Thursday, December 17, 2009
Monday, December 14, 2009
These days, it seems, there is no shortage of recommendations for fixing the way bonuses are paid to executives at big public companies.
Well, I have my own recommendation: Scrap the whole thing. Don't pay any bonuses. Nothing. - Henry Mintzberg
Monday, November 23, 2009
Montgomery & Co. review and outlook of venture-backed companies and the M&A markets:
1) There were over 7,000 private and independent venture‐backed companies at the end of 2008. There are 800 independent companies with venture investment dating 10 years or more. This level would double within 18 months unless M&A accelerates.
2) We expect pressure on venture firms to achieve realizations combined with consolidation of the growth sectors to drive M&A activity to 50% above historic levels by 2011.
3) We expect an increase in M&A as strategics accelerate their acquisition activity.
4) We project the median consideration for M&A to recover, but remain below recent levels
5) The total consideration of venture‐backed M&A will reach $60 billion per annum by 2013.
6) “IPO ready” companies have been delayed by the economic downturn, but we expect a recovery in the IPO market—which will also boost M&A activity.
7) Investment returns for venture investors will remain largely driven by M&A exits.
The Return of M&A: An Outlook For The Venture Industry -
Saturday, October 31, 2009
Take vacation time as just one example of resolutely denial-bound and unevolved U.S. culture; and remember, if you get sick, be sure to enjoy your vacation, puking your guts out, because that sick time is taken out of your paid time off (PTO), too. We don't even call it "vacation" any more because you're not entitled to any, whatsoever.
Productivity Dividends: DENIED.
If you're in the bottom 90% ... and, um, 90% of us ARE, we are to be grateful for our ever dwindling little pot of PTO. Vacation? Don't make me laugh. You want to become like those LAZY FRENCH people, I suppose. Yep, they look pretty LAZY to me.
For centuries we've been taught in Economics 101 that technology improves efficiencies which yield ever increasing productivity and productivity dividends. Labor saving after labor saving devices and methods have accrued for hundreds of years, yet, there is no saving of labor's fate. Ever.
We're not talking about people getting something for nothing, for heaven knows the permanent heirs of the American aristocracy will have none of that, we're talking about the people who created the dividends, sharing proportionately in the dividends.
No labor saving productivity dividend is ever declared and distributed to shareholders: you and me. Such dividends are only ever hoarded and squandered by the top 5%, 2%, 1%. The smaller the percentage, the more pathological the hoarding. It is, ipso facto, clinically pathological, even functionally sociopathic when one measures the dire fate of so many as the direct consequence of the behavior of so few. A sociopath is a person, a psychopathic personality, whose behavior is antisocial and who lacks a sense of moral responsibility or social conscience.
This will sound all too familiar to today's prevalent American 19th Century Industrial Capitalist Culture, which obliviously shrugs and says, "so?"
Sociopathological cultures kill through the Invisible Hand of a twisted and brutal wage slave tyrant. Today the brutality is reaching all new extremes, but because it is the Invisible Hand of the almighty market at work, there is no one to blame when high school children in Palo Alto are killing themselves in packs, jumping in front of trains, as the pressures of conformity to this pathological culture of hoarding and false scarcity mount to all time highs. What more evidence do you need, America?
You are literally killing your best and brightest youth. They know that they can't exist in such a soulless society. So they choose their only out. If they could move, they probably would; but their tragically heartbroken parents have become analogies for you, America. You probably truly do love your children. You probably have done your best. However, the Entire Environment in which you've been operating is Terminally Toxic.
If the entire culture is not changed, nothing you do or could have done, will ever save yourselves or your children. I share the devastation of your loss.
For those not so compassionate, no, the infinite iPods and PSP's were not enough to "satisfy the little spoiled brats" if that's the unconscionably cruel path of reasoning you'd like to take in response to this terrible situation; and I know you are out there, I've heard your conversations. You are poor and disenfranchised and bitter; told you are in the "middle class" even as you are numbered among the bottom 80% of Americans who scramble and claw to share just 8% of the economic pie in this country.
Yet, those children are human beings, random victims of the fate of their births just, as are you. No one deserve such a fate. So while I identify with the bitterness of the bottom 80%, I do not condone twisted and cruel interpretations of such unthinkable human tragedy.
There is, however, an abiding and ascendant message in the growing numbers of these situations: if we don't find a path to sustainable postscarcity, all the manufactured crap in the world will never save us. All of the hoarded and accrued wealth will never save us.
We are literally crushing ourselves and our children under the weight of our own avaricious abundance.With nothing but the most crushing pain for those families in my own heart of hearts, I must honor the sanctity of those magnificent lives by stating that:
Those trains are the very embodiment of the culture that created them, a nineteenth century culture that we continue to cling to with all the fervent faith of the most sincere Stockholm Syndrome devotee.
Perhaps this is just one empirical consequence of your pathological inbred hoarding of your mythological Productivity Dividend, America. Yet, when canonical publications like MarketWatch write that "Vacation-day allotment varies widely by country" and that "some workers enjoy eight weeks off per year; U.S. near bottom of list" the message in the title tag text is:
"Want more time off? Move ..."
"If you don't like it, move."
This is "MARE-ick-uh" mister, we don't compare notes with other nations that might have one hundred times the broadband at one tenth the price; we don't compare notes with other cultures that have found sustainable work-life balances; we don't compare notes with NOBODY.
Don't like it? Move!
And that's precisely what America's best and brightest have been doing and continue to do.
Thursday, October 29, 2009
TEAR DOWN ALL UNOCCUPIED HOUSES so we can create jobs by building them all over again.Wow, really?
I should really be a bigger fan of Mr. Santelli's because he continues to provide some of the most clear and compelling analogies that illustrate the sheer absurdity of the Job Trance gripping America. A Job Trance crippling progress, even as we hobble and wobble in our current self-inflicted state of socioeconomic anomie, the 100% accurately forecasted result of 19th century industrial era capitalism's centuries of success.
Such absurd suggestions to TEAR IT ALL DOWN should actually encourage us, for they provide additional empirical glimpses of a tragically misguided consensus reality crumbling before our very eyes. Crumbling, finally, despite the decades of institutional denial that refused to acknowledge the obvious manifestations of an emerging postscarcity society. Crumbling, despite the academic procrastination in noodling our way through sustainable new ways to circulate resources in a manner that continues to foster breakthrough innovation and sustainable technological progress.
The parenthetical Santelli Solution is to smash it all down so we can build it back up again. Wow. Really? Last I checked, most healthy children outgrew that stage of build it, smash it, build it, smash it, self-discovery and development by about age ten or twelve at the very latest. Grown ups realize that once you have built an asset, you employ and maintain that asset in a manner that maximizes its useful life.
As a society, if you've created so much abundance and surplus that all your old assumptions are proven wrong, the solution is not to DESTROY YOUR ENTIRE LIFE in order to prove you can build the same suboptimal life from scratch, all over again. Maybe that makes sense in some bizarre Any Rand fantasy where the hero architect turns noble ditch digger, but it's just plain ridiculous in the real world. Even the bible counsels that there is no nobility in a dog that repeatedly returns to it's own vomit.
