% and
the 18% is ignored.
The wealthy elites are happy to scapegoat NAFTA because addressing dislocation properly would
require transfer payments. The wealthy always want to avoid paying their fair share so they are
more than happy to blame NAFTA and cheer on the pols who scapegoat trade. The wealthy don't tolerate
pols that propose to truly address the issue in ways that involve transfer payments.
It is easy to drum up anti trade sentiments using xenophobia, racism and nativism. It is more
difficult to get people to be introspective and consider changing what they do
Your analysis is wrong. The wealthy elites backed Jeb! Bush and Rubio. Trump picked up the
economic nationalism of Jeff Session, Steve Bannon and talk radio. The rubes voted for Trump in
the primary even though the wealthy spent a lot on their candidates. The rubes want to scapegoat
both parties (Bill Clinton and the corrupt Republican insiders - drain the swamp).
Dean Baker:
"The 2016 GDP growth brought the average for the eight years of the Obama administration to
1.7 percent."
Trump channeled the anger of the rubes. Hillary didn't get the turnout that hope and change
Obama got. She flip-flopped on the TPP while Obama spent his remaining months trying to pass it.
Now it's dead.
You are absolutely correct. The actual solutions will require sacrifice from the rich. Even
more important (and difficult); it will require that we abandon the narrative of the rugged individual
who "takes care of himself" and "don't need no gobinment". The future belongs to countries that
can build up effective systems to educate each individual to the fullest extend of their capabilities
(not their wallets) - thereby making sure that critical human resources do not go to waste. The
future doesn't belong to the dying empire of the US.
Yes. The wealthy will need to sacrifice to fund these programs. And yes, the idea of every man
for himself (rugged individual) needs to be abandoned.
Unfortunately, racism gets in the way of educating ALL Americans and hurts all poor people,
not just blacks and Hispanics. Abandoning white male patriarchy will require sacrifice on the
part of many.
"It is easy to drum up anti trade sentiments using xenophobia, racism and nativism."
Only in bad times. People want scapegoats.
Obama averaged 1.7 percent annual GDP growth over his 8 years after the largest financial
crisis since the Great Depression.
More people voted for Hillary, but Sanders ran a popular campaign. Trump wont the primary and
electoral college by playing to the uneducated's fears and attacking the elite as corrupt.
Yes he scapegoated trade and offshoring, but he provided an explanation for the stagnating
incomes and shrinking middle class that voters have been experiencing for decades.
"Worker dislocation by factory closings and layoffs is an issue the US does not address
very well for lack of a workforce policy.
Dislocations can be caused by offshoring and trade
Dislocations can be caused by technological advance
We make more goods today with fewer workers; from 30% to 8.6%. As Delong points out 18 of
the 21% loss is due to technology.
.1% is due to Nafta and trade agreements.
The problem of worker dislocation will never be addressed if all the focus is on the 0.1%
and the 18% is ignored."
This is very true. Even if you want to quibble about whether trade is somewhat more important
than Delong says it is. The real problem is the US does not have a functioning workforce policy.
And trade is more easily scapegoated- I mean who can argue against technological progress?
The overall problem will not be addressed by focusing all attention on job loss due to trade.
Excellent comment by jonny bakho. Much better than Delong's I think.
By Scott Ferguson, Assistant Professor, University of South
Florida. He is also a Research Scholar at the Binzagr Institute for
Sustainable Prosperity. His current research and pedagogy focus on Modern
Monetary Theory and critiques of neoliberalism, aesthetic theory; the
history of digital animation and visual effects; and essayistic writing
across media platforms. Originally published at
Arcade
James Livingston has responded to
my
critique
of his Aeon essay, "
Fuck
Work
." His response was published in the Spanish magazine
Contexto
y Accion
. One can find an English translation
here
.
What follows is my reply:
... ... ...
This brings me to Modern Monetary Theory (MMT). Far from an "obscure
intellectual trend," MMT is a prominent heterodox school of political
economy that emerged from
post-Keynesian
economics
and has lately influenced the economic platforms of
Bernie
Sanders
,
Jeremy
Corbyn
, and Spain's
United
Left
. For MMT, money is not a private token that states amass and
hemorrhage. Rather, it is a boundless government instrument that can easily
serve the needs of the entire community. International monetary agreements
such the Eurozone's
Maastricht
Treaty
may impose artificial limits on fiscal spending, but these are,
MMT argues, political constraints. They are not economically inevitable and
can immediately be dissolved. In truth, every sovereign polity can afford to
take care of its people; most governments simply choose not to provide for
everyone and feign that their hands are tied.
To be sure, Liberalism has debated the "designation and distribution of
rival goods," as Livingston explains. In doing so, however, it has
overlooked how macroeconomic governance conditions the production of these
goods in the first place. MMT, by contrast, stresses money's creative role
in enabling productive activity and places government's limitless spending
powers at the heart of this process.
In lieu of Liberal "redistribution" via taxation, MMT calls for a
politics of "
predistribution
."
Redistributive politics mitigate wealth disparity by purportedly
transferring money from rich to poor. This is a false and deeply
metaphysical gesture, however, since it mistakes the monetary relation for a
finite resource instead of embracing government's actual spending
capacities. MMT's predistributive politics, meanwhile, insist that
government can never run out of money and that meaningful transformation
requires intervening directly in the institutions and laws that structure
economic activity. MMT does not imply a crude determinism in which
government immediately commands production and distribution. Rather, it
politicizes fiscal spending and the banking system, which together
underwrite the supposedly autonomous civil society that Livingston
celebrates.
MMT maintains, moreover, that because UBI is not sufficiently productive,
it is a passive and ultimately
inflationary
means
to remedy our social and environmental problems. It thus recommends a
proactive and politicized commitment to public employment through a
voluntary
Job
Guarantee
. Federally funded yet operated by
local
governments
and
nonprofits
,
such a system would fund communal and ecological projects that the private
sector refuses to pursue. It would stabilize prices by maintaining aggregate
purchasing power
and
productive activity during market downturns.
What is more, by eliminating forced unemployment, it would eradicate
systemic poverty, increase labor's bargaining power, and improve everyone's
working conditions. In this way, a Job Guarantee would function as a form
of
targeted
universalism
: In improving the lives of particular groups, such a
program would transform the whole of economic life from the bottom up.
Unlike the Job Guarantee, UBI carries no obligation to create or maintain
public infrastructures. It relinquishes capital-intensive projects to the
private sector. It banks on the hope that meager increases in purchasing
power will solve the
systemic
crises
associated with un- and underemployment.
Let us, then, abandon UBI's "end of work" hysteria and confront the
problem of social provisioning head on. There is no escape from our broken
reality. We do better to seize present power structures and transform
collective participation, rather than to reduce politics to cartoonish
oppositions between liberty and tyranny, leisure and toil. Technology is
marvelous. It is no substitute, however, for governance. And while civil
society may be a site of creativity and struggle, it has limited spending
abilities and will always require external support.
It is essential, therefore, to construct an adequate welfare system. On
this matter, Livingston and I agree. But Livingston's retreat from
governance strikes me as both juvenile and self-sabotaging. Such thinking
distracts the left from advancing an effective political program and
building the robust public sector we need.
I really need to be kicked out of the house, to go someplace and do
something I don't really want to do for 8 hours a day.
I've already got too much time to fritter away. I'm fairly certain,
giving me more time and money to make my own choices would not make the
world a better place.
Hmm. No "sarc" tag Really?? More free time and money wouldn't be a
benefit to you and your surroundings? That's hard to believe. To each
their own I guess.
I can see it both ways. Most people see that as sarcasm but I have
more than a few friends whose jobs are probably the only thing keeping
them out of jail. Idle hands being the devil's plaything and all. For
instance, the last thing you want to give a recovering addict is a lot
of free time and money.
As a recovering addict, I must vehemently disagree with ur
statement.
I would love to have as much money and free time on my hands to
work on the fun hobbies that keep me sober like Political Activism,
Blogging, Film, etc.
At no point in the "Job Guarantee" discussion did anyone advocate
forcing you to go to work. However, if you decide to get ambitious and
want a paid activity to do that helps make society a better place to
live, wouldn't it be nice to know that there'd be work available for you
to do?
Right now, that's not so easy to do without lots of effort searching
for available jobs and going through a cumbersome and dispiriting
application process that's designed to make you prove how much you
REALLY, REALLY want the job.
For me, the real silver bullet is the moral/political argument of a
Job Guarantee vs. Basic Income. Job Guarantee gives people a sense of
pride and accomplishment and those employed and their loved ones will
vigorously defend it against those who would attack them as 'moochers'.
Also, defenders can point to the completed projects as added ammunition.
Basic income recipients have no such moral/political defense.
The guaranteed jobs could be for a 20 or 30 hour week. I fear they
won't be as most job guarantee advocates seem to be Calvinists who
believe only work gets you into heaven though.
"MMT, by contrast, stresses money's creative role in enabling productive
activity and places government's limitless spending powers at the heart of
this process."
" [money] is a boundless government instrument "
Limitless spending power is identical to infinite spending powers. If
this is a central tenet of MMT, the whole conceptual construct can easily be
disproved by reductio ad absurdum.
"And while civil society may be a site of creativity and struggle, it has
limited spending abilities and will always require external support."
Sure, the support of Nature, but I guess the author is referring to Big
Brother, the all-knowing and benevolent government, source and creator of
all money, indispensable provider of jobs, jobs, jobs.
Before there was nothing, then came the Government and the Government
said: let there be money.
I would like to see you do that via "reductio ad absurdum" because I
find you absolutely clueless regarding MMT's propositions. Maybe you just
like to spout off?
It's a common 'argument' by people defending status quo. They claim
something is ridiculous and easily disproven and then leave it at
that. They avoid making argument that are specific enought to be
countered, because thay know they don't actually have a leg to stand
on.
Limitless may not have been the best word. Of course the government
can print money till the cows come home; but MMT recommends stopping when
you approach the real resource constraint.
Sloppy language does not help so thank you. So the next question is
how do constraints (natural or other) affect spending power under MMT,
is it asymptotic, is there an optimum, discontinuities?
The other major issue is that although spending power is controlled
by legislatures it must be recognized that wealth creation starts with
the work of people and physical capital, not by the good graces of
gov't. MMT makes it sound as if money exists just because gov't wills
it to exist, which is true in the sense of printing pieces of paper
but not in the sense of actual economic production and wealth
creation. Taxes are not the manner in which gov't removes money but it
really is the cost of gov't sitting on top of the economic production
by people together with physical capital.
Help me understand your last sentence. So, if I'm a farmer, the
time I spend digging the field is economic production, but the time
I spend sitting at my desk planing what to plant and deciding which
stump to remove next and how best to do it, and the time I spend
making deals with the bank etc, these are all unproductive hours
that make no contribution to my economic production?
Yes, Jamie. And as you point out, Ferguson is giving us a
better definition of "productive". He is not saying productivity
produces profits he is saying productive work fixes things and
makes them better. But some people never get past that road bump
called "productivity."
"MMT makes it sound as if money exists just because gov't wills
it to exist "
No, this is inaccurate, MMT says that the government must SPEND
money into existence, not just issue a legal fiat. Collecting taxes
in the currency creates a need for the currency. This is
historically accurate and can be traced from British colonial
history. They imposed taxes on the colonies in pound sterling, that
compelled the colonies to find something to export to Britain in
order to generate the foreign exchange to pay the taxes.
The debate is over how to get the currency in people's hands.
Should the govt just cut checks and let citizens spend as they see
fit? Or should the government directly employ resources to improve
society where the private sector isn't interested?
Regarding user Jamie's point, I hope I can add to it by saying
that someone is going to do the planning, whether it's the public
sector or the private sector, planning must be done. When
government does the planning, then it's decided democratically (at
least in theory). If the government doesn't do the planning, then
the private sector is left to do it on its own. This gets chaotic
if the private sector doesn't coordinate, or can get parasitic if
the private sector colludes against public interest.
I don't think there's anything wrong with calling money a
"boundless government instrument". The problem here comes from
confounding a potentially infinite resource (money) with the
inherently limited application of that resource. Sovereign money
really is limitless, what one can do with it is not. The distinction
needs to be clarified and emphasized, not glossed over.
"Limitless" is a pretty good word for some arguments. Look what you
get with "limited": every year congress up and says, "Hey dudes,
dudettes, we know you expected some governing from us, but we've
decided not to do that, because we've decided that the money we've
spent has taken us past the Debt Limit. So we're gonna stop now."
They're jerking you around. The rules of fiat money that they're using
don't work that way. In fact, Richard Nixon took the U.S. into a full
fiat money system so he could keep governing without having to worry
about running out of money to do it with.
International monetary agreements such the Eurozone's Maastricht
Treaty may impose artificial limits on fiscal spending, but these are,
MMT argues, political constraints. They are not economically
inevitable and can immediately be dissolved.
So no, not limitless. Rather, the limitations are political ones, not
economic. As long as the sovereignty of the currency is not in threat,
the money supply can be increased.
The author is making some assumptions, and then goes and takes them
apart. It's possilble (I didn't read the article he refers to), that the
assumptions he responds to directly are made by the article, but that
doesn't make them universal assumptions about UBI.
UBI is not a single exact prescription and in the same way, JG is not a
single exact prescription. The devil, in both cases, is in details. In fact,
there is not reason why JG and UBI should be mutually exclusive as a number
of people are trying to tell us.
and if we talk about governance well, the super-strong governance that
JG requires to function properly is my reason why I'd prefer a strong UBI to
most JG.
Now and then we get a failed UBI example study I'm not going to look at
that. But the socialist regimes of late 20th century are a prime example of
failed JG. Unlike most visitor or writers here, I had the "privilege" to
experience them first hand, and thanks but no thanks. Under the socialist
regimes you had to have a job (IIRC, the consitutions stated you had "duty"
to work). But that become an instrument of control. What job you could have
was pretty tightly controlled. Or, even worse, you could be refused any job,
which pretty much automatically sent you to prison as "not working
parasite".
I don't expect that most people who support JG have anything even
remotely similar in mind, but the governance problems still stay. That is,
who decides what jobs should be created? Who decides who should get what
job, especially if not all jobs are equal (and I don't mean just equal pay)?
Can you be firedt from your JG job if you go there just to collect your
salary? (The joke in the socialist block was "the government pretends to pay
us, we pretend to work"). Etc. etc.
All of the above would have to be decided by people, and if we should
know something, then we should know that any system run by people will be,
sooner or later, corrupted. The more complex it is, the easier it is to
corrupt it.
Which is why I support (meaningfull, meaning you can actually live on it,
not just barely survive) Basic Income over JG. The question for me is more
whether we can actually afford a meaningful one, because getting a "bare
survival one" does more damage than good.
That's why any JG would have to be filtered through local governments
or, more ideally, non-profit community organizations, and not a
centralized government. New York City's
Summer Youth Employment Program
offers a good model for this. Block
grants of money are delivered to a wide range of community organizations,
thus ensuring no one group has a monopoly, and then individual
businesses, other community groups, schools, non-profits, etc., apply to
the community organizations for an "employee" who works for them, but the
payment actually comes from the block grant. The government serves as the
deliverer of funds, and provides regulatory oversight to make sure no
abuses are taking place, but does not pick and choose the jobs/employers
themselves.
I don't see it as either/or. Provide a UBI and a job guarantee. The job
would pay over and above the UBI bit, if for some reason, you don't want to
work or cannot, you still have your Universal BASIC Income as the floor
through which you cannot fall.
Private employers will have to offer better conditions and pay to
convince people getting UBI to work for them. They wouldn't be able to
mistreat workers because they could simply bolt because they will not fall
into poverty if they quit. The dirtbags needing workers won't be able to
overpay themselves at the expense of workers because they feel completely
free to leave if you are a self worshipping douche.
It seems that over time the "floor through which you cannot fall"
becomes just that, the floor, as the effect of a UBI becomes the
universal value, well floor.
Was going to be my response as well, why such absolute yes or no
thinking? The benefit of the UBI is that is recognizes that we have been
increasing productivity for oh the last couple millenia for a REASON! To
have more leisure time! Giving everyone the opportunity to work more and
slave away isn't much of a consolation. We basically have a jobs
guarantee/floor right now, its called McDonalds, and no one wants it.
Labor needs a TON of leverage, to get us back to a reasonable
Scandinavian/Aussie standard of living. Much more time off, much better
benefits, higher wages in general. UBI provides this, it says screw you
employers unless you are willing to offer reasonable conditions we are
going to stay home.
Why the Job Guarantee versus Universal Basic Income is not about work,
BUT ABOUT GOVERNANCE!
Yep, agree 100%.
We live in a capitalist society which is dependent on a (wage) slave
population.
UBI? Are you mad?
I for one am mad, give me UBI!
Time to end the insanity of U.S. capitalism
I'm curious to know if either of these systems work if there is no
guarantee of "free" access to healthcare through single-payer or a national
insurance? I'm only marginally informed about UBI or MMT, and haven't found
adequate information regarding either as to how healthcare is addressed. It
seems clear that neither could work in the US, specifically for the reason
that any UBI would have to be high enough to pay insane insurance premiums,
and cover catastrophic illnesses without pushing someone into bankruptcy.
Can anyone clarify, or point me in the direction of useful information on
this?
I think they're basically separate issues although MMT provides a way
of thinking that federal single payer is possible.
MMT is basically anti-austerity and in favor of 'smart' deficits ie
not deficits for no reason but deficits that can improve the economy and
the overall social structure such as single payer, affordable education,
job guarantee program.
Stephanie Kelton has commented that MMT has no real problem with a UBI
if it is done in conjunction with a good job guarantee program. She is
well aware of the dangers of a UBI if it eliminates most other social
programs.
I think that a job guarantee at a living wage would provide a much
better standard for private employment than a UBI which could just work
as a supplement allowing private industry to pay lower wages. As a
supplement to a job guarantee a UBI could help address issues such as
payment for reproductive type work.
There are different flavors of UBI, most don't mention healthcare at
all. Milton Friedman's UBI flavor prefers that it replace all government
spending on social welfare to reduce the government's overall burden. MMT
says there is no sense in not having single payer.
My thought on the last thread of this nature is that if UBI were ever
enacted in the U.S., healthcare access would become restricted to those
with jobs (and the self-employeed with enough spare income to pay for
it). You don't have to be healthy to collect a subsistence payment from
to the government.
Here in Canada we have universal healthcare, as well as a basic income
guarantee for low income families with children and seniors. There is a
movement to extend that as well,
details of one plan here
.
In theory, I think it could be possible for the JG to build and staff
hospitals and clinics on a non-profit basis or at least price-controlled
basis, if so directed (*huge* question, of course - by what agency? govt?
local councils?). Ditto housing, schools, infrastructure, all kinds of
socially useful and pleasant stuff. However, the way the US tends to do
things, I would expect instead that a BIG or a JG would, as others have
pointed out, simply enable employers to pay less, and furthermore,
subsidize the consumption of overpriced goods and services. IOW, a repeat
of the ACA, just a pump to get more $$ to the top.
The problem is not the money, but that the Americans govern themselves
so poorly. No idea what the cure could be for that.
Fixing worker pay is actually VERY easy. It's purely a political
issue. You tie corporate taxes to worker compensation. More
specifically, you set the maximum compensation for CEOs at NO MORE
than (say) 50x average worker pay in their corporation (INCLUDING
temps AND off-shored workers IN US DOLLARS no passing the buck to Temp
Agencies or claiming that $10/day in hellhole country x is equivalent
to $50k in the US. NO, it is $10/day or $3650/yr, period). At 50x,
corporate taxation is at the minimum (say something like 17%). The
corporation is free to pay their top exec more than 50x but doing so
will increase the corporate tax to 25%. You could make it step-wise:
51-60x average worker pay = 25% corporate tax, 61-80x = 33% corporate
tax, etc.
It is time to recognize that CEO pay is NOT natural or earned at
stratospheric levels. THE best economic times in the US were between
the 50s to early 70s when top tax rates were much higher AND the
average CEO took home maybe 30x their average worker pay. We CAN go
back to something like that with policy. Also, REQUIRE that labor have
reps on the Board of Directors, change the rules of incorporation so
it is NOT mainly focused on "maximizing profit or shareholder value".
It must include returning a social good to the local communities
within which corporations reside. Profits and maximizing shareholder
value must be last (after also minimizing social/environmental harm).
Violate the rules and you lose your corporate charter.
There is no right to be a corporation. Incorporation is a privilege
that is extended by government. The Founders barred any corporate
interference in politics, and if a corporation broke the law, it lost
its charter and the corporate officers were directly held responsible
for THEIR actions. Corporations don't do anything, people in charge of
corporations make the decisions and carry out the actions so NO MORE
LLCs. If you kill people due to lax environmental protections or
worker safety, etc, then the corporate officers are DIRECTLY and
personally responsible for it. THEY made it happen, not some ethereal
"corporation".
Durned hippys imagine an IRON boot stamping on a once human face
forever. OK, now everybody back to the BIG house. Massa wanna reed yew sum
Bible verses. We're going to be slaves to the machines, ya big silly!
I'm sceptical whether a guaranteed job policy would actually work in
reality. There are plenty of historical precedents for example, during the
Irish potato famine because of an ideological resistence to providing direct
aid, there were many 'make work' schemes. You can still see the results all
along the west coast of Ireland little harbours that nobody has ever used,
massive drainage schemes for tiny amounts of land, roads to nowhere. It
certainly helped many families survive, but it also meant that those
incapacitated by starvation died as they couldn't work. It was no panacea.
There are numerous practical issues with make work schemes. Do you create
a sort of 2-layer public service with one level permanent jobs, the other
a variety of 'temporary' jobs according to need? And if so, how do you deal
with issues like:
1. The person on a make work scheme who doesn't bother turning up till 11
am and goes home at 2.
2. Regional imbalances where propering region 1 is desperately short of
workers while neighbouring region 2 has thousands of surplus people sweeping
streets and planting trees.
3. What effect will this have on business and artistic innovation?
Countries with strong welfare systems such as Sweden also tend to have a
very high number of start ups because people can quit their jobs and devote
themselves to a couple of years to develop that business idea they always
had, or to start a band, or try to make a name as a painter.
4. How do you manage the transition from 'make-work' to permanent jobs
when the economy is on the up, but people decide they prefer working in
their local area sweeping the street?
I can see just as many practical problems with a job guarantee as with
universal income. Neither solution is perfect in reality, some sort of mix
would be the only way I think it could be done effectively.
To provide some context for passers-by, this seemingly too-heated
debate is occurring in the context of the upcoming Podemos policy meeting
in Spain, Feb 10-12.. Podemos seems to have been unaware of MMT, and has
subscribed to sovereign-economy-as-household policies. Ferguson, along
with elements of the modern left, has been trying to win Podemos over to
MMT-based policies like a Jobs Guarantee rather than the Basic Income
scheme they have heretofore adopted rather uncritically.
(Of course Spain is far from "sovereign", but that's another matter
:-(
1) Fire them
2) Prospering region 1 isn't "short on workers" they just all have
private jobs.
3) What a good argument to also have single payer healthcare and some
sort of BIG as well as the JG
4) private companies must offer a better compensation package. One of the
benefits of the JG is that it essentially sets the minimum wage.
Yeah, those are pretty good answers right off the bat. (Obviously I
guess for #1 they can reapply in six months or something.)
Plutonium- I feel like true progress is trading shitty problems for
less shitty ones. I can't see any of the major proponents like Kelton,
Wray or Mitchell ever suggesting that the JG won't come with it's own
new sets of challenges. On the overly optimistic side though: you
could look at that as just necessitating more meaningful JG jobs
addressing those issues.
I was writing that on my phone this morning. Didn't have time to
go into great detail. Still, I wanted to point out that just
because there will be additional complexities with a JG, doesn't
mean there aren't reasonable answers.
1. If you fire them its not a jobs guarantee. Many people have
psychological/social issues which make them unsuitable for regular
hours jobs. If you don't have a universal basic income, and you don't
have an absolute jobs guarantee, then you condemn them and their
families to poverty.
2. The area is 'short on workers' if it is relying on a surplus
public employee base for doing things like keeping the streets clean
and helping out in old folks homes. It is implicit in the use of
government as a source of jobs of last resort that if there is no
spare labour, then you will have nobody to do all the non-basic works
and you will have no justification for additional infrastructure
spend.
3. You miss the point. A basic income allows people time and
freedom to be creative if they choose. When the Conservatives in the
early 1990's in the UK restricted social welfare to under 25's, Noel
Gallagher of Oasis predicted that it would destroy working class rock
n roll, and leave the future only to music made by rich kids. He was
proven right, which is why we have to listen to Coldplay every time we
switch on the radio.
4. This ignores the reality that jobs are never spread evenly
across regions. One of the biggest problems in the US labour market is
that the unemployed often just can't afford to move to where the jobs
are available. A guaranteed job scheme organised on local govenment
basis doesn't address this, if anything it can exacerbate the problem.
And the simplest and easiest way to have a minimum wage is to have a
minimum wage.
1) Kelton always talks about a JG being for people "willing and
able to work." If you are not willing I don't really have much
sympathy for you. If you are not able due to psychological factors
or disability, then we can talk about how you get on welfare or the
BIG/UBI. The JG can't work in a vacuum. It can't be the only social
program.
2) Seems unrealistic. You are just searching to find something
wrong. If there is zero public employment, that means private
employment is meeting all labor demands.
3) I have no idea what you are going on about. I'm in a band. I
also have a full-time job. I go see local music acts all the time.
There are a few that play music and don't work because they have
rich parents, but that's the minority. Most artists I know manage
to make art despite working full time. I give zero shits what
corporate rock is these days. If you don't like what's on the radio
turn it off. There are thousands of bands you've never heard of. Go
find them.
