Skepticism and critical thinking is not panacea, but can help to understand the world better
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May the source be with you, but remember the KISS principle ;-) Skepticism and critical thinking is not panacea, but can help to understand the world better |
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Secular stagnation is a term proposed by Keynesian economist Alvin Hansen back in the 1930s to explain the USA dismal economic performance during this period. The period in which sluggish growth and output, and employment levels well below potential, coincide with a problematically low (even negative) real interest rates even in the face of the extraordinarily easy monetary policy. Later a similar phenomenon occurred in Japan. that's why it is often called called Japanification of the economy. Secular stagnation returned to the USA in full force after the financial crisis of 2008 (so called The Long Recession), so this is the second time the USA society experience the same socio-economic phenomenon.
Formally it can be defined as any stagnation that lasts substantially longer then the business cycle (and dominates the business cycle induced variations of economic activities), the suppression of economic performance for a long (aka secular) period. It also can be viewed as the crisis of demand, when demand became systemically weak (which under neoliberalism is ensured by redistribution of wealth up).
The global stagnation we are experiencing is the logical result of the dominance of neoliberalism and a sign of its crisis an a ideology. It is somewhat similar to the crisis of Bolshevik's ideology in the USSR in 60th when everybody realized that the existing society cannot fulfill the key promise of higher living standards. And that over centralization of economic life naturally leads to stagnation. The analogy does not ends here, but this point is the most important.
Neoliberalism replaced over-centralization (with iron fist one party rule) with over-financialization (with iron fist rule of financial oligarchy), with generally the same result as for the economy ( In other words neoliberalism like bolshevism is equal to economic stagnation; extremes meet). The end of cheap oil did not help iether. In a sense neoliberalism might be viewed as the elite reaction to the end of cheap oil, when it became clear that there are not enough cookies for everyone.
This growth in the financial sector's profits has not been an accident; it is the result of engineered shift in the elite thinking, which changed government policies. The central question of politics is, in my view, "Who has a right to live and who does not". In the answer to this question, neoliberal subscribes to Social Darwinism: ordinary citizens should be given much less rather than more social protection. Such policies would have been impossible in 50th and 60th (A Short History of Neo-liberalism)
In 1945 or 1950, if you had seriously proposed any of the ideas and policies in today's standard neo-liberal toolkit, you would have been laughed off the stage at or sent off to the insane asylum. At least in the Western countries, at that time, everyone was a Keynesian, a social democrat or a social-Christian democrat or some shade of Marxist.
The idea that the market should be allowed to make major social and political decisions; the idea that the State should voluntarily reduce its role in the economy, or that corporations should be given total freedom, that trade unions should be curbed and citizens given much less rather than more social protection--such ideas were utterly foreign to the spirit of the time. Even if someone actually agreed with these ideas, he or she would have hesitated to take such a position in public and would have had a hard time finding an audience.
And this change in government polices was achieved in classic Bolsheviks coup d'état way, when yoiu first create the Party of "professional neoliberal revolutionaries". Who then push for this change and "occupy" strategic places like economics departments at the universities, privately funded think tanks, MSM, and then subvert one or both major parties. The crisis of "New Deal Capitalism" helped, but without network of think tanks and rich donors, the triumph of neoliberalism in the USA would have been impossible:
...one explanation for this triumph of neo-liberalism and the economic, political, social and ecological disasters that go with it is that neo-liberals have bought and paid for their own vicious and regressive "Great Transformation". They have understood, as progressives have not, that ideas have consequences. Starting from a tiny embryo at the University of Chicago with the philosopher-economist Friedrich von Hayek and his students like Milton Friedman at its nucleus, the neo-liberals and their funders have created a huge international network of foundations, institutes, research centers, publications, scholars, writers and public relations hacks to develop, package and push their ideas and doctrine relentlessly.
Most economists are acutely aware of the increasing role in economic life of financial markets, institutions and operations and the pursuit of prifits via excotic instruments such as derivatives (all this constituted financialization). This dominant feature of neoliberalism has huge the re-distributional implications, huge effects on the US economy, international dimensions and monetary system, depth and longevity of financial crises and unapt policy responses to them.
They have built this highly efficient ideological cadre because they understand what the Italian Marxist thinker Antonio Gramsci was talking about when he developed the concept of cultural hegemony. If you can occupy peoples' heads, their hearts and their hands will follow.
I do not have time to give you details here, but believe me, the ideological and promotional work of the right has been absolutely brilliant. They have spent hundreds of millions of dollars, but the result has been worth every penny to them because they have made neo-liberalism seem as if it were the natural and normal condition of humankind. No matter how many disasters of all kinds the neo-liberal system has visibly created, no matter what financial crises it may engender, no matter how many losers and outcasts it may create, it is still made to seem inevitable, like an act of God, the only possible economic and social order available to us.
Neoliberalism naturally leads to secular stagnation due to redistribution of wealth up. which undermines purchasing power of the 99%, or more correctly 99.9 of the population. In the USA this topic became hotly debated theme in establishment circles after Summers speech in 2013. Unfortunately it was suppressed in Presidential campaign of 2016. Please note that Sanders speaks about Wall Street shenanigans, but not about ideology of neoliberalism. No candidates tried to address this problem of "self-colonization" of the USA, which is probably crucial to "making America great again" instead of continued slide into what is called "banana republic" coined by American writer O. Henry (William Sydney Porter 1862–1910). Here is how Wikipedia described the term:
Banana republic or banana state is a pejorative political science term for politically unstable countries in Latin America whose economies are largely dependent on exporting a limited-resource product, e.g. bananas. It typically has stratified social classes, including a large, impoverished working class and a ruling plutocracy of business, political, and military elites.[1] This politico-economic oligarchy controls the primary-sector productions to exploit the country's economy.[2]
... ... ...
In economics, a banana republic is a country operated as a commercial enterprise for private profit, effected by a collusion between the State and favoured monopolies, in which the profit derived from the private exploitation of public lands is private property, while the debts incurred thereby are a public responsibility.
This topic is of great importance to the US elite because the USA is the citadel of neoliberalism. It also suggest that the natural way neoliberal economic system based on increasing of the level of inequality (redistribution of wealth up) should behave: after the initial economic boom (like in case of steroids use) caused by financialization of economy (as well as dissolution of the USSR), helped by off-shoring of manufacturing, the destructive effects of this temporary boost come into foreground. Redistribution of wealth up increases inequality which after a certain delay starts to undercuts domestic demand. It also tilts the demand more toward conspicuous consumption (note the boom of luxury cars sales in the USA).
But after inequality reaches certain critical threshold the economy faces extended period of low growth reflecting persistently weak private demand (purchasing power of lower 90% of population). People who mostly have low level service economy jobs (aka MC-jobs) can't buy that much. Earlier giants of American capitalism like Ford understood that, but Wall Street sharks do not and does not want. They operate under principle "Après nous le déluge" ("After us, the deluge").
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 Marx's crisis of overproduction on a new level. At this level it is intrinsically connected with the parasitic nature of complete financialization of the economy. The focus on monetary policy and the failure to enact fiscal policy options is the key structural defect of neoliberalism ideology and can't be changed unless neoliberal ideology is abandoned. Which probably will not happen unless another huge crisis hits the USA. That might not happen soon. Bolshevism lasted more then 70 years. If we assume that the "age of neoliberalism" started at 1973 with Pinochet coup d'état in Chile, neoliberalism as a social system is just 43 years old (as of 2016). It still has some "time to live"(TTL) in zombies state due to the principle first formulated by Margaret Thatcher as TINA ("There Is No Alternative") -- the main competitor, bolshevism, was discredited by the collapse of the USSR and China leadership adoption of neoliberalism. While Soviet leadership simply abandoned the sinking ship and became Nouveau riche in a neoliberal society that followed, Chinese elite managed to preserved at least outer framework of the Marxist state and the political control of the Communist party (not clear for how long). But there was a neoliberal transformation of Chinese economy, initiated, paradoxically, by the Chinese Communist Party.
Currently, no other ideology, including old "New Deal" ideology can compete with neoliberal ideology, although things started to change with Sanders campaign in the USA on the left and Trump campaign on the right. Most of what we see as a negative reaction to neoliberalism in Europe generally falls into the domain of cultural nationalism.
The 2008 financial crisis, while discrediting neoliberalism as an ideology (in the same way as WWII discredited Bolshevism), was clearly not enough for the abandonment of this ideology. Actually neoliberalism proved to be remarkably resilient after this crisis. Some researchers claim that it entered "zombie state" and became more bloodthirsty and ruthless.
There is also religious overtones of neoliberalism which increase its longevity (similar to Trotskyism, and neoliberalism can be called "Trotskyism for rich"). So, from a small, unpopular sect with virtually no influence, neo-liberalism has become the major world religion with its dogmatic doctrine, its priesthood, its law-giving institutions and perhaps most important of all, its hell for heathen and sinners who dare to contest the revealed truth. 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.
But there is another factor in play here: combination of peak (aka "plato" ;-) oil and established correlation of the speed of economic growth and prices on fossil fuels and first of all on oil. Oil provides more than a third of the energy we use on the planet every day, more than any other energy source (How High Oil Prices Will Permanently Cap Economic Growth - Bloomberg). It is dominant fuel for transport and in this role it is very difficult to replace.
That means that a substantial increase of price of oil acts as a fundamental limiting factor for economic growth. And "end of cheap oil" simply means that any increase of supply of oil to support growing population on the planet and economic growth now requires higher prices. Which naturally undermine economic growth, unless massive injection of currency are instituted. that probably was the factor that prevented slide of the US economy into the recession in 2009-2012. Such a Catch-22.
Growth dampening potential of over $100-a-barrel oil is now a well established factor. Unfortunately, the reverse is not true. Drop of oil price to below $50 as happened in late 2014 and first half of 2015 did not increase growth rate of the USA economy. It might simply prevented it from sliding it into another phase of Great Recession. Moreover when economies activity drops, less oil is needed. Enter permanent stagnation.
Also there is not much oil left that can be profitably extracted at prices below $80. So the current oil price slump is a temporary phenomenon, whether it was engineered, or is a mixture of factors including temporary overcapacity . Sooner or later oil prices should return to level "above $80", as only at this level of oil price capital expenditures in new production make sense. That des not mean that oil prices can't be suppressed for another year or even two, but as Herbert Stein aptly noted "If something cannot go on forever, it will stop,"
Imagine the alien spaceship landed somewhere in the world. There would be denial, disbelief, fear, and great uncertainty for the future. World leaders would struggle to make sense of the events. The landing would change everything.
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The secular stagnation (aka "end of permanent growth") is a very similar event. This also is the event that has potential to change everything, but it is much more prolonged in time and due to this less visible ("boiling frog effect"). Also this is not a single event, but a long sequence of related events that probably might last several decades (as Japan had shown) or even centuries. The current "Great Recession" might be just a prolog to those events. It is clearly incompatible with capitalism as a mode of production, although capitalism as a social system demonstrated over the years tremendous adaptability and it is too early to write it down completely. Also no clear alternatives exists.
A very slow recovery and the secular stagnation is characteristic of economies suffering from a balance-sheet recession (aka crisis of overproduction), as forcefully argued by Nomura’s Richard Koo and other economists. The key point is that private investment is down, not because of “policy uncertainty” or “increased regulation”, but because business-sector expectations about future profitability have become dramatically depressed — and rationally so — in a context characterized by heavy indebtedness (of both households and corporations). As businesses see the demand falls they scale down production which creates negative feedback look and depresses demand further.
| The key point is that private investment is down, not because of “policy uncertainty” or “increased regulation”, but because business-sector expectations about future profitability have become dramatically depressed — and rationally so — in a context characterized by heavy indebtedness (of both households and corporations). As businesses see the demand falls they scale down production which creates negative feedback look and depresses demand further. |
There are at least five different hypothesis about the roots of secular stagnation:
Summers’s remarks and articles were followed by an explosion of debate concerning “secular stagnation”—a term commonly associated with Alvin Hansen’s work from the 1930s to ’50s, and frequently employed in Monthly Review to explain developments in the advanced economies from the 1970s to the early 2000s.2 Secular stagnation can be defined as the tendency to long-term (or secular) stagnation in the private accumulation process of the capitalist economy, manifested in rising unemployment and excess capacity and a slowdown in overall economic growth. It is often referred to simply as “stagnation.” There are numerous theories of secular stagnation but most mainstream theories hearken back to Hansen, who was Keynes’s leading early follower in the United States, and who derived the idea from various suggestions in Keynes’s General Theory of Employment, Interest and Money (1936).Responses to Summers have been all over the map, reflecting both the fact that the capitalist economy has been slowing down, and the role in denying it by many of those seeking to legitimate the system. Stanford economist John B. Taylor contributed a stalwart denial of secular stagnation in the Wall Street Journal. In contrast, Paul Krugman, who is closely aligned with Summers, endorsed secular stagnation on several occasions in the New York Times. Other notable economists such as Brad DeLong and Michael Spence soon weighed in with their own views.3
Three prominent economists have new books directly addressing the phenomena of secular stagnation.4 It has now been formally modelled by Brown University economists Gauti Eggertsson and Neil Mehrotra, while Thomas Piketty’s high-profile book bases its theoretical argument and policy recommendations on stagnation tendencies of capitalism. This explosion of interest in the Summers/Krugman version of stagnation has also resulted in a collection of articles and debate, edited by Coen Teulings and Richard Baldwin, entitled Secular Stagnation: Facts, Causes and Cures.5
Seven years after “The Great Financial Crisis” of 2007–2008, the recovery remains sluggish. It can be argued that the length and depth of the Great Financial Crisis is a rather ordinary cyclical crisis. However, the monetary and fiscal measures to combat it were extraordinary. This has resulted in a widespread sense that there will not be a return to “normal.” Summers/Krugman’s resurrection within the mainstream of Hansen’s concept of secular stagnation is an attempt to explain how extraordinary policy measures following the 2007–2008 crisis merely led to the stabilization of a lethargic, if not comatose, economy.
But what do these economists mean by secular stagnation? If stagnation is a reality, does their conception of it make current policy tools obsolete? And what is the relationship between the Summers/Krugman notion of secular stagnation and the monopoly-finance capital theory?
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In “secular stagnation,” the term “secular” is intended to differentiate between the normal business cycle and long-term, chronic stagnation. A long-term slowdown in the economy over decades can be seen as superimposed on the regular business cycle, reflecting the trend rather than the cycle.
In the general language of economics, secular stagnation, or simply stagnation, thus implies that the long-run potential economic growth has fallen, constituting the first pillar of MISS. This has been most forcefully argued for by Robert Gordon, as well as Garry Kasparov and Peter Thiel.6 Their argument is that the cumulative growth effect of current (and future) technological changes will be far weaker than in the past. Moreover, demographic changes place limits on the development of “human capital.” The focus is on technology, which orthodox economics generally sees as a factor external to the economy and on the supply-side (i.e., in relation to cost). Gordon’s position is thus different than that of moderate Keynesians like Summers and Krugman, who focus on demand-side contradictions of the system.
In Gordon’s supply-side, technocratic view, there are forces at work that will limit the growth in productive input and the efficiency of these inputs. This pillar of MISS emphasizes that it is constraints on the aggregate supply-side of the economy that have diminished absolutely the long-run potential growth.
The second pillar of MISS, also a supply-side view, goes back at least to Joseph Schumpeter. To explain the massive slump of 1937, Schumpeter maintained there had emerged a growing anti-business climate. Moreover, he contended that the rise of the modern corporation had displaced the role of the entrepreneur; the anti-business spirit had a repressive effect on entrepreneurs’ confidence and optimism.7 Today, this second pillar of MISS has been resurrected suggestively by John B. Taylor, who argues the poor recovery is best “explained by policy uncertainty” and “increased regulation” that is unfavorable to business. Likewise, Baker, Bloom, and Davis have forcefully argued that political uncertainty can hold back private investment and economic growth.8
Summers and Krugman, as Keynesians, emphasize a third MISS pillar, derived from Keynes’s famous liquidity trap theory, which contends that the “full-employment real interest rate” has declined in recent years. Indeed, both Summers and Krugman demonstrate that real interest rates have declined over recent decades, therefore moving from an exogenous explanation (as in pillars one and two) to a more endogenous explanation of secular stagnation.9 The ultimate problem here is lack of investment demand, such that, in order for net investment to occur at all, interest rates have to be driven to near zero or below. Their strong argument is that there are now times when negative real interest rates are needed to equate saving and investment with full employment.
However, “interest rates are not fully flexible in modern economies”—in other words, market-determined interest rate adjustments chronically fail to achieve full employment. Summers contends there are financial forces that prohibit the real interest rate from becoming negative; hence, full employment cannot be realized.10
Some theorists contend that there has been demographic structural shifts increasing the supply of saving, thus decreasing interest rates. These shifts include an increase in life expectancy, a decrease in retirement age, and a decline in the growth rate of population.
Others, including Summers, point out that stagnation in capital formation (or accumulation) can be attributed to a decrease in the demand for loanable funds for investment. One mainstream explanation offered for this is that today’s new technologies and companies, such as Google, Microsoft, Amazon, and Facebook, require far less capital investment. Another hypothesis is that there has been an important decrease in the demand for loanable funds, although they argue this is due to a preference for safe assets. These factors can function together to keep the real interest rate very low. The policy implication of secular low interest rates is that monetary policy is more difficult to implement effectually; during a recession, it is weakened and can even become ineffectual.
Edward Glaeser, focusing on “secular joblessness,” places severe doubt on the first pillar of MISS, but then makes a very important additional argument. Glaeser rejects the notion that there has been a slowdown in technological innovation; innovation is simply “unrelenting.” Likewise, he is far less concerned with secular low real interest rates, which may be far more cyclical. “Therefore,” contends Glaeser, “stagnation is likely to be temporary.”
Nonetheless, Glaeser underscores secular joblessness, and thus the dysfunction of U.S. labor markets constitutes a fourth pillar of MISS: “The dysfunction in the labour market is real and serious, and seems unlikely to be solved by any obvious economic trend.” Somehow, then, the problem is due to a misfit of skills or “human capital” on the side of workers, who thus need retraining. “The massive secular trend in joblessness is a terrible social problem for the US, and one that the country must try to address” with targeted policy.11 Glaeser’s argument for the dysfunction of U.S. labor markets is based on recession-generated shocks to employment, specifically of less-skilled U.S. workers. After 1970, when workers lost their job, the damage to human capital became permanent. In short, when human capital depreciates due to unemployment, overall abilities and “talent” are “lost” permanently. This may be because the skills required in today’s economy need to be constantly practiced to be retained. Thus, there is a ratchet-like effect in joblessness caused by recessions, whereby recession-linked joblessness is not fully reversed during recoveries—and all this is related to skills (the human capital of the workers), and not to capital itself. According to Glaeser, the ratchet-like effect of recession-linked joblessness is further exacerbated by the U.S. social-safety net, which has “made joblessness less painful and increased the incentives to stay out of work.”12
Glaeser contends that, if his secular joblessness argument is correct, the macroeconomic fiscal interventions argued for by Summers and Krugman are off-base.13 Instead, the safety net should be redesigned in order to encourage rather than discourage people from working. Additionally, incentives to work need to be radically improved through targeted investments in education and workforce training.14 Such views within the mainstream debate, emphasizing exogenous factors, are generally promoted by freshwater (conservative) rather than saltwater (liberal) economists. Thus, they tend to emphasize supply-side or cost factors.
The fifth pillar of MISS contends that output and productivity growth are stagnant due to a failure to invest in infrastructure, education, and training. Nearly all versions of MISS subscribe to some version of this, although there are both conservative and liberal variations. Barry Eichengreen underscores this pillar and condemns recent U.S. fiscal developments that have “cut to the bone” federal government spending devoted to infrastructure, education, and training.
The fifth pillar of MISS necessarily reflects an imbalance between public and private investment spending. Many theorists maintain that the imbalance between public and private investment spending, hence secular stagnation, “is not inevitable.” For example, Eichengreen contends if “the US experiences secular stagnation, the condition will be self-inflicted. It will reflect the country’s failure to address its infrastructure, education and training needs. It will reflect its failure to…support aggregate demand in an effort to bring the long-term unemployed back into the labour market.”15
The sixth pillar of MISS argues that the “debt overhang” from the overleveraging of financial firms and households, as well as private and public indebtedness, are a serious drag on the economy. This position has been argued for most forcefully by several colleagues of Summers at Harvard, most notably Carmen Reinhart and Kenneth Rogoff.16 Atif Mian and Amir Sufi also argue that household indebtedness was the primary culprit causing the economic collapse of 2007–2008. Their policy recommendation is that the risk to mortgage borrowers must be reduced to avoid future calamities.17
As noted, the defenders of MISS do not necessarily support a compatibility between the above six pillars: those favored by conservatives are supply-side and exogenous in emphasis, while liberals tend towards demand-side and endogenous ones. Instead, most often these pillars are developed as competing theories to explain the warrant of some aspect of secular stagnation, and/or to defend particular policy positions while criticizing alternative policy positions. However, the concern here is not whether there is the possibility for a synthesis of mainstream views. Rather, the emphasis is on how partial and separate such explanations are, both individually and in combination.
As Krugman said "We now know that the economic expansion of 2003-2007 was driven by a bubble. You can say the same about the latter part of the 90s expansion; and you can in fact say the same about the later years of the Reagan expansion, which was driven at that point by runaway thrift institutions and a large bubble in commercial real estate." In other words blowing bubbles is the fundamental way neoliberal economy functions, not an anomaly.
As much as the USA population is accustomed to hypocrisy of the ruling elite and is brainwashed by MSM, this news, delivered to them personally by the crisis of 2008 was too much for them not question the fundamentals (A Primer on Neoliberalism):
Of course, the irony that those same institutions would now themselves agree that those “anti-capitalist” regulations are required is of course barely noted. Such options now being considered are not anti-capitalist. However, they could be described as more regulatory or managed rather than completely free or laissez faire capitalism, which critics of regulation have often preferred.But a regulatory capitalist economy is very different to a state-based command economy, the style of which the Soviet Union was known for. The points is that there are various forms of capitalism, not just the black-and-white capitalism and communism. And at the same time, the most extreme forms of capitalism can also lead to the bigger bubbles and the bigger busts.
In that context, the financial crisis, as severe as it was, led to key architects of the system admitting to flaws in key aspects of the ideology.
At the end of 2008, Alan Greenspan was summoned to the U.S. Congress to testify about the financial crisis. His tenure at the Federal Reserve had been long and lauded, and Congress wanted to know what had gone wrong. Henry Waxman questioned him:
- Greenspan:
I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
- Waxman:
In other words, you found that your view of the world, your ideology, was not right, it was not working.
- Greenspan:
Precisely. That is precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.
[Greenspan’s flaw] warped his view about how the world was organized, about the sociology of the market. And Greenspan is not alone. Larry Summers, the president’s senior economic advisor, has had to come to terms with a similar error—his view that the market was inherently self-stabilizing has been “dealt a fatal blow.” Hank Paulson, Bush’s treasury secretary, has shrugged his shoulders with similar resignation. Even Jim Cramer from CNBC’s Mad Money admitted defeat: “The only guy who really called this right was Karl Marx.” One after the other, the celebrants of the free market are finding themselves, to use the language of the market, corrected.
— Raj Patel, Flaw
, The Value of Nothing, (Picador, 2010), pp.4, 6-7
Now for the second time in history, the challenge is to save capitalism from itself: to recognize the great strengths of open, competitive markets while rejecting the extreme capitalism and unrestrained greed that have perverted so much of the global financial system in recent times. It took such a statesman as Franklin Delano Roosevelt to rebuild American capitalism after the Great Depression. New Deal policies allowed to rebuild postwar domestic demand, to engineer the Marshall Plan to rebuild Europe and to set in place the Bretton Woods system to govern international economic engagement.
With the abolishment of those policies blowing of one bubble after another, each followed by a financial crisis became standard chain of the events. Since 1973 we already have a half-dozen bubbles following by economic crisis. It started with Savings and loan crisis which partially was caused by the deregulation of S&Ls in 1980, by the Depository Institutions Deregulation and Monetary Control Act signed by President Jimmy Carter on March 31, 1980, an important step is a series that eliminated regulations initially designed to prevent lending excesses and minimize failures.
To hide this unpleasant fact neoliberals resort to so called the Great Neoliberal Lie:
The fallacious and utterly misleading argument that the global economic crisis (credit crunch) was caused by excessive state spending, rather than by the reckless gambling of the deregulated, neoliberalized financial sector.
Just as with other pseudo-scientific theories and fundamentalist ideologies, the excuse that "we just weren't fundamentalist enough last time" is always there. The neoliberal pushers of the establishment know that pure free-market economies are as much of an absurd fairytale as 100% pure communist economies, however they keep pushing for further privatizations, tax cuts for the rich, wage repression for the ordinary, and reckless financial sector deregulations precisely because they are the direct beneficiaries of these policies. Take the constantly widening wealth gap in the UK throughout three decades of neoliberal policy. The minority of beneficiaries from this ever widening wealth gap are the business classes, financial sector workers, the mainstream media elite and the political classes. It is no wonder at all that these people think neoliberalism is a successful ideology. Within their bubbles of wealth and privilege it has been. To everyone else it has been an absolute disaster.
Returning to a point I raised earlier in the article; one of the main problems with the concept of "neoliberalism" is the nebulousness of the definition. It is like a form of libertarianism, however it completely neglects the fundamental libertarian idea of non-aggression. In fact, it is so closely related to that other (highly aggressive) US born political ideology of Neo-Conservatism that many people get the two concepts muddled up. A true libertarian would never approve of vast taxpayer funded military budgets, the waging of imperialist wars of aggression nor the wanton destruction of the environment in pursuit of profit.
Another concept that is closely related to neoliberalism is the ideology of minarchism (small stateism), however the neoliberal brigade seem perfectly happy to ignore the small-state ideology when it suits their personal interests. Take the vast banker bailouts (the biggest state subsidies in human history) that were needed to save the neoliberalised global financial sector from the consequences of their own reckless gambling, the exponential growth of the parasitic corporate outsourcing sector (corporations that make virtually 100% of their turnover from the state) and the ludicrous housing subsidies (such as "Help to Buy and Housing Benefits) that have fueled the reinflation of yet another property Ponzi bubble.
The Godfather of neoliberalism was Milton Friedman. He made the case that illegal drugs should be legalised in order to create a free-market drug trade, which is one of the very few things I agreed with him about. However this is politically inconvenient (because the illegal drug market is a vital source of financial sector liquidity) so unlike so many of his neoliberal ideas that have consistently failed, yet remain incredibly popular with the wealthy elite, Friedman's libertarian drug legalisation proposals have never even been tried out.
The fact that neoliberals are so often prepared to ignore the fundamental principles of libertarianism (the non-aggression principle, drug legalisation, individual freedoms, the right to peaceful protest ...) and abuse the fundamental principles of small state minarchism (vast taxpayer funded bailouts for their financial sector friends, £billions in taxpayer funded outsourcing contracts, alcohol price fixing schemes) demonstrate that neoliberalism is actually more like Ayn Rand's barmy (greed is the only virtue, all other "virtues" are aberrations) pseudo-philosophical ideology of objectivism than a set of formal economic theories.
The result of neoliberal economic theories has been proven time and again. Countries that embrace the neoliberal pseudo-economic ideology end up with "crony capitalism", where the poor and ordinary suffer "austerity", wage repression, revocation of labor rights and the right to protest, whilst a tiny cabal of corporate interests and establishment insiders enrich themselves via anti-competitive practices, outright criminality and corruption and vast socialism-for-the-rich schemes.
Neoliberal fanatics in powerful positions have demonstrated time and again that they will willingly ditch their right-wing libertarian and minarchist "principles" if those principles happen to conflict with their own personal self-interest. Neoliberalism is less of a formal set of economic theories than an error strewn obfuscation narrative to promote the economic interests, and justify the personal greed of the wealthy, self-serving establishment elite.
The 1930s, a well researched period of balance-sheet recession, provides some interesting perspective despite large historical distance. Roosevelt was no socialist, but his New Deal did frighten many businesses, especially large business which BTW attempted a coupe to remove him from is position. Fortunately for Roosevelt CIA did not exist yet. And New Deal government projects has been much bigger and bolder, then anything Obama ever tried, because Obama administration was constrained in its action by dominant neoliberal thinking. Like regulatory capture, which is an immanent feature of neoliberalism, there is also less known and less visible ideological capture of the government. Which also makes neoliberalism more similar to bolshevism as this ideological capture and related inability of the USSR elite to modernize the economy on some "mixed" principles, when over-centralization stopped working. It, along with the collapse of the ideology, probably was one of the main reasons of the collapse of the USSR. Chinese leadership managed to do this and introduced "new economic policies"(NEP).
Uner New deal regime when public investment and hence aggregate demand expanded, the economy started to grow anyway. Roosevelt did have a vision and he did convince the electorate about the way to go. Cheap optimism of Reagan, or even audacity of hope "Obama style" were not enough. After all, as Francis Bacon may remind us: “Hope is a good breakfast, but it is a bad supper” (Apophthegms, 1624).
Obama/Bernanke-style attempts to stimulate growth by pure injection of cheap money in this environment not only inflate new bubbles instead of old one, with which the fighting starts. They also lead to massive redistribution of wealth that makes the problem even worse:
Paul Krugman tells us that Larry Summers joined the camp concerned about secular stagnation in his I.M.F. talk last week, something that I had not picked up from prior coverage of the session. This is good news, but I would qualify a few of the points that Krugman makes in his elaboration of Summers' remarks.First, while the economy may presently need asset bubbles to maintain full employment (a point I made in Plunder and Blunder: The Rise and Fall of the Bubble Economy), it doesn't follow that we should not be concerned about asset bubbles. The problem with bubbles is that their inflation and inevitable deflation lead to massive redistribution of wealth.
Larry Summers was the first establishment economist who conceded that this is the fact (Wikipedia)
... Larry Summers presented his view during November 2013 that secular (long-term) stagnation may be a reason that U.S. growth is insufficient to reach full employment: "Suppose then that the short term real interest rate that was consistent with full employment [i.e., the "natural rate"] had fallen to negative two or negative three percent. Even with artificial stimulus to demand you wouldn't see any excess demand. Even with a resumption in normal credit conditions you would have a lot of difficulty getting back to full employment."[13][14]
Robert J. Gordon wrote in August 2012:
"Even if innovation were to continue into the future at the rate of the two decades before 2007, the U.S. faces six headwinds that are in the process of dragging long-term growth to half or less of the 1.9 percent annual rate experienced between 1860 and 2007. These include demography, education, inequality, globalization, energy/environment, and the overhang of consumer and government debt. A provocative 'exercise in subtraction' suggests that future growth in consumption per capita for the bottom 99 percent of the income distribution could fall below 0.5 percent per year for an extended period of decades".[15]
One hypothesis is that high levels of productivity greater than the economic growth rate are creating economic slack, in which fewer workers are required to meet the demand for goods and services. Firms have less incentive to invest and instead prefer to hold cash. Journalist Marco Nappolini wrote in November 2013:
"If the expected return on investment over the short term is presumed to be lower than the cost of holding cash then even pushing interest rates to zero will have little effect. That is, if you cannot push real interest rates below the so-called short run natural rate [i.e., the rate of interest required to achieve the growth rate necessary to achieve full employment] you will struggle to bring forward future consumption, blunting the short run effectiveness of monetary policy...Moreover, if you fail to bring it below the long run natural rate there is a strong disincentive to increase fixed capital investment and a consequent preference to hold cash or cash-like instruments in an attempt to mitigate risk. This could cause longer-term hysteresis effects and reduce an economy's potential output."[13]
The cost of energy is probably another reason of secular stagnation along with excessive public and private debt. Rising cost of energy is deadly for capitalism. Here are some comments that might clarify the situation:
raskolnikov:This is the biggest crybaby column Krugman's ever written. He should be ashamed of himself and return his Nobel prize immediately. Has he ever put down Keynes long enough to read a little Marx? Here's Robert Brenner summing it up in 2009:
What mainly accounts for the long-term weakening of the real economy is a deep, and lasting, decline of the rate of return on capital investment since the end of the 1960s.
The failure of the rate of profit to recover is all the more remarkable, in view of the huge drop-off in the growth of real wages over the period.
The main cause, though not the only cause, of the decline in the rate of profit has been a persistent tendency to overcapacity in global manufacturing industries."
There's more, too. Instead of siding with crackpot Summers, Krugman should expand his research and be of some use to us all.
Kievite
I am not sure that it is correct to think about public debt as internal debt. It's all about energy.
That means that public debt is to a large extent foreign due to unalterable oil consumption (and related trade deficits). And that completely changes the situation unless you are the owner of the world reserve currency.
But even in the latter case (exorbitant privilege as Valéry Giscard d'Estaing called it ) you can expect attacks on the status of the currency as world reserve currency. The growth is still supported via militarization, forced opening of foreign markets (with military force, if necessary) and conversion of the state into national security state. But as Napoleon admitted "You can do anything with bayonets except sit on them"
One positive thing about high public (and to a large extent foreign owned) debt in the USA is that it undermines what Bacevich called "new American militarism" (http://www.amazon.com/The-New-American-Militarism-Americans/dp/0195173384). Bacevich argues that this is distinct political course adopted by the "defense intellectuals," the evangelicals, and the neocons. And they will never regret their failed efforts such as Iraq invasion.
From Amazon review:
=== Quote ===
Bacevich clearly links our present predicaments both at home and abroad to the ever greater need for natural resources, especially oil from the Persian Gulf. He demolishes all of the reasons for our bellicosity based on ideals and links it directly to our insatiable appetite for oil and economic expansion. Naturally, like thousands of writers before him, he points out the need for a national energy policy based on more effective use of resources and alternative means of production.
=== End of Quote ==
As Heinberg explained fossil fuels, primarily oil, permeate every aspect of our modern culture - from agriculture to cities and a long-term perspective. In the age of almost 7 billion people demanding more and more of limited resources, the media, politicians and governments tend to only report short-term perspectives and ignore Heinberg's Five Axioms of Sustainability to the extent that these concepts are taboo to be spoken, discussed or thought (Heinberg, Richard (2007) Five Axioms of Sustainability):
1. (Tainter’s Axiom): Any society that continues to use critical resources unsustainably will collapse.Exception: A society can avoid collapse by finding replacement resources.
Limit to the exception: In a finite world, the number of possible replacements is also finite.
...
2. (Bartlett’s Axiom): Population growth and/or growth in the rates of consumption of resources cannot be sustained.