As written here time and again, the problem is not that capitalism is evil or wrong or failed (in material terms). Rather, it's a victim of it's own one-trick pony variety of success and hobbled by genetic defects that include severely crash-prone short-sightedness and manufacturing myopia. It only knows it's own perspective. It only sees it's way to the next bend in the road. It's great at transporting societies from Point A to Point B -- agrarian to industrial -- with incomparable speed and efficiency; yet, then it stands utterly stunned and dumbfounded, paralyzed by the discovery of a Point C, beyond. "Now what?" panics capitalism. "Quick, back to Point A so we can show how awesome we are at getting to Point B!"
A to B, A to B, A to B. Boom, bust; Boom, Bust; boom, BUST. That's the best we can do with our best and brightest minds? Really? I don't buy it.
I don't buy it because I can't imagine a more pessimistic view of the world or of humanity, than one that believes that build it, smash it, build it, smash it, build it, smash it permanently manufactured scarcity industrial era capitalism is the permanent state for an ever accelerating technoprogressive society.
Wednesday, October 21, 2009
Has the U.S. actually been a Closet Communist economy, all this time? Would implementation of Free Market Socialism actually be a conservative movement? Goldman Sachs PR effort begins:
"The danger is that it comes off like propaganda." -- Fierce Finance
Trust us, we've been centrally controlling things for decades. We decide the winners and losers. We Win. You Lose. We do this For Your Own Good, to make sure you have just enough gadgets to keep you sedated and just enough cash to keep you one month from homelessness. Slavery built American and wage slavery grows America. If it ain't broke, don't fix it.
My only question is, what do you call the third tranche on the second derivative of irony?
Monday, October 19, 2009
So the money is just being shuffled from one Federal bank account to another, with each Wall Street bank skimming off $1 billion per month for itself? “Pretty much.”It's OUR cash. YOUR cash. We own the treasury and WE print the paper. This is no different than if I loaned you 20 bucks for lunch and when we get back to the office you said, "Now just give me another $0.60 and I'll give you your $20 back." Do the same thing with a billion and you pocket $30,000,000.00 for nothing more than taking my own money from my left hand and passing it back to the right.
Complete System #FAIL.
Monday, September 21, 2009
So with thanks to @johnrobb by way of @changeist via @urbanverse, 2 minutes and 35 seconds for your consideration:
Or download .SWF if JING playback gives you a hard time.
Elizabeth Warren, "With two people in the workforce, [today's families] actually have fewer dollars left over than their one income parents had a generation ago, to cover EVERYTHING. So what we have today is, TWO PEOPLE working full time, flat out, hard bore and they actually have less money to spend than one person working full time, just one generation ago.
Harry Kreisler, "And the older system, had a built in backup, this system does not because both are already working. This is a very VULNERABLE family that we have today because of an uncertain job market, healthcare, [unexpected or catastrophic] illness, and so on."
Remember the context here, friends. This is from MAY 2007! Long before the MULTIPLE MELTDOWNS of 2008. So families were already on the precipice of existence ALREADY ... *LONG BEFORE* THIS CRISIS STARTED.
Just to clarify, however, let's further remind ourselves that every Econ 101 student knows to ask the fundamental question of economics, "Compared to what?" So, we ask dear reader, what do you suppose is the state of the American family TODAY, as compared to MAY 2007? Better? Worse? The same? We all know the unequivocal answer to that question, and that answer is VASTLY WORSE.
But vastly worse COMPARED TO WHAT? American families are vastly worse compared to Teetering on the Very Precipice of Existence in the years just prior to the meltdowns. That can't possibly be a sustainable situation.
By all means, I encourage you to keep digging for yourself by viewing the full May 2007 Interview with Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School.
Planet Money writes "The ranks of the unemployed now include 14.9 million people in the U.S., up by 466,000 since last month." But that's not all, "The broadest measure of unemployment -- U6, which includes discouraged workers and those working part-time because all they can get -- hit 16.8 percent. That's up from 16.3 percent in July."
NPR News adds, "Unemployment Hits 26-Year High Of 9.7 Percent - The number of weekly hours worked remained at 33.1, above the low of 33 reached in June. Economists think companies will add more hours for current workers before hiring new ones."
This ain't ending any time soon, friends, if ever. So, why do we stay so fixated on what worked in 1850, when we are here on the cusp of 2050? It's really not that far away, boys and girls; think how recent 1970 was, from today's perspective. That's how close 2050 is, in the other direction.
Let's try some simple math: if 9.7% average unemployment means 14.9 million Americans on or approaching skid row, then the actual 16.8% total unemployment means at least 25.8 million Americans -- human beings like you and me -- out of work, right now.
Of course, we all know that these figures are based upon reports filed by people who are still sufficiently connected to the bureaucracy to even bother filling out the forms; so those who have dropped entirely off the grid are still not accounted for. Let's be super conservative and call that 10% of the 25.8M total.
That brings our number of Americans out of work to 28.4 million. For the sake of thinking just slightly ahead, if we call 20% a more forward-leaning estimate, that puts the total over 30 million. Even if that's a tiny bit high for today, it won't be very long until that number is indeed reached, right? If not during this particular roller coaster cycle, the next one or the one after that, because these numbers do nothing but grow, over time. That's not a direct indictment, because ironically, it's mostly because of how EFFICIENT we've become!
More on that efficiency later.
For the moment, just imagine 30 million Americans Out of Work and told that their only options are to find More Pretend Work or live on the streets. This, while empty housing and commercial space inventories are approaching all time highs. Oh, and housing starts are ticking up so we're building even more Empty Houses and more Empty Offices.
But they'll stay empty, unless you go back to playing YouTube videos in a cubicle instead of doing it right where you are, where you can keep an eye on your kids, help them learn, be involved in your community, and continue your own program of lifelong learning that could very well lead to the next breakthrough innovation -- even small but economically meaningful ones -- because you were finally afforded the 20% time REQUIRED for new solutions to come to fruition.
Aren't those 30 million American lives enough already, or do we really have to wait for 30%? Do we have to wait until ONE THIRD OF AMERICA is ON THE STREET before we simply call it what it is -- The Ultimate Achievement of Industrial Capitalism: Structual Unemployment -- and move on to the inevitable Basic Income solution? Do we really need to keep stalling?
Why keep kicking the proverbial Good Samaritan while he's down with the same vapid sentiment of kicking the can down the road? We all know that, "yeah, some time in the future" things will be as we describe them; so why not just go ahead and start fixing things now? Do we really need to keep up the same dysfunctional cycle of perpetuating crises before implementing positive adaptations that we all know are inevitable, anyway?
As a nation, as a global village, we can break this cycle of systemic self-loathing procrastination, if we simply choose to do so in large enough numbers. All of "the economic rules" that govern our expectations and interactions are implemented fictions: we made them up, and we can change them to better suit our desired outcomes for a world of sustainable abundance and peace.
I believe that it is no overstatement to suggest that, by the standards of 1776 existence, we are indeed very close to a place where we can confidently declare Mission Accomplished in terms of providing unconditional material sufficiency for everyone. Even if we are not "quite" there, the goal is sufficiently within reach to begin adapting our institutions to that inevitability, today. By what possible logically consistent rationale would we continue to so demure?
Learn more about agalamics.
Sunday, August 30, 2009
Read this Book:: Capital as Power: A Study of Order and Creorder - autoethnography: "Jonathan Nitzan and Shimshon Bichler are a tremendous influence on my approach to politics, economics, and culture. Check the Capital as Power table of contents, buy it, or read the first chapter (download at bnarchives.net)."