4) Again, you are just searching for What-If reasons to crap on
the JG. You try to keep the jobs local. Or you figure out free
transportation. There are these large vehicles called busses which
can transport many people at once.
Yes these are all valid logistical problems to solve, but you
present them like there are no possible solutions. I can come up
with several in less than 5 minutes.
For a more practical first step--how about getting rid of/slashing
regressive and non-federal income tax deductible sales taxes? shifting that
tax burden to where income growth has been.
Democratic Party-run states/cities are the biggest offenders when it
comes to high sales taxes.
universal basic income in the West + de facto open borders won't work.
just making a reasonable hypothesis.
There might be a psychological benefit to a jobs guarantee vs. UBI. There
are a lot of people that would much rather "earn" their income rather than
directly receiving it.
Which of these tools do you posess:
( ) Machete, pick-axe, big old hemp bag
( ) Scattergun, hound, mirrored shades
( ) Short-shorts, bandeau top, knee pads
( ) RealTree camo ACUs, FLIR scope
( ) ephedrine, pseudoephedrine, fast car
A JG would begin to rebuild the trust and cooperation needed to have a
society based on justice instead of might makes right. Human life is based
on obligations- we are all responsible to one another for the social system
to work. The problem is always about how to deal with cheaters and shirkers.
This problem is best solved by peer pressure and shaming- along with a
properly functioning legal system.
I get a kick out of the "make work" argument against a JG. With planned
obsolescence as the foundation of our economic system, it's just a more
sophisticated way of digging holes and filling them in again. Bring on
robotic automation, and the capitalist utopia is reached. Soul crushing,
pointless labor can be sidelined and replaced with an unthinking and
unfeeling machine in order to generate profits. The one problem is people
have no money to buy the cheep products. To solve that dilemma, use the
sovereign governments power to provide spending credits in the form of a
UBI. Capitalism is saved from is own contradictions- the can is kicked
farther down the road.
The obligations we have to one another must be defined before any system
organization can take place. Right now, the elite are trying to have their
cake and eat it too.
I agree with those who see a need for both programs. I think the critique
of UBI here is a good one, that raises many valid points. But I have trouble
with a portion of it. For instance:
by eliminating forced unemployment, it would eradicate systemic
poverty
treats 'poverty' as an absolute when it is a relative. No matter what
programs are in place, there will always be a bottom tier in our
hierarchical society and those who constitute it will always be
'impoverished' compared to those in higher tiers. This is the nature of the
beast. Which is why I prefer to talk about subsistence level income and
degrees above subsistence. The cost of living may not be absolutely fixed
over time, but it seems to me to be more meaningful and stable than the term
'poverty'. On the other hand, in a rent seeking economy, giving people an
income will not lift them out of poverty because rents will simply be
adjusted to meet the rise in resources. So UBI without rent control is
meaningless.
Another point is that swapping forced unemployment for forced employment
seems to me to avoid some core issues surrounding how society provides for
all its members. Proponents of the JG are always careful to stress that no
one is forced to work under the JG. They say things like, "jobs for everyone
who wants one". But this fails to address the element of coercion that
underlies the system. If one has no means to provide for oneself (i.e. we
are no longer a frontier with boundless land that anyone can have for cheap
upon which they may strike out and choose the amount of labor they
contribute to procure the quality of life they prefer-if ever was such the
case), then jobs for "everyone who wants one" is simply disingenuous. There
is a critical "needs" versus "wants" discussion that doesn't generally come
up when discussing JG. It's in there, of course, but it is postponed until
the idea is accepted to the point where setting an actual wage becomes an
issue. But even then, the wage set will bear on the needs versus wants of
the employed, but leaves out those foolish enough to not "want" a job.
Whereas, in discussing UBI, that discussion is front and center (since even
before accepting the proposal people will ask, how much?, and proper reasons
must be given to support a particular amount-which again brings us to
discussing subsistence and degrees above it-the discussion of subsistence or
better is "baked in" to the discussion about UBI in a way that it is not
when discussing the JG).
While UBI interests me as a possible route to a non-"means of
production"-based economy, the problem I see with it is that it could easily
reduce the populace to living to consume. Given enough funds to provide for
the basics of living, but not enough to make any gains within society, or
affect change. It's growth for growth's sake, not as to serve society.
Something is needed to make sure people aren't just provided for, but have
the ability to shape the direction of their society and communities.
Where I work @3/4 of the staff already receives social security and yet
it is not enough seems to me human satisfaction is boundless and providing
a relative minimum paper floor for everyone is just. Yet the way our market
is set up, this paper floor would be gobbled back up by the rentier class
anyway. So unless there is a miraculous change in our economic rent capture
policies, we are screwed
So yes, just describe to people precisely what it is a 'paper' floor
not something that has firm footing yet acknowledges inequities inherent in
our current currency distribution methods. And of course couple this with a
jobs guarantee. I have met way too many people in my life that 'fall through
the cracks' .
why is no one bemoaning the rabid over-consumption of the complainers who
suck up much more than they will ever need, hoarding and complaining about
people who do not have enough? the real problem is rampant out of control
parasites
But Ferguson should also adknowledge that Livingston has some points.
Why on earth we politically put limits to, for instance, public
earning-spending while do not put any limit to the net amount that one
person can earn, spend and own?
Upward redistribution is what occurs in the neoliberal framework. UBI is
distribution. Bear in mind that even in the best employment conditions, not
everybody can earn a salary. 100% employment is unrealistic.
The people marketing UBI and MMT have hundreds of years of attempted
social engineereing to overcome. I referring to the " why people want what
they want and why do they believe what they believe." Why?
The only suggestion I have is that, since everybody has a different
relationship to the concept of work, the populations involved need to be
smaller. Not necessarily fewer people, but more regions or nation states
that are actually allowed to try their ideas without being attacked by any
existing "empire" or "wanna be empire" via sanctions or militarily.
It is going to take many differerent regions, operating a variety of
economic systems (not the globalized private banking extraction method
pushed down every one's throat whether they like it or not) that people can
gravitate in and out of freely.
People would have the choice to settle in the region that has rules and
regulations that work most for their lives and belief systems (which can
change over time).
Looking at it from the perspective that there can be only one system that
300 million plus people (like the USA) or the world must be under is the
MAIN problem of social engineering. There needs to be space carved out for
these many experiments.
First, congratulations to everyone who managed to read this all the way
through. IMO both this (and the guy he's responding to), seem like someone
making fun of academic writing. Perhaps with the aid of a program that spits
out random long words.
FWIW, when I lived in Japan, they had a HUGE, construction-based
make-work program there, and it was the worst of both worlds: hard physical
labor which even the laborers knew served no purpose, PLUS constant street
obstruction/noise for the people in the neighborhoods of these make-work
projects. Not to mention entire beautiful mountains literally concreted over
in the name of 'jawbs'.
Different thought: I'm not sold on UBI either, but wouldn't it mess up
the prostitution/sex trafficking game, almost as a side effect? Has anyone
heard UBI fans promote it on that basis?
The sound and fury of disagreement is drowning out what both authors
agree on: guaranteed material standards of living and reduced working time.
If that's the true goal, we should say so explicitly and hammer out the
details of the best way to attain it.
Interesting read society has become so corrupt at every level from
personal up through municipal, regional and federal governments that it cant
even identify the problem, let alone a solution
all forms of government and their corresponding programs will fail until
that government is free from the monetary influences of individuals /
corporations and military establishments, whether it be from donations to a
political establishment or kick backs to politicians and legislators or
government spending directed to buddies and cohorts
I don't pretend to understand the arguments at the level to which they
are written, but at the basic level of true governance it must but open and
honest, this would allow the economy to function and be evaluated, and then
at that point we could offer up some ideas on how to enhance areas as needed
or scale back areas that were out of control or not adding value to society
as a whole
We stand at a place that has hundreds of years of built in corruption
into the model, capable so far of funneling money to the top regardless of
the program implemented by the left or the right sides of society
first step is to remove all corruption and influence from governance at
every level until then all the toils toward improvement are pointless as no
person has witnessed a "free market " in a couple hundred years, all
economic policy has been slanted by influence and corruption
we can not fix it until we actually observe it working, and it will never
work until it is free of bias / influence
no idea how we get there . our justice system is the first step in
repairing any society
It might well be that "human induced climate change"
enthusiasts are barking to the wrong tree.
Oil depletion might take care of the "climate change" (as
well as "excessive" humans) even without Trump or and other
politician. This is probably a matter of a decade or two.
The key here is proactive switching the use private car
fleet to more economical model and without draconian measures
such as $4 per gallon gas or $1K per cubic centimeter of
engine volume tax the process is very slow.
Obama administration was pretty inactive in this area,
despite all rhetoric.
There is no justification of using full size SUV or light
truck for communizing to work unless you agree to pay extra
for this privilege.
"... we have, in addition to 7.5 million officially unemployed (a number that is closer to 15 million when all the hidden unemployment is accounted for), 23.5 million Americans aged 25-to-54 who reside outside the confines of the labor force. And at a time when job openings are at record highs. ..."
"... Even the most ardent ''supply-sider" would admit that labor input is key to the outlook and this should really be at the top of the agenda - closing the widening and unprecedented gap between job openings and new hiring. There simply is no replacement for excellent education achievement with respect to maximizing labor productivity. ..."
"... So about all those job openings? Do they all pay a living wage ? ..."
"... So about all those job openings? They are FAKE job openings. They basically want to hire someone with $100K/year worth of experience & qualifications for $30K/year. And then when no one applies, the companies whine that they need H1B visa to fill the void. ..."
"... It boggles my mind, the kind of bullshit experienced by an acquaintance who is a Waitress, on top of all the shitty employers and scummy customers, she has to pay taxes on Estimated Tips, by a Percentage of Transactions regardless of whether she actually Received a Tip. ..."
"... The government assumes a tip exists at 8% and the waitress must pay on the assumption or the business owner gets pissed off because he/she will catch shit from the IRS at Tax time. Black people only tip on the 29th of February if it is a full moon, a trick they learned from the cheap Canadian bastards who got the idea from the Asians who also, mostly, do not tip. An establishment owner selling Beer/ Wine/ Liquor is responsible for the customers action after leaving the establishment, if they get in a wreck / DUI, ..."
"... That is just the Bar / Restaurant biz. Mc Donalds and the Fast food scam clan are often getting 50% of an employees wages paid through special programs for hiring recently released Felons, drug rehab grads and recent immigrants to name a few, so you already paid for half that burger and fries before you ordered it and Mc Donald is doing quite nicely, thank you. I could go on into the Construction and Manufacturing realms but life is short. ..."
Some observations on recent negative trends in productivity, employment mismatch, and
labor training and education from the increasingly more bearish David Rosenberg, who
notes that the Trump's proposed policies may end up helping growth on the margins, but
fail to focus on what is really important, making tens of millions of US workers
competitive and qualified for today's jobs market.
From Breakast with Rosie, via
Gluskin Sheff
I don't think we have a productivity problem - in fact, the demise of productivity is
vastly overstated and that is because the Bureau of Labor Statistics (BLS) is likely
vastly overstating labor input, and I'm talking here about how hours worked are
estimated.
But the real travesty, and what I think deserves top priority (but I don't see it),
is that
we have, in addition to 7.5 million officially unemployed (a number that
is closer to 15 million when all the hidden unemployment is accounted for), 23.5 million
Americans aged 25-to-54 who reside outside the confines of the labor force.
And
at a time when job openings are at record highs.
The problem is that unqualified applicants for these openings also are at a
record high
. The number of jobs available that are not being filled because the
skill set is absent is at an unprecedented level - and this was an overriding theme in
the latest edition of the Fed's Beige Book.
The question is what is in the policy playbook to redress this situation?
What we need is a policy playbook that makes education, apprenticeship and training a
major priority - the one plank that I had hoped would be yanked out of Bernie Sanders'
platform.
While deregulation and simplifying the tax code obviously are constructive segments
of the Trump plan, they are not the most important obstacles in the way of growth.
Neither is globalization.
Even the most ardent ''supply-sider" would admit that labor input is key to the
outlook and this should really be at the top of the agenda - closing the widening and
unprecedented gap between job openings and new hiring. There simply is no replacement
for excellent education achievement with respect to maximizing labor productivity.
I see scant attention being paid to this file - su
rely this is more important
than U.S. involvement in Brexit or trying to play a role in breaking up the European
Union, don't you think?
This figure is what terrifies Yellen and Obama. Steve Mnuchin and Trump have both called
the formula Obama changed to estimate the unemployment/employment rates pretty much total
bullshit.
Once the figures are revised back to 2006 we will probably find a steady 9%+ REAL
unemployment rate since 2007, and that tarnishes Janet's bullspray from her mouth and Obama's
precious and fading fast legacy.
Wulfkind -> FredFlintstone
Jan 21, 2017 4:53 PM
So about all those job openings? Do they all pay a living wage ? That is to say...can they
pay a person enough money to cover all normal living expenses ( not including debt you didn't
need to obtain but including debt like a mortgage or rent )....with enough left over to save ?
Also....will those jobs be linked to inflation so over time your once living wage does not
stagnate and drop below inflation so that you are actually taking a pay cut every year from
then on out ?
My suspicion is no. These fools only count the number of job postings without looking into the
quality of said jobs. And if they are shit jobs they'll just go to wetbacks anyway and thus
not help real Americans.
Thus....the high number of people not in the labor force.
rbg81 -> Wulfkind
Jan 21, 2017 5:24 PM
So about all those job openings?
They are FAKE job openings. They basically want to hire someone with $100K/year worth of
experience & qualifications for $30K/year. And then when no one applies, the companies whine
that they need H1B visa to fill the void.
Or undocumented who will work 14 hour days for minimum wage (or less) and not complain.
therover -> rejected
Jan 21, 2017 5:13 PM
So glad I am on the same side of the fence as you. I keep telling people when they ask
where my 17 year old son is going to school or what his SAT scores none of their business and
fuck that path of higher education bullshit where you spend 100K+ on some degree that will
probably get you no where.
That 100K+ that I have saved up is going to build him a woodshop filled with tools so he can
hone his creative skills in wood working or lead to a path toward carpentry, or it's going to
buy him a van filled with plumbing equipment so he can work with his uncle as a plumber.
As part of that path, going to community college for some business courses and striving to
getting first a 2 year associates that if needed, can matriculate to a 4 year degree in
business ( for his OWN BUSINESS). Not spending tons of cash right out of the gate on a 4 year
school. Shit..I know that scenario... been there done that. Plus every parent knows their
child (at least the should) and my guy takes his time with stuff so I know that first year or
so at that 50K plus a year school will be wasted.
Bottom line is he will be getting something other than a worthless degree when he ends up
flipping pancakes at an IHOP or waiting on tables at an Applebees. Not to say they are
meaningless/dead end jobs...they are if you spent 100K+ on a degree and STILL HAVE THAT JOB.
Peak Finance Jan 21, 2017 4:51 PM
I simply don't believe this:
The problem is that unqualified applicants for these openings also are at a record
high. The number of jobs available that are not being filled because the skill set is
absent is at an unprecedented level
I think this is a lie to justify the continuation of immigration and the hateful
damaging H1B program. I remember their bullshit lies from the early 00's , posting want adds
for people with "10 years of Java Experience" when Java had come out like 2 year prior, and
other impossible requests, and then being unable to fill those jobs were allowed to ship in
people from overseas.
Falling Down -> Peak Finance
Jan 21, 2017 5:00 PM
Correct.
The only real shortages are in certain skilled trades, in certain metros.
i know several people from my parents generation who got jobs in major corporations upon
high school graduation who were hired by the companies for their aptitude and trained into the
skill the comapny needed. a couple were trianed engineers and another a chemist besides pipe
fitter, ironworker and mechanic.
companies don't do that anymore because stockholders won't let them do it. there are some
privately held companies who still do it.
Giant Meteor -> besnook
Jan 21, 2017 5:27 PM
Companies don't do that anymore because that would step on the toes of the Educational
Industrial Complex gravy train. Professional courtesy is all. Loyalty and human potential is
no longer factored in ... Lets not even get started on the government jerbs ....
Twee Surgeon -> Giant Meteor
Jan 21, 2017 6:42 PM
A major problem too, is getting past the Human Resources Department in a larger company in
the Productive industries (Machine,Construction,Refinery, etc.)
First you meet the ancient grey goddess with the chains on her eyeglasses and she will direct
you to the Interviewer who will be Jennifer Eye-candy, Kanisha Token-Black or Juan De
Bilingualo, who all have a diploma from a college but know nothing about the industry at hand,
you are more likely to get hired on the Excellence of your new Nike tennis shoes than anything
related to the Skills required for the position.
If you can get past the women in Human Resources and talk to the guy that actually runs the
shop and look each other in the eye and talk about 'Making Stuff', then you might have the
job. That is how that works.
QQQBall -> besnook
Jan 21, 2017 7:26 PM
besnook. Exactly. not just engineers, but service reps, sales people, etc., that then were
promoted up thru the ranks of the same company. My lady retired from AT&T as a project manager
at like 54 yo.
She was hired after taking a test that only 4 peeps in the room passed. worked her way up -
they had reciprocal/mutually beneficial investments in each other. She is smart and had a
degree from UC here in Kali. Now, no loyalty either way in most cases.
Twee Surgeon -> DrData02
Jan 21, 2017 6:21 PM
Exactly, people are finding other ways to get by. I'm not sure how many ZH'ers have
experienced the modern non-corporate job market.
Unless you have a .gov job you are pretty much The next disposable android who can be worked
to death and replaced when the bearings are shot or an inconvenience arrives. Employers don't
want to Hire because it's too expensive due to various regulations, taxations and obligations
to the City, State, County and Federal government, all of which are Constantly Expanding and
must pay for the ever increasing pay-roll size and the unfunded liabilities and the pension
plan and the grant for the new skate board park etc, and so on, forever and ever.
It boggles my mind, the kind of bullshit experienced by an acquaintance who is a Waitress, on
top of all the shitty employers and scummy customers, she has to pay taxes on Estimated Tips,
by a Percentage of Transactions regardless of whether she actually Received a Tip.
The
government assumes a tip exists at 8% and the waitress must pay on the assumption or the
business owner gets pissed off because he/she will catch shit from the IRS at Tax time. Black
people only tip on the 29th of February if it is a full moon, a trick they learned from the
cheap Canadian bastards who got the idea from the Asians who also, mostly, do not tip.
An establishment owner selling Beer/ Wine/ Liquor is responsible for the customers action
after leaving the establishment, if they get in a wreck / DUI,
Whatever, and that was all from
Ronald Ray-guns era, the Small Business and Independence messiah. (The Dramm shop Act, I
think, Google has that hidden though.)
That is just the Bar / Restaurant biz. Mc Donalds and the Fast food scam clan are often
getting 50% of an employees wages paid through special programs for hiring recently released
Felons, drug rehab grads and recent immigrants to name a few, so you already paid for half
that burger and fries before you ordered it and Mc Donald is doing quite nicely, thank you.
I could go on into the Construction and Manufacturing realms but life is short.
The Problem
with the USA is the Government, I'm not holding my breath for Trump to make a change, I
remember the song and Dance when Ronny won the White house. Nothing fucking changed for most
people. It just began the Road to Barry Obama and here we are.
Donewithit22
Jan 21, 2017 5:35 PM
This is only a problem when people start to realize the systems that we have in place are
by nature a ponzi scheme. I partner and I dropped out of the workforce 2011ish. We realized by
the time we paid for health care, which was now mandated, city tax, state tax, fed tax, s/s
tax etc....what was the point of going to work.....
We both have degree and are in our mid 30's.
we sold everything we had bought land and have build a homestead doing most things
ourselves. we do odd jobs for extra cash and we live better , less stress then we used too. we
are going on vacation to Peru in about 3 weeks for 15 days and we often do a few days here or
there just to see the US. We love not being in the labor pool and we are both sorry we didnt
do this sooner.
thisguyoverhere
Jan 21, 2017 5:38 PM
In the skilled trades there are many former welders, ironworkers, boilermakers and fitters,
over 60 years old, working as consultants. These men (and some women) command high rates, the
respect of their union halls or fellow tradesman because of their body of knowledge and
experience.
Much of that knowledge will not be passed on, will be lost because these experienced 'field
engineers' (the real thing, no bull$hit diploma) are sick of the politics and seeing the
honest labor of skilled workers being siphoned off while some spoiled brat takes a sallary in
'the office'.
I have a degree. I learned more usefull skills in 6 months than 4 years of school.
We have a structural problem within our framework of 'educating' the next generation.
The result, many today have the cultivated tastes, but no capital to purchase the lifestyle.
Son of Captain Nemo
Jan 21, 2017 5:55 PM
"The problem is that unqualified applicants for these openings also are at a record high.
The number of jobs available that are not being filled because the skill set is absent is at
an unprecedented level - and this was an overriding theme in the latest edition of the Fed's
Beige Book."
Because U.S. corporations would rather spend the time and expense seeking the lowest labor
rate to do the job than retraining an existing workforce that has been dormant or obsolete
because of lack of work or "No work" at all...
This includes bending the rules for H1B and related visas... Even if we have a war on terror
and a Department of Homeland Security we've been waging since 2002 which places "very high
standards" on what moves in and out of the Country since 9/11!
Go figure!!!
Duc888
Jan 21, 2017 8:03 PM
Speaking specifically of those aged 16 to say......30 Largely unemployable. Lord knows I've
tried to employ a dozen or so in the last few years.
Won't put down the gdamned smart phone.
Don't want to get their hands dirty.
Apparently they've spent so much time pushing buttons on a game controller while growing up
they skipped what young guys have done while growing up in the last 75+ years, you know,
taking shit apart, putting shit back together, screwing it up, modifying shit, putting it back
together a second time and generally learning how shit works.
Complete and total lack of knowledge of the use of common hand tools and rudimentary
pneumatic powered tools.
Absolutely no attention span.
Absolutely no common sense.
See know value in actually learning any skills involved in a trade, they want / need
instant gratification.
Absolutely no critical thinking skills, (If I do this...the likely outcome will be
A._______ B._________ or C.________
They have no training in creating some type of mental flow
chart in their head to have at least some basic predictive skills.}
9. They have more excuses for missing work than any ten guys I knew while growing up.
10. most do not have access to reliable transportation to get to the work site / job.
Seems like the feminization has worked wonderfully.
People are Choosing to Work Part-Time, Why Is that So Hard
for Economic Reporters to Understand?
It is really amazing how major news outlets can't seem to
find reporters who understand the most basic things about the
economy. I guess this is evidence of the skills shortage.
Bloomberg takes the hit today in a piece * discussing
areas where the economy is likely to make progress in a Trump
administration and areas where it is not. In a middle "muddle
through" category, we find "Full-Time Work Is Likely to Stay
Elusive for Part-Timers." The story is:
"Trump has highlighted the number of part-time workers in
the U.S. economy, saying 'far too many people' are working in
positions for which they are overqualified and underpaid.
While the proportion of full-time workers in the labor force
remains below its pre-recession high, it's made up most of
the ground lost during the downturn. But it hasn't budged
much in the last two years, even as the job market has gotten
tighter. Some economists point to the gig economy as the
driving force (pun intended) behind part-timers. Others see a
broader shift in the labor market that's left many workers
stuck with shorter hours, lower wages and weaker benefits."
Okay, wrong, wrong, and wrong. In its monthly employment
survey (the Current Population Survey - CPS), the Bureau of
Labor Statistics asks people whether they are working more or
less than 35 hours a week. If they are working less than 35
hours they are classified as part-time. The survey then asks
the people who are working part-time why they are working
part-time. It divides these workers into two categories,
people who work part-time for economic reasons (i.e. they
could not find full-time jobs) and people who work part-time
for non-economic reasons. In other words the second group has
chosen to work part-time.
If we look at the numbers for involuntary part-time
workers, it dropped from 6.8 million in December of 2014 to
5.6 million in December of 2016. That is a drop of 1.2
million, or almost 18 percent. That would not seem to fit the
description of not budging much. Of course Bloomberg may have
been adding in the number of people who chose to work part,
which grew by 1.4 million over this two year period, leaving
little net change in total part-time employment.
Of course there is a world of difference between a
situation where people need full-time jobs, but work
part-time, because that is the only work they can find and a
situation in which people work part-time because they don't
want to spend 40 hours a week on the job. Most of us would
probably consider it a good thing if people who wanted to
spend time with their kids, or did not want to full time for
some other reason, had the option to work part-time. This is
what in fact has been happening and it has been going on for
three years, not two.
Come on Bloomberg folks -- did you ever hear of the
Affordable Care Act (a.k.a. "Obamacare")? As a result of
Obamacare workers are no longer dependent on employers for
health care insurance. This means that many people have opted
to work part rather than full time. This has opened up full
time jobs ** for people who need them, even though it has
left total part-time employment little changed.
In total, the number of people involuntarily working
part-time has fallen by 2.2 million since the ACA has been in
effect, while the number choosing to work part-time has risen
by 2.4 million. The sharpest increase in voluntary part-time
employment has been among young mothers *** and older workers
**** just below Medicare age.
It is really incredible that this shift from involuntary
part-time to voluntary part-time is not more widely known. It
is a very important outcome from the ACA.
My impression here is that in this particular issue Dean
Baker is out of touch with reality.
Question: how many people in this 1.2 million drop because
they retired at 62 forced to take a half of their SS pension,
or left workforce?
Also, can you consider Wal-Mart or Shop Right cashier
working 36 hours for $7.5 an hour and without any benefits
(as he/she can't afford them) fully employed.
Single mothers are probably the most important category to
analyze here.
This is an example of how the libertarian and Republican
conceptions of liberty and freedom are so off the mark.