...
3. To be sustainable, the use of renewable resources must proceed at a rate that is less than or equal to the rate of natural replenishment.
...
4. To be sustainable, the use of non-renewable resources must proceed at a rate that is declining, and the rate of decline must be greater than or equal to the rate of depletion.
The rate of depletion is defined as the amount being extracted and used during a specified time interval (usually a year) as a percentage of the amount left to extract.
...
5. Sustainability requires that substances introduced into the environment from human activities be minimized and rendered harmless to biosphere functions.
In cases where pollution from the extraction and consumption of non-renewable resources that has proceeded at expanding rates for some time threatens the viability of ecosystems, reduction in the rates of extraction and consumption of those resources may need to occur at a rate greater than the rate of depletion.
Archaeologist Joseph Tainter, in his classic study The Collapse of Complex Societies (1988), demonstrated that collapse is a frequent if not universal fate of complex societies and argued that collapse results from declining returns on efforts to support growing levels of societal complexity using energy harvested from the environment. Jared Diamond’s popular book Collapse: How Societies Choose to Fail or Succeed (2005) similarly makes the argument that collapse is the common destiny of societies that ignore resourse constraints. This axiom defines sustainability by the consequences of its absence—that is, collapse.
Adapted from Wikipedia
Excluding the current, there were two period of stagnation in the USA history:
Construction of structures, residential, commercial and industrial, fell off dramatically during the depression, but housing was well on its way to recovering by the late 1930s.[17]
The depression years were the period of the highest total factor productivity growth in the United States, primarily to the building of roads and bridges, abandonment of unneeded railroad track and reduction in railroad employment, expansion of electric utilities and improvements wholesale and retail distribution.[17]
The war created pent up demand for many items as factories that once produced automobiles and other machinery converted to production of tanks, guns, military vehicles and supplies. Tires had been rationed due to shortages of natural rubber; however, the U.S. government built synthetic rubber plants. The U.S. government also built synthetic ammonia plants, aluminum smelters, aviation fuel refineries and aircraft engine factories during the war.[17] After the war commercial aviation, plastics and synthetic rubber would become major industries and synthetic ammonia was used for fertilizer. The end of armaments production free up hundreds of thousands of machine tools, which were made available for other industries. They were needed in the rapidly growing aircraft manufacturing industry.[18]
The memory of war created a need for preparedness in the United States. This resulted in constant spending for defense programs, creating what President Eisenhower called the military-industrial complex.
U.S. birth rates began to recover by the time of World War II, and turned into the baby boom of the postwar decades. A building boom commenced in the years following the war. Suburbs began a rapid expansion and automobile ownership increased.[17]
High-yielding crops and chemical fertilizers dramatically increased crop yields and greatly lowered the cost of food, giving consumers more discretionary income. Railroad locomotives switched from steam to diesel power, with a large increase in fuel efficiency. Most importantly, cheap food essentially eliminated malnutrition in countries like the United States and much of Europe.
Many trends that began before the war continued:
- The use of electricity grew steadily as prices continued to fall, although at slower rate than in the early decades. More people purchased washing machines, dryers, refrigerators and other appliances. Air conditioning became increasingly prevalent in households and businesses. See:Diffusion of innovations#Diffusion data
- Infrastructures: The highway system continued to expand.[17] Construction of the interstate highway system started in the late 1950s. The pipeline network continued to expand.[19] Railroad track mileage continued its decline.
- Better roads and increased investment in the distribution system of trucks, warehouses and material-handling equipment, such as forklift trucks continued to reduce the cost of goods.
- Mechanization of agriculture increased dramatically, especially the use of combine harvesters. Tractor sales peaked in the mid-1950s.[20]
One of the first researchers who clearly attributed secular stagnation problem to neoliberalism was Alan Nasser, Professor Emeritus of Political Economy and Philosophy at The Evergreen State College. In his September 22, 2005 paper ECONOMIC LAWS, STRUCTURAL TENDENCIES, SECULAR STAGNATION THEORY, AND THE FATE OF NEOLIBERALISM he pointed out the key features of secular stagnation long before Summers started to understand the problem and even befor the economic crash of 2008 ;-)
September 22, 2005 | alannasser.org
Alan Nasser Invited presentation, University of Lille,
"We have now grown used to the idea that most ordinary or natural growth processes (the growth of organisms, or popu- lations of organisms or, for example, of cities) is not merely limited, but self-limited, i.e. is slowed down or eventually brought to a standstill as a consequence of the act of growth itself. For one reason or another, but always for some reason, organisms cannot grow indefinitely, just as beyond a certain level of size or density a population defeats its own capacity for further growth."
Sir Peter Medawar, The Revolution of Hope
"A business firm grows and attains great strength, and afterwards perhaps stagnates and decays; and at the turning point there is a balancing or equilibrium of the forces of life and decay. And as we reach to the higher stages of our work, we shall need ever more and more to think of economic forces as those which make a young man grow in strength until he reaches his prime; after which he gradually becomes stiff and inactive, till at last he sinks to make room for other and more vigorous life."
Alfred Marshall, Principals of Economics (1890)
"Though Keynes's 'breakdown theory is quite different from Marx's, it has an important feature in common with the latter: in both theories, the breakdown is motivated by causes inherent to the working of the economic engine, not by the action of factors external to it."
Joseph Schumpeter, Ten Great Economists
In this paper I shall address two major issues. Firstly, I shall discuss the implications for economic theory of a conception of economic laws widely at variance with the empiricist and/or positivist account of what laws are, how they are discovered, and how they are related to theory. At the same time, I will reject one cornerstone of anti-positivist thought, namely the idea that one cannot provide an account of laws that is fundamentally the same for the natural and the social sciences. Thus, I shall argue that an anti-positivist account of laws is entirely compatible with a conception of scientific laws that applies to both the "hard" (natural) and the "soft" (social) sciences. I shall defend this position by showing its application to economics and economic laws. In doing so, I will compare and contrast both natural-scientific (primarily physical) laws and social-scientific (primarily economic) laws. Secondly, I will argue that perhaps the most significant economic law descriptive of mature capitalism is the law of secular stagnation. The latter states that it is the natural tendency of a developed, industrialized capitalist economy to default to a state of chronic excess capacity and underconsumption. And this is itself a result of the tendency in advanced capitalism for the economic surplus (roughly, the difference between the Gross Domectic Product and the cost of producing the GDP) to grow at a rate more rapid than the growth of profitable industrial investment opportunities. In the course of my discussion I will use the United States as a paradigm case, Much as Marx attempted to identify the underlying features of the accumulation process by reference to England during the Industrial Revulution.
This has in fact been the state of global capital since the end of the "Golden Age" and the commencement of the age of globalized Reaganism/Thatcherism, i.e. the Age of Neoliberalism. I date the transition as commencing in 1973, the last year of post-War Keynesian growth rates in the USA. In fact, I will argue, neoliberal economic policy exacerbates capitalism'a tendency to stagnation. Let me begin with an account of economic laws.
LAWS, GENERATIVE MECHANISMS AND TENDENCIES
On the Humean or radical empiricist (positivist) account of laws, the latter are descriptions of observed regularities. Presumably, the scientist observes a "constant conjunction" of different kinds of happening, and infers from the regularity of the conjunction that the latter could not be merely accidental, and so concludes that the observed pattern of regularities must be nomological or law-like. 'Sodium chloride dissolves in water' and 'Metal expands when heated' would be simple examples of the results of this account of how laws of nature are discovered.
That this empiricist account is flawed becomes evident when we consider full-fledged laws of a genuine natural science, e.g. physics. I emphasize that laws are components of theories, which themselves are constitutive of established scientific disciplines, such as physics, chemistry, and biology. In fact, the two "laws" mentioned at the end of the preceding paragraph are not laws of physics at all. Among the genuine laws of physics is, e.g., 'Falling bodies near the surface of the earth accelerate at a constant rate.' This law is certainly not established by the observation of repeated conjunctions of events. On the contrary, actually observed falling bodies in "open systems", that is, in the circumstances of everyday life, conspicuously fail to conform to this law. Yet this is not taken to refute the law. For the law describes the behavior of bodies in a vacuum, that is to say, in a "closed system", one created by the scientist, typically in a laboratory situation. Philosophers of science have tended to ignore the distinction between regularities observed only in closed systems, and conjunctions observed in everyday life, which, as such, have no value as contributions to scientific knowledge. These philosophers have, accordingly, written as if the regularities in question were features of open systems, of nature. This confusion impedes our understanding of all types of laws, from physical to economic.
This failure –until relatively recently- of philosophers of science to properly attend to the importance of laboratory work in the acquisition of scientific knowledge is due to the fact that these philosophers have focused almost exclusively on science as established theory, i.e. as a way of representing the world. They had ignored how these theories were actually established. That is, they paid little attention to experiment, which is a way of intervening in the world. This inattention to what happens in closed systems created in the laboratory led thinkers to miss the importance of the concept of tendencies or dispositions in grasping the concept of a law of science. Let us dwell on this point and its relation to economic laws.
It is not that our knowledge of natural laws is not based on observed regularities. The point, rather, is that these regularities are not found in nature. They are found in closed systems, elaborately designed experimental circumstances found in laboratories. Yet, we correctly believe that what we learn in experimental situations gives us knowledge that is not confined to these situations. We believe that what we learn from observations of repeated patterns in experiments gives us not only knowledge of the behavior of objects in laboratory circumstances, but also knowledge of these same (kinds of) objects as they behave in nature, in the open systems of everyday life. But scientifically significant repeated patterns are not found in the world of daily life. This raises profound epistemological and ontological questions.
The most significant epistemological question arises from the following consideration: Were it not for the intervention of the experimenter, closed-system regularities would not obtain. Hence, the experimenter is a causal agent of the pattern of regularities observed in the laboratory. It is these contrived conjunctions which we invoke to justify our belief in (usually causal) laws. And while these regularities are the (partial) result of the intervention of the experimenter, we do not believe that the experimenter in any way originates the laws whose existence is attested to by the contrived regularities. The question therefore arises: What justifies our (correct) belief that knowledge obtained in closed laboratory systems designed by an agent applies also in open systems, i.e. in nature, which of course is not designed by scientists and does not evidence the regularities found under designed experimental circumstances?
I want to suggest that this question comes to the same as the following question: What must nature be like, and what must experiment reveal, in order for experimental knowledge to be able to be legitimately extended to the world outside of the laboratory, i.e. to nature? Note that this is a Realist question: it asks what we must presuppose about the constitution of the world in order that our experimentally-based scientific beliefs be justified. This is the precise Realist counterpart to Kant's Idealist question: What must we presoppose our minds –as opposed to nature or the world- to be like in order for scientific knowledge to be possible? I will argue that the answer to our Realist question provides the conceptual resources to elucidate the general nature of economic laws and economic theory, and the nature of the subject matter investigated by economists.
I will argue that since we believe that what we learn by experimental observation justifies our claim to knowledge of the experimental objects as they behave in nature, we must assume that these objects possess natural structures, similar to what Aristotle and the scholastics called "natures" or "essences." A natural structure must be conceived as what Critical Realists call a generative mechanism (hereafter, GM). The latter is a specific mode of material organization. What GMs generate are tendencies or dispositions to behave in characteristic ways. The statement that a physical thing or a social institution or structure tends to generate characteristic regularities is a statement of a law. The natural structure of salt, expressed in chemistry as HCl, is such that when it is mixed with water, whose natural structure or organization is expressed as H2O, it tends to dissolve. Gases tend to expand when heated and falling bodies near the surface of the earth tend to accelerate at a constant rate. These are statements of chemical and physical laws. We shall see that precisely the same kind of analysis can be made of laws in economics.
Tendencies are not the same as trends. The latter are merely observed regularities; there need be no implication that an underlying structural feature of the thing in question generates the regularity. This feature of laws is reflected in ordinary language in non-scientific contexts: we might say "He has a tendency to exaggerate." We mean that a disposition to exaggerate is a natural expression of his underlying character. We do not usually mean that he exaggerates whenever it is possible for him to exaggerate. This is part of the meaning of 'tendency.' Thus, tendencies can exist without being exercised. This happens when, e.g. salt is not mixed with water. Salt's nomological tendency to dissolve in water remains its categorical property even in the absence of circumstances in which its tendency to dissolve can be exercised. In addition, tendencies can be exercised without being realized. This is the case in the natural sciences when we observe, in non-laboratory situations, falling bodies accelerating at different rates. Indeed, no falling body in open systems is observed to accelerate at a constant or the same rate. But of course this is not taken to falsify the law of falling bodies. In nature, GMs continue to act in their characteristic ways without producing the patterned outcomes observable in closed experimental systems. This is so because in nature a multiplicity of GMs combine, interact and collide such as to result in the (scientifically irrelevant) flux of phenomena of the everyday world. The realization of a natural tendency can, in other words, be offset by counteracting forces. Thus, empiricism's mistake is to fail to recognize that GMs operate independent of the effects they generate. That is, GMs endure and go on acting (in the way that experimental closure enables us to identify) in nature, i.e. in open systems, where patterned regularities do not prevail. Statements about tendencies are not equivalent, salva veritate, to statements about their effects. Laws may exist and exercise their tendencies or powers even though no Humean "constant conjunctions" are observed. (This would be the case if it happened that the practice of creating closed experimental conditions had never been engaged in, i.e. in a world without science.)
LAWS, GENERATIVE MECHANISMS AND TENDENCIES IN ECONOMICS
GMs are not confined to the natural world. Natural structures are not the only structures there are. Plainly, there are humanely constructed structures. Capitalism is one such structure. Structures of this kind, GMs, that are dynamic by nature, i.e. which are characteristically diachronic, be they natural or socially constituted, share the same ontology. This should not be confused with the radical empiricist (positivist) claim that the natural and the social sciences share the same method. Clearly they do not: closed experimental situations exist but are not typical i istic outcomes ceteris paribus, ie. other things being equal, i.e. ceteris absentibus, other things being absent. When we identify the tendency of a thing, we specify what will happen, as a matter of course, if interfering conditions are absent. That is the point of vacuums in the closed systems created in laboratory experiments: they permit exercised tendencies, i.e. tendencies in operation, to be realized. If we want to know what gases tend to do when acted upon by heat, we eliminate all potential counteracting forces by creating a vacuum in the chamber, so that both gas and heat can express their natures unimpeded.
Thus, implicit in both physical- and social-scientific practice is the crucial distinction between the exercise and the realization (or manifestation) of a tendency. This distinction is essential to structural analysis in economics because of the impossibility of creating the social equivalent of a vacuum in the social sciences, which deal with the open systems of everyday life, where a great many forces and tendencies collide. Accordingly, just as the law of the tendency of falling bodies to accelerate at a constant rate is not falsified by the failure of falling bodies to behave accordingly in open systems, so too, e.g., the law of the tendency of the growth of productive capacity to outpace the growth of profitable investment opportunities -the thesis of secular stagnation theory- is not undermined by the remarkable growth rates of the Golden Age. In both cases, the presence of offsetting factors prevents the structurally generated tendency from being realized or manifested. I argue that the same can be said for any putative economic law.
In social science –and this is most conspicuous in economics, the most theoretically developed of the human sciences- we compensate for the absence of experimentally closed systems by constructing their functional equivalent, which we might call, in terms redolent of Weber, an ideal-typical theoretical model. It is an unfortunate habit (perhaps a tendency in the above-elaborated sense…) of mainstream economists to employ these models as if they described the open-system observable facts of economic life. This is, I suspect, a consequence of the economic empiricist's mistake referred to above, namely to think that GMs, if they must be spoken of at all, are to be conceived as reducible to their effects. (Recall Hume's claim, inspired by his reading of Newton, to expunge all notions of "power", "generation" and "production" from his analyses.) But, as noted above, GMs in both the social and the natural sciences employ unrealistic models, i.e. models which do not pretend to offer the equivalent of a photographic representation of the world. In both natural-scientific experiments and social-scientific ideal-type models, an attempt is made to abstract from the nonessential. We seek to place the spotlight of theory on what is necessary to the situation, system or institution under investigation, and to prescind from the arbitrary and accidental. In economics we seek to identify those features of capitalism that make it what it is. This enables us to identify capitalism's distinct and characteristic tendencies, and to describe what will happen as a result of the exercise of these tendencies, ceteris absentibus.
That there are such tendencies seems to me to be uncontroversial. We all know, for example, that cyclical downturns are not mere empirical contingencies of capitalist development, but structurally generated tendencies which follow inexorably from the specific mode of organization (structure) of capitalism. And like all tendencies, their realization can be offset, as we have seen above, by counteracting factors, such as fiscal and monetary policy. Other examples would be what Marx called the tendencies of capital to concentrate and centralize. The tendency, and corresponding law, with which I will be primarily concerned in this paper is constitutive of the theory of secular stagnation, and is far more likely than the immediately foregoing examples to generate controversy. I refer to the tendency of mature capitalism to suffer from a chronic paucity of profitable industrial investment opportunities, relative to the great magnitude of its investable surplus. Let us look more closely at this tendency.
THE THEORY OF SECULAR STAGNATION
It is worth mentioning that the view that the continuous accumulation of capital is both essential to the normal development of capitalist societies and essentially self-limiting was held by virtually all of the major modern political economists, in the form of one version or another of the doctrine of the falling rate of profit. Adam Smith explained the secular decline of the profit rate by the increasing abundance of capital in a developing capitalist society. Ricardo and Mill believed that the rate of profit would be depressed by the diminishing productivity of the land which would drive up the price of wage goods and therefore of the wages of labor, and so drive down the profits of capital. Marx pointed to the increasing capital-intensity of industry and the paucity of working-class purchasing power relative to the productive capacity of the economy, as the principal threat to the profit rate. And Keynes held that in mature capitalist economies the "marginal efficiency of capital", i.e. the expected rate of return (over cost) on an additional unit of a given capital asset, would tend to decline. All these thinkers had an at least intuitive appreciation of the fact that the growth of capital tends to be terminally self-limiting. (It is worth citing a remark of Joseph Shumpeter at this point:
"Though Keynes's 'breakdown theory is quite different from Marx's, it has an important feature in common with the latter: in both theories, the breakdown is motivated by causes inherent to the working of the economic engine, not by the action of factors external to it.")
In my estimation, no one understood the underlying dynamics of the tendency to stagnation better than the Polish economist Michal Kalecki, who is known to have developed the essentials of Keynes's General Theory before Keynes himself (and to have produced far more elegant mathematical formulations thereof). Perhaps the best way to understand Kalecki's thought is to see him as having argued that certain features of a not-yet-mature industrializing economy persist after the process of industrialization has been accomplished, with the effect that the developed capitalist economy is saddled with a problem of chronic excess capacity. Let me sketch this train of thought.
In the course of their natural growth capitalist economies reach a level of industrial development characterizable as maturity, a point beyond which growth must either cease, or be sustained by exogenous (in a sense to be elucidated below) means. Straight away we are confronted with a rejection of an assumption that is implicit in mainstream neoclassical theory, viz. that both the supply and the demand curves shift, virtually automatically, to the right. On the stagnationist conceptualization of growth or development, the process of development is not everlasting, but rather is at some point accomplished. There is the period, industrialization, during which the economy is developing, and which culminates in a (finally) industrialized or developed infrastructure. At this stage there will have been built up, or "accumulated", a complement of plant and equipment in steel production, machine tools, power stations, transport systems, etc., that is capable of satisfying a level of consumption demand consistent with the moral limits of a reasonably civilized style of life, the constraints imposed by a finite fund of natural resources, and, most importantly for stagnation theory, the limited possibilities of what Marx called "expanded reproduction" imposed by the accumulation process itself.
This account point can be expanded as follows. During any period of industrialization, the growth of the capital goods industry (hereafter, following Marx, Department I, or DI) must outpace the growth of the consumption goods industries (hereafter, again following Marx, Department II, or DII). Indeed, it belongs to the nature of the process of industrialization that the demand for the output of DI cannot be a function of the behavior of consumption demand; during industrialization, investment demand is both rapid and relatively autonomous. For if the principal project is to develop the means of production, then a disproportionate share of national wealth must be devoted to investment/accumulation at the expense of consumption. Strategic capital goods such as transport and communications networks and steel mills cannot be built bit by bit. This is clear with respect to railroads (Recall Keynes's remark that "Two pyramids are better than one, and two masses for the dead better than one; but two railroads from London to York are not necessarily better than one."), but perhaps not as clear with respect to steel facilities.
Suppose 1) that the efficient production of steel requires equipment with the capacity to produce 200,000 tons of steel, and 2) that demand turns out to be for 300,000 tons. The investor has two alternatives, either to forgo an extra market or to take a chance and add another 200.000 tons. On the second alternative, the one virtually assured in a period of (rapid) industrialization, the manufacturer is left with a surplus capacity of 100,000 tons. Here we see, writ small, a crucial source of two basic tendencies of capitalist development, the unrelenting pressure to expand markets, and the tendency to overproduction of a specific kind, namely the overproduction of capital goods, the tendency to overaccumulation. Each of these tendencies is the basis of a corresponding law of economics: Wherever we find a competitive, profit-driven market economy, we must also find a system-driven tendency to expand markets, and: Wherever we find a competitive, profit-driven market economy, we must also find a system-driven tendency for the growth of productive capacity to outpace the growth of effective demand.
As we have seen, all the major classical political economists anticipated the stationary state; they all assumed that the period of development or industrialization would come to an end. Basic industries would be in place, and DI would be capable of meeting all the replacement and expansion demands of DII. Prescinding for the moment from the emergence of new industries, DI would no longer be a source of substantial expansion demand for its own output; most of DI's internal expansion demand would be extinct.
But this is not th hread of classical (and perhaps neoclassical) theory contains the assurance that the capitalist economy provides a mechanism that in the long run counteracts the tendency of the demand for the products of DI to peter out. As one might expect, this is the price mechanism, which brings about, in the circumstances described above, a falling rate of profit (or interest) and thereby a simultaneous check on accumulation and spur to consumption. The causal chain is simple: the fall of the profit rate would lower capital's share of national income, i.e. it would transfer income from capital to labor. Thus, the demand gap created by the sharp waning of DI's expansion demand would be made up by the increase in consumption demand, which would of course mean an expansion in the demand for the output of DII. Moreover, an immediate expansion of DII at the expense of DI in order to assure a rapid transition out of the stationary state would be entirely feasible given the adaptability of certain key industries in DI to new market conditions resulting from the newly-expanded purchasing power of the working class. The construction of new factories could, for example, yield to the construction of new homes.
The theoretical elegance of this scenario is impressive -almost inspirational- but, alas for illusions, the price mechanism does not work this way. For the above-mentioned transfer in national income from capital to labor is supposed to happen when industrialization comes to an end by virtue of its having been accomplished. But from the capitalists' perspective, it is as if nothing counts as industrialization coming to an end. New industries, for example, can create a situation functionally equivalent to industrialization. "Accumulate, accumulate, that is Moses and the prophets."
We have at this point arrived at a picture of a developed capitalist economy which is in a state of permanent industrialization. Excess capacity prevails and working-class income is stagnant or declining. Interestingly, this has in fact been the state of both the U.S. and the global economy since 1973. According to the foregoing analysis, this reflects the fact that the U.S. and global economies are now instances not merely of the exercise of the law of the tendency of mature capitalism to stagnate, but of its realization. To put it differently: these economies are now in their natural state.
But important questions immediately arise. Why are these economies in their natural state now? And if there is a structurally generated tendency for capitalist economies to stagnate, how shall we account for the historically unprecedented growth rates of the Golden Age? I have barely sketched an outline of a response to these challenges above: if there is indeed a tendency for capitalism to stagnate, then there must have been in operation during the Golden Age what I called "counteracting forces and tendencies" which had spent themselves by the mid-1970s. In the absence of new offsetting forces, the tendency to stagnate has, as we should expect, re-asserted itself. These claims require further elaboration, and it is to this task that I now turn.
SECULAR STAGNATION AND TRANSFORMATIONAL GROWTH
In order to account for the actual pattern of capitalist growth in the context of stagnation theory, we must reflect on the kind of growth required by capitalist economic arrangements. Mainstream theory does not distinguish between kinds of growth if and when it addresses the specific requirements of capitalist growth at all. This is, I believe, a serious error. I will begin by introducing the notion of transformational growth, which transforms the entire way of life of society and absorbs exceptionally large amounts of the investible surplus. My point shall be that a capitalist economy cannot sustain growth merely by producing more and more different types of widgets, in the absence of pervasive structural change. Growth sustained in the latter manner is transformational growth.
We are forced to introduce the concept of transformational growth for reasons related to my earlier discussion of the structural features of mature capitalism which generates a chronic tendency to stagnation. I will now embellish this analysis. It should be clear that capitalism cannot grow in the way in which a balloon grows: its growth cannot leave its proportions intact, i.e. such that there are no new products and no new processes of production. This is to say that a capitalist economy either undergoes transformational growth or it stagnates. The argument is as follows.
Investment expands productive capacity, which in turn requires that demand increase at the same rate as potential production. Without the required rate of demand growth, underutilization/excess capacity will discourage further investment or capital accumulation and the result will of course be stagnation. Let us not address this issue in the manner of the neoclassical economist, who seems to assume that both supply and demand curves can be counted on to perennially shift to the right (absent, of course, undue government interference). But this quaint assumption is belied by the enormous literature on the development and indispensability to capitalism of the marketing and advertising industries, which we might view as massive efforts to counteract Keynes's declining marginal propensity to consume by deliberately creating among the consuming masses a full panoply of "manufactured" consumption desires. These considerations point to the need constantly to exogenously stimulate consumption demand in order to narrow the demand gap generated by the tendency to overaccumulation. But they do not yet establish the need to generate a broad, nation-wide pattern of demand required by structural change and transformational growth.
What is needed at this point are concrete examples of the generators of transformational growth, and of exactly how these generators accomplish one of the fundamental features of transformational growth, the mobilization and coordination of the economic resources of the entire country into a grand national project which stimulates demand not merely for this and that consumption good, but for crucial commodities and institutions such as oil, steel rubber, and other primary products, and communication and transportation facilities. What this requires are what Paul Baran and Paul Sweezy termed, in their influential Monopoly Capital (Monthly Review Press, 1966), "epoch-making innovations". Edward Nell and Robert Heilbroner have characterized these same innovations as "transformative innovations". Let me approach transformative innovations by looking at the tendency to stagnation from yet another perspective, one which focuses on the role of competition as a major force behind the growth of both investment and consumption.
Competition reduces the need for investment by tending to increase both productivity and savings. Let us see how this happens. As a result of competition business is under continuous pressure to cut costs and produce more efficiently. To the extent that business succeeds in these respects, productive potential is increased. At the same time, competition also requires business to hold down wages and salaries and to pay out dividend and profit income relatively sparingly. Together, these pressures hold back both worker and capitalist consumption. The result is a tendency for productive capacity to expand faster than consumption. This means that there is no reason for investment to grow, for capital to achieve the required rate of accumulation, unless there are major pressures transforming the way people live. In the absence of such pressures, we may expect stagnation.
There are two dimensions of transformative innovations which are in fact two aspects of the same phenomenon. One dimension is solely technological, and the other points to changes in a population's entire way of life. Neither of these is part of a process of steady, balloon-like growth, nor is either automatically, or normally, generated by the fundamental capitalist dynamics identified by the mainstream textbooks. For this reason I have called the stimulus imparted by these innovations 'exogenous'. Let us look first at the technological dimension of transformative innovation.
This can be identified, after the owl of Minerva has spread its wings, by reflecting on some of the requirements of ideal-typical capitalism. Neoliberals correctly remind us that the bottom line is of course "freedom", primarily the freedom of capital to roam the world seeking markets, sources of cheap labor and investment opportunities. Microecenomic textbooks in fact tend to assume the perfect mobility of both capital and labor.
Let us focus on sources of power, which became especially important after the industrial revolution. Technological development resulted in the virtually total replacement of human and animal muscle power by inanimate sources of power, mainly water and steam. But reliance on water as a source of power places extreme limits on the mobility of capital, and hence on the possibilities of capitalist growth. Water power is site-specific, and the number of rivers and streams is limited. Moreover, the water had to be fast-running and productive facilities had to be located as far downstream as possible. And of course water power is only seasonally available. These restraints alone place an intolerable obstacle to the free and ongoing accumulation of capital. Here we find an overwhelming incentive to switch from water to steam power. This constitutes a huge stimulus to the accumulation of capital on a national scale.
Capitalism requires sources of power that are independent of nature and can be applied constantly wherever they are needed. And these are precisely what steam power made possible. It was now possible to set up productive facilities virtually anywhere; a major fetter to the accumulation of capital was removed. The universal mobility required by capital was now much more fully realized. At this point I want to emphasize that this technological /economic transformation was necessarily accompanied by profound social and cultural changes. For the steam engine's reduction of the seasonality of water power made possible a feature of work that is increasingly common on a global scale: the emergence of modern year-round work habits. With this change comes a dramatic transformation of our notions (and practices) of work and leisure, with all the consequences these have for the felt experience of everyday life. That is an instance of the second dimension of transformative innovation, i.e. its introduction of dramatic cultural changes, changes in the way populations live.
Much the same can be said for the subsequent shift to electrical power, which makes possible trolley cars, refrigerators (as opposed to what used to be called, in the U.S., "ice boxes"), ranges, toasters, radios, washing machines, fans, et al.
The railroad too is a transformative innovation par excellence. Consider the spectacular effects of railroad expansion: internal transport costs are sharply reduced; both new products and new geographical areas are brought into commercial markets; it is now possible to deliver exports to port with unprecedented efficiency, thereby encouraging the extensive development of the export sector; and impetus is provided to the development of the coal, iron and engineering industries. As with the steam engine, these technological and economic benefits wee necessarily accompanied by profound social and cultural changes. The railroads changed the way of life of the people by binding them as never before. The possibility now existed for mass production, mass consumption and indeed mass culture.
And of course the establishment of a national rail network absorbed massive amounts of investible capital, thereby spurring sustainable growth and offsetting the realization of the economic law that capitalist economies tend to stagnate. Apropos: in the latter third of the nineteenth century, railroad investment in the U.S. amounted to more than all investment in manufacturing industries.
And who can doubt that the transformative effects of the introduction of the automobile were epoch-making? The expansion of the automobile industry was the single most important force in the economic expansion of the 1920s. Car production increased threefold during this decade. (The automobile industry produced 12.7% of all manufactured output, employed 7.1% of all manufacturing workers, and paid 8.7% of all industrial wages.) Immediately after World War II the auto industry continued what was to be its breakneck expansion, and the possibilities created thereby constituted what was perhaps the most extensive transformation of the country's way of life in its history.
Consider the stimulus to capital accumulation and employment constituted by the following, each and all a consequence of the increasing automobilization of American society and culture: the migration of the population from the central city to the suburbs and exurbs (first made possible by the streetcar, before the major streetcar operations were bough and then quickly dismantled by the auto companies); the need for surfaced roads, road construction and maintenance, highway construction and maintenance (which had already accounted for 2% of GDP in 1929); the suburbanization of America, with the attendant construction of housing, schools, hospitals, workplaces, and more; the growth of shopping malls; the expansion of the credit industry; the spread of hotels and motels; and of course the growth of the tourism/travel industry. Never before had any population's way of living been transformed so profoundly in so short a period of time. And of course no one has failed to recognize that Americans' main symbol of their most precious possession, their personal freedom/liberty, is their ability to drive, solo, cars that have increasingly come to resemble tanks. Americans' liberty, embodied in the automobile, has become, literally, a commodity.
The long-term growth of the U.S. economy cannot be adequately explained or described without reference to these transformative innovations. None of these are required by the models of capital accumulation found in neoclassical, Keynesian or Marxian growth theory. After the civil war, growth in the last third of the nineteenth century was spurred primarily by the railroads. This stimulus fizzled, as railroad expansion began to slow down, around 1907, when, in spite of extensive electrification of urban (and even some rural) areas, the U.S. economy began a stretch of slow growth, which lasted until the outbreak of World War I. After the end of the War, the economy experienced a brief slump, which was followed by a period of fairly sustained expansion in the 1920s. The latter, as we have seen, was spurred mainly by the growth of the automobile industry. But the rate of growth of the automobile industry slowed down after 1926, and with it the rate of growth of almost all other manufacturing industries. And wages and employment had not risen as rapidly as production, productivity or profits.
In fact, the economic situation in the U.S. at the end of the 1920s bore a remarkable resemblance to the current economic situation in America. After 1926 overcapacity emerged in many key industries, the most significant of these being automobiles, textiles, and residential construction. Contractionary forces are cumulative: excess capacity caused business confidence to decline, with resulting cutbacks in spending on productive capacity in the consumer durables and capital goods industries. The economy was intensely unsound at the end of the 1920s, and the indications at the time were clear. Consumer demand was held down by a steadily growing inequality of income. Thus, an increasing percentage of total purchases were financed by credit in order to foster purchases of consumer durables. About seventy-five percent of all cars were sold on credit. Accordingly, both home mortgages and installment debt grew rapidly. This was the extension of a trend that had begun as early as 1922, when total personal debt began rising faster than disposable income. Thus, underconsumption and traces of excess capacity, key indicators of stagnationist forces, were in effect from the very beginning of the "roaring '20s". These tendencies became increasingly foregrounded over the course of the decade.
Excess capacity in key manufacturing industries was displacing workers from capital-intensive, technologically advanced sectors to industries relatively devoid of technological advance, i.e. service industries such as trade, finance and government. With capital unable to find sufficiently profitable investment opportunities in high-productivity industries, rampant speculative activity ensued, fostered by the growing concentration of income and therefore savings during the decade. More than two thirds of all personal savings was held by slightly over two percent of all families. The wanton optimism of the 1920s led those with substantial savings to want to get richer quickly, and with little effort. The stock market bubble that materialized at the end of the decade seemed to justify the expectations that fortunes could be made overnight in real estate and the stock market. When investors acted on these expectations, the existing bubble became bigger and hence more fragile. To those familiar with the current state of the U.S. economy, the present situation presents itself as history repeating itself -contra Marx- yet again as farce.