SOURCE: The #CuratedWeb of the cognizer occasionally known as @fidler (link pending DNS propagation).
Monday, August 24, 2009
Shared FateYes, I've written on this topic before, but it's a fundamental message that requires periodic reinforcement.
"We recognize there is a community of interest among all of our stakeholders. There are no entitlements; we share together in our collective fate. To that end we have a salary cap that limits the compensation (wages plus profit incentive bonuses) of any Team Member to nineteen times the average total compensation of all full-time Team Members in the company."
The efficacy of Shared Fate in the Corporate Context is just one of many proven, empirical, objective justifications for serious consideration toward amending the U.S Code of Federal Regulations to include Salary Cap Ratios that ensure the benefits of corporate, collective human effort are reasonably circulated throughout the corporate body which created those benefits.
In short, it should be permanently illegal to see total compensation multiples of 400x or even 100x between a janitor and and genius trader. Sorry, genius trader, but in empirical existential terms, your 98% water, bloated sack of protoplasm, is of no more intrinsic value than anyone else's. You're made of the same sack of chemicals, knitted and knotted DNA, as anyone else. Your right to pathologically hoard ends at every other human's right to a roof, clothes, and 2,000 measly calories per day.
Oh, and in the ever so special case that you're among the Townhall Tantrum Tinfoil Hat brigade, just remember this instruction about any corporate body, from your own sanctified brainwashing:
"And the eye cannot say unto the hand, I have no need of thee: nor again the head to the feet, I have no need of you" (ICor1:21).So, do the right thing because of your brainwashing, or do it because it's the only socioeconomically sustainable solution, moving forward; in either case, it appears that the current U.S. Code governing Corporations Improperly Accumulating Surplus is far too reactive in timing, subjective in application, and wasteful in attempting to track down perpetrators and holding corporations accountable for engaging in destructive multi-generational abuses after the fact. It is not only just too damned hard to be Robin Hood all the time; it's actually not necessary if we get the basic rules and principles right, in the first place.
Shared Fate is foundational to that objective.
Wednesday, July 15, 2009
My prediction, then? Not a V, not a U. But an X. This economy can't get back on track because the track we were on for years -- featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere -- simply cannot be sustained.
The X marks a brand new track -- a new economy. What will it look like? Nobody knows. All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin. More on this to come.
Monday, July 13, 2009
Capitalism’s dirty little secret: excessive lending was the only way to maintain the living standards of the vast bulk of the population at a time when wealth was being concentrated in the hands of an elite.For much more detail and salient analysis, please read, repost, retweet, resend, and repeat P2P Foundation's Michel Bauwens's Updating our insights on the deepening meltdown. SOURCE: @stuarthenshall.
Illustration by Victor Juhasz, RollingStone.com
The amount by which the elite has benefited is startling, and illustrates the problem with lightly regulated free markets: the rich get much richer while the rest do not get richer at all.
Friday, July 10, 2009
Modern work is mostly a lie.
Especially in the so-called knowledge, information, or entertainment sectors, work has all too often become little more than an arbitrary hierarchy of stupidity fees, ignorance fines, influence peddling, and pathetic popularity plays. It's increasingly an unjustifiable waste of time to set up such pointless and counterproductive relationships in the first place. It's no wonder that increasingly, many of the most intelligent, creative, and educated simply opt out.
Forget value judgments about whether this is Good, Bad, Indifferent, a vast Right-wing or Left-wing conspiracy; the fact that more and more modern work is mostly a lie -- tens of millions of make-work duck-n-shuffle experts at looking busy -- is simply a primary symptom of the overwhelming success of 18th and 19th century industrial era capitalism and the attendant cultural anomie typical of the evolution toward postscarcity.
Take a typical knowledge work case: a consultant just upgraded six Wordpress blogs to version 2.8.1 in a total of about 20 seconds, thanks to automation, and billed clients for six hours. Why? Because the client has no idea of the level of automation available since the relationship was forged, years ago. The last the client knew, these updates could be "very risky" -- OMG! the website could go down! -- and "take a long time" to make sure hell doesn't accidentally freeze over.
Multiply such norms by some X-hundred million similar seemingly insignificantly tiny transactions per day. Each time we engage in these behaviors, believing we are the only ones doing it -- okay, maybe a few others do the same, we exponentially understate to ourselves -- we simply fail to conceive of the aggregate effect.
This is standard operating procedure for so-called service providers everywhere: find a client who doesn't know how easy you've made your work, convince them it's even more complicated than they imagined, and start the meter running. We've all seen this a thousand times. It's defended as monetizing the marginal value of efficiency. The thinking goes, "Hey, if the client needs something done and it's of X value to them, who cares HOW we get it done, right? If we're really efficient, that's our paycheck."
Well, yeah, sort of. On the other hand, that's a complete make-work sham, isn't it? This is why so much of modern work is mostly a lie, perpetrated by small cliques who myopically believe they are the only ones getting away with this game, who are collectively addicted to and fearful of any change from the status quo, and who implicitly agree to cover for one another's fiddling about in cubicles all in the name of keeping the job trance intact.
The job trance holds that a Calvinist industrial era hourly wage slave J.O.B. is the only conceivable moral Justification Of Being.
This is not an indictment of the hapless humans enshrouded in this stultifying, anachronistic systemic miasma; rather, this is an indictment of a systemic group think that has failed to declare and deploy the productivity dividends born of the past two centuries of accelerating progress. This is to expose the obsolete, old world Centralized Capitalist organizing principle that is failing to serve us all as humans, as a community, as a nation, moving forward.
In the entertainment industry case, everyone knows that the job or the part seldom goes to the best qualified or most talented applicant or audition. That's not An Efficient Market Objectively Allocating Resources, that's a popularity pecking order that is arbitrarily -- and often capriciously -- allocating resources that reinforce the dominant Central Capitalist Party Monarchy. Those who think that they see that game and can one day become king themselves, fully buy in and defend the monarchy, even though it's strictly against their own best self interest.
Modern work is mostly a lie. That's why more and more of the brightest and best qualified people opt out. It's one of several off-balance-sheet explanations of why U6 total unemployment is already above 16.5% and empirically indicative of the growing Structural Unemployment that has steadily, relentlessly overtaken us in recent decades.
Still need convincing? Maybe conjuring the Bloomberg brand will reopen a singed synapse or two:
“We are going to have a huge pool of unemployed, second only to the Great Depression,” said Allen Sinai, chief economist at Decision Economics in New York. “It will be a big public-policy problem.”We're clueless about how to handle surpluses -- the most dangerous of which is cognitive surplus -- and the Old World Centralized Capitalist Party Bosses began embezzling our exponential productivity dividends long ago by providing myriad creative ways to soak up the first hints of the sociologically volatile stuff.
But change kept accelerating faster and faster and faster and faster. Faster than ever dared imaginable by my very own great grandparent share croppers.
So Industrial Era capitalism worked. It succeeded. It blew the doors off of history. It will continue to work and succeed for other civilizations that need to make that phase state transition from agrarian to industrialized. But it's utterly obsolete for America and today it is our existential obligation to define what comes next -- Postscarcity Agalmics. If we fail, then one industrial locomotive after another will simply run off the end of the same iron rails of fear and inertia we've run off.