When people can afford to work part time instead of full time
to do things like raise children, attain higher education or
start companies, that is freedom. When the inaccessibility of
health insurance forces them to work full time when they
would otherwise prefer not, that is not enhanced freedom.
"... Building a massive castle in the desert or providing tax cuts to millionaires may increase aggregate demand, but they would also be wasteful and problematic ways to accomplish that goal." ..."
"... The Longer Depression: But now the wheel of history has turned once again. We have a Second Gilded Age. ..."
"... Summers's core fear is that the global economy-or, at least, the North Atlantic chunk of it-will be stuck for a generation or more in a situation in which, if investors have realistically expectations, then even if central banks reduce interest rates to accommodate those expectations and even if governments follow sensible but not extravagant fiscal policies, private financial markets will still fail to support a level of investment demand compatible with full employment. ..."
"... Thus economic policymakers will find themselves either hoping that investors form unrealistic expectations-prelude to a bubble-or coping with chronic ultralow interest rates and the associated risks of stubbornly elevated unemployment. ..."
"I wrote my speech on what I called the "new view" of
fiscal policy for a conference of Europeans. I was trying to
summarize an interesting wave of recent research and also to
continue our work of persuading Euro-area economies of the
still urgent and important task of using fiscal policy,
either spending increases or tax cuts, to support aggregate
demand. (Their unemployment rate is stuck around 10 percent
while ours is below 5 percent.)"
Germany's is more like 4 percent.
"In this case we have neither an urgent need for stimulus
of this magnitude nor would it have all of the same positive
side effects, like crowding in private investment. We also
have a medium- and long-run fiscal challenge that we would
not want to exacerbate. Finally, priorities matter. Building
a massive castle in the desert or providing tax cuts to
millionaires may increase aggregate demand, but they would
also be wasteful and problematic ways to accomplish that
goal."
So he agrees with Yellen and Krugman. No need for fiscal
expansion. Sounds like the usual neoliberals lies which have
led the Democrats to electoral oblivion.
In my view, the current debate about "secular stagnation"
started by Larry Summers is best thought of as the third
coming of John A. Hobson.
...
The Wheel Has Turned Again
The Longer Depression: But now the wheel of history
has turned once again. We have a Second Gilded Age.
We have had what looks to have been either the second-largest
or the largest adverse financial business-cycle shock in
history. We have had an economic downturn followed by a very
slow recovery that has produced and will produce a cumulative
output gap vis-a-vis potential that will rival and may well
exceed the Great Depression itself as a multiple of the
economy's productive potential.
But it is not just what people call "the Great Recession"
and should call "the Longer Depression". It is the long,
steady decline in safe interest rates at all maturities since
1990: the decline in short-term safe real interest rates from
4% to -1.5%, and the decline in long-term safe real interest
rates from 5% to 1%.
B. Larry's Core Worry:
And so now we have Larry
Summers (2013), reacting to the collapse of the short-term
safe nominal Wicksellian "neutral" rate of interest
consistent with full employment and with central banks'
ability to hit their inflation targets.
We are handicapped because there is not one place in which
Larry has developed his argument: it is evolving. But the
debate Larry has started seems to me, as I wrote, "the most
important policy-relevant debate in economics since John
Maynard Keynes's debate with himself in the 1930s."
Summers's core fear is that the global economy-or, at
least, the North Atlantic chunk of it-will be stuck for a
generation or more in a situation in which, if investors have
realistically expectations, then even if central banks reduce
interest rates to accommodate those expectations and even if
governments follow sensible but not extravagant fiscal
policies, private financial markets will still fail to
support a level of investment demand compatible with full
employment.
Thus economic policymakers will find themselves either
hoping that investors form unrealistic expectations-prelude
to a bubble-or coping with chronic ultralow interest rates
and the associated risks of stubbornly elevated unemployment.
...
C. Seeking Not a Cure But Palliatives:
For Summers,
secular stagnation does not have one simple cause but is the
concatenation of a number of different structural shocks un-
or only loosely-connected with each other in their origin
that have reinforced each other in their effects pushing the
short-term safe nominal Wicksellian "neutral" rate down below
zero. But even though there is no one root cause, there are
two effective palliatives to neutralize or moderate the
effects.
Thus Summers calls for two major policy initiatives:
Larger and much more aggressive progressive tax and
transfer (and predistribution?) policies to end the Second
Gilded Age.
A major shift to an investment-centered expansionary
fiscal policy as the major component of what somebody or
other once called "a somewhat comprehensive socialisation of
investment [as] the only means of securing an approximation
to full employment not exclud[ing] all manner of compromises
and of devices by which public authority will cooperate with
private initiative "
I think he has a very, very strong case here.
D. Achieving Potential:
The standard diss of Larry
was that even though his promise was immense-he was
brilliant, provocative, creative, and so willing to think
outside-the-box that you sometimes wondered whether he knew
where the box was or even if there was a box-there was no
great substantive contribution but only a bunch of footnotes
to lines of inquiry that really "belonged" to others.
1.
Inflation phobia (note it is the NOMINAL interest rate that
has fallen below zero)
2. The policy mix which tries to rely for monetary expansion
almost exclusively on private lending.
3. International capital flows which weaken the leverage of
national economic policy.
4. Rent extraction (for natural resources and for
intellectual property) which are a significant part of 3
above (and of the increasing inequality).
5. Competitive tax policy (i.e. lack of international
co-ordination)
"It's the same sort
of thing conservatives think they've caught Paul Krugman
doing. Back in August, when it looked like Hillary Clinton
was going to win the White House, he wrote that it was still
"Time to Borrow." But now that Donald Trump is getting ready
for the most elegant, most tremendous inauguration ever,
Krugman has said that "Deficits Matter Again." Now, this
might seem like a pretty straightforward gotcha, but only if
you don't read past the headlines. There's actually no
contradiction here.......
It isn't hypocritical to point out that borrowing money to
invest in infrastructure makes more sense than borrowing
money to cut taxes for the rich, especially when borrowing
money isn't the reduced-price lunch it was before. Nor is it
intellectually dishonest to say that what was good stimulus
before is still good policy today. That, after all, is what
made it good stimulus in the first place.
In the end, though, the only thing more predictable than
people changing their minds out of political expediency is
accusing other people of doing so."
Fixing our infrastructure is a good idea now and an even
better idea a few years back when Krugman and other sane
people called for it on a weekly basis. Problem is that the
way to do it is different now because the labor markets have
become tighter and the Fed is increasing interest rates.
All the concerns that GOPsters used to deny Obama's
request for infrastructure spending were pure BS back when
you had negative real interest rates and a large pool of
unemployed people. Now they are of concern and need to be
clearly evaluated. Massive government investments at this
time could compete with the private sector for capital and
labor - driving up the price of both. If the cost was covered
by deficit spending the total cost would not just have to be
calculated with a higher interest cost on the loans for the
project but also as the cost of higher interest rates on our
total national debt. That may be somewhat mitigated by not
putting the cost on the national credit card, but instead
taxing rich people more (to cover the full cost of
infrastructure). The main difference being that you either
invest by getting an interest bearing loan from rich people
(selling them treasuries) or get "a loan" with no interest
and no payments. Main economic difference being that the
later is cheeper.
"... Excellent article by an economist who understands that economic extends beyond markets and intersects with political enlightenment. Were more economists that inclusive and divorced from self promotion the study would have more effective application. ..."
"... For many today, greatness is simply a government in the business of actively governing, as opposed to shying away from it under one excuse or the other. One example: the meteoric rise of incomes for the wealthy, which is a direct result of less financial regulation. First discovered by Reagan, then perfected by Clinton, the method involves highlighting regulation as a dirty word and overstating its link to American Capitalism, and in the bargain achieving less work for government, plus bag brownie points for patriotism. ..."
"... But what it really was, was a reluctance to govern for almost thirty years. Thank goodness Trump called it out for the fraud it was, and Obama decided he would spend his last month making a show of "governing". ..."
"... So that's what greatness means to most today: Government, please show up for work every day and just do your job. Not draw lines in sand and unlock every bathroom in sight and let illegals in. Just your job please, that's all. Yes? Grrreaat, thank you Donald. ..."
"... I doubt many think that the greatness of America is just about money and power. But many corporations are run on exactly this limited idea of the greatness of corporations. ..."
"... And, unfortunately, these same misguided bottom-line corporations now control Congress and the GOP. Corporate control of Congress should not be primarily for increasing corporate profits. Part of the profits stemming from automation should be used to mitigate the tremendous disappearance of jobs that corporations are causing by introducing AI and automation. ..."
"... I have traveled overseas enough to have an idea of life in other countries. My father shared something with other veterans--a sense of belonging to something bigger than them based on being "in the service." ..."
"... That comradeship, born of intense experience while young, is rare. In terms of the sense of belonging to a city or state, the most successful of us move around and cities have lost most of what made them unique. ..."
"... there is no central cultural core to being American--as compared to being French or British--other than technology and the meritocracy of money, a personal sense of ownership in America on the part of a majority of Americans runs contrary to contemporary experience. ..."
"... The first step on this path is real social & economic justice for all in our wonderful country. The current economic inequality in the U.S. is a disgrace to any just & civil society. We must figure out a way to fairly deal with that & our other inequalities of education, opportunity & racial injustices, if we are to achieve our potential of being that 'shining city on the hill' that the rest of the world will want to follow. ..."
"... A Great Society cannot be great in any meaningful sense unless it is determinedly honest -- not just self-relievingly frank. Thus, although I was happy to see this article, which I judge to be 'exemplarily' honest, I had disappointment that, in an age when the term post-truth is being used to describe conversation in English-speaking society, it neglects to emphasize the essentiality of honesty in any debate about what being a great society entails. Adam Smith did his best to point that out, but the rich and powerful and especially those in public office and those of capitalistic ideological bent appear these days to be letting us all down in this respect. ..."
"... This article is long overdue. Mr Trump has never explained is what MADE America great in the past. If questioned, he demurred. His shallow approach to policy and his poor understanding of American history and civics makes any answer from him questionable. ..."
"... Our current Free Trade pacts make it too easy for employers to shift jobs abroad. Other countries protect their industries. We should do the same, by again placing tariffs on any goods which have been manufactured abroad which could be made here. This would not be "forcing employers to restore or maintain jobs". It would be saying that if you want to sell your products here, then you will either make them here or pay tariffs on them. ..."
"... The Free Trade pacts have an additional problem. They allow international corporations to sue us if they think that one of our laws or regulations is keeping them from making as much money as they otherwise could. These lawsuits are conducted in special courts whose decisions cannot be appealed. This allows international corporations to interfere with our democracy. They should not be allowed to sue us for enforcing our own laws. ..."
"... The issue isn't what the definition of "great" is. It's who America is great *for.* America is outstandingly great for a very slim slice at the tip-top of the economy. ..."
"... The GOP are now proving that they are traitors to the general welfare. They are determined to make this nation's chief goal be to protect the welfare of the wealthiest and best-connected. If we are depending on a free press or the voting booth to protect us, we are fooling ourselves. The forces that have seized our democracy are going to gut both the press, and our civil liberties, so that this country can never again be "of, for and by the people." It will henceforth be for the plutocrats. ..."
"... The rest of us should just go quietly, and die on our own. ..."
"Make America Great Again," the slogan of President-elect
Donald
J. Trump 's successful election campaign, has been etched in the national consciousness. But
it is hard to know what to make of those vague words.
We don't have a clear definition of "great," for example, or of the historical moment when, presumably,
America was truly great. From an economic standpoint, we can't be talking about national wealth,
because the country is wealthier than it has ever been: Real per capita household net worth has reached
a record high, as Federal Reserve Board data shows.
But the distribution of wealth has certainly changed: Inequality has widened significantly. Including
the effects of taxes and government transfer payments, real incomes for the bottom half of the population
increased only 21 percent from 1980 to 2014. That compares with a 194 percent increase for the richest
1 percent, according to a new study
by Thomas Piketty, Emmanuel Saez and Gabriel Zucman.
That's why it makes sense that Mr. Trump's call for a return to greatness resonated especially
well among non-college-educated workers in Rust Belt states - people who have been hurt as good jobs
in their region disappeared. But forcing employers to restore or maintain jobs isn't reasonable,
and creating sustainable new jobs is a complex endeavor.
Difficult as job creation may be, making America great surely entails more than that, and it's
worth considering just what we should be trying to accomplish. Fortunately, political leaders and
scholars have been thinking about national greatness for a very long time, and the answer clearly
goes beyond achieving high levels of wealth.
Adam Smith, perhaps the first true economist, gave some answers in "
An Inquiry Into the Nature and Causes of the Wealth of Nations ." That treatise is sometimes
thought of as a capitalist bible. It is at least partly about the achieving of greatness through
the pursuit of wealth in free markets. But Smith didn't believe that money alone assured national
stature. He also wrote
disapprovingly of the single-minded impulse to secure wealth, saying it was "the most universal
cause of the corruption of our moral sentiments." Instead, he emphasized that decent people should
seek real achievement - "not only praise, but praiseworthiness."
Strikingly, national greatness was a central issue in a previous presidential election campaign:
Lyndon B. Johnson , in 1964, called for the creation of a
Great Society, not merely a rich society or a powerful society. Instead, he spoke of achieving
equal opportunity and fulfillment. "The Great Society is a place where every child can find knowledge
to enrich his mind and to enlarge his talents," he said. "It is a place where leisure is a welcome
chance to build and reflect, not a feared cause of boredom and restlessness."
President Johnson's words still ring true. Opportunity is not equal for everyone in America. Enforced
leisure has indeed become a feared cause of boredom and restlessness for those who have lost jobs,
who have lost overtime work, who hold part-time jobs when they desire full-time employment, or who
were pushed into unwanted early retirement.
But there are limits to what government can do.
Jane Jacobs , the great urbanist,
wrote
that great nations need great cities, yet they cannot easily create them. "The great capitals of
modern Europe did not become great cities because they were the capitals," Ms. Jacobs said. "Cause
and effect ran the other way. Paris was at first no more the seat of French kings than were the sites
of half a dozen other royal residences."
Cities grow organically, she said, capturing a certain dynamic, a virtuous circle, a specialized
culture of expertise, with one industry leading to another, and with a reputation that attracts motivated
and capable immigrants.
America still has cities like this, but a fact not widely remembered is that Detroit used to be
one of them. Its rise to greatness was gradual. As Ms. Jacobs wrote, milled flour in the 1820s and
1830s required boats to ship the flour on the Great Lakes, which led to steamboats, marine engines
and a proliferation of other industries, which set the stage for automobiles, which made Detroit
a global center for anyone interested in that technology.
I experienced the beauty and excitement of Detroit as a child there among relatives who had ties
to the auto industry. Today, residents of Detroit and other fading metropolises want their old cities
back, but generations of people must create the fresh ideas and industries that spawn great cities,
and they can't do it by fiat from Washington.
All of which is to say that government intervention to enhance greatness will not be a simple
matter. There is a risk that well-meaning change may make matters worse. Protectionist policies and
penalties for exporters of jobs may not increase long-term opportunities for Americans who have been
left behind. Large-scale reduction of environmental or social regulations or in health care benefits,
or in America's involvement in the wider world may increase our consumption, yet leave all of us
with a sense of deeper loss.
Greatness reflects not only prosperity, but it is also linked with an atmosphere, a social environment
that makes life meaningful. In President Johnson's words, greatness requires meeting not just "the
needs of the body and the demands of commerce but the desire for beauty and the hunger for community."
Excellent article by an economist who understands that economic extends beyond markets
and intersects with political enlightenment. Were more economists that inclusive and divorced
from self promotion the study would have more effective application.
For many today, greatness is simply a government in the business of actively governing,
as opposed to shying away from it under one excuse or the other. One example: the meteoric rise
of incomes for the wealthy, which is a direct result of less financial regulation. First discovered
by Reagan, then perfected by Clinton, the method involves highlighting regulation as a dirty word
and overstating its link to American Capitalism, and in the bargain achieving less work for government,
plus bag brownie points for patriotism.
But what it really was, was a reluctance to govern for almost thirty years. Thank goodness
Trump called it out for the fraud it was, and Obama decided he would spend his last month making
a show of "governing".
But Reagan did not hesitate to govern on the international stage. That credit goes solely to
Obama, a president who's turned non-governance into something of an art. From refusing to regulate
bathroom etiquette, to egging people to have more casual sex (condoms on government, no worries,
go at it all you want), to unleashing 5 million illegals on domestic soil with a stroke of the
pen, this President has been the most ungoverning president in US history.
So that's what greatness means to most today: Government, please show up for work every
day and just do your job. Not draw lines in sand and unlock every bathroom in sight and let illegals
in. Just your job please, that's all. Yes? Grrreaat, thank you Donald.
I doubt many think that the greatness of America is just about money and power. But many
corporations are run on exactly this limited idea of the greatness of corporations.
And, unfortunately, these same misguided bottom-line corporations now control Congress
and the GOP. Corporate control of Congress should not be primarily for increasing corporate profits.
Part of the profits stemming from automation should be used to mitigate the tremendous disappearance
of jobs that corporations are causing by introducing AI and automation.
I was born in America in 1956 to native-born Americans. My father served starting right after
the Berlin Blockade, up through the Korean Conflict. My political consciousness was formed by
Vietnam, Kent State, the COINTELPRO Papers, the Pentagon Papers, the Church Committee reports.
My father had trust in the federal government, whereas I have none. I became a lawyer, and
married a lawyer. My brothers and my wife's sisters are all college-educated professionals.
Financially speaking, America has been very good to me. But as far as having any intellectual
or visceral concept of what America is, or what being an American means, I couldn't tell you.
I have traveled overseas enough to have an idea of life in other countries. My father shared
something with other veterans--a sense of belonging to something bigger than them based on being
"in the service."
That comradeship, born of intense experience while young, is rare. In terms of the
sense of belonging to a city or state, the most successful of us move around and cities have lost
most of what made them unique.
Given how very little we are expected to contribute to our city, state or country, or even
our neighbors, and as there is no central cultural core to being American--as compared to
being French or British--other than technology and the meritocracy of money, a personal sense
of ownership in America on the part of a majority of Americans runs contrary to contemporary experience.
I think this article touches on not only what will make America great, but also on how we should
act in order to show the rest of the world why liberal democracies are truly the path to prosperity
& peace in this oh so imperfect world.
How do we go about defeating ISIL & winning the smoldering economic/military contest with Russia
& China & other authoritarian regimes? By living righteously & daily demonstrating that treating
the planet & each other justly & humanely is the way to real happiness on Earth. & that we can
at the same time create plenty of wealth & life-fulfilling opportunities for all our citizens.
The first step on this path is real social & economic justice for all in our wonderful
country. The current economic inequality in the U.S. is a disgrace to any just & civil society.
We must figure out a way to fairly deal with that & our other inequalities of education, opportunity
& racial injustices, if we are to achieve our potential of being that 'shining city on the hill'
that the rest of the world will want to follow.
If the great liberal democracies of Europe & North America & the southern pacific region can
reinvigorate our optimism & our commitment to the communal values that have driven the world's
prosperity since WWII, we can surely convince the rest of the world through the awesome leverage
of 'social media' that our liberal values of education, fairness, & love for all of our fellow
humans is the true path to happiness & peace on Earth.
As a Britisher, educated at Wharton by the grace of an American-owned company, I feel gratitude
for American generosity; yet I am now a Canadian citizen, having decided that the US in the time
of Nixon could never be a place where my family could be happy. So I write this with mixed feelings.
A Great Society cannot be great in any meaningful sense unless it is determinedly honest
-- not just self-relievingly frank. Thus, although I was happy to see this article, which I judge
to be 'exemplarily' honest, I had disappointment that, in an age when the term post-truth is being
used to describe conversation in English-speaking society, it neglects to emphasize the essentiality
of honesty in any debate about what being a great society entails. Adam Smith did his best to
point that out, but the rich and powerful and especially those in public office and those of capitalistic
ideological bent appear these days to be letting us all down in this respect.
Having made a modest livelihood as an executive coach, I do not pretend that being honest (without
being self-relievingly so) is easy in high-level negotiations. Indeed it requires enormous courage,
intellect, empathy, and articulation skills. So I have enormous grief and considerable anxiety
for the state of US society today. But efforts like this one by the New York Times are certain
to be helpful. Thank you. I hope my contribution will be valuable to this fine newspaper and its
readers alike.
This article is long overdue. Mr Trump has never explained is what MADE America great in
the past. If questioned, he demurred. His shallow approach to policy and his poor understanding
of American history and civics makes any answer from him questionable.
Yet almost every policy and piece of legislation by Republicans seems aimed at making more
money for business. They assume it will trickle down to the workers (and we have seen over 30
years of how good that is working). So Republicans will ignore your plea or denigrate it. Doing
anything close to what you suggest gets in the way of making money.
"But forcing employers to restore or maintain jobs isn't reasonable, "
Our current Free Trade pacts make it too easy for employers to shift jobs abroad. Other
countries protect their industries. We should do the same, by again placing tariffs on any goods
which have been manufactured abroad which could be made here. This would not be "forcing employers
to restore or maintain jobs". It would be saying that if you want to sell your products here,
then you will either make them here or pay tariffs on them.
The Free Trade pacts have an additional problem. They allow international corporations
to sue us if they think that one of our laws or regulations is keeping them from making as much
money as they otherwise could. These lawsuits are conducted in special courts whose decisions
cannot be appealed. This allows international corporations to interfere with our democracy. They
should not be allowed to sue us for enforcing our own laws.
The issue isn't what the definition of "great" is. It's who America is great *for.* America
is outstandingly great for a very slim slice at the tip-top of the economy.
It's great for the Trumps and his cabinet members. These people have so much wealth that they
have bought our government. The gleeful look on McConnell's face last night after the GOP moved
to get rid of health care for millions, and to turn it back to the whim of the insurance companies,
said it all: America is great again for him. It's great for his owners.
The GOP are now proving that they are traitors to the general welfare. They are determined
to make this nation's chief goal be to protect the welfare of the wealthiest and best-connected.
If we are depending on a free press or the voting booth to protect us, we are fooling ourselves.
The forces that have seized our democracy are going to gut both the press, and our civil liberties,
so that this country can never again be "of, for and by the people." It will henceforth be for
the plutocrats.
The rest of us should just go quietly, and die on our own.
"... For him, the Soviet Union was once a stable, entrenched, conservative state and the majority of Russian people -- actually myself included -- thought it would last forever. But the way people employ language and read ideologies can change. That change can be undetectable at first, and then unstoppable. ..."
" In America there was once a popular but simplistic image of the Soviet Russia as the Evil
Empire destined to fall, precisely because it was unfree and therefore evil. Ronald Reagan who
advocated it also once said that the Russian people do not have a word for "freedom". Not so fast
-- says Alexei Yurchak. He was born in the Soviet Union and became a cultural anthropologist in
California. He employs linguistic structural analysis in very interesting ways. For him, the
Soviet Union was once a stable, entrenched, conservative state and the majority of Russian people
-- actually myself included -- thought it would last forever. But the way people employ language
and read ideologies can change. That change can be undetectable at first, and then unstoppable.
Yurchak's Master-idea is that the Soviet system was an example of how a state can prepare its
own demise in an invisible way. It happened in Russia through unraveling of authoritative discourse
by Gorbachev's naive but well-meaning shillyshallying undermining the Soviet system and the master
signifiers with which the Soviet society was "quilted" and held together. According to Yurchak
"In its first three or four years, perestroika was not much more than a deconstruction of Soviet
authoritative discourse". This could a cautionary tale for America as well because the Soviet
Union shared more features with American modernity than the Americans themselves are willing to
admit.
The demise of the Soviet Union was not caused by anti-modernity or backwardness of Russian
people. The Soviet experiment was a cousin of Western modernity and shared many features with
the Western democracies, in particular its roots in the Enlightenment project. The Soviet Union
wasn't "evil" in late stages 1950-1980s. The most people were decent. The Soviet system, despite
its flaws, offered a set of collective values. There were many moral and ethical aspects to Soviet
socialism, and even though those values have been betrayed by the state, they were still very
important to people themselves in their lives. These values were: solidarity, community, altruism,
education, creativity, friendship and safety. Perhaps they were incommensurable with the "Western
values" such as the rule of law and freedom, but for Russians they were the most important. For
many "socialism" was a system of human values and everyday realities which wasn't necessarily
equivalent of the official interpretation provided by the state rhetoric.
Yurchak starts with a general paradox within the ideology of modernity: the split between ideological
enunciation, which reflects the theoretical ideals of the Enlightenment, and ideological rule,
which are the practical concerns of the modern state's political authority. In Soviet Union the
paradox was "solved" by means of dogmatic political closure and elevation of Master signifier
[Lenin, Stalin, Party] but it doesn't mean the Western democracies are immune to totalitarian
temptation to which the Soviet Union had succumbed. The vast governmental bureaucracy and Quango-state
are waiting in the shadows here as well, may be ready to appropriate discourse.
It is hard to agree with everything in his book. But it is an interesting perspective. I wish
Alexei Yurchak would explore more implications of Roman Jacobson's "poetic function of language"
and its connection to Russian experiment in communism. It seems to me, as a Russian native speaker,
that Russians put stress on form, sound, and poetics. The English-language tradition prioritizes
content and meaning. Can we speak of "Hermeneutics" of the West versus "Poetics" of Russia? Perhaps
the tragedy of Russia was under-development of Hermeneutics? How does one explain the feeble attempts
to throw a light of reason into the loopy texts and theories of Marks, Lenin, Trotsky and Stalin?
Perhaps the Russians read it as a kind of magical text, a poetry, a bad poetry -- not Pasternak
or Blok -- but kind of poetry nevertheless?