FROM GREAT DEPRESSION TO GOLDEN AGE TO NEOLIBERALISM
The mounting instabilities of the economy of the 1920s led to a Depression that was unresponsive to the Roosevelt administration's elevenfold increase in government spending. When U.S. entry into World War II finally brought about a resumption of growth, there was nonetheless an abiding fear among economists that once War spending ceased, the forces and tendencies that had generated the Depression might reassert themselves and exceptionally slow growth could resume. Instead, much to the surprise of many economists, American capitalism began the most sustained period of expansion in its entire history. The period from 1947 to 1973 has come to be called "The Golden Age", and appears, on the face of it, to be a fatal anomaly with respect to secular stagnation theory. After all, if the causes of the Great Depression were structural, and the exogenous stimulus provided by the War was what produced a resumption of growth, how was it possible that the economy, in the absence of powerful exogenous stimulus, exhibited an historically unprecedented period of long-term growth?
I have suggested that sustained national (as opposed to intra-national regional) growth has been engendered by the emergence of transformative innovations, and it is this kind of consideration that I believe offers the most plausible explanation both of Golden-Age expansion and of the petering out of this growth period and the resumption of (global) stagnation. Five stimuli to long-term growth were set in motion after the War, and these were for the most part exogenous in the sense indicated, and essentially limited. I will construe these stimuli as forces counteracting the tendency to stagnation. Once most of these stimuli had spent their potential, stagnationist tendencies re-asserted themselves, and overinvestment became evident once again. With profitable industrial investment opportunities in short supply, the economic surplus was invested instead in what became a vast proliferation of financial instruments. When the bubble created by this process finally burst, it was replaced with a housing bubble. Indeed a variety of bubbles, in financial assets, in housing, in credit, and a substantially overvalued dollar now threaten an historically unparalleled reassertion of the tendency to stagnation. But let us look first at the counteracting forces.
After the War, and as a result of wartime rationing, Americans had accumulated a very large fund of savings, and the time had come when these could finally be spent. This accounted for an immediate surge of consumption spending which temporarily averted the onset of recession. But the effectiveness of this source of spending was soon spent. What truly impelled the sustained growth of the Golden Age was 1) the resumption of a vast expansion of the automobile industry, and with it the stimulation of the broad range of investment and employment opportunities discussed above in connection with automobilization; 2) large-scale economic aid to Europe, which stimulated export demand; 3) a nationwide process of suburbanization, which, in tandem with the expansion of auto production, expanded significantly the demand for the output of every other major industry; 4) the emergence of what president Eisenhower christened the "military-industrial" complex, which provided additional stimulus to the industries most vulnerable to economic instability, the industries of DI, the capital goods sector; and finally 5) the steady and growing expansion of business and especially consumer credit, which in recent years has assumed elephantine proportions.
Three of these factors bear the two most important features of epoch-making innovations. The expansion of the auto industry, suburbanization, and the ever-increasing expansion and extension of credit all absorb massive amounts of investible surplus, and transform the mode of life of the entire population. In so doing they impart a massive push to the macro-growth process. The first two of these have their initial direct effect on investment. The third factor, the growing importance of credit, affects both investment and consumption, but the long-term trend of the credit industry in the U.S., evident now in hindsight, is much more significant in relation to consumption. There is now in the States a credit bubble of menacing proportions, with consumers now in debt to the tune of about107% of disposable income. The Marshall Plan (number 2 above) affected mainly and directly investment and employment, with boosts to consumption following thereupon. By the mid- to late-1970s, the employment-generating capacity of the military had declined. Washington determined, in the light of the defeat in Vietnam, that hi-tech warfare, which is of course technology- rather than labor-intensive, must replace traditional forms of subversion and aggression, in order to render less likely a repeat of the "Vietnam Syndrome."
It is worth mentioning that the military-industrial complex and the vast extension of consumer credit were what constituted what Joan Robinson called "bastard Keynesianism" in the United States. Recall that Keynes had insisted that fiscal and monetary policy were necessary but not sufficient conditions for avoiding stagnation. The tendency to stagnation could be offset for the long run only if some key industries were nationalized, and income redistributed. Nationalization would allow the State to offset lagging demand by providing cheap inputs to the private sector, thereby enabling lower prices. And redistributing income would transfer liquidity from those who had more than they could either consume or invest to those whose consumption demand was severely constrained.
American policymakers saw it as their challenge to reap the effects of nationalization and redistribution without actually nationalizing industries or redistributing income. The solution was ingenious: the military-industrial complex would be the functional equivalent of state-owned industries, and would, as noted above, stimulate the demand for the output of those very firms that produced capital goods. And the extension of consumer credit would allow working people to mortgage future years' incomes and spend more without a corresponding increase in either their private or their social wage.
As mentioned earlier, these forces counteracting the tendency to stagnation were all inherently limited and temporary. By the late 1960s, the automobile industry had achieved maturity, suburbanization had been accomplished, and aid to Europe had not only long ended, but had apparently created for America the economic equivalent of Frankenstein's monster. Europe and Japan were now formidable threats to U.S. economic hegemony. (Germany, for example, has overtaken the U.S. as an exporter of capital goods.) These three colossal absorbers of surplus were now no longer in operation. In the mid-1960s social spending had overtaken military spending as the larger share of government spending. And credit had begun to function as a supplement to declining real income, rather than a further addition to growing income.
These combined developments rendered the post-War counters to the realization of the tendency to stagnation obsolete. The result was the onset of stagnation not only in the U.S. but also worldwide. In America there has been overcapacity in autos, steel, shipbuilding and petrochemicals since the mid- to late-1970s.
This general picture is widely reflected in the business press. Business Week noted that "..supply outpaces demand everywhere, sending prices lower, eroding corporate profits and increasing layoffs" (Jan. 25, 1999, p. 118). The former chairman of General Electric claimed that "..there is excess capacity in almost every industry" (The New York Times, Nov. 16, 1997, p. 3). The Wall Street Journal noted that "..from cashmere to blue jeans, silver jewelry to aluminum cans, the world is in oversupply" (Nov. 30, 1998, p. A17). And The Economist fretted that " the gap between sales and capacity is "at its widest since the 1930s" (Feb. 20, 1999, p. 15). At this time excess capacity in steel is exceeding twenty percent, in autos it has fluctuated around 30%. And these figures look good in comparison to unused capacity numbers in the "industries of the future" of the "New Economy", semiconductors and telecommunications. Not long ago, ninety-seven percent of fibre optic capacity was idle.
MAINSTREAM ECONOMICS AND STAGNATION THEORY
Let us begin with the indisputable fact that the regime of neoliberalism has brought with it a substantial decline in economic growth. The most widely cited study on this issue, produced for the IECD by Angus Maddison, shows that the annual rate of growth of real global GDP fell from 4.9% in 1950-1973 to 3 % in 1973-1998, a drop of 39 %. Theoretical commitments can guide perception: neoliberal economists either denied or ignored the decline in global growth because of their reliance on Say's Law, that it is not possible for total demand to fall below full-capacity supply over the long run. In my earlier remarks I offered an explanation of sluggish growth rates since 1973. Many orthodox economics have done something similar: they have offered explanations of the initial rise in excess capacity. But what has not been explained is why global supply did not eventually adjust itself to the slower rate of demand growth, with the result that in the mid-1970s the global economy would enter a period of sluggish expansion. And it is worth mentioning that even Keynesian macro-theory is inadequate in this regard. It assumes that slow growth in aggregate demand will result in a proportionate decline in the growth of aggregate supply through its effect upon investment and therefore productivity.
An adequate explanation of the sustained character of excess capacity can be constructed from insights from Schumpeter, Marx and the contemporary economist James Crotty. The analysis that follows should be understood within the framework of the version of secular stagnation theory sketched above.
Before the shift to neoliberal policies by Jimmy Carter, Reagan and Thatcher, the global economy was already subject to downward pressures on demand growth resulting from two oil price shocks and the restrictive macro policy imposed in response to oil-price induced inflation. These impediments to demand growth were exacerbated by neoliberal policies. In combination, these forces led to a sharp rise in excess capacity in globally competing industries. At the same time competitive pressures were further intensified by the reduction of the market power of national oligopolies caused by the removal of protectionist barriers to the free movement of goods and money across national boundaries. Accordingly, competitive pressures between nations rose dramatically. In this context, normal stagnationist tendencies operated to further constrain global demand growth and further reproduce industrial capacity faster than either neoclassical or Keynesian theory could comprehend.
The Achilles Heel of neoclassical theory with respect to its inability to account for the persistence of overcapacity during the neoliberal period is its account of competition. So-called "perfect competition" is alleged to lead to maximum efficiency and the elimination of excess capacity. This claim appears inconsistent with the history of real-world, pre- and post-oligopolistic competition. Textbook-like competition has led to periodic market gluts or overproduction crises, price wars, plummeting profits, unbearable debt burdens and violent labor relations. Neoclassical theory banishes these demons with the aid of two assumptions which appear designed explicitly to make them impossible. The first assumption claims that production cost per unit rises rapidly as output increases, and the second that exit from low-profit industries is free or costless. If these assumptions were indeed true, then pure competition could not be shown to have stagnation- or depression-inducing effects. But these assumptions are, I shall suggest, false.
I will begin with the least plausible of these two assumptions. It states that there is free or costless exit from low-profit industries. But productive assets are typically immobile or irreversible, i.e., they are not liquid, and this forces a sizeable loss in the value of a firm's capital should it choose to leave an unprofitable industry. Whether they are sold on a second-hand market or reallocated to a different industry, productive assets will lose substantial value. Capital flowing out of the aerospace industry has been found to sell for one third of its replacement cost. Insolvent telecom firms in the U.S. have sold their assets for 20 cents on the dollar. And isn't this what one would expect? For it is usually poor profit prospects and/or great excess capacity that heighten a firm's incentive to leave an industry. But it is precisely those circumstances which deeply depress the price of industry-specific assets on the second-hand market, since the supply of these assets grows even as the demand for them has collapsed.
Before I turn to the slightly more plausible (yet still false) assumption -that unit production cost rises dramatically as output increases- I will outline the corollary of neoclassical theory itself which neoclassical economists seek to evade by introducing this assumption. The theory tells us that pure competition will force price down until it covers marginal cost. Now if unit production cost remained constant irrespective of the output level, then marginal production cost and average production cost per unit would be equal. When perfect competition forces price to equal marginal cost, total revenue will be equal to total production cost. But in this case there will be no revenue left over either to pay the "fixed" cost of maintaining capital stock in the face of depreciation or obsolescence, or to pay interest and/or dividends to investors. Thus, perfect competition is seen to cause the representative firm to suffer, in each production period, a loss that is equal to fixed costs. Keeping in mind that most important global industries have huge fixed costs, no industry could long survive the consequences of intense competition.
We seem to have found a tendency to stagnation or complete system breakdown where we would least expect to find it - in neoclassical theory itself. But the theory claims to have a response to this embarrassment. It simply denies the claim that appears to entail the undesired consequence, namely the claim that unit production cost remains constant no matter what the output level. Armed now with the (false) assumption that unit production cost rises rapidly as production increases, the conclusion is drawn that marginal cost and price are greater than average unit production cost. Thus, in equilibrium, the gap between price and average production cost is sufficiently large to cover all fixed costs. Let competition be as fierce as you wish, the typical firm will not lose money. Voila!
I have claimed that each of the rescuing assumptions discussed above is false. What would realistic assumptions about marginal cost and the reversibility of invested capital look like? To answer this question we must recognize the distinctive character of the dominant industries of global trade and investment. These industries include steel, autos, aircraft, shipbuilding, petrochemicals, consumer durables, electronics, semiconductors and banking. Studies of this type of industry suggest that marginal cost does not typically rise with output, with the rare exception of cases when the industry is producing near full capacity output. Marginal cost behaves as we would expect in cases of economies of scale: it remains constant or declines as capacity utilization rises. It follows that if free competition forces price to equal marginal cost in these industries, we should count on an ensuing wave of bankruptcies. Here again we see that neoclassical theory, corrected for unrealistic assumptions, seems to commit us to conceptualize mature capitalism as subject to the law of an inherent tendency to stagnation or worse.
The issue I am focusing on here turns on the dynamics of unrestricted competition among oligopolies in the context of economies of scale. The importance of economies of scale underscores the crucial similarity of all the dominant industries, including the new information-technology and telecommunications (ITC) industries. I stress this point because influential neoclassical economists have wanted to claim a significant difference, with respect to overcapacity problems, between the ITC industries and the other dominant industries. For purposes of explaining the persistence of excess capacity under neoliberalism, we want to remember that as scale economies grow, marginal costs fall as fixed costs per unit rise. Thus, the greater the economies of scale, the more destructive becomes the marginal cost pricing required by intense competition. With this in mind, we can more easily see that 1) these dynamics in especially conspicuous operation in the ITC industries, and 2) that such differences as there are between ITC and the other dominant oligopolies are insignificant for the analysis of secular stagnation theory, and of capitalist growth in general.
The key issue right now, recall, is the highly destructive consequences of the tendency of free competition among dominant industries to force price to equal marginal cost. That this is the case is easier to see in the ITC sector than in the other dominant industries. This is because in ITC marginal cost is often close to zero. Producing another copy of software or adding another customer to eBay is virtually costless. This has led many mainstream economists to argue that ITC industries are exempt from the laws of the neoclassical theory of perfect competition. Since ITC firms have marginal costs much lower than their large fixed costs, the argument goes, the possession of at least temporary monopoly power is the only guarantee of an incentive to produce anything at all. Without monopoly pricing power prices will be competed down to marginal cost and fixed costs will be unable to be covered. Thus, the motor of the "new economy" is said to be the constant pursuit of monopoly power. But, contrary to the neoclassical claim, none of this distinguishes significantly between ITC and other key industries. The drive to monopoly power is characteristic of all large corporations in the present age.
As Paul Sweezy argued in his Marshall Lectures, the typical firm in an oligopolized industry strives to be a monopolist. Each firm does this individually, and they all do it collectively. Individual firms seek monopoly status through the sales effort, where the firm's product is put forth as the best in the industry and as different from all the others. Firms within the same industry seek to approach monopoly status by collusion with respect to pricing policy, especially by agreeing to refrain from cutthroat price competition. For reasons developed at length above, therefore, all dominant firms, whether old- or new-economy operations, will tend to achieve monopoly status and to be chronically saddled with excess capacity.
A SCANDALOUSLY BRIEF LOOK AT SLOW-GROWTH CAPITALISM
We are in the midst of another unparalleled period of historical capitalism. Since the onset of stagnation, the median wage in the States has not changed at all for the vast majority of wage workers. Over the past six quarters the gowth of wage income has been negative. A brief sketch of the state of the U.S. economy toward the end of last year highlights features whose most plausible explanation may lie in the fact of secular stagnation. If stagnation theory is accurate, what follows is precisely what we would expect to find. The current state of the U.S. and the global economy is best understood, I believe, against the background too briefly elaborated above. Here is a picture of the U.S. economy today. The key to a healthy economy is job- and income-creating investment in capital goods, which in turn generates a virtuous cycle of further growth in investment, jobs and income. Ominously, the investment, growth, employment and income pictures are unprecedentedly dismal.
Compared to cyclical recoveries between 1949 and 1973, recoveries during the neoliberal period have been weak. Indeed, one or two of the post-1973 upturns has been weaker than some downturns during the Golden Age. Since the stock market collapse of four years ago, the situation has worsened. Growth rates since 2000 have been half their previous average. Even this weak performance required historically unprecedented fiscal and monetary stimulus: 13 rate cuts, three tax cuts, massive government deficits and record growth in money and credit.
Official figures mask the economy's most serious problems. Growth figures are annualized by U.S. statisticians. Thus, the much-touted 7.1% growth rate in the third quarter of 2003 was the one that would emerge after twelve months if the current trend were to continue. The same growth rate would have been reported in the eurozone as 1.8%. This is an uncommonly weak performance.
Investment data are equally misleading. Since the mid-1990s the Bureau of Economic Analysis (BEA) has adjusted upward actual business dollar outlays on computers and related equipment to take into account quality improvements (faster processors, bigger hard drives, more memory). BEA calls this "hedonic adjustment." Accordingly, the BEA estimates that business high-tech investment quadrupled between 1996 and 2002, from $70.9 to $283.7. But in actual dollars spent, the increase was only from $70.9 billion to $74.2 billion, very low by historic standards. The high-tech boom was both greatly exaggerated and misleading. After all, neither profits nor wages are taken in "hedonically adjusted" dollars.
The difference between real and hedonic outlays explains what would otherwise be a paradoxical feature of the years 2000-2003: government was reporting big increases in high-tech investment, while manufacturers were bemoaning declining sales.
Hedonic pricing has accounted for a steadily rising percentage of all reported capital investment. But if we look at actual dollars spent, we find that since 1998 the growth rate of business fixed investment has actually been declining. Real capital investment has in fact not been this weak since the Great Depression.
The fudging of investment figures also obscures the sorry state of the jobs market. The Commerce Department's figures on nonresidential investment for the third and fourth quarters of 2003 reported increases of, respectively, 12.8 and 9.6%. A closer look reveals that the "adjusted" hi-tech sector is the only bright spot, with production and capacity rising, respectively, 24.6% and 11.1% over the past year. But hi-tech is not where significant jobs increases are found. Employment in hi-tech has declined steadily through the so-called "recovery" since its 2001 peak.
In non-hi-tech manufacturing, where investment figures are not adjusted, production from January 2003 to January 2004 rose only 0.9%, while capacity actually declined -0.2%. This represents a record nineteen-straight-month decline in mainline manufacturing capacity. Since it is mainline manufacturing which employs almost 95% of all manufacturing workers, it comes as no surprise that for the first time since the Great Depression the economy has gone more than three years without creating any jobs.
The jobs crisis is even worse than it appears. Here again statistical sleight-of-hand, this time by the Bureau of Labor Statistics (BLS), obscures economic reality. Based on data gathered employing the "net birth/death adjustment," BLS announced in April, 2004, that the long-awaited jobs recovery had finally arrived. Nonfarm payrolls had allegedly surged by a whopping 308,000 in March, 2004. The birth/death model uses business deaths to "impute" employment from business births. Thus, as more businesses fail, more new jobs are imputed to have materialized through business births. This improbable statistical artefact accounts for about half of the reported 308,000 March, 2004 payroll increase.
The birth/death model is based on statistics covering 1998-2002. This was a period of explosive telecom and dot.com startups, quite unlike today's flat economic landscape. Thus, two thirds of the 947,000 new jobs BLS "imputed" for March-May, 2004, were never actually counted by BLS and never reported by any firm.
BlS's household and establishment surveys tell a more sobering story. March employment by private industry actually fell by 175,000, and the number of self-employed workers declined by 288,000. Without the simultaneous increase of 439,000 government jobs, the March job announcement would have been a calamity. And both average weekly hours and total hours worked declined markedly, even as (according to the dubious birth/death findings) the work force increased. This is the first time in U.S. history that net job growth has been negative 26 months into a recovery.
The wage and salary picture has also set grim records. During the current recovery, wage and salary growth has actually been negative, at -0.6%, in contrast to the average increase of 7.2% characteristic of this point into each of the other eight post-War recoveries. In fact, median family income in the post-War period exhibits an ominous trend. From 1947 to 1967, real median family income rose by 75%. But since 1967, it has grown by only 30%.
Labor's losses have been capital's gain: since the peak of the last recovery, in the first quarter of 2001, corporate profits have risen 62.2%, compared to the average of 13.9% at the same point in the last eight recoveries. Never in American history has any recorded recovery had such a lopsided balance in the distribution of income gains between labor and capital.
Given the dismal investment, wage/salary and employment pictures, how has it been possible for consumption to have risen to 71% of GDP in the early nineties, from its prior post-War average of 66%? The answer is a growth rate of consumer debt never seen before in America. For the first time ever, in March 2001, overall debt levels (mortgage debt plus consumer debt, mainly credit card debt and car loans) rose above annual disposable income. And from 2001 to 2004 consumer debt rose from 101% to 116% of disposable income. In the first half of 2004, consumer borrowing has been at its highest ever. It has declined slightly in the meantime. So has consumer spending. Should Americans decide to significantly increase their saving and service debts, while lowering correspondingly their consumption expenditures, the global economy could experience a major disruption.
Up until very recently, consumers had stepped up their borrowing to compensate for slowing income growth. Thus, such growth as the U.S. has experienced in recent years has been almost entirely consumption- and debt-driven. More fundamentally, it has been bubble-driven, fueled principally by bubbles in home values and credit.
Since the collapse of stock market/hi-tech bubbles in 2001, the illusory "wealth effect" has been sustained, and consumer spending thereby encouraged, by another bubble, the enormous inflation of house prices. The biggest increase in household debt came from home mortgage debt, especially home mortgage refinancing. With mortgage rates low and home prices rising, households' home equity ballooned. Bloated home equity then provided rising collateral to underwrite still more borrowing.
What makes this especially problematic is that over the last ten years, the average family has suffered under large increases in health premiums, housing costs, tuition fees and child care costs. As a result, households' and individuals' margin of protection against insolvency has dramatically declined. Filings for personal bankruptcy are approaching a record high.
There are indications that these weaknesses and imbalances in the economy are reaching a critical mass. The mortgage refi boom has fizzled, and consumer spending is beginning to decline. Two years ago the Fed's quarterly Beige Book reported a disturbing shift in the composition of credit spending: more and more families are using their credit cards to finance spending on essentials, such as food and energy.
It is no exaggeration to say that both the U.S. economy and the global economy are hugely dependent on the American consumer's increasing willingness to spend more than (s)he makes. (Imported goods have been a rising proportion of all goods purchased here.) Thus, a decline in U.S. consumer spending portends further declines in investment, jobs and income. From January to July of 2004, consumer spending rose at an annual rate of 2.8%, down from 3.3% in 2003 and 3.1 % in 2002. For perspective, during the boom years 1999-2000, growth rates were 5.1% and 4.7%.
Spending on consumer durables is the most significant indicator of healthy growth, and the drastically lower spending in this area is cause for alarm: spending for consumer durables was down to $23.5 billion in the first seven months of this year, in contrast to $71 billion on 2003 and $58 billion in 2002.
Should consumer spending continue to decline, the economy faces the genuine likelihood of a severe recession. Of course not a single American politician addresses this issue.
What is required is a shift from bubble-, debt-, and consumption-driven growth to investment- and income-driven growth. This in turn necessitates a decline in Americas principal export, jobs. Domestic job growth, a higher minimum wage, tax cuts aimed predominantly at low- and middle-income families, a sharp reduction in defense spending and a redirection of these funds to long-neglected and pressing social needs such as health care reform, the provision of universal pre-school, and across-the-board repair and upgrading of America's deteriorated infrastructure of roads, highways,tunnels and bridges, all these should be at the forefront of a Democratic administration's agenda. The restoration of infrastructure is especially labor intensive, and would generate an enormous number of productive jobs. And as a national project spearheaded by government initiative, government would emerge as a major employer.
All this si entirely incompatible with the overwhelming neoliberal bent of even the most "liberal" political leaders. It was after all Bill Clinton who urinated on the grave of Franklin Roosevelt when he proclaimed "the end of welfare as we know it".
As unfashionable as it is to suggest such a thing at a conference of economists, the only hope for the world's majority seems to be the revival of the kinds of mass movements witnessed here in May of 1968, and throughout the world during the 1960s. And time may be short.
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Alan Nasser is Professor emeritus of Political Economy and Philosophy at The Evergreen State College. His book, The “New Normal”: Persistent Austerity, Declining Democracy and the Globalization of Resistance will be published by Pluto Press in 2013. If you would like to be notified when the book is released, please send a request to nassera@evergreen.edu
Thomas Palley » Blog Archive » Explaining Stagnation Why it Matters
John Bellamy Foster and Fred Magdoff clearly identify stagnation in their 2009 book The Great Financial Crisis: Causes and Consequences (HERE). They conclude with a section titled “Back to the real economy: the stagnation problem” and they write:
“It was the reality of economic stagnation beginning in the 1970s, as heterodox economists Ricardo Belliofiore and Joseph Halevi have recently emphasized, that led to the emergence of “the new financialized capitalist regime,” a kind of “paradoxical financial Keynesianiasm” whereby demand in the economy was stimulated primarily “thanks to asset-bubbles” (Foster and Magdoff, p.129).”
My own 2009 New America Foundation report, “America’s Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession”, concluded (HERE):
“The bottom line is macroeconomic failure rooted in America’s flawed economic paradigm is the ultimate cause of the financial crisis and Great Recession…. Now, there is a grave danger that policymakers only focus on financial market reform and ignore reform of America’s flawed economic paradigm. In that event, though the economy may stabilize, it will likely be unable to escape the pull of economic stagnation. That is because stagnation is the logical next stage of the existing paradigm.”
That report became a core chapter in my 2012 book, From Financial Crisis to Stagnation, the blurb for which reads (HERE):
“The U.S. economy today is confronted with the prospect of extended stagnation. This book explores why…. Financial deregulation and the house price bubble kept the economy going by making ever more credit available. As the economy cannibalized itself by undercutting income distribution and accumulating debt, it needed larger speculative bubbles to grow. That process ended when the housing bubble burst. The earlier post–World War II economic model based on rising middle-class incomes has been dismantled, while the new neoliberal model has imploded. Absent a change of policy paradigm, the logical next step is stagnation. The political challenge we face now is how to achieve paradigm change.”
The big analytical difference between Foster and Magdoff and myself is that they see stagnation as inherent to capitalism whereas I see it as the product of neoliberal economic policy. Foster and Magdoff partake of the Baran-Sweezy tradition that recommends deeper socialist transformation. I use a structural Keynesian framework that recommends reconstructing the income and demand generation mechanism via policies that include rebuilding worker bargaining power, reforming globalization, and reining in corporations and financial markets.
Larry Summers’ story of serial bubbles delaying stagnation has substantial similarities with both accounts but he avoids blaming either capitalism or neoliberalism. That is hardly surprising as Summers has been a chief architect of the neoliberal system and remains committed to it, though he now wants to soften its impact. Instead, he appeals to the black box of “secular stagnation” as ultimate cause and suggests fiscal policies that would ameliorate the demand shortage problem. However, those policies would not remedy the root cause of stagnation as they leave the economic architecture unchanged.
Though Summers and Krugman are relative late-comers to the stagnation hypothesis, they have still done a great public service by drawing attention to it. Now that stagnation has been identified, the real debate can begin.
The questions are what caused stagnation and what must be done to restore shared prosperity? There is no guarantee we will answer those questions correctly (my prior is mainstream economists will continue their track record of getting it wrong). But it is absolutely certain we will not get the right answer if we do not ask the right question. So thank you Larry Summers and Paul Krugman for putting stagnation on the table. Let the debate begin.
Tha means the major defeat for “stabilization policies” that were supposed to smooth the capitalist industrial cycle and abolish panics. And the problem preceeds the 2008 panic itself.
The highly misleading unemployment rate calculated by the U.S. Department of Labor notwithstanding, there has been a massive growth in long-term unemployment in the U.S. in the wake of the crisis, as shown by the declining percentage of the U.S. population actually working.
The current situation also refute the key tenet of neoclassical economy (which is pseudo-religious doctrine, so that only increase fanatic devotion of its well-paid adherents). Neoclassical economists insisted that since a “free market economy” naturally tends toward an equilibrium with full employment of both workers and machines, the economy should should quickly return to “full employment” after a recession. This is not the case. See also Secular Stagnation Lawrence H. Summers
There were several uncessful attempts to explaint his situation from neoclassical positions. In Secular Stagnation, Coalmines, Bubbles, and Larry Summers - NYTimes.com Paul Krugman emphasized the liquidity trap – zero lower bound to interest rates which supposedly prevents spending from reaching a level sufficient for full employment.
Larry’s formulation of our current economic situation is the same as my own. Although he doesn’t use the words “liquidity trap”, he works from the understanding that we are an economy in which monetary policy is de facto constrained by the zero lower bound (even if you think central banks could be doing more), and that this corresponds to a situation in which the “natural” rate of interest – the rate at which desired savings and desired investment would be equal at full employment – is negative.
And as he also notes, in this situation the normal rules of economic policy don’t apply. As I like to put it, virtue becomes vice and prudence becomes folly. Saving hurts the economy – it even hurts investment, thanks to the paradox of thrift. Fixating on debt and deficits deepens the depression. And so on down the line.
This is the kind of environment in which Keynes’s hypothetical policy of burying currency in coalmines and letting the private sector dig it up – or my version, which involves faking a threat from nonexistent space aliens – becomes a good thing; spending is good, and while productive spending is best, unproductive spending is still better than nothing.
Larry also indirectly states an important corollary: this isn’t just true of public spending. Private spending that is wholly or partially wasteful is also a good thing, unless it somehow stores up trouble for the future. That last bit is an important qualification. But suppose that U.S. corporations, which are currently sitting on a huge hoard of cash, were somehow to become convinced that it would be a great idea to fit out all their employees as cyborgs, with Google Glass and smart wristwatches everywhere. And suppose that three years later they realized that there wasn’t really much payoff to all that spending. Nonetheless, the resulting investment boom would have given us several years of much higher employment, with no real waste, since the resources employed would otherwise have been idle.
OK, this is still mostly standard, although a lot of people hate, just hate, this kind of logic – they want economics to be a morality play, and they don’t care how many people have to suffer in the process.
But now comes the radical part of Larry’s presentation: his suggestion that this may not be a temporary state of affairs.
2. An economy that needs bubbles?
We now know that the economic expansion of 2003-2007 was driven by a bubble. You can say the same about the latter part of the 90s expansion; and you can in fact say the same about the later years of the Reagan expansion, which was driven at that point by runaway thrift institutions and a large bubble in commercial real estate.
So you might be tempted to say that monetary policy has consistently been too loose. After all, haven’t low interest rates been encouraging repeated bubbles?
But as Larry emphasizes, there’s a big problem with the claim that monetary policy has been too loose: where’s the inflation? Where has the overheated economy been visible?
So how can you reconcile repeated bubbles with an economy showing no sign of inflationary pressures? Summers’s answer is that we may be an economy that needs bubbles just to achieve something near full employment – that in the absence of bubbles the economy has a negative natural rate of interest. And this hasn’t just been true since the 2008 financial crisis; it has arguably been true, although perhaps with increasing severity, since the 1980s.
One way to quantify this is, I think, to look at household debt. Here’s the ratio of household debt to GDP since the 50s:
There was a sharp increase in the ratio after World War II, but from a low base, as families moved to the suburbs and all that. Then there were about 25 years of rough stability, from 1960 to around 1985. After that, however, household debt rose rapidly and inexorably, until the crisis struck.
So with all that household borrowing, you might have expected the period 1985-2007 to be one of strong inflationary pressure, high interest rates, or both. In fact, you see neither – this was the era of the Great Moderation, a time of low inflation and generally low interest rates. Without all that increase in household debt, interest rates would presumably have to have been considerably lower – maybe negative. In other words, you can argue that our economy has been trying to get into the liquidity trap for a number of years, and that it only avoided the trap for a while thanks to successive bubbles.
And if that’s how you see things, when looking forward you have to regard the liquidity trap not as an exceptional state of affairs but as the new normal.
3. Secular stagnation?
How did this happen? Larry explicitly invokes the notion of secular stagnation, associated in particular with Alvin Hansen (pdf). He doesn’t say why this might be happening to us now, but it’s not hard to think of possible reasons.
Back in the day, Hansen stressed demographic factors: he thought slowing population growth would mean low investment demand. Then came the baby boom. But this time around the slowdown is here, and looks real.
Think of it this way: during the period 1960-85, when the U.S. economy seemed able to achieve full employment without bubbles, our labor force grew an average 2.1 percent annually. In part this reflected the maturing of the baby boomers, in part the move of women into the labor force.
This growth made sustaining investment fairly easy: the business of providing Americans with new houses, new offices, and so on easily absorbed a fairly high fraction of GDP.
Now look forward. The Census projects that the population aged 18 to 64 will grow at an annual rate of only 0.2 percent between 2015 and 2025. Unless labor force participation not only stops declining but starts rising rapidly again, this means a slower-growth economy, and thanks to the accelerator effect, lower investment demand.
By the way, in a Samuelson consumption-loan model, the natural rate of interest equals the rate of population growth. Reality is a lot more complicated than that, but I don’t think it’s foolish to guess that the decline in population growth has reduced the natural real rate of interest by something like an equal amount (and to note that Japan’s shrinking working-age population is probably a major factor in its secular stagnation.)
There may be other factors – a Bob Gordonesque decline in innovation, etc.. The point is that it’s not hard to think of reasons why the liquidity trap could be a lot more persistent than anyone currently wants to admit.
4. Destructive virtue
If you take a secular stagnation view seriously, it has some radical implications – and Larry goes there.
Currently, even policymakers who are willing to concede that the liquidity trap makes nonsense of conventional notions of policy prudence are busy preparing for the time when normality returns. This means that they are preoccupied with the idea that they must act now to head off future crises. Yet this crisis isn’t over – and as Larry says, “Most of what would be done under the aegis of preventing a future crisis would be counterproductive.”
He goes on to say that the officially respectable policy agenda involves “doing less with monetary policy than was done before and doing less with fiscal policy than was done before,” even though the economy remains deeply depressed. And he says, a bit fuzzily but bravely all the same, that even improved financial regulation is not necessarily a good thing – that it may discourage irresponsible lending and borrowing at a time when more spending of any kind is good for the economy.
Amazing stuff – and if we really are looking at secular stagnation, he’s right.
Of course, the underlying problem in all of this is simply that real interest rates are too high. But, you say, they’re negative – zero nominal rates minus at least some expected inflation. To which the answer is, so? If the market wants a strongly negative real interest rate, we’ll have persistent problems until we find a way to deliver such a rate.
One way to get there would be to reconstruct our whole monetary system – say, eliminate paper money and pay negative interest rates on deposits. Another way would be to take advantage of the next boom – whether it’s a bubble or driven by expansionary fiscal policy – to push inflation substantially higher, and keep it there. Or maybe, possibly, we could go the Krugman 1998/Abe 2013 route of pushing up inflation through the sheer power of self-fulfilling expectations.
Any such suggestions are, of course, met with outrage. How dare anyone suggest that virtuous individuals, people who are prudent and save for the future, face expropriation? How can you suggest steadily eroding their savings either through inflation or through negative interest rates? It’s tyranny!
But in a liquidity trap saving may be a personal virtue, but it’s a social vice. And in an economy facing secular stagnation, this isn’t just a temporary state of affairs, it’s the norm. Assuring people that they can get a positive rate of return on safe assets means promising them something the market doesn’t want to deliver – it’s like farm price supports, except for rentiers.
Oh, and one last point. If we’re going to have persistently negative real interest rates along with at least somewhat positive overall economic growth, the panic over public debt looks even more foolish than people like me have been saying: servicing the debt in the sense of stabilizing the ratio of debt to GDP has no cost, in fact negative cost.