As a recent New Scientist article put it
So will we cling to scarcity just so that we can keep capitalism? Or will capitalism have to evolve into some new kind of digital economics? The question underlines many things - from music piracy to the woes of the newspaper industry to Google's efforts to scan all the books in the world. (via @agalmacist)
Figuring how to make money in freeconomics is the challenge of our times. While the free is always an option (that is the point of Technology Wants to Be Free and Chris Anderson's new book "Free: The Future of a Radical Price"), free is NOT the only option. Sometimes the best way make money is to actually charge fans for what you produce.Another evolutionary example from KK:
Print 200 copies of a book in hard cover. Sell with "free" shipping. Then make the rest of the copies free as a downloadable PDF.
Tuesday, June 9, 2009
So we say this new mixed economy is not just arriving online, it's evolving everywhere, right now, as a natural, organic process of humans apprehending postscarcity.
Tuesday, June 2, 2009
The truth is that corporations in the U.S. and other countries have always been quasi-public entities chartered for public purposes. You would never know this from corporate propaganda that treats giant, multinational corporations as though they were simply giant versions of sole proprietorships or partnerships. But history and law alike make it clear that today's large corporations, like automobile manufacturers, are much more like spun-off government agencies than like large-scale lemonade stands.This is a fundamental mythology that comprises the metallurgical alloy most commonly found in the psychological chains of wage slavery: the idea that The Lemonade Stand is a realistic analogy for how an economy works, much less, how it should work.
Drive down any small main street in America and you'll find the vast majority of non-Big-Box enterprises as nothing more than propped-up facades.
For example, there is no way that 5 bookstores can survive in Half Moon Bay, California. We know this to be true, because we explored purchasing one of the most historically well known stores. That whole "market niche" is a complete facade in that 40 mile radius region. Multiply by tens of thousands of similar regions and you get the truth of the post-industrial-capitalism economy.
A brick-n-mortar storefront that sells only Futons? Are you kidding me? Or BBQ Grills?
These are all naive and misconstrued -- even when oh-so-sincerely well meaning -- derivations of The Lemonade Stand; each and every one doomed to the exact same fate, as predictably as the sun will rise tomorrow.
We have to Free Our Minds from the shackles of the Industrial Era psychology that worked for THAT era, but which is hobbling us from moving forward.
As we've expressed and implied numerous times, Corporate Charter Reform is the only viable path forward. Charters can be for specific purpose and embody specific, essential, sustainable values such as compensation ratios, vs hard salary caps.
Compensation Ratios ensure a free, highly competitive, Even Playing Field that also provides an economic breaker circuit to prevent destructive, pathological hoarding. Dividends can never do that. If they could, they would have long before now.
... the power to charter corporations for the purposes we choose and in the forms we prefer will always be a power we wield as a sovereign people. We the people should think about using our power.
Tuesday, May 26, 2009
One-third of the millionaires have disappeared from Maryland tax rolls. In 2008 roughly 3,000 million-dollar income tax returns were filed by the end of April. This year there were 2,000, which the state comptroller's office concedes is a "substantial decline." On those missing returns, the government collects 6.25% of nothing.
In other words, boards and bankers are just like the rest of us. They set aside their rational mind in favor of those anchors -- arbitrary and emotional points of concentration.
You don't need Goldman Sachs to do this math. Dr. Phil will probably do the trick.
Which leads to our question, have you ever wondered why the tone in this blog, along with growing numbers of others, is increasingly snarky and angry at the very core of free market capitalist convention? Why is Free Market Socialism emerging as the most likely, most credible evolutionary step forward, from here?
Obviously, both ideologies hold Free, Fair, Open, and Transparent Markets, central; however, unless you are ready to conceed that a small handful of irrelevant, underemployed, disenfranchised malcontent bloggers and tweeters have actually succeeded in steering the entire public debate toward Free Market Socialism and other Mixed Economic models, you'll have to conceed that plain old boring Empirical Analysis warrants the Snark, Anger, and Activism. In either case, as a defender of the status quo 19th century industrial wage slavery capitalism meme, you lose. You're just increasingly out of touch with present economic reality.
And when level heads like Barry Ritholz concur with data-driven sentiment that further supports a secular bull market for Snark and Anger, you become utterly irrelevant. Obsolete.
Case in point: while sharing the Back Story to Bailout Nation, Ritholz wrote:
The more I researched and wrote, the more it was apparent we were witnessing the greatest heist ever made. By the last section of the book, history’s biggest transfer of wealth — from the taxpayer to the Banksters — was taking place. Trillions were being shifted from the responsible to the reckless, from the prudent to the incompetent. It was infuriating — and you will see as the book progresses my initial academic tone gets replaced with greater snark and anger.Keep in mind that The Reckless and Incompent referenced above are the same people that Mssrs. Kudlow, Forbes, Draper, et al, would likely refer to as the "Best and Brightest of Capitalism" off of whose backs government should dismount. Of course, when government gets off the backs of the criminals, then that same lot blames the government (us, You and Me) for not being on their backs. I used to think apologists for that circular argument were just stupid; now I realize that such are both stupid and malicious. Not stupid because they don't see their own logic as circular; but stupid because they think that We The People don't see right through it. The origins of the deeply rooted maliciousness -- toward themselves and others -- which seeks to further skew such an insanely skewed system simply escapes all rational explaination.
Disclaimer: I'm fairly confident that this blog takes exception to several of Mr. Ritholz's specific financial and policy perspectives and I'm equally confident that Mr. Ritholz would not likely give this blog the time of day. However, such speculative dissonance only serves to further strenthen the case for justifiable Snark and Anger directed at Las Magus: those thousands of alchemical scumbags, along with their posses of millions of boot-licking, ass-kissing, Office Space suck-ups that systematically fired the upstanding for "not fitting in with the team" as such teams twisted entire corporate cultures into the image of their own skewed and twisted makers.
All I'm suggesting here is that when diverse, data-driven perspectives come to agree, that's usual an area worth noticing. In this case, the Unsustainable Resources Skews that typify our increasingly obsolete 19th century industrial capitalism more than merit the Snark and Anger.
So shall we too remain, until the song no longer remains the same.
Thursday, May 21, 2009
Also, a quick response to the idea of "skills atrophy." I'd suggest that happens disproportionately at the bottom of the barrel, not for the cream at the top.
More commonly, only Charlie Brown keeps trying to kick the ball after more than two or three good yanks. The smart people all say, "no thanks" when the game is rigged against them and take their generally OVERACHIEVING skills to the sidelines and even out of the stadium. This isn't about "re-educating" Maynard James Keenan's "tidal waves of dumbfounded dipshits."
Rather, one of the abiding tragedies of perpetuating Unsustainable Resource Skews is that WE LOSE THE BEST AND BRIGHTEST because they understand exactly what it means for them when 70% of the available net wealth is permanently hoarded by 5% of the population.
The math of that situation simply don't work out, do it?