Just loved this -- a brilliant study of how everyday citizens (as opposed to active supporters
or dissidents) cope with living in a decadent dictatorship, through strategies of ignoring the
powerful, focusing on hyperlocal socialities, treating ritualized support for the regime as little
more than an annoying chore, and withdrawal into subcultures. Yurchak demolishes the view that
the only choices available to late Soviet citizens were either blind support (though his accounts
of those figures who chose this path are deeply chilling) or active resistance, while at the same
time showing how many of the purported values of Soviet socialism (equality, education, friendship,
community, etc) were in fact deeply held by many in the population. While his entire account is
a tacit meditation on the manifold unpleasantnesses of living under the Soviet system, Yurchak
also makes clear that it was not all unpleasantness and that indeed for some people (such as theoretical
physicists) life under Soviet socialism was in some ways freer than for their peers in the West.
All of which makes the book function (sotto voce) as an explanation for the nostalgia that many
in Russia today feel for Soviet times - something inexplicable to those who claim that Communism
was simply and nothing but an evil.
The theoretical vehicle for Yurchak's investigation is the divergence between the performative
rather than the constative dimensions of the "authoritative discourse" of the late Soviet regime.
One might say that his basic thesis is that, for most Soviet people, the attitude toward the authorities
was "They pretend to make statements that corresponded to reality, and we pretend to believe them."
Yurchak rightly observes that one can neither interpret the decision to vote in favor of an official
resolution or to display a pro-government slogan at a rally as being an unambiguous statement
of regime support, nor assume that these actions were directly coerced. People were expected to
perform these rituals, but they developed "a complexly differentiating relationship to the ideological
meanings, norms, and values" of the Soviet state. "Depending on the context, they might reject
a certain meaning, norm or value, be apathetic about another, continue actively subscribing to
a third, creatively reinterpret a fourth, and so on." (28-29)
The result was that, as the discourse of the late Soviet period ossified into completely formalist
incantations (a process that Yurchak demonstrates was increasingly routinized from the 1950s onwards),
Soviet citizens participated in these more for ritualistic reasons than because of fervent belief,
which in turn allowed citizens to fill their lives with other sources of identity and meaning.
Soviet citizens would go to cafes and talk about music and literature, join a rock band or art
collective, take silly jobs that required little effort and thus left room for them to pursue
their "interests." The very drabness of the standardizations of Soviet life therefore created
new sorts of (admittedly constrained) spaces within which people could define themselves and their
(inter)subjective meanings. All of which is to say that the book consists of a dramatic refutation
of the "totalitarianism" thesis, demonstrating that despite the totalitarian ambitions of the
regime, citizens were continually able to carve out zones of autonomy and identification that
transcended the ambitions of the Authoritative discourse.
"... Normalisation is what has historically happened in the wake of financial crises. During the booms that precede busts, low interest rates encourage people to make investments with borrowed money. However, even after all of the prudent investment opportunities have been taken, people continue borrowing to invest in projects and ideas that are unlikely to ever generate profits. ..."
"... Eventually, the precariousness of some of these later investments becomes apparent. Those that arrive at this realization early sell up, settle their debts and pocket profits, but their selling often triggers a rush for the exits that bankrupts companies and individuals and, in many cases, the banks which lent to them. ..."
"... By contrast, the responses of policy-makers to 2008's financial crisis suggest the psychology of hypernormalisation. Quantitative easing (also known as money printing) and interest rate suppression (to zero percent and, in Europe, negative interest rates) are not working and will never result in sustained increases in productivity, income and employment. However, as our leaders are unable to consider alternative policy solutions, they have to pretend that they are working. ..."
"... Statistical chicanery has helped understate unemployment and inflation while global cooperation has served to obscure the currency depreciation and loss of confidence in paper money (as opposed to 'hard money' such as gold and silver) that are to be expected from rampant money printing. ..."
"... The recent fuss over 'fake news' seems intended to remove alternative news and information sources from a population that, alarmingly for those in charge, is both ever-more aware that the system is not working and less and less willing to pretend that it is . Just this month U.S. President Barack Obama signed the Countering Disinformation and Propaganda Act into law. United States, meet your Ministry of Truth. ..."
"... Great article. I think it does describe the USSA at the present time. Everything works until it doesn't. ..."
"... The funny thing is I had almost identical thoughts just a few days ago. But I was thinking in comparison more of East Germany's last 20 years before they imploded - peacefully, because not a single non-leading-rank person believed any of the official facts anymore (and therefore they even simply ignored orders from high command to crush the Leipzig Monday demonstrations.) ..."
"... I'm ok with a world led by Trump and Putin. ..."
"... I recall the joke from the old Soviet Union: "They pretend to pay us, we pretend to work." In the USSA these last few years, Barry pretends to tell the truth. Libtards pretend to believe him. ..."
"... Wrong. They believe him. Look at the gaggle of libtard/shiteaters at Soetero's Friday night bash at the White House. ..."
"... Reagan used to quip that in the Soviet Union, the people pretend to work and the government pretends to pay them. We're not the Soviet Union, but we have become a farce. Next stop - the fall. Followed by chaos, then onto something new. The new elites will just be the old elites, well, the ones that escape the noose. ..."
"... The real ugly problem with the Soviet Union is that whatever they broke it into isn't working well either. ..."
"... Russia's problem post collapse was the good ol' USSA and its capitalist, plunderer banking mavens. ..."
"... The only way to normalize banking in a contemporary banking paradigm of QE Infinity & Beyond is to start over again without the bankers & accountants that knowingly bet the ranch for a short term gain at the expense of long term profitability. In Japan an honourable businessman/CEO would suicide for bringing this kind of devastation to the company shareholders. ..."
"... In America they don't give a shit because it is always someone else other than the CEO that takes the fall. ..."
"... This, after I'd point out his evasion and deflection every time I addressed his bias and belief in the MSM propaganda mantras of racism, misogyny, xenophobia - all the usual labeling bullshit up to insinuating Russia hacked the election ..."
"... I've been using the term Hypernormalisation to describe aspects of western society for the last 15 years, before Adam Curtis's brilliant BBC documentary Hypernormalisation , afflicting western society and particularly politics. There are lies and gross distortions everywhere in western society and it straddles/effects all races, colours, social classes and the disease is most acute in our politics. ..."
"... We all know the hypernoprmalisation in politics, as we witness stories everyday on Zerohedge of the disconnect from reality ..."
"... It is called COGNITIVE DISSONANCE .. ..."
"... "When they are presented with evidence that works against that belief, the new evidence cannot be accepted. It would create a feeling that is extremely uncomfortable, called cognitive dissonance. And because it is so important to protect the core belief, they will rationalize, ignore and even deny anything that doesn't fit with the core belief." ..."
"... During their final days as a world power, the Soviet Union allowed cognitive dissonance to rule its better judgment as so many Americans are doing in 2012. The handwriting on the wall was pretty clear for Gorbachev. The Soviet economy was failing. They did none of the necessary things to save their economy. In 2012, the handwriting on the wall is pretty clear for the American people. The economy is failing. The people and the Congress do none of the necessary things to save their economy. Why? Go re-read the definition of cognitive dissonance. That's why. We have a classic fight going on between those who want government to take care of them who will pay the price of lost freedom to get that care, and those who value freedom above all else. ..."
"... to me the PTB are "Japanifying" the u.s. (decades of no growth, near total demoralization of a generation of worker bees (as in, 'things will never get any better, be glad for what little you've got' etc... look what they've done to u.s. millenials just since '08... fooled (crushed) them TWICE already) ..."
"... But the PTB Plan B is to emulate the USSR with a crackup, replete with fire sale to oligarchs of public assets. ..."
The term comes from Alexei Yurchak's 2006 book Everything was Forever, Until it was No More: The
Last Soviet Generation. The book argues that over the last 20 years of the Soviet Union, everyone
knew the system wasn't working, but as no one could imagine any alternative, politicians and citizens
were resigned to pretending that it was. Eventually this pretending was accepted as normal and the
fake reality thus created was accepted as real, an effect which Yurchak termed "hypernormalisation."
Looking at events over the past few years, one wonders if our own society is experiencing the
same phenomenon. A contrast with what economic policy-makers term "normalisation" is instructive.
Normalisation is what has historically happened in the wake of financial crises. During the
booms that precede busts, low interest rates encourage people to make investments with borrowed money.
However, even after all of the prudent investment opportunities have been taken, people continue
borrowing to invest in projects and ideas that are unlikely to ever generate profits.
Eventually, the precariousness of some of these later investments becomes apparent. Those
that arrive at this realization early sell up, settle their debts and pocket profits, but their selling
often triggers a rush for the exits that bankrupts companies and individuals and, in many cases,
the banks which lent to them.
In the normalisation which follows (usually held during 'special' bank holidays) auditors and
accountants go through financial records and decide which companies and individuals are insolvent
(and should therefore go bankrupt) and which are merely illiquid (and therefore eligible for additional
loans, pledged against good collateral). In a similar fashion, central bank officials decide which
banks are to close and which are to remain open. Lenders made freshly aware of bankruptcy risk raise
(or normalise) interest rates and in so doing complete the process of clearing bad debt out of the
system. Overall, reality replaces wishful thinking.
While this process is by no means pleasant for the people involved, from a societal standpoint
bankruptcy and higher interest rates are necessary to keep businesses focused on profitable investment,
banks focused on prudent lending and overall debt levels manageable.
By contrast, the responses of policy-makers to 2008's financial crisis suggest the psychology
of hypernormalisation. Quantitative easing (also known as money printing) and interest rate suppression
(to zero percent and, in Europe, negative interest rates) are not working and will never result in
sustained increases in productivity, income and employment. However, as our leaders are unable to
consider alternative policy solutions, they have to pretend that they are working.
To understand why our leaders are unable to consider alternative policy solutions such as interest
rate normalization and banking reform one only needs to understand that while such policies would
lay the groundwork for a sustained recovery, they would also expose many of the world's biggest banks
as insolvent. As the financial sector is a powerful constituency (and a generous donor to political
campaigns) the banks get the free money they need, even if such policies harm society as a whole.
As we live in a democratic society, it is necessary for our leaders to convince us that there
are no other solutions and that the monetary policy fixes of the past 8 years have been effective
and have done no harm.
Statistical chicanery has helped understate unemployment and inflation while global cooperation
has served to obscure the currency depreciation and loss of confidence in paper money (as opposed
to 'hard money' such as gold and silver) that are to be expected from rampant money printing.
Looking at unemployment figures first, while the unemployment rate is currently very low, the
number of Americans of working age not in the labour force is currently at an all-time high of over
95 million people. Discouraged workers who stop looking for work are no longer classified as unemployed
but instead become economically inactive, but clearly many of these people really should be counted
as unemployed. Similarly, while government statistical agencies record inflation rates of between
one and two percent, measures that use methodologies used in the past (such as John Williams' Shadowstats
measures) show consumer prices rising at annual rates of 6 to 8 percent. In addition, many people
have noticed what has been termed 'shrinkflation', where prices remain the same even as package sizes
shrink. A common example is bacon, which used to be sold by the pound but which is now commonly sold
in 12 ounce slabs.
Meanwhile central banks have coordinated their money printing to ensure that no major currency
(the dollar, the yen, the euro or the Chinese renminbi) depreciates noticeably against the others
for a sustained period of time. Further, since gold hit a peak of over $1900 per ounce in 2011, central
banks have worked hard to keep the gold price suppressed through the futures market. On more than
a few occasions, contracts for many months worth of global gold production have been sold in a matter
of a few minutes, with predictable consequences for the gold price. At all costs, people's confidence
in and acceptance of the paper (or, more commonly, electronic) money issued by central banks must
be maintained.
Despite these efforts people nonetheless sense that something is wrong. The Brexit vote and the
election of Donald Trump to the White House represent to a large degree a rejection of the fake reality
propagated by the policymaking elite. Increasingly, people recognize that a financial system dependent
upon zero percent interest rates is not sustainable and are responding by taking their money out
of the banks in favour of holding cash or other forms of wealth. In the face of such understanding
and resistance, governments are showing themselves willing to use coercion to enforce acceptance
of their fake reality.
The recent fuss over 'fake news' seems intended to remove alternative news and information
sources from a population that, alarmingly for those in charge, is both ever-more aware that the
system is not working and less and less willing to pretend that it is . Just this month U.S. President
Barack Obama signed the Countering Disinformation and Propaganda Act into law. United States, meet
your Ministry of Truth.
Meanwhile, in India last month, people were told that the highest denomination bills in common
circulation would be 'demonetized' or made worthless as of December 30th. People were allowed to
deposit or exchange a certain quantity of the demonetized bills in banks but many people who had
accumulated their savings in rupee notes (often the poor who did not have bank accounts) have been
ruined. Ostensibly, this demonetization policy was aimed at curbing corruption and terrorism, but
it is fairly obvious that its real objective was to force people into the banking system and electronic
money. Unsurprisingly, the demonetization drive was accompanied by limits on the quantity of gold
people are allowed to hold.
Despite such attempts to influence our thinking and our behaviour, we don't need to resign ourselves
to pretending that our system is working when it so clearly isn't. Looking at the eventual fate of
the Soviet Union, it should be clear that the sooner we abandon the drift towards hypernormalisation
and start on the path to normalisation the better off we will be.
Correct. I seen with sufficient level of comprehending consciousness the last 5 years of it
- copy-cat perfection with the current times in US(S)A, terrifying how similar the times are as
it is a clear indication of the times to come.
The funny thing is I had almost identical thoughts just a few days ago. But I was thinking
in comparison more of East Germany's last 20 years before they imploded - peacefully, because
not a single non-leading-rank person believed any of the official facts anymore (and therefore
they even simply ignored orders from high command to crush the Leipzig Monday demonstrations.)
I was just thinking that the whole economic world sees us in a sort of equilibrium at the moment.
There will be some adjustments under Trump, but nothing serious. We shall see ..
Repeat something often enough and it becomes hypernormalised. With that in mind the number
of eyes/minds/hits is all that matters. This has been known and exploited for hundreds of years.
That a handful of individuals can have a monopoly over the single most important aspect of
whether you live or die is the ultimate success of hypernormalisation. CENTRAL BANKING.
Mrs.M is of the last Soviet generation. Her .gov papers say so. There is never
a day when I don't hear something soviet. She still has a her red pioneer ribbon.
I have tried to encourage her to write about it on ZH so that we know. Do you think she
will? No. She's says that we can't understand what it was like no matter what she
says.
Mrs.M was born in 1981 so she has lived an interesting life. I married her in 2004 after
much paperwork and $15000. I wanted that female because we got along quite well. She
is who I needed with me this and I would do it all over again.
Needless to say, I do not support any aggression towards Russia. And to my fellow Americans,
I advise caution because the half you are broke ass fucks and are already ropes with me.
I recall the joke from the old Soviet Union: "They pretend to pay us, we pretend to work."
In the USSA these last few years, Barry pretends to tell the truth. Libtards pretend to believe
him.
Geezer, I'd change only one thing... I believe libtards bought Barry's bullshit hook, line
and sinker... it was the rest of us who not-so-subtly were saying WTF!!!
Reagan used to quip that in the Soviet Union, the people pretend to work and the government
pretends to pay them. We're not the Soviet Union, but we have become a farce. Next stop
- the fall. Followed by chaos, then onto something new. The new elites will just be the old elites,
well, the ones that escape the noose.
what noose? you think joe 6p is going to identify the culprits? i think not. "no one saw this
coming!!!" is still ringing in my ears from the last time.
I really don't know how people can keep on getting clicks with this tired crap. It didn't happen
in 2008 just get over it. The delusional people are the people that think the world is going to
end tomorrow.
Maybe the world has ended, for 95 million? I haven't paid a single Fed income tax dollar
in over 8 yrs., for a specific reason, I refuse to support the new normal circus, and quite frankly
I would have gotten out during the GWBush regime, but I couldn't afford to at the time.
The real ugly problem with the Soviet Union is that whatever they broke it into isn't working
well either. Same with the USSA. No one really knows what to do. Feudalism would probably
work, but it is not possible to go back to it. My bet is that we will end up with some form of
socialism, universal income and whatever else, just because there is no good alternative for dealing
with lots and lots of people who are not needed anymore.
Do you mean useless eaters or fuckers deserving the guillotine? Russia's problem post collapse
was the good ol' USSA and its capitalist, plunderer banking mavens.
The Soviet Union pushed its old culture to near destruction but failed to establish a new and
better culture to replace it, writes Angelo M. Codevilla in "The Rise of Political Correctness,"
and as a result the U.S.S.R fell, just as America's current "politically correct" and dysfunctional
"progressive utopia" will implode.
As such, Codevilla would agree that the US population " is both ever-more aware that the system
is not working and less and less willing to pretend that it is."
As for the U.S.S.R., "this step turned out instead to destroy the very basis of Soviet power,"
writes Codevilla. "[C]ontinued efforts to force people to celebrate the party's ersatz reality,
to affirm things that they know are not true and to deny others they know to be true to live
by lies requires breaking them , reducing them to a sense of fearful isolation, destroying their
self-esteem and their capacity to trust others. George Orwell's novel 1984 dramatized this culture
war's ends and means : nothing less than the substitution of the party's authority for the reality
conveyed by human senses and reason. Big Brother's agent, having berated the hapless Winston
for preferring his own views to society's dictates, finished breaking his spirit by holding up
four fingers and demanding that Winston acknowledge seeing five.
"Thus did the Soviet regime create dysfunctional, cynical, and resentful subjects. Because
Communism confused destruction of 'bourgeois culture' with cultural conquest, it won all the cultural
battles while losing its culture war long before it collapsed politically. As Communists identified
themselves in people's minds with falsehood and fraud, people came to identify truth with anything
other than the officials and their doctrines. Inevitably, they also identified them with corruption
and privation. A nd so it was that, whenever the authorities announced that the harvest had been
good, the people hoarded potatoes; and that more and more people who knew nothing of Christianity
except that the authorities had anathematized it, started wearing crosses."
And if you want to see the ruling class's culture war in action today in America, pick up the
latest issues of Vogue Magazine or O, The Oprah Magazine with their multitude of role reversals
between whites and minorities. Or check out the latest decisions by the U.S. Supreme Court forcing
people to acknowledge that America is not a Christian nation, or making it "more difficult for
men, women and children to exist as a family" or demanding via law "that their subjects join them
in celebrating the new order that reflects their identity."
As to just how far the ruling class has gone to serve the interests and proclivities of its
leaders and to reject the majority's demand for representation, Codevilla notes, "In 2012 no one
would have thought that defining marriage between one man and one woman, as enshrined in U.S.
law, would brand those who do so as motivated by a culpable psychopathology called 'homophobia,'
subject to fines and near-outlaw status. Not until 2015-16 did it occur to anyone that requiring
persons with male personal plumbing to use public bathrooms reserved for men was a sign of the
same pathology
"On the wholesale level, it is a war on civilization waged to indulge identity politics."
This article is so flawed! People[impoverished] aren't trying to jump over a wall patrolled
by guards into Mexico -YET. Tyler, why do you repost shit like this?
That's because the Yankees, fleeing high taxes, can move to the sunbelt states w/o freezing.
The USA went broke in 2008. Mexico got a head start by 22 years when oil prices collapsed in '86.
The only way to normalize banking in a contemporary banking paradigm of QE Infinity & Beyond
is to start over again without the bankers & accountants that knowingly bet the ranch for a short
term gain at the expense of long term profitability. In Japan an honourable businessman/CEO would
suicide for bringing this kind of devastation to the company shareholders.
In America they don't give a shit because it is always someone else other than the CEO
that takes the fall. 08 was proof that America is not equipped to participate in a Multinational
& Multipolar world of business & investment in business. America can't get along in business in
this world anymore. Greed has rendered America unemployable as a major market participant in a
Globally run network of businesses.
America is the odd man out these days even though the next POTUS promises better management
from a business perspective. Whilst the Mafia Cartel bosses trust TrumpO's business savvy the
rest of the planet Earth does not.
A liberal friend laid this movie on me to show me why he supported Hillary. A smart cookie,
a PHd teaching English in Japan. A Khazarnazi Jew, he even spent time in Kyiv, Ukraine pre-coup,
only mingling with "poets and writers". He went out of his way to tell me how bad the Russians
were, informed as he was prior to the rejection of the EU's usurious offer.
He even quite dramatically pulled out the Anti-Semite card. I had to throw Banderas in his
face and the US sponsored regime. I had respect for this guy and his knowledge but he just - could
- not - let - go the cult assumptions. I finally came to believe Liberal Arts educators are victims
of inbred conditioning. In retaliation, he wanted to somehow prove Putin a charlatan or villian
and Trump his proxie.
This, after I'd point out his evasion and deflection every time I addressed his bias and
belief in the MSM propaganda mantras of racism, misogyny, xenophobia - all the usual labeling
bullshit up to insinuating Russia hacked the election. Excerpts from a correspondence wherein
I go full asshole on the guy follow. Try and make sense of it if you watch this trash:
HyperNormalization 50:29 Not Ronald Rayguns, or Quadaffi plays along. Say what? They're, i.e.
Curtis, assuming what Q thought?
1:15 USSR collapses. No shit. Cronyism in a centralized organization grown too large is inevitable
it seems. So the premise has evolved to cultural/societal "management". Right. USSR collapses
but let's repeat the same mistakes 'cause "it's different this time". We got us a computer!
Then Fink the failed Squid (how do Squids climb the corporate ladder?) builds one and programs
historical data to,,,, forecast? I heard a' this. Let me guess. He couldn't avoid bias, making
his models fallacious. Whoops. Well, he does intend to manipulate society, or was that not the
goal? Come again? Some authority ran with it and ... captured an entire nation's media, conspired
with other like-minded sycophants and their mysterious masters to capture an election by ... I
may be getting ahead of myself.
Oh, boy, I have an inkling of where this is going. Perceptions modified by the word, advanced
by the herd, in order to capture a vulnerable society under duress, who then pick sides, fool
themselves in the process, miss the three hour tour never to live happily ever after on a deserted
isle because they eschew (pick a bias here from the list provided). The one you think the "others"
have, 'cause, shit, we're above it all, right? " Are we not entertained" is probably not the most
appropriate question here.
Point being, Curtis, the BBC documentarian, totally negates the reality of pathological Imperialism
as has been practiced by the West over the last half century, causing so many of the effects
he so casually eludes to in the Arab Spring, Libya, Syria, Russia, the US and elsewhere. Perhaps
the most blatant is this; Curtis asserts that Trump "defeated journalism" by rendering its fact-checking
abilities irrelevant. Wikipedia He Hypernormalizes the very audience that believes itself to be
enlightened. As for my erstwhile friend, the fucker never once admitted all the people *killed*
for the ideals he supported. I finally blew him off for good.
I've been using the term Hypernormalisation to describe aspects of western society for
the last 15 years, before Adam Curtis's brilliant BBC documentary Hypernormalisation , afflicting
western society and particularly politics. There are lies and gross distortions everywhere in
western society and it straddles/effects all races, colours, social classes and the disease is
most acute in our politics.
We all know the hypernoprmalisation in politics, as we witness stories everyday on Zerohedge
of the disconnect from reality...
Enter Operation Stillpoint: William Colby, William Casey and Leo Emil Wanta.
At the time it started, President Reagan wanted to get a better handle on ways to keep the
Soviets from expansionary tactics used to spread Vladimir Ilyich Ulyanov Lenin's philosophy of
communism around the world. He looked to his Special Task Force to provide a means of doing so.
One thing was certain: The economy of the Soviets had never been strong and corruption, always
present in government and always growing at least as fast as a government grows, made the USSR
vulnerable to outside interference just as the United States is today.
According to Gorbachev's Prime Minister, Nikolai Ryzhkov, the "moral [nravstennoe] state of
the society" in 1985 was its "most terrifying" feature: "[We] stole from ourselves, took and gave
bribes, lied in the reports, in newspapers, from high podiums, wallowed in our lies, hung medals
on one another. And all of this from top to bottom and from bottom to top."
Again, it sounds like today's America, doesn't it?
Foreign Minister Eduard Shevardnadze made equally painful comments about the lawlessness and
corruption dominating the Soviet Union. During the winter months of 1984-85, he told Gorbachev
that "Everything is rotten. It has to be changed."
"Sometimes people hold a core belief that is very strong," Frantz Fanon said in his 1952 book
Black Skin, White Masks (originally published in French as Peau Noire, Masques Blancs). "When
they are presented with evidence that works against that belief, the new evidence cannot be accepted.
It would create a feeling that is extremely uncomfortable, called cognitive dissonance. And because
it is so important to protect the core belief, they will rationalize, ignore and even deny anything
that doesn't fit with the core belief."
COGNITIVE DISSONANCE
During their final days as a world power, the Soviet Union allowed cognitive dissonance
to rule its better judgment as so many Americans are doing in 2012. The handwriting on the wall
was pretty clear for Gorbachev. The Soviet economy was failing. They did none of the necessary
things to save their economy. In 2012, the handwriting on the wall is pretty clear for the American
people. The economy is failing. The people and the Congress do none of the necessary things to
save their economy. Why? Go re-read the definition of cognitive dissonance. That's why. We have
a classic fight going on between those who want government to take care of them who will pay the
price of lost freedom to get that care, and those who value freedom above all else.
On one day we have 50 state attorneys general suing Bank of America for making fraudulent mortgages,
and on the next we have M.F. Global losing billions upon billions of customer dollars because
they got mixed with the firm's funds which is against the law or we have J.P. Morgan Chase
losing $2 billion (or is it $5 billion?) in bad investments. As Eduard Shevardnadze said, "Everything
is rotten. It has to be changed." As I would say it, "There is no Rule of Law in America today.
There has been no real Rule of Law since George Herbert Walker Bush took office."
No one listened then; no one is listening in America now. The primary reason? Cognitive dissonance.