I could go on, but by now I hope you’ve gotten the point. What Larry did at the IMF wasn’t just give an interesting speech. He laid down what amounts to a very radical manifesto. And I very much fear that he may be right.
David Graeber
A secret question hovers over us, a sense of disappointment, a broken promise we were given as children about what our adult world was supposed to be like. I am referring not to the standard false promises that children are always given (about how the world is fair, or how those who work hard shall be rewarded), but to a particular generational promise—given to those who were children in the fifties, sixties, seventies, or eighties—one that was never quite articulated as a promise but rather as a set of assumptions about what our adult world would be like. And since it was never quite promised, now that it has failed to come true, we’re left confused: indignant, but at the same time, embarrassed at our own indignation, ashamed we were ever so silly to believe our elders to begin with.
Where, in short, are the flying cars? Where are the force fields, tractor beams, teleportation pods, antigravity sleds, tricorders, immortality drugs, colonies on Mars, and all the other technological wonders any child growing up in the mid-to-late twentieth century assumed would exist by now? Even those inventions that seemed ready to emerge—like cloning or cryogenics—ended up betraying their lofty promises. What happened to them?
We are well informed of the wonders of computers, as if this is some sort of unanticipated compensation, but, in fact, we haven’t moved even computing to the point of progress that people in the fifties expected we’d have reached by now. We don’t have computers we can have an interesting conversation with, or robots that can walk our dogs or take our clothes to the Laundromat.
As someone who was eight years old at the time of the Apollo moon landing, I remember calculating that I would be thirty-nine in the magic year 2000 and wondering what the world would be like. Did I expect I would be living in such a world of wonders? Of course. Everyone did. Do I feel cheated now? It seemed unlikely that I’d live to see all the things I was reading about in science fiction, but it never occurred to me that I wouldn’t see any of them.
At the turn of the millennium, I was expecting an outpouring of reflections on why we had gotten the future of technology so wrong. Instead, just about all the authoritative voices—both Left and Right—began their reflections from the assumption that we do live in an unprecedented new technological utopia of one sort or another.
The common way of dealing with the uneasy sense that this might not be so is to brush it aside, to insist all the progress that could have happened has happened and to treat anything more as silly. “Oh, you mean all that Jetsons stuff?” I’m asked—as if to say, but that was just for children! Surely, as grown-ups, we understand The Jetsons offered as accurate a view of the future as The Flintstones offered of the Stone Age.
Surely, as grown-ups, we understand The Jetsons offered as accurate a view of the future as The Flintstones did of the Stone Age.
Even in the seventies and eighties, in fact, sober sources such as National Geographic and the Smithsonian were informing children of imminent space stations and expeditions to Mars. Creators of science fiction movies used to come up with concrete dates, often no more than a generation in the future, in which to place their futuristic fantasies. In 1968, Stanley Kubrick felt that a moviegoing audience would find it perfectly natural to assume that only thirty-three years later, in 2001, we would have commercial moon flights, city-like space stations, and computers with human personalities maintaining astronauts in suspended animation while traveling to Jupiter. Video telephony is just about the only new technology from that particular movie that has appeared—and it was technically possible when the movie was showing. 2001 can be seen as a curio, but what about Star Trek? The Star Trek mythos was set in the sixties, too, but the show kept getting revived, leaving audiences for Star Trek Voyager in, say, 2005, to try to figure out what to make of the fact that according to the logic of the program, the world was supposed to be recovering from fighting off the rule of genetically engineered supermen in the Eugenics Wars of the nineties.
By 1989, when the creators of Back to the Future II were dutifully placing flying cars and anti-gravity hoverboards in the hands of ordinary teenagers in the year 2015, it wasn’t clear if this was meant as a prediction or a joke.
The usual move in science fiction is to remain vague about the dates, so as to render “the future” a zone of pure fantasy, no different than Middle Earth or Narnia, or like Star Wars, “a long time ago in a galaxy far, far away.” As a result, our science fiction future is, most often, not a future at all, but more like an alternative dimension, a dream-time, a technological Elsewhere, existing in days to come in the same sense that elves and dragon-slayers existed in the past—another screen for the displacement of moral dramas and mythic fantasies into the dead ends of consumer pleasure.
Might the cultural sensibility that came to be referred to as postmodernism best be seen as a prolonged meditation on all the technological changes that never happened? The question struck me as I watched one of the recent Star Wars movies. The movie was terrible, but I couldn’t help but feel impressed by the quality of the special effects. Recalling the clumsy special effects typical of fifties sci-fi films, I kept thinking how impressed a fifties audience would have been if they’d known what we could do by now—only to realize, “Actually, no. They wouldn’t be impressed at all, would they? They thought we’d be doing this kind of thing by now. Not just figuring out more sophisticated ways to simulate it.”
That last word—simulate—is key. The technologies that have advanced since the seventies are mainly either medical technologies or information technologies—largely, technologies of simulation. They are technologies of what Jean Baudrillard and Umberto Eco called the “hyper-real,” the ability to make imitations that are more realistic than originals. The postmodern sensibility, the feeling that we had somehow broken into an unprecedented new historical period in which we understood that there is nothing new; that grand historical narratives of progress and liberation were meaningless; that everything now was simulation, ironic repetition, fragmentation, and pastiche—all this makes sense in a technological environment in which the only breakthroughs were those that made it easier to create, transfer, and rearrange virtual projections of things that either already existed, or, we came to realize, never would. Surely, if we were vacationing in geodesic domes on Mars or toting about pocket-size nuclear fusion plants or telekinetic mind-reading devices no one would ever have been talking like this. The postmodern moment was a desperate way to take what could otherwise only be felt as a bitter disappointment and to dress it up as something epochal, exciting, and new.
In the earliest formulations, which largely came out of the Marxist tradition, a lot of this technological background was acknowledged. Fredric Jameson’s “Postmodernism, or the Cultural Logic of Late Capitalism” proposed the term “postmodernism” to refer to the cultural logic appropriate to a new, technological phase of capitalism, one that had been heralded by Marxist economist Ernest Mandel as early as 1972. Mandel had argued that humanity stood at the verge of a “third technological revolution,” as profound as the Agricultural or Industrial Revolution, in which computers, robots, new energy sources, and new information technologies would replace industrial labor—the “end of work” as it soon came to be called—reducing us all to designers and computer technicians coming up with crazy visions that cybernetic factories would produce.
End of work arguments were popular in the late seventies and early eighties as social thinkers pondered what would happen to the traditional working-class-led popular struggle once the working class no longer existed. (The answer: it would turn into identity politics.) Jameson thought of himself as exploring the forms of consciousness and historical sensibilities likely to emerge from this new age.
What happened, instead, is that the spread of information technologies and new ways of organizing transport—the containerization of shipping, for example—allowed those same industrial jobs to be outsourced to East Asia, Latin America, and other countries where the availability of cheap labor allowed manufacturers to employ much less technologically sophisticated production-line techniques than they would have been obliged to employ at home.
From the perspective of those living in Europe, North America, and Japan, the results did seem to be much as predicted. Smokestack industries did disappear; jobs came to be divided between a lower stratum of service workers and an upper stratum sitting in antiseptic bubbles playing with computers. But below it all lay an uneasy awareness that the postwork civilization was a giant fraud. Our carefully engineered high-tech sneakers were not being produced by intelligent cyborgs or self-replicating molecular nanotechnology; they were being made on the equivalent of old-fashioned Singer sewing machines, by the daughters of Mexican and Indonesian farmers who, as the result of WTO or NAFTA–sponsored trade deals, had been ousted from their ancestral lands. It was a guilty awareness that lay beneath the postmodern sensibility and its celebration of the endless play of images and surfaces.
Why did the projected explosion of technological growth everyone was expecting—the moon bases, the robot factories—fail to happen? There are two possibilities. Either our expectations about the pace of technological change were unrealistic (in which case, we need to know why so many intelligent people believed they were not) or our expectations were not unrealistic (in which case, we need to know what happened to derail so many credible ideas and prospects).
Most social analysts choose the first explanation and trace the problem to the Cold War space race. Why, these analysts wonder, did both the United States and the Soviet Union become so obsessed with the idea of manned space travel? It was never an efficient way to engage in scientific research. And it encouraged unrealistic ideas of what the human future would be like.
Could the answer be that both the United States and the Soviet Union had been, in the century before, societies of pioneers, one expanding across the Western frontier, the other across Siberia? Didn’t they share a commitment to the myth of a limitless, expansive future, of human colonization of vast empty spaces, that helped convince the leaders of both superpowers they had entered into a “space age” in which they were battling over control of the future itself? All sorts of myths were at play here, no doubt, but that proves nothing about the feasibility of the project.
Some of those science fiction fantasies (at this point we can’t know which ones) could have been brought into being. For earlier generations, many science fiction fantasies had been brought into being. Those who grew up at the turn of the century reading Jules Verne or H.G. Wells imagined the world of, say, 1960 with flying machines, rocket ships, submarines, radio, and television—and that was pretty much what they got. If it wasn’t unrealistic in 1900 to dream of men traveling to the moon, then why was it unrealistic in the sixties to dream of jet-packs and robot laundry-maids?
In fact, even as those dreams were being outlined, the material base for their achievement was beginning to be whittled away. There is reason to believe that even by the fifties and sixties, the pace of technological innovation was slowing down from the heady pace of the first half of the century. There was a last spate in the fifties when microwave ovens (1954), the Pill (1957), and lasers (1958) all appeared in rapid succession. But since then, technological advances have taken the form of clever new ways of combining existing technologies (as in the space race) and new ways of putting existing technologies to consumer use (the most famous example is television, invented in 1926, but mass produced only after the war.) Yet, in part because the space race gave everyone the impression that remarkable advances were happening, the popular impression during the sixties was that the pace of technological change was speeding up in terrifying, uncontrollable ways.
Alvin Toffler’s 1970 best seller Future Shock argued that almost all the social problems of the sixties could be traced back to the increasing pace of technological change. The endless outpouring of scientific breakthroughs transformed the grounds of daily existence, and left Americans without any clear idea of what normal life was. Just consider the family, where not just the Pill, but also the prospect of in vitro fertilization, test tube babies, and sperm and egg donation were about to make the idea of motherhood obsolete.
Humans were not psychologically prepared for the pace of change, Toffler wrote. He coined a term for the phenomenon: “accelerative thrust.” It had begun with the Industrial Revolution, but by roughly 1850, the effect had become unmistakable. Not only was everything around us changing, but most of it—human knowledge, the size of the population, industrial growth, energy use—was changing exponentially. The only solution, Toffler argued, was to begin some kind of control over the process, to create institutions that would assess emerging technologies and their likely effects, to ban technologies likely to be too socially disruptive, and to guide development in the direction of social harmony.
While many of the historical trends Toffler describes are accurate, the book appeared when most of these exponential trends halted. It was right around 1970 when the increase in the number of scientific papers published in the world—a figure that had doubled every fifteen years since, roughly, 1685—began leveling off. The same was true of books and patents.
Toffler’s use of acceleration was particularly unfortunate. For most of human history, the top speed at which human beings could travel had been around 25 miles per hour. By 1900 it had increased to 100 miles per hour, and for the next seventy years it did seem to be increasing exponentially. By the time Toffler was writing, in 1970, the record for the fastest speed at which any human had traveled stood at roughly 25,000 mph, achieved by the crew of Apollo 10 in 1969, just one year before. At such an exponential rate, it must have seemed reasonable to assume that within a matter of decades, humanity would be exploring other solar systems.
Since 1970, no further increase has occurred. The record for the fastest a human has ever traveled remains with the crew of Apollo 10. True, the commercial airliner Concorde, which first flew in 1969, reached a maximum speed of 1,400 mph. And the Soviet Tupolev Tu-144, which flew first, reached an even faster speed of 1,553 mph. But those speeds not only have failed to increase; they have decreased since the Tupolev Tu-144 was cancelled and the Concorde was abandoned.
None of this stopped Toffler’s own career. He kept retooling his analysis to come up with new spectacular pronouncements. In 1980, he produced The Third Wave, its argument lifted from Ernest Mandel’s “third technological revolution”—except that while Mandel thought these changes would spell the end of capitalism, Toffler assumed capitalism was eternal. By 1990, Toffler was the personal intellectual guru to Republican congressman Newt Gingrich, who claimed that his 1994 “Contract With America” was inspired, in part, by the understanding that the United States needed to move from an antiquated, materialist, industrial mind-set to a new, free-market, information age, Third Wave civilization.
There are all sorts of ironies in this connection. One of Toffler’s greatest achievements was inspiring the government to create an Office of Technology Assessment (OTA). One of Gingrich’s first acts on winning control of the House of Representatives in 1995 was defunding the OTA as an example of useless government extravagance. Still, there’s no contradiction here. By this time, Toffler had long since given up on influencing policy by appealing to the general public; he was making a living largely by giving seminars to CEOs and corporate think tanks. His insights had been privatized.
Gingrich liked to call himself a “conservative futurologist.” This, too, might seem oxymoronic; but, in fact, Toffler’s own conception of futurology was never progressive. Progress was always presented as a problem that needed to be solved.
Toffler might best be seen as a lightweight version of the nineteenth-century social theorist Auguste Comte, who believed that he was standing on the brink of a new age—in his case, the Industrial Age—driven by the inexorable progress of technology, and that the social cataclysms of his times were caused by the social system not adjusting. The older feudal order had developed Catholic theology, a way of thinking about man’s place in the cosmos perfectly suited to the social system of the time, as well as an institutional structure, the Church, that conveyed and enforced such ideas in a way that could give everyone a sense of meaning and belonging. The Industrial Age had developed its own system of ideas—science—but scientists had not succeeded in creating anything like the Catholic Church. Comte concluded that we needed to develop a new science, which he dubbed “sociology,” and said that sociologists should play the role of priests in a new Religion of Society that would inspire everyone with a love of order, community, work discipline, and family values. Toffler was less ambitious; his futurologists were not supposed to play the role of priests.
Gingrich had a second guru, a libertarian theologian named George Gilder, and Gilder, like Toffler, was obsessed with technology and social change. In an odd way, Gilder was more optimistic. Embracing a radical version of Mandel’s Third Wave argument, he insisted that what we were seeing with the rise of computers was an “overthrow of matter.” The old, materialist Industrial Society, where value came from physical labor, was giving way to an Information Age where value emerges directly from the minds of entrepreneurs, just as the world had originally appeared ex nihilo from the mind of God, just as money, in a proper supply-side economy, emerged ex nihilo from the Federal Reserve and into the hands of value-creating capitalists. Supply-side economic policies, Gilder concluded, would ensure that investment would continue to steer away from old government boondoggles like the space program and toward more productive information and medical technologies.
But if there was a conscious, or semi-conscious, move away from investment in research that might lead to better rockets and robots, and toward research that would lead to such things as laser printers and CAT scans, it had begun well before Toffler’s Future Shock (1970) and Gilder’s Wealth and Poverty (1981). What their success shows is that the issues they raised—that existing patterns of technological development would lead to social upheaval, and that we needed to guide technological development in directions that did not challenge existing structures of authority—echoed in the corridors of power. Statesmen and captains of industry had been thinking about such questions for some time.
Industrial capitalism has fostered an extremely rapid rate of scientific advance and technological innovation—one with no parallel in previous human history. Even capitalism’s greatest detractors, Karl Marx and Friedrich Engels, celebrated its unleashing of the “productive forces.” Marx and Engels also believed that capitalism’s continual need to revolutionize the means of industrial production would be its undoing. Marx argued that, for certain technical reasons, value—and therefore profits—can be extracted only from human labor. Competition forces factory owners to mechanize production, to reduce labor costs, but while this is to the short-term advantage of the firm, mechanization’s effect is to drive down the general rate of profit.
For 150 years, economists have debated whether all this is true. But if it is true, then the decision by industrialists not to pour research funds into the invention of the robot factories that everyone was anticipating in the sixties, and instead to relocate their factories to labor-intensive, low-tech facilities in China or the Global South makes a great deal of sense.
As I’ve noted, there’s reason to believe the pace of technological innovation in productive processes—the factories themselves—began to slow in the fifties and sixties, but the side effects of America’s rivalry with the Soviet Union made innovation appear to accelerate. There was the awesome space race, alongside frenetic efforts by U.S. industrial planners to apply existing technologies to consumer purposes, to create an optimistic sense of burgeoning prosperity and guaranteed progress that would undercut the appeal of working-class politics.
These moves were reactions to initiatives from the Soviet Union. But this part of the history is difficult for Americans to remember, because at the end of the Cold War, the popular image of the Soviet Union switched from terrifyingly bold rival to pathetic basket case—the exemplar of a society that could not work. Back in the fifties, in fact, many United States planners suspected the Soviet system worked better. Certainly, they recalled the fact that in the thirties, while the United States had been mired in depression, the Soviet Union had maintained almost unprecedented economic growth rates of 10 percent to 12 percent a year—an achievement quickly followed by the production of tank armies that defeated Nazi Germany, then by the launching of Sputnik in 1957, then by the first manned spacecraft, the Vostok, in 1961.
It’s often said the Apollo moon landing was the greatest historical achievement of Soviet communism. Surely, the United States would never have contemplated such a feat had it not been for the cosmic ambitions of the Soviet Politburo. We are used to thinking of the Politburo as a group of unimaginative gray bureaucrats, but they were bureaucrats who dared to dream astounding dreams. The dream of world revolution was only the first. It’s also true that most of them—changing the course of mighty rivers, this sort of thing—either turned out to be ecologically and socially disastrous, or, like Joseph Stalin’s one-hundred-story Palace of the Soviets or a twenty-story statue of Vladimir Lenin, never got off the ground.
After the initial successes of the Soviet space program, few of these schemes were realized, but the leadership never ceased coming up with new ones. Even in the eighties, when the United States was attempting its own last, grandiose scheme, Star Wars, the Soviets were planning to transform the world through creative uses of technology. Few outside of Russia remember most of these projects, but great resources were devoted to them. It’s also worth noting that unlike the Star Wars project, which was designed to sink the Soviet Union, most were not military in nature: as, for instance, the attempt to solve the world hunger problem by harvesting lakes and oceans with an edible bacteria called spirulina, or to solve the world energy problem by launching hundreds of gigantic solar-power platforms into orbit and beaming the electricity back to earth.
The American victory in the space race meant that, after 1968, U.S. planners no longer took the competition seriously. As a result, the mythology of the final frontier was maintained, even as the direction of research and development shifted away from anything that might lead to the creation of Mars bases and robot factories.
The standard line is that all this was a result of the triumph of the market. The Apollo program was a Big Government project, Soviet-inspired in the sense that it required a national effort coordinated by government bureaucracies. As soon as the Soviet threat drew safely out of the picture, though, capitalism was free to revert to lines of technological development more in accord with its normal, decentralized, free-market imperatives—such as privately funded research into marketable products like personal computers. This is the line that men like Toffler and Gilder took in the late seventies and early eighties.
In fact, the United States never did abandon gigantic, government-controlled schemes of technological development. Mainly, they just shifted to military research—and not just to Soviet-scale schemes like Star Wars, but to weapons projects, research in communications and surveillance technologies, and similar security-related concerns. To some degree this had always been true: the billions poured into missile research had always dwarfed the sums allocated to the space program. Yet by the seventies, even basic research came to be conducted following military priorities. One reason we don’t have robot factories is because roughly 95 percent of robotics research funding has been channeled through the Pentagon, which is more interested in developing unmanned drones than in automating paper mills.
A case could be made that even the shift to research and development on information technologies and medicine was not so much a reorientation toward market-driven consumer imperatives, but part of an all-out effort to follow the technological humbling of the Soviet Union with total victory in the global class war—seen simultaneously as the imposition of absolute U.S. military dominance overseas, and, at home, the utter rout of social movements.
For the technologies that did emerge proved most conducive to surveillance, work discipline, and social control. Computers have opened up certain spaces of freedom, as we’re constantly reminded, but instead of leading to the workless utopia Abbie Hoffman imagined, they have been employed in such a way as to produce the opposite effect. They have enabled a financialization of capital that has driven workers desperately into debt, and, at the same time, provided the means by which employers have created “flexible” work regimes that have both destroyed traditional job security and increased working hours for almost everyone. Along with the export of factory jobs, the new work regime has routed the union movement and destroyed any possibility of effective working-class politics.
Meanwhile, despite unprecedented investment in research on medicine and life sciences, we await cures for cancer and the common cold, and the most dramatic medical breakthroughs we have seen have taken the form of drugs such as Prozac, Zoloft, or Ritalin—tailor-made to ensure that the new work demands don’t drive us completely, dysfunctionally crazy.
With results like these, what will the epitaph for neoliberalism look like? I think historians will conclude it was a form of capitalism that systematically prioritized political imperatives over economic ones. Given a choice between a course of action that would make capitalism seem the only possible economic system, and one that would transform capitalism into a viable, long-term economic system, neoliberalism chooses the former every time. There is every reason to believe that destroying job security while increasing working hours does not create a more productive (let alone more innovative or loyal) workforce. Probably, in economic terms, the result is negative—an impression confirmed by lower growth rates in just about all parts of the world in the eighties and nineties.
But the neoliberal choice has been effective in depoliticizing labor and overdetermining the future. Economically, the growth of armies, police, and private security services amounts to dead weight. It’s possible, in fact, that the very dead weight of the apparatus created to ensure the ideological victory of capitalism will sink it. But it’s also easy to see how choking off any sense of an inevitable, redemptive future that could be different from our world is a crucial part of the neoliberal project.
At this point all the pieces would seem to be falling neatly into place. By the sixties, conservative political forces were growing skittish about the socially disruptive effects of technological progress, and employers were beginning to worry about the economic impact of mechanization. The fading Soviet threat allowed for a reallocation of resources in directions seen as less challenging to social and economic arrangements, or indeed directions that could support a campaign of reversing the gains of progressive social movements and achieving a decisive victory in what U.S. elites saw as a global class war. The change of priorities was introduced as a withdrawal of big-government projects and a return to the market, but in fact the change shifted government-directed research away from programs like NASA or alternative energy sources and toward military, information, and medical technologies.
Of course this doesn’t explain everything. Above all, it does not explain why, even in those areas that have become the focus of well-funded research projects, we have not seen anything like the kind of advances anticipated fifty years ago. If 95 percent of robotics research has been funded by the military, then where are the Klaatu-style killer robots shooting death rays from their eyes?
Obviously, there have been advances in military technology in recent decades. One of the reasons we all survived the Cold War is that while nuclear bombs might have worked as advertised, their delivery systems did not; intercontinental ballistic missiles weren’t capable of striking cities, let alone specific targets inside cities, and this fact meant there was little point in launching a nuclear first strike unless you intended to destroy the world.
Contemporary cruise missiles are accurate by comparison. Still, precision weapons never do seem capable of assassinating specific individuals (Saddam, Osama, Qaddafi), even when hundreds are dropped. And ray guns have not materialized—surely not for lack of trying. We can assume the Pentagon has spent billions on death ray research, but the closest they’ve come so far are lasers that might, if aimed correctly, blind an enemy gunner looking directly at the beam. Aside from being unsporting, this is pathetic: lasers are a fifties technology. Phasers that can be set to stun do not appear to be on the drawing boards; and when it comes to infantry combat, the preferred weapon almost everywhere remains the AK-47, a Soviet design named for the year it was introduced: 1947.
The Internet is a remarkable innovation, but all we are talking about is a super-fast and globally accessible combination of library, post office, and mail-order catalogue. Had the Internet been described to a science fiction aficionado in the fifties and sixties and touted as the most dramatic technological achievement since his time, his reaction would have been disappointment. Fifty years and this is the best our scientists managed to come up with? We expected computers that would think!
Overall, levels of research funding have increased dramatically since the seventies. Admittedly, the proportion of that funding that comes from the corporate sector has increased most dramatically, to the point that private enterprise is now funding twice as much research as the government, but the increase is so large that the total amount of government research funding, in real-dollar terms, is much higher than it was in the sixties. “Basic,” “curiosity-driven,” or “blue skies” research—the kind that is not driven by the prospect of any immediate practical application, and that is most likely to lead to unexpected breakthroughs—occupies an ever smaller proportion of the total, though so much money is being thrown around nowadays that overall levels of basic research funding have increased.
Yet most observers agree that the results have been paltry. Certainly we no longer see anything like the continual stream of conceptual revolutions—genetic inheritance, relativity, psychoanalysis, quantum mechanics—that people had grown used to, and even expected, a hundred years before. Why?
Part of the answer has to do with the concentration of resources on a handful of gigantic projects: “big science,” as it has come to be called. The Human Genome Project is often held out as an example. After spending almost three billion dollars and employing thousands of scientists and staff in five different countries, it has mainly served to establish that there isn’t very much to be learned from sequencing genes that’s of much use to anyone else. Even more, the hype and political investment surrounding such projects demonstrate the degree to which even basic research now seems to be driven by political, administrative, and marketing imperatives that make it unlikely anything revolutionary will happen.
Here, our fascination with the mythic origins of Silicon Valley and the Internet has blinded us to what’s really going on. It has allowed us to imagine that research and development is now driven, primarily, by small teams of plucky entrepreneurs, or the sort of decentralized cooperation that creates open-source software. This is not so, even though such research teams are most likely to produce results. Research and development is still driven by giant bureaucratic projects.
What has changed is the bureaucratic culture. The increasing interpenetration of government, university, and private firms has led everyone to adopt the language, sensibilities, and organizational forms that originated in the corporate world. Although this might have helped in creating marketable products, since that is what corporate bureaucracies are designed to do, in terms of fostering original research, the results have been catastrophic.
My own knowledge comes from universities, both in the United States and Britain. In both countries, the last thirty years have seen a veritable explosion of the proportion of working hours spent on administrative tasks at the expense of pretty much everything else. In my own university, for instance, we have more administrators than faculty members, and the faculty members, too, are expected to spend at least as much time on administration as on teaching and research combined. The same is true, more or less, at universities worldwide.
The growth of administrative work has directly resulted from introducing corporate management techniques. Invariably, these are justified as ways of increasing efficiency and introducing competition at every level. What they end up meaning in practice is that everyone winds up spending most of their time trying to sell things: grant proposals; book proposals; assessments of students’ jobs and grant applications; assessments of our colleagues; prospectuses for new interdisciplinary majors; institutes; conference workshops; universities themselves (which have now become brands to be marketed to prospective students or contributors); and so on.
As marketing overwhelms university life, it generates documents about fostering imagination and creativity that might just as well have been designed to strangle imagination and creativity in the cradle. No major new works of social theory have emerged in the United States in the last thirty years. We have been reduced to the equivalent of medieval scholastics, writing endless annotations of French theory from the seventies, despite the guilty awareness that if new incarnations of Gilles Deleuze, Michel Foucault, or Pierre Bourdieu were to appear in the academy today, we would deny them tenure.
There was a time when academia was society’s refuge for the eccentric, brilliant, and impractical. No longer. It is now the domain of professional self-marketers. As a result, in one of the most bizarre fits of social self-destructiveness in history, we seem to have decided we have no place for our eccentric, brilliant, and impractical citizens. Most languish in their mothers’ basements, at best making the occasional, acute intervention on the Internet.
If all this is true in the social sciences, where research is still carried out with minimal overhead largely by individuals, one can imagine how much worse it is for astrophysicists. And, indeed, one astrophysicist, Jonathan Katz, has recently warned students pondering a career in the sciences. Even if you do emerge from the usual decade-long period languishing as someone else’s flunky, he says, you can expect your best ideas to be stymied at every point:
You will spend your time writing proposals rather than doing research. Worse, because your proposals are judged by your competitors, you cannot follow your curiosity, but must spend your effort and talents on anticipating and deflecting criticism rather than on solving the important scientific problems. . . . It is proverbial that original ideas are the kiss of death for a proposal, because they have not yet been proved to work.
That pretty much answers the question of why we don’t have teleportation devices or antigravity shoes. Common sense suggests that if you want to maximize scientific creativity, you find some bright people, give them the resources they need to pursue whatever idea comes into their heads, and then leave them alone. Most will turn up nothing, but one or two may well discover something. But if you want to minimize the possibility of unexpected breakthroughs, tell those same people they will receive no resources at all unless they spend the bulk of their time competing against each other to convince you they know in advance what they are going to discover.
In the natural sciences, to the tyranny of managerialism we can add the privatization of research results. As the British economist David Harvie has reminded us, “open source” research is not new. Scholarly research has always been open source, in the sense that scholars share materials and results. There is competition, certainly, but it is “convivial.” This is no longer true of scientists working in the corporate sector, where findings are jealously guarded, but the spread of the corporate ethos within the academy and research institutes themselves has caused even publicly funded scholars to treat their findings as personal property. Academic publishers ensure that findings that are published are increasingly difficult to access, further enclosing the intellectual commons. As a result, convivial, open-source competition turns into something much more like classic market competition.
There are many forms of privatization, up to and including the simple buying up and suppression of inconvenient discoveries by large corporations fearful of their economic effects. (We cannot know how many synthetic fuel formulae have been bought up and placed in the vaults of oil companies, but it’s hard to imagine nothing like this happens.) More subtle is the way the managerial ethos discourages everything adventurous or quirky, especially if there is no prospect of immediate results. Oddly, the Internet can be part of the problem here. As Neal Stephenson put it:
Most people who work in corporations or academia have witnessed something like the following: A number of engineers are sitting together in a room, bouncing ideas off each other. Out of the discussion emerges a new concept that seems promising. Then some laptop-wielding person in the corner, having performed a quick Google search, announces that this “new” idea is, in fact, an old one; it—or at least something vaguely similar—has already been tried. Either it failed, or it succeeded. If it failed, then no manager who wants to keep his or her job will approve spending money trying to revive it. If it succeeded, then it’s patented and entry to the market is presumed to be unattainable, since the first people who thought of it will have “first-mover advantage” and will have created “barriers to entry.” The number of seemingly promising ideas that have been crushed in this way must number in the millions.
And so a timid, bureaucratic spirit suffuses every aspect of cultural life. It comes festooned in a language of creativity, initiative, and entrepreneurialism. But the language is meaningless. Those thinkers most likely to make a conceptual breakthrough are the least likely to receive funding, and, if breakthroughs occur, they are not likely to find anyone willing to follow up on their most daring implications.
Giovanni Arrighi has noted that after the South Sea Bubble, British capitalism largely abandoned the corporate form. By the time of the Industrial Revolution, Britain had instead come to rely on a combination of high finance and small family firms—a pattern that held throughout the next century, the period of maximum scientific and technological innovation. (Britain at that time was also notorious for being just as generous to its oddballs and eccentrics as contemporary America is intolerant. A common expedient was to allow them to become rural vicars, who, predictably, became one of the main sources for amateur scientific discoveries.)
Contemporary, bureaucratic corporate capitalism was a creation not of Britain, but of the United States and Germany, the two rival powers that spent the first half of the twentieth century fighting two bloody wars over who would replace Britain as a dominant world power—wars that culminated, appropriately enough, in government-sponsored scientific programs to see who would be the first to discover the atom bomb. It is significant, then, that our current technological stagnation seems to have begun after 1945, when the United States replaced Britain as organizer of the world economy.
Americans do not like to think of themselves as a nation of bureaucrats—quite the opposite—but the moment we stop imagining bureaucracy as a phenomenon limited to government offices, it becomes obvious that this is precisely what we have become. The final victory over the Soviet Union did not lead to the domination of the market, but, in fact, cemented the dominance of conservative managerial elites, corporate bureaucrats who use the pretext of short-term, competitive, bottom-line thinking to squelch anything likely to have revolutionary implications of any kind.
If we do not notice that we live in a bureaucratic society, that is because bureaucratic norms and practices have become so all-pervasive that we cannot see them, or, worse, cannot imagine doing things any other way.
Computers have played a crucial role in this narrowing of our social imaginations. Just as the invention of new forms of industrial automation in the eighteenth and nineteenth centuries had the paradoxical effect of turning more and more of the world’s population into full-time industrial workers, so has all the software designed to save us from administrative responsibilities turned us into part- or full-time administrators. In the same way that university professors seem to feel it is inevitable they will spend more of their time managing grants, so affluent housewives simply accept that they will spend weeks every year filling out forty-page online forms to get their children into grade schools. We all spend increasing amounts of time punching passwords into our phones to manage bank and credit accounts and learning how to perform jobs once performed by travel agents, brokers, and accountants.
Someone once figured out that the average American will spend a cumulative six months of life waiting for traffic lights to change. I don’t know if similar figures are available for how long it takes to fill out forms, but it must be at least as long. No population in the history of the world has spent nearly so much time engaged in paperwork.
In this final, stultifying stage of capitalism, we are moving from poetic technologies to bureaucratic technologies. By poetic technologies I refer to the use of rational and technical means to bring wild fantasies to reality. Poetic technologies, so understood, are as old as civilization. Lewis Mumford noted that the first complex machines were made of people. Egyptian pharaohs were able to build the pyramids only because of their mastery of administrative procedures, which allowed them to develop production-line techniques, dividing up complex tasks into dozens of simple operations and assigning each to one team of workmen—even though they lacked mechanical technology more complex than the inclined plane and lever. Administrative oversight turned armies of peasant farmers into the cogs of a vast machine. Much later, after cogs had been invented, the design of complex machinery elaborated principles originally developed to organize people.
Yet we have seen those machines—whether their moving parts are arms and torsos or pistons, wheels, and springs—being put to work to realize impossible fantasies: cathedrals, moon shots, transcontinental railways. Certainly, poetic technologies had something terrible about them; the poetry is likely to be as much of dark satanic mills as of grace or liberation. But the rational, administrative techniques were always in service to some fantastic end.
From this perspective, all those mad Soviet plans—even if never realized—marked the climax of poetic technologies. What we have now is the reverse. It’s not that vision, creativity, and mad fantasies are no longer encouraged, but that most remain free-floating; there’s no longer even the pretense that they could ever take form or flesh. The greatest and most powerful nation that has ever existed has spent the last decades telling its citizens they can no longer contemplate fantastic collective enterprises, even if—as the environmental crisis demands— the fate of the earth depends on it.
What are the political implications of all this? First of all, we need to rethink some of our most basic assumptions about the nature of capitalism. One is that capitalism is identical with the market, and that both therefore are inimical to bureaucracy, which is supposed to be a creature of the state.