Tuesday, May 19, 2009
Why are such ratios essential? Regular readers already know the answer to that question, but we'll add here that primarily, ratios -- in addition to a whole suite of interrelated policies -- help to assure that that the economic circulatory system continues to operate in a sustainable manner. Cash clots kill and economy, just as surely as blood clots kill a body. Moreover, it is also physically, mathematically, existentially impossible for any individual human's contribution to the race to be worth billions or trillions of times more than any other human being. It's empirically impossible. We each only have 24 hours in a day and none of us is AGI-Posthuman-Enhanced just yet. Even then, it will ethically impossible in the land where it continues to be asserted that All Are Created Equal, with Certain Inalienable Rights, including Liberty and Justice for All.
Let's also briefly address the entitlement issue one more time. These economic blood clots do not have a "right" to exist. Nor do pathological hoarders have a "right" to indulge their mental illness, just because it's intertwined with cash. In fact, that entanglement makes their mental illness even more damaging to society.
Compulsive hoarding is a DSM-IV illness . Maybe it is genetic, and that might partly explain why insane levels of wholly unsustainable skews of untold wealth run in genetic lines. Mental illness attached to money is still mental illness. Literally, there are just a few thousand very sick compulsively hoarding human beings acting as blood clots within the flailing American economy. Just because the object of their hoarding can be hidden away in offshore accounts, doesn't make it any less hoarding. Just because everyone understands the value of cash, that doesn't mean that the Marginal Psychological Value of cash doesn't encounter an inflection point somewhere in the $100M range.
Everyone knows that there is a point at which the slips of paper lose ALL MEANINGFUL VALUE and the game devolves into a seventh grade playground pissing contest. Even the skewed-up hoarders themselves acknowledge this: watch, listen, and learn.
So go ahead, try to explain to me a Healthy Human Psychological Profile that NEEDS more than $100M in Personal Assets while neighbors are Giving Away Their Children just to survive. Healthy human beings consider the health of the village within which they were enabled to acquire so much. Of course they OWE the community; because without the community, there would be no context within which to play out this compulsive cash hoarding illness.
This unsustainable, skewed wealth hoarding is just psychologically sick and morally revolting. We've said that this is going to get personal and as unemployment rates continue to grow, the demands to Publish The List of the top 1000 most fiscally sick and sadistic are only going to grow.
Bottom line: Ayn Rand and Aldous Huxley were both wrong. The road to postscarcity is not an avenue that Parades Satanic Sloth, escorted by a Panoptic Police State; it is a road toward the fulfillment of the penultimate Promise and Triumph of Industrial Capitalism.
So let us not lament that something is lost. Celebrate instead the success of human ingenuity and perseverance that has brought us so far. WE DID IT! Huzzah! Freedom from Want and Poverty can be ours through new ways of participation and inclusion on the human stage. No caps, no limits to the potentials for humanity.
Monday, May 18, 2009
Oh, wait; actually, we'd do anything but move there.
But, but, but ... if CAPITALISM is omnipotent and MARKETS are omniscient, that place should be overwhelmed with buyers right now. And look, look, look, we have CURVES and GRAPHS that *PROVE* that Invisible Make Believe Theoretical Real Equilibrium-Claus is just about to slide down the chimney with toys and make-busy fake jobs for all the good little wage slave boys and girls.
We'll be back to the Normal That Caused All This in no time! Just tap your heals three times and join the rest of us in the BOTTOM 90% of Americans who work two jobs for just enough money to pay rent -- just like our Share Cropper great grandparents -- and repeat:
"There's no place called home. There's no place called home. There's no place called home."
Thursday, May 14, 2009
Big man, pig man, ha ha, charade you are
You well heeled big wheel, ha ha, charade you are
And when your hand is on your heart …
You're nearly a good laugh
Almost a joker
With your head down in the pig pen
Sayin’ "keep on diggy’in"
Pig stain on your fat chin
What do you hope to find?
When you're down in the pig mine
You're nearly a laugh
You're nearly a laugh
But you're really a cry …
We can be confident that we’re making progress when the turrets of the Grand Old Pedantic party are reduced to loading up histrionic emotional pejoratives as their last bastion of defense:
“The assumption that the pursuit of self-interest within the rules and conventions of society will also promote the public interest may be succeeded by a mushy collectivist pseudo-altruism, in which jealousy and envy are given a free ride …”
Right. It’s jealousy and envy, not empirical observation of Unsustainable Resource Skews which are functionally equivalent to massive blood clots lodged throughout the global economic circulatory system. Note to the non-empirically minded: if you clot up 42% of your vital bodily fluids, into any 1% of your body; or, if you clot up nearly 70% of any resource into 5% of any system; that, my friend, is unsustainable unto immediate herky-jerky death.
After all, if I might mirror an astonishingly articulate miscarriage of fact by our good friends at FT, “There is a risk that empirically dubious but emotionally attractive interpretations, which enshrine wild west, every man for himself, bar room brawl capitalism; and which call for a rapid return to the failed status quo, could gain ground.” Which is merely to say:
First they ignore us, then they laugh at us, then they attack us, then they copy us, then we win. Same as it ever was.
“Victims of your own success, unite! You have nothing to lose but your Unsustainable Resource Skews.”
Monday, May 11, 2009
Sunday, May 10, 2009
Bob Bronson "suggests that you bullishly extrapolate the “less worse” downtick in the Continuing Claims just reported, assuming the trend continues in a straight line without interruption, which is extremely unlikely (see the dotted arrows in chart below). He reaches an Unemployment Rate of 13.0% before yearend: 32 weeks times an average 0.15% increase (declining from 0.30% to 0.00%) added to 8.9% = 13.3%."It's definitely time to Read More.
Oh, and Happy Mother's Day. Right.
Friday, May 8, 2009
We're nearly at one out of four laid-off workers has already been out of work for six months. That's Andrew Stettner at the National Employment Law Project. He and his research partners at UC-Berkeley predict the share of long-term unemployed will hit 30 percent by next year.
This, while reporters chirp this morning, "the unemployment situation IMPROVED this month," fixating on a modest Decrease in the Rate of Decrease; whereas U-6 is vastly more reflective of reality, even if it too suffers the usual statistical challenges that result in unavoidable understatement. We can only count that which presents itself for counting. All too often, these numbers are like counting the ants we can see on the surface and calling it the whole anthill. The counting itself is accurate enough, the physical reality ... um, not so much.
Tuesday, May 5, 2009
From an extraordinarily timely NYT article:
Such things are easy for an American to ridicule; you don’t have to be a Fox News commentator to sneer at what, in the midst of a global financial crisis, seems like [OMG!] Socialism Gone Wild.
But there’s more to it.
This was one of the puzzling features of the Netherlands — the Dutch pioneered the multinational corporation and advanced the concept of shares of stock, and last year the country was the third-largest investor in U.S. businesses — and yet it has what I had been led to believe was a vast, socialistic welfare state. How can these [seemingly] polar-opposite value systems coexist?
Thank you for the referral, Georges!
Wednesday, April 15, 2009
Goldman and the privateering pirates of Wall Street "believe that this is their economy." FAIL.
Click to listen to today's Fresh Air from WHYY:
In his article "The Quiet Coup" in the May issue of The Atlantic Monthly, former (2007-2008) International Monetary Fund chief economist Simon Johnson says that U.S. suffers from "financial oligarchies."
Unless the U.S. breaks up its financial oligarchy, Johnson -- now a professor at MIT's Sloan School of Management -- warns that America could face a crisis that "could, in fact, be worse than the Great Depression -- because the world is now so much more interconnected and because the banking sector is now so big."