-- Chapter 2, "Wanta! Black Swan, White Hat" (2013)
Okay then, forget what was said in 1985, that was later reported in 2013 ..
Lee Wanta. I've heard of him before. He was screwed over for some bullshit charges. And the
CIA made a firm warning... How long did that dude spent in jail?
Just looked up his story as it was blurry. Cronyism at its finest. So now that I got my refreshing
course. Trump stole/adopted (however you want to look at that) his plan and the project the gov
(DOT) proposes sucks donkey balls compared to Wanta's.
So where are all the climate hoaxers now by the way? You'd figure they'd be all over this.
to me the PTB are "Japanifying" the u.s. (decades of no growth, near total demoralization
of a generation of worker bees (as in, 'things will never get any better, be glad for what little
you've got' etc... look what they've done to u.s. millenials just since '08... fooled (crushed)
them TWICE already)
But the PTB Plan B is to emulate the USSR with a crackup, replete with fire sale to oligarchs
of public assets. They will Japan as long as they can (so it will be difficult to forecast
any crackup anymore than six months beforehand). Hope they have a Gorbachev lined up, to limit
the bloodshed
"... "instead they've had difficulty even getting inflation high enough to hit their inflation target. Maybe the problem is the way the FED is counting dollars." ..."
"... Debt the First 5000 Years ..."
"... looks like ..."
"... "but at some point this must and will end" ..."
"... personal, anecdotal, small-sample, and otherwise qualified observations ..."
"instead they've had difficulty even getting inflation high enough to
hit their inflation target. Maybe the problem is the way the FED is counting
dollars."
Ah, but they did stop deflation. Which was all they really cared about.
Everything else was theater. Bottom line, Federal Reserve is the
counterparty to all the private interests naked shorting the US dollar.
Which always works unless that counterfeiting process starts to go into
reverse. Just like naked shorting in the stock market can go into reverse
and put a big deal of hurt on the naked shorters. But with naked shorting in
the stock market, the party that is doing the counterfeiting of stock
doesn't have a way to prevent the play from going into reverse. In contrast,
the Federal Reserve does, through QE and whatever else they can do. Believe
you me, if things got bad enough, they would have done a true helicopter
drop. Whatever it takes to get their "liquidity pump" working again.
And they got their liquidity pump working again and stopped deflation.
(So hey they were heros, yay! /sarc) And along the way, dollars (either
newly borrowed or already in the economy) ended up in assets. And those
assets keep going up through more inflation. So while they may not have
"levitated the economy", they did levitate the demand for their liquidity
pump. (What's not to love? /sarc)
It just hasn't reached high inflation because main street isn't a player.
Otherwise, if main street was a player too, like they were for the dot com
bubble and housing bubble, well then look out. But everybody on main street
is just trying to survive. As far as the Federal Reserve is concerned that's
a perfect "wall of worry" to provide them all the cover they need to make
sure inflation doesn't get out of hand. To use the words of Adam Smith,
"it's a virtuous cycle". Assets go up, the plebs aren't at the party yet, so
no need to take away the punch bowl.
(And hey look at all the temp jobs that main street has now. Who says the
magic of the Federal Reserve isn't doing good things? /sarc)
Ah yes, "stopping deflation", what a disaster it would be if rent,
food, health care cost less. The horror: people might be able to put a
little away as "savings" and maybe even "invest". Can't have that now can
we.
So we have a system where the Fed controls interest rates (domestic
policy) and Treasury worries about exchange rates (trade and
international). Their objectives align probably 20% of the time.
Meantime "bank underwriting" is a distant memory, just sign the deal, get
your bonus, if/when it goes south Papa (Momma) CB will just smash the
value of the scrip some more
yes djrichard that is a nice synopsis of how this all works but where
does it end? How long can it go on? It is the world's biggest Ponzi
scheme and it almost ended in 2008 when the plebes could no longer take
on the increasing amounts of debt to keep it going. A normal Ponzi scheme
ends when it runs out of fools to fleece but this one is different
because it involves central banks which can step in to keep it all going
once mainstream is tapped out. That's where we are now; they ginned up
massive amounts of base money that was used to prop up asset prices on
behalf of the elites. This whole thing has to be the biggest fraud and
crime in human history but it is so esoteric that most people can't see
it. The masses get buried under inflated costs associated with the asset
bubble, inflation and interest payments while a small sliver at the top
lives in a rentiers paradise.
They have added massive debt to the system since the 2008 debt crisis
and things are now fine? Low interest rates mask the burden but at some
point this must and will end. Once they stripped the gold out of the
system in 1971 they set the groundwork for an explosion of debt. It's a
very scary situation.
However, there has been a lot of unproductive private debt issuance
even so, such as companies issuing debt to buy back stock and student
debt financing overpriced college costs.
This is a good explanation of why private debt, particularly
unproductive household debt, is the danger:
QE is widely misunderstood as printing money when it isn't. It's a
way to lower long term interest rates and spreads (as in lower the
spread of prime mortgages relative to Treasuries).
2. China continues to have a massive debt bubble. And no major
economy has made the transition from being investment and export led
to consumption led without having a major financial crisis.
Are you suggesting that the U.S. monetary system is healthy and
sound?
Completely agree that the creation of unproductive debt is the
real problem in any economy. Michael Hudson has written brilliantly
on that issue. Most debt/money creation should be closely tied to
productive investment.
As for private debt to GDP, I have no basis to comment on
whether it higher or lower than pre-crisis levels without doing a
lot of work. Those types of figures are fraught with complexity
based on source data, assumptions and methodology. Would love to
see those figures by sector, student loan, credit card, auto loan,
mortgage, corporate, municipal, etc. In any case it is unambiguous
that government debt has increased by nearly $10,000,000,000,000.00
since 2008. Does anyone think that is a good thing? And that
excludes retirement and medical costs which dwarf the funded debt.
Federal deficit went up by $1.4 last year, 9/30/16 year-end, after
a 7 year supposed recovery when tax revenues should be peaking.
What's up with that?
The U.S. may be able to borrow in its own currency but because
of its current account deficit it is dependent on foreigners to
play along. How long is that going to last?
Any thoughts on the 1974 deal whereby the Saudis agreed to
secretly support the dollar. What happens to dollar hegemony
without those kinds of deals.
What is going on with Russia right now, why the new cold war?
Russia runs a pipeline through Ukraine and is the leading supplier
of natural gas to western Europe. It's not dollar based. Qatar sits
on the world's largest supplies of natural gas and wants to run
pipeline North through Syria. Asssad said no. U.S. then unleashed a
proxy war to unseat Assad. Qatar is a U.S. client state, like Saudi
Arabia, and they allowed U.S. to build massive air base outside of
Doha. Qatar plays along with U.S. and in return the Al Thani family
remains in power.
I am afraid this is all a bit more complicated and fragile than
meets the eye.
What is your definition of printing money? Is there no such
thing in your mind? Does a central bank ever print money in your
view of the system other than when they ask the U.S. Treasury's
Bureau of Engraving and Printing to create some federal reserve
notes?
I have read two of Randall Wray's books on MMT and Warren
Mossler's Seven Deadly Innocent Frauds. I am fairly well
acquainted with MMT. As for Mossler I wish he had a good
editor because his stuff could read much better. As for
Wray's TWINTOPT ("that which is needed to pay taxes")
definition of money, you can also argue for TWINTOPP ("that
which is needed to purchase petroleum") as a definition of
money. Pricing the world's most important commodity in
"something" is an even more effective of way of causing that
something to be used as money.
As for MMT I like some of the ideas but it seems to suffer
from the same fundamental problems that the current system
does. If the government has a monopoly on producing money, it
is a given that they will overdo it at some point just like
what happens with the current private system where the banks
over did it. You end up with the same rudimentary
questions/problems under MMT or the current type system:
1) what are the rules governing its creation?
2) and who is in charge and gets to decide?
Either system can work if it is intelligently and honesty
run but of course that is asking a lot. Unfortunately men can
not be trusted to run an honest system for any length of time
because creating money is the world's greatest privilege and
it will always be abused at some point; war, greed,
stupidity, it doesn't matter, at some point discipline is
lost. That in summary is the entire history of money.
There's a lot of history behind the MMT conception.
David Graeber, in
Debt the First 5000 Years
describes kings creating money in order to pay the army,
and creating impersonal markets (pp. 226-227) where money
was good in order to feed the army without
a) trundling huge convoys of grain all over the country
all day, every day, or
b) letting the army feed itself, and stripping the country
bare.
The way this had to be done without impersonal markets
is described by
Pierre Loti in Au Maroc
(not sure where to find a
version in English.) Loti was part of a French diplomatic
mission to the depths of Morocco. To feed the mission, the
Sultan sent word in advance to the people near each
nightly stop, ordering them to provide a sufficiently larg
feast. Without the modern features of civilisation, that
was the only way.
One of Gandhi's early campaigns was against a move by
the British governmennt in India to licence all mango
trees. The situation had been that there were feral mango
trees growing all over India, and anyone who was going by
such a tree, and felt like a snack, could pick a mango and
eat it. This scheme provided no role for the government.
The plan was for each tree to be licenced, for a fee, and
to destroy any un-owned, unlicenced tree. Then everybody
would be obliged to pay rupees for their snacks. The
government's control of society through the impersonal
market would be strengthened. Pity that people would get
less to eat. ISTR Gandhi won that one.
I could entertain the doubt that without pre-existing
money and a global impersonal market there would even be
petroleum to buy. Who would drill down to the petroleum,
pump it out of the ground, and ship it halfway around the
world to where you happen to be in the hope that you even
exist, and, if you exist, that you even want petroleum and
have something worthwhile to give in exchange? It takes a
global impersonal market to aggregate personal whims and
accidents into something that we call demand, and find we
can count on in making far-reaching decisions on what to
do. I wonder, could we even have industry without it?
Hmmm
Check out
http://www.monetary.org/lostscienceofmoney.html
History shows abuse of the money supply primarily comes
from two places: 1) true illegal counterfeiting by outside
parties, 2) true legal counterfeiting (ahem borrowing) by
inside parties who are simply shorting the currency when
the economy is publicly biased towards increased private
debt (think Wiemar Republic or Venezuela).
In contrast, Fed Gov fiat (MMT) is not based on a
fractional reserve system. At least not the ones I hear
people talk about. So the magnitude of
debasement/debauchery is a lot less compared to
fractional-based currencies. Plus the monetary base can
always be shrunk by issuing bonds if the will power to tax
is weak.
Thanks for stepping in, Yves. But I have a minor quibble with
that Private Debt to GDP graphic you linked. Because the graph's
Y-origin begins at 195%, the 7.5% reduction since 2008
looks
like
a 500% decrease. Bottom line private debt to GDP
remains very high and the economy is much weaker than it was in 08.
Unless GDP picks up quickly (less the Ponzi-esque growth in
equities), our financial future does not appear strong.
Is it OK if I hope (against my better judgement) that Trump is
serious about improving U.S. infrastructure through deficit
spending and the loony conservatives in Congress go along?
If this ends, the only way it does so is through deflation. But the
Fed Reserve is always on hand to do "whatever it takes" to prevent
deflation.
If the Federal Reserve loses that fight (and it's hard to think of
a scenario where they could ostensibly lose), then deflation would
take out everybody who is in debt. Which is pretty much everybody,
except people who have no debt and are holding cash. The Fed Gov would
certainly have to step in to provide 3 hots and a cot.
Instead, we have an outcome where the deflation monster is kept at
bay, but everybody is up to their eyeballs in debt (I'm speaking
private debt here. By the way, notice how private debt forgiveness
never enters into the conversation). Except for the elite, they're not
in debt to their eyeballs because the height of their eyeballs can
keep getting higher and higher. The elite know if the wall-of-worry
disappears, forcing the Fed Reserve to raise rates, they'll be caught
with their pants down. But they also know they'll be rescued again
(the ol deflation monster must be defeated once again. We do this for
you little people don't you know). So that's where the economy is
thriving for the elite.
In aggregate terms the elites hold the other side of all the
debt that was created, that is why they won't tolerate deflation,
everything implodes under such a scenario. The masses are buried
under the debt, while a small minority holds the asset side of it.
Therefore everything will be done to stave off deflation. System is
very fragile, teetering between deflation and potential hyper
inflation. They have threaded a needle so far to keep it stable but
things are not normal. It will be some time before we know how this
resolves itself.
The issue isn't monetary policy, i.e increasing or decreasing the supply
of money, the issue is that the way we've decided to do it is by increasing
and decreasing interests rates. So we end up in this bazzarro world where,
.
------
Stop! I know the answer!
Fed Chief Mariner Eccles explained that long ago "pushing on a string
won't work"
Keynes explains it in English This doesn't work when in a "liquidity
trap"
Our current Fed are Monetary_keynesians working in the Mariner Eccles
building.
"If we accept that only the Federal Government, through spending and
taxing, can increase or decrease the supply of dollars"
the vast majority of dollars in the economy are actually created by banks
in the form of deposits generated by making loans. The central bank (Federal
Govt.) seeks to control the level of reserves in the interbank market and
has very limited control over the the supply of money in the economy as a
whole. banks do not lend reserves, which is why there can be reserves
sloshing all around the system without causing inflation. As long as there
are idle resources in the economy the danger of inflation is overblown.
Just follow the money. How does monetary policy influence influence the
average person's finances? They don't have access to the discount window.
Business investment is at an all-time low. Just witness the famously large cash
hoards currently collecting dust in the Fortune 500 and companies like Uber
setting billions of dollars on fire trying to get into new markets instead of
developing new products. Instead they're using cheap debt to buy competitors
and fire all their employees. Small businesses are disappearing and there are
fewer new ones to replace them - nobody has collateral.
Until financial policy starts seriously considering "helicopter money" the
economy is just going to sit there spinning its wheels, going nowhere on the
backs of a vast underclass with no money to spend. Government contracts are and
remain the only way the average person might even catch a glimpse of the world
of finance, a fact that must seem appalling to any financial conservative.
Inflation is hidden in plain sight for many consumers. Just take a trip to
the grocery store, or a home improvement big box, or any number of other
retailers. From
personal, anecdotal, small-sample, and otherwise qualified
observations
, retailers held prices low until the election and then
started to raise them. That will add some pop to their fourth quarter earnings,
while people adjust budgets accordingly.
This is not correct and I hate to tell you but your comments on
this topic are very confused, and worse, you are terribly self
confident about your erroneous beliefs.
A fiat currency issuer can deficit spend without creating debt
instruments. You do not take your dollar bills in a fiat regime to the
Treasury and get them redeemed for something material. The only use
you can make of currency with the Treasury is to extinguish your tax
liabilities.
The Fed can only 'lend' fiat. They don't 'spend' fiat, unless
Congress authorizes the purchase (e.g. Tarp). But note that even
foreign currency purchases of the Fed have to be cleared by Treasury
(which happens behind closed doors and no one notices). So no, the Fed
does not bypass Congress.
And if you mean that Fed offers deposit insurance on deposits
(created via private lending) but that's still an authority given to
it by Congress when FDIC was created. And the FDIC has a 'line of
credit' with the Treasury, not the Fed, so again Congress is not
bypassed. In fact, the credibility of the FDIC only exists because of
that line of credit from the Treasury, since it means they are de
facto linked to the currency issuing entity directly.
The Fed NEVER creates fiat for the private sector. It exchanges
green paper money for bank reserve balances$ for $ exchange. There is
no cost to the Fed or the govt. Not to mention that the Fed's overall
operations are a cash cow for the federal govt (due to its profits via
interest income on securities owned vs. costs of its liabilities and
salaries, etc.), so it never needs Congressional appropriations. As an
MMT expert said of your BTW "This question in the first place shows
that this guy has no idea how any of this works."
This chart from Citibank shows the eye-popping expansion of central bank
balance sheets, from roughly $3 trillion in the year 2000 to $20 trillion
today.
Evidently the "EM" band in green is dominated by China, which accumulated
over $4 trillion in forex (primarily US Treasuries) through 2013. Now it's
having to sell Treasuries to prop up the yuan exchange rate.
But Haruhiko "Mad Dog" Kuroda at the Bank of Japan is picking up the slack
from China with a ferocious buying binge, as Mario "Whatever It Takes" Draghi
closely pursues him.
Common sense would tell you that expanding central bank assets at many
multiples of economic growth is neither sustainable nor even sensible. Central
banksters are giving ol' John Law a run for the money. With any luck they
should be able to produce an epic calamity, since their bubble blowing is
global rather than confined to one country.
Actually, the Fed is just laundering crap from our TBTFs and supporting
the purchasing power of the dollar:
http://econbrowser.com/wp-content/uploads/2015/12/fed_assets_dec_15.png
The grey is crap being invisibly written down at taxpayers expense (actually
holding a very small percentage of its face value, but embarrassing for
Jamie and Lloyd if admitted in public), the baby blue is keeping the imports
made abroad by our multinationals "affordable" without them having to re-patriate
the cash.
I'm pretty sure "grey" is the "good" MBS. They swore up and down it
was Fannie&Freddie MBS they were buying as part of QE these are
supposed to be the high quality end of mortgage instruments and I think
it really did turn out that way.
The drek mopped up from Bears and others is called "Maiden", and is
the nearly imperceptible dark blue on this chart. If they properly wrote
them down immediately, then they wouldn't show up on a current chart!
This is why "audit" sounds cool. Then we could have a completely
different chart showing how much they did give away to their buddies.
No doubt they did say that, I guess I've just grown less trusting.
Given the proTBTF tilt of all else that transpired I just can't
believe Timmy and The Fed really took possession of anything it would
have pained Jamie and Lloyd to give up.
"Common sense would tell you that expanding central bank assets at many
multiples of economic growth is neither sustainable nor even sensible.
Central banksters are giving ol' John Law a run for the money. With any luck
they should be able to produce an epic calamity, since their bubble blowing
is global rather than confined to one country."
It's inevitable and will make John Law look like a rank amateur when this
thing comes apart.
Personally, I'm looking forward to what happened next: the Regent
toured France with a detachment Dragoons collecting gold from hoarders at
bayonete point!
Yay! This article and its comments exemplifies why I spend far longer on NC
than on any other site on the Web. Not only had it never before occured to me
that The Wizard of Oz was an allegory of anything tho' it's obvious even to
the dim-witted like me once pointed out it helped me understand the concepts
and relationships that underlie 'money'. In short, how a pound note can be, as
it says, "worth one pound".
The author's critique of modern central banking seems dead on, the fallacy of pushing on a string
etc, but he seems to think their response was a mistake because what we really lack is fiscal
stimulus. Pardon me if I am confused but didn't the government just engage in the biggest fiscal
stimulus in the history of the world as evidenced by its massive deficit spending to the tune of ten
trillion dollars. Was that not a fiscal stimulus? What is the author's point? That we need even more
of this! If Mr. Ferguson would clarify that would be great.
I happen to think everything they have done is mistake and that what we need is a debt jubilee
which is what William White, one of the world's foremost monetary theorists and former chief
economist of the BIS also thinks.
No, the bailouts were not fiscal spending. They were done mainly by
special facilities and those loans were paid back. QE is also not fiscal
spending.
The US engaged in only about $800 billion of fiscal spending. China did
the most, IIRC about $2 trillion.
William White was very good in the runup to the crisis in identifying the
housing bubbles but is really clueless about the debt of fiat currency
issuers v. that of non-fiat issuers, like US states and countries in the
Eurozone.
There is a slight upside to the frightful monetary policy we have been
obliged to pursue by creating military mayhem all over the world we have
attracted savings to the US economy for fear it might be lost any where else.
Even UK has proved unsafe and western media is making the EU look dodgy too.
So regardless of the reality of a dormant national economy the money keeps
coming in.
Don't forget the tax havens either they invest in New York.
But look at the poem that's repeated in there. It's fairly clear that
Frank Baum had opinions on currency. Now that particular poem is a peon to
Mckinley and "honest money". Which would make one think that Baum was a hard
money advocate, as McKinley and "honest money" was the counter William
Jennings Bryan (WJB) arguing against the "cross of gold". But WJB's campaign
for silver had the same failings as gold, they were both banker's money.
Perhaps Baum saw the disadvantages either way.
In any case, Bill Still provides what I think is the better currency
allegory from Frank Baum's story, in that it's an advocation against both
silver (the silver shoes) and gold (the yellow brick road) and was for
"paper money" issued by the Fed Gov (the emerald city). See
https://www.youtube.com/watch?v=Sboh-_w43W8
. Now this is purely Bill's
interpretation, just like the refutation you're linking to was admitted to
be an interpretation too. I happen to think Bill's allegory works better and
there's strong reason to think that this is where Baum's head was at (given
he was opinionated on currency and an advocate of the farmer's
vulnerabilities to issues related to currencies).
Littlefield himself wrote to The New York Times letters to the editor
section spelling out that his theory had no basis in fact, but that his
original point was "not to label Baum, or to lessen any of his magic, but
rather, as a history teacher at Mount Vernon High School, to invest
turn-of-the-century America with the imagery and wonder I have always found
in his stories."
Biographers report that Baum had been a political activist in the
1890s with a special interest in the money question of gold and silver,
and the illustrator Denslow was a full-time editorial cartoonist for a
major daily newspaper. For the 1901 Broadway production Baum inserted
explicit references to prominent political characters such as President
Theodore Roosevelt .
Littlefield's knowledge of the 1890s was thin, and he made numerous
errors, but since his article was published, scholars in history,[7]
political science[1] and economics[11] have asserted that the images and
characters used by Baum closely resemble political images that were well
known in the 1890s. Quentin Taylor, for example, claimed that many of the
events and characters of the book resemble the actual political
personalities, events and ideas of the 1890s.[10] Dorothy-naοve, young
and simple-represents the American people. She is Everyman, led astray
and seeking the way back home.[10] Moreover, following the road of gold
leads eventually only to the Emerald City, which may symbolize the
fraudulent world of greenback paper money that only pretends to have
value.[10] It is ruled by a scheming politician (the Wizard) who uses
publicity devices and tricks to fool the people (and even the Good
Witches) into believing he is benevolent, wise, and powerful when really
he is a selfish, evil humbug. He sends Dorothy into severe danger hoping
she will rid him of his enemy the Wicked Witch of the West. He is
powerless and, as he admits to Dorothy, "I'm a very bad Wizard."[12]
Historian Quentin Taylor sees additional metaphors, including:
The Scarecrow as a representation of American farmers and their
troubles in the late 19th century
The Tin Man representing the industrial workers, especially those of
American steel industries
The Cowardly Lion as a metaphor for William Jennings Bryan
In it, there is some discussion of who Frank Baum really was. And other
stuff, like how Yip's song, "Brother Can You Spare a Dime," was regarded:
"Roosevelt and the Democratic Party really wanted to tone it down and keep
it off the radio,"
And why the songs stop in the film:
"on their way to the wicked witch, when all the songs stopped, because they
wouldn't let them do anymore. OK? You'll notice then the chase begins, you
see, in the movie.
AMY GOODMAN:
Why wouldn't they let them do anymore?
ERNIE HARBURG:
Because they didn't understand what he was doing, and they wanted a chase
in there."
Today Jared Bernstein (see sidebar on right of this blog)
questions Paul Krugman's sudden concern about crowding
out. I agree.
In the first place, conditions have not
changed drastically in the last two months. Krugman's
would have more credibility on this subject had he voiced
similar concerns at any point before the election. I don't
remember him having any problems with Hillary's
infrastructure spending plan for example.
Also, looking at two of my favorite metrics for
underemployment -- Not in Labor Force but Want a Job Now,
and Part Time for Economic reasons -- are each about
1,000,000 above their numbers in the late 1990s and the
2005-06 peaks. Since the jobs situation is clearly
decelerating from its peak two years ago, I do not believe
this 2,000,000 shortfall is ever going to be filled before
the next recession.
In short, I really don't see the basis for a "crowding
out" argument at this time.
If we are below full employment (I think we are in part
for reasons you note) then concerns about crowding out are
indeed premature. But if we were at full employment (again
I have my doubts) then this issue should be part of (not
the end all) policy discussions.
A new study
published by the McKinsey Global Institute estimates the
U.S. holds between 54 million and 68 million "independent
workers," which it defines as "someone who chooses how
much to work and when to work, who can move between jobs
fluidly and who has multiple employers or clients over the
course of the year." It includes individuals working on
short-term contracts and those who rent or sell goods and
services.
"A full-time job with one employer has been considered
the norm for decades, but increasingly, this fails to
capture how a large share of the workforce makes a
living," the report said. "Digital platforms are
transforming independent work, building on the ubiquity of
mobile devices, the enormous pools of workers and
customers they can reach and the ability to harness rich
real-time information to make more efficient matches." ...
To me the "crowding out" argument put forward by Krugman
and conservative economists demonstrates a bias against
the government. They want monetary policy not fiscal
policy to be the means by which investment and employment
levels are managed by the government.
J.W. Mason has
interesting blog post about the Zero Lower Bound.
"In the dominant paradigm, this is a specific technical
problem of getting interest rates below zero. Solve that,
and we are back in the comfortable Walrasian world. But
for those of us on the heterodox side, it is never the
case that the central bank can reliably keep output at
potential - maybe because market interest rates don't
respond to the policy rate, or because output doesn't
respond to interest rates, or because the central bank is
pursuing other objectives, or because there is no
well-defined level of "potential" to begin with. (Or, in
reality, all four.) So what people like Gourinchas and
Rey, or Paul Krugman, present as a special, temporary
state of the economy, we see as the general case.
One way of looking at this is that the ZLB is a device
to allow economists like Krugman and Gourinchas and Rey -
who whatever their scholarly training, are aware of the
concrete reality around them - to make Keynesian arguments
without forfeiting their academic respectability."