The second assumption is that capitalism is in its nature technologically progressive. It would seem that Marx and Engels, in their giddy enthusiasm for the industrial revolutions of their day, were wrong about this. Or, to be more precise: they were right to insist that the mechanization of industrial production would destroy capitalism; they were wrong to predict that market competition would compel factory owners to mechanize anyway. If it didn’t happen, that is because market competition is not, in fact, as essential to the nature of capitalism as they had assumed. If nothing else, the current form of capitalism, where much of the competition seems to take the form of internal marketing within the bureaucratic structures of large semi-monopolistic enterprises, would come as a complete surprise to them.
Defenders of capitalism make three broad historical claims: first, that it has fostered rapid scientific and technological growth; second, that however much it may throw enormous wealth to a small minority, it does so in such a way as to increase overall prosperity; third, that in doing so, it creates a more secure and democratic world for everyone. It is clear that capitalism is not doing any of these things any longer. In fact, many of its defenders are retreating from claiming that it is a good system and instead falling back on the claim that it is the only possible system—or, at least, the only possible system for a complex, technologically sophisticated society such as our own.
But how could anyone argue that current economic arrangements are also the only ones that will ever be viable under any possible future technological society? The argument is absurd. How could anyone know?
Granted, there are people who take that position—on both ends of the political spectrum. As an anthropologist and anarchist, I encounter anticivilizational types who insist not only that current industrial technology leads only to capitalist-style oppression, but that this must necessarily be true of any future technology as well, and therefore that human liberation can be achieved only by returning to the Stone Age. Most of us are not technological determinists.
But claims for the inevitability of capitalism have to be based on a kind of technological determinism. And for that very reason, if the aim of neoliberal capitalism is to create a world in which no one believes any other economic system could work, then it needs to suppress not just any idea of an inevitable redemptive future, but any radically different technological future. Yet there’s a contradiction. Defenders of capitalism cannot mean to convince us that technological change has ended—since that would mean capitalism is not progressive. No, they mean to convince us that technological progress is indeed continuing, that we do live in a world of wonders, but that those wonders take the form of modest improvements (the latest iPhone!), rumors of inventions about to happen (“I hear they are going to have flying cars pretty soon”), complex ways of juggling information and imagery, and still more complex platforms for filling out of forms.
I do not mean to suggest that neoliberal capitalism—or any other system—can be successful in this regard. First, there’s the problem of trying to convince the world you are leading the way in technological progress when you are holding it back. The United States, with its decaying infrastructure, paralysis in the face of global warming, and symbolically devastating abandonment of its manned space program just as China accelerates its own, is doing a particularly bad public relations job. Second, the pace of change can’t be held back forever. Breakthroughs will happen; inconvenient discoveries cannot be permanently suppressed. Other, less bureaucratized parts of the world—or at least, parts of the world with bureaucracies that are not so hostile to creative thinking—will slowly but inevitably attain the resources required to pick up where the United States and its allies have left off. The Internet does provide opportunities for collaboration and dissemination that may help break us through the wall as well. Where will the breakthrough come? We can’t know. Maybe 3D printing will do what the robot factories were supposed to. Or maybe it will be something else. But it will happen.
About one conclusion we can feel especially confident: it will not happen within the framework of contemporary corporate capitalism—or any form of capitalism. To begin setting up domes on Mars, let alone to develop the means to figure out if there are alien civilizations to contact, we’re going to have to figure out a different economic system. Must the new system take the form of some massive new bureaucracy? Why do we assume it must? Only by breaking up existing bureaucratic structures can we begin. And if we’re going to invent robots that will do our laundry and tidy up the kitchen, then we’re going to have to make sure that whatever replaces capitalism is based on a far more egalitarian distribution of wealth and power—one that no longer contains either the super-rich or the desperately poor willing to do their housework. Only then will technology begin to be marshaled toward human needs. And this is the best reason to break free of the dead hand of the hedge fund managers and the CEOs—to free our fantasies from the screens in which such men have imprisoned them, to let our imaginations once again become a material force in human history.
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May 08, 2021 | wolfstreet.com
And if it doesn't last after the stimmies are gone, dealers will sit on massively overpriced collateral, which could get messy.
By Wolf Richter for WOLF STREET .This has been going on for months: Used-vehicle prices spiking from jaw-dropper to jaw-dropper, and just when I thought prices couldn't possibly spike further, they do.
Prices of used vehicles that were sold at auctions around the US in April spiked by 8.3% from March, by 20% year-to-date, by 54% from April 2020, and by 40% from April 2019, according to the Used Vehicle Value Index released today by Manheim, the largest auto auction operator in the US and a unit of Cox Automotive. All heck has broken loose in the used vehicle market:
The price spike has now completely blown by the prior record spike over the 13-month period through September 2009, which included the cash-for-clunkers program that removed a whole generation of serviceable older vehicles from the market.
makruger May 8, 2021 at 1:31 am
Wolf Richter May 8, 2021 at 8:55 amCuriously, the St. Louis Fed says used car prices have been pretty much flat for the last 25 years. While the last year of data shows a notable jump in prices, it's apparently been bludgeoned a little with some old fashioned hedonic quality adjustments.
Scott May 8, 2021 at 1:34 ammakruger,
I'll help you out since I've been covering this for years. So here is the correct link that explains it all, new vehicle CPI and used vehicle CPI (which is what you cited), plus "hedonic quality adjustments."
And some relevant charts from that article:
Reply
I can see how the supply for these auctions will be tight for some time given that business travel and the resulting car rental usage is way down. In addition, I would expect a lot of corporate car purchasing is down considerably as many sales reps have worked remotely which stalled corporate car purchasing schedules.
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May 08, 2021 | www.wsj.com
Naples, Fla.
Messrs. Levy and Bordo allude to the sharp drop in the velocity of M2 after the 2007-09 crisis. The actual decline is startling. In the first quarter of 2007 M2 velocity was 1.99, by the first quarter of 2020 it had fallen almost continually to 1.38. In other words, the money stock went from turning over twice a year to under 1.4 times a year. This is the primary reason for the very low inflation over the period.
Because of the Covid lockdowns, M2 fell even further to 1.13 by the fourth quarter of 2020. As the authors point out, conditions are much different today than in 2007-20 because of boosted bank reserves, households with substantial savings ready to spend and commercial banks in good shape and eager to lend. Unless an economy-wide lockdown occurs, these are very good reasons to believe the velocity of money will increase significantly, just as the 27% surge in M2 since the outbreak of the pandemic works its way through the economy.
This is a prescription for major inflation, perhaps 4%-5% in the next two years. When people say "no way," I remind them that in the early 1980s hardly anyone believed that interest rates would ever return to 1950s levels. While many individuals prefer to trend forecast, never underestimate how inflation (and interest rates) can swing back and forth in ways that amaze.
Em. Prof. Stephen Happel
Arizona State University
Tempe, Ariz.
Messrs. Levy and Bordo might have made an equally compelling case about the Fed being in total denial about the more troubling risk: that its policies have been contributing to a global asset-price and credit-market bubble.
By maintaining ultralow interest rates and by continuing to expand its balance by $120 billion a month, even when the economy could soon be overheating and U.S. equity valuations are close to their all-time highs, the Fed risks further inflating the asset-price bubble. By so doing, it is heightening the chances of a hard economic landing when the Fed is eventually forced to slam on the monetary-policy brakes to meet its inflation objective.
Desmond Lachman
American Enterprise Institute
Washington
Why did the money supply hardly budge in 2008, whereas now it's steadily increasing? The answer is that during the financial crisis the Fed conducted a radical experiment: It paid banks not to lend. By design, quantitative easing shored up banks' balance sheets while interest on excess reserves prevented the newly created money from circulating.
In March 2020, the Fed slashed interest on excess reserves from 1.60% to 0.10%. The benefits of sitting on funds is much smaller, which is why lending has increased.
Messrs. Levy and Bordo emphasize structural factors in the U.S. economy, such as housing and trade. These matter, but not nearly so much as policy. Inflationary pressures will continue if the Fed's asset purchases increase the broader money supply. But this depends on whether the Fed raises interest on excess reserves to prepandemic levels.
For better or worse, interest on excess reserves is now a crucial policy tool. We can't understand inflation without it.
Assoc. Prof. Alexander William Salter
Texas Tech University
Lubbock, Texas
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Appeared in the May 5, 2021, print edition as 'Inflation Is More of a Threat Than Fed Says.'
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May 08, 2021 | www.wsj.com
SUBSCRIBER 3 hours ago Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.
The Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.
Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.
(Cont.)
Like thumb_up 5 Reply reply Share link Report flag D
SUBSCRIBER 3 hours agoYellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII SUBSCRIBER 3 hours agoThe Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.
Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.
(Cont.)
Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWIIThe Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.
Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.
(Cont.)
Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWIIThe Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.
Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.
(Cont.)
Yellen and the Fed are currently repeating one of the most disturbing episodes of U.S. economic history. It happened during the 1940s following the conclusion of WWII.The Fed is riding a tiger by the tail and will likely have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits. The U.S. M4 money supply rose an alarming 24% in March alone from a year earlier whereas M1 rose 37%. Notwithstanding these shocking numbers the Fed continues to buy $120bn of bonds each month and the total amount of money in circulation is exploding at an unprecedented 40% rate.
Professor William Barnett of the Center for Financial Stability in New York explained that today's financial collusion between the Fed and the Treasury is much like the 1940s when the Fed served as a fiscal agent for Democratic administrations. The chaotic aftermath? By mid-1947 the rate of inflation exceeded 17% per year - destroying low income households.
(Cont.)
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May 08, 2021 | www.wsj.com
President Biden and Secretary Yellen said this week there is no significant inflation
Carlos LumpuyPresident Biden and Secretary Yellen said this week there is no significant inflation.President Biden and Secretary Yellen said this week there is no significant inflation Carlos Lumpuy
On May 7 of last year, the metric standard of lumber, 1,000 board feet was $360 . Today it's $1,702 a record high. It broke $1,000 first time ever a month ago on April 7.
That's a 70% increase in lumber in just the last 30 days.
Copper was $2.33 on May 7 of last year. Today, $4.76 a record high.
Steel Rebar was $3,768 on May 7 of last year. Today: $5,483 , record high.
President Biden and Secretary Yellen said this week there is no significant inflation .
Tell that to a builder, his subcontractors, and the buyer of a newly built home this summer.
Food prices for Corn, Wheat, Soybeans, Rice, Milk, Coffee, Cocoa are up double digits in just the last two months.
Vice President Harris ignored a question about inflation with her regular everyday cackle laughing as she walked away.
We are in month four of this administration that prioritizes its war on the wind and the weather.
Figures are from Yahoo FinancePresident Biden and Secretary Yellen said this week there is no significant inflation.
On May 7 of last year, the metric standard of lumber, 1,000 board feet was $360 . Today it's $1,702 a record high. It broke $1,000 first time ever a month ago on April 7.
That's a 70% increase in lumber in just the last 30 days.
Copper was $2.33 on May 7 of last year. Today, $4.76 a record high.
Steel Rebar was $3,768 on May 7 of last year. Today: $5,483 , record high.
President Biden and Secretary Yellen said this week there is no significant inflation .
Tell that to a builder, his subcontractors, and the buyer of a newly built home this summer.
Food prices for Corn, Wheat, Soybeans, Rice, Milk, Coffee, Cocoa are up double digits in just the last two months.
Vice President Harris ignored a question about inflation with her regular everyday cackle laughing as she walked away.
We are in month four of this administration that prioritizes its war on the wind and the weather.
Figures are from Yahoo Finance
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May 07, 2021 | www.bnnbloomberg.ca
6h ago
U.S. job growth disappoints in challenge to economic recovery
Olivia Rockeman , Bloomberg News
https://imasdk.googleapis.com/js/core/bridge3.455.0_en.html#goog_688272017 U.S. jobs data in April disappoints
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U.S. jobs data in April disappoints
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8:24
One of the biggest risks to U.S. recovery is the difficulty aroun...
U.S. job growth significantly undershot forecasts in April, suggesting that difficulty attracting workers is slowing momentum in the labor market and challenging the economic recovery.
Payrolls rose 266,000 from a month earlier, according to a Labor Department report Friday that represented one of the largest downside misses on record. Economists in a Bloomberg survey projected a 1 million hiring surge in April.
The unemployment rate edged up to 6.1 per cent, though the labor-force participation rate also increased.
... The disappointing payrolls print leaves overall employment more than 8 million short of its pre-pandemic level and is consistent with recent comments from company officials highlighting challenges in filling open positions.
... While job gains accelerated in leisure and hospitality, employment at temporary-help agencies and transportation and warehousing declined sharply.
...
Labor force participation, a measure of the percentage of Americans either working or looking for work, rose to 61.7 per cent in April from 61.5 per cent, likely supported by increased vaccinations that helped fuel the reopenings of many retail establishments, restaurants and leisure-facing businesses.
Average weekly hours increased to match the highest in records dating back to 2006. The gain in the workweek, increased pay and the improvement in hiring helped boost aggregate weekly payrolls 1.2 per cent in April after a 1.3 per cent gain a month earlier.
Workforce participation for men age 25 to 54 increased last month, while edging lower for women.
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May 07, 2021 | finance.yahoo.com
Goldman Sachs Group Inc. and bond titan Pacific Investment Management Co. have a simple message for Treasuries traders fretting over inflation: Relax.
The firms estimate that bond traders who are pricing in annual inflation approaching 3% over the next handful of years are overstating the pressures bubbling up as the U.S. economy rebounds from the pandemic.
...the overshoot could be as large as 0.2-to-0.3 percentage point. That gap makes a difference with key market proxies of inflation expectations for the coming few years surging this week to the highest in more than a decade. The 10-year measure, perhaps the most closely followed, eclipsed 2.5% Friday for the first time since 2013, even after unexpectedly weak U.S. jobs data.
There's at least one market metric that backs up the view that the pressures, which have been building for months, aren't about to get out of hand and may even prove temporary. A swaps instrument that reflects the annual inflation rate for the second half of the next decade has been relatively stable in recent months.
...The Federal Reserve has been hammering home that it sees any spike in price pressures as likely short-lived, and that it's willing to let inflation run above target for a period as the economy revives.
... ... ...
... Inflation worries have been mounting against a backdrop of soaring commodities prices -- copper, for example, set a record high Friday. It's all happening as lawmakers in Washington debate another massive fiscal-stimulus package.
...
Korapaty calls the outlook for inflation "benign." His view is that the market is overly optimistic with its inflation assumptions, with the greatest mismatch to be found on the three- and five-year horizon. At roughly 2.75% and 2.7%, respectively, those rates are around 20 to 30 basis points higher than they should be, in his estimate.
... ... ...
...Treasury Secretary Janet Yellen stirred markets by saying interest rates will likely rise as government spending swells and the economy achieves faster growth. She walked back the remarks hours later.
... "Because we think front-end rates are pricing in a more aggressive Fed path than we believe, we do like shorter-dated nominal bonds, and think there's value there," she said.
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May 06, 2021 | www.zerohedge.com
Authored by Patricia McCarthy via AmericanThinker.com,
In 1949, sometime after the publication of George Orwell's Nineteen Eighty-Four , Aldous Huxley, the author of Brave New World (1931), who was then living in California, wrote to Orwell. Huxley had briefly taught French to Orwell as a student in high school at Eton.
Huxley generally praises Orwell's novel, which to many seemed very similar to Brave New World in its dystopian view of a possible future. Huxley politely voices his opinion that his own version of what might come to pass would be truer than Orwell's. Huxley observed that the philosophy of the ruling minority in Nineteen Eighty-Four is sadism, whereas his own version is more likely, that controlling an ignorant and unsuspecting public would be less arduous, less wasteful by other means. Huxley's masses are seduced by a mind-numbing drug, Orwell's with sadism and fear.
The most powerful quote In Huxley's letter to Orwell is this:
Within the next generation I believe that the world's rulers will discover that infant conditioning and narco-hypnosis are more efficient, as instruments of government, than clubs and prisons, and that the lust for power can be just as completely satisfied by suggesting people into loving their servitude as by flogging and kicking them into obedience.
Aldous Huxley.Could Huxley have more prescient? What do we see around us?
Masses of people dependent upon drugs, legal and illegal. The majority of advertisements that air on television seem to be for prescription drugs, some of them miraculous but most of them unnecessary. Then comes COVID, a quite possibly weaponized virus from the Fauci-funded-with-taxpayer-dollars lab in Wuhan, China. The powers that be tragically deferred to the malevolent Fauci who had long been hoping for just such an opportunity. Suddenly, there was an opportunity to test the mRNA vaccines that had been in the works for nearly twenty years. They could be authorized as an emergency measure but were still highly experimental. These jabs are not really vaccines at all, but a form of gene therapy . There are potential disastrous consequences down the road. Government experiments on the public are nothing new .
Since there have been no actual, long-term trials, no one who contributed to this massive drug experiment knows what the long-term consequences might be. There have been countless adverse injuries and deaths already for which the government-funded vaccine producers will suffer no liability. With each passing day, new side-effects have begun to appear: blood clots, seizures, heart failure.
As new adverse reactions become known despite the censorship employed by most media outlets, the more the Biden administration is pushing the vaccine, urging private corporations to make it mandatory for all employees. Colleges are making them mandatory for all students returning to campus.
The leftmedia are advocating the "shunning" of the unvaccinated. The self-appointed virtue-signaling Democrats are furious at anyone and everyone who declines the jab. Why? If they are protected, why do they care? That is the question. Same goes for the ridiculous mask requirements . They protect no one but for those in operating rooms with their insides exposed, yet even the vaccinated are supposed to wear them!
Months ago, herd immunity was near. Now Fauci and the CDC say it will never be achieved? Now the Pfizer shot will necessitate yearly booster shots. Pfizer expects to make $21B this year from its COVID vaccine! Anyone who thinks this isn't about money is a fool. It is all about money, which is why Fauci, Gates, et al. were so determined to convince the public that HCQ and ivermectin, both of which are effective, prophylactically and as treatment, were not only useless, but dangerous. Both of those drugs are tried, true, and inexpensive. Many of those thousands of N.Y. nursing home fatalities might have been prevented with the use of one or both of those drugs. Those deaths are on the hands of Cuomo and his like-minded tyrants drunk on power.
Months ago, Fauci, et al. agreed that children were at little or no risk of getting COVID, of transmitting it, least of all dying from it. Now Fauci is demanding that all teens be vaccinated by the end of the year! Why? They are no more in danger of contracting it now than they were a year ago. Why are parents around this country not standing up to prevent their kids from being guinea pigs in this monstrous medical experiment? And now they are " experimenting " on infants. Needless to say, some have died. There is no reason on Earth for teens, children, and infants to be vaccinated. Not one.
Huxley also wrote this:
"The surest way to work up a crusade in favor of some good cause is to promise people they will have a chance of maltreating someone. To be able to destroy with good conscience, to be able to behave badly and call your bad behavior 'righteous indignation' -- this is the height of psychological luxury, the most delicious of moral treats ."
Perhaps this explains the left's hysterical impulse to force these untested shots on those of us who have made the decision to go without it. If they've decided that it is the thing to do, then all of us must submit to their whims. If we decide otherwise, it gives them the righteous right to smear all of us whom they already deplore.
As C.J. Hopkins has written , the left means to criminalize dissent. Those of us who are vaccine-resistant are soon to be outcasts, deprived of jobs and entry into everyday businesses. This kind of discrimination should remind everyone of ...oh, Germany three quarters of a century ago. Huxley also wrote, "The propagandist's purpose is to make one set of people forget that certain other sets of people are human." That is precisely what the left is up to, what BLM is planning, what Critical Race Theory is all about.
Tal Zaks, Moderna's chief medical officer, said these new vaccines are "hacking the software of life." Vaccine-promoters claim he never said this, but he did. Bill Gates called the vaccines " an operating system " to the horror of those promoting it, a Kinsley gaffe. Whether it is or isn't hardly matters at this point, but these statements by those behind the vaccines are a clue to what they have in mind.
There will be in the next generation or so a pharmacological method of making people love their servitude and producing dictatorship without tears , so to speak, producing a kind of painless concentration camp for entire societies so that people will in fact have their liberties taken away from them but will rather enjoy it.
This is exactly what the left is working so hard to effect: a pharmacologically compromised population happy to be taken care of by a massive state machine. And while millions of people around the world have surrendered to the vaccine and mask hysteria, millions more, about 1.3 billion, want no part of this government vaccine mania.
In his letter to Orwell, Huxley ended with the quote cited above and again here because it is so profound:
Within the next generation I believe that the world's rulers will discover that infant conditioning and narco-hypnosis are more efficient, as instruments of government, than clubs and prisons, and that the lust for power can be just as completely satisfied by suggesting people into loving their servitude as by flogging and kicking them into obedience.
Huxley nailed the left more than seventy years ago, perhaps because leftists have never changed throughout the ages. 61,497 173
Fat Beaver 14 hours ago (Edited)
strych10 14 hours agoIf i am to be treated as an outcast or an undesirable because i refuse the vax, i will immediately become someone that has zero reverence for the law, and i can only imagine 10's of millions will be right there with me.
Dr. Chihuahua-González 13 hours agoWelcome to the club.
We have coffee in the corner and occasional meetings at various bars.
Fat Beaver 13 hours ago (Edited)I'm a doctor, you could contact me anytime and receive your injection.
sparky139 PREMIUM 10 hours agoI've gotta feeling the normie world you think you live in is about to change drastically for the worse...
bothneither 2 hours agoYou mean you'll sign papers that you injected us *wink *wink? And toss it away?
Unknown 6 hours ago (Edited)Oh geez how uncommon, another useless doctor with no Scruples who sold out to big Pharma. Please have my Gates sponsored secret sauce.
Deathrips 15 hours ago (Edited) remove linkBoth Huxley and Orwell are wrong. Neoliberalism (the use of once office for personal gains) is by far the most powerful force that subjugates the inept population. Neoliberalism demolished the mighty USSR, now destroying the USA, and will do the same to China. And this poison dribbles from the top to bottom creating self-centered population that is unable to unite, much less resist.
19331510 14 hours ago (Edited)Tylers.
You gonna cover Tucker Carlsons show earlier today on FOX news about vaxxx deaths? almost 4k reported so far this year.Joe Joe Depends 13 hours agohttps://www.openvaers.com/covid-data/death-stats
AGE Deaths
0-24 23
25-50 184
51-65 506
66-80 1164
81-100 1346
U 321
R.I.P.
JimmyJones 9 hours agoIndia up in arms about mere 1%
spanish flu was 3%
Nelbev 10 hours agoIs the population of india up in arms or is the MSM?
19331510 14 hours agoFacebook just flagged/censored it, must sign into see vid, Tuck also failed to mention mRNA and adenovirus vaxes were experimental and not FDA approved nor gone through stage III trials. Beside deaths, have blood clot issues. Good he mentioned how naturally immune if get covid and recovered, better than vaccine, but not covered for bogus passports. Me personally, I would rather catch covid and get natural immunity than be vaccinated with an untested experimental vaccine.
Ultramarines 15 hours ago (Edited)Covid19 links.
Websites:
https://www.americasfrontlinedocs.com/media/
https://covid19criticalcare.com/
https://childrenshealthdefense.org/
https://childrenshealthdefense.org/defender/
https://www.constitutionalrightscentre.ca/category/news/
https://doctors4covidethics.medium.com/
https://www.flemingmethod.com/
https://principia-scientific.com/
https://standupcanada.solutions/canadian-doctors-speak
https://vaccinechoicecanada.com/ https://vaccinechoicecanada.com/links/general-links/
Video Sharing : https://www.bitchute.com/ ; https://brandnewtube.com/ ; https://odysee.com/ ; https://rumble.com/ https://superu.net
Healthcare Professionals :
Dr. Jayanta Bhattacharya; Dr. Geert Vanden Bossche; Dr. Ron Brown; Dr. Ryan Cole; Dr. Richard Fleming; Dr. Simone Gold; Dr. Sunetra Gupta; Dr. Carl Heneghan; Dr. Martin Kulldorff; Dr. Paul Marik; Dr. Peter McCullough; Dr. Joseph Mercola; Dr. Lee Merritt; Dr. Judy Mikovits; Dr. Dennis Modry; Dr. Hooman Noorchashm; Dr. Harvey Risch; Dr. Sherri Tenpenny; Dr. Richard Urso; Dr. Michael Yeadon;
A list of Canadian doctors: https://standupcanada.solutions/canadian-doctors-speak
Lawyers : Dr. Reiner Fuellmich; Rocco Galati;
Drug Adverse Reaction Databases:
http://www.adrreports.eu/en/index.html (Search; Suspected Drug Reactions Reports for Substances) COVID-19 MRNA VACCINE MODERNA (CX-024414); COVID-19 MRNA VACCINE PFIZER-BIONTECH; COVID-19 VACCINE ASTRAZENECA (CHADOX1 NCOV-19); COVID-19 VACCINE JANSSEN (AD26.COV2.S)
https://vaers.hhs.gov/data.html
Research papers :
https://cormandrostenreview.com/report/ (pcr tests)
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7680614/ (face masks)
https://onlinelibrary.wiley.com/doi/epdf/10.1111/eci.13484 (lock downs)
https://www.nejm.org/doi/full/10.1056/NEJMc2026670 (child/teacher morbidity)
https://www.medrxiv.org/content/10.1101/2020.11.01.20222315v1 (transmission by children)
https://www.cdc.gov/mmwr/volumes/70/wr/mm7010e3.htm (masks/restaurants)
https://www.mdpi.com/1648-9144/57/3/199 (biased trial reporting)
Covid19 links.
Websites:
https://www.americasfrontlinedocs.com/media/
https://covid19criticalcare.com/
https://childrenshealthdefense.org/
https://childrenshealthdefense.org/defender/
https://www.constitutionalrightscentre.ca/category/news/
https://doctors4covidethics.medium.com/
https://www.flemingmethod.com/
https://principia-scientific.com/
https://standupcanada.solutions/canadian-doctors-speak
https://vaccinechoicecanada.com/ https://vaccinechoicecanada.com/links/general-links/
Video Sharing : https://www.bitchute.com/ ; https://brandnewtube.com/ ; https://odysee.com/ ; https://rumble.com/ https://superu.net
Healthcare Professionals :
Dr. Jayanta Bhattacharya; Dr. Geert Vanden Bossche; Dr. Ron Brown; Dr. Ryan Cole; Dr. Richard Fleming; Dr. Simone Gold; Dr. Sunetra Gupta; Dr. Carl Heneghan; Dr. Martin Kulldorff; Dr. Paul Marik; Dr. Peter McCullough; Dr. Joseph Mercola; Dr. Lee Merritt; Dr. Judy Mikovits; Dr. Dennis Modry; Dr. Hooman Noorchashm; Dr. Harvey Risch; Dr. Sherri Tenpenny; Dr. Richard Urso; Dr. Michael Yeadon;
A list of Canadian doctors: https://standupcanada.solutions/canadian-doctors-speak
Lawyers : Dr. Reiner Fuellmich; Rocco Galati;
Drug Adverse Reaction Databases:
http://www.adrreports.eu/en/index.html (Search; Suspected Drug Reactions Reports for Substances) COVID-19 MRNA VACCINE MODERNA (CX-024414); COVID-19 MRNA VACCINE PFIZER-BIONTECH; COVID-19 VACCINE ASTRAZENECA (CHADOX1 NCOV-19); COVID-19 VACCINE JANSSEN (AD26.COV2.S)
Research papers :
https://cormandrostenreview.com/report/ (pcr tests)
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7680614/ (face masks)
https://onlinelibrary.wiley.com/doi/epdf/10.1111/eci.13484 (lock downs)
https://www.nejm.org/doi/full/10.1056/NEJMc2026670 (child/teacher morbidity)
https://www.medrxiv.org/content/10.1101/2020.11.01.20222315v1 (transmission by children)
https://www.cdc.gov/mmwr/volumes/70/wr/mm7010e3.htm (masks/restaurants)
https://www.mdpi.com/1648-9144/57/3/199 (biased trial reporting)
Mineshaft Gap 10 hours agoHis making of the gamma and delta workforce was quite prescient. We are seeing it play out now, we all know gammas and delta. There was a really good ABC tv movie made in 1980 Brave New World. Excellent show, it shows the Alphas and names them Rothchild and so on. Shows what these people specifically want to do to the world. I wonder if the ruling psychopaths actually wait for science fiction authors to plan the future and then follow their script.
If Huxley were starting out today no major publisher would touch him.
They'd tell him Brave New World doesn't have a diverse enough of cast. Even the mostly likable totalitarian guy named Mustapha turns out to be white! A white Mustapha. It's soooo triggering. Also, what's wrong with a little electronic fun and drug taking, anyway? Lighten up , Aldous.
Meanwhile his portrait of shrieking medieval Catholic nuns who think they're possessed in The Devils of Loudun might remind the leftist editors too uncomfortably of their own recent bleating performances at "White Fragility" struggle sessions.
Sorry, Aldous. Just...too...problematic.
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May 01, 2021 | www.nakedcapitalism.com
Yves here. Mark Blyth is such a treat. How can you not be a fan of the man who coined "The Hamptons are not a defensible position"? Even though he's not always right, he's so incisive and has such a strong point of view that his occasional questionable notions serve as fodder for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo. Yves here. Mark Blyth is such a treat. How can you not be a fan of the man who coined "The Hamptons are not a defensible position"? Even though he's not always right, he's so incisive and has such a strong point of view that his occasional questionable notions serve as fodder for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo. Even though he's not always right, he's so incisive and has such a strong point of view that his occasional questionable notions serve as fodder for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo. Even though he's not always right, he's so incisive and has such a strong point of view that his occasional questionable notions serve as fodder for thought. And I suspect he'll be proven correct on his topic today, the inflation bugaboo. By Paul Jay.
... ... ...
Paul Jay
And is the idea that inflation is about to come roaring back one of the stupid ideas that you're talking about? And is the idea that inflation is about to come roaring back one of the stupid ideas that you're talking about?Mark Blyth
I hope that it is, but I'm going to go with Larry on this one. He says it's about one third chance that it's going to do this. I'd probably give it about one in ten, so it's not impossible.So, let's unpack why we're going to see this. Can you generate inflation? Yeah. I mean, dead easy. Imagine your Turkey. Why not be a kind of Turkish pseudo dictator?
Why not fire the head of your central bank in an economy that's basically dependent on other people valuing your assets and giving you money through capital flows? And then why don't you fire the central bank head and put in charge your brother-in-law? I think it was his brother-in-law. And then insist that low interest rates cure inflation. And then watch as the value of your currency, the lira collapses, which means all the stuff you import is massively expensive, which means that people will pay more, and the general level of all prices will go up, which is an inflation. So, can you generate an inflation in the modern world? Sure, yeah. Easy. Just be an idiot, right? Now, does this apply to the United States? No. That's where it gets entirely different. So, a couple of things to think about (first). So, you mentioned that huge number of 20 trillion dollars. Well, that's more or less about two thirds of what we threw into the global economy after the global financial crisis, and inflation singularly failed to show up. All those people in 2010 screaming about inflation and China dumping bonds and all that. Totally wrong. Completely wrong. No central bank that's got a brass nameplate worth a damn has managed to hit its inflation target of two percent in over a decade. All that would imply that there is a huge amount of what we call "˜slack' in the economy. (Also) think about the fact that we've had, since the 1990s, across the OECD, by any measure, full employment. That is to say, most people who want a job can actually find one, and at the same time, despite that, there has been almost no price pressure coming from wages, pushing on into prices, to push up inflation. So rather than the so-called vertical Phillips curve, which most of modern macro is based upon, whereby there's a kind of speed bump for the economy, and if the government spends money, it can't push this curve out, all it can do is push it up in terms of prices. What we seem to actually have is one whereby you can have a constant level of inflation, which is very low, and any amount of unemployment you want from 2 percent to 12 percent, depending on where you look and in which time-period.
All of which suggests that at least for big developed, open, globalized economies, where you've destroyed trade unions, busted up national product cartels, globally integrated your markets, and added 600 million people to the global labor supply, you just can't generate inflation very easily. Now, we're running, depending on how much actually passes, a two to five trillion-dollar experiment on which theory of inflation is right. This one, or is it this one? That's basically what we're doing just now. Larry's given it one in three that it's his one. I'd give it one in ten his one's right. Now, if I may just go on just for a seconds longer. This is where the politics of this gets interesting. Most people don't understand what inflation is. You get all this stuff talked by economists and central bankers about inflation and expectations and all that, but you go out and survey people and they have no idea what the damn thing is. Think about the fact that most people talk about house price inflation.
There is no such thing as house price inflation. Inflation is a general rise in the level of all prices. A sustained rise in the level of prices. The fact that house prices in Toronto have gone up is because Canada stopped building public housing in the 1980s and turned it into an asset class and let the 10 percent top earners buy it all and swap it with each other. That is singularly not an inflation. So, what's going to happen coming out of Covid is there will be a big pickup in spending, a pickup in employment. I think it's (going to be) less than people expect because the people with the money are not going to go out and spend it because they have all they want already. There are only so many Sub-Zero fridges you can buy. Meanwhile, the bottom 60 percent of the income distribution are too busy paying back debt from the past year to go on a spending spree, but there definitely will be a pickup. Now, does that mean that there's going to be what we used to call bottlenecks? Yeah, because basically firms run down inventory because they're in the middle of a bloody recession. Does it mean that there are going to be supply chain problems? Yes, we see this with computer chips. So, what's going to happen is that computer chips are going to go up in price.
So, lots of individual things are going to go up in price, and what's going to happen is people are going to go "there's the inflation, there's that terrible inflation," and it's not. It's just basically short-term factors that will dissipate after 18 months. That is my bet. For Larry to be right what would have to be true?
That we would have to have the institutions, agreements, labor markets and product markets of the 1970s. We don't.
... ... ...
So, I just don't actually see what the generator of inflation would be. We are not Turkey dependent on capital imports for our survival with a currency that's falling off a cliff. That is entirely different. That import mechanism, which is the way that most countries these days get a bit of inflation. That simply doesn't apply in the U.S. So, with my money on it, if I had to bet, it's one in 10 Larry's right, rather one in 3.