[ SOURCE: NPR ]
Wednesday, April 1, 2009
for those interested, specific comments follow this subject email.
> --- On Mon, 3/30/09, Some Random Interwebber wrote:
> From: Some Random Interwebber
> Subject: Fwd: Fw: Tax on Retirement Income
> To: A Select Group to Probe Responses, Perhaps
> Date: Monday, March 30, 2009, 8:49 PM
> I am scared for our county.
> > Windfall Tax on Retirement Income
> > Adding a tax to your
> > retirement is simply another way of saying to the American
> > people, you're so darn stupid that we're going to
> > keep doing this until we drain every cent from you.
> > That's what the Speaker of the House is saying. Read
> > below...............
> > Nancy Pelosi wants a
> > Windfall Tax on Retirement Income. In other words tax what
> > you have made by investing toward your retirement. This
> > woman is a nut case! You aren't going to believe this.
> > Madam speaker Nancy
> > Pelosi wants to put a Windfall Tax on all stock market
> > profits (including Retirement fund, 401K and Mutual Funds!
> > Alas, it is true - all to help the 12 M illion Illegal
> > Immigrants and other unemployed Minorities!
> > This woman is
> > frightening.
> > She quotes..' We need
> > to work toward the goal of equalizing income, (didn't
> > Marx say something like this?), in our country and at the
> > same time limiting the amount the rich can invest.' (I
> > am not rich, are you?)
> > When asked how these new
> > tax dollars would be spent, she replied:
> > 'We need to raise the
> > standard of living of our poor, unemployed and minorities.
> > For example, we have an estimated 12 million illegal
> > immigrants in our country who need our help along with
> > millions of unemployed minorities. Stock market windfall
> > profits taxes could go a long way to guarantee these people
> > the standard of living they would like to have as
> > 'Americans'.'
> > (Read that quote again and
> > again and let it sink in.) 'Lower your retirement, give
> > it to others who have not worked as you have for it'.
> > Send it on to your
> > friends. I just did!! This lady is out of her mind and she
> > is the speaker of the house
so, let's take a moment to pretend that this is not an April Fool's joke. what if someone were actually 'scared' of the undeniable necessity of correcting the decades of unsustainable hoarding that have become a malignant tumor that is so intimately intertwined within the very sinews of the american economy that, literally, any attempt to extract the tumor creates an existential risk to the entire body? let's have some fun with that thought experiment, shall we?
first, i'm worried that writer says he is scared. unsubstantiated fear is seldom an adaptive emotional response to any crisis; particularly in times of increasing and rapidly accelerating socio-technical changes. i like this old acronym, first heard from a Texas preacher during a 1980's downturn:
F.E.A.R. is all too often False Evidence Appearing Real.
as we see it today, at the core of a disturbingly normalized culture of unmitigated capitalist corruption are massive, unsustainable resource skews in america.
we've used this analogy before, and it's worth repeating. an economy is a circulatory system and just like the body, if 70%+ of the blood (liquid net worth) is pooled in less than 1%, or even 5%, or 10% of the body, that's going to kill the whole body every time. there is no other remedy for failed circulation but healthy circulation. we can pump in plasma while we clear the massive clots, but the clots must be dissolved. our system can not be hooked up to plasma transfusions for the long term; not even the medium term.
our emailer uses the name of marx as nearly synonymous with pure evil or utter market destruction. this is a grossly over-simplified and wildly popular misconception.
marx was often exactly right about many of the ultimate human outcomes of capitalism, though lenin thoroughly proved that violent revolt was the exact WRONG way to correct capitalism's shortcomings.
another popular misconception is that socialism is functionally equivalent to communism. a close corollary assumes that economic models are a zero sum games, each mutually exclusive from the other. naturally, such easy sound bites regularly pepper emotional outcries from financial entertainers such as santelli, cramer, or kudlow precisely because they constitute an EASY button for pushing viewer emotions.
unfortunately, repeated pressing of this EASY button is one of the most intellectually dishonest, populist fear-mongering tactics of the day, and these guys fully know better. perhaps oddly enough, cramer seems to come across as just a little less dishonest than kudlow in this regard. cramer seems more of a pragmatist while kudlow reliably portrays the ideologue.
while there is still far too much of a strong, negative knee-jerk stigma attached to the following words (probably because so few have studied the actual ideas), Free Market Socialism maintains and even improves upon the best of vibrant Free Markets -- which are uncompromisingly required to create Stuff, Services, and Wealth -- while simultaneously acknowledging that every part of the economic body is vital to that creative process, right down to a seemingly insignificant tiny baby toe.
at a bare minimum, america needs some form of universal healthcare and a universal basic income just in order to continue the adaptive evolution of our wonderful american experiment. these two requirements are not ideologically based 'demands' rather, they are functional requirements, essentially equivalent to Henry Ford's 'welfare capitalism' innovation (which many considered communistic): the 8 hour, $5 day.
today, we are again hearing similar philosophical opposition to today's required economic adaptations. this, in spite of the empirical historical reality that had Ford's 8 hour, $5/day "socialistic spreading of the wealth" not been abandoned, it may have continued to 'stimulate the economy' at the edges, where all stimulus is undeniably most effective in spurring consumption.
meanwhile, here on the cusp of Depression 2.0, we face additional and new complex challenges, on top of those created by the utter moral collapse of wild west renegade capitalism. from VC's and (former) captains of industry, to mentally ill veterans on the street, to the burgeoning 25% structurally unemployed (due to the *success* of early stage industrial capitalism), to an ever-growing and vibrant demographic of citizen scholars; each and every one of us is more globally interdependent than ever. the era of Shared Fate is indeed upon us. we're all in this together.
at the very tip of socioeconomic evolution, dramatic morphological change is happening right before our very eyes.
now is the time for the most experienced, tried, and true of america to participate in and shape these changes. obviously, evolutionary change can never be put back into the bottle; we can choose to adapt and thrive, be sidelined, or become ... as our previous president might have said, "extinctified."
Friday, March 13, 2009
Obama's budget cuts taxes for 95% of working Americans who are struggling to make ends meet. To pay for the investments we desperately need to get our economy moving again, it closes tax loopholes for big corporations and rolls back the Bush tax cuts for the wealthiest Americans.
Thursday, March 12, 2009
Briefing.com Estimate 640K
Consensus Estimate 644K
Actual Prior 645K
Revised up from under reported 639K
And keep in mind, this is only the Freshly Discarded Humans (U3), which is about Half of the actual Total Discarded Humans (U6).
Tuesday, March 3, 2009
This need not be the case. Those who so choose could become part of the solution in a single moment, but for the sclerosing strain of chronic Aristocratic Oligarch Entitlement Personality Disorder that has catastrophically clotted up the American economic circulation system.
More specific to the mythology at hand, let's see where have we heard, "Trust Us, the Second Half Will be Better" before? Oh yeah, same time, same channel as last year:
- TheStreet: New Year, Same Problem (1 Jan 2008)
- The estimates are certainly coming down for 2008, but they're still higher than this past calendar year," said John Butters, research analyst with Thomson. "Since 2007 estimates have been dropping faster, the growth rate for 2008 is actually increasing."