What's shocking to me is that, according to 'liberal'
economists like PK and pgl, the goal of monetary and
fiscal policy is not just full employment but rising real
wages.
So far the economy has somehow managed to reach
low unemployment, though nowhere near maximum employment
(the Fed's mandate.) And real wages, except for
supervisory personnel, have yet to show real growth.
Nonetheless PK and pgl want to preempt any move to
maximum employment and rising real wages by advocating
that Trump avoid any fiscal stimulus!!!
Methinks that these 'liberals' are really conservatives
in sheeps clothing...or maybe working in New York has
given them too close an affinity to the Wall Street
worldview.
The common thread between your comment and Peter K's, I
think, is that there is intelligent deficit spending and
then there is counterproductive deficit spending.
It's
pretty clear that significant infrastructure spending,
like the building of canals in the 19th century (because
water transportation is so cheap in terms of energy
needs), doesn't crowd out, because of all of the growth it
produces. On the other hand, if government just gives away
money that will be parked unproductively, that will tend
to crowd out.
The bottom line is that Krugman's concern is premature.
There may be a hidden agenda, of course, that his real
concern is that the GOP wants big deficits in order to
"starve the beast" and attempt to justify cuts in programs
like social insurance.
Exactly. I prefer Bernie's approach: work with Trump if he
wants to improve the lives of ordinary Americans, oppose
him if he simply wants to enrich the wealthy.
Stimulus
that boosts employment and wages is still needed. Opposing
any stimulus now is not appropriate.
I expect enough Democrats will be readily available to
assist Trump. If not, there are parliamentary procedures
that can be used...procedures that Democrats refused to
sully themselves using for the common good.
"if government just gives away money that will be parked
unproductively, that will tend to crowd out."
I guess I
agree with you that government or private investment has
to be judged on the merits of each case.
But just look at the epic housing bubble. It would have
been better if the government had taken that money and
just gave it out to the average citizen to spend.
I think Krugman is basically lobbying for the Fed to
Volckerize any potential positive economic impact of Trump
spending with a big anti-inflationary rate hike, which he
& his party cronies can then blame on crowding out and the
"market" response to excessive government borrowing. They
want a quick hard recession that they can use to win
Congress in 2018. Remember that the orthodox BS about
monetary policy is that the Fed doesn't in any way set,
determine or engineer rates, but just uses
anti-price-stickiness nudges to help the market achieve
the "neutral" equilibrium rate rate it is in some sense
"trying" to get to on its own. So, if the Fed trashes the
economy, they & Krugman will say its hands are clean.
Remember:
1. Krugman is a party hack in the first place;
2. Krugman represents the faction of the party that has
no solid ideas about how to fix what is wrong with our
country and our planet; so they can only succeed
politically if the other side fails worse;
3. Krugman is on record as believing that the US has
suffered something like a coup engineered by a conspiracy
between the FBI and Vladimir Putin. So at this point,
given the politically extreme circumstances he thinks
prevail, there is no reason to think he is beyond making
things up for the cause, as exigencies require.
Of course you are right, Krugman advocates different
economics depending on whether a Democrat or Republican is
in office.
But I am not strongly against the idea of the
Fed raising rates too quickly, despite the morale
shadiness of the idea.
They seem intent on doing it anyway even if Hillary had
won.
Yes ultimately I guess I would be in favor Yellen
"helping" Trump (or low wage workers) as Trump regularly
accused her of doing for Obama during the campaign.
It would improve workers' bargaining power and lives.
But a Republican loss in 2018 would also help.
Hobson's choice. Pick your poison.
More fundamentally, I think Krugman is pushing a
conservative view of economics which happens to line up
with mainstream academic economics.
"More fundamentally, I think Krugman is pushing a
conservative view of economics which happens to line up
with mainstream academic economics."
Yes, this is a real
problem. Krugman has a fundamentally conservative ("New
Keynesian") view of the economy and how it should work.
It's a free enterprise & market economy that generally
just needs some helpful stimulatory nudges from the
government: monetary nudges most of the time; fiscal
nudges when we're in the special circumstances of a
liquidity trap.
The problem is that by laying down all of these
orthodox, conservative markers, our ability to do anything
truly dramatic and socially innovative is damaged over the
long haul.
New Keynesianism was neither Keynesian
nor New Classical, but somewhere in between the two. It
modified the New Classical approach based on rational
expectations and efficient markets by accepting that
prices were sometimes sticky in the short run and markets
sometimes imperfect. Two of the leading figures of New
Keynsianism were Paul Krugman and Gregory Mankiw.
Ultimately, the differences between the New Classicals
and the New Keynsianians are relatively minor. Both accept
the long-run optimizing efficiency of a liberal capitalist
economy, but disagree only over how much government and
central bank gear-greasing is needed.
Krugman is not really an old-fashioned Keynesianism. He
was one of the creators of "New Keynesiansim". Also read
his introduction to Keynes's General Theory. He pours cold
water on the really important policy suggestions at the
end of the book in Book VI, which he mistakenly suggests
Keynes's did not seriously intend.
Even more
old-fashioned "Hicksian" Old Keynesianism is just one
version of conventional liberal macro, which is primarily
a tool for the countercyclical stabilization of our
day-to-day capitalist economy. That's not enough to fix
what is wrong with our planet or or domestic society, both
of which are facing deeper, more structural economic
crises that are very grave. We're going to have to be much
more radical and ambitious.
"One implication Paul
draws from these dynamics is that Republicans, motivated
not by improving the economy but by bashing Obama and the
D's, inveighed against deficits when we needed them and
are about to shift to not caring about them when deficits
again, according to the model could actually do some
harm.
But how reliable is this crowd-out hypothesis? It's
actually pretty hard to find a correlation between larger
budget deficits and higher interest rates in the data.
...
So is Paul making a mistake to continue to depend on
the model that has heretofore served him-and anyone else
willing to listen-so well? My guess is that deficit
crowd-out is not likely to be a big problem, as in posing
a measurable threat to growth, anytime soon, even if
deficits, which are headed up anyway according to CBO,
were to rise more than expected.
The global supply of loanable funds is robust and, in
recent years, rising rates have drawn in more capital
(pushing out the LM curve). Larger firms have enjoyed many
years of profitability without a ton of investment so they
could use retained earnings (the fact of unimpressive
investment at very low rates presents another challenge to
this broad model). And most importantly, while we're
surely closer to full employment, there are still a lot of
prime-age workers who could be drawn in to the job market
if demand really did accelerate.
(This, by the way, is the only part of Paul's rap today
that I found a bit confusing. He's a strong advocate of
the secular stagnation hypothesis, wherein secular forces
suppress demand and hold rates down, even in mature
recoveries. His prediction today seems at odds with that
view.)"
Bernstein isn't that radical. He was chief economist
for Joe Biden in the White House.
I think the epic housing bubble, financial crisis and
slow recovery are causing to people to push back against
the New Keynesian compromise and search for a better
economics, which just may be an older type of economics.
This is incorrect. Full Time employment has accelerated
after a slowdown earlier this year while part time
employment yry was noticeably lower in the 4th quarter.
That created the illusion of slowdown in NFP. The U-6 was
quite quite different.
This will probably reverse in the first half of 2017 as
yry full time employment growth goes ahead of 2016
boosting overhead NFP and continuing to lower U-6 down to
8.7-8% by June.
You are undermining your argument with those graphs. The
point is, NFP will likely reaccelerate unless there is
another slowdown. Most likely that gap will close in the
coming year.
I think need to let the inventory slump go. It was a
mistake and it being recorrected.
New Deal democrat -> John San Vant...
, -1
I hope I am wrong and you are right.
But ... If you
check out YoY growth in payrolls, it tends to be very
regular and in-noisy, peaking in roughly mid-cycle. The
only exceptions have been where we managed to avoid a
recession during a Fed tightening cycle.
YoY employment peaked at the end of 2014, and has been
decelerating ever since. So unfortunately I disagree with
you.
What % of US oil consumption is food transport? This got tricky quickly.
Average US person eats about 5.4 pounds of food a day. That's just the food.
Average meal travels 1500 miles to reach your mouth.
First tricky item - packaging. It has to transport, too. Amazing variance on
this. Glass jar of pickles vs paper around candy bars. The only estimate out
there is numbers for municipal solid waste and estimates of % of that is food
packaging. Year 2000 US waste generation 4.5 pounds/day/person, and growing.
Probably over 6 by now based on the curve, but will use 5 lbs/day cuz round
number.
31% of that is packaging and half of that number is food packaging. Some
2006 study. So 15% of 5 lbs a day is 0.75 pounds added to the 5.4 pounds of
food is 6.15 pounds shipped a day per person.
For 1500 miles.
Eyeballing some charts looks like typical/average truck hauling weight for
stuff hauled is 60,000 lbs. Typical diesel mileage 6 miles/gallon.
6.15 pounds X 320 million mouths = about 2 billion pounds of food moved each
day
1500 miles / 6 = 250 gallons truck burned
2 billion lbs / 60,000 lbs = 33,333 truck trips X 250 gallons/truck trip =
198.4K bpd to move food.
Ain't much. Maybe there's an error in there. Top of my head . . . things not
included, hauling spare parts for the food moving trucks, spare parts for the
packaging gizmos, plastic packaging, agricultural consumption itself.
[Edit] Blurb says 17% of total US oil use is agricultural, up and downstream
(fertilizer plus fuel). This would be far more than food transport.
I am suspicious of that fifteen hundred mile figure, but it may be accurate.
Or it may have assumed a life of it's own, after being tossed out by one or
two people who really just guessed at it.
Most of the food that is produced in truly huge amounts, staple food, is
shipped by water, and or by rail, if it travels a LONG way. A VERY limited
amount of food, in relation to the total amount, is air freighted.
Here in the USA, it's not too likely that very much in the way of
unprocessed or processed staple food is shipped more than a thousand miles
by truck. Exceptions will be mostly fresh high retail value produce, shipped
as directly and quickly as possible from grower to retailer.
The REAL food miles come at the very tail end of the distribution chain.
I never owned an eighteen wheeler, but I did once own a C70 Chevy which
would legally haul about sixteen thousand pounds of apples to market. The
farthest local growers usually go with their own truck of this sort is about
a hundred miles, one way. Thirty gallons of diesel would take me that far,
and home again.
The people who actually bought my apples at retail, after they were
picked up at the wholesale market and delivered around town in smaller
trucks, usually bought no more than five pounds at a time.
I'm guessing, pulling numbers out of my hat, but I suppose a typical
shoppers average grocery purchase weighs from about twenty five to thirty
pounds, up to a hundred pounds,depending on family size, and is made on
roughly a weekly basis, on average.
And I'm guessing that the average trip to the super market is at least
six to ten miles, round trip. THAT's where the food miles really pile up. A
liter of gasoline burnt to get fifty pounds home, the last five miles, times
around a hundred million households, times fifty weeks, adds up. FAST.
Maybe. The pickle jar weighs a LOT and there's not much food weight part
of that. The whole packaging thing is a significant thing, and that's
another food item I didn't include, disposal of it.
I'm going to guess
the 1500 mile thing came from the coasts' pop centers and their daily
bread from Iowa and Nebraska. The various websites talking about this
like to talk about a head of Imperial Valley California lettuce going to
England. X calories burned for 1 or two calories delivered to the mouth.
But that sort of thing definitely would drag the average up. 1500 miles
maybe is legit.
I am surprised the total transport is south of 1 mbpd, if it truly is.
As for shipping, I can't see Iowa bread going to NYC any way but by
truck. Not going to fly it there. And the canals don't reach.
Everybody driving the last 5 miles to the store . . . maybe that
really doesn't show in the diesel calc. Oh! Of course. The issue is not
diesel. It's the 60,000 pounds per trip. A car is carrying the much lower
weight per your estimate. Will redo.
14 billion pounds of food move the last 5 miles by car per week,
probably at 150 lbs per weekly load (family of 4 at 6 lbs/day/mouth
incl packaging)
14 billion / 150 lbs = 93 million car trips per
week.
5 miles in a 25 mpg car is 0.2 gallons. X 93 million /7 and /42 =
an additional 63,000 bpd from the car trips added to the trucks above.
About 260K bpd for food transport.
Hmmm of course if it's 5 miles each way that's a X 2 on the 63K.
And SUVs for that trip, not a Datsun. Might be up nudging 400K.
It occurs to me that Pepsi and Coke may not be food, and they are
heavy.
I'm having problems with this 400ish K number because the
famous 2004 pie chart of US oil consumption said 65%
transportation, and of that 65% it was only 37% passenger cars, 18%
heavy trucks and 27% light trucks (sums to 45%), and that was
before SUVs (called light trucks) had swept up sales. Though F-150s
may have arrived.
0.37 X 0.65 is only 24% of consumption. Trucks light and heavy
rather more. So what are they hauling. Food as a daily consumable
would seem to be the dominant hauled stuff, but apparently not.
Most of the grain or flour that goes from the midwest to the northeast
probably gets there by rail, where it will then be baked into bread,
packaged, and shipped by truck to food distribution centers, or
directly to supermarkets. But the distribution center food warehouse
seems to rule these days, because it's better to load a truck up to
the doors with a variety of stuff all destined for one address or
maybe two or three, than it is to have a truck stop to deliver bread
and nothing but bread to a bunch of different stores. That means a lot
more total time and miles invested in stop and go driving, compared to
the one stop load. That still happens, but not as often as in the
past.
Grain is milled into flour near where it's grown, when possible,
because this reduces total shipping costs, being that the weight and
volume of flour is less than the weight of whole unprocessed grain,
plus the tailings are used mostly in livestock rations, and customer
for that product is most definitely NOT in NYC, lol.
Most of the cows,hogs and chickens we eat are raised in
confinement, and are raised in the mid west and southeast, closer to
the feed supply, and where land and water are cheaper, and neighbors
less fussy, and mostly in localities where neighbors are relatively
few in number.
Nobody's ever going to operate a modern supersize hog farm anywhere
close to the BIG APPLE,
Watcher's conclusion is probably right not much fuel used to transport
food compared to the total available. On the other hand, some random
thoughts. 5.4 pounds/day/person is too high. Babies, young children,
seniors, etc. Second, the 1500 miles is too high. Some of the basics make up
a significant amount of the weight like liquid milk, along with other
dairy products, cheese and eggs. These products generally will never go 1500
miles. Vegetables, seafood, fruit, etc yes. But, chicken, pork and beef I
think that 1500 miles is too high.
Pre oil, railroad cars had no refrigeration to speak of in summer months.
That's where the term cattle car came from. Had to ship beef alive to the
cities.
I am not at all sure just HOW much of a cow winds up as nekkid ape
chow these days, but YOU most definitely don't WANT to know much about
what goes into processed meat products, if you plan on eating them.
Fifty years ago when I had the "insider tour" of a huge and
extremely famous hog slaugher plant that you get only by personal
invitation from management,even back then, they bragged about selling
everything but the squeal.
I'm pretty sure that well over fifty percent of the live weight of
a cow winds up as nekkid ape chow these days, but how much over I
can't say. Fifty to fifty five percent would be a reasonable guess.
Farmers have been breeding cows for more milk and meat, and less
waste, since the beginning. For the last seventy five years or so,
this breeding has been based on high tech such as artificial
insemination, a solid understanding of genetics, and very sharp
pencils. So a typical cow TODAY is going to yield significantly more
more than she did a decade or two back.
"... But it is not just what people call "the Great Recession" and should call "the Longer Depression". It is the long, steady decline in safe interest rates at all maturities since 1990: the decline in short-term safe real interest rates from 4% to -1.5%, and the decline in long-term safe real interest rates from 5% to 1%." ..."
"... "We're just barely over the border into normality, which is why I think the Fed should hold and we could still use some fiscal stimulus for insurance, and very low rates still make the case for lots of infrastructure spending. But it's not the same as it was.'" ..."
The Longer Depression: But now the wheel of history has
turned once again. We have a Second Gilded Age. We have
had what looks to have been either the second-largest or
the largest adverse financial business-cycle shock in
history. We have had an economic downturn followed by a
very slow recovery that has produced and will produce a
cumulative output gap vis-a-vis potential that will rival
and may well exceed the Great Depression itself as a
multiple of the economy's productive potential.
But it is not just what people call "the Great
Recession" and should call "the Longer Depression". It is
the long, steady decline in safe interest rates at all
maturities since 1990: the decline in short-term safe real
interest rates from 4% to -1.5%, and the decline in
long-term safe real interest rates from 5% to 1%."
Krugman insists things are basically the same. We're
almost back to normal. Progressive Neoliberalism. Really,
these people need to be sidelined.
Bernie Sanders was completely right.
"We're just barely over the border into normality,
which is why I think the Fed should hold and we could
still use some fiscal stimulus for insurance, and very low
rates still make the case for lots of infrastructure
spending. But it's not the same as it was.'"
No it's not the same as it was, as DeLong points out.
1. Jason Furman Obama's chief economist, says, 'Aging
workforce and declining productivity are driving slower
growth' & "Furman noted that productivity is declining all
around the world"
2. "Former Obama chief economist Alan Krueger told the
panel that the administration might have accepted a lower
growth rate in order to foster a "no-drama" economy so that
the financial sector could heal from the financial crisis."
3. "Hubbard and John Taylor, a Stanford University
professor, argued that new policies could make a difference.
Sluggish growth "is due to policy," Taylor said. "What you
need is a whole set of policies" to address the problem"
I am drawn to Krueger and Furman's views b/c they are
based on the past 8 years experience but shocked by Hubbard
and Taylor's since their views are solely based on Trump
Economic Team Hype without reference to specific concrete
Policy or even a known proposal by Trump's team
"Suggesting Trump's economic plans can spark growth closer
to 3% is 'wishful thinking,' Obama adviser says"
'Aging workforce and declining productivity are driving
slower growth, Furman says'
By Greg Robb, Senior economics reporter...Jan 7,
2017...4:42 p.m. ET
"CHICAGO (MarketWatch) - Republican economists were upbeat
Saturday that President-elect Donald Trump's economic
policies could get the economy growing closer to a
sustainable 3% annual rate, but the suggestion was greeted
with skepticism by a senior member President Obama's economic
team.
At the moment, the Congressional Budget Office estimates
the economy's sustainable growth rate is 1.8%, down from a
historical rate above 3%.
During a bipartisan panel discussion at the American
Economic Association meeting, Glenn Hubbard, dean of the
Columbia University Business School, said Trump's plans could
get GDP growth "up to 2.75% or so."
While the details of Trump's policies remain unknown, the
combination of broad-based tax reform, regulatory reform,
infrastructure and military spending could boost the economy,
Hubbard said.
However, Jason Furman, Obama's chief economist, shot back
that Republicans were ignoring the "massive" depressing
impact on growth from an aging workforce.
"This is going to matter a lot. If you forecast something
like 2%-2.2% [growth], it is going to take your budget in one
direction, if you forecast 2.75% or higher, it is going to
take your budget in a different direction, he said.
Furman said of growth rates of 2.75% or higher would be
further away from the forecast of mainstream economists "than
any budget in the last 24 years."
"Part of how you get higher is wishful thinking," Furman
said. Details of any tax cut will matter, he said.
However, Hubbard and John Taylor, a Stanford University
professor, argued that new policies could make a difference.
Sluggish growth "is due to policy," Taylor said. "What you
need is a whole set of policies" to address the problem, he
added.
"Where we are now in this economy...is that some
structural reforms have the potential for not only a
long-term benefit which as economists we emphasize but also
short-run," Taylor said.
Taylor said poor U.S. economic policies "had a huge
influence" on productivity growth, which has been weakening
since 2005.
"There is an opportunity for reversal," he said.
But Furman noted that productivity is declining all around
the world, which suggests that Obamacare and other U.S.
regulations might not be the cause of the decline.
Former Obama chief economist Alan Krueger told the panel
that the administration might have accepted a lower growth
rate in order to foster a "no-drama" economy so that the
financial sector could heal from the financial crisis.
"Part of that was by design, part of that was...an attempt
to make the financial system safer to ensure that banks
raised more capital as a buffer against shocks. It probably
has come at the cost of some growth," Krueger said.
"Going forward...I think we may go from a no-drama economy
to something very different," he added."
They work for the guy who chooses to blame the Russians and
ignore the crooked party he led. Who borrowed $1422B and his
mouthpieces said the deficit was <$600B......
They say the
same things to John Lennon about Peace!
Who knows what happens in the future?
Someone should have heard the guy who said 'it makes no
sense to run Qaddafi's weapons from Benghazi to the jihadis',
and 'don't send the ambassador over there late in the day'.
I am reminded of what the losers, the naysayers said about
Bernie's ideas.
Too much opinion, and not enough let's try it rather than
saying "it cannot be done".
Answer to the point about aging workforce: EPR for under
54 year olds has plenty of slack. As to productivity that is
a "on the one hand" proposition.
I would have a tarot reading before I listened to the
Obama guys.
It seems the lightning speed spread of contingent labor in
the 2010s should be evidence of this. Contingent labor as
in being "on call" for positions such as retail clerk. A person
who must be available for uncertain hours loses the opportunity
to find a second job. The employer demanding contingent labor
is essentially demanding uncompensated work hours.
In any event, the practice seems to have become near universal
by a couple years ago, suggesting a level of employer market
power far in excess of what one would think by looking at
numbers like the official unemployment rate. It may also suggest
that labor market monopsony may exist at quite small employer
size.
What you describe is in general not due to monopsony. There
is still a substantial number of independent retail and other
companies that are not (explicitly) coordinating their actions
and job function designs.
It is just regular supply and
demand dynamics, in combination with social feedback (actors
observing what "peers" are getting away with and trying the
same, and after a while it works its ways into a new normal).
In corporate lingo it is known as "best practices" - don't
innovate process, just copy what has worked elsewhere.
retail and other companies that are not (explicitly) coordinating
"
Although they have an app for coordinating plus incentive
to coordinate, they fully understand that by the time they
begin coordinating the game is over. The game for brick and
mortar retail is now hanging by a tread.
16% of retail is now intertube orders being shipped out
by USPS, Fedex, Amazon airship drone & UPS. For the next 2
years the 16% will double each year then slowly expand toward
the 99% asymptote. Sure!
When you ski at Aspen you will see old-time-y shops for
retail, shops that only the wealthy will use for more than
window-shop. Plenty time for best practices but
cm,
"companies that are not (explicitly) coordinating their actions
and job function designs."
That happens by default.
Wall-Mart dominates retail (5K stores I think out of over
11,593 stores and clubs in 28 countries) and it is a very
cruel company. Other companies copy Wall-Mart practices.
They have no "social conscience" at all and try to drive
their labor as hard as possible paying as little as possible.
In other words, they can be viewed as a corporate psychopath.
Developing countries, like China and India are urbanizing and their populations are becoming more affluent, this will increase
global energy demand 24% by 2040. This includes the ExxonMobil prediction that energy use efficiency will double (figure 4).
The world population will increase from 7.3 billion today to over 9 billion in 2040, with a much larger middle class population
(defined as >$14,600 and <$29,200 yearly for a family of 4) using energy than today. World GDP will effectively double by 2040.
Living standards will rise dramatically, especially in the developing world.
Natural gas consumption will increase 54 quadrillion BTUs by 2040. Nuclear and renewables will increase 24 and 20 quadrillion
BTUs, respectively. The 2040 energy mix will remain about the same as today (figure 5 and Table 1).
Rising electricity demand will drive the growth in global energy between now and 2040. The increase in the number of homes
with electricity, industrialization of the developing world and our increasingly digital and plugged-in lifestyles will drive
this growth. Half of global electricity demand is from industrial activity; thus good jobs can be lost if electricity costs
are too high. Jobs will move to locations where electricity is cheap, an example is the new Voestalpine steel plant in Corpus
Christi, Texas.
Crude oil and natural gas will remain the world's primary energy source. Even in 2040 oil and natural gas will supply 57%
of all energy demand, this is an increase from 56% today. Oil demand will grow 18% through 2040 and natural gas demand will
grow 44%. The developing world will account for the largest increases. Unconventional ("fracked") oil and gas, oil ("tar")
sands, and deep water oil production will account for over 25% of the liquid supply in 2040.
Carbon dioxide emissions will increase, at least until 2030."
High taxes create a "tax shield". The price at the pump in Europe is approx. 1/3 oil and refining and 2/3 tax and duty (see
http://euanmearns.com/energy-prices-in-europe/ ). Consumption
is therefore less responsive (inelastic) to the international oil market price compared to the USA. Also, Europeans have adapted
to this over time and drive smaller and more fuel efficient cars.
Several oil producers have cut back on subsidies during the last couple of years. This should restrict domestic demand increase.
Most oil exporters' oil consumption/capita will probably level off and never come close to the US figure. However, given the level
of population growth and demographics (young people) in MENA their domestic consumption is unlikely to reduce significantly (slight
increase seems more likely).
The only major exporter not there is Russia at 0.02, but President Trump will help them increase. Not an exporter, but FYI Singapore is highest I've seen at 0.24.
"The only major exporter not there is Russia at 0.02, but President Trump will help them increase."
How? Will he help to increase car fleet in Russia? KSA and its neighbours use a lot of oil for electricity generation.
Russia uses natural gas, nuclear, hydro and coal.
Just to add information, in Europe, taxes are split in two parts: excise (typically fixed amount) and VAT (variable amount). For
gas in Belgium, excise are about 0.60 per litre or half the price of gas.
So price variations due to oil international prices
are attenuated. Add to these that taxes decreases when oil price increase and increase when oil price decrease. This is a way
to guarantee revenue for the State when oil prices decrease.