Paul Jay
The other point he raises, and we talked a little bit about this in a previous interview, but let's revisit it, is that the size of the American debt, even if it isn't inflationary at some point, creates some kind of crisis of confidence in the dollar being the reserve currency of the world, and so this big infrastructure spending is a problem because of that. That's part of, I believe, one of his arguments. The other point he raises, and we talked a little bit about this in a previous interview, but let's revisit it, is that the size of the American debt, even if it isn't inflationary at some point, creates some kind of crisis of confidence in the dollar being the reserve currency of the world, and so this big infrastructure spending is a problem because of that. That's part of, I believe, one of his arguments.Mark Blyth
The way political economists look at the financial plumbing, I think, is different to the way that macro economists do. We see it rather differently. The first thing is, what's your alternative to the dollar unless you're basically going to go all-in on gold or bitcoin? And good luck with those. If we go into a crushing recession and our bond market collapses, don't think that Europe's going to be a safe haven given that they've got half the US growth rate. And we could talk about what Europe's got going on post-pandemic because it's not that good. So what's your alternative (to the Dollar)? Buy yen? No, not really. You're going to buy Chinese assets? Well, good luck, and given the way that their country is being run at the moment, if you ever want to take your capital out. I'm not sure that's going to work for you, even if you could. So you're kind of stuck with it. Mechanically there's another problem. All of the countries that make surpluses in the world make surpluses because we run deficits. One has to balance the other. So, when you're a Chinese firm selling to the United States, which is probably an American firm in China with Chinese subcontractors selling to the United States, what happens is they get paid in dollars. When they receive those dollars in China, they don't let them into the domestic banking system. They sterilize them and they turn them into the local currency, which is why China has all these (dollar) reserves. That's their national savings. Would you like to burn your reserves in a giant pile? Well, one way to do that would be to dump American debt, which would be equivalent to burning your national savings. If you're a firm, what do you do? Well, you basically have to use dollars for your invoicing. You have to use dollars for your purchasing, and you keep accumulating dollars, which you hand back to your central bank, which then hands you the domestic currency. The central bank then has a problem because it's got a liability " (foreign) cash rather than an asset. So, what's the easiest asset to buy? Buy another 10-year Treasury bill, rinse and repeat, rinse and repeat. So, if we were to actually have that type of crisis of confidence, the people who would actually suffer would be the Germans and the Chinese, because their export-driven models only makes sense in terms of the deficits that we run. Think of it as kind of monetarily assured destruction because the plumbing works this way. I just don't see how you can have that crisis of confidence because you've got nowhere else to take your confidence.Paul Jay
If I understand it correctly, the majority of American government debt is held by Americans, so it's actually really the wealth is still inside the United States. I saw a number, this was done three or four years ago, maybe, but I think it was Brookings Institute, that assets after liabilities in private hands in the United States is something like 98 trillion dollars. So I don't get where this crisis of confidence is going to come any time soon. If I understand it correctly, the majority of American government debt is held by Americans, so it's actually really the wealth is still inside the United States. I saw a number, this was done three or four years ago, maybe, but I think it was Brookings Institute, that assets after liabilities in private hands in the United States is something like 98 trillion dollars. So I don't get where this crisis of confidence is going to come any time soon.Mark Blyth
Basically, if your economy grows faster (than the rest of the world because you are) the technological leader, your stock markets grows faster than the others. If you're an international investor, you want access to that. (That ends) only if there were actual real deep economic problems (for the US), like, for example, China invents fusion energy and gives it free to the world. That would definitely screw up Texas. But short of that, it's hard to see exactly what would be these game-changers that would result in this. And of course, this is where the Bitcoin people come in. It's all about crypto, and nobody has any faith in the dollar, and all this sort of stuff. Well, I don't see why we have faith in something (like that instead . I think it was just last week. There wasn't much reporting on this, I don't know if you caught this, but there were some twenty-nine-year-old dude ran a crypto exchange. I can't remember where it was. Maybe somewhere like Turkey. But basically he had two billion in crypto and he just walked off with the cash. You don't walk off with the Fed, but you could walk off with a crypto exchange. So until those problems are basically sorted out, the notion that we can all jump into a digital currency, which at the end of the day, to buy anything, you need to turn back into a physical currency because you don't buy your coffee with crypto, we're back to that (old) problem. How do you get out of the dollar? That structural feature is incredibly important.Paul Jay
So there's some critique of the Biden infrastructure plan and some of the other stimulus, coming from the left, because, one, the left more or less agrees with what you said about inflation, and the critique is that it's actually not big enough, and let me add to that. I'm kind of a little bit surprised, maybe not anymore, but Wall Street on the whole, not Larry Summers and a few others, but most of them actually seem quite in support of the Biden plan. You don't hear a lot of screaming about inflation from Wall Street. Maybe from the Republicans, but not from listening to Bloomberg Radio. So there's some critique of the Biden infrastructure plan and some of the other stimulus, coming from the left, because, one, the left more or less agrees with what you said about inflation, and the critique is that it's actually not big enough, and let me add to that. I'm kind of a little bit surprised, maybe not anymore, but Wall Street on the whole, not Larry Summers and a few others, but most of them actually seem quite in support of the Biden plan. You don't hear a lot of screaming about inflation from Wall Street. Maybe from the Republicans, but not from listening to Bloomberg Radio.Mark Blyth
You don't even hear a lot of screaming about corporate taxes, which is fascinating, right? You'd think they'd be up in arms about this? I actually spoke to a business audience recently about this, and I kind of did an informal survey and I said, "why are you guys not up in arms about this?" And someone that was on the call said, "well, you know, the Warren Buffet line about you find out who's swimming naked when the tide goes out? What if a lot of firms that we think are great firms are just really good at tax optimization? What if those profits are really just contingent on that? That would be really nice to know this because then we could stop investing in them and invest in better stuff that actually does things." You don't even hear a lot of screaming about corporate taxes, which is fascinating, right? You'd think they'd be up in arms about this? I actually spoke to a business audience recently about this, and I kind of did an informal survey and I said, "why are you guys not up in arms about this?" And someone that was on the call said, "well, you know, the Warren Buffet line about you find out who's swimming naked when the tide goes out? What if a lot of firms that we think are great firms are just really good at tax optimization? What if those profits are really just contingent on that? That would be really nice to know this because then we could stop investing in them and invest in better stuff that actually does things."Paul Jay
And pick up the pieces of what's left of them for a penny if they have to go down. And pick up the pieces of what's left of them for a penny if they have to go down.Mark Blyth
Absolutely. Just one thought that we'll circle back, to the left does not think it's big enough, etc. Well, yes, of course they wouldn't, and this is one of those things whereby you kind of have to check yourself. I give the inflation problem a one in ten. But what I'm really dispassionately trying to do is to look at this as just a problem. My political preferences lie on the side of "˜the state should do more.' They lie on the side of "˜I think we should have higher real wages.' They lay on the side that says that "˜populism is something that can be fixed if the bottom 60 percent actually had some kind of growth.' So, therefore, I like programs that do that. Psychologically, I am predisposed therefore to discount inflation. I'm totally discounting that because that's my priors and I'm really deeply trying to check this. In this debate, it's always worth bearing in mind, no one's doing that. The Republicans and the right are absolutely going to be hell bent on inflation, not because they necessarily really believe in (inevitable) inflation, (but) because it's a useful way to stop things happening. And then for the left to turn around and say, well, it isn't big enough, (is because you might as well play double or quits because, you know, you've got Biden and that's the best that's going to get. So there's a way in which when we really are trying to figure out these things, we kind of have to check our partisan preferences because they basically multiply the errors in our thinking, I think.Paul Jay
Now, earlier you said that one of the main factors why inflation is structurally low now, I don't know if you said exactly those words. Now, earlier you said that one of the main factors why inflation is structurally low now, I don't know if you said exactly those words.Mark Blyth
I would say that yes. I would say that yes.Paul Jay
Is the weakness of the unions, the weakness of workers in virtually all countries, but particularly in the U.S., because it matters so much. That organizing of workers is just, they're so unable to raise their wages over decades of essentially wages that barely keep up with inflation and don't grow in any way, certainly not in any relationship to the way productivity has grown. So we as progressives, well, we want workers to get better organized. We want stronger unions. We want higher wages, but we want it without inflation. Is the weakness of the unions, the weakness of workers in virtually all countries, but particularly in the U.S., because it matters so much. That organizing of workers is just, they're so unable to raise their wages over decades of essentially wages that barely keep up with inflation and don't grow in any way, certainly not in any relationship to the way productivity has grown. So we as progressives, well, we want workers to get better organized. We want stronger unions. We want higher wages, but we want it without inflation.Mark Blyth
And it's a question of how much room you have to do that. I mean, essentially, if you quintuple the money supply, eventually prices will have to rise"¦but that depends upon the velocity of money which has actually been collapsing. So maybe you'd have to do it 10 times. There's interesting research out of London, which I saw a couple of weeks ago, that basically says you really can't correlate inflation with increases in the money supply. It's just not true. It's not the money that's doing it. It's the expectations. That then begs the question, well, who's actually paying attention if we all don't really understand what inflation is? So I tend to think of this as basically a kind of a physical process. It's very easy to understand if your currency goes down by 50 percent and you're heavily dependent on imports. You're import (prices) go up. All the prices in the shops are going to go up. That's a mechanism that I can clearly identify that will generate rising prices. If you have big unions, if you have kind of cartel-like vertically integrated firms that control the national market, if you have COLA contracts. If you have labor able to do what we used to call leapfrogging wage claims against other unions, if this is all institutionally and legally protected, I can see how that generates inflation, that is a mechanism I can point to. That doesn't exist just now. Let's unpack this for a minute. The sort of fundamental theoretical assumption on this is based is some kind of "˜marginal productivity theory of wages.' In a perfectly free market with free exchange, in which we don't live, what would happen is you would hire me up to the point that my marginal product is basically paying off for you, and once it produces zero profits, that's kind of where my wages end. I'm paid up to the point that my marginal product is useful to the firm. This is not really a useful way of thinking about it because if you're the employer and I'm the worker, and I walk up to you and say, hey, my marginal productivity is seven, so how about you pay me seven bucks? You just say, shut up or I'll fire you and get someone else. Now, the way that we used to deal with this was a kind of "˜higher than your outside option,' on wages. The way we used to think about this was "why would you pay somebody ten bucks at McDonald's?" Because then you might actually get them to and flip the burgers because they're outside option is probably seven bucks, and if you pay them seven bucks, they just won't show up. So we used to have to pay workers a bit more. So that was, in a sense, (workers) claiming (a bit of the surplus) from productivity. But now what we've done, Suresh Naidu the economist was talking about this the other day, is we have all these technologies for surveilling workers (instead of paying them more). So now what we can do is take that difference between seven and ten and just pocket it because we can actually pay workers at your outside option, because I monitor everything you do, and if you don't do exactly what I say I'll fire you, and get somebody else for seven bucks. So all the mechanisms for the sharing of sharing productivity, unions, technology, now lies in the hands of employers. It's all going against labor. So (as a result) we have this fiction that somehow when the economy grows, our productivity goes up, and workers share in that. Again, what's the mechanism? Once you take out unions and once you weaponize the ability of employers to extract surplus through mechanisms like technology, franchising, all the rest of it, then it just tilts the playing field so much that we just don't see any increase in wages. (Now) let's bring this back to inflation. Unless you see systematic (and sustained) increases in the real wage that increases costs for firms to the point that they need to push on prices, I just don't see the mechanism for generating inflation. It just isn't there. And we've underpaid the bottom 60 percent of the U.S. labor market so long it would take a hell of a lot of wage inflation to get there, with or without unions.Paul Jay
Yeah, what's that number, that if the minimum wage was adjusted for inflation and it was what the minimum wage was, what, 30 years ago, the minimum wage would be somewhere between 25 and 30 bucks, and that wasn't causing raging inflation. Yeah, what's that number, that if the minimum wage was adjusted for inflation and it was what the minimum wage was, what, 30 years ago, the minimum wage would be somewhere between 25 and 30 bucks, and that wasn't causing raging inflation.Mark Blyth
And there is that RAND study from November 2020 that was adeninely entitled, "˜Trends in Income 1979 to 2020,' and they calculated, and I think this is the number, but even if I'm off, the order of magnitude is there, that transfers, because of tax and regulatory changes, from the 90th percentile of the distribution to the 10 percentile, totalled something in the order of $34 trillion. That's how much was vacuumed up and practically nothing trickled down. So when you consider that as a mechanism of extraction, why are worrying about inflation (from wages)? The best story on inflation is actually Charles Goodhart's book that came out last year. We got a long period of low inflation because of global supply chains, and because of demographic trends. It's a combination of global supply chains, Chinese labor, and demographics all coming together to basically push down labor costs, and that's why you get this long period of deflation, which leads to rising profits and zero inflation. A perfectly reasonable way of explaining it. And his point is that, well, that's coming to an end. The demographics are shifting, or shrinking. We're going back to more closed economies. You're going to create this inflation problem again. OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? And there is that RAND study from November 2020 that was adeninely entitled, "˜Trends in Income 1979 to 2020,' and they calculated, and I think this is the number, but even if I'm off, the order of magnitude is there, that transfers, because of tax and regulatory changes, from the 90th percentile of the distribution to the 10 percentile, totalled something in the order of $34 trillion. That's how much was vacuumed up and practically nothing trickled down. So when you consider that as a mechanism of extraction, why are worrying about inflation (from wages)? The best story on inflation is actually Charles Goodhart's book that came out last year. We got a long period of low inflation because of global supply chains, and because of demographic trends. It's a combination of global supply chains, Chinese labor, and demographics all coming together to basically push down labor costs, and that's why you get this long period of deflation, which leads to rising profits and zero inflation. A perfectly reasonable way of explaining it. And his point is that, well, that's coming to an end. The demographics are shifting, or shrinking. We're going back to more closed economies. You're going to create this inflation problem again. OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? The best story on inflation is actually Charles Goodhart's book that came out last year. We got a long period of low inflation because of global supply chains, and because of demographic trends. It's a combination of global supply chains, Chinese labor, and demographics all coming together to basically push down labor costs, and that's why you get this long period of deflation, which leads to rising profits and zero inflation. A perfectly reasonable way of explaining it. And his point is that, well, that's coming to an end. The demographics are shifting, or shrinking. We're going back to more closed economies. You're going to create this inflation problem again. OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? The best story on inflation is actually Charles Goodhart's book that came out last year. We got a long period of low inflation because of global supply chains, and because of demographic trends. It's a combination of global supply chains, Chinese labor, and demographics all coming together to basically push down labor costs, and that's why you get this long period of deflation, which leads to rising profits and zero inflation. A perfectly reasonable way of explaining it. And his point is that, well, that's coming to an end. The demographics are shifting, or shrinking. We're going back to more closed economies. You're going to create this inflation problem again. OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? OK, what's the timeline on that? About 20 years? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here? A few years ago, we were told we had 12 years to fix the climate problem or we're in deep shit. If we have to face the climate problem versus single to double-digit inflation, I'm left wondering what is the real problem here?
cocomaan , , May 1, 2021 at 7:24 am
Great piece. He put to words something I've thought about but couldn't articulate: if wages are stagnant, how could you possibly get broad based inflation?
There is no upward pressure on labor costs anywhere in the economy. The pressures are all downward.
You would need government spending in the order of magnitudes to drive up wages. Or release from a lot of debt, like student loan forgiveness or what have you.
Left in Wisconsin , , May 1, 2021 at 2:06 pm
I'm not sure you need wage growth to get inflation. As Blyth notes, most of the time inflation is a currency or a monetary issue. In the 70s, it was initially an oil thing " and oil flows through a lot of products " and then really went crazy only when Volker started raising interest rates. I don't think there is an episode of "wage-push" inflation in history. (The union cost-of-living clauses don't "cause" inflation, they only adjust for past inflation. If unions can cause wage-push inflation, someone needs to explain how they did this in the late 70s, when they were much less powerful and unemployment was substantially higher, than in the 1950s.) One could argue that expansive fiscal policy might drive inflation but, even then, the mechanism is through price increases, not wage increases. You do need consumption but that can always come from the wealthy and further debt immiseration of the rest of us.
Adam Eran , , May 1, 2021 at 2:51 pm
Blythe is one of those guys who is *almost* correct. For example he declares that expectations drive inflation. What about genuine shortages? The most recent U.S. big inflation stemmed from OPEC withholding oil"a shortage we answered by increasing the price ($1.75/bbl in 1971 -> $42/bbl in 1982). In Germany, the hyperinflation was driven by the French invading the Ruhr, something roughly like shutting down Ohio in the U.S. A shortage of goods resulted. Inflation! In Zimbabwe, the Rhodesian (white) farmers left, and the natives who took over their farms were not producing enough food. A shortage of food, requiring imports, resulted. Inflation!
I guess you could say people in Zimbabwe "expected" food"¦but that's not standard English.
JFYI, Blythe is not a fan of MMT. He calls it "annoying." Yep, that's his well-reasoned argument about how to think about it.
As a *political* economist, he may have a point in saying MMT is a difficult political sell, but otherwise, I'd say the guy is clueless about it.
CH , , May 1, 2021 at 9:13 am
Inflation isn't caused by the amount of money in the economy but by the amount of *spending*.
Like the other commenter, I've wondered this too"if wages have been stagnant for a generation, then how are we going to get inflation? By what mechanism? It seems like almost all of the new money just adds a few zeros to the end of the bank account balances of the already rich (or else disappears offshore).
Still, you just cannot people to understand this because of houses, health care and education. One might even argue that inflated house and education prices are helping keep inflation down. If more and more of our meager income is going to pay for these fixed expenditures, then there's no money left over to pay increased prices for goods and services. So there's no room to increase the prices of those things. As Michael Hudson would point out, it's all sucked away for debt service, meaning a lot of the "money printing" is just subsidizing Wall Street.
But if you pay attention to the internet, for years there have been conspiracy theories all across the political spectrum that we were really in hyperinflation and the government just secretly "cooked the books" and manipulated the statistics to convince us all it wasn't happening. Of course, these conspiracy theories all pointed to the cost of housing, medicine and education as "proof" of this theory (three things which, ironically, didn't go up spectacularly during the Great Inflation of the 1970's). Or else they'd point to gas prices, but that strategy lost it's potency after 2012. Or else they'd complain that their peanut butter was secretly getting smaller, hiding the inflation (shrinkflation is real, or course, but it's not a vast conspiracy to hide price increases from the public).
I'm convinced that this was the ground zero for the kind of anti-government conspiratorial thinking that's taken over our politics today. These ideas was heavy promoted by libertarians like Ron Paul starting in the nineties, helped by tracts like "The Creature from Jekyll Island," which argued that the Fed itself was one big conspiracy. I've seen plenty of people across the political spectrum"including on the far Left"take all of this stuff as gospel.
So if the government is secretly hiding inflation and the Fed itself is a grand conspiracy to convince us that paper is money (rather than "real" money, aka gold), then is it that hard to believe they're manipulating Covid statistics and plotting to control us all by forcing us all to wear masks and get vaccinated? In my view, it all started with inflation paranoia.
Blyth explains why housing inflation isn't really a sign of hyperinflation. But the average "man on the street" just doesn't get it. To Joe Sixpack, not counting some of the things he has to pay for is cheating. So are "substitutions" like ground beef when steak gets too pricey, or a Honda Civic for a Toyota Camry, for example. The complexity of counting inflation is totally lost on them, making them vulnerable to conspiratorial thinking. Since Biden was elected, the ZOMG HyPeRiNfLaTiOn!!&%! articles are ubiquitous.
Does anyone have a good way of explaining this to ordinary (i.e. non-economically literate) people? I'd love to hear it! Thanks.
TomDority , , May 1, 2021 at 9:41 am
"There is no such thing as house price inflation. Inflation is a general rise in the level of all prices. A sustained rise in the level of prices. The fact that house prices in Toronto have gone up is because Canada stopped building public housing in the 1980s and turned it into an asset class and let the 10 percent top earners buy it all and swap it with each other. That is singularly not an inflation."
Maybe I am totally off but, I would say"¦. By your definition, inflation does not exist in the economic terminology as inflation only exists if generally all prices go up and a singularity of soaring house prices and education and healthcare do not constitute an inflation because the number of things inflating do not meet some unknown number of items needed for a general rise in all prices to create an inflation.
What I read you to say is that if Labor prices go up " that could lead to inflation " but if house prices go up (as they have) that is not inflation.
Hypothetically " if labor prices do not go up and the "˜nessesities of living' prices go up (Housing and Med) " would you not have an inflation in the cost of living? " I am convinced that economists and market experts try to claim that the economy and markets are seperate and distinct from humans as a science " and that Political science has nothing to do with what they present. Yet, humans are the only species to have formed the markets and money we all participate and, the only species, therefore, to have an exclusive asset ownership, indifferent to any other species " IE " if you can't pay you can't play and have no say.
I submit that one or a few asset price increases that are combined with labor price stasis(the actual money outlayed for those asset price increased products not moving up) " especially one that is a basic to living (shelter) and not mobile (like money) is inflation " Land prices going up will generally increase the prices of all products created thereon.
Chris , , May 1, 2021 at 9:55 am
Exactly my interpretation.
The "transitory" "food inflation" (but it's not inflation since TVs went down!) is no issue. Just eat 2 years from now or a TV instead.
Objective Ace , , May 1, 2021 at 10:23 am
I think there's two things going on here. There's different inflation indicators, and asset prices are by definition never a part of inflation
The main indicator of CPI has so many different things in it that the inflation of any one item is going to have little effect on it. But you can look up BEA's detailed GDP deflator to see inflation for more specific things like housing expenses (rent) or transportation.
So back to real estate/land: real estate and land are like the stock market. They aren't subject to inflation. They are subject to appreciation. There is somewhat of a feedback effect for sure though: Increased real estate prices can drive up inflation. Rent for sure gets driven up, but also any other good that's built domestically if the owners of capital need to pay more to rent their factories/farms etc.
As noted in the article though, capitalists can simply move their production overseas so there's a limit to how much US land appreciation can filter into inflation. Its definitely happening with rent as housing can't be outsourced. But rent is only one part of overall inflation
jsn , , May 1, 2021 at 10:23 am
The point he was making is that the price change in housing is the result of a policy restructuring of the market: no new public housing and financial deregulation.
The price of food is similarly a response to policy changes: industry consolidation and resulting price setting to juice financial profits.
The point is distinguishing between political forces and market forces. The former is socially/politically determined while the latter has to do with material realities within a more or less static market structure.
This is a distinction essential to making good policy but useless from a cost of living perspective.
Starry Gordon , , May 1, 2021 at 11:26 am
One could prevent crossover for awhile, but eventually certain policies are going to affect certain markets. The policy of giving the rich money drives up asset prices, real estate is a kind of asset, eventually rising real estate costs affect the market the proles enter when they have to buy or rent real estate.
If state institutions tell them there is no inflation, the proles learn that the state institutions lie because they know better from direct experience. Once that gap develops, it's as with personal relationships: when trust is broken, it is very hard to replace. Once belief in state institutions is lost, significant political effects ensue. Often they are rather unpleasant.
jsn , , May 1, 2021 at 1:06 pm
Yes. Discussing complexity in a low trust society makes definitions of terms within a discussion necessary.
The same words are used in different contexts to mean different things making a true statement in one place a lie in another.
Skip Intro , , May 1, 2021 at 2:22 pm
Blyth pointed to the lack of systemic drivers of price increases, and how the traditional ones have disappeared. I think one that he missed, that results in a disconnect with the evidence of price increases across multiple sectors, is the neoliberal infestation. Rent-sucking intermediaries have imposed themselves into growing swaths of the mechanisms of survival, hollowed out productive capacity, and crapified artifacts to the extent that their value is irredeemably reduced. This is a systemic cause for reduced buying power, i.e. inflation, but it is not a result of monetary or fiscal policy, but political and ideological power.
cnchal , , May 1, 2021 at 3:23 pm
> . . . The fact that house prices in Toronto have gone up is because Canada stopped building public housing in the 1980s and turned it into an asset class and let the 10 percent top earners buy it all and swap it with each other.
That is a total load of baloney. The eighties were a time when the Conservative government came up with the foreign investor program and it was people from Hong Kong getting out before the British hand over to China in 1997.
I was there, trying to save for a house and for every buck saved the houses went up twenty. I finally pulled the plug in 89 when someone subdivided a one car garage from their house and sold it for a small fortune. The stories of Hong Kongers coming up to people raking their yard and offering cash well above supposed market rates and the homeowner dropping their rakes and handing over the keys were legendary.
It's still that way except now they come from mainland China, CCP members laundering their loot.
Any government that makes domestic labor compete with foreign richies for housing is mendacious.
When a Canadian drug dealer "saves up" a million to buy a house and the RCMP get wind of it, they lose the house. When a foreigner show up at the border with a million, it's all clean.
Robert Hahl , , May 1, 2021 at 9:49 am
Many people who talk about avoiding inflation are speaking euphemistically about preventing wage growth, and only that; dog whistles, clearly heard by the intended audience. Yet they are rarely confronted directly on this point. Instead we hear that they don't understand what the word inflation means, and Mark seems to be saying these euphamists (eupahmites?) needn't be so concerned because wages will not go up anyway. If so, what we are talking about here is merely helping workers stay afloat without making any fundamental changes. Well, both sides can agree to that as usual. Guess I'm just worn out by this kind of thing.
Basil Pesto , , May 1, 2021 at 10:02 am
this is only related insofar as Mark Blyth is a treat, and I shared it last week, but icymi, an excellent interview with him on the European Super League debacle last week , which really was a huge story.
The Rev Kev , , May 1, 2021 at 10:28 am
The thing that I like about Mark Blyth is how he cuts to the chase and does not waffle. Must be his upbringing in Scotland I would say. The revelation that the US minimum wage should be about $25-30 is just mind-boggling in itself. But in that talk he unintentionally put a value on how much is at stake in making a fairer economic system and it works out to be about $34 trillion. That is how much has been stolen by the upper percentile and why workers have gone from having a job, car, family & annual vacation to crushing student debt, a job at an Amazon fulfillment center and a second job being an Uber driver while living out of car.
Skip Intro , , May 1, 2021 at 1:24 pm
That $25-30 wage was keeping up with inflation , if it were keeping up with productivity it would be, IIRC, nearly twice that. It is interesting to see a dollar figure put on the amount you can reap after a generation or two of growing a middle class, by impoverishing it.
cnchal , , May 1, 2021 at 3:41 pm
This is key.
But now what we've done, Suresh Naidu the economist was talking about this the other day, is we have all these technologies for surveilling workers (instead of paying them more) . So now what we can do is take that difference between seven and ten and just pocket it because we can actually pay workers at your outside option, because I monitor everything you do, and if you don't do exactly what I say I'll fire you, and get somebody else for seven bucks.
Praise be the STEM workers. Without them where would the criminal corporate class be?
Every time I listen to the news (without barfing) the story is, we need moar STEM workers, and I ask myself, what do they do for a living?
howard in nyc , , May 1, 2021 at 10:37 am
Blyth is a bass guitar player! The things you learn about people.
eg , , May 1, 2021 at 11:32 am
I think he also plays guitar and drums, in addition to the bass guitar.
Mikel , , May 1, 2021 at 2:02 pm
If that kind of tidbit excites you:
Before going into economics, Alan Greenspan was a sax and clarinet player who played with the likes of Stan Getz and Quincy Jones.Go figure"¦.
The Rev Kev , , May 1, 2021 at 7:42 pm
Mark Blyth has a remarkable history as well as, well, I will let you read this article about him-
https://www.jhunewsletter.com/article/2006/10/things-ive-learned-prof-mark-blyth-26651
As a tidbit, he has released five or six albums when younger and is into gourmet Indian cuisine.
HotFlash , , May 1, 2021 at 9:04 pm
And Michael Hudson studied piano and conducting . Do failed musicians gravitate to economics? Perhaps for the same reason as my bank manager, a failed bass player (honors graduate from Classy Cdn U in double bass), they see the handwriting on the wall. He told me his epiphany came when he and his band-mates were trying to make cup-o-noodles with tap water in a room over the pub in Thunder Bay where they were playing.
Tex , , May 1, 2021 at 10:39 am
The mental gymnastics to get to "everything needed to survive costs more but wages have not gone up in decades so therefore its all transitory and inflation does not exist" must be painful. How high does the price for cat food have to get before we stop eating?
freebird , , May 1, 2021 at 10:11 pm
Thank you. Most things I buy or am forced to pay for are rising in price. The economists may enjoy the article, but here in Topeka, it's not flying.
KLG , , May 1, 2021 at 10:49 am
Yes! "The Hamptons are not a defensible position" ranks right up there with "It is easier to imagine the end of the world than the end of (neoliberal) capitalism" by Mark Fisher (and F. Jameson?).
Jeff W , , May 1, 2021 at 5:03 pm
"The Hamptons are not a defensible position"
From Mark Blyth's 2016 interview with AthensLive here .
Return of the Bride of Joe Biden , , May 1, 2021 at 12:12 pm
Does anybody here have knowledge of how much hedonic adjustments influence our official measures of inflation?
chuck roast , , May 1, 2021 at 12:30 pm
Very good, Mark. This leads to the next Q. How do we maintain aggregate demand? The rich guys increasingly Hoover everything up and pay no taxes. So, there is no T. Is the only way to get cash and avoid deflation deficit spending by the G? There is no I worth a damn. (X-M) is a total drain on everything since it's all M in the US and no X. The deficits will have to go out of sight in the future.
You say that there is no velocity of money. Is this because the more money pored into the economy by the G, the more money the rich guys steal? So, there is a general collapse in C. Maybe the work around for the rich guy theft is a $2,000 (sorry, $1,400) check every now and then to the great unwashed. The poors can circulate it a couple of times before the rich guys steal it. Seems like the macro-economists have a lot of "˜splainin' to do. Oh, right, they are busy right now measuring the output gap.
eg , , May 1, 2021 at 2:17 pm
Can someone please define the variables in this comment?
T
G
X
M
CAlso, is there an equation that goes with them?
chuck roast , , May 1, 2021 at 3:29 pm
GNP = Consumption + Investment + Government + (Exports " Imports)
I'd like to see Mark go into a discussion on the velocity of money. I remember the old timey Keynesians lecturing about it, and that's all I remember. I'm guessing that it's related to the marginal propensity to consume.
Ed S. , , May 1, 2021 at 4:35 pm
Chuck,
I may be getting a bit out over my skis, but the St. Louis Fed calculates the velocity of money ( https://fred.stlouisfed.org/series/M2V ). It is defined as
The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy.
So as velocity slows, fewer transactions happen. Based on the linked chart, the peak velocity was 2.2 in mid-1997. In Q1 2021, it was 1.12. By my understanding, although the money supply continues to increase, the money isn't flowing through the economy in the way it was over the last 30 years (or even 10 years ago).
It's beyond my level of understanding to say with any certainty as to why the slowdown in velocity has occurred, but I speculate it's directly related to the ever-growing inequality in the US economy and the ongoing rentier-ism that Dr. Hudson discusses. [simplistically, if Jeff Bezos has $1.3 billion more on Monday than on Friday, that money will flow virtually nowhere. If each of Amazon's employees equally shared that $1.3 billion (about $1,000 each), the preponderance of the money would flow into the economy in short order].
I've always speculated that money velocity is one of the key indicators of the stagnant economy since 2008. It certainly has coincided with the dramatic increase in wealth in the top fraction (not the 1% but the 0.001%) of the US population.
flora , , May 1, 2021 at 1:03 pm
Thanks for this post. Blyth is always good at explaining in a way I can understand.
Mikel , , May 1, 2021 at 1:04 pm
What Blythe has laid out is not a tale about inflation or money, but a tale about power.
If money goes to the non-elite, you get inflation. If it goes to the elite, you don't get inflation.
If you are a country with little control of your resources (not lack of resources, but control) and/or loans (think IMF)/debt (think war reparations) that give people with little interest in whether you live or die control over your countries' finances, you can be prone to inflation or even hyperinflation.Yeah, I figured out a long time ago that none of this is any "natural economic law" because there is no such thing as "nature" in economics. Inflation is all about political decisions and perceptions.
And I saw this on YouTube a couple of days ago"¦and I still can't think of anything around me that hasn't gone up on price.
politicaleconomist , , May 1, 2021 at 2:37 pm
This is a good response to Summers. But I have a quibble and a concern.
My quibble is that he offers no theory of inflation except implicitly aggregate supply exceeding aggregate demand and there is nothing but hand-waving regarding what he is referring to that he feels has a one chance in ten of happening versus Summers one in three. A second part of this quibble is: what does it mean for inflation to "come roaring back." I assume it means more than just a short-term adjustment to a shot of government spending and gifting. I believe if he thought this through he would have to conclude that without changes in the current structure of the global economy there is no way for this to happen. That really is the case he has made. With labor beaten down not only in the US but worldwide inflation will not come roaring back, period. That is unless there is a chance either that a labor renewal is a near-term possibility. I doubt he believes this. Or does he believe there is another way for inflation to roar back? If so, what is that way, what is the theory behind it?A more fundamental concern is the part where he relies on marginal productivity theory when discussing employment and exploitation. Conceptually that far from Marx's fundamental distinction between labor and labor power.
Wukchumni , , May 1, 2021 at 2:45 pm
Hyperinflation doesn't seem to be possible in this age of digital money no matter how much you conjure up because nobody notices the extreme amount of monies around all of the sudden as the average joe isn't in the know.
Used houses are always appreciating in value, but none dare call it inflationary, more of a desired outcome in income advancement if you own a domicile.
There were no shortages of anything in the aftermath of the GFC, and now for want of a semiconductor, a car sale was lost. Everything got way too complex, and we'll be paying the price for that.
I think the inflation to come won't be caused by a lack of faith in a given country's money, but the products and services it enabled us to purchase.
Mikel , , May 1, 2021 at 3:47 pm
""¦and now for want of a semiconductor, a car sale was lost"¦."
Sometimes car sales are lost because the price of cars has gone up (new and used)"¦just don't call it inflation"¦I'm going to let some more time pass, but stimulus or not, we went from all economic problems being laid at the feet of Covid to now moving on to "shortages" everywhere"¦
Just enought to make you go"¦hmmmm"¦.unti more time passes.
Ed S. , , May 1, 2021 at 8:34 pm
Used houses always appreciate " or is it that they appreciate due to a combination of inflation in income over time and the dramatic decrease in interest rates over the last 20 years?
A very quick back of the envelope calc (literally " and all number are approximate):
In June 2000, median US income was $40,500; 30 yr mortgage rate was 8.25%. 28% of monthly income = $945. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc) of roughly $125,000.
In June 2005, median US income was $44,000; 30 yr mortgage rate was 5.5%. 28% of monthly income = $1026. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc) of roughly $180,000.
In June 2010, median US income was $49,500; 30 yr mortgage rate was 4.69%. 28% of monthly income = $1155. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc) of roughly $225,000.