- US growth to recover in 2008 (Feb 2008)
- Forbes: Atlanta Fed's Lockhart sees economy improving in second half of 2008 (Feb 2008)
- CNN: Experts: Don't fear the weak dollar (Mar 2008)
- "But two key factors temper economists' fears about the lasting impact of a sunken dollar: a surge in exports and expectations that the economy will begin to show signs of the growth during the second half of the year."
- ROTFLMAO! Trust the Experts!
- CNN: Read the Fed's minutes (Apr 2008)
- "The staff projection showed a contraction of real GDP in the first half of 2008 followed by a slow rise in the second half. The recently enacted fiscal stimulus package was expected to boost real GDP in the second half of 2008, but that effect was projected to unwind in 2009."
- Home Sales, Prices to Pick Up in Second Half of 2008 , Says NAR Chief Economist (May 2008)
- Fox Business News (echo chamber for NAR, May 2008)
- "Home sales and prices throughout most of the country are poised for improvement in the second half of 2008."
- Car economist sees limited drop in '08 US sales (Nov 2008)
- I could go on, but it's not worth wasting more time proving what we all already know.
"Devil and the deep blue sea behind me; Vanish in the air youll never find me. I will turn your flesh to alabaster; When you find your servant is your master" (Wrapped Around Your Finger, The Police).
Sunday, March 1, 2009
TONY MARTIN, MP, Sault Ste Marie
Basic income a right, essential for economic recovery
Martin speaks at international conference in New York
NEW YORK - (March 1) - A basic income guarantee for people living in poverty honors human dignity and will help countries recover from the recession, Sault MP Tony Martin told the closing plenary of an international conference here today.
“We are facing a challenge today different in nature and depth than anything any of us have experienced before,” Martin told delegates attending the 8th Congress of the U.S. Basic Income Guarantee Network.
“It will require phenomenal common effort to get us through it in a way that leaves no one behind. We need to be able to influence the decision makers (politicians). Large numbers of people need to be sending the same message -- poverty is not acceptable for anybody.
“We need to be speaking to people of kindred spirit in faith groups, in labour organizations and other citizen groups rooted in a quest for fairness and justice. The economic system is failing, people are being affected. We have an unprecedented opportunity to affect positive change. It is in our collective self interest to do so. It is not only a moral imperative, it is necessary for economic recovery and redistributive justice. A basic income is part of the answer. Those who had privilege will fight this and are well funded and organized.”
While here, Martin met with Conservative Senator Hugh Segal, another conference presenter and long-time advocate for a guaranteed income, on plans to move the basic income initiative forward in Parliament.
Martin believes any economic stimulus package should include income security investments and critical social infrastructure for communities.
"We have a duty as a socieity and government to offer equal opportunity for everyone, to ensure people have enough money to pay for the basic necessities of life, including food, clothing, shelter, heat."
Sunday, February 15, 2009
“Nearly everybody has been caught by surprise at the speed in which unemployment is increasing, and are groping for a response,” said Nicolas Véron, a fellow at Bruegel, a research center in Brussels that focuses on Europe’s role in the global economy.
Modestly, it seems, "nearly everybody" hasn't included us. So far.
Just last week, the new United States director of national intelligence, Dennis C. Blair, told Congress that instability caused by the global economic crisis had become the biggest security threat facing the United States, outpacing terrorism.
Unemployment in Britain is expected to rise to 9.5 percent by the middle of 2010, from 6.3 percent now, according to Peter Dixon, an economist with Commerzbank in London. Germany’s jobless rate could rise to 10.5 percent from 7.8 percent, he added.
Keep in mind, all these numbers are often and regularly intentionally understated by around half (give or takebecause they omit the previously and long-term unemployed. Compare U3 to U6 and note correlations so helpful to understating the case with uncanny symmetry.
On the other hand, some genius at JP Morgan is apparently helping to clarify the picture by exponential overstatement of the bubble collapse.
Tuesday, February 10, 2009
Friday, February 6, 2009
It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world. -- Paul Krugman, New York Times, Feb 5, 2009The BLS U.S. UNEMPLOYMENT PICTURE Right Now
Data extracted on: February 6, 2009 (8:47:17 PM)
SOURCE:Bureau of Labor Statistics Table A-12. Alternative measures of labor underutilization (Percent)
Series Id:LNS13327709 Seasonal Adjusted
Series title: (seas) Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers
Labor force status: Aggregated totals unemployed
Type of data:Percent
Age:16 years and over
Percent/rates: Unemployed and mrg attached and pt for econ reas as percent of labor force plus marg attached
Just last month, January 2009, Seeking Alpha explained:
As you can see here we have an increase of 1.3% to 13.5% unemployment in December. Many people including myself think this is a better more accurate number for understanding the current unemployment situation.
It is also interesting to note that a loss of 1.3% of jobs from a labor force of about 254 million with slightly more then a 65% participation rate equals job losses of more then 1 million jobs from November to December. Almost double that which was reported.
Interesting also is that even though the scales are somewhat different (U6 at 6% unemployment is good) the U6 numbers represent a 10% increase in the unemployment rate vs just a 5.8% increase in the U3 from Nov to Dec.
Something to think about and keep an eye on going forward.
Prior to the addition of today's (February 6, 2009) 600,000 lost jobs, The Market Oracle, UK explained, "if you include the people that the government doesn't even count – such as unemployed farm workers, the idle self-employed, and workers in private homes – the unemployment rate approaches an astonishing 18% (top line)."
"In other words, unemployment has insidiously spread to almost one-fifth of the U.S. work force, a number much larger than the single-digit figure commonly bandied about in the press."
So if we're already at 18% to 20% real unemployment, and Davos is even partially correct that things are definitely going to get worse before they get better, how unlikely is 25% unemployment, really?
Not all that unlikely, at all. Friends, in case you haven't yet noticed, this is called a Disruptive Inflection Point. It's time to insist that our leaders shift gears into the Post-Industrial, Post-Information, Post-Scarcity policy mode.
I understand the paradox, it's easy to think that downturns must be because we don't have enough stuff. However, terabyte hard drives are $100. Brand new state-of-the-art netbooks with 1GB RAM and 8GB solid state drives (no moving parts) are $250. We have more than enough information age stuff. In fact, it's a crisis of context amidst runaway accelerating change, a crisis of abundance, and a crisis of resource skews; not a crisis of lack. Perhaps Toffler was simply a little ahead of schedule; perhaps his future shock has finally arrived.
What we do know is that Barry Ritholtz has: "frequently exhorted people to pay attention to N.I.L.F. — those people Not in Labor Force." And:
Over the past few years, dishonest politicos failed to mention that Unemployment had gone down primarily due to people leaving the labor pool — not due to a surge of new job creation.
U.S. Labor Force Participation Rate
We also know that as far back as June 2008, Ritholtz pleaded, to no avail, of course:
Finally, raise your hand if you think U6 is really, truly accurate. What, no hands? How many think the number is overstated? Really? Nobody? How about understated? That's what I thought. But by how much 10%? 50%? Can we really continue to sit around twiddling our thumbs and placing false hope in this "stimulus" that will essentially only bail out essential infrastructure companies? I think not.
Here is a modest proposal for all of the poor scribes (like me) who slog through the monthly NFP report: For the sake of more accurately describing the conditions in the labor market, let's begin reporting two measures of Unemployment: U3 as well as U6.