After the Jean Laherrere post on global reserves I had a go at predicting a future supply trajectory
myself. It is based on 620 Gb developed declining at 4.35% annually; 150 Gb discovered and undeveloped
with about 120 identified from identified conventional projects on companies' books and 30 from
shale; and 25 Gb undiscovered represented by a linear decline from current discovery numbers over
twenty years. That gives 795 Gb reserves remaining about what he had.
Note the figures in the legend give the overall production in the years shown on the chart.
Extra heavy oil is given as 30 kbpd coming on stream every year until 2023 representing the
drop off in tar sands development and probable falls in Venezuela production, and then 200 kbpd
added for every year after. As the projects take about 5 years to complete this would represent
about 8 in development at any one time, but also requiring projects for 3 or 4 upgraders, 1 or
2 pipelines and a new refinery to be ongoing in parallel.
For new conventional projects I assumed a one-year ramp up, a ten-year plateau and 10% yearly
decline to shut down after 25 years. The numbers coming on line until 2022 I've taken from what
is currently on the E&Ps books with some probable short-term projects that could be developed
in time. After that I just made reasonable guesses, assuming an extra three-year development time
from discoveries for ne fields.
The results aren't very different from Dennis Coyne's except there isn't a new peak (in 2018
which he is predicting I don't know where that extra production could come from based on current
development activity) and there is a big gap in 2019 to 2022 reflecting the capital cuts over
the past 3 years.
The biggest issue for me is that, assuming exporter countries maintain the same overall internal
demand at about half current production, then net exports would fall by 50% in 2032 and to zero
by 2041. There is also a 20% decline in available exports between 2018 and 2023. Things wouldn't
be quite so clear cut as some countries will continue to export while other producers become net
importers.
If this is close to reality I don't see it making transition very easy. Apart from added renewables
and nuclear, and increasing efficiencies there will be a turn to gas if there is sufficient easily
available, a loss in demand from recession (depression in a lot of places I suspect), and I think
also an inevitable turn back to coal maybe with another push to in-situ gasification.
OK, I have to bring in a not-directly-oil-related comment, because it's related to demand.
My non-oil projections for growth of electric cars - which are the key technology displacing
oil usage. I believe since they are superior technology, they are essentially production-limited.
I believe price issues will be automatically addressed by economies of scale as production
increases.
So my production projections see a big increase in electric car sales in 2018 (thanks
to models we already know about). I believe the high sales in 2018 cause much, much more
capital , which causes much more investment by car companies. This takes 2-5 years to pay
off. So I see a huge increase in production (and therefore sales) in the 2020-2023 time
range.
Specifically - to get back to oil - I believe sometime in that time range, 2020-2023,
is when electric car sales per year become large enough to displace an amount of oil exceeded
the natural decline rate of oil fields (I've seen different estimates for that rate, but
it's a close enough range that it doesn't matter for this projection). This is still well
before market saturation is reached.
So combine this with your projection out to 2022, along with Laherrere's and Coyne's
projections out to 2022, all of which are similar. Before sometime in the 2020-2023 range,
we can expect petroleum demand to remain solid. But after that, demand will be dropping
faster than the natural drop in supply. There will be a *glut* of oil. There will be no
new drilling, or at least not profitably.
If a bunch of oil projects are started in the 2016-2023 period which start producing
after 2023, they won't pay off, they'll be big money-losers and make the glut worse. (With
a three-year project time, the glut will remain brutal for three years afterwards as old
projects go online.)
At that point, low oil prices become the determining factor in the size of reserves.
High-priced producers go bankrupt and shut down. Refineries, now with excess capacity, go
bankrupt and shut down. Refineries have to retool to optimize for aircraft kerosene production
instead of gasoline production. I think it's about this time - after a bunch of bankruptcies
which leave wells in a derelict state - that the regulators start going after the survivors
to cover their environmental liabilities preemptively, making them plug wells properly.
I'm not exactly sure how the rest of the shakeout happens, but I'm glad to be totally out
of the industry before then.
Thanks George. That's a fascinating chart. Thanks for breaking out the different production
sources. How the world is going to get by on 20% less available exports by 2018 to 2023
is going to be interesting. Zero available exports by 2041! That's gonna be a damned mess.
When oil prices rise in 2017 and 2018 there will be
increased output from Russia and OPEC, in my view.
A lot of output in those nations has relatively short time for
development, they just need to develop already discovered reserves, there
will also be some increase in US LTO output and Canadian oil sands output
with higher oil prices. Possibly the peak will be lower, but I expect a
at least a 50% probability that the 2015 peak will be surpassed.
Dennis can you say what those resources are i.e. field names,
expected production, time to develop. Because I know of nothing like
that, and can't think of anything in the past where 1 or 2 mmbpd has
been bought on line from FEED to plateau in 18 months, which is what
you seem to be assuming. I can only think of Iran as a possible source
but most of their stuff is gas flood, that needs big compressors to
provide the injected gas it is impossible to go through a design,
procurement and start-up cycle on such systems in under 24 months.
There are combined cuts of 1.7 Mb/d. That production from OPEC
and Russia can be brought online in June 2017. Also infill drilling
will increase in other nations as oil prices increase.. My scenario
is pretty conservative relative to IEA and EIA Outlooks.
I do not have information on specific fields and
developments.
The IEA and EIA do have this information and their future
outlooks are quite a bit more optimistic than what I have
presented. I believe that those estimates are too optimistic and
yours may be too pessimistic.
A problem with your analysis is that you seem to assume no
reserve growth just as Jean Laherrere does. I believe an
assumption of no future reserve growth leads to too pessimistic
an outlook.
US reserve growth from 1980 to 2005 was about 63%. I have
assumed C+C minus extra heavy reserves will grow by about 300 Gb
from 2010 to 2060 or 300/850=35% over 50 years. Perhaps that is
too optimistic, time will tell. Also I assume LTO resources in
the US are only about 40 to 50 Gb, possibly too optimistic, but
less so than the EIA.
Oil price appears to be
shyly
creeping up maybe because it's
testing the ceiling at where the economic engine starts sputtering and
backfiring?
A little late, but, just-viewed (and recommended)
The Overnighters
Desperate, broken men chase their dreams and run from their demons in
the
North Dakota oil fields
. A local Pastor risks
everything to help them.
"The Overnighters is a feature documentary produced, directed and
photographed by Jesse Moss was awarded the Special Jury Prize for
Intuitive Filmmaking [etc.]
'The director, Jesse Moss, plays it as it lays. An observational,
near-invisible presence, he fills the frame with the faces of economic
deprivation and bad choices, neither judging nor sugarcoating. What
emerges is a blue-collar meditation on the meaning of community and the
imperative of compassion.' ~ The New York Times, Critics' Pick, Jeanette
Catsoulis
'A remarkable nonfiction essay on golden rules and grand intentions
and oil booms that do not pay off for everyone a rich and troubling
documentary highlight of the year.' ~ The Chicago Tribune, Michael
Phillips
'Like a punch in the gut. I can't remember the last time a documentary
hit me so hard layered, provocative, and surprisingly intimate" ~
Leonard Maltin
'If John Steinbeck were writing in the second decade of the 21st
century, 'The Overnighters' is precisely the story he'd want to tell' ~
Salon, Andrew O'Hehir
Another year; another section of the Russian-roulette rollercoaster ride
(where corkscrews could mean missing rivets )
A ten percent drop in oil production over 12 years appears quite manageable.
All we need is a twenty percent efficiency gain in that time to handle it
easily. It will help push EV production.
Yes, there is value. The long term predicament has
potentially awful implications, and it seems better to prolong the status
quo than face the reality that things are changing. Increased production
efforts now will result in some additional supply coming online a few
years down the road when it will likely be sorely wanted.
Besides, the short term goal is more likely tax reductions and
subsidies that can affect balance sheets in the shorter term. In the oil
business, the long emergency is now. New production for the long term is
less critical than financial survival.
More free money is probably the only thing that will increase
production. I can't see reasoned investment decisions going to E&P in
this uncertain business climate, but free money clouds the view of risk,
so fools will rush in, if history repeats.
Yes, there is value in political hopium. Keeps the masses from
thinking about change.
The politicians won't do what we think they will anyway, for the most
part.
Oil and gas supply is now falling. The chart below shows pretty clearly why
there was a glut: over investment leading to over supply, which is now
correcting. Nothing much to do with demand reduction that I can see. One thing
I haven't seen discussed, and can't find find a lot of analysis on, is how much
either direct motor fuel subsidies (e.g. in producer countries and some other
developing countries) or high taxes in Europe tend to reduce the impact of
prices on demand changes. I'd be interested in any opinions or references.
This is the a boom and bust cycle combined with the end of life in a mature
basin looks like (for the UK only one new field approval this year to
September).
And this is why the coming bust in supply might be a bit different from
previously something changed in the oil industry in December 2014 and I
don't think things will play out quite as they have previously, even with
rapidly rising prices, given the debt load.
According to the
Energy Export
Databrowser
they were still exporting about 600,000 bpd in 2015. That
year their exports dropped by 21%. It is entirely possible that export
dropped past zero in 2016 and they became a net importer.
However I guess we will just have to wait until we have the total 2016
data. But if anyone else has any further data I would love to hear it.
"I had read somewhere that the value of imported refined products was
near to equaling the value of their exported crude."
Correct.
The drop in Mexico's net exports of crude oil and refined products was
much steeper in value terms than in volume terms. It declined from
US$26.2bn in 2011 to U.S.15.6 bn in 2014 and just 400 million in 2016.
Mexico: value of the foreign trade of crude oil and refined
products (billion U.S. dollars)
source: PEMEX
"It would be interesting to compare the money they earn exporting
crude to the money they spend importing refined products. Either way,
Mexico is on the brink. Just as Indonesia had to fall back on other
forms of revenue, like destroying their forests, once oil exports
became oil imports, Mexico will have to find something else to lean on
once oil doesn't pay the bills."
A sharp drop in the value of net
crude and product exports had a negative impact on Mexico's foreign
trade balance, which deteriorated from virtually zero in 2012 to a
deficit of US$14-15 in 2015-2016.
But that's not critical, as oil and product exports now account for
only 5% of Mexico's total exports, down from 16% in 2011.
"... The first coming of John A Hobson was, of course, Hobson (1902): Imperialism: A Study. In Hobson's schema, unequal income distribution combined with the limited physical capacity to consume of the rich meant that anything like full employment could be maintained only with a growing share of output devoted to government purchases and investment. But where were there vents for additional investment? Abroad, in the growing empire: ..."
"... "Investors who have put their money in foreign lands, upon terms which take full account of risks connected with the political conditions of the country, desire to use the resources of their Government to minimize these risks, and so to enhance the capital value and the interest of their private investments. The investing and speculative classes in general also desire that Great Britain should take other foreign areas under her flag in order to secure new areas for profitable investment and speculation " ..."
"... Moreover, the military apparatus necessary to conquer and to defend what had been conquered soaked up productive capacity that would otherwise have been idle. As Winston Churchill put it with respect to Great Britain's naval construction plans for the year 1909: "The Admiralty had demanded six [Dreadnought-class] battleships: the economists offered four: and we finally compromised at eight." Thus governments that embarked on imperialism and armaments found their domestic economies in relatively good shape with respect to employment, capacity utilization, and profits; while governments that minded their knitting did not. And even though imperialism and militarism were humanitarian and cost-benefit disasters, governments that pursued them tended to remain in office. And this pushed Europe toward World War I. ..."
"The point here is that argument by gotcha is even
worse now than usual. If you see progressive economists
saying different things about Trump deficits than they said
about Obama deficits, it's because the situation has changed,
and the very same models that called for fiscal stimulus when
Republicans pretended to be fiscally responsible say that
deficits are no longer good now that they're showing what
they always were."
Krugman isn't progressive, he's a "progressive neoliberal"
as opposed to democratic socialists like Bernie Sanders and
his supporters. Unlike the very, very angry thugs here in comments.
As Hillary said, "we're not Denmark." DeLong is right even as he strays off of the neoliberal
reservation. There are strong arguments for fiscal stimulus and
government investment. Progressive neoliberals have delivered us to this place
with their lackluster macro and corporate free trade. Krugman makes straw man arguments about "deficits." Nobody
is arguing about deficits.
I. The Third Coming of John A. Hobson
In my view, the current debate about "secular stagnation"
started by Larry Summers is best thought of as the third
coming of John A. Hobson.
The first coming of John A Hobson was, of course,
Hobson (1902): Imperialism: A Study. In Hobson's schema,
unequal income distribution combined with the limited
physical capacity to consume of the rich meant that anything
like full employment could be maintained only with a growing
share of output devoted to government purchases and
investment. But where were there vents for additional
investment? Abroad, in the growing empire:
"Investors who have put their money in foreign lands,
upon terms which take full account of risks connected with
the political conditions of the country, desire to use the
resources of their Government to minimize these risks, and so
to enhance the capital value and the interest of their
private investments. The investing and speculative classes in
general also desire that Great Britain should take other
foreign areas under her flag in order to secure new areas for
profitable investment and speculation "
Moreover, the military apparatus necessary to conquer
and to defend what had been conquered soaked up productive
capacity that would otherwise have been idle. As Winston
Churchill put it with respect to Great Britain's naval
construction plans for the year 1909: "The Admiralty had
demanded six [Dreadnought-class] battleships: the economists
offered four: and we finally compromised at eight." Thus
governments that embarked on imperialism and armaments found
their domestic economies in relatively good shape with
respect to employment, capacity utilization, and profits;
while governments that minded their knitting did not. And
even though imperialism and militarism were humanitarian and
cost-benefit disasters, governments that pursued them tended
to remain in office. And this pushed Europe toward World War
I.
"And
meanwhile I and other
Keynesians are getting
mail accusing us of
being the hypocrites"
Who is saying this?
Nobody. None of Thoma's
links have said this.
Krugman is just
setting up a straw man
argument. He ignores
what DeLong has to say.
Krugman:
"Now deficits are
fine at precisely the
moment when the economy
seems to be fairly close
to full employment, the
Federal Reserve is
starting to hike rates,
and the case for fiscal
expansion, while not
completely absent, is
fairly subtle, resting
mainly on the
precautionary motive."
The argument for
fiscal expansion isn't
subtle.
Bernie Sanders made
it very plainly. DeLong
makes it in his
discussion of the
secstags and Larry
Summers below (and yet
he was for Hillary
Clinton. Huh.)
Hillary Clinton's
proposed fiscal action
was such that Alan
Blinder didn't think it
would alter the path of
rate hikes by the Fed.
That is, she didn't
agree with Summer or
DeLong. She agreed with
Krugman.
Progressive
neoliberalism. It
doesn't work. It just
gives us the SecStags
and creates more and
more Trump voters.
In my view, the
current debate about
"secular stagnation"
started by Larry Summers
is best thought of as
the third coming of John
A. Hobson.
The first coming of
John A Hobson was, of
course, Hobson (1902):
Imperialism: A Study. In
Hobson's schema, unequal
income distribution
combined with the
limited physical
capacity to consume of
the rich meant that
anything like full
employment could be
maintained only with a
growing share of output
devoted to government
purchases and
investment. But where
were there vents for
additional investment?
Abroad, in the growing
empire:
Investors who have
put their money in
foreign lands, upon
terms which take full
account of risks
connected with the
political conditions of
the country, desire to
use the resources of
their Government to
minimize these risks,
and so to enhance the
capital value and the
interest of their
private investments. The
investing and
speculative classes in
general also desire that
Great Britain should
take other foreign areas
under her flag in order
to secure new areas for
profitable investment
and speculation
Moreover, the
military apparatus
necessary to conquer and
to defend what had been
conquered soaked up
productive capacity that
would otherwise have
been idle. As Winston
Churchill put it with
respect to Great
Britain's naval
construction plans for
the year 1909: "The
Admiralty had demanded
six [Dreadnought-class]
battleships: the
economists offered four:
and we finally
compromised at eight."
Thus governments that
embarked on imperialism
and armaments found
their domestic economies
in relatively good shape
with respect to
employment, capacity
utilization, and
profits; while
governments that minded
their knitting did not.
And even though
imperialism and
militarism were
humanitarian and
cost-benefit disasters,
governments that pursued
them tended to remain in
office. And this pushed
Europe toward World War
I.
It is conventional
among economists to not
understand Hobson's
"underconsumptionist"
argument. As Ben
Bernanke commented in
2013:
As I pointed out
[when] Larry first
raised the secular
stagnation argument
it's hard to imagine
that there would be a
permanent dearth of
profitable investment
projects. As Larry's
uncle Paul Samuelson
taught me in graduate
school at MIT, if the
real interest rate were
expected to be negative
indefinitely, almost any
investment is
profitable. For example,
at a negative (or even
zero) interest rate, it
would pay to level the
Rocky Mountains to save
even the small amount of
fuel expended by trains
and cars that currently
must climb steep grades.
It's therefore
questionable that the
economy's equilibrium
real rate can really be
negative for an extended
period
This, of course,
misses the point that
risk-bearing capacity is
an essential factor of
production needed for
private-sector business
investment, and risk
bearing capacity must be
mobilized and paid
for-and paid for very
handsomely given the
adverse selection and
moral hazard problems in
financing private
investment. A very
healthy average risky
rate of profit is
perfectly consistent
with a short-term safe
real rate of interest
less than the negative
of the rate of
inflation.
For Hobson, of
course, the solution was
progressive tax and
transfer (and perhaps
predistribution?)
policies to end the
Gilded Age and create a
reasonable distribution
of income, in which
fortunes would not be in
the hands of those whose
stomachs were small and
whose narrow eyes were
not much bigger, and who
would thus hoard rather
than spend their
incomes.
The second coming of
John A. Hobson was, of
course, Alvin Hansen
(1939). Secular
stagnation was "sick
recoveries which die in
their infancy and
depressions which feed
on themselves and leave
a hard and seemingly
immovable core of
unemployment " We were
"rapidly entering a
world in which we must
fall back upon a more
rapid advance of
technology than in the
past if we are to find
private investment
opportunities adequate
to maintain full
employment " For Hansen,
the solution was either
(a) more investment in
research and development
to speed technological
progress, or (b) public
investment "in human and
natural resources and in
consumers' capital goods
of a collective
character "
In some sense
Hobson's fears became
true and more than true:
World War I, and what
followed. And when the
world economy reoriented
itself after World War
II we were no longer in
a Gilded Age but,
rather, in an Age of
Social Democracy with a
much more equal income
distribution-and so
Hobson's unequal income
distribution and
resulting
underconsumptionist
worries were no longer
relevant.
Alvin Hansen's
worries were similarly
obsolete as the
post-World War II order
formed itself. We got
the greater public
investment, both in
research and development
to spur more rapid
technological
progress-DARPA-and in
the Cold War arms race.
The Wheel Has Turned
Again
The Longer
Depression: But now the
wheel of history has
turned once again. We
have a Second Gilded
Age. We have had what
looks to have been
either the
second-largest or the
largest adverse
financial business-cycle
shock in history. We
have had an economic
downturn followed by a
very slow recovery that
has produced and will
produce a cumulative
output gap vis-a-vis
potential that will
rival and may well
exceed the Great
Depression itself as a
multiple of the
economy's productive
potential.
But it is not just
what people call "the
Great Recession" and
should call "the Longer
Depression". It is the
long, steady decline in
safe interest rates at
all maturities since
1990: the decline in
short-term safe real
interest rates from 4%
to -1.5%, and the
decline in long-term
safe real interest rates
from 5% to 1%.
B. Larry's Core
Worry: And so now we
have Larry Summers
(2013), reacting to the
collapse of the
short-term safe nominal
Wicksellian "neutral"
rate of interest
consistent with full
employment and with
central banks' ability
to hit their inflation
targets.
We are handicapped
because there is not one
place in which Larry has
developed his argument:
it is evolving. But the
debate Larry has started
seems to me, as I wrote,
"the most important
policy-relevant debate
in economics since John
Maynard Keynes's debate
with himself in the
1930s."
Summers's core fear
is that the global
economy-or, at least,
the North Atlantic chunk
of it-will be stuck for
a generation or more in
a situation in which, if
investors have
realistically
expectations, then even
if central banks reduce
interest rates to
accommodate those
expectations and even if
governments follow
sensible but not
extravagant fiscal
policies, private
financial markets will
still fail to support a
level of investment
demand compatible with
full employment.
Thus economic
policymakers will find
themselves either hoping
that investors form
unrealistic
expectations-prelude to
a bubble-or coping with
chronic ultralow
interest rates and the
associated risks of
stubbornly elevated
unemployment.
III. Causes of
Secular Stagnation III
Such "badly behaved
investment demand and
savings supply
functions," as Martin
Feldstein called them
when he taught this
stuff to me at Harvard
back in 1980, could have
seven underlying causes:
High income
inequality, which boosts
savings too much because
the rich can't think of
other things they'd
rather do with their
money. (Hobson)
Technological and
demographic stagnation
that lowers the return
on investment and pushes
desired investment
spending down too far.
(Hansen)
Non-market actors
whose strong demand for
safe, liquid assets is
driven not by
assessments of market
risk and return but
rather by political
factors or by political
risk. (Bernanke)
A broken financial
sector that fails to
mobilize the
risk-bearing capacity of
society and thus drives
too large a wedge
between the returns on
risky investments and
the returns on safe
government debt.
(Rogoff)
Very low actual and
expected inflation,
which means that even a
zero safe nominal rate
of interest is too high
to balance desired
investment and planned
savings at full
employment. (Krugman,
Blanchard)
Limits on the demand
for investment goods
coupled with rapid
declines in the prices
of those goods, which
together put too much
downward pressure on the
potential profitability
of the investment-goods
sector.
Technological
inappropriateness, in
which markets cannot
figure out how to
properly reward those
who invest in new
technologies even when
the technologies have
enormous social
returns-which in turn
lowers the private rate
of return on investment
and pushes desired
investment spending down
too far.
A. Other Economists'
Views as Partial: The
first thing to note is
that other economists
who have been worrying
at related issues have
views all of which
appear to be a subset of
Summers-style secular
stagnation concerns.
Hobson saw income
inequality as the
root-that's number 1 on
the list. Hansen saw
demographic and
technological
stagnation-that's number
2, and today this point
of view is echoed by
Gordon. Bernanke, the
former Federal Reserve
chairman, says we have
entered an age of a
"global savings glut"
because of mercantilism
and political risk in
emerging markets-that's
number 3 on the list.
Kenneth Rogoff of
Harvard points to the
emergence of global
"debt supercycles" that
have broken the ability
of financial markets to
do the risk
transformation on a
large enough
scale-that's number 4.
CUNY's Paul Krugman
warns of the return of
"Depression economics"
and seeks central banks
that will "credibly
promise to be
irresponsible", while
Olivier Blanchard called
for a 4%/year inflation
target-that's number 5.
And numbers 6 and 7 have
not yet made their
appearance in the
policy-macroeconomic
debate. But they should.
Larry Summers is all
of the above: all seven.
B. Against Partial
Explanations: And his
major concern is to
argue against those who
think that it is just
one of the seven that is
the problem-that there
is a quick fix, which
will either come of
itself relatively soon
or could be brought
forward in time via a
simple, clever policy
move. Thus Summers on
Bernanke:
Ben suggest[s] the
savings glut is a
relatively transitory
phenomenon that will be
repaired. Perhaps in the
fullness of time [but]
it is very difficult to
read market judgments
about real interest
rates as suggesting that
that is likely . For the
relevant medium‐term
policy horizon (as I
have no useful views
about 2040 or 2050) the
challenge of absorbing
savings in productive
investment will be the
overriding challenge for
macroeconomic policy
And Summers on
Rogoff:
Ken Rogoff argues
that the current
weakness is the
temporary result of
over‐indebtedness . The
debt super‐cycle view
does not have a ready
explanation for the low
level of real interest
rates, nor does it have
a ready explanation for
the fact that real
interest rates have
fallen steadily . Ken
suggests an alternative
hypothesis for
explaining the low level
of real interest rates
a generalized increase
in the level of risk .
[But] you would expect
[that] to lead to a
decline, rather than an
increase, in asset
values, given that it
was those assets that
had become more risky.
You would expect it to
manifest itself in a
measurable and clear
increase in implied
volatilities, as
reflected in options
markets. You would
expect it to reflect
itself in a dramatic
increase in the pricing
of out‐of‐the‐money
puts. But the opposite
has occurred . The
length of time that
markets are forecasting
low real interest rates
makes the stagnation
fairly secular or the
debt super‐cycle very
long, at which point the
distinction blurs.
And what is the
temporary debt‐overhand
induced headwind that is
thought to be present in
a major way today but
that will be gone in
three years? Corporate
balance sheets are
flush. The spread
between LIBOR and other
yields are low. Debt
service ratios are at
abnormally low levels.
Whatever your indicator
of repair from the
financial crisis, it has
mostly happened. And yet
with interest rates of
zero, the United States
is still likely to grow
at only two percent this
year. I do not see a
good reason to be
confident that that
situation will be
significantly better
three years from now .
Any debt overhang
would itself be
endogenous. Why did we
have a vast erosion of
credit standards by
2005? Why were interest
rates in a place that
enabled such bubbles?
Because that was what
was necessary to keep
the economy going with
adequate aggregate
demand through that
period. So even if a
debt overhanging were
occurring it would in a
sense be a mechanism
through which secular
stagnation or
over‐saving produces
damage. It is not an
alternative to the idea
of secular stagnation
Summers's rejection
of the Krugman-Blanchard
higher-inflation-is-the-solution
position as a sufficient
and quick fix seems to
me more subtle. I do not
think he has set it out
clearly. But what
Summers is thinking-or
at least what the Larry
Summers emulation module
I have running on my own
wetware is thinking-is
this:
There are worthy
private risky investment
projects and unworthy
ones. Worthy risky
projects have a
relatively low
elasticity with respect
to the required real
yield-that is, lowering
interest rates to
rock-bottom levels would
not induce much more
spending. In contrast,
unworthy risky
investment projects have
a high elasticity. Thus,
when safe interest rates
get too low, savers who
should not be bearing
risk nonetheless reach
for yield-they stop
checking whether
investment projects are
worthy or unworthy.