In June 2015, median US income was $53,600; 30 yr mortgage rate was 4.00%. 28% of monthly income = $1250. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc) of roughly $260,000.
Finally, In June 2020, median US income was $63,000; 30 yr mortgage rate was 3.25%. 28% of monthly income = $1470. That supports a mortgage (30 yr fixed, P&I only " no tax, insurance, etc) of roughly $340,000.
And for fun, if you went to 40% of income in 2020 (payment only), a $2100 monthly payment will cover nearly a $500,000 mortgage in 2020.
For the vast majority of home buyers, the price isn't the main consideration " it's how much will it cost per month. So a small increase in median income (roughly 2% per year) combined with dramatically lower interest rates can drive a HUGE increase in a mortgage " and ultimately the price that can be paid for a house.
Michael Ismoe , , May 1, 2021 at 3:24 pm
I find it amazing that when you give poor people money, it creates inflation. If you give rich people money, it creates jobs (LOL. Sure it does.).
As long as billionaires pay as little as possible, the world is fine.
Tom Bradford , , May 1, 2021 at 3:49 pm
Can't say I really understand this sort of thing but saying rocketing house-prices is "˜a singularity' rather than "˜house-price inflation' has to me echoes of the Bourbon's "Bread too expensive? Let them eat cake." And Versailles wasn't a defensive position either.
In my version of economics-for-the-under-tens you get inflation in two situations. First is where enough folk have enough cash in their pockets for producers/manufacturers/retailers to hike their prices without hitting their sales too much and secondly where there's a shortage of stuff people want and/or need which leads to a bidding war. However I'd agree with Blyth that neither condition exists now or seems likely to arise for a while, making a "˜spike' in inflation unlikely.
ArvidMartensen , , May 1, 2021 at 4:17 pm
I am a non-economist, and so my thoughts below may be wrong. However, here goes.
I would say we have had inflation. Roaring inflation. For the past 20 years of so.Inflation in wages and ordinary costs of living? No, wages have been stagnant. Health care has led the charge in cost of living increases, but most other living expense increases have been low.
Inflation in asset prices? We have had massive inflation in the costs of residential housing where I live.
20 years ago I could buy a 5 br, 3 bath home on a decent block in a good area close to everything for $270,000 dollars. Sure it needed some renovation, but still"¦. Now to buy that home it would cost me around $1,250,000. So that home has gone up in value by 500%. Man, that is inflation.As I understand it, asset inflation is not counted by governments in the GDP or CPI. It appears that those who have most of the assets don't want this to be counted, by the very fact that they control the politicians who control what is counted, and asset inflation isn't counted in the economic data that the politicians rely upon to prove how prudent they are.
So if you want a day to day example of where all this free money is going, look at housing. And also have a quick look at the insane increases in the worth of billionaires. They love all this government spending which magically? seems to end up, via asset purchase and asset price inflation, in their pockets.
cnchal , , May 1, 2021 at 7:02 pm
That home has gone up in price by 500%
Price is what one pays, value is what one gets. That house is roughly the same, so the value has not changed, but the price has gone up by a factor of 5
Same with stawks. One share of Amazon stawk is $3,467.42 as of yesterday.
What is its value? If Bezos can work his tools ever harder, monitor them down to the nanosecond and wring ever moar productivity out of them before throwing them in the tool dumpster behind every Amazon warehouse, the value proposition is that someone else will believe the stawk price should be even higher, at which point one can sell it at greater price for a profit.
Susan the other , , May 1, 2021 at 5:07 pm
What is inflation? Good question. I'd say inflation is fear of monetary devaluation. Not devaluation, just the fear of it. We'll never overcome this unease if we always deal in numbers. Dollars, digits, whatever. We need to deal in commodities " let's call just about everything we live with and use a "commodity". Including unpaid family help/care; and the more obvious things like transportation. If we simply took a summary of all the necessary things we need to live decent lives " but not translated into dollars because dollars have no sense " and then provided these necessities via some government agency so that they were not "inflated" in the process and thereby provided a stable society, then government could MMT this very easily. Our current approach is so audaciously stupid it will never make sense let alone balance any balance sheets. That's a feature, not a bug because it's the best way to steal a profit. The best way to stop demand inflation or some fake scarcity or whatever is to provide the necessary availability. That's where uncle Joe is gonna run headlong into a brick wall. He has spent his entire life doing the exact opposite.
William Neil , , May 1, 2021 at 6:59 pm
The figure for the upward transfer of wealth from the Rand Study was $50 trillion between 1975-2018. It was adjusted up by the authors from $47 trillion to bring it up to 2020 trends.
Here are the authors explaining what they found and their methodology: https://time.com/5888024/50-trillion-income-inequality-america/
Now the interesting thing to me is this " look at the date of the publication in Time magazine: Sept. 14, 2020, so right in the heart of campaign fever, and it never came up in the debates, in the press"¦I didn't hear about it until Blyth made one of his appearances on Jay's show with Rana Foroohar. Long after the election.
VietnamVet , , May 1, 2021 at 9:47 pm
As long as 80% of Americans are head over heels in debt and 52% of 18-to-29-year-olds are currently living with their parents, there never will be the wage inflation of the 1970s. A majority of the people arrested for the Capitol riot had a history of financial trouble. The elite blue zones in Washington State and Oregon that prospered from globalism are seeing a spike in coronavirus cases. North American neoliberal governments have failed dismally. It is intentional in order to exploit more wealth for the rich from the natural resources and workers. If the mRNA vaccines do not control coronavirus variants, and a workable national public health system is not implemented; succession and chaos will bring on Zimbabwe type inflation.
There is a reason why Portland Oregon has been a center of unrest for the past year. The Elite just do not want to see it. How can Janet Yellen deal with this? She can't. She is an Insider. She was paid 7.2 million dollars in speaker and seminar fees in the last two years not to.
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May 05, 2021 | www.wsj.com
Treasury Secretary walks backs comments she made earlier suggesting that rates might riseTreasury Secretary Janet Yellen said Tuesday she is neither predicting nor recommending that the Federal Reserve raise interest rates as a result of President Biden's spending plans, walking back her comments earlier in the day that rates might need to rise to keep the economy from overheating.
"I don't think there's going to be an inflationary problem, but if there is, the Fed can be counted on to address it," Ms. Yellen, a former Fed chairwoman, said Tuesday at The Wall Street Journal's CEO Council Summit.
Ms. Yellen suggested earlier Tuesday that the central bank might have to raise rates to keep the economy from overheating, if the Biden administration's roughly $4 trillion spending plans are enacted.
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Apr 27, 2021 | www.zerohedge.com
Authored by Paul Joseph Watson via Summit News,
Leftists reacted with fury after Fox News host Tucker Carlson said people who wear masks outside should be mocked and that parents who made their kids wear them were engaging in "child abuse."
https://imasdk.googleapis.com/js/core/bridge3.453.0_en.html#goog_1043494571
Carlson noted that masks were "purely a sign of political obedience like Kim Il-Sung pins in Pyongyang" and that the only people who voluntarily wear masks outside are "zealots and neurotics."
He then asserted that the tables should be turned on Biden voters who have been harassing conservatives for almost a year for not wearing a mask in public.
"The rest of us should be snorting at them first, they're the aggressors – it's our job to brush them back and restore the society we were born in," said Carlson.
"So the next time you see someone in a mask on the sidewalk or on the bike path, do not hesitate. Ask politely but firmly, ' Would you please take off your mask? Science shows there is no reason for you to be wearing it. Your mask is making me uncomfortable, " he added.
https://platform.twitter.com/embed/Tweet.html?dnt=false&embedId=twitter-widget-0&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2hvcml6b25fdHdlZXRfZW1iZWRfOTU1NSI6eyJidWNrZXQiOiJodGUiLCJ2ZXJzaW9uIjpudWxsfX0%3D&frame=false&hideCard=false&hideThread=false&id=1386921015943602178&lang=en&origin=https%3A%2F%2Fwww.zerohedge.com%2Fcovid-19%2Ftucker-carlson-says-people-who-wear-masks-outside-should-be-mocked&sessionId=2230b0fb24328ba2a6edaa853064249defa128d8&siteScreenName=zerohedge&theme=light&widgetsVersion=b5cd9ac%3A1619504549508&width=550px
"We should do that and we should keep doing it until wearing a mask outside is roughly as socially accepted as lighting a Marlboro on an elevator."
The Fox News host went on to call mask wearing "repulsive" while asserting that forcing children to wear masks outside should be illegal.
"Your response when you see children wearing masks as they play should be no different from your response to seeing someone beat a kid in Walmart. Call the police immediately. Contact Child Protective Services. Keep calling until someone arrives," Carlson said.
"What you're looking at is abuse, it's child abuse, and you are morally obligated to attempt to prevent it," he added.
As expected, Carlson immediately began trending on Twitter, with hysterical leftists hyperventilating over Tucker once again challenging their cult. Many called for the Fox News host to be fired while others ludicrously described him as a "national security threat."
As we highlighted yesterday , even Dr. Fauci now admits that the risk of vaccinated people spreading COVID outside is "minuscule," and yet some health professionals are pushing for the mask mandates to be made permanent.
The transmission of COVID-19 outdoors is almost non-existent, making mask mandates merely a political tool of population control.
In a recent open letter to the German government and state premiers, five leading members of the Association for Aerosol Research (GAeF) wrote, "The transmission of SARS-CoV-2 viruses takes place indoors almost without exception. Transmission outdoors is extremely rare and never leads to cluster infections as can be observed indoors."
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Fiscal.Enema 8 hours ago (Edited)
Robert Neville 7 hours agoIn all fairness... Tucker should have pointed out that SOME MASKS do filter out the virus most of the time.
Wearing a mask outdoors in most situations is ridiculous, stupid, and dangerous.
3M N95's 1860 which are electrostatically charged have good filtration protection against most virus.
Why the us government did not fund this type of mask for all is telling what the overall strategy is.
Controlling you, your neighbor, and others that think for themselves.
Its not about the virus
Fiscal.Enema 6 hours agoActually, M95 masks filter out 95% of particles over 4 microns in diameter in perfect conditions. In the real world it is much less effective than that. Viruses are generally less than one micron in size so they are ineffective for most viruses. Also, the masks are so hard to breath through that some version have an exhale valve so they do nothing to protect others if you are infected. Most masks don't protect your eyes. The only thing that works is a space suit that is decontaminated before you remove it. The rest is virtue siganling.
Dickweed Wang 10 hours ago (Edited)PUT THAT IN YOUR PIPE AND SMOKE IT!
Properly fitted n95's do protect against virus and the science proves it.
This is an excerpt from the "Stanford Study" from November 2020 (that's been making the rounds in the alternative media and conservative media space recently) about the uselessness of masks in preventing "the virus":
A meta -analysis among health care workers found that compared to no masks, surgical mask and N95 respirators were not effective against transmission of viral infections or influenza-like illness based on six RCTs [28] . Using separate analysis of 23 observational studies, this meta -analysis found no protective effect of medical mask or N95 respirators against SARS virus [28] . A recent systematic review of 39 studies including 33,867 participants in community settings (self-report illness), found no difference between N95 respirators versus surgical masks and surgical mask versus no masks in the risk for developing influenza or influenza-like illness, suggesting their ineffectiveness of blocking viral transmissions in community settings [29] .
It's predictable that the usual suspects have come out of the woodwork to "fact check" and disparage the entire paper (do an internet search for 'Stanford Mask Paper' and you'll see what I'm talking about). Their main criticism is 'that wasn't published by Stanford', while they totally ignore the claims made in the paper. When you look at the people and organizations doing the fact checking it really shows that the entire mask issue is a political/control ploy. Here's the link to the entire paper if anyone is interested:
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May 03, 2021 | www.zerohedge.com
Dickweed Wang 10 hours ago (Edited)
Capt Tripps 10 hours ago remove linkAs an anti-mask militant for quite a while now I've been going out of my way to ask people with masks on outdoors why they're wearing one (I've really tried to be polite but it's getting increasingly hard to do that). In literally hundreds of instances I haven't gotten a straight answer yet. It's stunning that people are so gullible but it shows what the power of propaganda really is. 99% of that is coming from teevee, which truly rots your brain.
safelyG 10 hours agoThey are signaling the submission to a tyrannical state. That submission makes us all less free.
radical-extremist 10 hours agomister tucker is wrongeddy wrong wrong.
we must all wear multiple masks. indoors. outdoors. at work. at play. while we sleep. while we bathe. while we eat. while we sing praises unto the most high.
and we must remain 8 feet apart, one from the other. at all times.
and report our whereabouts and our contacts and our body temperature. to the authorities.
get your vacines!
lovingly,
bill n melindaRealism 10 hours ago remove linkWhen Tucker Carlson says to tell people to take off their masks and call CPS on parents who mask their children he's trolling the Left. And because the Left has no sense of humor or irony or hypocrisy...they're of course OUTRAGED, which was his point.
aztrader 10 hours agoI like it best when hiking outside, in 75 degree weather with a nice breeze, you see people put up their mask as they walk by
Pure comedy, it's hard to understand the stupidity if you think you'll get any disease much less Covid walking by someone
And importantly, would you really be hiking if you had Covid LOL
Prince Velveeta 10 hours ago (Edited) remove linkMask wears see it as a badge of honor because they "care" about other people. In reality, it's a badge of Stupidity and ignorance.
California is an open-air mental ward. I was just out there and the collective idiocy is astounding. People jogging with masks on , exaggerating their breathing as they pass you in some competitive virtue signaling event. I witnessed some idiot jogging up the hill past my family member's house, with a bandana on his face, being sucked into his mouth as he's gasping for air.....
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Apr 16, 2021 | www.zerohedge.com
Authored by Caitlin Johnstone,
Back in the good old days, when things were more innocent and simple, the psychopathic Central Intelligence Agency had to covertly infiltrate the news media to manipulate the information Americans were consuming about their nation and the world. Nowadays, there is no meaningful separation between the news media and the CIA at all.
Analysis: US blinks first on Russia-Ukraine tensionsJournalist Glenn Greenwald just highlighted an interesting point about the reporting by The New York Times on the so-called “Bountygate†story the outlet broke in June of last year about the Russian government trying to pay Taliban-linked fighters to attack US soldiers in Afghanistan.
“One of the NYT reporters who originally broke the Russia bounty story (originally attributed to unnamed ‘intelligence officials’) say today that it was a CIA claim,†Greenwald tweeted .
“So media outlets - again - repeated CIA stories with no questioning: congrats to all.â€
Indeed, NYT’s original story made no mention of CIA involvement in the narrative, citing only “officials,†yet this latest article speaks as though it had been informing its readers of the story’s roots in the lying, torturing , drug-running , warmongering Central Intelligence Agency from the very beginning. The author even writes “The New York Times first reported last summer the existence of the C.I.A.’s assessment,†with the hyperlink leading to the initial article which made no mention of the CIA. It wasn’t until later that The New York Times began reporting that the CIA was looking into the Russian bounties allegations at all.
https://platform.twitter.com/embed/Tweet.html?dnt=false&embedId=twitter-widget-0&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2hvcml6b25fdHdlZXRfZW1iZWRfOTU1NSI6eyJidWNrZXQiOiJodGUiLCJ2ZXJzaW9uIjpudWxsfX0%3D&frame=false&hideCard=false&hideThread=false&id=1382793565714153472&lang=en&origin=https%3A%2F%2Fwww.zerohedge.com%2Fpolitical%2Fcia-used-infiltrate-media-now-cia-media&sessionId=77ef0dadbd05c9f3bcb1de7857a624713a43f3d8&siteScreenName=zerohedge&theme=light&widgetsVersion=ff2e7cf%3A1618526400629&width=550px
This would be the same “Russian bounties†narrative which was discredited all the way back in September when the top US military official in Afghanistan said no satisfactory evidence had surfaced for the allegations, which was further discredited today with a new article by The Daily Beast titled “ U.S. Intel Walks Back Claim Russians Put Bounties on American Troops â€.
The Daily Beast , which has itself uncritically published many articles promoting the CIA “Bountygate†narrative, reports the following:
It was a blockbuster story about Russia’s return to the imperial “Great Game†in Afghanistan. The Kremlin had spread money around the longtime central Asian battlefield for militants to kill remaining U.S. forces. It sparked a massive outcry from Democrats and their #resistance amplifiers about the treasonous Russian puppet in the White House whose admiration for Vladimir Putin had endangered American troops.
But on Thursday, the Biden administration announced that U.S. intelligence only had “low to moderate†confidence in the story after all. Translated from the jargon of spyworld, that means the intelligence agencies have found the story is, at best, unproven â€" and possibly untrue.
https://platform.twitter.com/embed/Tweet.html?dnt=false&embedId=twitter-widget-1&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2hvcml6b25fdHdlZXRfZW1iZWRfOTU1NSI6eyJidWNrZXQiOiJodGUiLCJ2ZXJzaW9uIjpudWxsfX0%3D&frame=false&hideCard=false&hideThread=false&id=1382769897420296194&lang=en&origin=https%3A%2F%2Fwww.zerohedge.com%2Fpolitical%2Fcia-used-infiltrate-media-now-cia-media&sessionId=77ef0dadbd05c9f3bcb1de7857a624713a43f3d8&siteScreenName=zerohedge&theme=light&widgetsVersion=ff2e7cf%3A1618526400629&width=550px
So the mass media aggressively promoted a CIA narrative that none of them ever saw proof of, because there was no proof, because it was an entirely unfounded claim from the very beginning. They quite literally ran a CIA press release and disguised it as a news story.
This allowed the CIA to throw shade and inertia on Trump’s proposed troop withdrawals from Afghanistan and Germany, and to continue ramping up anti-Russia sentiments on the world stage , and may well have contributed to the fact that the agency will officially be among those who are exempt from Biden’s performative Afghanistan “withdrawal†.
In totalitarian dictatorships, the government spy agency tells the news media what stories to run, and the news media unquestioningly publish it. In free democracies, the government spy agency says “Hoo buddy, have I got a scoop for you!†and the news media unquestioningly publish it.
In 1977 Carl Bernstein published an article titled “ The CIA and the Media †reporting that the CIA had covertly infiltrated America’s most influential news outlets and had over 400 reporters who it considered assets in a program known as Operation Mockingbird . It was a major scandal, and rightly so. The news media is meant to report truthfully about what happens in the world, not manipulate public perception to suit the agendas of spooks and warmongers.
Nowadays the CIA collaboration happens right out in the open, and people are too propagandized to even recognize this as scandalous. Immensely influential outlets like The New York Times uncritically pass on CIA disinfo which is then spun as fact by cable news pundits . The sole owner of The Washington Post is a CIA contractor , and WaPo has never once disclosed this conflict of interest when reporting on US intelligence agencies per standard journalistic protocol. Mass media outlets now openly employ intelligence agency veterans like John Brennan, James Clapper, Chuck Rosenberg, Michael Hayden, Frank Figliuzzi, Fran Townsend, Stephen Hall, Samantha Vinograd, Andrew McCabe, Josh Campbell, Asha Rangappa, Phil Mudd, James Gagliano, Jeremy Bash, Susan Hennessey, Ned Price and Rick Francona, as are known CIA assets like NBC’s Ken Dilanian, as are CIA interns like Anderson Cooper and CIA applicants like Tucker Carlson.
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This isn’t Operation Mockingbird. It’s so much worse. Operation Mockingbird was the CIA doing something to the media. What we are seeing now is the CIA openly acting as the media. Any separation between the CIA and the news media, indeed even any pretence of separation, has been dropped.
This is bad. This is very, very bad. Democracy has no meaningful existence if people’s votes aren’t being cast with a clear understanding of what’s happening in their nation and their world, and if their understanding is being shaped to suit the agendas of the very government they’re meant to be influencing with their votes, what you have is the most powerful military and economic force in the history of civilization with no accountability to the electorate whatsoever. It’s just an immense globe-spanning power structure, doing whatever it wants to whoever it wants. A totalitarian dictatorship in disguise.
And the CIA is the very worst institution that could possibly be spearheading the movements of that dictatorship. A little research into the many, many horrific things the CIA has done over the years will quickly show you that this is true; hell, just a glance at what the CIA was up to with the Phoenix Program in Vietnam will.
https://platform.twitter.com/embed/Tweet.html?dnt=false&embedId=twitter-widget-3&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2hvcml6b25fdHdlZXRfZW1iZWRfOTU1NSI6eyJidWNrZXQiOiJodGUiLCJ2ZXJzaW9uIjpudWxsfX0%3D&frame=false&hideCard=false&hideThread=false&id=1382856410443186179&lang=en&origin=https%3A%2F%2Fwww.zerohedge.com%2Fpolitical%2Fcia-used-infiltrate-media-now-cia-media&sessionId=77ef0dadbd05c9f3bcb1de7857a624713a43f3d8&siteScreenName=zerohedge&theme=light&widgetsVersion=ff2e7cf%3A1618526400629&width=550px
There’s a common delusion in our society that depraved government agencies who are known to have done evil things in the past have simply stopped doing evil things for some reason. This belief is backed by zero evidence, and is contradicted by mountains of evidence to the contrary. It’s believed because it is comfortable, and for literally no other reason.
The CIA should not exist at all, let alone control the news media, much less the movements of the US empire. May we one day know a humanity that is entirely free from the rule of psychopaths, from our total planetary behavior as a collective, all the way down to the thoughts we think in our own heads.
May we extract their horrible fingers from every aspect of our being.
* * *
New book: Notes From The Edge Of The Narrative Matrix .
The best way to get around the internet censors and make sure you see the stuff I publish is to subscribe to the mailing list for at my website or on Substack , which will get you an email notification for everything I publish. My work is entirely reader-supported , so if you enjoyed this piece please consider sharing it around, liking me on Facebook , following my antics on Twitter , or throwing some money into my tip jar on Ko-fi , Patreon or Paypal . If you want to read more you can buy my books . For more info on who I am, where I stand, and what I’m trying to do with this platform, click here . Everyone, racist platforms excluded, has my permission to republish, use or translate any part of this work (or anything else I’ve written) in any way they like free of charge.
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May 03, 2021 | finance.yahoo.com
The prices of raw materials used to make almost everything are skyrocketing, and the upward trajectory looks set to continue as the world economy roars back to life.
From steel and copper to corn and lumber, commodities started 2021 with a bang, surging to levels not seen for years. The rally threatens to raise the cost of goods from the lunchtime sandwich to gleaming skyscrapers. It’s also lit the fuse on the massive reflation trade that’s gripped markets this year and pushed up inflation expectations. With the U.S. economy pumped up on fiscal stimulus, and Europe’s economy starting to reopen as its vaccination rollout gets into gear, there’s little reason to expect a change in direction.
JPMorgan Chase & Co. said this week it sees a continued rally in commodities and that the “reflation and reopening trade will continue.†On top of that, the Federal Reserve and other central banks seem calm about inflation, meaning economies could be left to run hot, which will rev up demand even more.
“The most important drivers supporting commodity prices are the global economic recovery and acceleration in the reopening phase,†said Giovanni Staunovo, commodity analyst at UBS Group AG. The bank expects commodities as a whole to rise about 10% in the next year.
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May 03, 2021 | finance.yahoo.com
The Treasury market's inflation bulls seem to have gotten a green light from Federal Reserve Chair Jerome Powell to double down on wagers that price pressures will only intensify in the months ahead.
The renewed mojo for the reflation trade follows Powell's reaffirmation this week of the central bank's intention to let the world's biggest economy run hot for some time as it recovers from the pandemic. The Fed's unwavering commitment to ultra-loose policy in the face of robust economic data is what caught traders' attention. It took on added significance as it coincided with signs infections are ebbing again in the U.S., and as President Joe Biden unveiled plans for trillions more in fiscal spending.
Investors eying all this aren't ready to give the Fed the benefit of the doubt in its assessment that inflationary pressures will prove temporary. A key bond-market proxy of inflation expectations for the next decade just hit the highest since 2013, and cash has been pouring into the largest exchange-traded fund for Treasury Inflation-Protected Securities. Globally, there's been a net inflow into mutual and exchange-traded inflation-linked debt funds for 23 straight weeks, EPFR Global data show.
The Fed is stressing that inflation's upswing "is transitory, but we likely won't have better clarity on this assertion until this initial economic wave from reopening has subsided," said Jake Remley, a senior portfolio manager at Income Research + Management, which oversees $89.5 billion. "Inflation is a very difficult macro-economic phenomenon to predict in normal times. The uncertainty of a global pandemic and a dramatic economic rebound" has made it even harder.
Ten-year TIPS provide a reasonably priced insurance policy against inflation risk over the coming decade, Remley said. The securities show traders are wagering annual consumer price inflation will average about 2.4% through April 2031. The measure has roared back from the depths of last year, when it dipped below 0.5% at one point in March.
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May 03, 2021 | finance.yahoo.com
Brian Sozzi · Editor-at-Large Sat, May 1, 2021, 6:05 PM
Billionaire Warren Buffett is joining the long list of executives saying serious levels of inflation are starting to take hold as the U.S. economy roars back from the COVID-19 downturn.
"We are seeing substantial inflation," Buffett said at the Berkshire Hathaway annual shareholder meeting broadcast exclusively by Yahoo Finance . "We are raising prices. People are raising prices to us, and it's being accepted."
Buffett called out much higher steel costs impacting Berkshire's housing and furniture businesses.
"People have money in their pocket, and they pay higher prices... it's almost a buying frenzy," Buffett said, noting that the economy is "red hot."
The Oracle of Omaha isn't alone in battling inflation at the moment from everything to higher steel prices to runaway copper prices.
The number of mentions of "inflation" during first quarter earnings calls this month have tripled year-over-year, the biggest jump dating back to 2004, according to fresh research from Bank of America strategist Savita Subramanian . Raw materials, transportation, and labor were cited as the main drivers of inflation .
Subramanian's research found that the number of inflation mentions has historically led the consumer price index by a quarter, with 52% correlation. In other words, Subramanian thinks investors could see a "robust" rebound in inflation in coming months in the wake of the latest round of C-suite commentary.
"Inflation is arguably the biggest topic during this earnings season, with a broad array of sectors (Consumer/Industrials/Materials, etc.) citing inflation pressures," Subramanian notes.
The world's biggest companies are taking action, just like Buffett at Berkshire.
Proctor & Gamble said recently it would begin to hike prices on baby care , feminine care and adult incontinence products in the United States. Price increases will range from mid- to high-single digit percentages. The hikes will go into effect in mid-September.
Whirlpool CFO Jim Peters recently told Yahoo Finance Live the appliance maker just jacked up prices by 5% to 12% to counteract rising steel costs.
Kleenex maker Kimberly-Clark said it will increase prices in the U.S. and Canada on the majority of its consumer products due to "significant" commodity cost inflation. The percentage increases will range from mid- to high-single digits and go into effect in June.
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May 03, 2021 | www.zerohedge.com
By Joseph Carson , former chief economist of Alliance Bernstein
Federal Reserve Chairman Jerome Powell has played down the current runup in inflation, arguing it is associated with the reopening of the economy. And as the low inflation readings of one year ago drop out, the twelve-month calculation (i.e., the so-called base effect) of reported inflation is likely to move up in the coming months.
Yet, Mr. Powell's "base effect" inflation argument is nonsense. For the "base effect" argument to be correct, the twelve-month reading of reported inflation should be markedly lower when the economy was closed than what occurred before the pandemic. But that's not the case.
Last week, the Bureau of Economic Analysis reported that the twelve-month change ending in March 2021 in the core personal consumption index (the Fed's preferred price index) was 1.83%. That compares to the 1.87% reading for the year ending in February 2020 and 1.7% for the year before that.
The 1.83% reading for twelve months ending March 2021 essentially matches the average inflation rate of the two prior years. And that 12 month period includes the three months (April to June) when the economy was closed, and GDP plunged a record 31% annualized. How could there be a "base effect" on reported inflation when the base year has the same inflation rate as it did before the pandemic?
Mr. Powell's "base effect" inflation argument has not been questioned or challenged by analysts or reporters. Regardless of that, investors need to ignore the Fed's rhetoric and treat upcoming price increases as "new" inflation.
As nonsensical as the explanation for the uptick in inflation, so too is the remedy. Demand has always been the primary force behind broad inflation cycles. Yet, Mr. Powell argues that product price inflation will ease once manufacturers increase output and eliminate "supply bottlenecks," and home inflation will slow once builders build more homes.
It's hard to see how more supply (or growth) will slow inflation anytime soon. Federal Home Loan Mortgage Company (Freddie Mac) estimates that the US needs almost 4 million new homes to meet demand. That could take two to three years. Also, it's hard to see how increasing product output will solve the inflation problem. The supply-side argument solution; fight inflation with more demand and more commodity inflation.
The Fed's mantra has always been "inflation is everywhere and always a monetary phenomenon." But nowhere in Mr. Powell's statements or comments do you find any monetary policy role for increased inflation or any responsibility for containment. Investors forewarned.
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Apr 29, 2021 | www.shadowstats.com
After thirteen months, the BLS still cannot count the Unemployed. Headline U.3 Unemployment also remained deep in non-recovery territory. The BLS acknowledged continuing misclassification of some "unemployed" persons as "employed," in the Household Survey. Where the count of the understated unemployed had an "upside limit" of 636,000 persons in March 2021, the February 2021 upside estimate of understated unemployed was 756,000. The difference would be a potential headline U.3 of 6.44% instead of today's headline 6.05%, which was down from a headline 6.22% in February. Fully adjusted for COVID-19 disruptions, based on BLS side-surveys of Pandemic impact, and with more than six million people missing from the headline U.S. labor force, actual headline U.3 unemployment still should be well above 10%, the highest unemployment rate since before World War II, outside of the Pandemic and possibly at the trough of the 1982-1983 recession. Broader March 2021 headline U.6 unemployment [including some decline in short-term discouraged workers and those employed part-time for economic reasons] eased to 10.71% from 11.07% in February. Including long-term discouraged/ displaced workers, the March 2021 ShadowStats Alternate Measure –- moving on top of the decline in U.6 –- notched minimally lower to 25.7%, from 25.8% in February 2021, reflecting some modeled transition of "short-term" to "long-term" discouraged workers, with the Pandemic having passed its 12-month anniversary. The latest Unemployment Rates are posted on the ALTERNATE DATA tab (above).
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Apr 29, 2021 | www.moonofalabama.org
vk , Apr 29 2021 15:19 utc | 7
Food for thought:
Federal Reserve isn't fooling anybody on inflation
I don't share David P. Goldman's ideology and convictions. They are almost the polar opposite of mine's.
But he has something I don't have, something that only a bourgeois specialist can give: insider information.
I once hypothesized here that, if the USA were to collapse suddenly (which I don't think it ever will, but if it do happen), then it would surely involve an uncontrolled growing spiral of inflation/hyperinflation. That's the logical conclusion of an hypothetical collapse of the USD standard.
So far, I can only see a mild rise in inflation. I don't think the USA will ever experience hyperinflation (four-digit) or even true high inflation (two-digit). Goldman is a rabid neoliberal, and anything above 2% is hyperinflation for him, so we should take these kind of analyses with a grain of salt.
--//--
Sugar rush:
US real GDP rose 6.4 per cent on an annualised basis in the first quarter
Fed Chair Jay Powell said that the Fed was not going to tighten monetary policy any time soon. So the US stock market hit yet another all-time high.
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Apr 27, 2021 | www.unz.com
We Can’t Police These People GREGORY HOOD • APRIL 21, 2021 • 2,300 WORDS • 16 COMMENTS • REPLY Tweet Reddit Share Share Email Print More RSS Share to Gab After a jury found Derek Chauvin guilty on all three counts, people celebrated outside of the Hennepin County Government Center and marched downtown in Minneapolis, Minnesota, on April 20, 2021. (Credit Image: © Dominick Sokotoff / ZUMA Wire)“Nothing is more certainly written in the book of fate than that these people are to be free. Nor is it less certain that the two races, equally free, cannot live in the same government. Nature, habit, opinion has drawn indelible lines of distinction between them.†â€" Thomas Jefferson
https://platform.twitter.com/embed/Tweet.html?dnt=true&embedId=twitter-widget-0&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2hvcml6b25fdHdlZXRfZW1iZWRfOTU1NSI6eyJidWNrZXQiOiJodGUiLCJ2ZXJzaW9uIjpudWxsfX0%3D&frame=false&hideCard=false&hideThread=false&id=1384615385127817225&lang=en&origin=https%3A%2F%2Fwww.unz.com%2Fghood%2Fwe-cant-police-these-people%2F&sessionId=d2e5069c452172e4f5d4a2eb4c42221d839ce747&theme=light&widgetsVersion=ff2e7cf%3A1618526400629&width=500px
The trial was pointless . We knew the outcome . We knew the threat. Convict Derek Chauvin of murder, or cities will burn . Jurors surely knew they would be doxxed if they didn’t vote to convict; one potential juror was dismissed after he dared mention this fear.
There is a debate to be had about police conduct. I’m not going to back the blue unconditionally after Charlottesville , Ashli Babbit , and the ruthless manhunt for January 6 rioters. Derek Chauvin would have carried out the same orders against us. However, what Derek Chauvin did to George Floyd isn’t even close to what happened to white man Daniel Shaver , gunned down in a hotel hallway by a police officer who was later acquitted and was paid for his mental suffering . This is about race, not police. I expect police will crack down further on law-abiding whites while ignoring black crime .
The howls for Derek Chauvin’s head were primal. I haven’t heard such cries of triumph since O.J. Simpson was acquitted .
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Of course, Derek Chauvin was hardly a champion of white identity . In 2018, the Twin Cities Pioneer Press gave a fawning profile to his then-wife, Hmong refugee Kellie Chauvin. She called her husband a “gentleman†and “just a softie.†Less than two years later, just three days after George Floyd’s death , she divorced him. Her lawyer told journalists about her “utmost sympathy†for Floyd’s family.
What’s so striking about the Derek Chauvin case is that it could have happened anywhere. Every police officer (or white person who lives in a black neighborhood) knows about the sob stories, the wailing, the lying, and the sudden switch from threats to begging and back again when blacks face cops. Floyd himself had tried this soft-shoe routine when he was arrested in 2019. Derek Chauvin and his three colleagues had probably seen far worse.
Yet it was Derek Chauvin’s blasé attitude during the arrest, his business-like nature, that doomed him. If he had acted less professional, by panicking or begging Floyd to remain calm, it would have been different. The other officers were just as relaxed. They must feel dumbfounded that their attempts to subdue a raving man on drugs led to something close to a revolution. The prosecutor’s closing argument was something out of a nursery rhyme, denying that George Floyd’s heart problems and drug-taking caused his death, but rather that Derek Chauvin’s “heart was too small.†(The media loved it.)