Its been pretty obvious for sometime that the Financial Media are doing a disservice to their readers by only reporting U3, given how dramatically it understates Unemployment. Indeed, consumer sentiment reports are at deep negative levels that only occur when Unemployment is much than what U3 has been saying. It is painfully obvious that U3 does not paint an accurate view of the Employment situation.
Its way past time to fix that.Here's the experiment I propose: Let's start reporting both, with appropriate descriptions of each. Report U3, add U6, provide monthly and year over year changes. Let the reader see the full picture, via BLS data.
So what do we do to adjust to this Disruptive Inflection Point? We legislate a U.S. Basic Income immediately and make it a model for The World.
The Basic Income solution to Structural Unemployment is nothing new, many of the world's leading intellectuals have seen this coming for a very long time:
One of the explanations behind structural unemployment came from Austrian and French social philosopher, André Gorz. He argues that it could be permanent in modern society. He therefore argues that a basic income could be a solution, and as he explain: "The connection between more and better has been broken; our needs for many products and services are already more than adequately met, and many of our as-yet-unsatisfied needs will be met not by producing more, but by producing differently, producing other things, or even producing less. This is especially true as regards our needs for air, water, space, silence, beauty, time and human contact...Discussion thread on Friendfeed.
Tuesday, February 3, 2009
We don't know what we're getting into.Meanwhile, the "official account" merely quips:
Now I saw the Swedes did this for their bank rescue a few years ago, and they did it very well; but as was admitted by the central bank governor, they knew what they were buying. They knew they were dodgy properties in Uppsala or somewhere; it was a small country, people knew what the bad debts or likely bad debts might be.
We haven't got a clue, in the big countries! And we don't know where these debts are. I don't think some of the banks fully know their exposure to the subprime market at the moment. I'm not sure they know their exposure to the high levels of business leveraging that are out, particularly private equity; a lot of which have to be repaid quite soon.
They don't know what's going to happen, if unemployment rockets, as it might, how many people are going to be able to pay their credit card bills, and how many people are going to be able to pay their mortgages, and what repossessions will take place. They don't know. And the idea that somehow, the munificent taxpayer, suddenly with their arms open, 'give us your rubbish' and so on; I think, is very dangerous.
We're beginning to get very close to straining the patience of the population and the voter and everybody else in this area. Our grandchildren will be paying some of these debts already incurred. Don't take for granted that this is a technical issue anymore, I've got a feeling its gonna' run a lot hotter and a lot more widely than this, and rather than experts talking about things, people are going to ... get this social unrest is going to start chipping in quite quickly ... and politicians will find themselves scrambling, pragmatically, through whatever circumstances they face.
Which comes back to that danger of protectionism, and trying to get yourself in a Swedish position so at leas you know what you're doing. At the moment, you don't know what you're doing, not with the great big banks of the western world and where their possible toxic assets lie. -- John Monks, GenSec, ETUC
"John Monks, General Secretary, European Trade Union Confederation (ETUC), Brussels, suggested that the real problem is that we still don’t know what we are getting into. “Social unrest is going to start chipping in quickly,” he said."This is what is being passed off as a transcript? Why isn't the quotation below (at 35:45 in this archive video) in the sorry excuse for an abridged transcript of this event? Where are the comprehensive transcripts?
"We have given $150B to AIG -- one company -- and most of that money has disappeared; now that's one company. We would have put social security on a sound financial basis for a hundred years or more with the money we've been spending on the banks. Giving all the old age people in America security for the next one hundred years versus bailing out a few banks. That's the "bad bank" idea. If you go ahead with that, I think it raises real issues about social values." - Joseph E. StiglitzThis is the same guy that wrote the following back on December 11, 2007. I'm open to hearing explanations as to why the following comments apparently are not readily archived on any U.S. financial sites, but rather most easily found in the Daily Times of Pakistan.
Global economy is exposed to America’s houses of cards
By Joseph E. Stiglitz (Dec, 2007)
There are times when being proven right brings no pleasure. For several years I have argued that a housing bubble that had replaced the stock market bubble of the 1990s was supporting America’s economy. But no bubble can expand forever. With middle-class incomes in the United States stagnating, Americans could not afford ever more expensive homes.
Economists, as opposed to those who make their living gambling on stocks, make no claim to being able to predict when the day of reckoning will come, much less identifying the event that will bring down the house of cards. But the patterns are systematic, with consequences that unfold gradually, and painfully, over time.
There is a macro-story and a micro-story here. The macro-story is simple, but dramatic. Some, observing the crash of the sub-prime mortgage market, say, “Don’t worry, it is only a problem in the real estate sector.” But this overlooks the key role that the housing sector has played in the US economy, with direct investment in real estate and money taken out of houses through refinancing mortgages accounting for two-thirds to three-quarters of growth over the last six years.
Booming home prices gave Americans the confidence, and the financial wherewithal, to spend more than their income. America’s household savings rate was at levels not seen since the Depression, either negative or zero. With higher interest rates depressing housing prices, the game is over. As America moves to, say, a 4 percent savings rate (still small by normal standards), aggregate demand will weaken, and with it, the economy.
The micro-story is more dramatic. Record-low interest rates in 2001, 2002 and 2003 did not lead Americans to invest more - there was already excess capacity. Instead, easy money stimulated the economy by inducing households to refinance their mortgages, and to spend some of their capital.
It is one thing to borrow to make an investment, which strengthens balance sheets; it is another thing to borrow to finance a vacation or a consumption binge. But this is what Alan Greenspan encouraged Americans to do. When normal mortgages did not prime the pump enough, he encouraged them to take out variable-rate mortgages - at a time when interest rates had nowhere to go but up.
Predatory lenders went further, offering negative amortization loans, so the amount owed went up year after year. Now reality has hit: Newspapers report cases of borrowers whose mortgage payments exceed their entire income.
Globalisation implies that America’s mortgage problem has worldwide repercussions. America managed to pass off bad mortgages worth hundreds of billions of dollars to investors (including banks) around the world. They buried the bad mortgages in complicated instruments, buried them so deep that no one knew exactly how badly they were impaired, and no one could calculate how to re-price them quickly. In the face of such uncertainty, markets froze.
Those in financial markets who believe in free markets have temporarily abandoned their faith. While the US Treasury and the International Monetary Fund warned East Asian countries facing financial crises 10 years ago against the risks of bailouts and told them not to raise their interest rates, the US ignored its own lectures about moral hazard effects, bought up billions in mortgages, and lowered interest rates.
But lower short-term interest rates have led to higher medium-term rates, which are more relevant for the mortgage market. It may make sense for central banks (or Fannie Mae, America’s major government-sponsored mortgage company) to buy mortgage-backed securities in order to help provide market liquidity. But those from whom they buy them should provide a guarantee, so the public does not have to pay the price for their bad investment decisions. Equity owners in banks should not get a free ride.
It is the victims of predatory lenders who need government help. With mortgages amounting to 95 percent or more of the value of the house, debt restructuring will not be easy. What is required is to give individuals with excessive indebtedness an expedited way to a fresh start: for example, a special bankruptcy provision allowing them to recover, say, 75 percent of the equity they originally put into the house, with the lenders bearing the cost. There are many lessons for America, and the rest of the world; but among them is the need for greater financial sector regulation, especially better protection against predatory lending, and more transparency.
Joseph Stiglitz is a Nobel laureate in economics.