Put it another way:
there are people who
should be holding risky
assets and there are
people who should be
holding safe assets. The
problem with boosting
inflation so that the
central bank can make
the real return on
holding safe assets
negative is that it
induces people who
really should not be
holding risky assets to
buy them.
I would speculate
that, deep down, Summers
still believes in one
tenet of inflation
economics: that
effective price
stability-the
expectation of stable 2
percent inflation-is a
very valuable asset in a
market economy. It
should not be thrown
away.
C. Seeking Not a Cure
But Palliatives: For
Summers, secular
stagnation does not have
one simple cause but is
the concatenation of a
number of different
structural shocks un- or
only loosely-connected
with each other in their
origin that have
reinforced each other in
their effects pushing
the short-term safe
nominal Wicksellian
"neutral" rate down
below zero. But even
though there is no one
root cause, there are
two effective
palliatives to
neutralize or moderate
the effects.
Thus Summers calls
for two major policy
initiatives:
Larger and much more
aggressive progressive
tax and transfer (and
predistribution?)
policies to end the
Second Gilded Age.
A major shift to an
investment-centered
expansionary fiscal
policy as the major
component of what
somebody or other once
called "a somewhat
comprehensive
socialisation of
investment [as] the
only means of securing
an approximation to full
employment not
exclud[ing] all manner
of compromises and of
devices by which public
authority will cooperate
with private
initiative "
I think he has a
very, very strong case
here.
D. Achieving
Potential: The standard
diss of Larry was that
even though his promise
was immense-he was
brilliant, provocative,
creative, and so willing
to think outside-the-box
that you sometimes
wondered whether he knew
where the box was or
even if there was a
box-there was no great
substantive contribution
but only a bunch of
footnotes to lines of
inquiry that really
"belonged" to others.
"Thus Summers calls for
two major policy
initiatives:
Larger
and much more aggressive
progressive tax and
transfer (and
predistribution?)
policies to end the
Second Gilded Age.
A major shift to an
investment-centered
expansionary fiscal
policy as the major
component of what
somebody or other once
called "a somewhat
comprehensive
socialisation of
investment [as] the
only means of securing
an approximation to full
employment not
exclud[ing] all manner
of compromises and of
devices by which public
authority will cooperate
with private
initiative "
I think he has a
very, very strong case
here."
That wasn't Hillary
Clinton's platform. Yes
she was better than
Trump, but not good
enough.
Has there been a country before in which oil and gas production has stopped? I
can't think of one, but Denmark might be the first in coming years, what with
DONG pulling out of fossil fuels, cancellation of an oil project last year (I
think the last real prospect for them I've forgotten the name though) and now
this:
"Maersk Oil today confirmed it would cease production on its North Sea Trya
field. The operator said it had failed to identify an economically viable
solution for the full recovery of the remaining resources in the Denmark's
largest gas field. Maersk Oil COO Martin Rune Pedersen said: "Tyra has since
1984 been the main hub for gas production and processing in the Danish North
Sea. The Tyra facilities are approaching the end of their operational life, and
together with our partners in DUC we have assessed solutions for safe
decommissioning and possible rebuilding of the Tyra facilities."'
As I recall the seafloor had been subsiding as the reservoir pressure has
been reduced. Jacking up existing facilities or rebuilding would be expensive
for the remaining gas resource. I think the hub receives associated gas from
some oil fields which will need to be rerouted as part of the decommissioning.
Three, Four... Many Secular Stagnations!
by Brad DeLong
January 07, 2017 at 05:25 AM
...
C. Seeking Not a Cure But Palliatives: For Summers, secular stagnation does not have one
simple cause but is the concatenation of a number of different structural shocks un- or
only loosely-connected with each other in their origin that have reinforced each other in
their effects pushing the short-term safe nominal Wicksellian "neutral" rate down below
zero. But even though there is no one root cause, there are two effective palliatives to
neutralize or moderate the effects.
Thus Summers calls for two major policy initiatives:
1. Larger and much more aggressive progressive tax and transfer (and predistribution?)
policies to end the Second Gilded Age.
2. A major shift to an investment-centered expansionary fiscal policy as the major
component of what somebody or other once called "a somewhat comprehensive socialisation of
investment [as] the only means of securing an approximation to full employment not
exclud[ing] all manner of compromises and of devices by which public authority will
cooperate with private initiative "
I think he has a very, very strong case here.
..."
Be more like Denmark.
Although technocratic, these are more socialist than progressive neoliberal solutions.
Progressive neoliberalism with its emphasis on private sector "solutions" helped to bring
about our so-called secular stagnation.
Why didn't Summers back
Bernie Sanders over Clinton?
Peter K. ->
Peter K....
, -1
Krugman in today's links:
"Now deficits are fine at precisely the moment when the economy seems to be fairly close to
full employment, the Federal Reserve is starting to hike rates, and the case for fiscal
expansion, while not completely absent, is fairly subtle, resting mainly on the
precautionary motive. "
It seems the lightning speed spread of contingent labor in
the 2010s should be evidence of this. Contingent labor as
in being "on call" for positions such as retail clerk. A
person who must be available for uncertain hours loses the
opportunity to find a second job. The employer demanding
contingent labor is essentially demanding uncompensated
work hours.
In any event, the practice seems to have become near
universal by a couple years ago, suggesting a level of
employer market power far in excess of what one would
think by looking at numbers like the official unemployment
rate. It may also suggest that labor market monopsony may
exist at quite small employer size.
What you describe is in general not due to monopsony.
There is still a substantial number of independent retail
and other companies that are not (explicitly) coordinating
their actions and job function designs.
It is just
regular supply and demand dynamics, in combination with
social feedback (actors observing what "peers" are getting
away with and trying the same, and after a while it works
its ways into a new normal).
In corporate lingo it is known as "best practices" -
don't innovate process, just copy what has worked
elsewhere.
retail and other companies that are not (explicitly)
coordinating
"
Although they have an app for coordinating plus
incentive to coordinate, they fully understand that by the
time they begin coordinating the game is over. The game
for brick and mortar retail is now hanging by a tread.
16% of retail is now intertube orders being shipped out
by USPS, Fedex, Amazon airship drone & UPS. For the next 2
years the 16% will double each year then slowly expand
toward the 99% asymptote. Sure!
When you ski at Aspen you will see old-time-y shops for
retail, shops that only the wealthy will use for more than
window-shop. Plenty time for best practices but
cm,
"companies that are not (explicitly) coordinating their
actions and job function designs."
That happens by
default.
Wall-Mart dominates retail (5K stores I think out of
over 11,593 stores and clubs in 28 countries) and it is a
very cruel company. Other companies copy Wall-Mart
practices.
They have no "social conscience" at all and try to
drive their labor as hard as possible paying as little as
possible. In other words, they can be viewed as a
corporate psychopath.
Fred C. Dobbs :
As observed, Dems don't like deficits
when GOPsters do them, and the GOP doesn't like them unless they do them.
PK: 'And meanwhile I
and other Keynesians are getting mail accusing us of being the hypocrites: "You were for deficits
when Obama was in, now they're bad!"
But as I just said, the situation has changed.' ...
As even I have noted, deficits are *useful* when employment is down and infrastructure needs building.
We haven't done enough of that lately, for sure.
It may not be overwhelming in its effect, but he did DO something, and had an effect, made
an example.
Gee, what a terrible thing to do.
What the Wall Street Dems have done is feel the average worker's pain, hand out some questionably
progressive programs like the Heritage Foundation's ACA, and explain why it was all necessary
in the name of free trade and globalization.
>" Remember when the "Wall Street
Dems" saved the ENTIRE US-branded auto manufacturing industry?"
Did not they save their friends
investment portfolios (and some saved their own). Collapse of auto sector means plunge of S&P500,
because of interconnection with other sectors. the lowest point of S&P 500 during this period
was around 670. I think they have no other options.
"... On Thursday, at a rough estimate, 75,000 Americans were laid off or fired by their employers. Some of those workers will find good new jobs, but many will end up earning less, and some will remain unemployed for months or years. ..."
"... In an average month, there are 1.5 million "involuntary" job separations (as opposed to voluntary quits), or 75,000 per working day. ..."
"... Krugman refuses to admit the possibility that Trump may actually have shifted the cost-benefit of moving jobs abroad. Now corporations will have to weigh the cost of being condemned in the court of public opinion for moving jobs abroad...negative publicity that they can ill afford. ..."
The Age of Fake Policy, by Paul Krugman, NY Times
:
On
Thursday, at a rough estimate, 75,000 Americans were laid off or
fired by their employers. Some of those workers will find good new
jobs, but many will end up earning less, and some will remain
unemployed for months or years.
If that sounds terrible to you..., I'm just assuming that Thursday
was a normal day in the job market. ...
In an average month,
there are
1.5 million "involuntary" job separations
(as opposed to
voluntary quits), or 75,000 per working day.
Hence my number.
...
assuming that Thursday was a normal day in the job market.
... In an average month, there are 1.5 million
"involuntary" job separations (as opposed to voluntary
quits), or 75,000 per
"
Bless your fat bones pK!
At last you have saved the day!
Tell me something! How many of the 75,000 were fired
because their employer figured he could stay in business
longer if he didn't have to raise their wages by virtue of
the *minimum wage regulation*?
How many of such lost jobs could have been saved had
our governmental gals and guys opted for maximum wage
regulation instead? For example a maximum wage regulation
that would have cut your fat salary in half to reduce the
inequality in this fair city? A maximum wage regulation
would require less overhead in light of the fewer wage
earners at the top of the heap but generate more of wage
dispersion since there is more fat to cut at the apex of
the pyramid than fat to gain at entry level salaries.
Can't you just see it now? pK and his wealthy
colleagues staging a violent demonstration? An objection
from the mob? pK heaving industrial strength cherry bombs
at innocent constables?
Just in case you are an honest broker and just not
actually aware of the policy preference differences
between Republicans and Democrats (and between someone
like Kudlow and someone like Krugman) - one of these key
policy difference is that Democrats have a policy platform
to raise, rather than lower, the top marginal rate (the
amount of money that triggers the highest tax rate on all
dollars earned after reaching that point). A higher
marginal rate, usually any rate that exceeds 70%, is in
practice a maximum wage.
Also - the minimum wage is really low in historic
value. It isn't likely to be what causes job loss.
JohnH :
, -1
Krugman refuses to admit the possibility that Trump
may actually have shifted the cost-benefit of moving jobs
abroad. Now corporations will have to weigh the cost of
being condemned in the court of public opinion for moving
jobs abroad...negative publicity that they can ill afford.
By contrast, Obama had eight years to use the bully
pulpit...but could never figure out what it was...
Now if Krugman and Democrats only had a plan for saving
jobs. Sadly, they can muster nothing more than a 'just
suck it up,' because the jobs are gone for good...
ilsm -> JohnH...
, -1
jumped shark, a lot of folks took a few days off from
embarrassing themselves after the crooked neocon was
beaten.
Where is Democrats' War on Climate Change? Where is
Krugman's?
[Of course, pgl, the 'progressive liberal' mocks job
creation potential of solar power...just like Trump.]
Instead of bashing Trump 24/7, Democrats and Krugman
would be better served promoting a green, high employment
future.
anne -> pgl...
, -1
Important point.
Knowing how large infrastructure
spending will be relative to the size of an economy is
important. Chinese planners will be spending $860 billion
between 2017 and 2020 on alternative energy and high-speed
rail projects or $360 and $500 billion respectively.
The $860 billion comes to $215 billion yearly or 2.6%
of current Gross Domestic Product taken in simple dollar
terms.
is the usa immune to this kind of stagnation? if so,
why?
Libezkova -> yuan...
, -1
> "is the usa immune to this kind of stagnation? if so,
why?"
Impoverishment of population under neoliberalism pushes
the economy into recession. Not enough demand so unless
exports compensate for this you are cooked. To make the
situation much worse Japan is net oil importer.
The USA like Japan is importer too (actually the largest
one) but it has large domestic production: forth largest
(data below are for 2015):
== quote ==
Country | Production (bbl/day) | Share of World's output
(Percentage)
1 Russia 10,107,000 14.05%
2 Saudi Arabia 9,735,200 13.09%
3 United States 9,373,000 12.23%
4 China 4,189,000 5.15%
5 Canada 3,603,000 4.54%
6 Iraq 3,368,000 4.45%
7 Iran 3,113,000 4.14%
== end of quote ==
Simultaneously the USA is the owner of world reserve
currency (in which oil is predominantly traded). That also
helps.
Those two factors as well as the fact that the Fed put
the economy on life support in 2011 again might be one
reason why the USA still (formally) is not in perma-recession
(secular stagnation), but it might be in the pipeline with
oil prices reverting or exceeding the previous maximum.
Which might be a matter of the next three-five years.
Trump still might be lucky but "after Trump" might be not.
If we measure income of the lower 80% of the US
population I am not that sure the USA is doing that well
and the economics is out of the wood. Real GDP per capita
has increased since 2009 while the real median income per
household has not, indicating a trend toward greater
income inequality (and/or smaller households). Extreme
poverty ( households living on less than $2 per day before
government benefits), doubled from 636,000 to 1.46 million
households (including 2.8 million children) between 1996
and 2011, with most of increase occurring between late
2008 and early 2011
Most jobs created since 2008 are McJobs in service
sector, but a lot of jobs eliminated were permanent
reasonably paying jobs. So domestic demand is dropping and
with the credit lines already overextended there is no
light at the end of the tunnel.
Of course, neoliberal "cult of GDP" (aka "pro-growth")
crowd will deny this, but now GDP includes everything
including such activities as gambling (and in GB
prostitution). In other words, it is probably slightly
fudged, much like inflation numbers.
This is my hypothesis, anyway... My impression is that
markets got ahead of themselves in the current rally.
Real capitalism, the policies that place a priority on
building more capital, solve most income inequality,
because you can't build capital without paying a lot of
workers, and when lots of workers are being paid, they can
demand more pay, and at the same time, more capital means
more production, and to sell all the increased production,
prices must equal the wages paid for both operations and
for building all the capital.
Economies are zero sum, at
least in the long run. Since conservatives have adopted
free lunch economics, the idea that economies are not zero
sum, the idea that prices can far exceed wages paid,
profits come out of ever increasing debt, which is
basically paying for current production using labor from
the future.
Since Reagan and the conservative embrace of free lunch
economics, private and public debt has exploded,
committing trillions in future wages to paying for past
consumption.
A sign of the past consumption is in the decaying value
of infrastructure. Flint water is a case of bipartisan
free lunch economics. Can't charge higher rates for water
starting in 1950 and keep hiking water rates because
paying workers cost too much, and the unemployed, or
underemployed workers being paid too little because low
prices require not paying workers, can not afford higher
water rates to pay workers which would lift all wages in
Flint. By not paying workers for the past 75 years, the
water system capital has been consumed, thus creating
billions in debt for the continued supply of clean water.
Multiply Flint water by the hundred thousand
communities who made similar bipartisan free lunch
economic policy decisions on water, sewer, energy,
transportation, education, housing, communications, and
the US has trillions in debt to be the leader in national
economic power globally that the US was in the 60s.
Even in health, the US has run up trillions in debt by
failing to pay more for better health capital over the
past half century. Better health in human capital is
costly because humans would need to work more every hour
of the day for free. Like walking or biking instead of
driving. People hate public transit because it can be
provided only by having central nodes to use it, requiring
human power to get to and from those nodes.
But having placed a priority on using cars to move more
than the distance to where the car is parked, paying to
use cars has not been high enough, so the roads are
trillions in debt in carrying capacity.
But hey, we can't charge higher prices to use cars
because the low wage food workers stuck in that job
because they lost their road construction job, can not
afford to pay more for using a car to pay more road
construction workers.
Even hard
core conservatives know this is not true in general. Per
financial markets, Milton Friedman would tell you how
backwards this claim really is. Of course he grew up
during the Great Depression so he saw even as a kid how
destructive financial crises can be. Maybe you should read
some of what he wrote about that period.
People like Warren Buffet make their bread and butter on
market crashes - they have lots of reserve cash and can
buy up equities at bargain basement prices. Personally I
missed the boat by a year because I'm small potatoes but I
got in by 2010 and did very well indeed.
I think one of
the biggest distortions is in big Pharma, where the
government pays for a lot of the research and gets nigh on
none of the return, and excessive patent and patent
manipulation allow pharma to rip off consumers.
This is essentially medical care, which really should
be a public good. It's not, it's a distorted market.
...For anyone who believes that progress should remain the
compass guiding societies in the twenty-first century, the
priority is to redefine it in today's context and to spell
out the corresponding policy agenda.
Even leaving aside other important dimensions of the issue
such as fear of globalization, growing ethical doubts about
contemporary technologies, and concerns about the
environmental consequences of growth redefining progress is
a challenge of daunting magnitude. This is partly because a
sensible agenda must simultaneously address its
macroeconomic, educational, distributional, and spatial
dimensions. It is also because yesterday's solutions belong
to the past: a social compact designed for an environment of
high-growth, equalizing technological progress won't help
address the problems of a low-growth world of divisive
technological innovation.
In short, social justice is not a matter only for
fair-weather environments. For several decades, growth has
served as a substitute for sensible social cohesion policies.
What advanced societies need now are social compacts that are
resilient to demographic shifts, technological disruptions,
and economic shocks.
In 2008, US President Barack Obama campaigned on "hope"
and "change we can believe in." The substantive response to
the reactionary revival must be to give content to this
largely unfulfilled promise.
That last sentence is where analysis must really start, not
stop.
And this sentence "What advanced societies need now
are social compacts that are resilient to demographic shifts,
technological disruptions, and economic shocks. " is a ready
made argument for a national dividend - isn't it. But he
doesn't have the guts to say it.
But anyway, I think I should come back to the story that
we are chasing the wrong theory of politics. We need to spend
much more time building a narrative about what we want to
happen and then get experts to decide how best to acchieve
that. The general public are not the people to decide HOW to
go about it. They should be deciding WHERE we should go.
Fake News on Germany's Unemployment Rate at the New
York Times
Alright, that is not entirely fair, but when the NYT
told readers * that Germany's unemployment rate is 6.0
percent it seriously misled readers. The issue is that
this figure refers to Germany's unemployment rate as
calculated by Germany's government. This measure counts
workers who are employed part-time, but want full-time
jobs, as being unemployed. By contrast, the standard
measure of the unemployment rate in the United States
counts these workers as being employed.
This would be reasonable if the German government
measure was the only one available, but it isn't. The
Organisation for Economic Co-operation and Development
calculates a harmonized unemployment rate that is
essentially the same as the unemployment rate generally
used for the United States. By this measure ** Germany's
unemployment rate is just 4.0 percent.
The NYT can be partially forgiven since this was a
Reuters story that it made available on its web site. (I
don't know if it ran in the print edition.) Still, it
would not be hard to add a sentence either explaining the
difference or alternatively including the OECD measure.
In this same vein, and it's a new year, let me also
harp on the practice of printing other country's growth
rates as quarterly figures. While the rate of GDP growth
is always expressed as an annual rate in the United
States, most other countries express their growth as a
quarterly rate. Typically this raises the U.S. growth rate
by a factor of four. For example, a 0.5 percent quarterly
growth rate translates into a 2.0 percent annual rate. (To
be precise, the growth rate should be taken to the fourth
power. For low growth rates this will typically be the
same as multiplying by four.)
Anyhow, articles often appear in the NYT and elsewhere
that just print the growth rate as a quarterly rate,
frequently without even pointing out that it is a
quarterly rate. This gives readers an inaccurate
impression of the growth rate in other countries.
It really should not be too much to expect a newspaper
to convert the growth rates in annualized rates. After
all, the reporters are more likely to have the time to do
this than the readers. And, this is supposed to be about
providing information to readers, right?
The Last but not LeastTechnology is dominated by
two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt.
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Glenndclonghorn says: 07/20/2017 at 3:47 pm
SPRs in general try to have 90 days of domestic consumption in them. This was a standard put into place mostly in Europe. China has embraced it.Dennis Coyne says: 05/25/2017 at 12:30 pm
Hello, don't forget that Xinhua doesn't publish China's SPR figures. The SPR figure in the chart is an estimate based on (Production + Imports Refinery Inputs). I'm not sure if all the teapots are included in the official refinery data.Energy News says: 05/26/2017 at 8:49 am
China's April diesel stocks fall for second straight month -XinhuaGeorge Kaplan says: 05/26/2017 at 1:54 pmProf. Cohen: Not One Piece of Factual Evidence That Russia 'Hacked the Election'
You can follow this conversation by subscribing to the comment feed for this post. Shah of Bratpuhr : , March 21, 2017 at 11:08 AM
Article ended with Bitcoin... otherwise, great story.Shah of Bratpuhr -> Shah of Bratpuhr... , March 21, 2017 at 11:09 AMBitcoin is quite volatile vs USD.tjfxh : , March 21, 2017 at 12:34 PMThe article is poorly researched. The author needs to read Innes, Graeber, Ingham, Wray and Hudson on the history of money from the perspective of credit instead of relying on Davies, who emphasizes commodity money and doesn't distinguish between bullion and chartal.kthomas -> tjfxh ... , March 21, 2017 at 01:03 PM....coffee. Was there nothing you agreed with?tjfxh : , March 21, 2017 at 02:09 PMI was speaking specifically of the early history in my comment, but the entire article was rather one-sided. The debated on the history and nature of money is nuanced and the author made it seem as through the article presents a definitive version. The audience to which it is addressed would not glean that from the article and would likely come away with a one-sided and simplistic perspective on the history and nature of money.anne -> tjfxh ... , March 21, 2017 at 02:32 PMDo set down any specific references when possible.JohnH : , March 21, 2017 at 02:32 PMMichael Hudson offers a wonderful piece on the ancient middle east, how they handled oppressive debt, and how, in the Anglo-Saxon word, the biblical word for debt got translated into 'sin.'pgl -> JohnH... , March 21, 2017 at 03:26 PMFor the last couple of years, employment growth has been falling on trend, by both measures. But currently, establishment-survey employment is growing at 1.6% per year, and household survey employment is growing at 1.0% per year. The latter number is a lot closer to 0.8%. The establishment survey is what it says - a survey of establishments. The household survey is a survey of people. The advantages of the establishment survey are that it covers a significant fraction of all establishments, and reporting errors are less likely - firms generally have a good idea how many people are on their payrolls. But, the household survey has broader coverage (includes the self-employed for example) of the population, and it's collected in a manner consistent with the unemployment and labor force participation data - that's all from the same survey. There's greater potential for measurement error in the household survey, as people can be confused by the questions they're asked. You can see that in the noise in the growth rate data in the chart.
This chart looks at the ratio of household-survey employment to establishment-survey employment. Over long periods of time, these two measures don't grow at the same rate, due to changes over time in the fraction of workers who are in establishments vs. those who are not. For long-run employment growth rates, you should put more weight on the household survey number (as this is a survey of the whole working-age population), provided of course that some measurement bias isn't creeping into the household survey numbers over time. Note that, since the recession, establishment-survey employment has been growing at a significantly higher rate than household-survey employment.
Here, focus on the last year. LFPR is little changed, increasing from 62.9% to 63.0%, and the same is true for EPOP, which increased from 59.8% to 60.0%. That looks like a labor market that has settled down, or is close to it.
So, by this measure the labor market is at its tightest since 2001. Job openings are plentiful relative to would-be workers.
In the chart, U3 is the conventional unemployment rate, and U6 includes marginally attached workers (those not in the labor force who may be receptive to working) and those employed part-time for economic reasons. The U3 measure is not so far, at 4.7%, from its previous trough of 4.4% in March 2007, while the gap between current U6, at 9.2% and its previous trough, at 7.9% in December 2006, is larger. Two caveats here: (i) How seriously we want to take U6 as a measure of unemployment is an open question. There are problems even with conventional unemployment measures, in that we do not measure the intensity of search - one person's unemployment is different from another's - and survey participants' understanding of the questions they are asked is problematic. The first issue is no worse a problem for U6 than for U3, but the second issue is assuredly worse. For example, it's not clear what "employed part time for economic reasons" means to the survey respondent, or what it should mean to the average economist. Active search, as measured in U3, has a clearer meaning from an economic point of view, than an expressed desire for something one does not have - non-satiation is ubiquitous in economic systems, and removing it is just not feasible. (ii) What's a normal level for U6? Maybe the U6 measure in December 2006 was undesirably low, due to what was going on in housing and mortgage markets.
This measure is still somewhat elevated relative to pre-recession times. However, if we look at short term unemployment (5 weeks or less), this is unusually low:
As well, the insured unemployment rate (those receiving unemployment insurance as a percentage of the labor force) is very low:
To collect UI requires having worked recently, so this reflects the fact that few people are being laid off - transitions from employment to unemployment are low.
According to standard Friedman Phillips-curve logic, we should see a negative correlation in the chart, but the correlation is essentially zero.
1 comment:
Avraam J Dectis March 21, 2017 at 7:58 AM
Watcher's conclusion is probably right not much fuel used to transport food compared to the total available. On the other hand, some random thoughts. 5.4 pounds/day/person is too high. Babies, young children, seniors, etc. Second, the 1500 miles is too high. Some of the basics make up a significant amount of the weight like liquid milk, along with other dairy products, cheese and eggs. These products generally will never go 1500 miles. Vegetables, seafood, fruit, etc yes. But, chicken, pork and beef I think that 1500 miles is too high.Watcher says: 01/10/2017 at 3:16 pm