Whether a routine arrest like this becomes a cause depends on countless factors. If the teenager Darnella Frazier had not taken a video , nothing would have happened. Even with body cam footage, I suspect there would have been no case. Without a simple image to rouse the simple masses, no one would have cared.
The sanctification of George Floyd makes this even more surreal. The #MeToo movement took down powerful men who had made inappropriate jokes or crude gestures decades ago, but a criminal who spent his last moments on earth trying to rip-off shopkeepers and lying to police has become a holy figure , complete with literal claims of miracles. George Floyd’s life and death were practically a caricature of what the crudest “racist†would conjure out of a hateful imagination. A white man with his record would have been treated exactly the same , but because Floyd was black, journalists made him a saint. Most people let others build their reality . Post-white America has a new faith .
Fox News host Greg Gutfeld, author of The Bible of Unspeakable Truths and The Joy of Hate , said that even if Derek Chauvin wasn’t guilty of all charges, he thought the verdict was a good thing. “I want a verdict that keeps this country from going up in flames,†he explained. That’s the bravery of American conservatives for you. While the country didn’t “go up in flames,†there were some troubling signs last night that worse is to come.
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The guilty verdict didn’t calm the streets. It didn’t even calm the politicians. The President of the United States said that “this can be a moment of significant change.†Kamala Harris , whose parents are immigrants, intones that this won’t “heal the pain that existed for generations.†Barack and Michelle Obama want “true justice,†which requires “that we come to terms with the fact that Black Americans are treated differently, every day.†(I don’t think they mean affirmative action.) Alexandria Ocasio-Cortez said the verdict wasn’t justice and doesn’t want people to think the system works. Empty-headed celebrities demand that more be done.
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The guilty verdicts didn’t douse the fire; it fed the flames. It’s yet more proof: rioting works.
And now, we’ve already had a member of Congress demanding that policing be abolished because it can’t be reformed:
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Rep. Tlaib represents Detroit , where the already-ruined city saw a huge increase in homicides and shootings in 2020, just another part of what was undoubtedly the largest single-year increase in the murder rate in American history. Almost all the added victims were black. “The community†doesn’t seem to care, so there’s no reason politicians should.
Let’s hear no wailing about “black lives.†The main victims of the crime wave are black, with victims including children , partygoers , and funeral guests . Voters who elect progressive prosecutors don’t seem to care any more than the “community†does. Do they prefer bloodshed to good police work?
Vox tells us BLM has led to a reduction in “police homicides†in areas where there were protests. Of course, at least some of these homicides would have been justified use of force. Yet the very same research Vox cites says that between 2014 and 2019, there were “somewhere between 1,000 and 6,000 more homicides than would have been expected [absent protests]†in those places. Even if we accept the unhinged premise that police suddenly stopped gunning down blacks for no reasons, the result of BLM was thousands of dead blacks â€" and nice houses for the movement’s co-founder .
Still, it’s not about blacks. It’s about us. Rudyard Kipling, a poet who wouldn’t get far in our affirmative action world , wrote :
It is always a temptation for a rich and lazy nation,
To puff and look important and to say: â€"
“Though we know we should defeat you, we have not the time to meet you.
We will therefore pay you cash to go away.â€
And that is called paying the Dane-geld;
But we’ve proved it again and again,
That if once you have paid him the Dane-geld
You never get rid of the Dane.
We paid the Dane-geld. We’ve shamefully paid it to people with far less nobility and courage than the Vikings. The Minnesota protester screaming that riots worked is right. They worked because they had media backing. If others ran the press, the Cannon Hinnant case alone could have changed everything. Instead, most whites haven’t heard of it, nor about the others of our race butchered every year .
Our loss of identity leaves us vulnerable to moral blackmail. Whites seem to be in a permanent state of shellshock. White conservatives want to be left alone, with Tucker Carlson saying that what the nation needs “more than anything†is “a moment to catch our national breath.†Really? Conservatives know something is wrong, but don’t dare recognize the real problem. Republicans who collaborate with this rotten system have shut down even halting steps towards white identity .
Meanwhile, over the last decade, white liberals have radically changed their views on race and actively discriminate against whites . It’s more correct to say that new views were inserted into their brains through hysterical media coverage of police shootings. Those who call themselves “very liberal†are hopelessly deluded. A majority think that police gun down over 1,000 unarmed black men a year â€" almost 100 times the actual number.
https://www.bitchute.com/embed/5Bf07CnmFidD/
Statistics can’t compete with sob-stories, and stories give people meaning. I believe many Americans get their moral purpose for life from them.
There are also specific benefits in keeping the system going. Activists and politicians build careers. Blacks get a chance of hitting the “ ghetto lottery †(assumed they aren’t killed) and becoming heroes. It’s a strong incentive to turn a petty scam into an epic showdown. Journalists who want to lead a social revolution or just get clicks (or both) fall right in line.
Even as this is written, there is a case in Columbus, Ohio that could be our next George Floyd-style passion play. Officers arrived at a chaotic brawl and shot a black girl. Body cam footage shows the girl trying to stab someone before she was shot. Nonetheless, the image the Associated Press uses for the story is a Black Lives Matter protest. It looks like yet another case of a degenerate “community†causing chaos, attracting the police, and causing a racial confrontation.
This is what the dead girl’s aunt told The Daily Beast:
The police are going to lie. I’m so thankful that someone from the family was actually on the scene,†[Aunt] Bryant said . . . . “The police are going to lie. The police are going to cover up for themselves. They don’t care. At this point, I feel like they’re just out to kill Black people. They’re not here to protect and serve. That isn’t happening. That’s been over a long time ago. They’re not here to protect and serve. They’re here to kill Black folks.
Like many other whites, I’m exhausted. Unlike Tucker Carlson , I don’t think we need a chance to catch our breath or pursue change more slowly. We need radical change.
Every confrontation between a white officer and a non-white criminal is a potential riot . The process is corrupt because judges, jurors, and politicians know that the mob has a veto over the verdict. The rule of law is dead.
The answer is separation . Without it, this will never stop.
https://www.bitchute.com/embed/2vb9uMyWhLuW/
The strange reality is that there is almost no difference now between being a notorious white advocate or any white guy. Derek Chauvin went, in just one day, from a heartwarming “softie†who married a Hmong refugee to the embodiment of white supremacy. A few days ago, it was a soldier who stopped a black guy from accosting women. He had to be chased from his home. Tomorrow it could be you.
You could try to stop a crime. You could fight back against an assault. Maybe you just look at someone the wrong way. Maybe you do nothing at all. But if you donated $10 to a cause the media don’t like â€" or even if you didn’t â€" you could be the mark for the next great hate hoax.
I write this reluctantly. Many of us become white advocates kicking and screaming, afraid to see the truth. We all get here through experience , usually painful.
However, no matter how far you run, how earnestly you plead, what you say, or even whom you marry, you will always be white to those with power. That means many despise you. At some point, you must decide to stand or kneel, and a society that kneels before the memory of a George Floyd is not one worth serving or saving.
Credit Image: © Matthew Hatcher/SOPA Images via ZUMA WireWhites created this country. They sustain it. Without whites, there is no America. America is an extension of Western Civilization, white civilization, on this continent. Whites pay to support people who hate, curse, and sometimes kill us. We gain nothing. They owe everything. What they have, we gave them, through weakness, folly, and good intensions .
People celebrated outside of the Hennepin County Government Center after a jury found Derek Chauvin guilty on April 20, 2021. (Credit Image: © Dominick Sokotoff / ZUMA Wire)We deserve reparations for trillions wasted in a 60-year effort to babysit a population that pays us back with violence and hatred. Most importantly, we deserve liberation from this albatross that prevents any kind of real national life. Almost any price would be worth paying if we could be sovereign and free, something our ancestors took for granted.
All the quasi-theological abstractions about “privilege†and “critical theory†melt away before one immutable truth: They need us; we don’t need them. Until we have the will to say so, all of us â€" including you â€" are just one “viral†incident away from ruin.
Dr. Charles Fhandrich , says: April 21, 2021 at 6:10 pm GMT • 10.8 hours ago
SafeNow , says: April 21, 2021 at 7:14 pm GMT • 9.7 hours agoDon’t know who Gregory Hood is but I do know after reading all of his essays, that he is the most erudite writer on race issues. I find him fair and balanced basically sticking to the relevant issue of what ever he is writing about.
Jimmy le Blanc , says: April 21, 2021 at 7:23 pm GMT • 9.5 hours ago“Almost any price would be worth paying if we could be sovereign and free…â€
This essay is superb…but worryingly, only as far as it goes. What, very specifically, is the separation plan, and what is the price that might have to be paid and IS worth paying, and what is the price that is NOT worth paying? The action-plan cannot be safely specified, because we have already come too far for one to safely specify it. Already. And worse is to come.
Besides individual ramifications, there is this. In Trump vs. Hawaii, Justice Roberts declined to overrule Korematsu (the Japanese-internment case). He wrote that Korematsu had been “overruled by history.†Group internment remains the law of the land.
And yes, I am too cowardly to speak-out. Again. I was an undergraduate at an elite University exactly when (late 60s) and where this all started. I (and my friends, and like-minded faculty members and administrators) were all too cowardly to speak out, and take action, then. Too much to lose. I apologize to the younger generations.
Katrinka , says: April 21, 2021 at 7:37 pm GMT • 9.3 hours agoAmerican Renaissance is a joke. No mention of the (((real problem))) at all. Until we can discuss and point to the (((instigators))) of our present day horror, we will achieve nothing. The funny and ironic thing about all of this is, (((they))) will suffer as much as any White at the hands of the Frankenstein’s monster they created. I guess Whites can take some small comfort in those just desserts.
Chris Moore , says: • Website April 21, 2021 at 7:41 pm GMT • 9.2 hours agoThe U.S. had a good run while it lasted. My plan is to move on. Whites really should consider leaving. Problem is when we establish a new area they will just come to move in on us all over again.
steinbergfeldwitzcohen , says: April 21, 2021 at 9:29 pm GMT • 7.4 hours agoFox News host Greg Gutfeld, author of The Bible of Unspeakable Truths and The Joy of Hate, said that even if Derek Chauvin wasn’t guilty of all charges, he thought the verdict was a good thing. “I want a verdict that keeps this country from going up in flames,†he explained. That’s the bravery of American conservatives for you.
This is how greed-driven “Jews†(Gutfeld is a partially Hebrew, greed-driven Globalist and stooge for Conservatism Inc) have destroyed the neoconned American right, and ultimately the nation. Having no soul or backbone, brushing it all under the carpet in deference to the Golden Calf markets, Satanic Hebrews like Gutfeld will appease the irrational mob all day long, and then just prior to collapse, invoke their “Jewish†heritage and flee to Israel.
This us why they are known as Judenrats , and have always been.
And “liberal†Judenrats are even worse, but had trouble penetrating the GOP until the ((neocons)) came along and sold it on easy-money wars.
Anything for a buck, no matter how Satanic. Morality never enters into the equation. They’re only destroying animal goyim nations, after all.
Paulbe , says: April 21, 2021 at 10:49 pm GMT • 6.1 hours agoWhites don’t need blacks, browns or Jewish parasites.
The day we refuse to be intimidated and believe the lies is the day we get our countries back.
Demand that Congress exercise their constitutional power over money creation.
National strike.
Something.
We need to turn this cancer around rather than waiting for the ship to hit the iceberg. That will be the financial collapse lurking. It is the perfect opportunity for radical reform including constitutional admendments. It will be a blessing in disguise: angry masses looking for soneone to blame. Tptb will try to throw US to the angry masses but we throw them.@KatrinkaUltrafart the Brave , says: • Website April 22, 2021 at 12:52 am GMT • 4.1 hours agoThe comment above yours expresses well why “moving on†may not be possible. Its not just America they want.
@steinbergfeldwitzcohen y intractable endemic racial frictions in the USA are being systematically nurtured and nourished by malign agents embedded in the American governmental and media frameworks.Phibbs , says: April 22, 2021 at 12:56 am GMT • 4.0 hours agoThe behaviour and loyalties of your Senator Maxine Waters makes this abundantly clear, beyond any ambiguity or doubt.
So there is a cancer, for sure, eating away at the American Republic.
To extend the analogy, the danger with any cancer is permitting it to get past the point of no return, after which the host cannot possibly recover and is inevitably consumed.
So you better find a cure soon, preferably something holistic which feeds the healthy constituents and promotes healing at the same time as extinguishing the poisonous infections.
Otherwise Team America may suffer a tragic and permanent demise.
ThreeCranes , says: April 22, 2021 at 1:03 am GMT • 3.9 hours agoDon’t forget that Jews own the media and the politicians. The culture of vicitmhood, cancel culture, “wokeness,†race-baiting and multi-racialism all either originate in the Jewish community or are strongly supported by Jews. Jews brought down white, Christian Russia in 1917 and they are in the process of doing that here. Jews hate us Christian whites and that fact is reflected in their media.
unwoke , says: April 22, 2021 at 2:34 am GMT • 2.4 hours agoMighty fine piece of writing.
ruralguy , says: April 22, 2021 at 2:46 am GMT • 2.2 hours ago“All the quasi-theological abstractions about “privilege†and “critical theory†melt away before one immutable truth: They need us; we don’t need them. Until we have the will to say so, all of us…â€
Us who? White liberals don’t want you & don’t need you & never will accept you, let alone agree any hare-brained scheme to ‘separate’ or have a racial homeland. And they’re using Blacks to tell you that.
And until we have the will to say so, nothing will result from DOA dreams about a separate state for “usâ€. A separate quasi-theological state abstraction based on race will melt away in immutable reality as quickly as the communist belief in a dictatorship of the proletariat abstraction. You have to make it here; there is no “us†anymore. Get ready for 2022 or civil war as you will, but there’s no escape to la-la land.RoatanBill , says: April 22, 2021 at 3:07 am GMT • 1.8 hours agoIn the 1960 census, Minnesota was 98.8% white. In 1973, Time magazine ran an article on the “Good Life in Minnesota.†It really was. We led the nation in education. In 1960, there were 1,400 violent crimes in the State. Now, it is 13,000 to 14,000. What happened? We had mass migration from Chicago. Our Minnesota socialists offered generous welfare benefits that attracted Chicago’s blacks and resettled many refugees from failed countries, like Somalia, to the State. The State went from low crime, highly educated, to much crime, much disorder, and a feeling we now live in a 3rd world country. Today, we have armed soldiers with machine guns on the corners of the streets in Minneapolis. You’d think the woke monsters that censure our news and who form the Chauvin jury would awake from their idiocy, but instead, they censure the facts, portray cops as the bad guys, portray drug abusing criminal degenerates like George Floyd as saints.
Robert Dolan , says: April 22, 2021 at 3:38 am GMT • 1.3 hours agoIt looks like blacks are now untouchable. This can only cause them to increase their savage ways.
Realistically, wouldn’t it be better if every white person that wanted to be armed could do so, and do so without a gov’t permission slip? The reason we can’t pack a piece is because the gov’t says the police will protect us. I know that’s a lie, do you?
Get rid of street cops like Chauvin because they are the ones that aren’t there to protect us and end up in Floyd type situations. We should be demanding our Constitutional rights to carry a weapon if we want to AND have the laws changed so if we take out some POS there’s nothing to worry about.
Just think if a shop keepers in Portland put a shotgun round through their window through the same hole made by the brick some antifa or blm POS threw. All the rioting and destruction would have been cut off in seconds as these miscreants scatter. That’s the only way to handle the low life trash that currently has immunity via a justice system that is broken.
Eliminate street cops. Demand our Constitutional rights. Tell the gov’t to change the laws that allow for deadly force when attacked by some miscreant.
Magic Dirt , says: April 22, 2021 at 3:40 am GMT • 1.3 hours agoIt was a show trial.
A witch hunt.
And the Pollards were behind it.
Watch as cops refuse to police black areas….and black communities that are already under siege will EXPLODE in mayhem.
Ray Caruso , says: April 22, 2021 at 4:09 am GMT • 47 minutes agoIntentions. Not “intensionsâ€. Weird error.
No, Whites cannot police them, just like we cannot educate them. That’s why the only acceptable solution is to expel them from White countries. Any other course of action will mean the end of civilization because their presence is incompatible with civilized life. Fuck them all and their cuckservative fans.
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Apr 27, 2021 | www.zerohedge.com
We've been outlining how the Fed and other central banks have unleashed an inflationary bubble in all assets truly an Everything Bubble.
We've already assessed the impact this is having on commodities, bonds and other asset classes. Today I want to assess the impact this will have on stocks.
To do that, we need to look at emerging markets.
Inflation is a common occurrence for emerging markets, primarily because more often than not they devalue their currencies, whether by choice or because the markets lose faith in their ability to pay off their debts.
Because of this, emerging markets can provide a glimpse into how inflation affects stocks. So, let's dig in.
Here is a chart of South Africa's stock market since 2003. As you can see, the stock market rallied significantly until 2010, but has effectively gone nowhere ever since then.
The reason this chart looks so lackluster is because it is priced in U.S. dollars. The $USD has been strengthening against the South African currency (the Rand) since 2010.
Watch what happens we price the South Africa stock market in its domestic currency (blue line). Suddenly, this stock market has been ROARING, rising some 750% since 2003. That means average annual gains of 41%!!!
Let's use another example.
Below is a chart of the Mexican stock market priced in $USD. Once again, we see a stock market that has done nothing of note for years.
Now let's price it in pesos (actually the exchange rate of pesos to $USD, but close enough).
You get the general idea. So if hot inflation is in the U.S. financial system, it would make perfect sense for stocks (denominated in the $USD which is losing value due to inflation) to ERUPT higher.
Something like I don't know what's happened since mid-2020?
Look, we all know what's going on here. The stock market is erupting higher as inflation rips into the financial system based on Fed NUCLEAR money printing. And we all know what comes when this bubble bursts.
On that note, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.
The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.
We are making just 100 copies available to the public.
To pick up yours, swing by:
https://phoenixcapitalmarketing.com/inflationstorm.html
Best Regards
Graham Summers
Chief Market Strategist
Phoenix Capital Research
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Apr 27, 2021 | www.zerohedge.com
Don't believe your lying eyes, will be the message tomorrow from The Fed's Jay Powell as he hypnotizes investors to believe that "inflation is transitory" and they have "the tools" to manage it.
'Bond King' Jeff Gundlach is not buying that line and told BNN Bloomberg in an interview this morning.
"...more importantly, I'm not sure why they think they know it's transitory... how do they know that?"
"...there's plenty of money-printing that's been going on, and we've seen commodity prices going up massively... home prices in the US are inflating very substantially... so there's a lot of inflation that's already baked in to input prices ."
Gundlach does admit that Powell has a point in the very near term as the prints were about to see "which could be as high as 4% [for CPI]" are off of year-ago, very depressed levels. "...what he means by transitory is that the base effect will lead to problems in the next few months but then the base effect will become less problematic."
But, Gundlach adds, "it's not clear to me that inflation is going to go back down to around 2 to 2.5%... we don't know, nobody knows... but we're most concerned with the fact that The Fed thinks they know."
This is worrisome because The Fed's track record is anything but inspiring...
"when I go back to the global financial crisis, when we almost had a complete meltdown of the financial system, Ben Bernanke completely missed all of the problems that led to the crisis."
Bernanke's infamous "contained to subprime... and subprime is only a sliver of the market" comments could be about to be trumped by Powell's "inflation is transitory" comments as Gundlach warns "there's plenty of indicators that suggest inflation is going to go higher and not just on a transitory basis."
The Fed is "trying to paint the picture" of control, but Gundlach tries to make clear: "they're guessing."
So, what does that mean for markets?
While some fear "we ain't seen nothing yet" in terms of yields rising (and multiple contraction), Gundlach notes that "it really depends on just how much manipulation the authorities are willing to do."
The billionaire fund manager notes that yields are "still very low... well below the current inflation rate... so we have negative yields everywhere on the yield curve."
It's also "hard to figure out who's going to buy the bonds," he notes, "as we are about to see issuance like we have never seen before." Foreigners have been selling bonds for years and domestically there is little demand, so Gundlach notes the only one left to soak up all this extra supply is The Federal Reserve, which has already expanded its balance sheet massively in the last 12 months.
"Who's going to buy all these many trillions of dollars of bonds? Foreigners have been selling for years and they've accelerated their selling in the last several quarters, domestic buyers are not exactly selling, but they're not adding to their holdings. So what's left to absorb all of the spawn supply is the Federal Reserve ."
"Left to true, free markets, bond yields at the long-end would obviously be higher than they are now."
And so who will buy all these bonds with negative real yields - The Fed... "and they have been transparent about their willingness and ability to buy bonds and expand their balance sheet with no ceiling."
Gundlach is talking about Yield Curve Control, reminding viewers that "The Fed can set the long-end wherever they want it... there's a precedent for this from back in the 1940s into the 50s," in order to ease the pain of the debt from World War II.
Of course, Gundlach warns ominously, "once they stopped the yield curve control, we went into a 27 year massive bear market in bonds, because of 'guns-n'butter' policies... which look like our policies today."
Simply put, he sees "an echo [in current markets and policies] of what happened in the late 1970s into the early 1980s."
His forecast is that "The Fed will allow the market forces to take yields to higher levels [10Y 2.25%] before stepping in."
The Bond King also note that the US stock market is very overvalued by virtually every important metric , and especially so versus foreign markets such as Asia and even Europe.
"I bought European equities a couple of weeks ago, literally for the first time in many years. I can't remember the last time I did it. And that's largely because I think the U.S. dollar is almost certain to decline over the intermediate to long term."
There's a lot more in the interview on the impact of Biden's stimmies and potential tax hikes...
https://webapps.9c9media.com/vidi-player/1.9.19/share/iframe.html?currentId=2189621&config=bnn/share.json&kruxId=&rsid=bellmediabnnbprod,bellmediaglobalprod&siteName=bnnb&cid=%5B%7B%22contentId%22%3A2189621%2C%22ad%22%3A%7B%22adsite%22%3A%22ctv.bnn%22%2C%22adzone%22%3A%22ctv.bnn%22%7D%7D%5D 10,571 48 NEVER
Sound of the Suburbs 26 minutes ago
WITCH PELOSI 39 minutes agoWe are going to train you in this Mickey Mouse economics that doesn't consider private debt and put you in charge of financial stability at the FED.
They don't stand a chance.
Financial stability arrived in the Keynesian era and was locked into the regulations of the time.
https://www.brettonwoodsproject.org/wp-content/uploads/2009/10/banking-crises.png
"This Time is Different" by Reinhart and Rogoff has a graph showing the same thing (Figure 13.1 - The proportion of countries with banking crises, 1900-2008).
Neoclassical economics came back and so did the financial crises.
The neoliberals removed the regulations that created financial stability in the Keynesian era and put independent central banks in charge of financial stability.
Why does it go so wrong?
Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from 2001 – 2007 and knew there was going to be a financial crisis.
Richard Vague has looked at the data for financial crises going back 200 years and found the cause was nearly always runaway bank lending.
We put central bankers in charge of financial stability, but they use an economics that ignores the main cause of financial crises, private debt.
Most of the problems are coming from private debt.
The technocrats use an economics that ignores private debt.
The poor old technocrats don't stand a chance.
atomp 34 minutes ago42" entry level lawnmower @ Home Depot, spring 2014, $999. Spring 2021 $1549. That's what I call inflation! And maybe a little greed to boot!
Sound of the Suburbs 25 minutes ago remove link$30 is the new $10.
In 2008 the Queen visited the revered economists of the LSE and said "If these things were so large, how come everyone missed it?"
It's that neoclassical economics they use Ma'am, it doesn't consider private debt.
Here it is Ma'am, look it's obvious.
https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6
At 18 mins.
Let's get our experts in neoclassical economics to have a look.
"It was a black swan"
Not considering private debt is the Achilles' heel of neoclassical economics.
It is a black swan to them.
That's the problem.
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Apr 24, 2021 | www.zerohedge.com
The important part for future production is that we make a clear distinction between those three supply sources (counting OPEC and the + states as one source). There are very different reasons for why production is down from each source and more importantly, what the long term prospects are.
In the second part of this report, we will discuss the prospects of each source in detail and show that the pandemic, and the ensuing price crash, have accelerate a process where global production will hardly be able to grow. At the same time, demand will not peak as quickly as people believe. This has the potential for a massive supply shortfall in the medium term.
smellmyfingers 2 hours ago
wick7 38 minutes agoThe only real shortage we have is truth.
We're all being fed a huge steaming pile of BS on everything. Oil build/draw. Crypto currencies based upon what? Fiat money, paper.
All these lying politicians and banksters just jockeying for positions to steal as much as they can as they push the human family to genocide.
wick7 35 minutes agoEither way oil is going over the Seneca cliff and then Mad max here we come.
Galtmandu 1 hour ago (Edited)Every oil well that has ever existed has followed a bell curve. Pretending oil is infinite is like believing in a flat earth.
Thrashed10 2 hours agoThis is some weak sauce analysis on the relationship between gold and energy prices. Here is a summary:
Energy prices and gold prices tend to correlate.
I have simplified,
Galtmandu
PS, your model is basically, interest rate policy, fed reserves of gold supply, and inflation - not groundbreaking stuff. You have created an algorithm that uses these three inputs to overlay on gold prices. Simple stuff. In fact, a basic polynomial exercise gets you your best fit.
Now, predict the movements of fed gold reserves, inflation, and interest rate policy. You can't. Therefore, your model has no predictive capability beyond your opinion. Otherwise, you would be spending your days sipping umbrella drinks.
If I seem aggressive about this stuff its because I hate this kind of faux-analytical b@llsh&t that is just sales propaganda.
hanekhw 1 hour agoI'm sitting mostly in cash right now. I do have a little exposure to oil. And food.
The oil market is so manipulated. Probably a smart move long term. But I have to trade so my kids get ice cream. I already know my trade for Monday if I feel motivated. I trade commodities and industrials. The boring stuff that is not sexy.
Oil prices linked to the worthless dollar won't continue and this Administration is working hard to make our dollars even more worthless.
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Apr 19, 2021 | www.youtube.com
Dichroic Sounds , 22 hours ago (edited)When Trump said that we are up against "The Invisible Enemy", this is the enemy he was talking about.
Jonathan Sterling , 1 day agoThey've been doing this forever, we're just now becoming aware of it. The false narrative goes much deeper than stealing an election.
remigiusz wójcik , 1 day agoThe politician most responsible for pitting ordinary men and women against each other, ruining marriage among ordinary people, then accusing someone else of "having no soul" is ironic.
Robert Jackson , 1 day agoThe biggest problem of it is that media cannot be prosecuted for it and they definitely should be
KyleHboc , 2 days agoNo war in the last 50 years was started without the support of the press. Julian Assange Truths like this are why they can't let him surface.
Rogue Agent , 1 day agoThey knew the bounties story was fake and they all ran with it anyway.
Cui Bono , 1 day agoIt's the Orwellian narrative: "We have enemies overseas." Enemies that aren't real enemies because we really don't actually want to start a war with them but we need to put on a show to keep the people distracted from looking at who are the real enemies inside their own country.
Mari Olsdatter , 1 day agoBiden is so full of it, as if he would dare say anything to Putin, then he really would find out how hot things can get behind the gym.
CARRIE REGAN , 1 day agoThese self-appointed "elites" should exchange their lives for the slain lives of the military victims of their lies.
Das Karnickel , 2 days agoAll of their dirty tricks are played out and predictable now. These demons will lie about anything and everything.
I remember when journalists had to show their proof and quote their sources. It's now all propaganda.
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Apr 14, 2021 | seekingalpha.com
Summary
- For a third consecutive month, everyday prices moved sharply higher with gains led by motor fuels prices.
- On the core services side, significant increases came from motor vehicle insurance (up 3.3 percent for the month), transportation services (+1.8 percent), and motor vehicle maintenance services (+1.0 percent).
- Energy prices continue to drive the Everyday Price Index higher in the early part of 2021.
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Apr 14, 2021 | angrybearblog.com
For a given time-horizon, it has been conventional for those estimating such a "rational" market forecast of expected inflation to take the appropriate Treasury security nominal yield of that time horizon (say 5 years) and simply subtract from it the yield on the same time horizon TIPS, which covers security holders for inflation. So it has long looked like this difference is a pretty good estimate of this market expectation of inflation, given that TIPS covers for it while the same time horizon Treasury security does not.
Well, it turns out that there are some other things involved here that need to be taken account, one for each of these securities. On the Treasury side, it turns out that the proper measure of the expected real yield must take into account the expected time path of shorter term yields up to that time horizon. This time path has associated with it a risk regarding the path of interest rates throughout the time period. This is called the Treasury risk premium, or trp. It can be either positive or negative, with it apparently having been quite high during the inflationary 1979s.
The element that needs to be taken into account with respect to the TIPS is that these securities are apparently not as liquid in general as regular Treasury securities, and the measure of this gap is the Liquidity premium, or lp. This was apparently quite high when these were first issues and also saw a surge during the 2008-09 financial crisis. In principle this can also be of either sign, although has apparently been positive.
Anyway, the difference between the nominal T security yield and the appropriate TIPS yield is called the "inflation breakeven," the number that used to be focused on as the measure of market inflation expectations. But the new view is that this must be adjusted by adding (tpr – lp).
In a post just put up on Econbrowser by Menzie the current inflation breakeven for five years out is 2.52%. But according to Menzie the current (tpr – lp) adjustment factor is -0.64%. So adding these two together gives as the market expected inflation rate five years from now of 1.88%, although Menzie rounded it out to 1.9%.
If indeed this is what we should be looking at it says the market is not expecting all that much of an increase in the rate of inflation from its current 1.7% five years from now. The Fed and others are looking at a short term spike in prices this year, but the market seems to agree with their apparent nonchalance (shared by Janet Yellen) that this will wain later on, with that expected 5 year rate of inflation still below the Fed's target of 2%.
Certainly this contrasts with the scary talk coming from Larry Summers and Olivier Blanchard, not to mention most GOP commentators, regarding what the impact of current fiscal policies passed and proposed by Biden will do to the future rate of inflation. Not a whole lot, although, of course, rational expectations is not something that always forecasts all that well, so the pessimists might still prove to be right.
Barkley Rosser
Likbez , April 14, 2021 6:27 pm
Larry Summers is a puppet of financial oligarchy. Everything that he writes should be viewed via this prism. He also is highly overrated.
IMHO rates are no longer are determined by only domestic factors.I think that the size of foreign holdings of the USA debt and their dynamics is another important factor. FED will do everything to keep inflation less then 2% but this is possible only as long as they can export inflation.
BTW realistically inflation in the USA is probably 30%-60% higher than the official figure. Look at http://www.shadowstats.com/ :
March 2021 annual Consumer Price Index inflation hit an unadjusted three-year high of 2.62%, as gasoline prices soared to multi-year highs, not seen since well before the 2020 Oil Price War. -- March Producer Price Index exploded, with respective record annualized First-Quarter PPI inflation levels of 9.0% in Aggregate, 16.0% in Goods and 5.6% in Services.
• L A T E S T .. N U M B E R S .. March 2021 unadjusted year-to-year March 2021 CPI-U Inflation jumped 2.62% -- a one-year high -- as gasoline prices soared, not only fully recovering pre-Oil Price War levels of a year ago, but also hitting the highest unadjusted levels since May of 2019 (April 13th, Bureau of Labor Statistics – BLS). Headline March 2021 CPI-U gained 0.62% in the month, 2.62% year-to-year, against monthly and annual gains of 0.35% and 1.68% in February.
That inflation pickup reflected more than a full recovery in gasoline prices, which had been severely depressed by the Oil Price War of one year ago. Such had had the effect of depressing headline U.S. inflation up through February 2021, including suppressing the 2021 Cost of Living Adjustment (COLA) for Social Security by about one-percentage point to the headline 1.3%. By major sector, March Food prices gained 0.11% in the month, 3.47% year-to-year (vs. 0.17% and 3.62% in February); "Core" (ex-Food and Energy) prices gained 0.34% in March, 1.65% year-to-year (vs. 0.35% and 1.28% in February); Energy prices gained 5.00% in March, 13.17% year-to-year (vs. 3.85% and 2.36% in February), with underlying Gasoline prices gaining 9.10% in the month, 22.48% year-to-year (vs. 6.41% and 1.52% in February).
The March 2021 ShadowStats Alternate CPI (1980 Base) rose to 10.4% year-to-year, up from 9.4% in February 2021 and against 9.1% in January 2021. The ShadowStats Alternate CPI-U estimate restates current headline inflation so as to reverse the government's inflation-reducing gimmicks of the last four decades, which were designed specifically to reduce/ understate COLAs.
Related graphs and methodology are available to all on the updated ALTERNATE DATA tab above. Subscriber-only data downloads and an Inflation Calculator are available there, with extended details in pending No. 1460 .
In this sense China and Japanese policies will influence the USA rates. If they cut buying the US debt the writing for higher rates is on the wall. In a way, recent events might signal that FED can lose the control over rate if and when foreign actors cut holding of the USA debt.
Behavior of foreign actors is probably the key factor that will determine the rates in the future.
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economistsview.typepad.com
The 10-year Treasury note yield TMUBMUSD10Y,
1.653% fell to 1.659%, down from 1.675% at the end of Monday, while the 2-year note TMUBMUSD02Y,0.168% was steady at 0.169%. The 30-year bond yield TMUBMUSD30Y,2.339% slid 0.9 basis point to 2.336%.What's driving Treasurys?
The U.S. consumer price index rose 0.6% in March, while the core gauge that strips out for energy and food prices came in at an 0.3% increase.
The annual rate of inflation climbed to 2.6% from 1.7% in the prior month, marking the highest level since the fall of 2018.
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Apr 11, 2021 | www.rt.com
Ms No PREMIUM 2 hours ago
The Jewish Anti-defamation league is after Tucker Carlson. That's as bad as it gets. They have more money than God.
Anti-Defamation League chief Jonathan Greenblatt "Tucker must go"...."white supremacist tenet that the white race is in danger by a rising tide of non-whites" that is "anti-Semitic, racist and toxic."
https://www.sott.net/article/451245-Another-professional-outrage-group-wants-Fox-News-host-Tucker-Carlson-FIRED-This-time-its-the-ADL 1
odb 2 hours ago
"To find out who really rules you, find out who it is that you can't criticize". Voltaire. play_arrow
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